Exhibit 10.2
TRANSITION PROPERTY SERVICING AGREEMENT
between
RELIANT ENERGY TRANSITION BOND COMPANY LLC
Issuer
and
RELIANT ENERGY, INCORPORATED
Servicer
Dated as of October 24, 2001
Table of Contents
ARTICLE I DEFINITIONS .............................................................. 1
SECTION 1.01. DEFINITIONS ......................................................... 1
SECTION 1.02. OTHER DEFINITIONAL PROVISIONS ....................................... 1
ARTICLE II APPOINTMENT AND AUTHORIZATION OF SERVICER ............................... 2
SECTION 2.01. APPOINTMENT OF THE SERVICER; ACCEPTANCE OF APPOINTMENT .............. 2
SECTION 2.02. AUTHORIZATION ....................................................... 2
SECTION 2.03. DOMINION AND CONTROL OVER TRANSITION PROPERTY ....................... 2
ARTICLE III BILLING SERVICES ....................................................... 3
SECTION 3.01. DUTIES OF THE SERVICER .............................................. 3
SECTION 3.02. COLLECTION AND ALLOCATION OF TRANSITION CHARGES ..................... 5
SECTION 3.03. PAYMENT OF TC COLLECTIONS ........................................... 5
SECTION 3.04. SERVICING AND MAINTENANCE STANDARDS ................................. 7
SECTION 3.05. SERVICER'S CERTIFICATES ............................................. 8
SECTION 3.06. ANNUAL STATEMENT AS TO COMPLIANCE; NOTICE OF DEFAULT ................ 8
SECTION 3.07. ANNUAL INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REPORT ............. 8
SECTION 3.08. TRANSITION PROPERTY DOCUMENTATION ................................... 9
SECTION 3.09. COMPUTER RECORDS; AUDITS OF DOCUMENTATION ........................... 9
SECTION 3.10. DEFENDING TRANSITION PROPERTY AGAINST CLAIMS ........................ 10
SECTION 3.11. OPINIONS OF COUNSEL ................................................. 10
ARTICLE IV SERVICES RELATED TO TRANSITION CHARGE ADJUSTMENTS AND RAAF
ADJUSTMENTS ........................................................................ 11
SECTION 4.01. TRANSITION CHARGE ADJUSTMENTS AND RAAF ADJUSTMENTS .................. 11
ARTICLE V THE SERVICER ............................................................. 11
SECTION 5.01. REPRESENTATIONS AND WARRANTIES OF THE SERVICER ...................... 11
SECTION 5.02. INDEMNITIES OF THE SERVICER; RELEASE OF CLAIMS ...................... 14
SECTION 5.03. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF,
THE SERVICER ...................................................................... 16
SECTION 5.04. ASSIGNMENT OF THE SERVICER'S OBLIGATIONS ............................ 17
SECTION 5.05. LIMITATION ON LIABILITY OF THE SERVICER AND OTHERS .................. 17
SECTION 5.06. RELIANT ENERGY NOT TO RESIGN AS SERVICER ............................ 18
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SECTION 5.07. SERVICING FEE ........................................... 18
SECTION 5.08. SERVICER EXPENSES ....................................... 19
SECTION 5.09. APPOINTMENTS ............................................ 19
SECTION 5.10. NO SERVICER ADVANCES .................................... 19
SECTION 5.11. REMITTANCES ............................................. 19
SECTION 5.12. PROTECTION OF TITLE ..................................... 20
ARTICLE VI SERVICER DEFAULT ............................................ 20
SECTION 6.01. SERVICER DEFAULT ........................................ 20
SECTION 6.02. NOTICE OF SERVICER DEFAULT .............................. 22
SECTION 6.03. WAIVER OF PAST DEFAULTS ................................. 22
SECTION 6.04. APPOINTMENT OF SUCCESSOR ................................ 22
SECTION 6.05. COOPERATION WITH SUCCESSOR .............................. 23
ARTICLE VII MISCELLANEOUS PROVISIONS ................................... 23
SECTION 7.01. AMENDMENT ............................................... 23
SECTION 7.02. NOTICES ................................................. 23
SECTION 7.03. ASSIGNMENT .............................................. 24
SECTION 7.04. LIMITATIONS ON RIGHTS OF OTHERS ......................... 24
SECTION 7.05. SEVERABILITY ............................................ 24
SECTION 7.06. SEPARATE COUNTERPARTS ................................... 24
SECTION 7.07. HEADINGS ................................................ 25
SECTION 7.08. GOVERNING LAW ........................................... 25
SECTION 7.09. ASSIGNMENT TO THE TRUSTEE ............................... 25
SECTION 7.10. NONPETITION COVENANTS ................................... 25
SECTION 7.11. TERMINATION ............................................. 25
SECTION 7.12. IMPLEMENTATION OF TEXAS ELECTRIC CHOICE PLAN ............ 25
SECTION 7.13. PUCT CONSENT ............................................ 25
SECTION 7.14. EFFECT OF SUBSEQUENT PUCT REGULATIONS ................... 26
SCHEDULE A TO SERVICING AGREEMENT
ANNEX 1 TO SERVICING AGREEMENT
APPENDIX A - MASTER DEFINITIONS
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TRANSITION PROPERTY SERVICING AGREEMENT dated as of October 24, 2001 (this
"Agreement") between RELIANT ENERGY TRANSITION BOND COMPANY LLC, a Delaware
limited liability company (the "Issuer"), and RELIANT ENERGY, INCORPORATED, a
Texas corporation ("Reliant Energy"), as the servicer of the Transition Property
hereunder (together with each successor to Reliant Energy in such capacity
pursuant to Section 5.03 or 6.04, the "Servicer").
WHEREAS the Servicer is willing to service the Transition Property
purchased from the Seller by the Issuer;
WHEREAS the Issuer, in connection with ownership of the Transition
Property, desires to engage the Servicer to carry out the functions described
herein;
WHEREAS, the Texas Electric Choice Plan allows for customer choice in
the selection of electric-service providers beginning in January 2002, subject
to delay under certain circumstances (the first date of such customer choice to
be referred to as "Choice");
WHEREAS, the Texas Electric Choice Plan allows for customer choice in
the selection of electric-service providers during a pilot program that began in
July 2001 (the "Pilot Program"), and during the Pilot Program both Reliant
Energy and certain REPs may provide electric service to various Customers;
WHEREAS, the Transition Charges may not be itemized on Customers' bills
and the TC Collections initially will be commingled with other funds collected
from Customers and REPs (as applicable); and
WHEREAS, a number of parties may have an interest in such commingled
collections, and such parties have entered into an Intercreditor Agreement as of
the date hereof that allows the party acting as both the Servicer and the
Receivables Servicer to allocate the collected, commingled funds according to
each interested party's interest;
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:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS. Capitalized terms used but not otherwise
defined in this Agreement have the respective meanings set forth in Appendix A
hereto.
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 references to Sections,
Annexes, Schedules and Exhibits in or to this Agreement unless otherwise
specified; and the term "including" shall mean "including without limitation."
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(b) The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms.
(c) All terms defined in this Agreement have the defined meanings
when used in any certificate or other document made or delivered pursuant to
this Agreement unless otherwise defined therein.
ARTICLE II
APPOINTMENT AND AUTHORIZATION OF SERVICER
SECTION 2.01. APPOINTMENT OF THE SERVICER; ACCEPTANCE OF APPOINTMENT.
Subject to Section 5.04, Section 5.06 and Article VI, the 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 the 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
Transition Property, the Servicer shall be, and hereby is, authorized and
empowered by the Issuer to:
(a) execute and deliver, on behalf of itself or the Issuer, as the
case may be, any and all instruments, documents or notices, and
(b) on behalf of itself or the Issuer, as the case may be, make any
filing and participate in Proceedings related to the duties of the Servicer
hereunder with any governmental authorities, including with the PUCT.
The Issuer shall furnish the Servicer with such documents as have been
prepared by the Servicer for execution by the Issuer, and with such other
documents as may be in the 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, the 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 TRANSITION PROPERTY.
Notwithstanding any other provision contained herein, the Servicer and the
Issuer agree that the Issuer shall have dominion and control over the Transition
Property, and the Servicer, in accordance with the terms hereof, is acting
solely as the servicing agent of the Issuer with respect to the Transition
Property. The Servicer hereby agrees that it shall not take any action that is
not authorized by this Agreement, the Texas Electric Choice Plan or the
Financing Order, that is not consistent with its customary procedures and
practices, or that shall impair the rights of the Issuer with respect to the
Transition Property, in each case unless such action is required by law or court
or regulatory order.
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ARTICLE III
BILLING SERVICES
SECTION 3.01. DUTIES OF THE SERVICER. The Servicer, as agent for the
Issuer (to the extent provided herein), shall have the following duties:
(a) Duties of Servicer Generally. The Servicer shall manage,
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service, administer and make collections in respect of the Transition Property.
The Servicer's duties will include:
(i) obtaining meter reads and providing such metering
information to the REPs, as applicable (unless another entity assumes
metering responsibilities in accordance with the Financing Order,
applicable tariffs or the Texas Electric Choice Plan);
(ii) calculating and billing the Transition Charges;
(iii) collecting payments of Transition Charges and payments with
respect to Transition Property from all persons or entities responsible
for remitting Transition Charges and other payments with respect to
Transition Property to the Servicer under the Financing Order, the
Texas Electric Choice Plan, PUCT Regulations or applicable tariffs;
provided, however, the Issuer and the Servicer acknowledge and agree
that pursuant to the Intercreditor Agreement, payments in respect of
Transition Charges and Transition Property may be deposited initially
into an account held and processed by Reliant Energy in its individual
capacity for the benefit of the Servicer, and that Reliant Energy in
its individual capacity may be replaced as the holder of such account
by a Replacement Servicer or Designated Account Holder as those terms
are defined and as set forth more fully in the Intercreditor Agreement;
(iv) posting all TC Collections remitted to the Servicer and
posting all late-payment penalties assessed against REPs (as described
in Section 3.02);
(v) responding to inquiries by Customers, REPs, the PUCT or any
other State, local or federal governmental authority with respect to
the Transition Property and the Transition Charges;
(vi) accounting for TC Collections and late-payment penalties of
REPs, investigating and resolving delinquencies (including, where
permitted by the Financing Order, Tariff TC and/or PUCT Regulations,
terminating transmission and distribution service for nonpayment of
charges), processing and depositing collections, making periodic
remittances to the Trustee and furnishing periodic reports to the
Issuer, the Trustee and each Rating Agency;
(vii) providing certified calculations and other information
reasonably requested by any party to the Intercreditor Agreement to
allow such party to perform its duties properly under the Intercreditor
Agreement and monitoring collections, allocations and remittances of
funds for compliance with the Intercreditor Agreement;
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(viii) providing information reasonably requested by Reliant
Energy in connection with the allocation of collections between
Transition Charges and Transition Property on one hand, and other
charges and fees on the other;
(ix) monitoring payments by each REP, reviewing any financial
reports provided by each REP and monitoring compliance by each REP with
the credit standards and deposit obligations set forth in the Financing
Order;
(x) notifying each REP of any defaults by such REP in its
payment obligations and other obligations (including its credit
standards) under Tariff TC, and enforcing against such REP at the
earliest date permitted by the Financing Order and Tariff TC any
remedies provided by such Tariff TC, the Financing Order or other
applicable law;
(xi) selling, as the agent for the Issuer, as its interest may
appear, defaulted or written off accounts in accordance with the
Servicer's usual and customary practices;
(xii) taking action in connection with Transition Charge
Adjustments and RAAF Adjustments as is set forth herein; and
(xiii) any other duties specified for a servicer under the
Financing Order, Tariff TC, the Texas Electric Choice Plan or other
applicable law.
Anything to the contrary notwithstanding, the duties of the Servicer
set forth in this Agreement shall be qualified in their entirety by, and the
Servicer shall at all times comply with, the Financing Order, the Texas Electric
Choice Plan and any PUCT Regulations, orders or directions 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
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immediately notify the Issuer, the Trustee and each Rating Agency in writing of
any laws or PUCT Regulations, orders or directions 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 the
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Issuer, the Trustee or any Rating Agency, the Servicer shall provide to the
Issuer, the Trustee or such Rating Agency, as the case may be, any public
financial information in respect of the Servicer, or any material information
regarding the Transition Property to the extent it is reasonably available to
the Servicer, that may be reasonably necessary and permitted by law for the
Issuer, the Trustee or the 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 to the Issuer and to the
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 Transition Charges applicable to each Customer Class.
