[Draft--9/16/98]
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MASTER SERVICING
AGREEMENT
between
PECO ENERGY TRANSITION TRUST,
the other Issuers from
time to time party hereto
and
PECO ENERGY COMPANY
Servicer
Dated as of [ ], 1998
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TABLE OF CONTENTS
Page
ARTICLE I
Definitions
SECTION 1.01. Definitions.....................................................2
SECTION 1.02. Other Definitional Provisions..................................12
ARTICLE II
Appointment and Authorization of Servicer
SECTION 2.01. Appointment of Servicer; Acceptance of
Appointment..................................................13
SECTION 2.02. Authorization..................................................13
SECTION 2.03. Dominion and Control over Serviced
Intangible Transition Property...............................14
ARTICLE III
Billing Services
SECTION 3.01. Duties of Servicer.............................................15
SECTION 3.02. Collection and Allocation of Intangible
Transition Charges...........................................17
SECTION 3.03. Servicing and Maintenance Standards............................19
SECTION 3.04. Servicer's Certificates........................................20
SECTION 3.05. Annual Statement as to Compliance;
Notice of Default............................................20
SECTION 3.06. Annual Independent Certified Public
Accountants' Report..........................................21
SECTION 3.07. Intangible Transition Property Documentation..................22
SECTION 3.08. Computer Records; Audits of Documentation......................23
SECTION 3.09. Defending Intangible Transition
Property Against Claims......................................25
SECTION 3.10. Opinions of Counsel............................................25
ARTICLE IV
Services Related to Intangible
Transition Charges Adjustments
SECTION 4.01. Intangible Transition Charges Adjustments......................27
ARTICLE V
The Servicer
SECTION 5.01. Representations and Warranties of Servicer.....................27
SECTION 5.02. Indemnities of Servicer; Release
of Claims....................................................31
SECTION 5.03. Merger or Consolidation of, or Assumption
of the Obligations of, Servicer..............................34
SECTION 5.04. Assignment of Servicer's Obligations...........................36
SECTION 5.05. Limitation on Liability of Servicer
and Others........................................36
SECTION 5.06. PECO Energy Not To Resign as Servicer..........................37
SECTION 5.07. Monthly Servicing Fee..........................................38
SECTION 5.08. Servicer Expenses..............................................39
SECTION 5.09. Appointments...................................................39
SECTION 5.10. Remittances....................................................40
SECTION 5.11. Servicer Advances..............................................41
SECTION 5.12. Protection of Title............................................41
ARTICLE VI
Servicer Default
SECTION 6.01. Servicer Default...............................................42
SECTION 6.02. Notice of Servicer Default.....................................45
SECTION 6.03. Waiver of Past Defaults........................................46
SECTION 6.04. Appointment of Successor.......................................46
SECTION 6.05. Cooperation with Successor.....................................48
ARTICLE VII
Miscellaneous Provisions
SECTION 7.01. Amendment......................................................48
SECTION 7.02. Notices........................................................49
SECTION 7.03. Assignment.....................................................50
SECTION 7.04. Limitations on Rights of Others................................50
SECTION 7.05. Severability...................................................50
SECTION 7.06. Separate Counterparts..........................................51
SECTION 7.07. Headings.......................................................51
SECTION 7.08. Governing Law..................................................51
SECTION 7.09. Assignment to Bond Trustee.....................................51
SECTION 7.10. Nonpetition Covenants..........................................52
SECTION 7.11. Addition of Issuers............................................53
SECTION 7.12. Termination by Issuers.........................................53
SECTION 7.13. Limitation of Liability of Trustee.............................53
Page
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EXHIBIT A Servicing Procedures
EXHIBIT B Supplement for Addition of Issuer
ANNEX 1 ITC Adjustment Process and Reports
- PECO Energy Transition Trust
MASTER SERVICING AGREEMENT dated as of [ ], 1998, between PECO
ENERGY TRANSITION TRUST, a Delaware business trust (the "First Issuer"),
the other Issuers from time to time party hereto (together with the First
Issuer, the "Issuers"), and PECO ENERGY COMPANY, a Pennsylvania
corporation, as the servicer of the Intangible Transition Property
(together with each successor to PECO ENERGY COMPANY (in the same capacity)
pursuant to Section 5.03 or 6.02, the "Servicer").
WHEREAS the Servicer is willing to service the Intangible Transition
Property purchased from the Seller by each Issuer; and
WHEREAS each Issuer, in connection with ownership of Serviced Intangible
Transition Property, desires to engage the Servicer to carry out the functions
described herein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained and intending to be legally bound hereby, the parties hereto
agree as follows:
2
ARTICLE I
Definitions
SECTION 1.01. Definitions. Whenever used in this Agreement, each of the
following words and phrases shall have the following meaning:
"Agreement" means this Master Servicing Agreement, as the same may be
amended and supplemented from time to time.
"Annual Accountant's Report" has the meaning specified in Section 3.06(a).
"Bond Trustees" means, collectively, The Bank of New York, a New York
banking corporation, as bond trustee under the Indenture to which the First
Issuer is a party, and each other Person serving as a bond trustee or in a
similar capacity under any of the other Indentures, or any successors to any of
the foregoing.
"Business Day" means any day other than a Saturday, Sunday or a day on
which banking institutions in the City of New York, the City of Philadelphia or
the State of Delaware are required by law or executive order to remain closed.
"Class" means, with respect to any Series, any one of the classes of
Transition Bonds of that Series.
"Collateral" means, with respect to an Issuer, all property of such Issuer
pledged by it to secure Transition
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Bonds issued by such Issuer as provided in the Indenture to which it is a
party.
"Collection Period" means the period from and including the 18th day of a
calendar month to but excluding the 18th day of the next calendar month.
"Competitive Transition Charges" means the competitive transition charges
that PECO Energy may impose on Customers as set forth in a schedule thereof in
the Final Order issued on May 14, 1998 by the PUC with respect to PECO Energy's
restructuring plan.
"Customers" means each person that (i) was a customer of PECO Energy
located within PECO Energy's retail electric service territory on January 1,
1997 or that became a customer of electric services within such territory after
January 1, 1997, (ii) is still located within such territory, and (iii) is in a
Rate Class that has been assigned stranded cost responsibility.
"Duff" means Duff & Xxxxxx Credit Rating Company or its successor.
"Fitch" means Fitch IBCA, Inc. or its successor.
"Formation Documents" means, collectively, the Amended and Restated Trust
Agreement of the First Issuer dated as of [ ], 1998, among the
Seller and the trustees named therein, and any other trust agreement,
certificate of incorporation, limited liability company
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agreement, partnership agreement, or other document pursuant to which any
other Issuer is formed or governed, in each case, as the same may be amended and
supplemented from time to time.
"Holder" or "Transition Bondholder" means the Person in whose name a
Transition Bond of any Series or Class is registered as provided in the
Indenture therefor.
"Indentures" means, collectively, the indenture dated as of
[ ], 1998, between the First Issuer and The Bank of New York, and
each indenture entered into by any other Issuer in connection with the
issuance of Transition Bonds, in each case as the same may be amended and
supplemented from time to time, including by any Series Supplement.
"Insolvency Event" means, with respect to a specified Person,
(a) the filing of a decree or order for relief by a court having jurisdiction in
the premises in respect of such Person or any substantial part of its property
in an involuntary case under any applicable Federal or state bankruptcy,
insolvency or other similar law now or hereafter in effect, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official for such Person or for any substantial part of its property, or
ordering the winding-up or liquidation of such Person's affairs, and such decree
or order shall remain
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unstayed and in effect for a period of 90 consecutive days or (b) the
commencement by such Person of a voluntary case under any applicable Federal or
state bankruptcy, insolvency or other similar law now or hereafter in effect, or
the consent by such Person to the entry of an order for relief in an involuntary
case under any such law, or the consent by such Person to the appointment of or
taking possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official for such Person or for any substantial part of
its property, or the making by such Person of any general assignment for the
benefit of creditors, or the failure by such Person generally to pay its debts
as such debts become due, or the taking of action by such Person in furtherance
of any of the foregoing.
"Intangible Transition Charges" means the amounts authorized by the PUC to
be imposed on all Customer bills with respect to the Intangible Transition
Property and collected, through a non-bypassable mechanism, by the Seller or its
successor or by any other entity which provides electric service to Customers,
to recover Qualified Transition Expenses pursuant to the Qualified Rate Order.
"Intangible Transition Charges Adjustment" means each adjustment to
Intangible Transition Charges related to the Serviced Intangible Transition
Property made in accordance with Section 4.01 and the Issuer Annexes or in
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connection with the conveyance to any Issuer of Intangible Transition Property
or the redemption or refunding by any Issuer of Transition Bonds.
