1
EXHIBIT 10.1
SECURITIZATION PROPERTY SALE AGREEMENT
between
THE DETROIT EDISON SECURITIZATION FUNDING LLC
Issuer
and
THE DETROIT EDISON COMPANY
Seller
Dated as of [ ]
2
Table of Contents
Page
----
ARTICLE I
Definitions
SECTION 1.01 Definitions............................................................................. 1
SECTION 1.02 Other Definitional Provisions........................................................... 1
ARTICLE II
Conveyance of Securitization Property
SECTION 2.01 Conveyance of Initial Securitization Property........................................... 2
SECTION 2.02 Conditions to Conveyance of Securitization Property..................................... 3
ARTICLE III
Representations and Warranties of Seller
SECTION 3.01 Organization and Good Standing.......................................................... 4
SECTION 3.02 Due Qualification....................................................................... 4
SECTION 3.03 Power and Authority..................................................................... 5
SECTION 3.04 Binding Obligation...................................................................... 5
SECTION 3.05 No Violation............................................................................ 5
SECTION 3.06 No Proceedings.......................................................................... 5
SECTION 3.07 Approvals............................................................................... 6
SECTION 3.08 The Securitization Property............................................................. 6
SECTION 3.09 Solvency................................................................................ 8
ARTICLE IV
Covenants of the Seller
SECTION 4.01 Seller's Existence...................................................................... 9
SECTION 4.02 No Liens or Conveyances................................................................. 9
SECTION 4.03 Use of Proceeds......................................................................... 9
SECTION 4.04 Delivery of Collections................................................................. 9
SECTION 4.05 Notice of Liens......................................................................... 9
SECTION 4.06 Compliance with Law..................................................................... 9
SECTION 4.07 Covenants Related to Securitization Property............................................ 9
SECTION 4.08 Protection of Title..................................................................... 10
SECTION 4.09 Taxes................................................................................... 11
SECTION 4.10 Alternative Electric Suppliers.......................................................... 11
SECTION 4.11 Filings Pursuant to Financing Order..................................................... 11
ARTICLE V
Additional Undertakings of the Seller
SECTION 5.01 Liability of the Seller; Indemnities.................................................... 12
i
3
SECTION 5.02 Merger or Consolidation of, or Assumption of the Obligations of, the Seller............. 13
SECTION 5.03 Limitation on Liability of the Seller and Others........................................ 14
ARTICLE VI
Miscellaneous Provisions
SECTION 6.01 Amendment............................................................................... 14
SECTION 6.02 Notices................................................................................. 15
SECTION 6.03 Assignment by Seller.................................................................... 15
SECTION 6.04 Assignment to Trustee................................................................... 15
SECTION 6.05 Limitations on Rights of Others......................................................... 16
SECTION 6.06 Severability............................................................................ 16
SECTION 6.07 Separate Counterparts................................................................... 16
SECTION 6.08 Headings................................................................................ 16
SECTION 6.09 Governing Law........................................................................... 16
SECTION 6.10 Nonpetition Covenant.................................................................... 16
EXHIBIT A - Xxxx of Sale.............................................................................. A-1
EXHIBIT B - Opinion of Counsel........................................................................ B-1
EXHIBIT C - Opinion of Counsel........................................................................ C-1
APPENDIX A - Master Definitions
ii
4
SECURITIZATION PROPERTY SALE AGREEMENT, dated as of [ ], by
and between THE DETROIT EDISON SECURITIZATION FUNDING LLC, a Michigan limited
liability company, as issuer (the "Issuer"), and THE DETROIT EDISON COMPANY, a
Michigan corporation, as seller hereunder (in such capacity, the "Seller").
W I T N E S S E T H:
WHEREAS the Issuer desires to purchase from time to time
Securitization Property created pursuant to the Statute and the Financing Order;
WHEREAS the Seller is willing to sell Securitization Property
to the Issuer;
WHEREAS the Issuer, in order to finance the purchase of the
Securitization Property, will from time to time issue Securitization Bonds under
the Indenture; and
WHEREAS the Issuer, to secure its obligations under the
Securitization Bonds and the Indenture, will pledge its right, title and
interest and grant a security interest in, to and under the Securitization
Property to the Trustee for the benefit of the Securitization Bondholders.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and intending to be
legally bound hereby, the parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01 DEFINITIONS. Capitalized terms used herein and
not otherwise defined herein have the meanings assigned to them in Appendix A
hereto.
SECTION 1.02 OTHER DEFINITIONAL PROVISIONS.
(a) "Agreement" means this Securitization Property Sale
Agreement, as the same may be amended, supplemented or otherwise modified from
time to time.
(b) Non-capitalized terms used herein which are defined in the
Statute, as the context requires, have the meanings assigned to such terms in
the Statute, but without giving effect to amendments to the Statute after the
date hereof which have a material adverse effect on the Issuer or the
Securitization Bondholders.
(c) All terms defined in this Agreement have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(d) The words "hereof", "herein", "hereunder" and words of
similar import when used in this Agreement refer to this Agreement as a whole
and not to any particular provision of this Agreement; Section, Schedule and
Exhibit references contained in this Agreement are
5
references to Sections, Schedules and Exhibits in or to this Agreement unless
otherwise specified; and the term "including" means "including without
limitation".
(e) The definitions contained in this Agreement are applicable
to the singular as well as the plural forms of such terms.