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SECTION 3.02. COLLECTION AND ALLOCATION OF TRANSITION CHARGES.
(a) The Servicer shall use all reasonable efforts to collect all
amounts owed in respect of Transition Charges and late-payment penalties (as set
forth in Section 3.02(c) below) 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
Transition Charges, except as contemplated in this Agreement or as required by
law or court or PUCT order or directive. The Servicer shall enforce at the
earliest possible date the obligations with respect to the Transition Charges of
each REP and each other Person owing or collecting Transition Charges, provided
that any REP shall be entitled to hold back from its payment of Transition
Charges to the Servicer an allowance for charge-offs according to the procedure
and calculations set forth in the Financing Order, Tariff TC and the Issuer
Annex.
(b) Any amounts received into a lockbox or other account
controlled by the Servicer in the event of a default by an REP (as defined in
the Financing Order and Tariff TC) that represent a partial payment toward an
outstanding customer balance will be allocated first to Transition Charges and,
second, pro rata to other fees and charges, as specified in Tariff TC and
Finding of Fact No. 50(e)(3) in the Financing Order. Other than as described in
the preceding sentence, if a Customer or REP pays only a portion of its xxxx, a
pro rata portion of Transition Charge revenues shall be deemed to be collected,
and any such partial payment will be allocated, first, ratably based on the
amount owed for Transition Charges and the amount owed for other fees and
charges, other than late charges, owed to Reliant Energy or any successor and,
second, any remaining portion of such partial payment shall be allocated as late
charges to Reliant Energy or any successor.
(c) If an REP fails to remit payment in full of all Transition
Charges billed to such REP by the close of business on the day that is 35
calendar days after the date on which the Transition Charges were billed to the
REP ("REP Billing Day"), the Servicer shall assess and collect a late-payment
penalty (the "Penalty") from such REP on the 36th day following the REP Billing
Day (the "Penalty Assessment Day"). The amount of such late-payment penalty
shall be 5% of the amount of TC Collections that were billed on the REP Billing
Day and not paid on or before the calendar day immediately preceding the Penalty
Assessment Day. All amounts collected in respect of Penalties shall be paid to
the Trustee for deposit in the Collection Account and shall be applied against
Transition Bond obligations. Disputes regarding whether and when an REP has made
payment of billed Transition Charges shall be resolved in accordance with
Section 8(b) of the Issuer Annex.
SECTION 3.03. PAYMENT OF TC COLLECTIONS.
(a) The Servicer shall prepare and deliver at Closing a
Collections Curve for collections arising from bills sent during each Billing
Month that is to occur from and including the Billing Month in which Closing
occurs through and including the Billing Month that includes the beginning of
Choice, inclusive (each such month, a "Pre-Choice Billing Month").
(b) Prior to Choice and through the Billing Month that is seven
months after Choice but excluding any TC Collections with respect to any Pilot
Program,
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(i) The Servicer agrees to remit actual TC Collections received
by the Servicer with respect to any Pre-Choice Billing Month to the
Trustee for deposit in the Collection Account not later than the
Remittance Date immediately following the Reconciliation Date for such
Pre-Choice Billing Month. In addition, the Servicer shall make periodic
payments on account of TC Collections with respect to each Pre-Choice
Billing Month to the Trustee for deposit in the Collection Account as
follows:
(A) On each Monthly Remittance Date, for so long as the
Servicer is in satisfaction of the conditions of Section 5.11(b),
the Servicer shall remit to the Trustee with respect to each
Pre-Choice Billing Month the amount of TC Collections estimated
to have been received by the Servicer from Customers during the
calendar month immediately preceding the Current Remittance
Month, based on the applicable Collections Curve then in effect
for the Customer Classes, for the Pre-Choice Billing Months, plus
any Accrued Interest thereon from the date such TC Collections
are estimated to have been received pursuant to this Section
3.03(b)(i)(A). For purposes of the foregoing, no TC Collections
shall be deemed to have been received in the Current Remittance
Month with respect to any Pre-Choice Billing Month that is more
than six months prior to the Current Remittance Month.
(B) On each Daily Remittance Date, for so long as the
Servicer is not in satisfaction of the conditions of Section
5.11(b), the Servicer shall remit to the Trustee with respect to
the Pre-Choice Billing Months the amount of TC Collections
estimated to have been received by the Servicer from Customers on
such Daily Remittance Date with respect to the Pre-Choice Billing
Months, including any amounts on deposit with the Servicer prior
to such Daily Remittance Date during a period when the Servicer
had been remitting on a Monthly Remittance Date, plus Accrued
Interest thereon from the date such TC Collections are estimated
to have been received pursuant to this Section 3.03(b)(i)(B),
provided that for each such Pre-Choice Billing Month, such
estimate of TC Collections shall be made by dividing (1) the
amount of TC Collections estimated to be received from Customers
during the Current Remittance Month, based on the applicable
Collections Curve then in effect, for each of the Pre-Choice
Billing Months divided by (2) the number of Business Days in the
Current Remittance Month. For purposes of the foregoing, no TC
Collections shall be deemed to have been received in the Current
Remittance Month with respect to any Pre-Choice Billing Month
that is more than seven months prior to the Current Remittance
Month.
(ii) On or before the Reconciliation Date for each Pre-Choice
Billing Month, the Servicer shall determine whether there exists a
Curve Payment Shortfall or an Excess Curve Payment with respect to
such Billing Month by comparing the actual TC Collections of the
Servicer with respect to such Billing Month to the Collections Curve
Payments previously made by the Servicer to the Trustee in respect of
such Billing Month. In the event there is a Curve Payment Shortfall
with respect to such Billing Month, the Servicer shall pay the Curve
Payment Shortfall to the Trustee for deposit into the Collection
Account on that Reconciliation Date. In the event that there is an
Excess
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Curve Payment for the applicable Billing Month, the Servicer may (i)
reduce the amount that the Servicer is required to remit to the Trustee
for deposit in the Collection Account on the corresponding Remittance
Date (and, if necessary, succeeding Remittance Dates) by the amount of
the Excess Curve Payment plus the amount of Accrued Interest originally
paid by the Servicer to the Trustee thereon upon written notice to the
Trustee, or (ii) require the Trustee by written direction to pay to the
Servicer from the Collection Account the amount of the Excess Curve
Payment plus the amount of Accrued Interest originally paid by the
Servicer to the Trustee thereon, which payment shall become the
property of the Servicer.
(c) During any Pilot Program (with respect to TC Collections
attributable to such Pilot Program) and beginning with Choice,
(i) the Servicer shall collect and remit to the Trustee for
deposit in the Collection Account on a monthly or daily basis in
accordance with Section 5.11(a) or 5.11(b), as the case may be, the
Transition Charges plus Accrued Interest thereon from the date or dates
such Transition Charges were actually received in accordance with
Section 3.02 upon receipt of such collection from any source; provided
that
(ii) the Servicer shall follow the procedure for making payments
of actual TC Collections and TC Collections on account to the Trustee
as set forth in Section 3.03(b) for the time period set forth therein
in respect of Transition Charges collected by the Servicer from (A)
Customers and others required to pay Transition Charges who are not
receiving electric service from an REP during any Pilot Program and (B)
Customers and others required to pay Transition Charges who are
receiving electric service from an REP during any Pilot Program or
beginning with Choice but maintain outstanding balances of Transition
Charges and/or other charges and fees from the period prior to such
Pilot Program or Choice, which outstanding balances are billed and
collected by an entity other than such REP.
(d) The Servicer agrees and acknowledges that it will hold all
TC Collections and other Transition Property collected by it for the benefit of
the Issuer and the Trustee and that all amounts will be remitted by the Servicer
in accordance with this Agreement without any surcharge, fee, offset, charge or
other deduction other than as expressly permitted in the Financing Order or
Section 3.03(b)(ii) of this Agreement and without making any claim to reduce its
obligation to remit all TC Collections and any other proceeds of the Transition
Property collected by it.
SECTION 3.04. SERVICING AND MAINTENANCE STANDARDS. The Servicer shall,
on behalf of the Issuer:
(a) manage, service, administer and make collections in respect
of the Transition Property with reasonable care and in material compliance with
applicable law, including without limitation all applicable PUCT Regulations and
guidelines, using the highest degree of care and diligence that the Servicer
exercises with respect to billing and collection activities that the Servicer
conducts for itself and others;
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(b) follow standards, policies and procedures in performing its
duties as Servicer that are customary in the electric transmission and
distribution industry or that the PUCT has mandated and consistent with the
terms and provisions of the Financing Order, Tariff TC and existing law;
(c) use all reasonable efforts to enforce and maintain the
Issuer's and the Trustee's rights in respect of the Transition Property;
(d) calculate Transition Charges and RAAFs in compliance with the
Texas Electric Choice Plan, the Financing Order, any PUCT order related to
Transition Charge allocation and any applicable tariffs;
(e) provide all reports to such parties to the Intercreditor
Agreement regarding the Transition Charges and RAAFs as are necessary to effect
collection, allocation and remittance of payments in respect of Transition
Charges and other collected funds in accordance with this Agreement and the
Intercreditor Agreement; and
(f) make all filings required under the Texas Electric Choice
Plan or the UCC to maintain the perfected security interest of the Trustee in
the Trust Estate and use all reasonable efforts to otherwise enforce and
maintain the Trustee's rights in respect of the Transition Property and the
Trust Estate;
except where the failure to comply with any of the foregoing would not
materially and adversely affect the Issuer's or the Trustee's interest in the
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 Transition Property, which, in the
Servicer's judgment, may include the taking of legal action pursuant to Section
3.10 hereof or otherwise.
SECTION 3.05. SERVICER'S CERTIFICATES. The Servicer shall provide to
the Issuer, the Trustee and the Rating Agencies the statements and certificates
specified in the Issuer Annex at the time and in the manner set forth therein.
SECTION 3.06. ANNUAL STATEMENT AS TO COMPLIANCE; NOTICE OF DEFAULT.
The Servicer shall deliver to the Issuer, to the Trustee and to each Rating
Agency, on or before March 31 of each year beginning March 31, 2002, 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 all its obligations under this
Agreement throughout such period or, if there has been a default in the
fulfillment of any such obligation, stating that there has been a
default and describing each such default.
SECTION 3.07. ANNUAL INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REPORT.
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(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 the Issuer, to the Trustee
and to each Rating Agency, on or before March 31 of each year, beginning March
31, 2002, 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
related to financial matters in connection with the Servicer's compliance with
its obligations under this Agreement during the preceding calendar year (or, in
the case of the first Annual Accountant's Report, the period of time from the
first Sale Date through December 31, 2001), identifying the results of such
procedures and including any exceptions noted. In the event such accounting firm
requires the Trustee or the Issuer to agree or consent to the procedures
performed by such firm, the Issuer shall direct the Trustee in writing to so
agree; it being understood and agreed that the Trustee shall deliver such letter
of agreement or consent in conclusive reliance upon the direction of the Issuer,
and the Trustee shall not 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 3.08. TRANSITION PROPERTY DOCUMENTATION. To assure uniform quality
in servicing the Transition Property and to reduce administrative costs, the
Servicer shall keep on file, in accordance with its customary procedures, all
Transition Property Documentation, it being understood that the Servicer is
acting only as the servicing agent and custodian for the Issuer with respect to
the Transition Property Documentation.
SECTION 3.09. COMPUTER RECORDS; AUDITS OF DOCUMENTATION.
(a) Safekeeping. The Servicer shall maintain accurate and complete
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accounts, records and computer systems pertaining to the Transition Property and
the 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) Transition Charges and the TC Collections
from time to time remitted to the Trustee pursuant to Section 5.11 and to enable
the Issuer to comply with this Agreement and the Indenture. The Servicer shall
conduct, or cause to be conducted, periodic audits of the 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 the Issuer and
the Trustee, as pledgee of the Issuer, to verify the accuracy of the Servicer's
record keeping. The Servicer shall promptly report to the Issuer and to the
Trustee any failure on the Servicer's part to hold the Transition Property
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 the Issuer or the Trustee of the Transition Property Documentation.
The Servicer's duties to hold the Transition Property Documentation on behalf of
the Issuer set forth in this Section 3.09, to the extent such Transition
Property Documentation has not been previously transferred to a successor
Servicer, shall terminate three years after the
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earlier of the date on which (i) the Servicer is succeeded by a successor
Servicer pursuant to the provisions of this Agreement or (ii) no Transition
Bonds of any Series are outstanding.