"Intangible Transition Property" means the irrevocable right of the Seller
or its successor or assignee to collect Intangible Transition Charges from
Customers to recover through the issuance of Transition Bonds the Qualified
Transition Expenses described in the Qualified Rate Order, including all right,
title and interest of the Seller or its successor or assignee in such order and
in all revenues, collections, claims, payments, money or proceeds of or arising
from Intangible Transition Charges pursuant to such order, and all proceeds of
any of the foregoing.
"Intangible Transition Property Documentation" has the meaning assigned to
that term in Section 3.07.
"Issuer Annex" means, with respect to the First Issuer, Annex 1 hereto, and
with respect to any other Issuer, an Annex hereto describing the statements and
certificates to be provided by the Servicer and the procedures regarding
Intangible Transition Charges Adjustments to be followed by the Servicer with
respect to such Issuer.
"Issuers" means, collectively, the First Issuer and each other Person from
time to time named as an Issuer
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in this Agreement, in each case each until a successor replaces it and,
thereafter, such successor.
"ITC Collections" means amounts collected in respect of Intangible
Transition Charges or the Intangible Transition Property.
"Lien" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind.
"Losses" means collectively, any and all liabilities, obligations, losses,
damages, payments, costs or expenses of any kind whatsoever.
"Monthly Allocation Date" means the 20th day of each calendar month or, if
any such day is not a Business Day, the immediately succeeding Business Day.
"Monthly Servicing Fee" means, with respect to any Series of Transition
Bonds, the fee payable to the Servicer on each Monthly Allocation Date for
services rendered, determined pursuant to Section 5.07.
"Moody's" means Xxxxx'x Investors Service Inc., or its successor.
"Mortgage" means the First and Refunding Mortgage, dated May 1, 1923
between the Counties Gas and Electric Company (to which PECO Energy is
successor) and Fidelity Trust Company (to which First Union National Bank is
successor), as trustee, as supplemented and amended by 96 supplemental
indentures.
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"Officers' Certificate" means a certificate signed by (a) the chairman of
the board, the president, the vice chairman of the board, the executive vice
president or any vice president and (b) a treasurer, assistant treasurer,
secretary or assistant secretary of the Servicer.
"Operating Expenses" means, with respect to any Issuer, all fees, costs,
expenses and indemnity payments owed by such Issuer, including all amounts owed
by such Issuer to a Bond Trustee or any other trustee of such Issuer, the
Monthly Servicing Fee payable in respect of Transition Bonds issued by such
Issuer, legal fees and expenses of the Servicer allocated to such Issuer
pursuant to Section 3.09 and legal and accounting fees, costs and expenses of
such Issuer and any trustee of such Issuer.
"Opinion of Counsel" means one or more written opinions of counsel who may
be an employee of or counsel to the Seller or the Servicer, which counsel shall
be reasonably acceptable to the Bond Trustees, the Issuers or the Rating
Agencies, as applicable, and shall be in form reasonably satisfactory to the
Bond Trustee, if applicable.
"PECO Energy" means PECO Energy Company, a Pennsylvania corporation.
"Percentage" means, with respect to any Issuer, the percentage equivalent
of a fraction, the numerator of which is the aggregate Intangible Transition
Charges (as
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adjusted from time to time) applicable to all Series of Transition Bonds
issued by such Issuer and the denominator of which is the aggregate Intangible
Transition Charges (as adjusted from time to time) applicable to all Series of
Transition Bonds issued by all the Issuers.
"Person" means any individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust (including any beneficiary
thereof), business trust, unincorporated organization or government or any
agency or political subdivision thereof.
"PUC" means the Pennsylvania Public Utility Commission or any successor.
"PUC Regulations" means any regulations promulgated or adopted by the PUC.
"Qualified Rate Order" means the order of the PUC issued on May 14, 1998,
adopted in accordance with the Statute, which, among other things, creates the
Intangible Transition Property and authorizes the imposition and collection of
the Intangible Transition Charges by PECO Energy or its assignee.
"Qualified Transition Expenses" has the meaning assigned to that term in
the Qualified Rate Order.
"Rate Class" means each of the rate classes into which Customers are
divided as of the date hereof, as such rate classes may be reconfigured from
time to time.
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"Rating Agency" means any rating agency rating the Transition Bonds of any
Class or Series at the time of issuance thereof at the request of the Issuer of
such Class or Series. If no such organization or successor is any longer in
existence, "Rating Agency" shall be a nationally recognized statistical rating
organization or other comparable Person designated by an Issuer, notice of which
designation shall be given to the Bond Trustee under the Indenture to which such
Issuer is a party, any trustee of such Issuer and the Servicer.
"Rating Agency Condition" means, with respect to any action, the
notification in writing by each Rating Agency to the Seller, the Servicer, the
Bond Trustees and the applicable Issuer that such action will not result in a
reduction or withdrawal of the then current rating by such Rating Agency of any
outstanding Series or Class of Transition Bonds issued by such Issuer.
"Released Parties" has the meaning specified in Section 5.02(e).
"Remittance Date" means each date on which ITC Collections allocated to any
Issuer are to be remitted by the Servicer to the Bond Trustee for such Issuer
pursuant to Section 5.10.
"Sale Agreements" means, collectively, the Intangible Transition Property
Sale Agreement dated
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[ ], 1998, between the Seller and the First Issuer, and any other
agreements between the Seller and any other Issuer relating to the sale of
Intangible Transition Property to such Issuer.
"Sale Date" means each date on which the Seller sells, conveys, or
otherwise transfers any Intangible Transition Property to any Issuer.
"Seller" means PECO Energy and its successors in interest to the extent
permitted hereunder.
"Series" means any series of Transition Bonds issued by any of the Issuers.
"Series Supplement" means an indenture supplemental to the Indenture that
authorizes a particular Series of Transition Bonds.
"Serviced Intangible Transition Property" means, collectively, all
Intangible Transition Property sold, conveyed, assigned or otherwise transferred
to any Issuer by the Seller or, with respect to an Issuer, all Intangible
Transition Property sold, conveyed, assigned or otherwise transferred to such
Issuer by the Seller.
"Servicer Default" means an event specified in Section 6.01.
"Servicing Fee Rate" means, with respect to any Series of Transition Bonds,
the per annum rate specified in
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the Indenture pursuant to which such Transition Bonds are issued.
"Standard & Poor's means Standard & Poor's Rating Group, or its successor.
"Statute" means the Pennsylvania Electricity Generation Customer Choice and
Competition Act, Chapter 28 of Title 66 of the Pennsylvania Consolidated
Statutes, 66 Pa. C.S., ss.2801, et seq.
"Termination Notice" has the meaning specified in Section 6.01(d).
"Third Party" means any third party, including any electric generation
supplier, providing billing or metering services, licensed by the PUC pursuant
to relevant provisions of the Statute and any PUC order.
"Transition Bonds" means "transition bonds" (as defined in the Statute)
issued by any Issuer.
"UCC" means, unless the context otherwise requires, the Uniform Commercial
Code, as in effect in the relevant jurisdiction, as amended from time to time.
SECTION 1.02. Other Definitional Provisions. (a) The words "hereof",
"herein", "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement; Section, Annex, Schedule and Exhibit references contained in
this Agreement are
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references to Sections, Annexes, Schedules and Exhibits in or to this
Agreement unless otherwise specified; and the term "including" shall mean
"including without limitation".
(b) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
ARTICLE II
Appointment and Authorization of Servicer
SECTION 2.01. Appointment of Servicer; Acceptance of Appointment. Subject
to Section 5.04 and Article VI, each Issuer hereby appoints the Servicer, and
the Servicer hereby accepts such appointment, to perform the Servicer's
obligations pursuant to this Agreement on behalf of and for the benefit of each
Issuer in accordance with the terms of this Agreement. This appointment and the
Servicer's acceptance thereof may not be revoked except in accordance with the
express terms of this Agreement.
SECTION 2.02. Authorization. With respect to all or any portion of the
Serviced Intangible Transition Property, the Servicer shall be, and hereby is,
authorized and empowered by each Issuer to (a) execute and deliver, on behalf of
itself or such Issuer, as the case may be, any and all instruments, documents or
notices, and (b) on behalf of itself or such Issuer, as the case may be, make
any filing
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and participate in proceedings of any kind with any governmental
authorities, including with the PUC. Each Issuer shall furnish the Servicer with
such documents as have been prepared by the Servicer for execution by such
Issuer, and with such other documents as may be in such Issuer's possession, as
necessary or appropriate to enable the Servicer to carry out its servicing and
administrative duties hereunder. Upon the written request of the Servicer, each
Issuer shall furnish the Servicer with any powers of attorney or other documents
necessary or appropriate to enable the Servicer to carry out its duties
hereunder.
