TRANSITION PROPERTY SERVICING AGREEMENT by and between ENTERGY TEXAS RESTORATION FUNDING, LLC, Issuer and ENTERGY TEXAS, INC., Servicer Dated as of November 6, 2009
Exhibit
99.1
by
and between
Issuer
and
ENTERGY
TEXAS, INC.,
Servicer
Dated
as of November 6, 2009
TABLE OF
CONTENTS
Page
ARTICLE
I
DEFINITIONS
|
SECTION
1.01.
|
Definitions.
|
|
ARTICLE
II
APPOINTMENT
AND AUTHORIZATION
|
SECTION
2.01.
|
Appointment
of Servicer; Acceptance of Appointment
|
|
|
SECTION
2.02.
|
Authorization
|
|
|
SECTION
2.03.
|
Dominion
and Control Over the Transition Property
|
|
ARTICLE
III
ROLE OF
SERVICER
|
SECTION
3.01.
|
Duties
of Servicer
|
|
|
SECTION
3.02.
|
Servicing
and Maintenance Standards
|
|
|
SECTION
3.03.
|
Annual
Reports on Compliance with Regulation AB.
|
|
|
SECTION
3.04.
|
Annual
Report by Independent Registered Public Accountants.
|
|
|
SECTION
3.05.
|
Monitoring
of Third-Party Collectors
|
|
ARTICLE
IV
SERVICES
RELATED TO TRUE-UP ADJUSTMENTS
|
SECTION
4.01.
|
True-Up
Adjustments
|
|
|
SECTION
4.02.
|
Limitation
of Liability
|
|
ARTICLE
V
THE
TRANSITION PROPERTY
|
SECTION
5.01.
|
Custody
of Transition Property Records
|
|
|
SECTION
5.02.
|
Duties
of Servicer as Custodian.
|
|
|
SECTION
5.03.
|
Custodian’s
Indemnification
|
|
|
SECTION
5.04.
|
Effective
Period and Termination
|
|
ARTICLE
VI
THE
SERVICER
|
SECTION
6.01.
|
Representations
and Warranties of Servicer
|
|
|
SECTION
6.02.
|
Indemnities
of Servicer; Release of Claims
|
|
|
SECTION
6.03.
|
Binding
Effect of Servicing Obligations
|
|
|
SECTION
6.04.
|
Limitation
on Liability of Servicer and Others
|
|
|
SECTION
6.05.
|
ETI
Not to Resign as Servicer
|
|
|
SECTION
6.06.
|
Servicing
Compensation
|
|
|
SECTION
6.07.
|
Compliance
with Applicable Law
|
|
|
SECTION
6.08.
|
Access
to Certain Records and Information Regarding Transition
Property
|
|
|
SECTION
6.09.
|
Appointments
|
|
|
SECTION
6.10.
|
No
Servicer Advances
|
|
|
SECTION
6.11.
|
Remittances
|
|
|
SECTION
6.12.
|
Maintenance
of Operations
|
|
ARTICLE
VII
DEFAULT
|
SECTION
7.01.
|
Servicer
Default
|
|
|
SECTION
7.02.
|
Appointment
of Successor.
|
|
|
SECTION
7.03.
|
Waiver
of Past Defaults
|
|
|
SECTION
7.04.
|
Notice
of Servicer Default
|
|
|
SECTION
7.05.
|
Cooperation
with Successor
|
|
ARTICLE
VIII
MISCELLANEOUS
PROVISIONS
|
SECTION
8.01.
|
Amendment.
|
|
|
SECTION
8.02.
|
PUCT
Condition
|
|
|
SECTION
8.03.
|
Maintenance
of Accounts and Records
|
|
|
SECTION
8.04.
|
Notices
|
|
|
SECTION
8.05.
|
Assignment
|
|
|
SECTION
8.06.
|
Limitations
on Rights of Others
|
|
|
SECTION
8.07.
|
Severability
|
|
|
SECTION
8.08.
|
Separate
Counterparts
|
|
|
SECTION
8.09.
|
Headings
|
|
|
SECTION
8.10.
|
GOVERNING
LAW
|
|
|
SECTION
8.11.
|
Assignment
to Indenture Trustee
|
|
|
SECTION
8.12.
|
Nonpetition
Covenants
|
|
|
SECTION
8.13.
|
Limitation
of Liability
|
|
EXHIBITS
AND SCHEDULES
Exhibit A Form
of Monthly Servicer’s Certificate
Exhibit B Form
of Semi-Annual Servicer’s Certificate
Exhibit C-1 Form
of Servicer’s Regulation AB Compliance Certificate
Exhibit
C-2 Form
of Certificate of Compliance
Schedule 4.01(a) Expected
Amortization Schedule
ANNEXES
Annex
I Servicing
Procedures
This
TRANSITION PROPERTY SERVICING AGREEMENT (this “Agreement”), dated as
of November 6, 2009, is between ENTERGY TEXAS RESTORATION FUNDING, LLC, a
Delaware limited liability company, as issuer (the “Issuer”), and ENTERGY
TEXAS, INC. (“ETI”), a Texas
corporation, as servicer (the “Servicer”).
RECITALS
WHEREAS,
pursuant to the Securitization Law and the Financing Order, ETI, in its capacity
as seller (the “Seller”), and the
Issuer are concurrently entering into the Sale Agreement pursuant to which the
Seller is selling and the Issuer is purchasing certain Transition Property
created pursuant to the Securitization Law and the Financing Order described
therein;
WHEREAS,
in connection with its ownership of the Transition Property and in order to
collect the associated Transition Charges, the Issuer desires to engage the
Servicer to carry out the functions described herein (such functions or similar
functions currently performed by the Servicer for itself with respect to its own
charges to its Customers) and the Servicer desires to be so
engaged;
WHEREAS,
the Issuer desires to engage the Servicer to act on its behalf in obtaining
True-Up Adjustments from the PUCT and the Servicer desires to be so
engaged;
WHEREAS,
the TC Collections initially will be commingled with other funds collected by
the Servicer;
WHEREAS,
although the Service Area is not open to retail competition, the parties agree
that certain standards and procedures shall be included in this Agreement
concerning REPs when and if retail competition is introduced into the Service
Area; and
WHEREAS,
the PUCT, or its attorney, will enforce this Agreement for the benefit of the
Customers to the extent permitted by law;
NOW,
THEREFORE, in consideration of the premises and the mutual covenants herein
contained, the parties hereto agree as follows:
ARTICLE
I
DEFINITIONS
SECTION
1.01. Definitions.
(a) Unless
otherwise defined herein, capitalized terms used herein shall have the meanings
assigned to them in that certain Indenture (including Appendix A
thereto) dated as of the date hereof between the Issuer and The Bank of New York
Mellon, a New York banking corporation, in its capacity as the indenture trustee
(the “Indenture
Trustee”) and in its separate capacity as a securities intermediary (the
“Securities
Intermediary”), as the same may be amended, restated, supplemented or
otherwise modified from time to time.
(b) All terms
defined in this Agreement shall have the defined meanings when used in any
certificate or other document made or delivered pursuant hereto unless otherwise
defined therein.
(c) 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, Schedule, Exhibit, Annex and Attachment
references contained in this Agreement are references to Sections, Schedules,
Exhibits, Annexes and Attachments in or to this Agreement unless otherwise
specified; and the term “including” shall mean “including without
limitation.”
(d) The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms.
(e) Non-capitalized
terms used herein which are defined in the Utilities Code shall, as the context
requires, have the meanings assigned to such terms in the Utilities Code, but
without giving effect to amendments to the Utilities Code after the date hereof
which have a material adverse effect on the Issuer or the Holders.
ARTICLE
II
APPOINTMENT
AND AUTHORIZATION
SECTION
2.01. Appointment of Servicer;
Acceptance of Appointment. 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 or any assignee thereof in accordance with the terms of
this Agreement and applicable law. 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 and/or the Issuer, as the case may be, any and all
instruments, documents or notices, and (b) on behalf of itself and/or the
Issuer, as the case may be, make any filing and participate in proceedings of
any kind with any Governmental Authority, including with the
PUCT. The Issuer shall execute and deliver to the Servicer such
documents as have been prepared by the Servicer for execution by the Issuer and
shall furnish the Servicer with such other documents as may be in the Issuer’s
possession, in each case as the Servicer may determine to be necessary or
appropriate to enable it to carry out its servicing and administrative duties
hereunder. Upon the Servicer’s written request, 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
the Transition Property. Notwithstanding any other provision
herein, 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 and custodian for the Issuer with respect to the Transition
Property and the Transition Property Records. The Servicer shall not
take any action that is not authorized by this Agreement, that would contravene
the Utilities Code, the PUCT Regulations or the Financing Order, that is not
consistent with its customary procedures and practices, or that shall impair the
rights of the Issuer in the Transition Property, in each case unless such action
is required by applicable law or court or regulatory order.