(b) Maintenance of and Access to Records. The Servicer shall maintain
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the Transition Property Documentation at 0000 Xxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxx
or at such other office as shall be specified to the Issuer and to the Trustee
by written notice not later than 30 days prior to any change in location. The
Servicer shall permit the Issuer and the 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 Transition Property, the Transition Charges
and the Transition Property Documentation. The failure of the Servicer to
provide access to such information as a result of an obligation or applicable
law (including PUCT Regulations) prohibiting disclosure of information regarding
customers shall not constitute a breach of this Section 3.09(b).
(c) Release of Documents. Upon written instruction from the Trustee
--------------------
in accordance with the Indenture, the Servicer shall release any Transition
Property Documentation to the Trustee, the Trustee's agent or the Trustee's
designee, as the case may be, at such place or places as the Trustee may
designate, as soon as practicable.
SECTION 3.10. DEFENDING TRANSITION PROPERTY AGAINST CLAIMS. The Servicer
shall institute any action or Proceeding necessary to compel performance by the
PUCT, the State of Texas, each REP and each party to the Intercreditor Agreement
(and in the case of each REP at the earliest possible time) of any of their
obligations or duties under the Texas Electric Choice Plan, the Financing Order
or the Intercreditor Agreement with respect to the Transition Property, and the
Servicer 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 to
block or overturn any attempts to cause a repeal of, modification of, or
supplement to, the Texas Electric Choice Plan or the Financing Order. The costs
of any such action shall be payable from TC Collections as an Operating Expense
in accordance with the Indenture. The Servicer's obligations pursuant to this
Section 3.10 shall survive and continue notwithstanding the fact that the
payment of Operating Expenses pursuant to the Indenture may be delayed (it being
understood that the Servicer may be required initially to advance its own funds
to satisfy its obligations hereunder).
SECTION 3.11. OPINIONS OF COUNSEL. The Servicer shall deliver to the
Issuer and to the Trustee:
(a) promptly after the execution and delivery of this Agreement and
of each amendment hereto, promptly after the execution of the 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 such counsel, all filings,
including filings with the Secretary of State of the State of Texas
pursuant to the Texas Electric Choice Plan and filings pursuant to the
UCC, that are necessary to perfect the transfer and security interests of
each of the Issuer and the Trustee in the Transition Property have been
executed and filed and are in full force and effect, and reciting the
details of such filings or referring to prior Opinions of Counsel in
which such details are given, or
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(ii) to the effect that, in the opinion of such counsel, no such action
shall be necessary to preserve and protect such interests; 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,
including filings with the Secretary of State of the State of Texas
pursuant to the Texas Electric Choice Plan and filings pursuant to the
UCC, that are necessary to fully preserve and protect the interests of
each of the Issuer and the Trustee in the Transition Property have been
executed and filed and are in full force and effect, 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.
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 interests.
ARTICLE IV
SERVICES RELATED TO TRANSITION CHARGE ADJUSTMENTS AND RAAF
ADJUSTMENTS
SECTION 4.01. TRANSITION CHARGE ADJUSTMENTS AND RAAF ADJUSTMENTS. The
Servicer shall perform the calculations and take the actions relating to
adjusting the Transition Charges and RAAFs as set forth in the Issuer Annex at
the time and in the manner set forth therein.
ARTICLE V
THE SERVICER
SECTION 5.01. REPRESENTATIONS AND WARRANTIES OF THE SERVICER. The Servicer
makes the following representations and warranties as of each Sale Date, on
which the Issuer has relied and will rely in acquiring Transition Property. The
representations and warranties shall survive the execution and delivery of this
Agreement, the sale of any of the Transition Property to the Issuer and the
pledge thereof to the Trustee pursuant to the Indenture.
(a) Organization and Good Standing. If the Servicer is Reliant Energy,
------------------------------
the Servicer is a corporation duly organized and in good standing under the laws
of the State of Texas, with 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 to execute, deliver and carry out
the terms of this Agreement and the Intercreditor Agreement and has the power,
authority and legal right to service the Transition Property. Any successor
Servicer hereto represents and warrants that it is a corporation duly organized
and in good standing under
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the laws of the state of its incorporation, with 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 to execute,
deliver and carry out the terms of this Agreement and the Intercreditor
Agreement and has the power, authority and legal right to service the 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
Transition Property as required by this Agreement and the Intercreditor
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 Transition Property).
(c) Power and Authority. The Servicer has the corporate power and
-------------------
authority to execute and deliver this Agreement and the Intercreditor Agreement
and to carry out the terms of each; and the execution, delivery and performance
of this Agreement and the Intercreditor Agreement have been duly authorized by
the Servicer by all necessary corporate action.
(d) Binding Obligation. This Agreement and the Intercreditor Agreement
------------------
constitute legal, valid and binding obligations of the Servicer enforceable
against the Servicer in accordance with their 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 court proceeding in
equity or at law).
(e) No Violation. The consummation of the transactions contemplated by
------------
this Agreement and the Intercreditor Agreement (to the extent applicable to the
Servicer's responsibilities thereunder) and the fulfillment of the terms of each
will 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 Servicer, or any indenture,
agreement or other instrument to which the Servicer is a party or by which it is
bound or 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; or violate any law or any order, rule or regulation applicable to
the Servicer of any court or of any federal or State regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over the Servicer or its properties.
(f) Approvals. Except for the Issuance Advice Letter, filings with the
---------
PUCT for adjusting Transition Charges and RAAFs pursuant to Section 4.01 and the
Issuer Annex and filings with the Secretary of State of the State of Texas under
the Texas Electric Choice Plan and Article 9 of the 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
Servicer of this Agreement or the Intercreditor Agreement, the performance by
the Servicer of the transactions contemplated thereby or the fulfillment by the
Servicer of the terms of each, except those that
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have been obtained or made or that are required by this Agreement to be made in
the future by the Servicer.
(g) No Proceedings. There are no Proceedings 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) seeking any determination or ruling that might materially and
adversely affect the Transition Property or the performance by the Servicer
of its obligations under, or the validity or enforceability against the
Servicer of, this Agreement, except as disclosed by the Servicer on
Schedule A hereto;
(ii) relating to the Servicer and which might materially and adversely
affect the federal or State income, gross receipts or franchise tax
attributes of the Transition Property or the Transition Bonds; or
(iii) seeking to prevent the issuance of the Transition Bonds or the
consummation of any of the transactions contemplated by this Agreement or
any of the other Basic Documents.
(h) Reports and Certificates. Each report and certificate delivered
------------------------
in connection with any filing made to the PUCT by the Servicer on behalf of the
Issuer with respect to Transition Charges, Transition Charge Adjustments or RAAF
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.
(i) Conversion. The conversion of Reliant Energy into a Texas limited
----------
liability company will not:
(i) interrupt Reliant Energy's existence;
(ii) affect Reliant Energy's rights, title and interests in its real
estate and other property or its power and authority to perform its
obligations under the Sale Agreement, this Agreement or the other Basic
Documents;
(iii) impair or diminish the liabilities and obligations of Reliant
Energy, including, without limitation, its obligations under this Agreement
or any other Basic Document;
(iv) affect the right, title and interest of the Issuer or the Trustee
n and to the Transition Property, including without limitation any security
interest of the Issuer or the Trustee in such property; or
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(v) result in (A) the breach of any representation or warranty made
pursuant to this Section 5.01 or (B) after notice or lapse of time, or
both, a Servicer Default.
SECTION 5.02. INDEMNITIES OF THE 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 and the Intercreditor Agreement.
(b) The Servicer shall indemnify the Issuer and the Trustee (for
itself and on behalf of the Transition Bondholders) and each of their respective
trustees, members, managers, officers, directors, employees 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 willful misconduct, bad faith or 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 the Intercreditor Agreement;
(ii) the Servicer's breach of any of its representations or warranties
in this Agreement or the Intercreditor Agreement; or
(iii) litigation and related expenses relating to its status and
obligations as Servicer (other than any proceedings the Servicer is
required to institute under this Agreement);
provided, however, that the Servicer shall not be liable for any Losses
resulting from the willful misconduct or gross negligence of any Person
indemnified pursuant to this Section 5.02 (each, an "Indemnified Person") or
resulting from a breach of a representation or warranty made by such Indemnified
Person to the Servicer in any Basic Document that gives rise to the Servicer's
breach.
(c) Promptly after receipt by an Indemnified Person of written notice
of its involvement in any action, proceeding or investigation, such Indemnified
Person shall, if a claim for indemnification in respect thereof is to be made
against the Servicer under this Section 5.02, notify the Servicer in writing of
such involvement. Failure by an Indemnified Person to so notify the Servicer
shall relieve the Servicer from the obligation to indemnify and hold harmless
such Indemnified Person under this Section 5.02 only to the extent that the
Servicer suffers actual prejudice as determined by a court of competent
jurisdiction as a result of such failure. With respect to any action, proceeding
or investigation brought by a third party for which indemnification may be
sought by an Indemnified Person under this Section 5.02, the Servicer shall be
entitled to assume the defense of any such action, proceeding or investigation
unless (x) such action, proceeding or investigation exposes the Indemnified
Person to a risk of criminal liability or forfeiture, (y) the Servicer and such
Indemnified Person have a conflict of interest in their respective defenses of
such action, proceeding or investigation or (z) there exists at the time the
Servicer would assume such defense an ongoing Servicer Default. Upon assumption
by the Servicer of the defense of any such action, proceeding or investigation,
the Indemnified Person
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shall have the right to participate in such action or proceeding and to retain
its own counsel (including local counsel), and the Servicer shall bear the
reasonable fees, costs and expenses of such separate counsel. The Indemnified
Person shall not settle or compromise or consent to the entry of any judgment
with respect to any pending or threatened claim, action, suit or proceeding in
respect of which indemnification may be sought under this Section 5.02 (whether
or not the Servicer is an actual or potential party to such claim or action)
unless the Servicer agrees in writing to such settlement, compromise or consent
and such settlement, compromise or consent includes an unconditional release of
the Servicer from all liability arising out of such claim, action, suit or
proceeding.
(d) The Servicer shall indemnify the Trustee and its respective
trustees, officers, directors, employees 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 the
acceptance or performance of the trusts and duties contained herein and in the
Indenture, except to the extent that any such Loss (i) shall be due to the
willful misconduct, bad faith or gross negligence of the Trustee or (ii) shall
arise from the Trustee's breach of any of its representations or warranties set
forth in the Indenture; provided, however, that the foregoing indemnity is
extended to the Trustee solely in its individual capacity and not for the
benefit of the Transition Bondholders or any other Person. Such amounts with
respect to the Trustee shall be deposited and distributed in accordance with the
Indenture.
(e) The Servicer's indemnification obligations under Section 5.02(b)
and (d) for events occurring prior to the removal or resignation of the Trustee
or the termination of this Agreement shall survive the resignation or removal of
the Trustee or the termination of this Agreement and shall include reasonable
costs, fees and expenses of investigation and litigation (including the Issuer's
and the Trustee's reasonable attorneys' fees and expenses).
(f) Except to the extent expressly provided for in this Agreement,
the Sale Agreement or the Formation Documents (including the Servicer's claims
with respect to the Servicing Fees and the Seller's claim for payment of the
purchase price of Transition Property), the Servicer hereby releases and
discharges the Issuer (including its members, managers, employees and agents, if
any), and the Trustee (including its respective officers, directors and agents)
(collectively, the "Released Parties") from any and all actions, claims and
demands whatsoever, which the Servicer, in its capacity as Servicer, shall or
may have against any such Person relating to the Transition Property or the
Servicer's activities with respect thereto other than any actions, claims and
demands arising out of the willful misconduct, bad faith or gross negligence of
the Released Parties.
(g) The Servicer and the Issuer hereby acknowledge that,
notwithstanding anything herein to the contrary, the Trustee is a third-party
beneficiary of this Section 5.02 and is entitled to the benefits of the
indemnity from the Servicer contained herein and to bring any action to enforce
such indemnification directly against the Servicer.