SECTION 2.03. Dominion and Control over Serviced Intangible Transition
Property. Notwithstanding any other provision herein, the Servicer and each
Issuer agree that such Issuer shall have dominion and control over its
respective Serviced Intangible Transition Property, and the Servicer, in
accordance with the terms hereof, is acting solely as the servicing agent of
such Issuer with respect to the Serviced Intangible Transition Property owned by
such Issuer. The Servicer hereby agrees that it shall not take any action that
is not authorized by this Agreement, that is not consistent with its customary
procedures and practices, or that shall impair the rights of any Issuer in its
respective Serviced Intangible Transition Property, in each
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case unless such action is required by law or court or regulatory order.
ARTICLE III
Billing Services
SECTION 3.01. Duties of Servicer. The Servicer, as agent for each Issuer
(to the extent provided herein), shall have the following duties:
(a) Duties of Servicer Generally. The Servicer will manage, service,
administer and make collections in respect of the Serviced Intangible
Transition Property. The Servicer's duties will include (i) calculating and
billing the Intangible Transition Charges and collecting (from Customers
and Third Parties, as applicable) and posting all ITC Collections; (ii)
responding to inquiries by Customers, Third Parties, the PUC, or any
Federal, local or other state governmental authorities with respect to the
Serviced Intangible Transition Property and Intangible Transition Charges;
(iii) accounting for ITC Collections, investigating delinquencies,
processing and depositing collections and making periodic remittances,
furnishing periodic reports to the Issuers, the Bond Trustees and the
Rating Agencies; (iv) selling, as the agent for each Issuer, as its
interest may appear, defaulted or written off accounts
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in accordance with the Servicer's usual and customary practices; and (v)
taking action in connection with Intangible Transition Charge Adjustments
as set forth herein. Anything to the contrary notwithstanding, the duties
of the Servicer set forth in this Agreement shall be qualified in their
entirety by any PUC Regulations as in effect at the time such duties are to
be performed. Without limiting the generality of this Section 3.01(a), in
furtherance of the foregoing, the Servicer hereby agrees that it shall also
have, and shall comply with, the duties and responsibilities relating to
data acquisition, usage and xxxx calculation, billing, customer service
functions, collections, payment processing and remittance set forth in
Exhibit A hereto.
(b) Notification of Laws and Regulations. The Servicer shall
immediately notify the Issuers, the Bond Trustees and the Rating Agencies
in writing of any laws or PUC Regulations hereafter promulgated that have a
material adverse effect on the Servicer's ability to perform its duties
under this Agreement.
(c) Other Information. Upon the reasonable request of any Issuer, any Bond
Trustee or any Rating Agency, the Servicer shall provide to such Issuer,
such Bond Trustee or such Rating Agency, as the case may be,
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any public financial information in respect of the Servicer, or any
material information regarding the Intangible Transition Property to the
extent it is reasonably available to the Servicer, as may be reasonably
necessary and permitted by law for such Issuer, such Bond Trustee or such
Rating Agency to monitor the performance by the Servicer hereunder. In
addition, so long as any of the Transition Bonds of any Series are
outstanding, the Servicer shall provide each Issuer and each Bond Trustee,
within a reasonable time after written request therefor, any information
available to the Servicer or reasonably obtainable by it that is necessary
to calculate the Intangible Transition Charges applicable to each Rate
Class.
SECTION 3.02. Collection and Allocation of Intangible Transition Charges.
(a) The Servicer shall use all reasonable efforts consistent with its customary
servicing procedures to collect all amounts owed in respect of Intangible
Transition Charges as and when the same shall become due and shall follow such
collection procedures as it follows with respect to collection activities that
the Servicer conducts for itself or others. The Servicer shall not change the
amount of or reschedule the due date of any scheduled payment of Intangible
Transition Charges, except as contemplated in this Agreement or as required by
law or
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court or PUC order; provided, however, that the Servicer may take any of
the foregoing actions to the extent that such action would be in accordance with
customary billing and collection practices of the Servicer with respect to
billing and collection activities that it conducts for itself.
(b) Any amounts received by the Servicer from a Customer that
represent a partial payment toward an outstanding balance will be applied first
to state tax charges, then Intangible Transition Charges, then to Competitive
Transition Charges, then to transmission and distribution charges and finally to
electric generation charges. Notwithstanding the foregoing, when PECO Energy is
providing billing for its transmission and distribution charges which is
separate from billing for generation, any amounts received from Customers
remitting partial payments will be applied in the following priority: (i) to the
outstanding balance before direct access to electric generation from electric
generation suppliers or the installment amount for a payment agreement on such
balance; (ii) to the balance due for state tax charges; (iii) to the balance due
[or the installment amount for a payment agreement]/1 for Intangible Transition
Charges; (iv) to the balance due or the installment amount for a payment
agreement for Competitive Transition Charges; (v) to the
-----------------
/1 Verify whether or nor this applies to ITC.
19
balance due or the installment amount for a payment agreement for fixed and
variable utility distribution service charges; (vi) to the current state tax
charges; (vii) to the current Intangible Transition Charges; and (viii) to other
charges.
(c) Any ITC Collections received by the Servicer shall be allocated between
the Issuers based on their respective Percentages at the time such Intangible
Transition Charges were billed.
SECTION 3.03. Servicing and Maintenance Standards. The Servicer shall, on
behalf of each Issuer, (a) manage, service, administer and make collections in
respect of the Serviced Intangible Transition Property with reasonable care and
in material compliance with applicable law, including all applicable PUC
Regulations and guidelines, using the same degree of care and diligence that the
Servicer exercises with respect to billing and collection activities that the
Servicer conducts for itself and others; (b) follow standards, policies and
procedures in performing its duties as Servicer that are customary in the
Servicer's industry; (c) use all reasonable efforts, consistent with its
customary servicing procedures, to enforce and maintain rights in respect of the
Intangible Transition Property; and (d) calculate Intangible Transition Charges
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in compliance with the Statute, the Qualified RateOrder and any applicable
tariffs, except where the failure to comply with any of the foregoing would not
adversely affect any Issuer's or any Bond Trustee's interest in the Serviced
Intangible Transition Property. The Servicer shall follow such customary and
usual practices and procedures as it shall deem necessary or advisable in its
servicing of all or any portion of the Serviced Intangible Transition Property,
which, in the Servicer's judgment, may include the taking of legal action
pursuant to Section 3.09 hereof or otherwise.
SECTION 3.04. Servicer's Certificates. (a) The Servicer will provide to
each Issuer and the Bond Trustee under the Indenture to which such Issuer is a
party, the statements and certificates specified in the Issuer Annex for such
Issuer.
SECTION 3.05. Annual Statement as to Compliance; Notice of Default. (a) The
Servicer shall deliver to each Issuer, each Bond Trustee and each Rating Agency,
on or before March 31 of each year beginning March 31, 1999, an Officers'
Certificate, stating that (i) a review of the activities of the Servicer during
the preceding calendar year (or relevant portion thereof) and of its performance
under this Agreement has been made under such officers' supervision and (ii) to
the best of such officers' knowledge, based on such review, the Servicer has
fulfilled
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all its obligations under this Agreement throughout such period or, if
there has been a default in the fulfillment of any such obligation, describing
each such default.
(b) The Servicer shall deliver to each Issuer, each Bond Trustee and each
Rating Agency, promptly after having obtained knowledge thereof, but in no event
later than five Business Days thereafter, written notice in an Officers'
Certificate of any event which with the giving of notice or lapse of time, or
both, would become a Servicer Default under Section 6.01.
SECTION 3.06. Annual Independent Certified Public Accountants' Report. (a)
The Servicer shall cause a firm of independent certified public accountants
(which may also provide other services to the Servicer or the Seller) to
prepare, and the Servicer shall deliver to each Issuer, each Bond Trustee and
each Rating Agency, on or before March 31 of each year, beginning March 31, 1999
to and including the March 31 succeeding the retirement of all Transition Bonds,
a report addressed to the Servicer (the "Annual Accountant's Report"), which may
be included as part of the Servicer's customary auditing activities, to the
effect that such firm has performed certain procedures in connection with the
Servicer's compliance with its obligations under this Agreement during the
preceding calendar year ended December 31 (or, in the case of the first Annual
22
Accountant's Report, the period of time from the first Sale Date until December
31, 1998), identifying the results of such procedures and including any
exceptions noted. In the event such accounting firm requires any Bond Trustee or
any Issuer to agree or consent to the procedures performed by such firm, such
Issuer shall direct the applicable Bond Trustee in writing to so agree; it being
understood and agreed that such Bond Trustee will deliver such letter of
agreement or consent in conclusive reliance upon the direction of such Issuer,
and neither such Bond Trustee nor such Issuer will make any independent inquiry
or investigation as to, and shall have no obligation or liability in respect of,
the sufficiency, validity or correctness of such procedures.
(b) The Annual Accountant's Report shall also indicate that the accounting
firm providing such report is independent of the Servicer within the meaning of
the Code of Professional Ethics of the American Institute of Certified Public
Accountants.