ARTICLE II
CONVEYANCE OF SECURITIZATION PROPERTY
SECTION 2.01 CONVEYANCE OF INITIAL SECURITIZATION PROPERTY.
(a) In consideration of the Issuer's payment to or upon the
order of the Seller of $[ ] (the "Initial Purchase Price") by wire transfer of
funds immediately available on the date hereof to Seller's account no.
[________] at [________], routing transit # [________], subject to the
conditions specified in Section 2.02, the Seller does hereby irrevocably sell,
transfer, assign and otherwise convey to the Issuer, without recourse (subject
to the obligations of the Seller herein), all right, title and interest of the
Seller in, to and under the Initial Securitization Property identified in the
Xxxx of Sale delivered pursuant to Section 2.02(a) on or prior to the Initial
Transfer Date (such sale, transfer, assignment and conveyance of the Initial
Securitization Property to include, to the fullest extent permitted by the
Statute and the Michigan UCC, the assignment of all revenues, collections,
claims, rights, payments, money or proceeds of or arising from the SB Charges
related to the Initial Securitization Property, as the same may be adjusted from
time to time). Such sale, transfer, assignment and conveyance of the Initial
Securitization Property is hereby expressly stated to be a sale or other
absolute transfer and, pursuant to Section 10l of the Statute and the Financing
Order, shall constitute a true sale of all of the Seller's right, title and
interest, in, to and under, and not a borrowing secured by, the Initial
Securitization Property. The preceding sentence is the statement referred to in
Section 10l of the Statute. The Seller agrees and confirms that upon payment of
the Initial Purchase Price and the execution and delivery of this Agreement and
the related Xxxx of Sale, the Seller shall have no right, title or interest in,
to or under the Initial Securitization Property.
(b) Subject to the conditions specified in Section 2.02, the
Issuer does hereby purchase the Initial Securitization Property from the Seller
for the consideration set forth in paragraph (a) above.
(c) The Seller and the Issuer each acknowledge and agree that
the purchase price for the Initial Securitization Property sold pursuant to this
Agreement is equal to its fair market value at the time of sale.
(d) The Seller and the Issuer further agree that from time to
time the Seller may offer to sell, and the Issuer may purchase, Subsequent
Securitization Property as of Subsequent Transfer Dates, subject to the
conditions specified in Section 2.02, in exchange for consideration to be agreed
upon (in each case, the "Subsequent Purchase Price"). The Seller and the Issuer
hereby agree that each such sale, transfer, assignment and conveyance of any
Subsequent Securitization Property shall include, to the fullest extent
permitted by the Statute and the Michigan UCC, the assignment of all revenues,
collections, claims, rights, payments, money or
2
6
proceeds of or arising from the SB Charges related to the Subsequent
Securitization Property, as the same may be adjusted from time to time. Such
sale, transfer, assignment and conveyance of the Subsequent Securitization
Property is hereby expressly stated to be a sale or other absolute transfer and,
pursuant to Section 10l of the Statute and the Financing Order, shall constitute
a true sale of all of the Seller's right, title and interest, in, to and under,
and not a borrowing secured by, the Subsequent Securitization Property. The
preceding sentence is the statement referred to in Section 10l of the Statute.
The Seller agrees and confirms that after giving effect to any sale contemplated
by this paragraph (d) and the execution and delivery of the related Xxxx of
Sale, it shall have no right, title or interest in, to or under the Subsequent
Securitization Property.
(e) Notwithstanding the foregoing, if but only if, contrary to
the agreement and intent of the parties and the Financing Order, any sale,
transfer, assignment and conveyance of any Securitization Property is
determined by a court not to be a true sale as contemplated by the parties
hereto and by the Statue, then
(i)(A) the Seller hereby appoints the Issuer as the
agent of the Seller ("Seller's Agent") for purposes
of this clause(e)(i), (B) the Issuer shall be deemed
to have issued and sold the Securitization Bonds for
and on behalf of the Seller as Seller's Agent
pursuant to the Statute, the Financing Order, the
Indenture and the Underwriting Agreement, and (C) the
Issuer shall be deemed to have granted and does
hereby grant, as of the date hereof, for and on
behalf of the Seller as Seller's Agent, a valid and
enforceable lien and security interest in the
Securitization Property to the Trustee for the
benefit of the Securitization Bondholders, pursuant
to the Statue, the Financing Order and the Indenture
in connection with the issuance of the Securitization
Bonds; provided, however, that if a court of
competent jurisdiction determines that the provision
in this clause(e)(i) does not create a valid and
enforceable lien then
(ii) such sale, transfer, assignment and conveyance
shall be treated as a pledge of such Securitization
Property and the Seller shall be deemed to have
granted, and does hereby grant, as of the date hereof
a security interest to the Issuer in such
Securitization Property to secure a payment
obligation incurred by the Seller in the amount paid
by the Issuer for the Securitization Property.