ARTICLE
III
ROLE OF
SERVICER
SECTION
3.01. Duties of
Servicer. The Servicer, as agent for the Issuer, shall have
the following duties:
(a) Duties of Servicer
Generally. The Servicer’s duties in general shall include
management, servicing and administration of the Transition Property; obtaining
meter reads, calculating usage (including demand and including any such usage by
Customers served by a REP, when and if the Service Area becomes subject to
retail competition), billing, collections and posting of all payments in respect
of the Transition Property; responding to inquiries by Customers, REPs, the
PUCT, or any other Governmental Authority with respect to the Transition
Property; delivering Bills to Customers or REPs, if any; investigating and
handling delinquencies (and furnishing reports with respect to such
delinquencies to the Issuer), processing and depositing collections and making
periodic remittances; furnishing periodic reports to the Issuer, the Indenture
Trustee and the Rating Agencies; making all filings with the PUCT and taking
such other action as may be necessary to perfect the Issuer’s ownership
interests in and the Indenture Trustee’s first priority Lien on the Transition
Property; making all filings and taking such other action as may be necessary to
perfect and maintain the perfection and priority of the Indenture Trustee’s Lien
on all Transition Bond Collateral; selling as the agent for the Issuer as its
interests may appear defaulted or written off accounts in accordance with the
Servicer’s usual and customary practices; taking all necessary action in
connection with True-Up Adjustments as set forth herein; and performing such
other duties as may be specified under the Financing Order to be performed by
it. Anything to the contrary notwithstanding, the duties of the
Servicer set forth in this Agreement shall be qualified in their entirety by any
PUCT Regulations, the Financing Order, and the federal securities laws and the
rules and regulations promulgated thereunder, including Regulation AB, 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 Annex I hereto,
as it may be amended from time to time. For the avoidance of doubt,
the term “usage” when used herein refers to both kilowatt hour consumption and
kilowatt demand.
(b) Reporting
Functions.
(i) Monthly Servicer’s
Certificate. On or before the twenty-fifth calendar day of
each month (or if such day is not a Servicer Business Day, on the immediately
preceding Servicer Business Day), the Servicer shall prepare and deliver to the
Issuer, the PUCT, the Indenture Trustee and the Rating Agencies a written report
substantially in the form of Exhibit A hereto
(a “Monthly Servicer’s
Certificate”) setting forth certain information relating to TC Payments
received by the Servicer during the Collection Period immediately preceding such
date, including the Remittance Shortfall or Excess Remittance as required by
Section 6.11(c) hereof; provided, however, that for any
month in which the Servicer is required to deliver a Semi-Annual
Servicer’s Certificate pursuant to Section 4.01(c)(ii), the Servicer shall
prepare and deliver the Monthly Servicer’s Certificate no later than the date of
delivery of such Semi-Annual Servicer’s Certificate.
(ii) Notification of Laws and
Regulations. The Servicer shall immediately notify the Issuer,
the Indenture Trustee and the Rating Agencies in writing of any Requirements of
Law or PUCT Regulations hereafter promulgated that have a material adverse
effect on the Servicer’s ability to perform its duties under this
Agreement.
(iii) Other
Information. Upon the reasonable request of the Issuer, the
Indenture Trustee or any Rating Agency, the Servicer shall provide to the
Issuer, the Indenture 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, as may be reasonably necessary and permitted by law
to enable the Issuer, the Indenture Trustee or the Rating Agencies to monitor
the performance by the Servicer hereunder. In addition, so long as
any of the Transition Bonds are outstanding, the Servicer shall provide the
Issuer and the Indenture 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 TC
Customer Class.
(iv) Preparation of
Reports. The Servicer shall prepare and deliver such
additional reports as required under this Agreement, including a copy of each
Semi-Annual Servicer’s Certificate described in Section 4.01(c)(ii), the annual
Servicer’s Regulation AB Compliance Certificate and Certificate of Compliance
described in Section 3.03, and the Annual Accountant’s Report described in
Section 3.04. In addition, the Servicer shall prepare, procure,
deliver and/or file, or cause to be prepared, procured, delivered or filed, any
reports, attestations, exhibits, certificates or other documents required to be
delivered or filed with the SEC (and/or any other Governmental Authority) by the
Issuer or the Sponsor under the federal securities or other applicable laws or
in accordance with the Basic Documents, including, but without limiting the
generality of foregoing, filing with the SEC, if applicable, a copy or copies of
(i) the Monthly Servicer’s Certificates described in Section 3.01(b)
(under Form 10-D or any other applicable form), (ii) the Semi-Annual
Servicer’s Certificates described in Section 4.01(c)(ii) (under
Form 10-D or any other applicable form), (iii) the annual statements
of compliance, attestation reports and other certificates described in
Section 3.03, and (iv) the Annual Accountant’s Report (and any
attestation required under Regulation AB) described in
Section 3.04. In addition, the appropriate officer or officers
of the Servicer shall (in its separate capacity as Servicer) sign the Sponsor’s
annual report on Form 10-K (and any other applicable SEC or other reports,
attestations, certifications and other documents), to the extent that the
Servicer’s signature is required by, and consistent with, the federal securities
laws and/or any other applicable law.
(c) Opinions of
Counsel. The Servicer shall deliver to the Issuer and the
Indenture Trustee:
(i) upon
execution and delivery of this Agreement and the Sale Agreement or of any
amendment hereto or thereto, an Opinion of Counsel from Independent counsel of
the Issuer either (A) to the effect that, in the opinion of such counsel,
all filings, including filings with the PUCT and the Texas Secretary of State
and all filings pursuant to the UCC, that are necessary under the UCC and the
Securitization Law to fully preserve, protect and perfect the Liens of the
Indenture Trustee in the Transition Property have been authorized, executed and
filed, and reciting the details of such filings, or (B) to the effect that,
in the opinion of such counsel, no such action shall be necessary to preserve,
protect and perfect such Liens; and
(ii) within
ninety (90) days after the beginning of each calendar year beginning with the
first calendar year beginning more than three (3) months after the date
hereof, an Opinion of Counsel from Independent counsel of the Issuer, dated as
of a date during such ninety (90)-day period, either (A) to the effect
that, in the opinion of such counsel, all filings, including filings with the
PUCT and the Texas Secretary of State and all filings pursuant to the UCC, have
been executed and filed that are necessary under the UCC and the Securitization
Law to fully preserve, protect and perfect the Liens of the Indenture Trustee in
the Transition Property, and reciting the details of such filings, or
(B) to the effect that, in the opinion of such counsel, no such action
shall be necessary to preserve, protect and perfect such Liens.
Each
Opinion of Counsel referred to in clause (i) or
(ii) above
shall specify any action necessary (as of the date of such opinion) to be taken
in the following year to preserve, protect and continue the perfection of such
interest or Lien.
SECTION
3.02. Servicing and Maintenance
Standards. On behalf of the Issuer, the Servicer shall (a)
manage, service, administer and make collections in respect of the Transition
Property with reasonable care and in material compliance with applicable
Requirements of Law, including all applicable PUCT Regulations and guidelines,
using the same degree of care and diligence that the Servicer exercises with
respect to similar assets for its own account and, if applicable, for others;
(b) follow customary standards, policies and procedures for the industry in
Texas in performing its duties as Servicer; (c) use all reasonable efforts,
consistent with its customary servicing procedures, to enforce, and maintain
rights in respect of, the Transition Property and to xxxx and collect the
Transition Charges; (d) comply with all Requirements of Law, including all
applicable PUCT Regulations and guidelines, applicable to and binding on it
relating to the Transition Property; (e) file all PUCT notices described in the
Securitization Law and file and maintain the effectiveness of UCC financing
statements with respect to the property transferred from time to time under the
Sale Agreement, and (f) take such other action on behalf of the Issuer to
ensure that the Lien of the Indenture Trustee on the Transition Bond Collateral
remains perfected and of first priority. 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, at
the Issuer’s expense but subject to the priority of payments set forth in
Section 8.02(e) of the Indenture.
SECTION
3.03. Annual Reports on Compliance
with Regulation AB.
(a) The
Servicer shall deliver to the Issuer, the PUCT, the Indenture Trustee and the
Rating Agencies, on or before the earlier of (a) March 31 of each
year, beginning March 31, 2010, or (b) with respect to each calendar year
during which the Sponsor’s annual report on Form 10-K is required to be
filed in accordance with the Exchange Act and the rules and regulations
thereunder, the date on which the annual report on Form 10-K is required to
be filed in accordance with the Exchange Act and the rules and regulations
thereunder, certificates from a Responsible Officer of the Servicer
(i) containing, and certifying as to, the statements of compliance required
by Item 1123 (or any successor or similar items or rule) of Regulation AB, as
then in effect and (ii) containing, and certifying as to, the statements
and assessment of compliance required by Item 1122(a) (or any successor or
similar items or rule) of Regulation AB, as then in effect. These
certificates may be in the form of, or shall include the forms attached hereto
as Exhibit C-1
and Exhibit C-2
hereto, with, in the case of Exhibit C-1, such
changes as may be required to conform to applicable securities
laws.