SECTION 3.07. Intangible Transition Property Documentation. To assure
uniform quality in servicing the Serviced Intangible Transition Property and to
reduce administrative costs, the Servicer shall keep on file, in accordance with
its customary procedures, all documents relating to the Intangible Transition
Property, including
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copies of the Qualified Rate Order and all documents filed
with the PUC in connection with any Intangible Transition Charges Adjustment
(collectively, the "Intangible Transition Property Documentation").
SECTION 3.08. Computer Records; Audits of Documentation. (a) Safekeeping.
The Servicer shall maintain accurate and complete accounts, records and computer
systems pertaining to the Intangible Transition Property and the Intangible
Transition Property Documentation in accordance with its standard accounting
procedures and in sufficient detail to permit reconciliation between payments or
recoveries on (or with respect to) Intangible Transition Charges and the ITC
Collections from time to time remitted to each Bond Trustee pursuant to Section
5.10 and to enable each Issuer to comply with this Agreement and the Indenture
to which it is a party. The Servicer shall conduct, or cause to be conducted,
periodic audits of the Intangible Transition Property Documentation held by it
under this Agreement and of the related accounts, records and computer systems,
in such a manner as shall enable each Issuer and each Bond Trustee, as pledgee
of the applicable Issuer, to verify the accuracy of the Servicer's record
keeping. The Servicer shall promptly report to each Issuer and each Bond Trustee
any failure on the Servicer's part to hold the Intangible Transition Property
24
Documentation and maintain its accounts, records and computer systems as herein
provided and promptly take appropriate action to remedy any such failure.
Nothing herein shall be deemed to require an initial review or any periodic
review by any Issuer or any Bond Trustee of the Intangible Transition Property
Documentation.
(b) Maintenance of and Access to Records. The Servicer shall maintain the
Intangible Transition Property Documentation at 0000 Xxxxxx Xxxxxx,
Xxxxxxxxxxxx, Xxxxxxxxxxxx or at such other office as shall be specified to each
Issuer and each Bond Trustee by written notice not later than 30 days prior to
any change in location. The Servicer shall permit each Issuer and each Bond
Trustee or their respective duly authorized representatives, attorneys, agents
or auditors at any time during normal business hours to inspect, audit and make
copies of and abstracts from the Servicer's records regarding the Intangible
Transition Property and Intangible Transition Charges and the Intangible
Transition Property Documentation. The failure of the Servicer to provide access
to such information as a result of an obligation or applicable law (including
PUC Regulations) prohibiting disclosure of information regarding customers shall
not constitute a breach of this Section 3.08(b).
25
SECTION 3.09. Defending Intangible Transition Property Against Claims. The
Servicer shall institute any action or proceeding necessary to compel
performance by the PUC or the Commonwealth of Pennsylvania of any of their
obligations or duties under the Statute or the Qualified Rate Order with respect
to the Intangible Transition Property. The costs of any such action reasonably
allocated by the Servicer to the Serviced Intangible Transition Property shall
be payable from ITC Collections as an Operating Expense in accordance with the
Indentures and shall be allocated among the Issuers based on their respective
Percentages at the time such costs are incurred. The Servicer's obligations
pursuant to this Section 3.09 shall survive and continue notwithstanding the
fact that the payment of Operating Expenses pursuant to the Indentures may be
delayed (it being understood that the Servicer may be required to advance its
own funds to satisfy its obligations hereunder).
SECTION 3.10. Opinions of Counsel. The Servicer shall deliver to each
Issuer and each Bond Trustee:
(a) promptly after the execution and delivery of this Agreement and of
each amendment hereto, promptly after the execution of each Sale Agreement
and of each amendment thereto and on each Sale Date, an Opinion of Counsel
either (i) to the effect that, in the opinion of
26
such counsel, all filings, including filings with the PUC pursuant to the
Statute, that are necessary to fully preserve and protect the interests of
each Bond Trustee in the Serviced Intangible Transition Property have been
executed and filed, and reciting the details of such filings or referring
to prior Opinions of Counsel in which such details are given, or (ii) to
the effect that, in the opinion of such counsel, no such action shall be
necessary to preserve and protect such interest; and
(b) within 90 days after the beginning of each calendar year beginning
with the first calendar year beginning more than three months after the
first Sale Date, an Opinion of Counsel, dated as of a date during such
90-day period, either (i) to the effect that, in the opinion of such
counsel, all filings with the PUC pursuant to the Statute, have been
executed and filed that are necessary to preserve fully and protect fully
the interest of each Bond Trustee in the Serviced Intangible Transition
Property, and reciting the details of such filings or referring to prior
Opinions of Counsel in which such details are given, or (ii) to the effect
that, in the opinion of such counsel, no such action shall be necessary to
preserve and protect such interest.
27
Each Opinion of Counsel referred to in clause (a) or (b) above shall
specify any action necessary (as of the date of such opinion) to be taken in the
following year to preserve and protect such interest.
ARTICLE IV
Services Related to Intangible
Transition Charges Adjustments
SECTION 4.01. Intangible Transition Charges Adjustments. The Servicer shall
perform the calculations and take the actions relating to revising the
Intangible Transition Charges, in each case set forth in each Issuer Annex to
this Agreement.
ARTICLE V
The Servicer
SECTION 5.01. Representations and Warranties of Servicer. The Servicer
makes the following representations and warranties as of each Sale Date, on
which the Issuers have relied and will rely in acquiring Serviced Intangible
Transition Property. The representations and warranties shall survive the sale
of any of the Serviced Intangible Transition Property to any Issuer and the
pledge thereof to any Bond Trustee pursuant to any Indenture.
(a) Organization and Good Standing. The Servicer is a corporation duly
organized and in good standing under the laws of the state of its
incorporation, with
28
the corporate power and authority to own its properties and to conduct its
business as such properties are currently owned and such business is
presently conducted, and has the power, authority and legal right to
service the Serviced Intangible Transition Property.
(b) Due Qualification. The Servicer is duly qualified to do business
as a foreign corporation in good standing, and has obtained all necessary
licenses and approvals in, all jurisdictions in which the ownership or
lease of property or the conduct of its business (including the servicing
of the Serviced Intangible Transition Property as required by this
Agreement) requires such qualifications, licenses or approvals (except
where the failure to so qualify would not be reasonably likely to have a
material adverse effect on the Servicer's business, operations, assets,
revenues, properties or prospects or adversely affect the servicing of the
Serviced Intangible Transition Property).
(c) Power and Authority. The Servicer has the corporate power and
authority to execute and deliver this Agreement and to carry out its terms;
and the execution, delivery and performance of this Agreement have been
duly authorized by the Servicer by all necessary corporate action.
29
(d) Binding Obligation. This Agreement constitutes a legal, valid and
binding obligation of the Servicer enforceable against the Servicer in
accordance with its terms subject to bankruptcy, receivership, insolvency,
fraudulent transfer, reorganization, moratorium or other laws affecting
creditors' rights generally from time to time in effect and to general
principles of equity (regardless of whether considered in a proceeding in
equity or at law).
(e) No Violation. The consummation of the transactions contemplated by
this Agreement and the fulfillment of the terms hereof shall not conflict
with, result in any breach of any of the terms and provisions of, nor
constitute (with or without notice or lapse of time) a default under, the
articles of incorporation or by-laws of the Servicer, or any indenture,
agreement or other instrument to which the Servicer is a party or by which
it shall be bound; nor result in the creation or imposition of any Lien
(other than the lien of the Mortgage on the Servicer's interest in this
Agreement) upon any of its properties pursuant to the terms of any such
indenture, agreement or other instrument; nor violate any law or any order,
rule or regulation applicable to the Servicer of any court or of any
Federal or state regulatory body,
30
administrative agency or other governmental instrumentality having
jurisdiction over the Servicer or its properties.
(f) Approvals. Except for filings with the PUC for revised Intangible
Transition Charges pursuant to Section 4.01 and the Issuer Annexes and UCC
continuation filings, no approval, authorization, consent, order or other
action of, or filing with, any court, Federal or state regulatory body,
administrative agency or other governmental instrumentality is required in
connection with the execution and delivery by the Servicer of this
Agreement, the performance by the Servicer of the transactions contemplated
hereby or the fulfillment by the Servicer of the terms hereof, except those
that have been obtained or made.
(g) No Proceedings. There are no proceedings or investigations pending
or, to the Servicer's best knowledge, threatened before any court, Federal
or state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Servicer or its properties:
(i) except as disclosed by the Servicer to the Issuers, seeking any
determination or ruling that might materially and adversely affect the
performance by the Servicer of its obligations under, or the validity or
enforceability against
31
the Servicer of this Agreement or (ii) relating to the Servicer and which
might adversely affect the Federal or state income tax attributes of the
Transition Bonds.