15
SECTION 5.03. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS
OF, THE SERVICER. Any Person:
(a) into which the Servicer may be merged or consolidated and which
succeeds to all or substantially all of the electric transmission and
distribution business of the Servicer (or, if the Servicer's transmission and
distribution functions are split, which provides distribution services directly
to a majority of the Servicer's then-existing customers),
(b) which results from the division of the Servicer into two or more
Persons and which succeeds to all or substantially all of the electric
transmission and distribution business of the Servicer (or, if the Servicer's
transmission and distribution functions are split, which provides distribution
services directly to a majority of the Servicer's then-existing customers),
(c) which may result from any merger or consolidation to which the
Servicer shall be a party and which succeeds to all or substantially all of the
electric transmission and distribution business of the Servicer (or, if the
Servicer's transmission and distribution functions are split, which provides
distribution services directly to a majority of the Servicer's then-existing
customers),
(d) which may succeed to the properties and assets of the Servicer
substantially as a whole and which succeeds to all or substantially all of the
electric transmission and distribution business of the Servicer (or, if the
Servicer's transmission and distribution functions are split, which provides
distribution services directly to a majority of the Servicer's then-existing
customers), or
(e) which may otherwise succeed to all or substantially all of the
electric transmission and distribution business of the Servicer (or, if the
Servicer's transmission and distribution functions are split, which provides
distribution services directly to a majority of the Servicer's then-existing
customers),
which Person in any of the foregoing cases executes an agreement of assumption
to perform every obligation of the Servicer under this Agreement, shall be the
successor to the Servicer under this Agreement 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, the
representations and warranties made pursuant to Section 5.01 shall be true
and correct 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 Servicer shall have delivered to the Issuer and the Trustee an
Officers' Certificate and an opinion of Independent counsel each stating
that such consolidation, merger, conversion or succession and such
agreement of assumption comply with this Section 5.03 and that all
conditions precedent, if any, provided for in this Agreement relating to
such transaction have been complied with;
16
(iii) the Servicer shall have delivered to the Issuer, the Trustee and
the Rating Agencies an Opinion of Counsel either
(A) stating that, in the opinion of such counsel, all filings to
be made by the Servicer, including filings with the PUCT pursuant to
the Texas Electric Choice Plan and the UCC, that are necessary fully to
preserve and protect the interests of each of the Issuer and the
Trustee in the Transition Property have been executed and filed and are
in full force and effect, 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 Servicer shall have delivered to the Issuer, the Trustee and
the Rating Agencies an opinion of independent tax counsel (as selected by,
and in form and substance satisfactory to, the Servicer, 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
Servicer, the Issuer, the Trustee or the Transition Bondholders.
The Servicer 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 Servicer
substantially as a whole and becomes the successor to the Servicer in accordance
with the terms of this Section 5.03, then upon the satisfaction of all of the
other conditions of this Section 5.03, the Servicer shall automatically and
without further notice be released from its obligations hereunder.
Notwithstanding anything to the contrary contained in this Section 5.03, the
Servicer shall be able to convert to a Texas limited liability company without
execution of the above-described agreement, without compliance with clauses (i),
(ii), (iii), (iv) or (v) above and without the execution or filing of any
document or any further act by any of the parties to this Agreement; provided,
however, that after such conversion the Servicer shall make all filings required
under the Texas Electric Choice Plan or the UCC to reflect any change in the
name of the Servicer effective upon such conversion and shall, within 30 days of
such conversion, provide notice of such conversion to each Rating Agency.
SECTION 5.04. ASSIGNMENT OF THE SERVICER'S OBLIGATIONS. Upon written notice
to the Trustee and the Rating Agencies, the Servicer may assign a portion of its
obligations hereunder to an assignee (A) in accordance with the Intercreditor
Agreement with respect to the obligations to maintain and process any account
into which initial collections may be deposited and process payments in respect
of Transition Charges or (B) subject to the satisfaction of Section 5.03.
SECTION 5.05. LIMITATION ON LIABILITY OF THE SERVICER AND OTHERS. The
Servicer shall not be liable to the Issuer or the Trustee, except as provided
under this
17
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 Servicer against any liability that would
otherwise be imposed by reason of willful misconduct, bad faith or negligence in
the performance of its duties or by reason of reckless disregard of its
obligations and duties under this Agreement or the Intercreditor 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 Trustee
or on any document of any kind, reasonably believed to be genuine and to have
been signed by the proper party 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 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; provided,
however, that the Servicer may undertake any reasonable action that it may deem
necessary or desirable in respect of this Agreement and the rights and duties of
the parties to this Agreement and the interests of the Transition Bondholders
under this Agreement. In such event, the legal expenses and costs of such action
and any liability resulting therefrom shall be expenses, costs and liabilities
of the Servicer.
SECTION 5.06. RELIANT ENERGY NOT TO RESIGN AS SERVICER. Subject to the
provisions of Sections 5.03 and 5.04, Reliant Energy shall not resign from the
obligations and duties imposed on it as Servicer under this Agreement unless the
Servicer delivers to the Issuer, the Trustee and the PUCT written notice of such
resignation at the earliest practicable time and, concurrently therewith or
promptly thereafter, an opinion of Independent legal counsel that the Servicer's
performance of its duties under this Agreement shall no longer be permissible
under applicable law. No such resignation shall become effective until a
successor Servicer shall have assumed the servicing obligations and duties
hereunder of the Servicer in accordance with Section 6.04.
SECTION 5.07. SERVICING FEE. The Issuer agrees to pay the Servicer on each
Payment Date, solely to the extent amounts are available therefor in accordance
with the Indenture, the Servicing Fee with respect to all Series of Transition
Bonds. For so long as:
(i) Reliant Energy or one of its affiliates is the Servicer,
(ii) a successor to Reliant Energy or one of its affiliates is the
Servicer due to the operation of the provisions of Section 5.03, or
(iii) any Person is the successor Servicer hereunder pursuant to the
provisions of Section 5.04 if the predecessor Servicer was Reliant Energy
or one of its affiliates,
the amount of the Servicing Fee paid to the Servicer annually shall equal 0.05%
of the Transition Bond Balance on the Initial Transfer Date and shall be
prorated into equal payment amounts based on the number of Payment Dates that
are expected to occur (a) in the remaining portion of the calendar year in which
the Servicer began to provide any of the services set forth in this Agreement
(provided that the Servicing Fee for such time period shall be prorated to the
fraction
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of a calendar year during which the Servicer provides any of the services set
forth in this Agreement) and (b) in each calendar year thereafter.
In the event that a successor Servicer not affiliated with Reliant Energy
is appointed in accordance with Section 6.04, the amount of Servicing Fee paid
to the Servicer annually shall be agreed upon by the successor Servicer and the
Trustee but shall in no event exceed 0.60% of the Transition Bond Balance on the
Initial Transfer Date and shall be prorated into equal payment amounts as set
forth in the preceding paragraph. The foregoing fees constitute a fair and
reasonable price for the obligations to be performed by the Servicer. The
Servicer and any successor Servicer agrees to pay from amounts received as the
Servicing Fee all fees due and owing pursuant to the Intercreditor Agreement,
and neither the Servicer nor any successor Servicer shall seek or be entitled to
any other or additional reimbursement therefor. The Trustee shall not be
responsible or liable for the Servicing Fee or any fees arising from the
Intercreditor Agreement or for any increase or differential in such fees.
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 and under the Intercreditor Agreement,
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, with written notice to the
Trustee, may at any time appoint a subservicer or agent 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 the
Issuer for the servicing and administering of the Transition Property in
accordance with the provisions hereof without diminution of such obligation and
liability by virtue of the appointment of such subservicer or agent and to the
same extent and under the same terms and conditions as if the Servicer alone
were servicing and administering the Transition Property. The fees and expenses
of the subservicer or agent shall be as agreed between the Servicer and its
subservicer or agent from time to time, and none of the Issuer, the Trustee or
the Transition Bondholders shall have any responsibility therefor. Any such
appointment shall not constitute a Servicer resignation under Section 5.06. The
Designated Account Holder shall constitute a subservicer for purposes of this
Section 5.09.
SECTION 5.10. NO SERVICER ADVANCES. Except as set forth in Section 3.03
regarding payments on account of TC Collections under the Collections Curve, the
Servicer shall not make any advances of interest on or principal of the
Transition Bonds.
SECTION 5.11. REMITTANCES.
(a) Except as provided in subsection (b) below, the Servicer shall
remit all TC Collections (from whatever source) and all proceeds of the Trust
Estate of the Issuer, if any, received by the Servicer, to the Trustee for
deposit pursuant to the Indenture, not later than the second Business Day after
receipt thereof (or, if earlier, deemed receipt, if the Collections Curves are
applicable).
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(b) Notwithstanding the foregoing clause (a), as long as:
(i) Reliant Energy or any successor to Reliant Energy's electric
transmission or distribution business, or both, remains the Servicer,
(ii) no Servicer Default has occurred and is continuing, and
(iii) (A) Reliant Energy or such successor maintains a short-term
rating of "A-1" or better by Standard & Poor's, "P-1" or better by Moody's
and "F-1" or better by Fitch (and for five Business Days following a
reduction in either such rating), or
(B) the Servicer obtains a letter of credit or surety bond in form and
substance satisfactory to the Trustee and issued by a bank or surety
company, as the case may be, having a long-term unsecured credit rating
from S&P of "AA" or better, from Moody's of "Aa3" or better and, if Fitch
provides a rating thereon, from Fitch of "AA" or better and having capital
and surplus not less than $50,000,000 to assure remittances of TC
Collections on each Remittance Date and 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 Section
3.03(a)(i)(B), but in lieu thereof, shall remit all TC Collections (from
whatever source) in accordance with Section 3.03(a)(i)(A), and all proceeds of
the Trust Estate of the Issuer, if any, received by the Servicer during any
Collection Period, to the Trustee for deposit pursuant to the Indenture, not
later than the corresponding Monthly Remittance Date.
SECTION 5.12. PROTECTION OF TITLE. The Servicer shall execute and file all
such filings, including filings with the Secretary of State of the State of
Texas pursuant to the Texas Electric Choice Plan and Article 9 of the UCC, and
cause to be executed and filed all 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 the Issuer and the Trustee in the Transition Property, including
all filings required under the Texas Electric Choice Plan and Article 9 of the
UCC relating to the transfer of the ownership or security interest in the
Transition Property by the Seller to the Issuer or any security interest granted
by the Issuer in the Transition Property. The Servicer 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.
ARTICLE VI
SERVICER DEFAULT
SECTION 6.01. SERVICER DEFAULT. If any one of the following events (a
"Servicer Default") occurs and is continuing:
(a) any failure by the Servicer to remit to the Trustee, on behalf
of the Issuer, any required remittance by the date that such remittance must be
made that continues unremedied for a period of five Business Days; or
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(b) any failure by the Servicer duly to observe or perform in any
material respect any other covenant or agreement of the Servicer set forth in
this Agreement (other than as provided in Section 6.01(a) or (c)) or any other
Basic Document to which it is a party in such capacity, which failure
(i) materially and adversely affects the Transition Property or the
timely collection of the Transition Charges or the rights of the Trustee or
the Transition Bondholders, and
(ii) continues unremedied for a period of 60 days;
(c) any failure by the Servicer duly to perform its obligations under
Section 7 of Annex 1 to this Agreement in the time and manner set forth therein,
which failure continues unremedied for a period of five days;
(d) any representation or warranty made by the Servicer in this
Agreement or any Basic Document proves to have been incorrect when made, which
has a material adverse effect on the Transition Property or the Issuer's
ownership interest therein, the security interest of the Trustee in the
Transition Property, the Issuer, the Transition Bondholders or the investment of
the Transition Bondholders in the Transition Bonds, 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 (with a copy to the
Trustee) by the Issuer or the Trustee or after discovery of such failure by an
officer of the Servicer, as the case may be; or
(e) an Insolvency Event occurs with respect to the Servicer;
then, so long as the Servicer Default shall not have been remedied, and in no
other circumstances, the Trustee may, or shall upon the written instruction of
the Majority Holders, terminate all the rights and obligations (other than the
indemnification obligations set forth in Section 5.02 hereof and the obligation
under Section 6.04 to continue performing its functions as Servicer until a
successor Servicer is appointed) of the Servicer under this Agreement by notice
then given in writing to the Servicer (a "Termination Notice") and the Trustee
shall comply with the provisions of Section 5 of the Intercreditor Agreement.
The Servicer shall notify each Rating Agency promptly upon the Servicer's
receipt of a Termination Notice.
In addition, upon a Servicer Default, the Issuer and the Trustee shall be
entitled to (y) apply to a state district court located in Xxxxxx County, Texas,
for sequestration and payment to the Trustee of revenues arising with respect to
the Transition Property, and (z) apply to the PUCT for an order that amounts
arising from the Transition Charges be transferred to a separate account for the
benefit of the Transition Bondholders, in accordance with the Texas Electric
Choice Plan.