SECTION 2.02 CONDITIONS TO CONVEYANCE OF SECURITIZATION
PROPERTY. The obligation of the Seller to sell, and the obligation of the
Issuer, to purchase Securitization Property upon any Transfer Date shall be
subject to and conditioned upon the satisfaction or waiver of each of the
following conditions:
(a) on or prior to the Transfer Date, the Seller shall deliver
to the Issuer a duly executed Xxxx of Sale identifying the Securitization
Property to be conveyed as of that date, substantially in the form of Exhibit A
hereto;
(b) as of the Transfer Date, no breach by the Seller of its
representations, warranties or covenants in this Agreement shall exist and the
Seller shall have delivered to the Issuer and the Trustee an Officer's
Certificate to such effect and no Servicer Default shall have occurred and be
continuing;
(c) as of the Transfer Date:
(i) the Issuer shall have sufficient funds available
to pay the purchase price for the Securitization Property to be
conveyed on such date, and
(ii) all conditions set forth in the Indenture to the
issuance of one or more Series of Securitization Bonds intended to
provide such funds shall have been satisfied or waived;
(d) on or prior to the Transfer Date, the Seller shall have
taken all actions required under the Statute, the Financing Order and the
Michigan UCC, including, without limitation, filings under the Michigan UCC to
transfer to the Issuer ownership of the Securitization Property
3
7
to be conveyed on such date, free and clear of all Liens other than Liens
created by the Issuer pursuant to the Indenture, and the Issuer shall have taken
any action required for the Issuer to grant to the Trustee a first priority
perfected security interest in the Collateral and maintain such security
interest as of such date;
(e) in the case of any sale of Subsequent Securitization
Property only, the Seller shall have provided the Issuer and each Rating Agency
with a notice specifying the Subsequent Transfer Date for the Subsequent
Securitization Property not later than 10 days prior to the Subsequent Transfer
Date;
(f) the Seller shall have delivered to each Rating Agency and
to the Issuer:
(i) an Opinion of Counsel to the Seller with respect
to the transfer of the Securitization Property then being conveyed to
the Issuer substantially in the form of Exhibit B hereto, and
(ii) an Opinion of Counsel to the Seller,
substantially in the form of Exhibit C hereto;
(g) the Seller shall have delivered to the Trustee and the
Issuer an Officer's Certificate confirming the satisfaction of each condition
precedent specified in this Section 2.02;
(h) with respect to any Subsequent Sale, the Seller shall have
taken any action necessary in order for the Rating Agency Condition to have been
satisfied; and
(i) the Seller shall have received the Initial Purchase Price
or the Subsequent Purchase Price, as applicable, in funds immediately available
on the applicable Transfer Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
As of the Transfer Date, the Seller makes the following
representations and warranties on which the Issuer has relied and will rely in
acquiring Securitization Property. The following representations and warranties
are made under existing law as in effect as of the Transfer Date. The Seller
shall not be in breach of any representation or warranty herein as a result of a
change in law occurring after the Transfer Date. The representations and
warranties shall survive the sale of Securitization Property to the Issuer and
the pledge thereof to the Trustee pursuant to the Indenture.
SECTION 3.01 ORGANIZATION AND GOOD STANDING. The Seller is a
corporation duly organized and in good standing under the laws of the State of
Michigan, with corporate power and authority to own its properties and conduct
its business as currently owned or conducted.
SECTION 3.02 DUE QUALIFICATION. The Seller is duly qualified
to do business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions, other than Michigan, in
which the ownership or lease of property or the
4
8
conduct of its business requires such qualifications, licenses or approvals
(except where the failure to so qualify and to obtain such licenses and
approvals would not be reasonably likely to have a material adverse effect on
the Seller's business, operations, assets, revenues, properties or prospects).
SECTION 3.03 POWER AND AUTHORITY. The Seller has the corporate
power and authority to execute and deliver this Agreement and to carry out its
terms; the Seller has full corporate power and authority to own the
Securitization Property and sell and assign the Securitization Property to the
Issuer, and the Seller has duly authorized such sale and assignment to the
Issuer by all necessary corporate action; and the execution, delivery and
performance of this Agreement has been duly authorized by the Seller by all
necessary corporate action.
SECTION 3.04 BINDING OBLIGATION. This Agreement constitutes a
legal, valid and binding obligation of the Seller enforceable against the Seller
in accordance with its terms subject to bankruptcy, receivership, insolvency,
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).
SECTION 3.05 NO VIOLATION. The consummation of the
transactions contemplated by this Agreement and the fulfillment of the terms
hereof do not conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time) a default
under, the articles of incorporation or by-laws of the Seller, or any indenture,
agreement or other instrument to which the Seller is a party or by which it is
bound; nor result in the creation or imposition of any Lien upon any of its
properties pursuant to the terms of any such indenture, agreement or other
instrument (except as contemplated in the Indenture and as set forth in Section
2.01(e) hereof); nor violate any law or any order, rule or regulation applicable
to the Seller of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over the Seller or its properties. The Securitization Property is not subject to
any Lien thereon, including under the Mortgage and Deed of Trust, dated October
1, 1924 (as amended and supplemented), of The Detroit Edison Company to First
Chicago Trust Company of New York, as successor trustee, other than the Liens
created pursuant to the Indenture and the Statute.
SECTION 3.06 NO PROCEEDINGS. Except as disclosed in writing by
the Seller to the Issuer, there are no proceedings or investigations pending or,
to the Seller's best knowledge, threatened, before any court, federal or state
regulatory body, administrative agency or other governmental instrumentality
having jurisdiction over the Seller or its properties:
(a) asserting the invalidity of any of the Basic Documents,
the Securitization Bonds, the Statute or the Financing Order;
(b) seeking to prevent the issuance of the Securitization
Bonds or the consummation of any of the transactions contemplated by the Basic
Documents or the Securitization Bonds;
(c) challenging the Seller's treatment of the Securitization
Bonds as debt of the Seller for federal and state tax purposes; or
5
9
(d) seeking any determination or ruling that could reasonably
be expected to materially and adversely affect the performance by the Seller of
its obligations under, or the validity or enforceability of, the Basic Documents
or the Securitization Bonds.