(b) The
Servicer shall use commercially reasonable efforts to obtain from each other
party, if any, participating in the servicing function any additional
certifications as to the statements and assessment required under Item 1122 or
Item 1123 of Regulation AB to the extent required in connection with the filing
of the annual report on Form 10-K; provided, however, that a failure to
obtain such certifications shall not be a breach of the Servicer’s duties
hereunder. The parties acknowledge that the Indenture Trustee’s
certifications shall be limited to the Item 1122 certifications described in
Exhibit E
of the Indenture.
(c) The
initial Servicer, in its capacity as Sponsor, shall post on its own website or
on one maintained by an Affiliate and file with or furnish to the SEC, in
periodic reports and other reports as are required from time to time under
Section 13 or Section 15(d) of the Exchange Act (without regard to the
number of Holders of Transition Bonds to the extent permitted by and consistent
with the Sponsor’s obligations under applicable law), the information described
in Section 3.07(g) of the Indenture with respect to the Outstanding
Transition Bonds to the extent such information is reasonably available to the
Sponsor. The initial Servicer, in its capacity as Sponsor, shall not
voluntarily suspend or terminate its filing obligations as Sponsor with the SEC
as described in this Section 3.03(c). The covenants of the
initial Servicer, in its capacity as Sponsor, pursuant to this
Section 3.03(c) shall survive the resignation, removal or termination of
the initial Servicer as Servicer hereunder.
SECTION
3.04. Annual Report by Independent
Registered Public Accountants.
(a) The
Servicer, at its own expense in partial consideration of the Servicing Fee paid
to it, shall cause a firm of Independent registered public accountants (which
may provide other services to the Servicer or the Seller) to prepare annually,
and the Servicer shall deliver annually to the Issuer, the PUCT, the Indenture
Trustee and the Rating Agencies on or before the earlier of
(a) March 31 of each year, beginning March 31, 2010 or
(b) with respect to each calendar year during which the Sponsor’s annual
report on Form 10-K is required to be filed in accordance with the Exchange
Act and the rules and regulations thereunder, the date on which the annual
report on Form 10-K is required to be filed in accordance with the Exchange
Act and the rule and regulations thereunder, a report addressed to the Servicer
(the “Annual
Accountant’s Report”) to the effect that such firm has performed certain
procedures, agreed between the Servicer and such accountants, in connection with
the Servicer’s compliance with its obligations under this Agreement during the
preceding twelve (12) months ended December 31 (or, in the case of the first
Annual Accountant’s Report to be delivered on or before March 31, 2010, the
period of time from the date of this Agreement until December 31, 2009),
identifying the results of such procedures and including any exceptions
noted. In the event that the accounting firm providing such report
requires the Indenture Trustee to agree or consent to the procedures performed
by such firm, the Issuer shall direct the Indenture Trustee in writing to so
agree; it being understood and agreed that the Indenture Trustee will deliver
such letter of agreement or consent in conclusive reliance upon the direction of
the Issuer, and the Indenture Trustee will 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 in accordance with the
Rules of the Public Company Accounting Oversight Board, and shall include the
attestation report required under Item 1122(b) of Regulation AB (or any
successor or similar items or rule), as then in effect.
SECTION
3.05. Monitoring of Third-Party
Collectors. If a Third-Party Collector does xxxx or collect
Transition Charges on behalf of the Issuer, then, from time to time, until the
Retirement of the Transition Bonds, the Servicer shall, in accordance with the
Servicing Standard, take all actions with respect to such Third-Party Collectors
required to be taken by the Servicer as set forth, if applicable, in any
agreement with the Servicer, the Financing Order, Tariffs, other tariffs and any
other PUCT Regulations in effect from time to time and implement such additional
procedures and policies as are necessary to ensure that the obligations of all
Third-Party Collectors in connection with Transition Charges are properly
enforced in accordance with, if applicable, the terms of any agreement with the
Servicer, the Financing Order, Tariffs, other tariffs and any other PUCT
Regulations in effect from time to time. Such procedures and policies
shall include the following:
(a) Maintenance of Records and
Information. In addition to any actions required by the
Tariffs, PUCT Regulations or other applicable law, the Servicer
shall:
(i) maintain
adequate records for promptly identifying and contacting each Third-Party
Collector;
(ii) maintain
records of end-user Customers which are billed by Third-Party Collectors to
permit prompt transfer of billing responsibilities in the event of default by
such Third-Party Collectors;
(iii) maintain
adequate records for enforcing compliance by all Third-Party Collectors with
their obligations with respect to Transition Charges, including compliance with
all Remittance Requirements, REP Credit Requirements and REP Deposit
Requirements; and
(iv) provide
to each Third-Party Collector such information necessary for such Third-Party
Collector to confirm the Servicer’s calculation of Transition Charges and
remittances, including, if applicable, charge-off amounts.
The
Servicer shall update the records described above no less frequently than
quarterly.
(b) Credit and Collection
Policies. The Servicer shall, to the fullest extent permitted
under the Financing Order, impose such terms with respect to credit and
collection policies applicable to Third-Party Collectors as may be reasonably
necessary to prevent the then-current rating of the Transition Bonds from being
downgraded, withdrawn or suspended. The Servicer shall, in accordance
with and to the extent permitted by the Utilities Code, applicable PUCT
Regulations and the terms of the Financing Order, include and impose the
above-described terms in all tariffs filed under the Utilities Code which would
allow REPs or other utilities to issue single bills which include Transition
Charges to ETI’s Customers. The Servicer shall periodically review
the need for modified or additional terms based upon, among other things, (i)
the relative amount of TC Payments received through REPs relative to the
Periodic Billing Requirement, (ii) the historical payment and default experience
of each REP and (iii) such other credit and collection policies to which the
REPs are subject, and if permitted by applicable law, will set out any such
modified or additional terms in a supplemental tariff filed with the
PUCT.
(c) Monitoring of Performance
and Payment by REPs. In addition to any actions required by
the Tariffs, PUCT Regulations or other applicable law, the Servicer shall
undertake to do the following:
(i) The
Servicer shall require each REP to pay all Transition Charges (less any
applicable charge-off allowances) billed to such REP in accordance with the
provisions of the Initial Tariff, and PUCT Regulations (whether or not
disputed). The Servicer shall monitor compliance by each REP with all
Remittance Requirements, REP Credit Requirements and REP Deposit Requirements
and take prompt action to enforce such requirements.
(ii) Where a
REP is responsible for billing the Customers, the Servicer shall, consistent
with its customary billing practices, xxxx each Applicable REP no less
frequently than the billing cycle otherwise applicable to such
Customers.
(iii) The
Servicer shall work with REPs to resolve any disputes using the dispute
resolution procedures established in the Initial Tariff and any PUCT
Regulations, in accordance with the Servicing Standard.
(d) Enforcement of REP
Obligations. The Servicer shall, in accordance with the terms
of the Initial Tariff, ensure that each REP remits all TC Payments which it is
obligated to remit to the Servicer. In the event of any default by
any REP, the Servicer shall enforce all rights set forth in and take all other
steps permitted by, if applicable, the Financing Order, Tariffs, other tariffs
and any other PUCT Regulations as it determines, in accordance with the
Servicing Standard, are reasonably necessary to ensure the prompt payment of TC
Payments by such REP and to preserve the rights of the Holders with respect
thereto, including, where appropriate, terminating the right of any REP to xxxx
and collect Transition Charges or petitioning the PUCT to impose such other
remedies or penalties as may be available under the
circumstances. Any agreement entered into between the Servicer and a
defaulted REP will be limited to the terms of this Agreement and will satisfy
the Rating Agency Condition. In the event the Servicer has actual
knowledge that a REP is in default, including due to the downgrade by the Rating
Agencies of any party providing credit support for such REP, the Servicer shall
promptly notify a Responsible Officer of the Indenture Trustee in writing of the
same and, shall, if applicable, instruct the Indenture Trustee either
to:
(i) withdraw
from such REP’s REP Deposit Account and deposit into the Collection Account the
lesser of (x) the amount of cash on deposit in such REP Deposit Account and
allocable to the Transition Property at such time and (y) the amount of any
Transition Charges then due and payable by such REP; or
(ii) make
demand under any letter of credit, guarantee or other credit support up to the
lesser of (x) the amount of such letter of credit, guarantee or other
credit support and (y) the amount of any Transition Charges then due and
payable by such REP, and forward the amounts received, if any, as a result of
such demand to the Collection Account.