On or after the receipt by the Servicer of a Termination Notice, all
authority and power of the Servicer under this Agreement, whether with respect
to the Transition Property, the related Transition Charges or otherwise, shall,
upon appointment of a successor Servicer pursuant to Section 6.04 and pursuant
to the provisions of the Intercreditor Agreement, without further action, pass
to and be vested in such successor Servicer and, without limitation, the Trustee
is hereby authorized and empowered to execute and deliver, on behalf of the
predecessor Servicer,
21
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 Transition Property Documentation and related documents, or otherwise.
The predecessor Servicer shall cooperate with the successor Servicer, the
Trustee and the Issuer in effecting the termination of the responsibilities and
rights of the predecessor Servicer under this Agreement and the Intercreditor
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 Transition Property or the related Transition Charges. As soon as
practicable after receipt by the Servicer of such Termination Notice, the
Servicer shall deliver the Transition Property Documentation to the successor
Servicer. All reasonable costs and expenses (including attorneys' fees and
expenses) incurred in connection with transferring the Transition Property
Documentation to the successor Servicer and amending this Agreement or the
Intercreditor Agreement to reflect such succession as Servicer pursuant to this
Section shall be paid by the predecessor Servicer upon presentation of
documentation of such costs and expenses. Termination of Reliant Energy's rights
as a Servicer shall not terminate Reliant Energy's rights or obligations in its
individual capacity under the Sale Agreement or the Intercreditor Agreement
(except rights thereunder deriving from its rights as the Servicer hereunder).
SECTION 6.02. NOTICE OF SERVICER DEFAULT. The Servicer shall deliver to the
Issuer, to the Trustee, to the PUCT, and to each Rating Agency promptly after
having obtained actual knowledge thereof, but in no event later than two
Business Days thereafter, written notice in an Officers' Certificate of any
event or circumstance 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. The Trustee, with the written
consent of the Majority Holders, may waive in writing in whole or in part any
default by the Servicer in the performance of its obligations hereunder and its
consequences, except a default in making any required remittances to the Trustee
of TC Collections from Transition Property in accordance with Section 5.11 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 Servicer shall continue to perform its functions as Servicer
under this Agreement and shall be entitled to receive the requisite portion of
the Servicing Fee, until a successor Servicer shall have assumed in writing the
obligations of the Servicer hereunder as described below. In the event of the
Servicer's removal or resignation hereunder, the Trustee at the written
direction and with the consent of the Majority Holders shall appoint a successor
Servicer, and the successor Servicer shall accept its appointment by a written
assumption in form acceptable to the Issuer and the Trustee. In no event shall
the Trustee be liable for its appointment of a successor Servicer appointed with
due care. If, within 30 days after the delivery of the Termination Notice, a new
Servicer shall not have been appointed and accepted such appointment, the
Trustee may petition
22
the PUCT 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 PUCT Regulations to perform the
duties of the Servicer pursuant to the Texas Electric Choice Plan, the
Financing Order and this Agreement,
(ii) the Rating Agency Condition shall have been satisfied, and
(iii) such Person enters into a servicing agreement with the Issuer
having substantially the same provisions as this Agreement and into the
Intercreditor Agreement (as TC Servicer).
(b) Upon appointment, the successor Servicer shall be the successor
in all respects to the predecessor Servicer under this Agreement and shall be
subject to all the responsibilities, duties and liabilities arising thereafter
relating thereto placed on the predecessor Servicer and shall be entitled to the
Servicing Fee 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 predecessor Servicer
covenants and agrees with the 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 Servicer and
the Issuer, with the prior written consent of the Trustee, the consent of the
PUCT pursuant to Section 7.13 and the satisfaction of the Rating Agency
Condition. Promptly after the 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.
Prior to the execution of any amendment to this Agreement, the Issuer and
the Trustee shall be entitled to receive and conclusively 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 referred to in Section
3.11. 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 7.02. NOTICES. All demands, notices and communications upon or to
the Servicer, the Issuer, the Trustee 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
23
(a) in the case of the Servicer, to Reliant Energy, 0000 Xxxxxxxxx
Xxxxxx, Xxxxxxx, Xxxxx 00000, Attention: Treasurer;
(b) in the case of the Issuer, to Reliant Energy Transition Bond
Company LLC, 0000 Xxxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000, Attention:
Manager;
(c) in the case of the Trustee, at its Corporate Trust Office;
(d) in the case of Moody's, to Xxxxx'x Investors Service, Inc., ABS
Monitoring Department, 00 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000;
(e) in the case of Standard & Poor's, to Standard & Poor's, a division
of The XxXxxx-Xxxx Companies, 00 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000; and
(f) in the case of Fitch, to Fitch, Inc., 0 Xxxxx Xxxxxx Xxxxx, Xxx
Xxxx, Xxx Xxxx 00000;
(g) in the case of the PUCT, to 0000 X. Xxxxxxxx Xxxxxx, Xxxxxx, Xxxxx
00000-0000, Attention: Executive Director and General Counsel;
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 or termination of
the Servicer, this Agreement may not be assigned by the Servicer. Any purported
assignment not in compliance with this Agreement shall be void.
SECTION 7.04. LIMITATIONS ON RIGHTS OF OTHERS. The provisions of this
Agreement are solely for the benefit of the Servicer, the Issuer and the
Trustee, on behalf of itself 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 the Trust Estate 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 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.
24
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 State of Texas, 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 THE TRUSTEE. The Servicer 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 any Transition Bondholders of all right, title and interest of the Issuer in,
to and under the Transition Property owned by the Issuer and the proceeds
thereof and the assignment of any or all of the Issuer's rights hereunder and
under the Intercreditor Agreement to the Trustee. Notwithstanding such
assignment, in no event shall the Trustee have any liability for the
representations, warranties, covenants, agreements or other obligations of the
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 Issuer.
SECTION 7.10. NONPETITION COVENANTS. Notwithstanding any prior
termination of this Agreement or the Indenture, but subject to a court's rights
to order the sequestration and payment of revenues arising with respect to the
Transition Property pursuant to Section 39.309(f) of the Texas Electric Choice
Plan, the Servicer shall not, prior to the date which is one year and one day
after the termination of the Indenture, 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.
SECTION 7.11. TERMINATION. This Agreement shall terminate when all
Transition Bonds have been retired or redeemed in full.
SECTION 7.12. IMPLEMENTATION OF TEXAS ELECTRIC CHOICE PLAN. In the event
that the effective date for implementation of the Choice provisions of the Texas
Electric Choice Plan shall be extended by the PUCT, all references in this
Agreement or in Appendix A hereto (Definitions) to the "Texas Electric Choice
Plan," "Choice," "January 1, 2002" or "January 2002" shall mean and be deemed to
be references to such extended date of implementation without further action
hereunder.
SECTION 7.13. PUCT CONSENT. To the extent the consent of the PUCT is
required to effect any amendment to or modification of this Agreement or any
provision of this Agreement,
25
(a) Reliant Energy may request the consent of the PUCT by
delivering to the PUCT's executive director and general counsel a written
request for such consent, which request shall contain:
(i) a reference to Docket No. 21655;
(ii) an Officer's Certificate stating that the proposed amendment or
modification has been approved by all parties to this Agreement; and
(iii) a statement identifying the person to whom the PUCT or its
staff is to address its consent to the proposed amendment or modification
or request additional time;
(b) The PUCT shall, within fifteen days of receiving the request
for consent complying with Section 7.13(a) above, either
(i) provide notice of its consent or lack of consent to the person
specified in Section 7.13(a)(iii) above, or
(ii) be conclusively deemed to have consented to the proposed
amendment or modification,
unless, within fifteen days of receiving the request for consent complying with
Section 7.13(a) above, the PUCT or its staff delivers to the office of the
person specified in Section 7.13(a)(iii) above a written statement requesting an
additional amount of time not to exceed thirty days in which to consider whether
to consent to the proposed amendment or modification. If the PUCT or its staff
requests an extension of time in the manner set forth in the preceding sentence,
then the PUCT shall either provide notice of its consent or lack of consent to
the person specified in Section 7.13(a)(iii) above no later than the last day of
such extension of time or be conclusively deemed to have consented to the
proposed amendment or modification on the last day of such extension of time.
SECTION 7.14. EFFECT OF SUBSEQUENT PUCT REGULATIONS. Notwithstanding
anything to the contrary contained in this Agreement (including Annex 1 hereto),
to the extent the PUCT promulgates any PUCT Regulation permitted by the
Financing Order or the Texas Electric Choice Plan whose effect is to modify or
supplement any provision of this Agreement relating to REP standards, this
Agreement shall be deemed to have been so modified or supplemented on the
effective date of such regulation, and all other provisions contained herein
shall be deemed modified accordingly without the necessity of any further action
by any party hereto. The Servicer will notify the Issuer and the Rating Agencies
of any such PUCT Regulation and the corresponding modification of or supplement
to this Agreement promptly upon obtaining knowledge thereof.
26
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.
RELIANT ENERGY TRANSITION BOND COMPANY LLC
By:
_________________________________________
Name:
Title:
RELIANT ENERGY, INCORPORATED, as Servicer
By:
_________________________________________
Name:
Title:
Acknowledged and Accepted:
Bankers Trust Company, not in its
individual capacity but solely as
Trustee on behalf of the Holders
of the Transition Bonds
By: _______________________________
Name:
Title:
27
SCHEDULE A
TO
TRANSITION PROPERTY SERVICING AGREEMENT
Proceedings 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 seeking any determination or ruling that might materially and
adversely affect the Transition Property or the performance by the Servicer of
its obligations under, or the validity or enforceability against the Servicer
of, this Agreement:
NONE.
28
ANNEX 1
TO
TRANSITION PROPERTY SERVICING AGREEMENT
The Servicer agrees to comply with the following with respect to
Reliant Energy Transition Bond Company LLC (the "Issuer"):
SECTION 1. DEFINITIONS.
(a) Capitalized terms used herein and not otherwise defined
shall have the meanings set forth in Appendix A to the Transition
Property Servicing Agreement dated as of October 24, 2001, between the
Issuer and Reliant Energy, as Servicer.
(b) Whenever used in this Annex 1, the following words and
phrases shall have the following meanings:
SECTION 2. CHANGES TO RAAF METHODOLOGY PURSUANT TO PUCT ORDER. If, as
provided in Tariff TC, the PUCT enters an order pursuant to Section 39.253(f) of
the Texas Electric Choice Plan, the Servicer shall recalculate the applicable
initial RAAFs for each class of Customer set forth in Tariff TC using the
methodology set forth in such PUCT order and file the RAAF Adjustment within
forty-five (45) days of the order's becoming final and nonappealable, and the
adjusted RAAF shall become effective thirty (30) days thereafter.
SECTION 3. CALCULATION DATE STATEMENTS TO ISSUER AND TRUSTEE. For each
Calculation Date, the Servicer shall provide to the Issuer, the Trustee and the
Rating Agencies a statement indicating
(a) the Transition Bond Balance and the Projected Transition
Bond Balance for each Series as of the immediately preceding Payment
Date,
(b) the amount on deposit in the Overcollateralization
Subaccount and the Scheduled Overcollateralization Level as of the
immediately preceding Payment Date,
(c) the amount on deposit in the Capital Subaccount and the
Required Capital Amount as of the immediately preceding Payment Date;
(d) the amount on deposit in the Reserve Subaccount as of the
immediately preceding Payment Date;
(e) the Projected Transition Bond Balance and the Servicer's
projection of the Transition Bond Balance on the Payment Date
immediately preceding the next succeeding Adjustment Date;
(f) the Scheduled Overcollateralization Level and the Servicer's
projection of the amount on deposit in the Overcollateralization
Subaccount for the Payment Date immediately preceding the next
succeeding Adjustment Date;
1
(g) the Required Capital Amount and the Servicer's projection of
the amount on deposit in the Capital Subaccount for the Payment Date
immediately preceding the next succeeding Adjustment Date; and
(h) the Servicer's projection of the amount on deposit in the
Reserve Subaccount for the Payment Date immediately preceding the next
succeeding Adjustment Date.
SECTION 4. CALCULATION DATE ACTIVITY BETWEEN THE SERVICER AND REPS.
(a) On or about each Calculation Date, the Servicer shall
reconcile with each REP that has chosen to hold back an allowance for
charge-offs in its payments of TC Collections to the Servicer in accordance with
the Financing Order and Tariff TC the amounts held back by the REP since the
previous Calculation Date (or since the issuance of the applicable Series of
Transition Bonds, in the case of the first Calculation Date) and the amounts
actually written off as uncollectible from Customer accounts that have been
permanently terminated during the same time period.