(h) Reports and Certificates. Each report and certificate delivered in
connection with any filing made to the PUC by the Servicer on behalf of any
Issuer with respect to Intangible Transition Charges or Intangible
Transition Charges Adjustments will constitute a representation and
warranty by the Servicer that each such report or certificate, as the case
may be, is true and correct in all material respects; provided, however,
that to the extent any such report or certificate is based in part upon or
contains assumptions, forecasts or other predictions of future events, the
representation and warranty of the Servicer with respect thereto will be
limited to the representation and warranty that such assumptions, forecasts
or other predictions of future events are reasonable based upon historical
performance.
SECTION 5.02. Indemnities of Servicer; Release of Claims. (a) The Servicer
shall be liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Servicer under this Agreement.
(b) The Servicer shall indemnify each Issuer and each Bond Trustee, for
itself and on behalf of the
32
Transition Bondholders for which it acts as Bond Trustee, and each of
their respective trustees, officers, directors and agents for, and defend and
hold harmless each such Person from and against, any and all Losses that may be
imposed upon, incurred by or asserted against any such Person as a result of (i)
the Servicer's wilful misfeasance, bad faith or gross negligence in the
performance of its duties or observance of its covenants under this Agreement or
the Servicer's reckless disregard of its obligations and duties under this
Agreement or (ii) the Servicer's breach of any of its representations or
warranties in this Agreement.
(c) If any action, claim, demand or proceeding (including any
governmental investigation) shall be brought or asserted against a party (the
"indemnified party") entitled to any indemnification provided for under this
Section 5.02, such indemnified party shall promptly notify the Servicer in
writing; provided, however, that failure to give such notification shall not
affect the indemnification provided hereunder except to the extent the Servicer
shall have been actually prejudiced as a result of such failure.
(d) The Servicer shall indemnify the Bond Trustees and their respective
officers, directors and agents for, and defend and hold harmless each such
Person from and against, any and all Losses that may be imposed upon, incurred
by or asserted against any such Person as a result
33
of the acceptance or performance of the trusts and duties contained
herein and in the Indenture, except to the extent that any such Loss shall be
due to the wilful misfeasance, bad faith or gross negligence of the applicable
Bond Trustee. Such amounts with respect to the Bond Trustee of the First Issuer
shall be deposited and distributed in accordance with the Indenture to which
such Bond Trustee is a party.
(e) The Servicer's indemnification obligations under Section 5.02(b) and
(d) for events occurring prior to the removal or resignation of any Bond Trustee
or the termination of this Agreement with respect to any Issuer shall survive
the resignation or removal of such Bond Trustee or the termination of this
Agreement with respect to such Issuer and shall include reasonable costs, fees
and expenses of investigation and litigation (including any Issuer's and any
Bond Trustee's reasonable attorneys' fees and expenses).
(f) Except to the extent expressly provided for in this Agreement, the
Sale Agreements or the Formation Documents (including the Servicer's claims with
respect to the Monthly Servicing Fees and the Seller's claim for payment of the
purchase price of Intangible Transition Property), the Servicer hereby releases
and discharges each Issuer (including its respective trustees, officers,
directors and agents, if any), and each Bond Trustee (including its respective
officers,
34
directors and agents) (collectively, the "Released Parties") from any
and all actions, claims and demands whatsoever, which the Servicer, in its
capacity as Servicer or Seller, shall or may have against any such Person
relating to the Serviced Intangible Transition Property or the Servicer's
activities with respect thereto other than any actions, claims and demands
arising out of the wilful misconduct, bad faith or gross negligence of the
Released Parties.
SECTION 5.03. Merger or Consolidation of, or Assumption of the
Obligations of, Servicer. Any Person (a) into which the Servicer may be merged
or consolidated and which succeeds to the major part of the electric
distribution business of the Servicer, (b) which results from the division of
the Servicer into two or more Persons and which succeeds to the major part of
the electric distribution business of the Servicer, (c) which may result from
any merger or consolidation to which the Servicer shall be a party and which
succeeds to the major part of the electric distribution business of the
Servicer, (d) which may succeed to the properties and assets of the Servicer
substantially as a whole and which succeeds to the major part of the electric
distribution business of the Servicer or (e) which may otherwise succeed to the
major part of the
35
electric distribution business of the Servicer, which Person in any of
the foregoing cases executes an agreement of assumption to perform every
obligation of the Servicer hereunder, shall be the successor to the Servicer
under this Agreement without further act on the part of any of the parties to
this Agreement; provided, however, that (i) immediately after giving effect to
such transaction, no representation and warranty made pursuant to Section 5.01
shall have been breached and no Servicer Default, and no event which, after
notice or lapse of time, or both, would become a Servicer Default, shall have
occurred and be continuing, (ii) the Servicer shall have delivered to each
Issuer and each Bond Trustee an Officers' Certificate and an Opinion of Counsel
each stating that such consolidation, merger or succession and such agreement of
assumption comply with this Section 5.03 and that all conditions precedent
provided for in this Agreement relating to such transaction have been complied
with, (iii) the Rating Agencies shall have received prior written notice of such
transaction, (iv) the Servicer shall have delivered to each Issuer, each Bond
Trustee and each Rating Agency an Opinion of Counsel either (A) stating that, in
the opinion of such counsel, all filings, including filings with the PUC
pursuant to the Statute, have been executed and filed that are necessary to
preserve fully and protect fully the interests of each
36
Issuer in the Serviced Intangible Transition Property and reciting the
details of such filings or (B) stating that, in the opinion of such counsel, no
such action shall be necessary to preserve and protect such interests.
Notwithstanding anything herein to the contrary, the execution of the above
referenced agreement of assumption and compliance with clauses (i), (ii), (iii)
and (iv) above shall be conditions precedent to the consummation of the
transactions referred to in clause (a), (b), (c), (d) or (e) above.
SECTION 5.04. Assignment of Servicer's Obligations. Pursuant to
paragraph 13 of the Qualified Rate Order in which the PUC authorizes PECO Energy
to contract with an alternative party to perform PECO Energy's obligations
contemplated in the Qualified Rate Order, the Servicer may assign its
obligations hereunder to any electric distribution company (as such term is
defined in the Statute) which succeeds to the major part of PECO Energy's
electric distribution business.
SECTION 5.05. Limitation on Liability of Servicer and Others. The
Servicer shall not be liable to any Issuer, except as provided under this
Agreement, for any action taken or for refraining from the taking of any action
pursuant to this Agreement or for errors in judgment; provided, however, that
this provision shall not protect the
37
Servicer against any liability that would otherwise be imposed by reason
of wilful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of reckless disregard of obligations and duties under this
Agreement. The Servicer and any director or officer or employee or agent of the
Servicer may rely in good faith on the advice of counsel reasonably acceptable
to the Bond Trustees or on any document of any kind, prima facie properly
executed and submitted by any Person, respecting any matters arising under this
Agreement.
Except as provided in this Agreement, the Servicer shall not be under
any obligation to appear in, prosecute or defend any legal action that is not
incidental to its duties to service the Serviced Intangible Transition Property
in accordance with this Agreement or related to its obligation to pay
indemnification, and that in its reasonable opinion may cause it to incur any
expense or liability.
SECTION 5.06. PECO Energy Not To Resign as Servicer. Subject to the
provisions of Sections 5.03 and 5.04, PECO Energy shall not resign from the
obligations and duties hereby imposed on it as Servicer under this Agreement
except upon a determination that the performance of its duties under this
Agreement shall no longer be permissible under applicable law. Notice of any
such determination permitting the resignation of PECO Energy shall be
38
communicated to each Issuer, each Bond Trustee and each Rating Agency at the
earliest practicable time (and, if such communication is not in writing, shall
be confirmed in writing at the earliest practicable time), and any such
determination shall be evidenced by an Opinion of Counsel to such effect
delivered to each Issuer and each Bond Trustee concurrently with or promptly
after such notice. No such resignation shall become effective until a successor
Servicer shall have assumed the servicing obligations and duties hereunder of
PECO Energy in accordance with Section 6.02.
SECTION 5.07. Monthly Servicing Fee. Each Issuer, severally
and not jointly, agrees to pay the Servicer, solely to the extent amounts are
available therefor in accordance with the Indenture to which such Issuer is a
party, the Monthly Servicing Fees with respect to all Series of Transition Bonds
issued by such Issuer. The Monthly Servicing Fee with respect to a Series for a
Monthly Allocation Date shall equal the product of (a) 1/12, (b) the Servicing
Fee Rate for such Series and (c) the outstanding principal amount of the
Transition Bonds of such Series as of such Monthly Allocation Date. The Servicer
will be entitled to retain as additional compensation net investment income on
ITC Collections related to Serviced Intangible Transition Property received by
the Servicer
39
during any Collection Period and the late fees, if any, paid by
Customers to the Servicer. The foregoing fees constitute a fair and reasonable
price for the obligations to be performed by the Servicer.