The
Indenture Trustee shall, within two (2) Business Days of receipt of such
written notice, withdraw such funds from the REP Deposit Account or make demand
under such credit support, as applicable, and deposit such funds withdrawn or
received, as applicable, into the Collection Account.
(e) Maintenance of REP Deposit
Accounts. If any REPs collect Transition Charges within the
Service Area, then the Servicer shall cause the entity acting as Indenture
Trustee to maintain one or more REP Deposit Accounts as described in
Section 8.02(g) of the Indenture. The Servicer shall provide
written direction to the Indenture Trustee regarding the allocation and release
of funds on deposit in the REP Deposit Accounts, as permitted or required by the
Indenture, this Agreement, the Financing Order or any Tariff or PUCT
Regulations. The Indenture Trustee shall be entitled to conclusively
rely on any such written directions from the Servicer. The Servicer
will seek and use reasonable best efforts to obtain, from any REP which wishes
to satisfy its credit support requirements by making a deposit to a REP Deposit
Account, a written security agreement stating that (i) by making such
deposit the REP has granted a security interest in such deposit in favor of the
Indenture Trustee, and (ii) the Indenture Trustee, in holding such deposit
as collateral, will have the rights and remedies of a secured party under
Article 9 of the UCC with respect to such collateral, and the Servicer will
promptly forward any such agreement to the Indenture Trustee.
(f) Affiliated Third-Party
Collectors. In performing its obligations under this
Section 3.05, the Servicer shall deal with any Third-Party Collectors which
are Affiliates of the Servicer on terms which are no more favorable in the
aggregate to such affiliated Third-Party Collector than those used by the
Servicer in its dealings with any Third-Party Collectors that are not affiliates
of the Servicer.
ARTICLE
IV
SERVICES
RELATED TO TRUE-UP ADJUSTMENTS
SECTION
4.01. True-Up
Adjustments. From time to time, until the Retirement of the
Transition Bonds, the Servicer shall identify the need for Annual True-Up
Adjustments, Interim True-Up Adjustments and Non-Standard True-Up Adjustments
and shall take all reasonable action to obtain and implement such True-Up
Adjustments, all in accordance with the following:
(a) [RESERVED]
(b) True-Up
Adjustments.
(i) Annual True-Up Adjustments
and Filings. Each year no later than fifteen (15) days prior
to the first billing cycle of November the Servicer shall: (A) update the
data and assumptions underlying the calculation of the Transition Charges,
including projected electricity usage during the next Calculation Period for
each TC Customer Class and including interest and estimated expenses and fees of
the Issuer to be paid during such period, the Days Sales Outstanding and
write-offs; (B) determine the Periodic Payment Requirement and Periodic
Billing Requirement for the next Calculation Period based on such updated data
and assumptions; (C) determine the Transition Charges to be allocated to
each TC Customer Class during the next Calculation Period based on such Periodic
Billing Requirement and the terms of the Financing Order and the Tariffs filed
pursuant thereto and in doing so the Servicer shall use the Periodic Billing
Requirement Allocation Factors approved in the Tariff to allocate the Transition
Charges, including, as applicable, the result of the implementation of the most
recent Non-Standard True-Up Adjustment; (D) make all required notice and
other filings with the PUCT to reflect the revised Transition Charges, including
any Amendatory Tariffs; and (E) take all reasonable actions and make all
reasonable efforts to effect such Annual True-Up Adjustment and to enforce the
provisions of the Securitization Law and the Financing Order; provided, however, that if the
Servicer determines that the forecasted billing units for one or more of the TC
Customer Classes for an upcoming period decreases by more than 10% compared to
the billing units for the threshold period set forth in the Financing Order, the
Servicer shall implement a Non-Standard True-Up Adjustment and, if such
Non-Standard True-Up Adjustment shall be made in the time period provided for
Annual True-Up Adjustments pursuant to this Section 4.01(b)(i), such
Non-Standard True-Up Adjustment shall also qualify as an Annual True-Up
Adjustment for purposes of this Agreement. The Servicer shall
implement the revised Transition Charges, if any, resulting from such Annual
True-Up Adjustment as of the Annual True-Up Adjustment Date.
(ii) Non-Standard True-Up
Adjustments and Filings. In the event that the Servicer
determines that a Non-Standard True-Up Adjustment is required, the Servicer
shall, no later than ninety (90) days prior to the first billing cycle of
November (A) recalculate the Transition Charges to reallocate such
Transition Charges among TC Customer Classes in accordance with the procedures
for Non-Standard True-Up Adjustments set forth in the Financing Order and the
Tariffs filed pursuant thereto; (B) make all required notice and other
filings with the PUCT to reflect the revised Transition Charges, including any
Amendatory Tariffs; and (C) take all reasonable actions and make all
reasonable efforts to effect such Non-Standard True-Up Adjustment and to enforce
the provisions of the Securitization Law and the Financing Order. The
Servicer shall implement the revised Transition Charges, if any, resulting from
such Non-Standard True-Up Adjustment on the Non-Standard True-Up Adjustment
Date. For the avoidance of doubt, no Annual True-Up Adjustment or
Interim True-Up Adjustment shall be considered a Non-Standard True-Up Adjustment
solely because Transition Charges are allocated under such Annual True-Up
Adjustment or Interim True-Up Adjustment in the same manner as in a preceding
Non-Standard True-Up Adjustment.
(iii) Interim True-Up Adjustments
and Filings. Within the 30-day period ending prior to the
first billing cycle in May of each year and, within the 30-day period preceding
the first billing cycle in August 2022, and in each November, February, May and
August thereafter, the Servicer shall compare the anticipated Unrecovered
Balance, as of the next Payment Date and after giving effect to payments to be
made on such Payment Date, to the Projected Unrecovered Balance as of such
Payment Date. The Servicer shall, no later than fifteen (15) days
prior to the end of such thirty (30) day period, make a mandatory Interim
True-Up Adjustment if the Servicer forecasts that TC Collections will be
insufficient (a) to make all scheduled payments of interest, principal and
other amounts in respect of any Tranche of Transition Bonds during the current
and next succeeding semi-annual period or quarterly period, as applicable, and
(b) to replenish the applicable Capital Subaccount to the Required Capital
Level. If the Servicer determines that an Interim True-Up Adjustment
is required under the immediately preceding sentence, then the Servicer shall:
(A) update the data and assumptions underlying the calculation of the Transition
Charges, including projected electricity usage during the next Calculation
Period for each TC Customer Class and including interest and estimated expenses
and fees of the Issuer to be paid during such period, the rate of delinquencies
and write-offs; (B) determine the Periodic Payment Requirement and Periodic
Billing Requirement for the next Calculation Period based on such updated data
and assumptions; (C) determine the Transition Charges to be allocated to each TC
Customer Class during the next Calculation Period based on such Periodic Billing
Requirement and the terms of the Financing Order and the Tariffs filed pursuant
thereto, and in doing so the Servicer shall use the method of allocating
Transition Charges then in effect, including as applicable, the result of the
implementation of the most recent Non-Standard True-Up Adjustment as approved in
the Tariff; (D) make all required notice and other filings with the PUCT to
reflect the revised Transition Charges, including any Amendatory Tariffs; and
(E) take all reasonable actions and make all reasonable efforts to effect such
Interim True-Up Adjustment and to enforce the provisions of the Securitization
Law and the Financing Order which relate thereto. The Servicer shall
implement the revised Transition Charges, if any, resulting from such Interim
True-Up Adjustment on the Interim True-Up Adjustment Date. The
Servicer may not implement Interim True-Up Adjustments more frequently than
every six (6) months; provided that the
Servicer may implement Interim True-Up Adjustments quarterly for any Transition
Bonds remaining Outstanding commencing in August 2022.
(c) Reports.
(i) Notification of Amendatory
Tariff Filings and True-Up Adjustments. Whenever the Servicer
files an Amendatory Tariff with the PUCT or implements revised Transition
Charges with notice to the PUCT without filing an Amendatory Tariff if permitted
by the Financing Order, the Servicer shall send a copy of such filing or notice
(together with a copy of all notices and documents which, in the Servicer’s
reasonable judgment, are material to the adjustments effected by such Amendatory
Tariff or notice) to the Issuer, the Indenture Trustee and the Rating Agencies
concurrently therewith. If, for any reason any revised Transition
Charges are not implemented and effective on the applicable date set forth
herein, the Servicer shall notify the Issuer, the Indenture Trustee and each
Rating Agency by the end of the second Servicer Business Day after such
applicable date.