SECTION 3.07 APPROVALS. Except for the filing of financing
statements and continuation statements under the Michigan UCC, 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
Seller of this Agreement, the performance by the Seller of the transactions
contemplated hereby or the fulfillment by the Seller of the terms hereof, except
those that have been obtained or made and those that the Seller, in its capacity
as Servicer under the Servicing Agreement, is required to make in the future
pursuant to the Servicing Agreement and post closing filings required in
connection therewith.
SECTION 3.08 THE SECURITIZATION PROPERTY.
(a) Information. All information provided by the Seller to the
Issuer with respect to the Securitization Property is correct in all material
respects.
(b) Effect of Transfer. Each sale, transfer, assignment and
conveyance herein contemplated constitutes a sale or other absolute transfer, of
all right, title and interest of the Seller in, to and under the Securitization
Property from the Seller to the Issuer; upon execution and delivery of this
Agreement and the related Xxxx of Sale, the Seller will have no right, title or
interest in, to or under the Securitization Property; and the Securitization
Property would not be part of the estate of the Seller as debtor in the event of
the filing of a bankruptcy petition by or against the Seller under any
bankruptcy law.
(c) Transfer Filings. The Seller is the sole owner of the
Securitization Property sold to the Issuer on the Transfer Date; and the
Securitization Property will have been validly sold, assigned, transferred and
conveyed to the Issuer free and clear of all Liens other than Liens created by
the Issuer pursuant to the Indenture. All actions or filings, including filings
with the Michigan Secretary of State under the Michigan UCC, necessary in any
jurisdiction to give the Issuer a valid first priority perfected ownership
interest in the Securitization Property and to grant to the Trustee a first
priority perfected security interest in the Securitization Property, free and
clear of all Liens of the Seller or anyone else have been taken or made.
(d) Financing Order Irrevocable; Process Valid; No Litigation;
etc.
(i) The Financing Order has been issued by the MPSC
in accordance with the Statute, and such order and the process by
which it was issued comply with all applicable laws, rules and
regulations. The Financing Order has become effective pursuant to the
Statute and is, and as of the date of issuance of any Securitization
Bonds will be, in full force and effect and final and non-appealable.
(ii) As of the Series Issuance Date, the
Securitization Bonds of the related Series will be entitled to the
protections provided by the Statute and, in accordance with the
Statute, the Financing Order and the SB Charge authorized therein,
6
10
subject to the Periodic Adjustments to the SB Charge provided for in
the Financing Order, have become irrevocable.
(iii) (A) Under the Statute, the State of Michigan
may not take or permit any action that would impair the
value of Securitization Property, reduce or alter, except
for Periodic Adjustments, or impair the SB Charges to be
imposed, collected, and remitted to the Issuer, until the
principal, interest and premium, and any other charges
incurred and contracts to be performed in connection with
the Securitization Bonds have been paid and performed in
full (subject to the 15 year limitation upon the imposition
of SB Charges pursuant to the Statute and the Financing
Order); and
(B) under the contract clauses of the State
of Michigan and the United States constitutions, the State
of Michigan, including the MPSC, could not take any action
that substantially impairs the rights of the Securitization
Bondholders unless such action is a reasonable exercise of
the State of Michigan's sovereign powers and of a character
reasonable and appropriate to further a legitimate public
purpose, and, under the takings clauses of the State of
Michigan and the United States constitutions, the State of
Michigan could not repeal or amend the Statute or take any
other action in contravention of its pledge in Section
10n(2) of the Statute if such action constitutes a permanent
appropriation of the property interest of Securitization
Bondholders in the Securitization Property and deprives the
Securitization Bondholders of their reasonable expectations
arising from their investments in Securitization Bonds,
unless just compensation, as determined by a court of
competent jurisdiction, is provided to Securitization
Bondholders.
(iv) There is no order by any court providing for the
revocation, alteration, limitation or other impairment of the Statute,
the Financing Order, the Securitization Property or the SB Charge, or
any rights arising under any of them, or that seeks to enjoin the
performance of any obligations under the Financing Order which in any
way is adverse to the position of the Securitization Bondholders.
(v) No other 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 creation or
transfer of the Securitization Property, except those that have been
obtained or made and those that the Seller, in its capacity as
Servicer under the Servicing Agreement, is required to make in the
future pursuant to the Servicing Agreement and post closing filings
required in connection therewith.
(vi) Except as disclosed in current reports of the
Seller filed with the Commission, (a) there are no proceedings or
investigations pending, or to the best of the Seller's knowledge,
threatened before any court, federal or state regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Seller or the Issuer or their respective
properties challenging the Statute or the Financing Order and (b)
there is no voter referendum or initiative that has been filed with
the
7
11
Michigan Secretary of State or that, to the best of the Seller's
knowledge, is being circulated among voters which attempts to amend,
repeal or revoke the Statute in a manner that would impair the
security of the Securitization Bondholders.
(e) Assumptions. The assumptions used in calculating the
initial SB Charge pursuant to the Financing Order are reasonable and made in
good faith.
(f) Creation of Securitization Property.