(b) If the REP has held back less than the amount actually written
off as uncollectible during the time period, the REP shall be entitled to a
credit against future Transition Charge payments over the twelve-month period
immediately following the next Adjustment Date in the amount of the hold-back
shortfall and no other remedy. If the REP has held back more than the amount
actually written off as uncollectible during the time period, the permitted
charge-off percentage shall be adjusted so that it is projected that the REP
will remit to the Servicer the amount of such underpayment of TC Collections
over the twelve-month period immediately following the next upcoming Adjustment
Date.
(c) The Servicer will incorporate the REPs' Customer default
information and any subsequent credits to the REPs for Transition Charges
already paid by the REPs to the Servicer in its calculation of the Transition
Charge Adjustments on the Calculation Date. The REPs' right under this Section 4
to receive a credit against future payments of TC Collections to the Servicer
shall not take effect until after the next upcoming Adjustment Date.
(d) In any case the Servicer shall xxxx to and collect from each
REP such REP's share of the amount required to meet the requirements of the
Financing Order, provided that in addition each billing shall also include the
amount of the holdback allowed for chargeoffs.
SECTION 5. REMITTANCE STATEMENTS. On or before each remittance by the
Servicer to the Trustee, the Servicer shall prepare and furnish to the Issuer
and the Trustee a statement setting forth the aggregate amount remitted or to be
remitted by the Servicer to the Trustee for deposit on such date pursuant to the
Indenture.
SECTION 6. PAYMENT DATE STATEMENTS. By 12:00 noon Central Time on the
Business Day immediately preceding each Payment Date, the Servicer shall prepare
and furnish to the Issuer, the Trustee and the Rating Agencies a Semiannual
Servicer's Certificate setting forth the transfers and payments to be made in
respect of such Payment Date pursuant to Section
2
8.02(d) of the Indenture and the amounts thereof and the amounts to be paid to
Holders of Transition Bonds of each Series pursuant to Section 8.02(e) of the
Indenture.
SECTION 7. TRANSITION CHARGE AND RAAF ADJUSTMENTS.
(a) Prior to each Calculation Date, the Servicer shall calculate
(i) the RAAF Adjustments to be made in accordance with the
methodology set forth in Tariff TC, as may be modified from time to
time by order from the PUCT,
(ii) the Transition Bond Balance as of each Calculation Date (a
written copy of which shall be delivered by the Servicer to the Trustee
within five days following such Calculation Date), and
(iii) the Transition Charge Adjustment with respect to the
Transition Property for the twelve-month period preceding and including
the next upcoming Adjustment Date and each subsequent twelve-month
period, such that the Servicer projects that TC Collections therefrom
allocable to the Issuer will be sufficient so that:
(A) 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, taking into account any
amounts on deposit in the Reserve Subaccount,
(B) 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 Scheduled Overcollateralization Level for such
date, taking into account amounts on deposit in the Reserve
Subaccount,
(C) the amount on deposit in the Capital 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
Required Capital Amount for such date, taking into account any
amounts on deposit in the Reserve Subaccount,
(D) thereafter, the TC Collections will provide for
amortization of the remaining outstanding principal amount of each
Series in accordance with the Expected Amortization Schedule
therefor, payment of interest on each Series when due and deposits
to the Overcollateralization Subaccount such that the balance
therein will equal the Scheduled Overcollateralization Level on
each Payment Date,
(E) the Servicer can reconcile past overpayments and
underpayments by the REP of Transition Charges arising out of
hold-backs for charge-offs in accordance with Section 4 of this
Annex,
3
(F) the Servicer can recover out of TC Collections the
interest paid to an REP arising out of a dispute between the
Servicer and such REP pursuant to Section 8(b) of this Annex for
which the Servicer's claim to the funds in dispute was not clearly
unfounded, and
(G) the fees and expenses of the Servicer, the Trustee, the
independent managers of the Issuer and the Administrator and other
fees expenses, charges and costs authorized in the Financing Order
will be paid.
(b) On each Calculation Date, the Servicer shall make annual
reconciliation filings with the PUCT for that Calculation Date. The Servicer
shall promptly thereafter provide notice and a copy of such filings to each
Rating Agency. The Servicer's Calculation Date filings shall include:
(i) any RAAF Adjustments to take effect on the next Adjustment
Date (in which case, the Servicer shall provide notice of such filing to
all parties in PUCT Docket No. 21665 and shall participate in a contested
case proceeding at the PUCT, the purpose of which will be to determine
whether any proposed adjustment complies with the Financing Order, as set
forth therein), and
(ii) a tariff supplement setting forth Transition Charge
Adjustments to become effective on the next Adjustment Date and supporting
data, including the calculation of the Transition Charge Adjustments.
(c) The Servicer shall calculate any interim Transition Charge
Adjustments to be requested between Calculation Dates to correct
under-collection or over-collection of Transition Charges, as set forth in the
Financing Order and Tariff TC. In the event an interim Transition Charge
Adjustment is permitted under Tariff TC, the Servicer will file for such an
adjustment with the PUCT not less than fifteen days prior to the proposed
Interim Adjustment Date. The Servicer shall promptly thereafter provide notice
and a copy of such filings to each Rating Agency. The Servicer will make the
interim filing described in this Section 7(c) no more frequently than every
three months if quarterly payments are made to Transition Bond Owners and no
more frequently than every six months if semi-annual payments are made to
Transition Bond Owners.
(d) The Servicer shall take reasonable steps to monitor the
Transition Charge rate for each class of Customers to determine whether any such
rate exceeds the maximum rate that class of Customers is obligated to pay under
Section 39.202(a) of the Texas Electric Choice Plan. If such maximum rate is
being exceeded for any class of Customers ("Affected Class"), then the Servicer
shall cause the billing entity for Customers in the Affected Class to apply the
maximum rate allowed under that section to the Affected Class, and the rates for
all other classes of Customers ("Remaining Classes") shall be recalculated using
the maximum rate for the Affected Class. The Servicer will allocate any
resulting deficiency in Transition Charges to the Remaining Classes based on the
ratio of the RAAFs then in effect.
(e) On each Adjustment Date and Interim Adjustment Date, the
Servicer shall
4
(i) take all reasonable actions and make all reasonable efforts
in order to effectuate all adjustments approved by the PUCT to the
Transition Charges and/or RAAFs, and
(ii) promptly send to the Trustee copies of all material notices
and documents relating to such adjustments.
SECTION 8. OTHER ACTIVITY BETWEEN THE SERVICER AND REPS.
(a) In the event an REP provides a cash deposit to the Trustee
in the form of up to two months' maximum expected transition charge collections,
a surety bond or letter of credit (each an "REP Deposit") pursuant to the
Financing Order and Tariff TC,
(i) the Servicer shall agree with the REP as to the size of the
initial REP Deposit,
(ii) no more frequently than quarterly, upon the request of
either the REP or the Servicer, the Servicer shall cooperate with the REP
as required by the Financing Order and Tariff TC to ensure that the REP
Deposit accurately reflects up to two months' maximum TC Collections.
Within 10 days following the review by the REP and Servicer of the size of
the REP Deposit, either the REP shall remit to the Trustee the amount of
any shortfall in the REP Deposit or the Servicer shall instruct the Trustee
to remit to the REP any portion of the REP Deposit no longer required to be
on deposit,
(iii) The Servicer shall instruct the Trustee in writing to remit
to the REP the REP Deposit, plus any investment earnings thereon, upon the
Final Maturity Date of the final Class, if applicable, of the final Series
of Transition Bonds except such portion of the REP Deposit as was utilized
in satisfaction of the REP's obligation to remit billed Transition Charges,
and
(iv) The Servicer shall instruct the Trustee to remit to the REP
the REP Deposit, plus any investment earnings thereon, within 30 days of
the date on which the REP Deposit is no longer required under the Financing
Order or Tariff TC.
(b) In the event an REP disputes any amount of billed
Transition Charges, the Servicer shall require the REP to pay the disputed
amount under protest within the time for payment set forth in Section 3.02 of
this Agreement. The Servicer shall attempt to resolve informally the dispute
with the REP, or any dispute related to the date of receipt of Transition Charge
payments, Penalties, or the size of the required REP Deposit. If the REP and
the Servicer cannot reach an informal resolution to the dispute, either party
may file a complaint with the PUCT as set forth in the Financing Order and
Tariff TC. If the REP prevails in the informal dispute process or before the
PUCT, the Servicer shall provide the REP with a refund of the disputed amount
paid to the Servicer plus interest at a rate approved by the PUCT. As provided
in the Financing Order, Tariff TC and Section 7(a)(iii)(F) of this Annex,
interest paid by the Servicer shall be recoverable through Transition Charges
if the Servicer's claim to the funds is not clearly unfounded. In addition, as
provided in the Financing Order and Tariff TC, the Servicer shall not be
required to pay interest to the REP if the Servicer has received inaccurate
5
metering data from another entity providing competitive metering services
pursuant to the Texas Electric Choice Plan.
(c) The Servicer shall adhere to the instructions of an REP that
bills Customers for Transition Charges to terminate transmission and
distribution service to a Customer for nonpayment by the Customer pursuant to
the Financing Order and Tariff TC.
SECTION 9. OTHER ACTIVITIES BY THE SERVICER.
(a) In addition to the obligation set forth in Section 8(c) of
this Annex, the Servicer shall have the rights and obligations to terminate
electric service for non-payment of Transition Charges under the circumstances
set forth in Tariff TC and PUCT Regulations.
(b) If an REP fails to remit payment in full of all Transition
Charges billed to such REP by the day that is 45 calendar days after the REP
Billing Day, the Servicer shall, in addition to assessing the Penalty against
such REP described in Section 3.02(c) of the Servicing Agreement, direct the
Trustee by written instruction to apply from such REP's REP Deposit (by making a
withdrawal from a deposit account, a demand under a surety bond, and/or a draw
under a letter of credit, as applicable) into the Collection Account the lesser
of the amount of Transition Charges such REP has failed to remit or the amount
of the REP Deposit. The Servicer shall notify the REP of such withdrawal, demand
and/or draw from the REP Deposit to the Collection Account and instruct the REP
to remit immediately the amount of such withdrawal, demand and/or draw to the
Trustee for replenishment of such REP's REP Deposit. The Servicer shall require
the REP to immediately replenish its REP Deposit and shall at the earliest
practicable date avail itself of such legal remedies as may be appropriate to
collect any remaining unpaid Transition Charges and associated penalties due to
the Servicer after application of the REP Deposit, in accordance with the
Financing Order and Tariff TC.
(c) If an REP is in default pursuant to Section 9, Part B,
Paragraphs D(3) and (4) of Tariff TC and Findings of Fact 50(e) and (f) of the
Financing Order (such default an "REP Default"), the Servicer shall perform such
duties as are required of the Servicer therein, including but not limited to the
following:
(i) in the event the REP in REP Default seeks to implement
alternative arrangements with the Servicer regarding the billing and
collection of Transition Charges pursuant to Section 9, Part B, Paragraph
D(3) of Tariff TC and Finding of Fact 50(e) of the Financing Order, the
Servicer shall consider proposals from such REP but shall not accept any
proposal, and no proposal shall be deemed mutually suitable and agreeable,
other than the options set forth in Section 9, Part B, Paragraphs D(3)(a)
and D(3)(c) of Tariff TC unless (i) the Servicer is directed promptly in
writing by the Trustee to accept a proposal of such REP following the
approval of such proposal by the Majority Holders, (ii) such proposal would
not materially and adversely affect the interests of the Transition
Bondholders and (iii) the Rating Agency Condition has been satisfied; and
(ii) in the event the REP in REP Default fails to immediately
select and implement an alternative method of billing and collecting
Transition Charges as specified in Section 9, Part B, Paragraph D(3) of
Tariff TC and Finding of Fact 50(e) of the
6
Financing Order or fails to adequately meet its responsibilities
thereunder, the Servicer shall immediately allow the Provider of Last
Resort or another qualified REP of a Customer's choosing to immediately
assume responsibility for the billing and collection of Transition Charges
from such Customer.