(ii) Semi-Annual Servicer’s
Certificate. Not later than five (5) Servicer Business
Days prior to each Payment Date or Special Payment Date, the Servicer shall
deliver a written report for the Transition Bonds, substantially in the form of
Exhibit B
hereto (the “Semi-Annual Servicer’s
Certificate”) to the Issuer, the PUCT, the Indenture Trustee and the
Rating Agencies which shall include all of the following information (to the
extent applicable and including any other information so specified in the Series
Supplement) as to the Transition Bonds with respect to such Payment Date or
Special Payment Date or the period since the previous Payment Date, as
applicable:
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(a)
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the
amount of the payment to Holders allocable to principal, if
any;
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(b)
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the
amount of the payment to Holders allocable to
interest;
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(c)
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the
aggregate Outstanding Amount of such Transition Bonds, before and after
giving effect to any payments allocated to principal reported under clause (a)
above;
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(d)
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the
difference, if any, between the amount specified in clause (c)
above and the Outstanding Amount specified in the Expected Amortization
Schedule;
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(e)
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any
other transfers and payments to be made on such Payment Date or Special
Payment Date, including amounts paid to the Indenture Trustee and to the
Servicer; and
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(f)
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the
amounts on deposit in the Capital Subaccount and the Excess Funds
Subaccount, after giving effect to the foregoing
payments.
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(iii) Reports to
Customers.
(A) After
each revised Transition Charge has gone into effect pursuant to a True-Up
Adjustment, the Servicer shall, to the extent and in the manner and time frame
required by applicable PUCT Regulations, if any, cause to be prepared and
delivered to Customers any required notices announcing such revised Transition
Charges.
(B) The
Servicer shall comply with the requirements of the Financing Order and Tariff
with respect to the identification of Transition Charges on Bills. In
addition, at least once each year, the Servicer shall (to the extent that it
does not separately identify the Transition Charges as being owned by the Issuer
in the Bills regularly sent to Customers or any REPs, when and if ETI’s Service
Area becomes subject to retail competition) cause to be prepared and delivered
to such Customers and REPs a notice stating, in effect, that the Transition
Property and the Transition Charges are owned by the Issuer and not the
Seller. Unless prohibited by applicable PUCT Regulations, the
Servicer shall use reasonable efforts to cause each Applicable REP, at least
once each year, to include similar notices in the bills sent by such Applicable
REP to Customers indicating additionally that the Transition Charges are not
owned by such Applicable REP (to the extent that such Applicable REP does not
include such information in the Bills regularly sent to
Customers). Such notice shall be included either as an insert to or
in the text of the Bills delivered to such Customers or shall be delivered to
Customers by electronic means or such other means as the Servicer or the
Applicable REP may from time to time use to communicate with its respective
Customers.
(C) Except to
the extent that applicable PUCT Regulations make any future Applicable REP
responsible for such costs, or the Applicable REP has otherwise agreed to pay
such costs, the Servicer shall pay from its own funds all costs of preparation
and delivery incurred in connection with clauses (A) and (B) above,
including printing and postage costs as the same may increase or decrease from
time to time.
(iv) REP
Reports. When and if the Service Area becomes subject to
retail competition and if any REPs collect the Transition Charges within the
Service Area, then the Servicer shall provide to the Rating Agencies, upon
request, any publicly available reports filed by the Servicer with the PUCT (or
otherwise made publicly available by the Servicer) relating to REPs and any
other non-confidential and non-proprietary information relating to REPs
reasonably requested by the Rating Agencies to the extent such information is
reasonably available to the Servicer.
SECTION
4.02. Limitation of
Liability. (a) The Issuer and the Servicer expressly
agree and acknowledge that:
(i) In
connection with any True-Up Adjustment, the Servicer is acting solely in its
capacity as the servicing agent hereunder.
(ii) Neither
the Servicer nor the Issuer nor the Indenture Trustee is responsible in any
manner for, and shall have no liability whatsoever as a result of, any action,
decision, ruling or other determination made or not made, or any delay (other
than any delay resulting from the Servicer’s failure to make any filings
required by Section 4.01 in a timely and correct manner or any breach by
the Servicer of its duties under this Agreement that adversely affects the
Transition Property or the True-Up Adjustments), by the PUCT in any way related
to the Transition Property or in connection with any True-Up Adjustment, the
subject of any filings under Section 4.01, any proposed True-Up Adjustment,
or the approval of any revised Transition Charges and the scheduled adjustments
thereto.
(iii) Except to
the extent that the Servicer is liable under Section 6.02, the Servicer
shall have no liability whatsoever relating to the calculation of any revised
Transition Charges and the scheduled adjustments thereto, including as a result
of any inaccuracy of any of the assumptions made in such calculation regarding
expected energy usage and the Days Sales Outstanding, write-offs and estimated
expenses and fees of the Issuer, so long as the Servicer has acted in good faith
and has not acted in a negligent manner in connection therewith, nor shall the
Servicer have any liability whatsoever as a result of any Person, including the
Holders, not receiving any payment, amount or return anticipated or expected or
in respect of any Transition Bond generally.
(b) Notwithstanding
the foregoing, this Section 4.02 shall not relieve the Servicer of
liability for any misrepresentation by the Servicer under Section 6.01 or
for any breach by the Servicer of its other obligations under this
Agreement.
ARTICLE
V
THE
TRANSITION PROPERTY
SECTION
5.01. Custody of Transition
Property Records. To assure uniform quality in servicing the
Transition Property and to reduce administrative costs, the Issuer hereby
revocably appoints the Servicer, and the Servicer hereby accepts such
appointment, to act as the agent of the Issuer as custodian of any and all
documents and records that the Seller shall keep on file, in accordance with its
customary procedures, relating to the Transition Property, including copies of
the Financing Order, Issuance Advice Letters, Tariffs and Amendatory Tariffs
relating thereto and all documents filed with the PUCT in connection with any
True-Up Adjustment and computational records relating thereto (collectively, the
“Transition Property
Records”), which are hereby constructively delivered to the Indenture
Trustee, as pledgee of the Issuer with respect to all Transition
Property.
SECTION
5.02. Duties of Servicer as
Custodian.
(a) Safekeeping. The
Servicer shall hold the Transition Property Records on behalf of the Issuer and
maintain such accurate and complete accounts, records and computer systems
pertaining to the Transition Property Records as shall enable the Issuer and the
Indenture Trustee, as applicable, to comply with this Agreement, the Sale
Agreement and the Indenture. In performing its duties as custodian,
the Servicer shall act with reasonable care, using that degree of care and
diligence that the Servicer exercises with respect to comparable assets that the
Servicer services for itself or, if applicable, for others. The
Servicer shall promptly report to the Issuer, the Indenture Trustee and the
Rating Agencies any failure on its part to hold the Transition Property Records
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 Indenture Trustee of the Transition Property
Records. The Servicer’s duties to hold the Transition Property
Records set forth in this Section 5.02, to the extent such Transition
Property Records have not been previously transferred to a successor Servicer
pursuant to Article VII,
shall terminate one year and one day after the earlier of the date on which
(i) the Servicer is succeeded by a successor Servicer in accordance with
Article VII and
(ii) no Transition Bonds are Outstanding.
(b) Maintenance of and Access to
Records. The Servicer shall maintain the Transition Property
Records at the address set forth in Section 8.04(a), or at such other office as
shall be specified to the Issuer and the Indenture Trustee by written notice at
least thirty (30) days prior to any change in location. The Servicer
shall make available for inspection, audit and copying to the Issuer and the
Indenture Trustee or their respective duly authorized representatives, attorneys
or auditors the Transition Property Records at such times during normal business
hours as the Issuer or the Indenture Trustee shall reasonably request and which
do not unreasonably interfere with the Servicer’s normal
operations. Nothing in this Section 5.02(b) shall affect the
obligation of the Servicer to observe any applicable law (including any PUCT
Regulation) prohibiting disclosure of information regarding the Customers, and
the failure of the Servicer to provide access to such information as a result of
such obligation shall not constitute a breach of this
Section 5.02(b).
(c) Release of
Documents. Upon instruction from the Indenture Trustee in
accordance with the Indenture, the Servicer shall release any Transition
Property Records to the Indenture Trustee, the Indenture Trustee’s agent or the
Indenture Trustee’s designee, as the case may be, at such place or places as the
Indenture Trustee may designate, as soon as practicable. Nothing in
this Section 5.02(c) shall affect the obligation of the Servicer to observe
any applicable law (including any PUCT Regulation) prohibiting disclosure of
information regarding the Customers, and the failure of the Servicer to provide
access to such information as a result of such obligation shall not constitute a
breach of this Section 5.02(c).