(i) For purposes of the Statute and the Michigan UCC,
the Securitization Property constitutes a present property right;
(ii) the Securitization Property consists of (A) the
irrevocable right of the Seller to impose, collect and receive SB
Charges in the amount necessary to provide for full recovery of
principal of and interest on the Securitization Bonds, together with
Ongoing Other Qualified Costs; (B) the right under the Financing Order
to obtain Periodic Adjustments of the SB Charges; and (C) all
revenues, collections, payments, money and proceeds arising out of the
rights and interests described in (A) and (B); and
(iii) the Financing Order, including the right to
collect the SB Charge, has become irrevocable and not subject to
reduction, impairment or adjustment by further action of the MPSC,
except for Period Adjustments.
(g) Prospectus. As of the date hereof, the information
describing the Seller under the caption "The Seller and Servicer of the
Securitization Property" in the prospectus dated [ ], 2001 relating to the
Securitization Bonds is correct in all material respects.
SECTION 3.09 SOLVENCY. After giving effect to the sale of any
Securitization Property hereunder, the Seller:
(a) is solvent and expects to remain solvent;
(b) is adequately capitalized to conduct its business and
affairs considering its size and the nature of its business and intended
purposes;
(c) is not engaged and does expect to engage in a business for
which its remaining property represents an unreasonably small portion of its
capital;
(d) reasonably believes that it will be able to pay its debts
as they become due; and
(e) is able to pay its debts as they mature and does not
intend to incur, or believes that it will incur, indebtedness that it will not
be able to repay at its maturity.
8
12
ARTICLE IV
COVENANTS OF THE SELLER
SECTION 4.01 SELLER'S EXISTENCE. So long as any of the
Securitization Bonds are outstanding, the Seller shall keep in full force and
effect its existence as a corporation and remain in good standing under the laws
of the jurisdiction of its organization, and shall obtain and preserve its
qualification to do business in each jurisdiction in which such qualification is
or will be necessary to protect the validity and enforceability of this
Agreement and each other instrument or agreement to which the Seller is a party
necessary to the proper administration of this Agreement and the transactions
contemplated hereby.
SECTION 4.02 NO LIENS OR CONVEYANCES. Except for the
conveyances hereunder, the Seller shall not sell, pledge, assign or transfer to
any other Person, or grant, create, incur, assume or suffer to exist any Lien
on, any of the Securitization Property, whether now existing or hereafter
created, or any interest therein. The Seller shall not at any time assert any
Lien against or with respect to any Securitization Property, and shall defend
the right, title and interest of the Issuer and the Trustee, as assignee of the
Issuer, in, to and under the Securitization Property, whether now existing or
hereafter created, against all claims of third parties claiming through or under
the Seller.
SECTION 4.03 USE OF PROCEEDS. The Seller shall use proceeds
from the sale of the Securitization Property in accordance with the Financing
Order.
SECTION 4.04 DELIVERY OF COLLECTIONS. If the Seller receives
collections of the SB Charge with respect to the Securitization Property or the
proceeds thereof, the Seller shall pay the Servicer all payments received by the
Seller in respect thereof as soon as practicable after receipt thereof by the
Seller, but in no event later than two Business Days after such receipt.
SECTION 4.05 NOTICE OF LIENS. The Seller shall notify the
Issuer and the Trustee promptly after becoming aware of any Lien on any
Securitization Property other than the conveyances hereunder or under the
Indenture.
SECTION 4.06 COMPLIANCE WITH LAW. The Seller shall comply with
its organizational or governing documents and all laws, treaties, rules,
regulations and determinations of any governmental instrumentality applicable to
the Seller, except to the extent that failure to so comply would not adversely
affect the Issuer's or the Trustee's interests in the Securitization Property or
under any of the Basic Documents or the Seller's performance of its obligations
hereunder.
SECTION 4.07 COVENANTS RELATED TO SECURITIZATION PROPERTY.
(a) So long as any of the Securitization Bonds are
outstanding, the Seller shall:
(i) treat the Securitization Bonds as debt of the
Issuer and not the Seller, except for financial accounting or tax
reporting purposes;
9
13
(ii) disclose in its financial statements that it is
not the owner of the Securitization Property and that the assets of
the Issuer are not available to pay creditors of the Seller or any of
its Affiliates (other than the Issuer);
(iii) disclose the effects of all transactions
between the Seller and the Issuer in accordance with generally
accepted accounting principles; and
(iv) not own or purchase any Securitization Bonds.
(b) The Seller agrees that upon the sale by the Seller of the
Securitization Property to the Issuer pursuant to this Agreement:
(i) to the fullest extent permitted by law, including
the Statute and applicable MPSC Regulations, the Issuer shall have all
of the rights originally held by the Seller with respect to the
Securitization Property, including the right to collect any amounts
payable by any Customer in respect of such Securitization Property,
notwithstanding any objection or direction to the contrary by the
Seller; and
(ii) any payment by any Customer to the Issuer shall
discharge such Customer's obligations in respect of such
Securitization Property to the extent of such payment, notwithstanding
any objection or direction to the contrary by the Seller.
(c) So long as any of the Securitization Bonds are
Outstanding,
(i) in all proceedings relating directly or
indirectly to the Securitization Property the Seller shall: (A)
affirmatively certify and confirm that it has sold the Securitization
Property to the Issuer (other than for financial accounting or tax
reporting purposes), and (B) not make any statement or reference in
respect of the Securitization Property that is inconsistent with the
ownership thereof by the Issuer (other than as required for financial
accounting or tax reporting purposes); and
(ii) the Seller shall not take any action in respect
of the Securitization Property except as contemplated by the Basic
Documents.