(d) In the event the Provider of Last Resort defaults or is
ineligible to provide billing and collection of Transition Charges when
requested by a Customer or the Servicer, as applicable, the Servicer shall
assume responsibility for billing and collection of Transition Charges until a
new Provider of Last Resort is named by the PUCT or the Customer requests the
services of another REP, in accordance with Tariff TC and PUCT Regulations. In
any case, the Servicer shall enforce the obligations, and exercise its remedies
against, each REP including any Provider of Last Resort, at the earliest
possible time permitted under the Financing Order and Tariff TC.
7
APPENDIX A
DEFINITIONS
The definitions contained in this Appendix A are applicable to the
singular as well as the plural forms of such terms.
"Accrued Interest" means interest accrued at the Federal Funds Rate on
----------------
amounts held by the Servicer prior to, on, or after the date such amounts are
due and payable to the Trustee under this Agreement.
"Act" has the meaning specified in Section 11.03 of the Indenture.
---
"Adjustment Date" means the date other than an Interim Adjustment Date
---------------
on which any Transition Charge Adjustment (other than an interim (non-annual)
Transition Charge Adjustment) and/or any RAAF Adjustment, as applicable, becomes
effective. The first Adjustment Date will be on or about October 31, 2002, and
all subsequent Adjustment Dates shall be on or about the same day of the year in
subsequent years.
"Administration Agreement" means the Administration Agreement dated as
------------------------
of October 24, 2001, between Reliant Energy, as Administrator, and the Issuer,
as the same may be amended and supplemented from time to time.
"Administrator" means Reliant Energy as administrator under the
-------------
Administration Agreement and each successor to or assignee of Reliant Energy in
the same capacity.
"Affiliate" means, with respect to any specified Person, any other
---------
Person controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, control, when used with respect to
any specified Person, means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms controlling and controlled
have meanings correlative to the foregoing.
"Annual Accountant's Report" has the meaning assigned to that term in
--------------------------
Section 3.07 of the Servicing Agreement.
"Basic Documents" means the Issuer LLC Agreement, the Issuer
---------------
Certificate of Formation, the Sale Agreement, the Servicing Agreement, the
Intercreditor Agreement, the Administration Agreement, the Indenture, any
Supplemental Indentures and any Bills of Sale.
"Xxxx of Sale" has the meaning assigned to that term in the Sale
------------
Agreement.
"Billing Month" means a particular calendar month during which
-------------
Transition Charges are billed to Customers.
"Book-Entry Transition Bonds" means beneficial interests in the
---------------------------
Transition Bonds, ownership and transfers of which shall be made through book
entries by a Clearing Agency as described in Section 2.11 of the Indenture.
8
"Business Day" means any day other than a Saturday or Sunday or a day
------------
on which banking institutions in the City of Houston, Texas, or in the City of
New York, New York, are required or authorized by law or executive order to
remain closed.
"Calculation Date" means, with respect to each Series of Transition
----------------
Bonds, the date on which the calculations and filings set forth in the Issuer
Annex will be made each year. The first Calculation Date will be no later than
October 17, 2002, if the Servicer requests only Transition Charge Adjustments,
and no later than August 2, 2002, if the Servicer requests any RAAF Adjustments
(whether or not the Servicer also requests Transition Charge Adjustments).
Subsequent Calculation Dates will be on or about the same applicable day of the
year in subsequent years.
"Capital Subaccount" has the meaning specified in Section 8.02(a) of
------------------
the Indenture.
"Choice" means the first date on which a Person who
------
(a) was a retail customer of electric service of Reliant Energy
located within Reliant Energy's service territory on May 1, 1999, or that became
a retail customer of electric service of Reliant Energy located within Reliant
Energy's service territory after May 1, 1999,
(b) is still located within Reliant Energy's service territory,
and
(c) has been, prior to such date, receiving electric
transmission and/or distribution service from Reliant Energy or the successor
to Reliant Energy's distribution business,
may receive retail electric service from an REP, which is expected to be either
the beginning of the first billing cycle for each Customer following January 1,
2002, or earlier, in the case of certain Pilot Programs.
"Class" means, with respect to any Series, any one of the classes of
-----
Transition Bonds of that Series, as specified in the Series Supplement for that
Series.
"Clearing Agency" means an organization registered as a "clearing
---------------
agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" means a broker, dealer, bank, other
---------------------------
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Collection Account" has the meaning specified in Section 8.02(a) of
------------------
the Indenture.
"Collection Period" means the period from and including the first day
-----------------
of a calendar month to but excluding the first day of the next calendar month.
"Collections Curve" means a separate forecast prepared by the Servicer
-----------------
for two groups of Customer Classes of the percentages of amounts billed in a
Pre-Choice Billing Month that are expected to be received during each of the
following six months.
9
"Collections Curve Payment" means, with respect to a Billing Month, the
-------------------------
sum of the amounts paid to the Trustee by the Servicer in respect of Transition
Charges over a six-month period following that Billing Month based on the
Collections Curves for that Billing Month.
"Corporate Trust Office" means the principal office of the Trustee at
----------------------
which at any particular time its corporate trust business shall be administered,
which office as of the date of the execution of the Indenture is located at,
Xxxx Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, 00000 Attention: Corporate Trust and
Agency Services-Structured Finance Team, or at such other address as the Trustee
may designate from time to time by notice to the Transition Bondholders and the
Issuer, or the principal Corporate Trust Office of any successor Trustee (the
address of which the successor Trustee will notify the Transition Bondholders
and the Issuer).
"Current Remittance Month" means the calendar month in which a
------------------------
particular Daily Remittance Date or Monthly Remittance Date occurs.
"Curve Payment Shortfall" means, with respect to each Pre-Choice
-----------------------
Billing Month and the Reconciliation Date for such Billing Month, the excess of
actual TC Collections the Servicer has received for that Billing Month over the
Collections Curve Payments previously made to the Trustee by the Servicer for
that Billing Month.
"Customer Class" means each of the Transition Charge classes specified
--------------
in the Financing Order.
"Customers" means each Person from which Reliant Energy is authorized
---------
to recover retail stranded costs under the Texas Electric Choice Plan or any
PUCT Regulation.
"Daily Remittance Date" means each Business Day of each calendar month.
---------------------
"Default" means any occurrence that is, or with notice or the lapse of
-------
time or both would become, an Event of Default.
"Designated Account Holder" has the meaning specified in the
-------------------------
Intercreditor Agreement.
"DTC" means The Depository Trust Company.
---
"Event of Default" has the meaning specified in Section 5.01 of the
----------------
Indenture.
"Excess Curve Payment" means, with respect to each Pre-Choice Billing
--------------------
Month and the Reconciliation Date for such Billing Month, the excess of the
Collections Curve Payments previously made to the Trustee by the Servicer for
that Billing Month over actual TC Collections the Servicer has received for that
Billing Month.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Expected Amortization Schedule" means, with respect to each Series or,
------------------------------
if applicable, each Class of Transition Bonds, the expected amortization
schedule for principal thereof, as specified in the Series Supplement therefor.
10
"Expected Final Payment Date" means, with respect to each Series or, if
---------------------------
applicable, each Class of Transition Bonds, the date when all interest and
principal is scheduled to be paid for that Series or Class in accordance with
the Expected Amortization Schedule, as specified in the Series Supplement
therefor.
"Federal Funds Rate" means, for any period, a fluctuating interest rate
------------------
per annum equal for each day during such period to the weighted average of the
rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day that is a Business Day, the average of the quotations for such day on such
transactions received by the Servicer from three federal funds brokers of
recognized standing selected by it.
"Final Maturity Date" means, for each Series or, if applicable, each
-------------------
Class of Transition Bonds, the date by which all principal and interest on the
Transition Bonds is required to be paid, as specified in the Series Supplement
therefor.
"Financing Order" means the Financing Order issued by the PUCT on May
---------------
31, 2000, (PUC Docket No. 21665) pursuant to the Texas Electric Choice Plan, as
interpreted by the PUCT on September 18, 2001 (PUC Docket No. 21665, SOAH Docket
No ###-##-####).
"Fitch" means Fitch, Inc., or any successor thereto.
-----
"Formation Documents" means, collectively, the Issuer Certificate of
-------------------
Formation, the Issuer LLC Agreement and any other document pursuant to which the
Issuer is formed or governed, 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 on the Transition Bond
Register.
"Indenture" means the Indenture dated as of October 24, 2001, between
---------
the Issuer and the Trustee, as the same may be amended and supplemented from
time to time by one or more indentures supplemental thereto, and shall include
the forms and terms of the Transition Bonds established thereunder.
"Independent" means, when used with respect to any specified Person,
-----------
that the Person
(a) is in fact independent of the Issuer, any other obligor upon
the Transition Bonds, the Servicer and any Affiliate of any of the
foregoing Persons,
(b) does not have any direct financial interest or any material
indirect financial interest in the Issuer, any such other obligor, the
Servicer or any Affiliate of any of the foregoing Persons and
(c) is not connected with the Issuer, any such other obligor, the
Servicer or any Affiliate of any of the foregoing Persons as an
officer, employee, promoter, underwriter, trustee, partner, director or
person performing similar functions.
11
"Initial Transfer Date" means the Series Issuance Date for the first
---------------------
Series of Transition Bonds.
"Initial Transition Property" means the Transition Property sold by the
---------------------------
Seller to the Issuer as of the Initial Transfer Date pursuant to the Sale
Agreement.
"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 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.
"Intercreditor Agreement" means the Intercreditor Agreement dated as of
-----------------------
October 24, 2001, among the Issuer, Reliant Energy, in its individual capacity
and as the Servicer, and the Trustee, AEP Credit, Inc., and The Bank of New
York, as the same may be amended and supplemented from time to time.
"Interim Adjustment Date" means the effective date of any interim
-----------------------
(non-annual) Transition Charge Adjustment.
"Issuance Advice Letter" means the letter filed by Reliant Energy with
----------------------
the PUCT pursuant to Ordering Paragraph No. 5 of the Financing Order.
"Issuer" means Reliant Energy Transition Bond Company LLC, a Delaware
------
limited liability company, or its successor or the party named as such in the
Indenture until a successor replaces it and, thereafter, means the successor.
"Issuer Annex" means Annex 1 of the Servicing Agreement.
------------
"Issuer Certificate of Formation" means the Certificate of Formation of
-------------------------------
the Issuer that was filed with the Delaware Secretary of State on November 10,
1999, as the same may be amended and restated from time to time.
12
"Issuer LLC Agreement" means the Amended and Restated Limited Liability
--------------------
Company Agreement between the Issuer and Reliant Energy, as sole Member, dated
as of October 24, 2001, as the same may be amended and supplemented from time to
time.
"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.
"Majority Holders" means the Holders of a majority of the Outstanding
----------------
Amount of the Transition Bonds of all Series.
"Monthly Remittance Date" means the twentieth (20th) day of each calendar
-----------------------
month (or if such twentieth (20th) day is not a Business Day, the next Business
Day).
"Moody's" means Xxxxx'x Investors Service Inc., or any successor thereto.
-------
"Officers' Certificate" means a certificate signed, in the case of Reliant
---------------------
Energy, by
(a) the chairman of the board, the president, the vice chairman of
the board or any vice president; and
(b) a treasurer, assistant treasurer, secretary or assistant
secretary.
"Operating Expenses" means, with respect to the Issuer, all fees, costs,
------------------
expenses and indemnity payments owed by the Issuer, including all amounts owed
by the Issuer to the Trustee, the Servicing Fee, the fee payable by the Issuer
to the Administrator under the Administration Agreement, the fees and expenses
payable by the Issuer to the Independent managers of the Issuer and legal and
accounting fees, costs and expenses of the Issuer.
"Opinion of Counsel" means one or more written opinions of counsel who may
------------------
be an employee of or counsel to Reliant Energy, which counsel shall be
reasonably acceptable to the Trustee, the Issuer or the Rating Agencies, as
applicable, and which shall be in form reasonably satisfactory to the Trustee,
if applicable.