(d) Defending Transition
Property Against Claims. The Servicer shall institute any
action or proceeding necessary to compel performance by any REP (at the earliest
possible time) of any of their respective obligations or duties under the
Securitization Law and the Financing Order with respect to the Transition
Property, and the Servicer agrees to take such legal or administrative actions,
including without limitation 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 Securitization Law or the Financing
Order. The costs of any action described in this Section 5.02(d)
shall be payable from TC Collections as an Operating Expense (and shall not be
deemed to constitute a portion of the Servicing Fee) in accordance with the
Indenture. The Servicer’s obligations pursuant to this
Section 5.02(d) shall survive and continue notwithstanding that payment of
such Operating Expense may be delayed pursuant to the terms of the Indenture (it
being understood that the Servicer may be required initially to advance its own
funds to satisfy its obligations hereunder).
(e) Additional Litigation to
Defend Transition Property. In addition to the above, the
Servicer shall, at its own expense, institute any action or proceeding necessary
to compel performance by the PUCT or the State of Texas of any of their
respective obligations or duties under the Securitization Law or the Financing
Order with respect to the Transition Property, and to compel performance by any
future REPs with any of their respective obligations or duties under any Tariffs
or any agreement with the Servicer entered into pursuant to such
Tariffs. In any proceedings related to the exercise of the power of
eminent domain by any municipality to acquire a portion of ETI’s electric
distribution facilities, the Servicer shall assert that the court ordering such
condemnation must treat such municipality as a successor to ETI under the
Securitization Law and the Financing Order.
SECTION
5.03. Custodian’s
Indemnification. The Servicer as custodian shall indemnify the
Issuer, the Independent Managers and the Indenture Trustee (for itself and for
the benefit of the Holders) and each of their respective officers, directors,
employees and agents for, and defend and hold harmless each such Person from and
against, any and all liabilities, obligations, losses, damages, payments and
claims, and reasonable costs or expenses, of any kind whatsoever (collectively,
“Losses”) that
may be imposed on, incurred by or asserted against each such Person as the
result of any negligent act or omission in any way relating to the maintenance
and custody by the Servicer, as custodian, of the Transition Property Records;
provided, however, that the
Servicer shall not be liable for any portion of any such amount resulting from
the willful misconduct, bad faith or negligence of the Issuer, the Independent
Managers or the Indenture Trustee, as the case may be.
Indemnification
under this Section 5.03 shall survive resignation or removal of the
Indenture Trustee or any Independent Manager and shall include reasonable
out-of-pocket fees and expenses of investigation and litigation (including
reasonable attorney’s fees and expenses).
SECTION
5.04. Effective Period and
Termination. The Servicer’s appointment as custodian shall
become effective as of the Closing Date and shall continue in full force and
effect until terminated pursuant to this Section 5.04. If the
Servicer shall resign as Servicer in accordance with the provisions of this
Agreement or if all of the rights and obligations of the Servicer shall have
been terminated under Section 7.01, the appointment of the Servicer as
custodian shall be terminated effective as of the date on which the termination
or resignation of the Servicer is effective. Additionally, if not
sooner terminated as provided above, the Servicer’s obligations as Custodian
shall terminate one year and one day after the date on which no Transition Bonds
are Outstanding.
ARTICLE
VI
THE
SERVICER
SECTION
6.01. Representations and
Warranties of Servicer. The Servicer makes the following
representations and warranties, as of the Closing Date and as of such other
dates as expressly provided in this Section 6.01, on which the Issuer and
the Indenture Trustee are deemed to have relied in entering into this Agreement
relating to the servicing of the Transition Property. The
representations and warranties shall survive the execution and delivery of this
Agreement, the sale of any Transition Property and the pledge thereof to the
Indenture Trustee pursuant to the Indenture.
(a) Organization and Good
Standing. The Servicer is duly organized and validly existing
and is in good standing under the laws of the State of Texas, with the requisite
corporate or other 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
had at all relevant times, and has, the requisite power, authority and legal
right to service the Transition Property and to hold the Transition Property
Records as custodian.
(b) Due
Qualification. The Servicer is duly qualified to do business
and is 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) shall require 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
or properties or to its servicing of the Transition Property).
(c) Power and
Authority. The execution, delivery and performance of this
Agreement have been duly authorized by all necessary action on the part of the
Servicer under its organizational or governing documents and laws.
(d) Binding
Obligation. This Agreement constitutes a legal, valid and
binding obligation of the Servicer enforceable against the
Servicer in accordance with its terms, subject to applicable
insolvency, reorganization, moratorium, fraudulent transfer and other laws
relating to or affecting creditors’ rights generally from time to time in effect
and to general principles of equity (including concepts of materiality,
reasonableness, good faith and fair dealing), regardless of whether considered
in a proceeding in equity or at law.
(e) No
Violation. The consummation of the transactions contemplated
by this Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, nor constitute (with
or without notice or lapse of time) a default under, the organizational
documents of the Servicer, or any indenture or other agreement or instrument to
which the Servicer is a party or by which it or any of its property is bound;
nor result in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement or other instrument
(other than any Lien that may be granted under the Basic Documents or any Lien
created pursuant to Section 39.309 of the Securitization Law); nor violate
any existing law or any existing order, rule or regulation applicable to the
Servicer of any Governmental Authority having jurisdiction over the Servicer or
its properties.
(f) No
Proceedings. There are no proceedings or investigations
pending or, to the Servicer’s knowledge, threatened, before any Governmental
Authority having jurisdiction over the Servicer or its properties involving or
relating to the Servicer or the Issuer or, to the Servicer’s knowledge, any
other Person: (i) asserting the invalidity of this Agreement or any of the
other Basic Documents, (ii) 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, (iii) seeking any
determination or ruling that could reasonably be expected to materially and
adversely affect the performance by the Servicer of its obligations under, or
the validity or enforceability of, this Agreement, any of the other Basic
Documents or the Transition Bonds or (iv) seeking to adversely affect the
federal income tax or state income or franchise tax classification of the
Transition Bonds as debt.
(g) Approvals. No
approval, authorization, consent, order or other action of, or filing with, any
Governmental Authority is required in connection with the execution and delivery
by the Servicer of this Agreement, the performance by the Servicer of the
transactions contemplated hereby or the fulfillment by the Servicer of the terms
hereof, except those that have been obtained or made, those that the Servicer is
required to make in the future pursuant to Article IV and
those that the Servicer may need to file in the future to continue the
effectiveness of any financing statement filed under the UCC.
(h) Reports and
Certificates. Each report and certificate delivered in
connection with an Issuance Advice Letter or delivered in connection with any
filing made to the PUCT by the Issuer with respect to the Transition Charges or
True-Up 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
(and facts known to the Servicer on the date such report or certificate is
delivered).
SECTION
6.02. Indemnities of Servicer;
Release of Claims. (a) The Servicer shall be liable in
accordance herewith only to the extent of the obligations specifically
undertaken by the Servicer under this Agreement.
(b) The
Servicer shall indemnify the Issuer, the Indenture Trustee (for itself and for
the benefit of the Holders), and the Independent Managers and each of their
respective trustees, officers, directors, employees and agents (each, an “Indemnified Person”)
for, and defend and hold harmless each such Person from and against, any and all
Losses imposed on, 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
its reckless disregard of its obligations and duties under this Agreement,
(ii) the Servicer’s breach of any of its representations and warranties
contained in this Agreement, (iii) any litigation or related expenses
relating to the Servicer’s status or obligations as Servicer (other than any
proceeding the Servicer is required to institute under the Servicing Agreement)
or (iv) any finding that interest payable to any future REP with respect to
disputed funds must be paid by the Issuer or from the Transition Property,
except to the extent of Losses either resulting from the willful misconduct, bad
faith or gross negligence of such Person seeking indemnification hereunder or
resulting from a breach of a representation or warranty made by such Person
seeking indemnification hereunder in any of the Basic Documents that gives rise
to the Servicer’s breach.
(c) For
purposes of Section 6.02(b), in the event of the termination of the rights
and obligations of ETI (or any successor thereto pursuant to Section 6.03)
as Servicer pursuant to Section 7.01, or a resignation by such Servicer
pursuant to this Agreement, such Servicer shall be deemed to be the Servicer
pending appointment of a successor Servicer pursuant to
Section 7.02.
(d) Indemnification
under this Section 6.02 shall survive any repeal of, modification of, or
supplement to, or judicial invalidation of, the Securitization Law or the
Financing Order and shall survive the resignation or removal of the Indenture
Trustee or any Independent Manager or the termination of this Agreement and
shall include reasonable out-of-pocket fees and expenses of investigation and
litigation (including reasonable attorney’s fees and expenses).
(e) Except to
the extent expressly provided in this Agreement or the other Basic Documents
(including the Servicer’s claims with respect to the Servicing Fee,
reimbursement for any Excess Remittance, reimbursement for costs incurred
pursuant to Section 5.02(d) and the payment of the purchase price of
Transition Property), the Servicer hereby releases and discharges the Issuer,
the Independent Managers, and the Indenture Trustee and each of their respective
officers, directors and agents (collectively, the “Released Parties”)
from any and all actions, claims and demands whatsoever, whenever arising, which
the Servicer, in its capacity as Servicer or otherwise, 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.