(iii) the Seller shall not sell securitization
property under a separate financing order in connection with the
issuance of additional securitization bonds unless the Rating Agency
Condition is satisfied.
SECTION 4.08 PROTECTION OF TITLE. The Seller shall execute and
file such filings, and cause to be executed and filed such filings, and take all
such actions, all in such manner and in such places as may be required by law
fully to preserve, maintain, and protect the interests of the Issuer and the
Trustee in the Securitization Property, including all filings required under the
Michigan UCC relating to the transfer of the ownership of the Securitization
Property by the Seller to the Issuer and the pledge of the Securitization
Property by the Issuer to the Trustee. The Seller shall deliver (or cause to be
delivered) to the Issuer and the Trustee file-stamped copies of, or filing
receipts for, any document filed as provided above, as soon as available
following such filing. The Seller shall institute any action or proceeding
necessary to compel the performance by the MPSC or the State of Michigan of any
of their obligations or
10
14
duties under the Statute or the Financing Order, and the Seller agrees to take
such legal or administrative actions, including defending against or instituting
and pursuing legal actions and appearing or testifying at hearings or similar
proceedings, as may be reasonably necessary:
(a) to protect the Issuer and the Securitization Bondholders from
claims, state actions or other actions or proceedings of third
parties which, if successfully pursued, would result in a
breach of any representation set forth in Article III; or
(b) to block or overturn any attempts to cause a repeal of,
modification of or supplement to the Statute, the Financing
Order, or the rights of Securitization Bondholders by
legislative enactment or constitutional amendment that would
be adverse to the Issuer, the Trustee or the Securitization
Bondholders.
The costs of any such actions or proceedings shall be reimbursed by the Issuer
to the Seller from amounts on deposit in the Collection Account as an Operating
Expense. The Seller's obligations pursuant to this Section 4.08 shall survive
and continue notwithstanding that the payment of Operating Expenses pursuant to
the Indenture may be delayed (it being understood and agreed that the Seller may
be required to temporarily advance its own funds to satisfy its obligations
hereunder). The Seller designates the Issuer as its agent and attorney-in-fact
to execute any filings of financing statements, continuation statements or other
instruments required of the Issuer pursuant to this Section, it being understood
that the Issuer shall have no obligation to execute any such instruments.
SECTION 4.09 TAXES. So long as any of the Securitization Bonds
are outstanding, the Seller shall, and shall cause each of its subsidiaries to,
pay all material taxes, assessments and governmental charges imposed upon it or
any of its properties or assets or with respect to any of its franchises,
business, income or property before any penalty accrues thereon if the failure
to pay any such taxes, assessments and governmental charges would, after any
applicable grace periods, notices or other similar requirements, result in a
Lien on the Securitization Property; provided that no such tax need be paid if
the Seller or one of its Affiliates is contesting the same in good faith by
appropriate proceedings promptly instituted and diligently conducted and if the
Seller or such Affiliate has established appropriate reserves as shall be
required in conformity with generally accepted accounting principles.
SECTION 4.10 ALTERNATIVE ELECTRIC SUPPLIERS. So long as any of
the Securitization Bonds are outstanding, the Seller shall not permit any AES to
xxxx or collect SB Charges on behalf of the Issuer unless required by applicable
law or regulation and, to the extent permitted by applicable law or regulation,
the Rating Agency Condition is satisfied.
SECTION 4.11 FILINGS PURSUANT TO FINANCING ORDER. The Seller
shall comply with all filing requirements, including any making post closing
filings, in accordance with the Financing Order.
11
15
ARTICLE V
ADDITIONAL UNDERTAKINGS OF THE SELLER
The Seller hereby undertakes the obligations contained in this
Article V and agrees that the Issuer shall have the right to assign its rights
with respect to such obligations to the Trustee for the benefit of the
Securitization Bondholders.
SECTION 5.01 LIABILITY OF THE SELLER; INDEMNITIES.
(a) The Seller shall be liable in accordance herewith only to
the extent of the obligations specifically undertaken by the Seller under this
Agreement.
(b) The Seller shall indemnify the Issuer and the Trustee, for
itself and on behalf of the Securitization Bondholders, and each of the Issuer's
and the Trustee's respective officers, directors, managers, employees and agents
for, and defend and hold harmless each such Person from and against, any and all
taxes (other than any taxes imposed on Securitization Bondholders solely as a
result of their ownership of Securitization Bonds) that may at any time be
imposed on or asserted against any such Person under existing law as of any
Transfer Date as a result of the sale and assignment of the Securitization
Property by the Seller to the Issuer, the acquisition or holding of the
Securitization Property by the Issuer or the issuance and sale by the Issuer of
the Securitization Bonds, including any sales, gross receipts, general
corporation, single business, personal property, privilege, franchise or
license taxes, but excluding any taxes imposed as a result of a failure of such
person to properly withhold or remit taxes imposed with respect to payments on
any Securitization Bond, it being understood that the Securitization Bondholders
shall be entitled to enforce their rights against the Seller under this Section
5.01(b) solely through a cause of action brought for their benefit by the
Trustee.