"Outstanding" with respect to Transition Bonds means, as of the date of
-----------
determination, all Transition Bonds theretofore authenticated and delivered
under the Indenture except:
(a) Transition Bonds theretofore cancelled by the Transition Bond
Registrar or delivered to the Transition Bond Registrar for cancellation;
(b) Transition Bonds or portions thereof the payment for which
money in the necessary amount has been theretofore deposited with the
Trustee or any Paying Agent in trust for the Holders of such Transition
Bonds; provided, however, that if such Transition Bonds are to be
redeemed, notice of such redemption has been duly given pursuant to the
Indenture or provision therefor, satisfactory to the Trustee; and
13
(c) Transition Bonds in exchange for or in lieu of other
Transition Bonds which have been authenticated and delivered pursuant to
the Indenture unless proof satisfactory to the Trustee is presented that
any such Transition Bonds are held by a bona fide purchaser;
provided that in determining whether the Holders of the requisite Outstanding
Amount of the Transition Bonds or any Series or Class thereof have given any
request, demand, authorization, direction, notice, consent or waiver hereunder
or under any Basic Document, Transition Bonds owned by the Issuer, any other
obligor upon the Transition Bonds, the Servicer or any Affiliate of any of the
foregoing Persons shall be disregarded and deemed not to be Outstanding, except
that, in determining whether the Trustee shall be protected in relying upon any
such request, demand, authorization, direction, notice, consent or waiver, only
Transition Bonds that a Responsible Officer of the Trustee knows to be so owned
shall be so disregarded. Transition Bonds so owned that have been pledged in
good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Transition Bonds and that the pledgee is not the Issuer, any other obligor upon
the Transition Bonds, the Servicer or any Affiliate of any of the foregoing
Persons.
"Outstanding Amount" means the aggregate principal amount of all
------------------
Outstanding Transition Bonds or, if the context requires, all Outstanding
Transition Bonds of a Series or Class Outstanding at the date of determination.
"Overcollateralization Subaccount" has the meaning specified in Section
--------------------------------
8.02(a) of the Indenture.
"Paying Agent" means the Trustee or any other Person that meets the
------------
eligibility standards for the Trustee specified in Section 6.11 of the Indenture
and is authorized by the Issuer to make the payments of principal of or premium,
if any, or interest on the Transition Bonds on behalf of the Issuer.
"Payment Date" means, with respect to each Series or, if applicable, each
------------
Class of Transition Bonds, the date or dates specified as Payment Dates for such
Series or Class in the Series Supplement therefor.
"Penalty" means a late-fee penalty assessed by the Servicer against an REP
-------
for the REP's failure to remit timely payments of Transition Charges as set
forth in Section 3.02(c) of this Agreement.
"Penalty Assessment Day" has the meaning specified in Section 3.02(c) of
----------------------
the Servicing Agreement.
"Person" means any individual, corporation, estate, partnership, joint
------
venture, association, joint stock company, trust (including any beneficiary
thereof), business trust, limited liability company, unincorporated organization
or government or any agency or political subdivision thereof.
14
"Pilot Program" means a pilot program before Choice under which certain
-------------
Customers may choose to buy electric energy from certain REPs pursuant to
Section 39.104 of the Texas Electric Choice Plan.
"Pre-Choice Billing Month" has the meaning specified in Section 3.03(a).
------------------------
"Proceeding" means any suit in equity, action at law or other judicial or
----------
administrative proceeding.
"Projected Transition Bond Balance" means, as of any date, the anticipated
---------------------------------
Outstanding Amount of Transition Bonds after giving effect to payment of the sum
of the amounts provided for in the Expected Amortization Schedules for each
outstanding Series of Transition Bonds and such date.
"Provider of Last Resort" has the meaning specified in Section 39.106 of
-----------------------
the Texas Electric Choice Plan.
"PUCT" means the Public Utility Commission of Texas or any successor
----
entity thereto.
"PUCT Regulations" means any regulations, rules, orders or directives
----------------
promulgated, issued or adopted by the PUCT.
"Qualified Costs" has the meaning assigned to that term in the Texas
---------------
Electric Choice Plan and the Financing Order.
"RAAF" means the regulatory asset allocation factor used to allocate
----
Transition Charges among different classes of Customers, as set forth in Tariff
TC and any other applicable tariff or order.
"RAAF Adjustment" means each adjustment to any RAAF made in accordance
---------------
with Section 4.01 of the Servicing Agreement, Tariff TC and any other applicable
tariff, any order issued by the PUCT pursuant to Section 39.253 of the Texas
Electric Choice Plan, and the Issuer Annex.
"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,
which initially shall be Xxxxx'x, Fitch and Standard & Poor's. 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 the Issuer, written notice of which designation shall be given to
the Trustee and the Servicer.
"Rating Agency Condition" means, with respect to any action, the
-----------------------
notification in writing to each Rating Agency of such action, and confirmation
from S&P and Fitch to the Trustee and the 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.
"Receivables Servicer" means Reliant Energy and each successor to or
--------------------
assignee of Reliant Energy (in the same capacity) pursuant to the Intercreditor
Agreement.
15
"Reconciliation Date" means, with respect to any Pre-Choice Billing Month,
-------------------
the twentieth day (or if such twentieth day is not a Business Day, the next
Business Day) in the seventh month after such Billing Month.
"Redemption Date" means, with respect to each Series or, if applicable,
---------------
each Class of Transition Bonds, the date for the redemption of the Transition
Bonds of such Series or Class pursuant to Sections 10.01 or 10.02 of the
Indenture or the Series Supplement for such Series or Class, which in each case
shall be a Payment Date.
"Released Parties" has the meaning specified in Section 5.02(f) of the
----------------
Servicing Agreement.
"Reliant Energy" means Reliant Energy, Incorporated, a Texas corporation,
--------------
or its successor.
"Remittance Date" means a Daily Remittance Date or a Monthly Remittance
---------------
Date, as applicable.
"REP" means a retail electric provider under the Financing Order.
---
"REP Billing Day" has the meaning specified in Section 3.02(c) of the
---------------
Servicing Agreement.
"REP Default" has the meaning specified in Section 9(c) of the Issuer
-----------
Annex.
"REP Deposit" has the meaning specified in Section 8 of the Issuer Annex.
-----------
"Required Capital Amount" means the required balance in the Capital
-----------------------
Subaccount on a particular date.
"Reserve Subaccount" has the meaning specified in Section 8.02(a) of the
------------------
Indenture.
"Responsible Officer" means, with respect to the Trustee, any officer
-------------------
within the Corporate Trust Office of the Trustee, including any Vice President,
Director, Managing Officer, associate, Assistant Vice President, Secretary,
Assistant Secretary, or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also, with respect to a particular matter, any other officer to whom such matter
is referred because of such officer's knowledge of and familiarity with the
particular subject.
"Retiring Trustee" means a Trustee that resigns or vacates the office of
----------------
Trustee for any reason.
"Sale Agreement" means the Transition Property Sale Agreement dated as of
--------------
October 24 2001, between the Seller and the Issuer, as the same may be amended
and supplemented from time to time.
16
"Sale Date" means each date on which the Seller sells, transfers, assigns
---------
and conveys the Transition Property to the Issuer.
"Scheduled Overcollateralization Level" means, with respect to any Payment
-------------------------------------
Date, the amount set forth as such in Schedule 1 of the Indenture, as such
Schedule has been adjusted in accordance with Section 3.19 of the Indenture to
reflect redemptions or defeasances of Transition Bonds and issuances of
additional Series of Transition Bonds.
"Seller" means Reliant Energy, or its successor, in its capacity as seller
------
of the Transition Property to the Issuer pursuant to the Sale Agreement.
"Semiannual Servicer's Certificate" has the meaning specified in the
---------------------------------
Indenture.
"Series" means any series of Transition Bonds issued by the Issuer and
------
authenticated by the Trustee pursuant to the Indenture, as specified in the
Series Supplement therefor.
"Series Issuance Date" means, with respect to any Series, the date on
--------------------
which the Transition Bonds of such Series are to be originally issued in
accordance with Section 2.10 of the Indenture and the Series Supplement for such
Series.
"Series Supplement" means an indenture supplemental to the Indenture that
-----------------
authorizes a particular Series of Transition Bonds.
"Servicer" means Reliant Energy, as the servicer of the Transition
--------
Property, and each successor to or assignee of Reliant Energy (in the same
capacity) pursuant to Section 5.03, 5.04, or 6.04 of the Servicing Agreement.
"Servicer Default" means an event specified in Section 6.01 of the
----------------
Servicing Agreement.
"Servicing Agreement" means the Transition Property Servicing Agreement
-------------------
dated as of October 24, 2001, between the Issuer and the Servicer, and
acknowledged by the Trustee, as the same may be amended and supplemented from
time to time.
"Servicing Fee" means the fee payable by the Issuer to the Servicer on
-------------
each Payment Date with respect to each series of Transition Bonds in an amount
specified in Section 5.07 of the Servicing Agreement.
"Standard & Poor's" or "S&P" means Standard & Poor's, a division of The
--------------------------
XxXxxx-Xxxx Companies, or any successor thereto.
"State" means any one of the 50 states of the United States of America or
-----
the District of Columbia.
"Subsequent Sale" means the sale of additional Transition Property by the
---------------
Seller to the Issuer after the Initial Transfer Date, subject to the
satisfaction of the conditions specified in the Sale Agreement and the
Indenture.
17
"Subsequent Transfer Date" means the date that a Subsequent Sale will be
------------------------
effective, specified in a written notice provided by the Seller to the Issuer
pursuant to the Sale Agreement.
"Subsequent Transition Property" means Transition Property sold by the
------------------------------
Seller to the Issuer as of a Subsequent Transfer Date pursuant to the Sale
Agreement.
"Successor Servicer" means a successor Servicer appointed by the Trustee
------------------
pursuant to Section 6.04 of the Servicing Agreement which will succeed to all
the rights and duties of the Servicer under the Servicing Agreement.
"Tariff TC" means the tariff on the form entitled "Schedule TC" approved
---------
by the PUCT in the Financing Order and filed by Reliant Energy prior to the
issuance of any Transition Bonds.
"TC Collections" means amounts constituting good funds collected by any
--------------
Person in respect of Transition Charges and Transition Property
"TC Servicer" has the meaning specified in the Intercreditor Agreement.
-----------
"Termination Notice" has the meaning specified in Section 6.01 of the
------------------
Servicing Agreement.
"Texas Electric Choice Plan" means the Act of May 21, 1999, 76th Leg. R.S.
--------------------------
ch. 405, 1999.
"Transfer Date" means the Initial Transfer Date or any Subsequent Transfer
-------------
Date, as applicable.
"Transition Bond" means any of the Transition Bonds (as defined in the
---------------
Texas Electric Choice Plan) issued by the Issuer pursuant to the Indenture.
"Transition Bond Balance" means, as of any date, the aggregate Outstanding
-----------------------
Amount of all Series of Transition Bonds on such date.
"Transition Bond Owner" means, with respect to a Book-Entry Transition
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Bond, the Person who is the beneficial owner of such Book-Entry Transition Bond,
as reflected on the books of the Clearing Agency, or on the books of a Person
maintaining an account with such Clearing Agency (directly as a Clearing Agency
Participant or as an indirect participant, in each case in accordance with the
rules of such Clearing Agency).
"Transition Bond Register" has the meaning specified in Section 2.05 of
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the Indenture.
"Transition Bond Registrar" means the Trustee, in its capacity as keeper
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of the Transition Bond Register, or any successor to the Trustee in such
capacity.
"Transition Charge Adjustment" means each adjustment to Transition Charges
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related to the Transition Property made in accordance with Section 4.01 of the
Servicing Agreement and the Issuer Annex or in connection with the redemption or
refunding by the Issuer of Transition Bonds.
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"Transition Charges" means the nonbypassable amounts to be charged for the
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use or availability of electric services, approved by the PUCT in the Financing
Order to recover Qualified Costs, that shall be collected by Reliant Energy, its
successors, assignees or other collection agents as provided for in the
Financing Order.
"Transition Property" means the rights and interests of Seller or its
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successor under the Financing Order, once those rights are first transferred to
the Issuer or pledged in connection with the issuance of the Transition Bonds,
including the irrevocable right to impose, collect and receive through
Transition Charges payable by retail electric customers within Seller's
certificated service area as it existed on May 1, 1999, an amount sufficient to
cover the Qualified Costs of the Seller authorized in the Financing Order, the
right to receive Transition Charges in amounts and at times sufficient to pay
principal and interest and make other deposits in connection with the Transition
Bonds and all revenues and collections resulting from Transition Charges.
"Transition Property Documentation" means all documents relating to the
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Transition Property, including copies of the Financing Order and all documents
filed with the PUCT in connection with any Transition Charges Adjustment, as
described in Section 3.08 of the Servicing Agreement.
"Trust Estate" has the meaning specified in the Granting Clause of the
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Indenture.
"Trustee" means Bankers Trust Company, a New York banking corporation, as
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trustee, or its successor or any successor Trustee under the Indenture.
"UCC" means, unless the context otherwise requires, the Uniform Commercial
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Code, as in effect in the relevant jurisdiction, as amended from time to time
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