(f) Promptly
after receipt by an Indemnified Person of notice (or, in the case of the
Indenture Trustee, receipt of notice by a Responsible Officer only) of the
commencement of any action, proceeding or investigation, such Indemnified Person
shall, if a claim in respect thereof is to be made against the Servicer under
this Section 6.02, notify the Servicer in writing of the commencement
thereof. 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 6.02 only to the extent that the
Servicer suffers actual prejudice 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 under this Section 6.02, the Servicer shall
be entitled to conduct and control, at its expense and with counsel of its
choosing that is reasonably satisfactory to such Indemnified Person, the defense
of any such action, proceeding or investigation (in which case the Servicer
shall not thereafter be responsible for the fees and expenses of any separate
counsel retained by the Indemnified Person except as set forth below); provided
that the Indemnified Person shall have the right to participate in such action,
proceeding or investigation through counsel chosen by it and at its own expense.
Notwithstanding the Servicer’s election to assume the defense of any action,
proceeding or investigation, the Indemnified Person shall have the right to
employ separate counsel (including local counsel), and the Servicer shall bear
the reasonable fees, costs and expenses of such separate counsel if (i) the
defendants in any such action include both the Indemnified Person and the
Servicer and the Indemnified Person shall have reasonably concluded that there
may be legal defenses available to it that are different from or additional to
those available to the Servicer, (ii) the Servicer shall not have employed
counsel reasonably satisfactory to the Indemnified Person to represent the
Indemnified Person within a reasonable time after notice of the institution of
such action, (iii) the Servicer shall authorize the Indemnified Person to
employ separate counsel at the expense of the Servicer or (iv) in the case
of the Indenture Trustee, such action exposes the Indenture Trustee to a
material risk of criminal liability or forfeiture or a Servicer Default has
occurred and is continuing. Notwithstanding the foregoing, the
Servicer shall not be obligated to pay for the fees, costs and expenses of more
than one separate counsel for the Indemnified Persons other than one local
counsel, if appropriate.
(g) The
Servicer shall indemnify the PUCT (for the benefit of Customers) for, and defend
and hold harmless against, any and all Losses that may be imposed upon, incurred
by or asserted against the PUCT, including any increase in the Servicing Fee
that becomes payable pursuant to Section 6.06, as a result of a Servicer
Default resulting from the Servicer’s willful misconduct, bad faith or
negligence in performance of its duties or observance of its covenants under
this Agreement. The indemnification obligation set forth in this
paragraph may be enforced by the PUCT but is not enforceable by any REP or any
Customer. Any indemnity payments made to the PUCT under this
paragraph for the benefit of Customers shall be remitted to the Indenture
Trustee promptly for deposit into the applicable Collection
Account.
SECTION
6.03. Binding Effect of Servicing
Obligations. Any Person (a) into which the Servicer may
be merged, converted or consolidated, (b) that may result from any
reorganization, merger (including, but not limited to, merger as defined in Art.
1.02.A.(18) of the Texas Business Corporation Act or in Section 1.002(55)
of the Texas Business Organizations Code, as applicable to the Servicer, as
amended from time to time (including, without limitation, any merger commonly
referred to as a “merger by division”)), conversion or consolidation to which
the Servicer shall be a party, or (c) that may acquire or succeed to
(whether by merger, division, conversion, consolidation, reorganization, sale,
transfer, lease, management contract or otherwise) (1) the properties and assets
of the Servicer substantially as a whole, (2) all or substantially all of the
electric transmission and distribution business of the Servicer which is
required to provide electric service to the Servicer’s customers in the Service
Area (or, if transmission and distribution are not provided by a single entity,
the distribution business of the Servicer required to provide electric service
to the Servicer’s Customers in the Service Area), or (3) the distribution system
business assets of the Servicer in a portion of the Service Area, and which
Person in any of the foregoing cases executes an agreement of assumption to
perform all of the obligations of the Servicer hereunder shall be a successor to
the Servicer under this Agreement (a “Permitted Successor”) without further act
on the part of any of the parties to this Agreement; provided, however,
that
(i) immediately
after giving effect to such transaction, no representation, warranty or covenant
made pursuant to Section 6.01 shall be breached and no Servicer Default, and no
event which, after notice or lapse of time, or both, would become a Servicer
Default shall have occurred and be continuing,
(ii) the
Servicer shall have delivered to the Issuer, the Indenture Trustee and each
Rating Agency an Officer’s Certificate and an Opinion of Counsel from
Independent counsel stating that such consolidation, conversion, merger,
division, reorganization, sale, transfer, lease, management contract
transaction, acquisition or other succession and such agreement of assumption
comply with this Section 6.03 and that all conditions precedent, if any,
provided for in this Agreement relating to such transaction have been complied
with,
(iii) the
Servicer shall have delivered to the Issuer, the Indenture Trustee and each
Rating Agency an Opinion of Counsel from Independent counsel of the Servicer
either (A) stating that, in the opinion of such counsel, all filings to be
made by the Servicer and the Issuer, including filings with the PUCT pursuant to
the Securitization Law, have been authorized, executed and filed that are
necessary to fully preserve and protect the respective interests of the Issuer
and the Indenture Trustee in all of the Transition Property and reciting the
details of such filings, or (B) stating that, in the opinion of such
counsel, no such action shall be necessary to preserve and protect such
interests,
(iv) the
Servicer shall have delivered to the Issuer, the Indenture Trustee, the Rating
Agencies and the PUCT an Opinion of Counsel from Independent tax counsel stating
that, for federal income tax purposes, notwithstanding such consolidation,
conversion, merger, division, reorganization, sale, transfer, lease, management
contract transaction, acquisition or other succession and such agreement of
assumption, (a) the Issuer will not be subject to tax as an entity separate
from its sole owner, (b) the Transition Bonds will be treated as debt of
the Issuer’s sole owner, and (c) the Transition Bonds will not be treated
as transferred in a taxable exchange; and
(v) the
Servicer shall have given the Rating Agencies prior written notice of such
transaction, or, in the case of clause (c)(4) above, the Rating Agency
Condition shall be satisfied.
When the
conditions set forth in this Section 6.03 have been satisfied, the
preceding Servicer shall automatically and without further notice (except as
provided in clause (v) above) be released from all of its obligations
hereunder.
When any
Person (or more than one Person) acquires the properties and assets of the
Servicer substantially as a whole or otherwise becomes the successor, whether by
merger, conversion, consolidation, sale, transfer, lease, management contract or
otherwise, to all or substantially all of the electric transmission and
distribution business of the Servicer (or, if transmission and distribution are
not provided by a single entity, provides distribution service directly to
Customers taking service at facilities, premises or loads located in
the Service Area in accordance with the terms of this Section 6.03),
then upon satisfaction of all of the other conditions of this Section 6.03, the
preceding Servicer shall automatically and without further notice be released
from all of its obligations hereunder.
SECTION
6.04. Limitation on Liability of
Servicer and Others. Except as otherwise provided under this
Agreement, neither the Servicer nor any of the directors, officers, employees or
agents of the Servicer shall be liable to the Issuer or any other Person for any
action taken or for refraining from the taking of any action pursuant to this
Agreement or for good faith errors in judgment; provided, however, that this
provision shall not protect the Servicer or any such person against any
liability that would otherwise be imposed by reason of willful misconduct, bad
faith or negligence in the performance of duties or by reason of reckless
disregard of obligations and duties under this Agreement. The
Servicer and any director, officer, employee or agent of the Servicer may rely
in good faith on the advice of counsel reasonably acceptable to the Indenture
Trustee or on any document of any kind, prima facie properly executed and
submitted by any Person, respecting any matters arising under this
Agreement.
Except as
provided in this Agreement, including but not limited to Sections 5.02(d) and
(e), the Servicer shall not be under any obligation to appear in, prosecute or
defend any legal action relating to the Transition Property that is not directly
related to one of the Servicer’s enumerated duties in 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, in respect of any Proceeding, undertake any action that it is not
specifically identified in this Agreement as a duty of the Servicer but that the
Servicer reasonably determines is necessary or desirable in order to protect the
rights and duties of the Issuer or the Indenture Trustee under this Agreement
and the interests of the Holders and Customers under this
Agreement. The Servicer’s costs and expenses incurred in connection
with any such proceeding shall be payable from TC Collections as an Operating
Expense (and shall not be deemed to constitute a portion of the Servicing Fee)
in accordance with the Indenture. The Servicer’s obligations pursuant
to this Section 6.04 shall survive and continue notwithstanding that
payment of such Operating Expense may be delayed pursuant to the terms of the
Indenture (it being understood that the Servicer may be required initially to
advance its own funds to satisfy its obligations hereunder).