(c) The Seller shall indemnify the Issuer and the Trustee, for
itself and on behalf of the Securitization Bondholders, and each of the Issuer's
and the Trustee's respective officers, directors, managers, employees and agents
for, and defend and hold harmless each such Person from and against, (i) any and
all amounts of principal of and interest on the Securitization Bonds not paid
when due or when scheduled to be paid in accordance with their terms and the
amount of any deposits to the Issuer required to have been made in accordance
with the terms of the Basic Documents which are not made when so required, in
each case as a result of the Seller's breach of any of its representations,
warranties or covenants contained in this Agreement, and (ii) any and all
liabilities, obligations, claims, actions, suits or payments of any kind
whatsoever that may be imposed on or asserted against any such Person, other
than any liabilities, obligations or claims for or payments of principal of or
interest on the Securitization Bonds, together with any reasonable costs and
expenses incurred by such Person, as a result of the Seller's breach of any of
its representations, warranties or covenants contained in this Agreement.
(d) The Seller shall pay any and all taxes levied or assessed
upon all or any part of the Issuer's property or assets based on existing law as
of the Transfer Date.
12
16
(e) Notwithstanding Section 5.01(b) and (c) above, the Seller
shall not be liable for any consequential damages, including any loss of market
value of the Securitization Bonds, resulting from any downgrade of the ratings
of the Securitization Bonds.
(f) Indemnification under this Section 5.01 shall survive the
resignation or removal of the Trustee and the termination of this Agreement and
shall include reasonable fees and expenses of investigation and litigation
(including reasonable attorneys' fees and expenses). The Seller shall not
indemnify any party under this Section 5.01 for any changes in law after the
Transfer Date.
(g) The indemnification obligation of the Seller under this
Section 5.01 shall be pari passu with all other general unsecured obligations of
the Seller.
SECTION 5.02 MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, THE SELLER. Any Person:
(a) into which the Seller may be merged or consolidated and which
succeeds to all or the major part of the electric distribution
business of the Seller,
(b) which results from the division of the Seller into two or more
Persons and which succeeds to all or the major part of the
electric distribution business of the Seller,
(c) which may result from any merger or consolidation to which the
Seller shall be a party and which succeeds to all or the major
part of the electric distribution business of the Seller,
(d) which may succeed to the properties and assets of the Seller
substantially as a whole and which succeeds to all or the
major part of the electric distribution business of the
Seller, or
(e) which may otherwise succeed to all or the major part of the
electric distribution business of the Seller,
which Person in any of the foregoing cases executes an agreement of assumption
to perform every obligation of the Seller under this Agreement, shall be the
successor to the Seller hereunder without the execution or filing of any
document or any further act by any of the parties to this Agreement; provided,
however, that
(i) immediately after giving effect to such transaction, no
representation or warranty made pursuant to Article III shall
have been breached and no Servicer Default, and no event that,
after notice or lapse of time, or both, would become a
Servicer Default, shall have occurred and be continuing,
(ii) the Seller shall have delivered to the Issuer and the Trustee
an Officer's Certificate and an Opinion of Counsel each
stating that such consolidation, merger or succession and such
agreement of assumption comply with this Section 5.02 and that
all conditions precedent, if any, provided for in this
Agreement relating to such transaction have been complied
with,
13
17
(iii) the Seller shall have delivered to the Issuer and the Trustee
an Opinion of Counsel either
(A) stating that, in the opinion of such counsel, all
filings to be made by the Seller, including Michigan UCC
filings, that are necessary fully to preserve and protect
fully the respective interests of the Issuer and the Trustee
in the Securitization Property have been executed and filed,
and reciting the details of such filings, or
(B) stating that, in the opinion of such counsel, no
such action is necessary to preserve and protect such
interests,
(iv) the Rating Agencies shall have received prior written notice
of such transaction; and
(v) the Seller shall have delivered to the Issuer and the Trustee
an opinion of independent tax counsel (as selected by, and in
form and substance reasonably satisfactory to, the Seller, and
which may be based on a ruling from the Internal Revenue
Service) to the effect that, for federal income tax purposes,
such consolidation or merger will not result in a material
adverse federal income tax consequence to the Seller, the
Issuer, the Trustee or the holders of the Outstanding
Securitization Bonds.
The Seller shall not consummate any transaction referred to in clauses (a), (b),
(c), (d) or (e) above except upon execution of the above described agreement of
assumption and compliance with clauses (i), (ii), (iii), (iv) and (v) above.
When any Person acquires the properties and assets of the Seller substantially
as a whole and becomes the successor to the Seller in accordance with the terms
of this Section 5.02, then upon the satisfaction of all of the other conditions
of this Section 5.02, the Seller shall automatically and without further notice
be released from its obligations hereunder.
SECTION 5.03 LIMITATION ON LIABILITY OF THE SELLER AND OTHERS.
The Seller and any director, officer, employee or agent of the Seller may rely
in good faith on the advice of counsel or on any document of any kind, prima
facie properly executed and submitted by any Person, respecting any matters
arising hereunder. Subject to Section 4.08, the Seller shall not be under any
obligation to appear in, prosecute or defend any legal action that is not
incidental to its obligations under this Agreement, and that in its opinion may
involve it in any expense or liability.
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 6.01 AMENDMENT.
(a) This Agreement may be amended by the Seller and the
Issuer, with the consent of the Trustee and the satisfaction of the Rating
Agency Condition. Promptly after the
14
18
execution of any such amendment or consent, the Issuer shall furnish written
notification of the substance of such amendment or consent to each of the Rating
Agencies.