SECTION 5.08. Servicer Expenses. Except as otherwise expressly provided
herein, the Servicer shall be required to pay all expenses incurred by it in
connection with its activities hereunder, including fees and disbursements of
independent accountants and counsel, taxes imposed on the Servicer and expenses
incurred in connection with reports to Transition Bondholders.
SECTION 5.09. Appointments. The Servicer may at any time appoint a
subservicer to perform all or any portion of its obligations as Servicer
hereunder; provided, however, that the Rating Agency Condition shall have been
satisfied in connection therewith; provided further that the Servicer shall
remain obligated and be liable to each Issuer for the servicing and
administering of the Serviced Intangible Transition Property in accordance with
the provisions hereof without diminution of such obligation and liability by
virtue of the appointment of such subservicer and to the same extent and under
the same terms and conditions as if the Servicer alone were servicing and
administering the Serviced Intangible Transition Property. The fees and expenses
of the subservicer shall be as agreed between the
40
Servicer and its subservicer from time to time, and no Issuer (or
trustee thereof, if any), Bond Trustee or Transition Bondholder shall have any
responsibility therefor.
SECTION 5.10. Remittances. (a) Subject to Section 5.07, the Servicer
shall remit all ITC Collections (from whatever source) allocated to each Issuer
pursuant to Section 3.02 and all proceeds of other Collateral of such Issuer, if
any, received by the Servicer to the Bond Trustee under the Indenture to which
such Issuer is a party, for deposit pursuant to such Indenture, not later than
the second Business Day after receipt thereof.
(b) Notwithstanding the foregoing clause (a), (i) as long as PECO Energy
or any successor to PECO Energy's electric distribution business remains the
Servicer, (ii) no Servicer Default has occurred and is continuing and (iii) (A)
PECO Energy or such successor maintains a short-term rating of "A-2" or better
by Standard & Poor's and "P-2" or better by Moody's (and for five Business Days
following a reduction in either such rating) or (B) the Rating Agency Condition
shall have been satisfied (and any conditions or limitations imposed by the
Rating Agencies in connection therewith are complied with), the Servicer need
not make the daily remittances required by such clause (a), but in lieu thereof,
shall remit all ITC Collections (from
41
whatever source) allocated to each Issuer pursuant to Section 3.02 and all
proceeds of other Collateral of such Issuer, if any, received by the Servicer
during any Collection Period to the Bond Trustee under the Indenture to which
such Issuer is a party, for deposit pursuant to such Indenture, not later than
the final day of any Collection Period or, if any such day is not a Business
Day, the next succeeding Business Day.
SECTION 5.11. Servicer Advances. The Servicer shall make advances of
interest or principal on the Transition Bonds of any Series in the manner and to
the extent, if any, specified in any Annex to this Agreement entered into in
connection with the issuance of such Transition Bonds.
SECTION 5.12. Protection of Title. The Servicer shall execute and file
such filings, including filings with the PUC pursuant to the Statute, and cause
to be executed and filed such filings, all in such manner and in such places as
may be required by law fully to preserve, maintain, and protect the interests of
each Issuer in its respective Serviced Intangible Transition Property, including
all filings required under the Statute relating to the transfer of the ownership
or security interest in the Serviced Intangible Transition Property by the
Seller to such Issuer or any security interest granted by such Issuer
42
in its Serviced Intangible Transition Property. The Servicer shall
deliver (or cause to be delivered) to the applicable Issuers file-stamped copies
of, or filing receipts for, any document filed as provided above, as soon as
available following such filing.
ARTICLE VI
Servicer Default
SECTION 6.01. Servicer Default. If any one of the following events (a
"Servicer Default") shall occur and be continuing:
(a) any failure by the Servicer to remit to any Bond Trustee on behalf
of an Issuer any required remittance that shall continue unremedied for a
period of three Business Days after written notice of such failure is
received by the Servicer from such Issuer or Bond Trustee; or
(b) any failure by the Servicer or, so long as the Seller and the
Servicer are the same Person, the Seller, as applicable, duly to observe or
perform in any material respect any other covenant or agreement of the
Servicer or the Seller, as the case may be, set forth in this Agreement or
any other Basic Document to which it is a party, which failure shall (i)
materially and adversely affect the Intangible Transition Property and (ii)
continue unremedied for a period of 30 days
43
after written notice of such failure shall have been given to the Servicer
or the Seller, as the case may be, by any Issuer or any Bond Trustee or
after discovery of such failure by an officer of the Servicer or the
Seller, as the case may be; or
(c) any representation or warranty made by the Servicer in this
Agreement shall prove to have been incorrect when made, which has a
material adverse effect on any of the Issuers or the Transition Bondholders
and which material adverse effect continues unremedied for a period of 60
days after the date on which written notice thereof shall have been given
to the Servicer by any Issuer or any Bond Trustee; or
(d) an Insolvency Event occurs with respect to the Servicer;
then, and in each and every case, so long as the Servicer Default shall not have
been remedied, Bond Trustees, as assignees of the applicable Issuers, with
respect to Holders of a majority of the outstanding principal amount of the
Transition Bonds, by notice then given in writing to the Servicer (a
"Termination Notice") may terminate all the rights and obligations (other than
the indemnification obligations set forth in Section 5.02 hereof and the
obligation under Section 6.02 to continue performing its functions as Servicer
until a successor Servicer is
44
appointed) of the Servicer under this Agreement with respect to all the
Issuers. In addition, upon a Servicer Default described in Section 6.01(a), each
of the following shall be entitled to apply to the PUC for sequestration and
payment of revenues arising with respect to the Serviced Intangible Transition
Property: (i) each Issuer or its assignees or (ii) pledgees or transferees,
including transferees under the Statute, of the Serviced Intangible Transition
Property. On or after the receipt by the Servicer of a Termination Notice, all
authority and power of the Servicer under this Agreement with respect to the
Issuers, whether with respect to the Serviced Intangible Transition Property,
the related Intangible Transition Charges or otherwise, shall, upon appointment
of a successor Servicer pursuant to Section 6.02, without further action, pass
to and be vested in such successor Servicer and, without limitation, each Bond
Trustee is hereby authorized and empowered to execute and deliver, on behalf of
the predecessor Servicer, as attorney-in-fact or otherwise, any and all
documents and other instruments, and to do or accomplish all other acts or
things necessary or appropriate to effect the purposes of such Termination
Notice, whether to complete the transfer of the Intangible Transition Property
Documentation and related documents, or otherwise. The predecessor Servicer
shall cooperate with the successor Servicer, the Bond Trustees and
45
the Issuers in effecting the termination of the responsibilities and rights
of the predecessor Servicer under this Agreement, including the transfer
to the successor Servicer for administration by it of all cash amounts that
shall at the time be held by the predecessor Servicer for remittance, or shall
thereafter be received by it with respect to the Serviced Intangible Transition
Property or the related Intangible Transition Charges. As soon as practicable
after receipt by the Servicer of such Termination Notice, the Servicer shall
deliver the Intangible Transition Property Documentation to the successor
Servicer. All reasonable costs and expenses (including attorneys fees and
expenses) incurred in connection with transferring the Intangible Transition
Property Documentation to the successor Servicer and amending this Agreement to
reflect such succession as Servicer pursuant to this Section shall be paid by
the predecessor Servicer upon presentation of reasonable documentation of such
costs and expenses. Termination of PECO Energy as Servicer shall not terminate
PECO Energy's rights or obligations as Seller under any of the Sale Agreements.
SECTION 6.02. Notice of Servicer Default. The Servicer shall deliver to
each Issuer, each Bond Trustee and each Rating Agency promptly after having
obtained knowledge
46
thereof, but in no event later than five Business Days thereafter,
written notice in an Officer's Certificate of any event or circumstance (such as
a breach of any representation or warranty made by the Servicer in this
Agreement) which, with the giving of notice or the passage of time, would become
a Servicer Default under Section 6.01.
SECTION 6.03. Waiver of Past Defaults. All the Bond Trustees acting
together may waive in writing any default by the Servicer in the performance of
its obligations hereunder and its consequences, except a default in making any
required remittances to any Bond Trustee of ITC Collections from Serviced
Intangible Transition Property in accordance with Section 5.10 of this
Agreement. Upon any such waiver of a past default, such default shall cease to
exist, and any Servicer Default arising therefrom shall be deemed to have been
remedied for every purpose of this Agreement. No such waiver shall extend to any
subsequent or other default or impair any right consequent thereto.
SECTION 6.04. Appointment of Successor. (a) Upon the Servicer's receipt
of a Termination Notice, pursuant to Section 6.01 or the Servicer's resignation
in accordance with the terms of this Agreement, the predecessor Servicer shall
continue to perform its functions as Servicer under this Agreement and shall be
entitled to receive the requisite portion of the Monthly Servicing Fees, until a
47
successor Servicer shall have assumed in writing the obligations of the Servicer
hereunder as described below. In the event of the Servicer's termination
hereunder, Bond Trustees, as assignees of the applicable Issuers, with respect
to Holders of a majority of the outstanding principal amount of the Transition
Bonds, shall appoint a successor Servicer, and the successor Servicer shall
accept its appointment by a written assumption in form acceptable to the Issuers
and the Bond Trustees. If, within 30 days after the delivery of the Termination
Notice, a new Servicer shall not have been appointed and accepted such
appointment, any Bond Trustee may petition the PUC or a court of competent
jurisdiction to appoint a successor Servicer under this Agreement. A Person
shall qualify as a successor Servicer only if (i) such Person is permitted under
PUC Regulations to perform the duties of the Servicer pursuant to the Statute,
the Qualified Rate Order and this Agreement, (ii) the Rating Agency Condition
shall have been satisfied and (iii) such Person enters into a servicing
agreement with the Issuers having substantially the same provisions as this
Agreement.
(b) Upon appointment, the successor Servicer shall be the successor in
all respects to the predecessor Servicer and shall be subject to all the
responsibilities, duties and liabilities arising thereafter relating thereto
48
placed on the predecessor Servicer and shall be entitled to the Monthly
Servicing Fees and all the rights granted to the predecessor Servicer by the
terms and provisions of this Agreement.
(c) The successor Servicer may not resign unless it is prohibited from
serving as such by law.
SECTION 6.05. Cooperation with Successor. The Servicer covenants and
agrees with each Issuer that it will, on an ongoing basis, cooperate with the
successor Servicer and provide whatever information is, and take whatever
actions are, reasonably necessary to assist the successor Servicer in performing
its obligations hereunder.
ARTICLE VII
Miscellaneous Provisions
SECTION 7.01. Amendment. This Agreement may be amended by the Seller,
the Servicer and the Issuers, with the consent of all the Bond Trustees.
Promptly after the execution of any such amendment or consent, the Issuers shall
furnish written notification of the substance of such amendment or consent to
each of the Rating Agencies.
Prior to the execution of any amendment to this Agreement, the Issuers
and the Bond Trustees shall be entitled to receive and rely upon an Opinion of
Counsel stating that the execution of such amendment is authorized or permitted
by this Agreement and the Opinion of Counsel
49
referred to in Section 3.10. The Issuers and the Bond Trustees may, but
shall not be obligated to, enter into any such amendment which affects their own
rights, duties or immunities under this Agreement or otherwise.
SECTION 7.02. Notices. All demands, notices and communications upon or
to the the Servicer, the Issuers, the Bond Trustees or the Rating Agencies under
this Agreement shall be in writing, delivered personally, via facsimile,
reputable overnight courier or by first class mail, postage prepaid, and shall
be deemed to have been duly given upon receipt (a) in the case of the Servicer,
to PECO Energy Company, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxxxx, XX 00000, Attention of
Vice President, Finance and Treasurer, (b) in the case of any Issuer or any Bond
Trustee, at the address provided for notices or communications to such Person in
the Indenture to which such Person is a party, (c) in the case of Moody's, to
Xxxxx'x Investors Service, Inc., ABS Monitoring Department, 00 Xxxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000, (d) in the case of Standard & Poor's, to Standard &
Poor's Corporation, 00 Xxxxxxxx (00xx Xxxxx), Xxx Xxxx, Xxx Xxxx 00000,
Attention of Asset Backed Surveillance Department, (e) in the case of Fitch, to
Fitch IBCA, Inc., Xxx Xxxxx Xxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, and (f) in
the case of Duff, to Duff & Xxxxxx Credit Rating Company, 00 X. Xxxxxx Xxxxxx
(00xx Xxxxx), Xxxxxxx, Xxxxxxxx 00000;
50
or, as to each of the foregoing, at such other address as shall be
designated by written notice to the other parties.
SECTION 7.03. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 5.03 and 5.04 and as provided
in the provisions of this Agreement concerning the resignation of the Servicer,
this Agreement may not be assigned by the Servicer.
SECTION 7.04. Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of the Servicer, the Issuers (including
their respective trustees, if any) and the Bond Trustees, on behalf of
themselves and the Transition Bondholders, and nothing in this Agreement,
whether express or implied, shall be construed to give to any other Person any
legal or equitable right, remedy or claim in any Collateral or under or in
respect of this Agreement or any covenants, conditions or provisions contained
herein.
SECTION 7.05. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction
51
shall not invalidate or render unenforceable such provision in any other
jurisdiction.
SECTION 7.06. Separate Counterparts. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 7.07. Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 7.08. Governing Law. This Agreement shall be construed in
accordance with the laws of the Commonwealth of Pennsylvania, without reference
to its conflict of law provisions, and the obligations, rights and remedies of
the parties hereunder shall be determined in accordance with such laws.
SECTION 7.09. Assignment to Bond Trustee. The Servicer hereby
acknowledges and consents to any mortgage, pledge, assignment and grant of a
security interest by any Issuer to any Bond Trustee pursuant to any Indenture
for the benefit of any Transition Bondholders of all right, title and interest
of such Issuer in, to and under the Serviced Intangible Transition Property
owned by such Issuer and the proceeds thereof and the assignment of any or all
of such
52
Issuer's rights hereunder to such Bond Trustee. In no event shall any
Bond Trustee have any liability for the representations, warranties, covenants,
agreements or other obligations of any Issuer, hereunder or in any of the
certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the applicable Issuer.
SECTION 7.10. Nonpetition Covenants. Notwithstanding any prior
termination of this Agreement or the Indenture, but subject to the PUC's rights
to order the sequestration and payment of revenues arising with respect to the
Serviced Intangible Transition Property notwithstanding any bankruptcy,
reorganization or other insolvency proceedings with respect to the debtor,
pledgor or transferor of the Serviced Intangible Transition Property pursuant to
Section 2812(d)(3)(v) of the Statute, the Servicer shall not, prior to the date
which is one year and one day after the termination of the applicable Indenture,
petition or otherwise invoke or cause any Issuer to invoke the process of any
court or government authority for the purpose of commencing or sustaining a case
against any Issuer under any Federal or state bankruptcy, insolvency or similar
law or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of any Issuer or any substantial part of
the property of any
53
Issuer, or ordering the winding up or liquidation of the affairs of any
Issuer.
SECTION 7.11. Addition of Issuers. Upon execution and delivery by the
Servicer and a Person which owns Intangible Transition Property sold to such
Person by the Seller of an instrument in the form of Exhibit B hereto, such
Person shall become an Issuer hereunder with the same force and effect as if
originally named as an Issuer herein. The execution and delivery of any such
instrument shall not require the consent of any Issuer hereunder. The rights and
obligations of each Issuer hereunder shall remain in full force and effect
notwithstanding the addition of any new Issuer as a party to this Agreement.
SECTION 7.12. Termination by Issuers. This Agreement shall terminate
with respect to any Issuer when all Transition Bonds issued by such Issuer have
been retired, redeemed or defeased in full.
SECTION 7.13. Limitation of Liability of Trustee. Notwithstanding
anything contained herein to the contrary, this Agreement has been countersigned
by First Union Trust Company, National Association, not in its individual
capacity but solely in its capacity as trustee of the First Issuer and in no
event shall First Union Trust Company, National Association, in its individual
capacity have any liability for warranties, covenants, agreements or other
54
obligations of the First Issuer hereunder or in any of the certificates,
notices or agreements delivered pursuant hereto, as to all of which recourse
shall be had solely to the assets of the First Issuer. For all purposes of this
Agreement, in the performance of its duties or obligations hereunder or in the
performance of any duties or obligations of the First Issuer hereunder, First
Union Trust Company, National Association, shall be subject to, and entitled to
the benefits of, the applicable terms and provisions of the Formation Documents
relating to the First Issuer.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers as of the day and year first above
written.
PECO ENERGY TRANSITION TRUST,
by First Union Trust Company,
National Association, not in
its individual capacity but
solely as Issuer Trustee on
behalf of PECO Energy
Transition Trust,
by
------------------------------------
Title:
55
PECO ENERGY COMPANY, Servicer,
by
------------------------------------
Title:
Acknowledged and Accepted:
THE BANK OF NEW YORK, not
in its individual capacity
but solely as Bond Trustee
on behalf of the Holders of
Transition Bonds issued by
the First Issuer,
by
------------------------------------
Title:
EXHIBIT B
Supplement for Addition of Issuer
SUPPLEMENT NO. __ dated as of [ ], to the Master Servicing
Agreement dated as of [ ], 1998, between [ ], a [state of
formation] [type of entity] (the "New Issuer") and PECO ENERGY COMPANY,
a Pennsylvania corporation as Servicer (the "Servicer").