(b) Prior to the execution of any amendment to this Agreement,
the Issuer and the Trustee 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. The Issuer and the Trustee 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 6.02 NOTICES. Unless otherwise specifically provided
herein, all notices, directions, consents and waivers required under the terms
and provisions of this Agreement shall be in English and in writing, and any
such notice, direction, consent or waiver may be given by United States
first-class mail, reputable overnight courier service, facsimile transmission or
electronic mail (confirmed by telephone, United States first-class mail or
reputable overnight courier service in the case of notice by facsimile
transmission or electronic mail) or any other customary means of communication,
and any such notice, direction, consent or waiver shall be effective when
delivered or transmitted, or if mailed, five days after deposit in the United
States first-class mail with proper postage for first-class mail prepaid:
(a) in the case of the Seller, at The Detroit Edison Company, 0000
0xx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000-0000, Attention:
Corporate Secretary,
(b) in the case of the Issuer, at The Detroit Edison
Securitization Funding LLC, 0000 0xx Xxxxxx, 000 XXX, Xxxxxxx,
Xxxxxxxx 00000-0000, Attention: Secretary,
(c) in the case of Moody's, at Xxxxx'x Investors Service, Inc.,
ABS Monitoring Department, 00 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000,
(d) in the case of Standard & Poor's, at Standard & Poor's Ratings
Services, 00 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention: Asset Backed Surveillance Department,
(e) in the case of Fitch, at Fitch, Inc., 0 Xxxxx Xxxxxx Xxxxx,
Xxx Xxxx, Xxx Xxxx 00000, Attention: ABS Surveillance, and
(f) in the case of the Trustee, at the address provided for
notices or communications to the Trustee in the Indenture;
or, as to each of the foregoing, at such other address as shall be designated by
written notice to the other parties.
SECTION 6.03 ASSIGNMENT BY SELLER. Subject to Section 5.02,
this Agreement may not be assigned by the Seller.
SECTION 6.04 ASSIGNMENT TO TRUSTEE. The Seller hereby
acknowledges and consents to any pledge, assignment and grant of a security
interest by the Issuer to the Trustee pursuant to the Indenture for the benefit
of the Securitization Bondholders of all right, title and
15
19
interest of the Issuer in, to and under the Securitization Property and the
proceeds thereof and the assignment of any or all of the Issuer's rights
hereunder to the Trustee.
SECTION 6.05 LIMITATIONS ON RIGHTS OF OTHERS. The provisions
of this Agreement are solely for the benefit of the Seller, the Issuer and the
Trustee, on behalf of itself and the Securitization 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 the Collateral or
under or in respect of this Agreement or any covenants, conditions or provisions
contained herein.
SECTION 6.06 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 shall not invalidate or
render unenforceable such provision in any other jurisdiction.
SECTION 6.07 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 6.08 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 6.09 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF MICHIGAN, WITHOUT REFERENCE TO ITS
CONFLICT OF LAWS PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 6.10 NONPETITION COVENANT. Notwithstanding any prior
termination of this Agreement or the Indenture, the Seller hereby covenants and
agrees that it shall not, prior to the date which is one year and one day after
the termination of the Indenture and the payment in full of the Securitization
Bonds, any other amounts owed under the Indenture, including, without
limitation, any amounts owed to third-party credit enhancers, and any amounts
owed under any Hedge Agreement or Interest Rate Swap Agreement, acquiesce,
petition or otherwise invoke or cause the Issuer to invoke the process of any
court or government authority for the purpose of commencing or, sustaining a
case against, the 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 the Issuer or any substantial part of
the property of the Issuer, or ordering the winding up or liquidation of the
affairs of the Issuer.
16
20
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their respective duly authorized
officers as of the date and year first above written.
THE DETROIT EDISON
SECURITIZATION FUNDING LLC,
as Issuer
By:
----------------------------
Name:
Title:
THE DETROIT EDISON COMPANY,
as Seller
By:
----------------------------
Name:
Title:
21
EXHIBIT A
XXXX OF SALE
For good and valuable consideration the receipt of which is
hereby acknowledged, THE DETROIT EDISON COMPANY, a Michigan corporation (the
"Seller"), does hereby sell, assign, transfer and convey to THE DETROIT EDISON
SECURITIZATION FUNDING LLC, a Michigan limited liability company (the "Issuer"),
without recourse except as provided in the Sale Agreement referred to below, all
of the Seller's right, title and interest in, to and under the Securitization
Property identified as follows: ______, which sale, assignment, transfer and
conveyance of the Securitization Property shall include, as provided in the
Statute, the sale, assignment, transfer and conveyance of all of the Seller's
right, title and interest in, to and under all revenues, collections, payments,
money or proceeds arising under or with respect to the SB Charge related to the
Securitization Property, as such SB Charge may be adjusted from time to time in
accordance with the Statute and the Financing Order, to have and to hold the
same unto the Issuer and to the successors and assigns of the Issuer, forever.
Capitalized terms used herein and not defined shall have the
meanings set forth in the Securitization Property Sale Agreement dated [ ] (the
"Sale Agreement") between the Issuer and the Seller.
IN WITNESS WHEREOF, the Seller has duly executed and delivered
this Xxxx of Sale this [ ]th day of [ ].
THE DETROIT EDISON COMPANY,
as Seller
By:
-------------------------
Name:
Title:
Accepted this [ ]th day of [ ].
THE DETROIT EDISON SECURITIZATION FUNDING LLC
By:
-----------------------------
Name:
Title:
A-1