A. Reference is made to the Master Servicing Agreement dated as of [ ],
1998 (as amended, supplemented or otherwise modified from time to time, the
"Servicing Agreement"), between PECO ENERGY TRANSITION TRUST, a Delaware
business trust (the "First Issuer"), the other Issuers from time to time party
thereto (together with the First Issuer, the "Issuers") and the Servicer.
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Servicing Agreement.
C. The Issuers have entered into the Servicing Agreement in order to
provide for servicing of the Serviced Intangible Transition Property. Section
7.11 of Servicing Agreement provides that additional Persons may become Issuers
under the Servicing Agreement by execution and delivery of an instrument in the
form of this Supplement. The New Issuer is executing this Supplement in
accordance with the requirements of the Servicing Agreement to become
2
an Issuer under the Servicing Agreement in order to provide for the
servicing of the Serviced Intangible Transition Property owned by the New
Issuer.
Accordingly, the Servicer and the New Issuer agree as follows:
SECTION 1. In accordance with Section 7.11 of the Servicing Agreement, the
New Issuer by its signature below becomes an Issuer under the Servicing
Agreement with the same force and effect as if originally named therein as an
Issuer and the New Issuer hereby agrees to all the terms and provisions of the
Servicing Agreement applicable to it as an Issuer thereunder. Each reference to
an "Issuer" in the Servicing Agreement shall be deemed to include the New
Issuer. The Servicing Agreement is hereby incorporated herein by reference.
SECTION 2. The New Issuer represents and warrants to the Servicer that this
Supplement has been duly authorized, executed and delivered by it and
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms.
SECTION 3. This Supplement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same agreement. This Supplement shall become effective when the
3
Servicer shall have received counterparts of this Supplement that, when
taken together, bear the signatures of the New Issuer and the Servicer.
SECTION 4. Except as expressly supplemented hereby, the Servicing Agreement
shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE COMMONWEALTH OF PENNSYLVANIA WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 6. Any provision of this Supplement that is prohibited or
unenforceable in any jurisdiction shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.
4
SECTION 7. All communications and notices hereunder shall be in writing and
given as provided in Section 7.02 of the Servicing Agreement.
IN WITNESS WHEREOF, the New Issuer and the Servicer have duly executed this
Supplement to the Servicing Agreement as of the day and year first above
written.
[Name Of New Issuer],
by
--------------------------------
Title:
PECO ENERGY COMPANY, Servicer,
by
--------------------------------
Title:
ANNEX 1
to
MASTER SERVICING AGREEMENT
The Servicer agrees to comply with the following with respect to PECO Energy
Transition Trust (the "First Issuer"):
SECTION 1. Definitions. (a) Capitalized terms used herein and not otherwise
defined shall have the meanings set forth in the Master Servicing Agreement
dated as of [ ], 1998, between the First Issuer, the other Issuers from time to
time party thereto and PECO ENERGY COMPANY, as Servicer.
(b) Whenever used in this Annex 1, the following words and phrases shall
have the following meanings:
"Adjustment Date" has the meaning specified in the Indenture.
"Adjustment Request" means an application filed by the Servicer with the
PUC for revised Intangible Transition Charges pursuant to Section 4(b) of this
Annex.
"Bond Trustee" has the meaning specified in the Indenture.
"Calculation Date" means, with respect to any Series of Transition Bonds,
such date or dates specified as such in the Series Supplement therefor.
"Calculated Overcollateralization Level" has the meaning set forth in the
Indenture.
"Class" has the meaning specified in the Indenture.
"Expected Amortization Schedule" has the meaning set forth in the
Indenture.
"Expected Final Payment Date" has the meaning set forth in the Indenture.
"Holder" or "Transition Bondholder" has the meaning set forth in the
Indenture.
"Indenture" means the Indenture dated as of [ ], 1998, between the First
Issuer and the Bond Trustee, as amended and supplemented from time to time,
including any Series Supplement.
"Overcollateralization Subaccount" has the meaning set forth in the
Indenture.
"Payment Date" has the meaning specified in the Indenture.
"Projected Transition Bond Balance" has the meaning specified in the
Indenture.
"Regulatory Year" means (i) the period from [ ], 1998 through
and including the first Adjustment Date (the "Initial Regulatory Year") and
(ii) following the Initial Regulatory Year until December 31, 2010, each period
from and including each Adjustment Date through but excluding the following
Adjustment Date.
"Reserve Subaccount" has the meaning set forth in the Indenture.
"Sale Agreement" has the meaning set forth in the Indenture.
"Series" has the meaning specified in the Indenture.
"Series Supplement" has the meaning specified in the Indenture.
"Transferred ITP" has the meaning specified in the Sale Agreement.
"Transition Bonds" has the meaning specified in the Indenture.
"Transition Bond Balance" has the meaning specified in the Indenture.
SECTION 2. Calculation Date Statements. For each Calculation Date, the
Servicer will provide to the First Issuer and the Bond Trustee a statement
indicating (i) the Transition Bond Balance and the Projected Transition Bond
Balance for each Series as of the immediately preceding Payment Date, (ii) the
amount on deposit in the Overcollateralization Subaccount and the Calculated
Overcollateralization Level as of the immediately preceding Payment Date, (iii)
the Projected Transition Bond Balance for the next Payment Date and the
Servicer's projection of the Transition Bond Balance as of the next Payment Date
and,
(iv) the Calculated Overcollateralization Level for the next Payment Date
and the Servicer's projection of the amount on deposit in the
Overcollateralization Subaccount as of the next Payment Date.
SECTION 3. Remittance Date Statements. On or before each Remittance Date,
the Servicer will prepare and furnish to the First Issuer and the Bond Trustee a
statement setting forth the aggregate amount remitted or to be remitted by the
Servicer to the Bond Trustee for deposit on such Remittance Date pursuant to the
Indenture.
Section 4. Monthly Allocation Date Statements. On or before each Monthly
Allocation Date, the Servicer will prepare and furnish to the First Issuer and
the Bond Trustee a statement setting forth the transfers and payments to be made
on such Monthly Allocation Date pursuant to Section 8.02(d) of the Indenture and
the amounts thereof.
Section 5. Payment Date Statements. On or before each Payment Date for each
Series of Transition Bonds, the Servicer will prepare and furnish to the First
Issuer and the Bond Trustee a statement setting forth the amounts to be paid to
Holders of Transition Bonds of such Series pursuant to Section 8.02(e) of the
Indenture.
SECTION 6. Intangible Transition Charges Adjustments. (a) Prior to each
Calculation Date, the Servicer shall calculate (i) the Transition Bond Balance
as
of each Calculation Date (a written copy of which shall be delivered by the
Servicer to the Bond Trustee within five days following such Calculation Date)
and (ii) the revised Intangible Transition Charges with respect to the
Transferred Intangible Transition Property for the then-current Regulatory Year
and each subsequent Regulatory Year, such that the Servicer projects that ITC
Collections therefrom allocable to the First Issuer will be sufficient so that
(x) the Transition Bond Balance on the Payment Date immediately [preceding] the
next Adjustment Date will equal the Projected Transition Bond Balance as of such
date or, if earlier with respect to any Series or Class of Transition Bonds, by
the Expected Final Payment Date therefor, (y) the amount on deposit in the
Overcollateralization Subaccount on the Payment Date immediately [preceding] the
next Adjustment Date, or if earlier with respect to any Series or Class of
Transition Bonds, by the Expected Final Payment Date therefor, will equal the
Calculated Overcollateralization Level for such date, taking into account
amounts on deposit in the Reserve Subaccount and (z) thereafter will provide for
amortization of the remaining outstanding principal amount of each Series in
accordance with the Expected Amortization Schedule therefor and deposits to the
Overcollateralization Subaccount such that the balance
therein will equal the Calculated Overcollateralization Level on each
Payment Date.
(b) On each Calculation Date, the Servicer shall (i) file an Adjustment
Request with the PUC for such revised Intangible Transition Charges with respect
to the Transferred Intangible Transition Property to remain in effect until the
effective date of the next Intangible Transition Charges Adjustment with respect
to the Transition Bonds or, if earlier with respect to any Series or Class of
Transition Bonds, the Expected Final Payment Date therefor, (ii) take all
reasonable actions and make all reasonable efforts in order to effectuate such
revision to such Intangible Transition Charges and (iii) promptly send to the
Bond Trustee copies of all material notices and documents relating to such
revision.
SECTION 7. Servicer Advances. The Servicer shall not make any advances of
interest or principal on the Transition Bonds of any Series.
SECTION 8. Loss Calculations. Upon notice from the Seller, the Servicer
shall perform the calculations specified in Sections 5.01(c)(ii)(x) and
5.01(c)(ii)(y) of the Sale Agreement in the manner specified in such Sections
and notify the Issuer and the Bond Trustee thereof.