SECTION
6.05. ETI Not to Resign as
Servicer. Subject to the provisions of Section 6.03, ETI
shall not resign from the obligations and duties hereby imposed on it as
Servicer under this Agreement unless ETI delivers to the Indenture Trustee and
the PUCT an opinion of Independent counsel to the effect that ETI’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 responsibilities and obligations of
ETI in accordance with Section 7.02.
SECTION
6.06. Servicing
Compensation. (a) In consideration for its services hereunder,
until the Retirement of the Transition Bonds, the Servicer shall receive an
annual fee (the “Servicing Fee”) in an
amount equal to (i) $290,000 for so long as ETI or an Affiliate of ETI is
the Servicer or (ii) if ETI or any of its Affiliates is not the Servicer,
an amount agreed upon by the Successor Servicer and the Issuer, provided that such
amount shall not exceed 0.60% of the aggregate initial principal amount of all
Outstanding Transition Bonds unless (A) the Rating Agency Condition is satisfied
and (B) the amount is approved by the PUCT. The Servicing Fee shall be paid
semi-annually with half of the Servicing Fee being paid on each Payment
Date. The Servicer also shall be entitled to retain as additional
compensation (i) any interest earnings on TC Payments received by the
Servicer and invested by the Servicer during each Collection Period prior to
remittance to the Collection Account and (ii) all late payment charges, if
any, collected from Customers or REPs; provided, however, that if the
Servicer has failed to remit the Daily Remittance to the General Subaccount of
the Collection Account on the Servicer Business Day that such payment is to be
made pursuant to Section 6.11 on more than three (3) occasions during
the period that the Transition Bonds are outstanding, then thereafter the
Servicer will be required to pay to the Indenture Trustee interest on each Daily
Remittance accrued at the Federal Funds Rate from the Servicer Business Day on
which such Daily Remittance was required to be made to the date that such Daily
Remittance is actually made.
(b) The
Servicing Fee set forth in Section 6.06(a) shall be paid to the Servicer by
the Indenture Trustee, on each Payment Date in accordance with the priorities
set forth in Section 8.02(e) of the Indenture, by wire transfer of
immediately available funds from the applicable Collection Account to an account
designated by the Servicer. Any portion of the Servicing Fee not paid
on any such date should be added to the Servicing Fee payable on the subsequent
Payment Date. In no event shall the Indenture Trustee be liable for
the payment of any Servicing Fee or other amounts specified in this
Section 6.06; provided that this
Section 6.06 does not relieve the Indenture Trustee of any duties it has to
allocate funds for payment for such fees under Section 8.02 of the
Indenture.
(c) Except as
expressly provided elsewhere in this Agreement, the Servicer shall be required
to pay from its own account expenses incurred by the Servicer in connection with
its activities hereunder (including any fees to and disbursements by
accountants, counsel, or any other Person, any taxes imposed on the Servicer and
any expenses incurred in connection with reports to Holders) out of the
compensation retained by or paid to it pursuant to this Section 6.06, and
shall not be entitled to any extra payment or reimbursement
therefor.
(d) The
foregoing Servicing Fees constitute a fair and reasonable price for the
obligations to be performed by the Servicer. Such Servicing Fee shall
be determined without regard to the income of the Issuer, shall not be deemed to
constitute distributions to the recipient of any profit, loss or capital of the
Issuer and shall be considered a fixed Operating Expense of the Issuer subject
to the limitations on such expenses set forth in the Financing
Order.
SECTION
6.07. Compliance with Applicable
Law. The Servicer covenants and agrees, in servicing the
Transition Property, to comply in all material respects with all laws applicable
to, and binding upon, the Servicer and relating to such Transition Property the
noncompliance with which would have a material adverse effect on the value of
the Transition Property; provided, however, that the
foregoing is not intended to, and shall not, impose any liability on the
Servicer for noncompliance with any Requirement of Law that the Servicer is
contesting in good faith in accordance with its customary standards and
procedures.
SECTION
6.08. Access to Certain Records
and Information Regarding Transition Property. The Servicer
shall provide to the Indenture Trustee access to the Transition Property Records
as is reasonably required for the Indenture Trustee to perform its duties and
obligations under the Indenture and the other Basic Documents, and shall provide
access to such records to the Holders as required by applicable
law. Access shall be afforded without charge, but only upon
reasonable request and during normal business hours at the respective offices of
the Servicer. Nothing in this Section 6.08 shall affect the
obligation of the Servicer to observe any applicable law (including any PUCT
Regulation) prohibiting disclosure of information regarding the Customers, and
the failure of the Servicer to provide access to such information as a result of
such obligation shall not constitute a breach of this
Section 6.08.
SECTION
6.09. Appointments. The
Servicer may at any time appoint any Person to perform all or any portion of its
obligations as Servicer hereunder; provided, however, that, unless
such Person is an Affiliate of ETI, the Rating Agency Condition shall have been
satisfied in connection therewith; provided further that the
Servicer shall remain obligated and be liable under this Agreement 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 Person 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 any such Person
shall be as agreed between the Servicer and such Person from time to time and
none of the Issuer, the Indenture Trustee, the Holders or any other Person shall
have any responsibility therefor or right or claim thereto. Any such
appointment shall not constitute a Servicer resignation under
Section 6.05.
SECTION
6.10. No Servicer
Advances. The Servicer shall not make any advances of interest
or principal on the Transition Bonds.
SECTION
6.11. Remittances. (a) On
each Servicer Business Day, commencing on or about 44 days after the Closing
Date, the Servicer shall remit to the General Subaccount of the Collection
Account the total TC Payments estimated to have been received by the Servicer
from or on behalf of Customers on such Servicer Business Day in respect of all
previously billed Transition Charges (the “Daily Remittance”),
which Daily Remittance shall be calculated according to the procedures set forth
in Annex I
and shall be remitted as soon as reasonably practicable but in any event no
later than the second Servicer Business Day after such payments are estimated to
have been received. Prior to (or concurrent with) each remittance to
the General Subaccount of the Collection Account pursuant to this
Section 6.11, the Servicer shall provide written notice to the Indenture
Trustee of each such remittance (including the exact dollar amount to be
remitted). The Servicer shall also, promptly upon receipt, remit to
the Collection Account any other proceeds of the Transition Bond Collateral
which it may receive from time to time.
(b) The
Servicer agrees and acknowledges that it holds all TC Payments collected by it
and any other proceeds for the Transition Bond Collateral received by it for the
benefit of the Indenture Trustee and the Holders and that all such amounts will
be remitted by the Servicer in accordance with this Section 6.11 without
any surcharge, fee, offset, charge or other deduction except (i) as set
forth in
clause (c) below and (ii) for late fees permitted by
Section 6.06. The Servicer further agrees not to make any claim
to reduce its obligation to remit all TC Payments collected by it in accordance
with this Agreement except (i) as set forth in clause (c) below
and (ii) for late fees permitted by Section 6.06.
(c) On or
before June 30 of each year (or, if such day is not a Servicer Business Day, the
immediately preceding Servicer Business Day) commencing with June 30, 2010, the
Servicer shall calculate the amount of any Remittance Shortfall or Excess
Remittance for the Reconciliation Period, as provided in Section 6(e) of
Annex I. The Servicer shall allocate such Remittance Shortfall
or Excess Remittance as follows: (A) if a Remittance Shortfall exists, the
Servicer shall make a supplemental remittance, to the General Subaccount of the
Collection Account within two (2) Servicer Business Days, or (B) if an
Excess Remittance exists, the Servicer shall be entitled either (i) to
reduce the amount of each Daily Remittance which the Servicer subsequently
remits to the General Subaccount of the Collection Account for application to
the amount of such Excess Remittance until the balance of such Excess Remittance
has been reduced to zero, the amount of such reduction becoming the property of
the Servicer or (ii) so long as such withdrawal would not cause the amounts
on deposit in the General Subaccount or the Excess Funds Subaccount to be
insufficient for the payment of the next installment of interest on the
Transition Bonds or principal due at maturity on the next Payment Date or upon
acceleration on or before the next Payment Date, to be paid immediately from
such General Subaccount or Excess Funds Subaccount, the amount of such Excess
Remittance, such payment becoming the property of the Servicer. If
there is a Remittance Shortfall, the amount which the Servicer remits to the
General Subaccount of the Collection Account on the relevant date set forth
above shall be increased by the amount of such Remittance Shortfall, such
increase coming from the Servicer’s own funds. The Servicer may
calculate the Excess Remittance or Remittance Shortfall more often than annually
in its discretion if the Servicer believes such reconciliations are
appropriate. The results of any such reconciliation shall be reported
in the next issued Monthly Servicer’s Certificate.
(d) Unless
otherwise directed to do so by the Issuer, the Servicer shall be responsible for
selecting Eligible Investments in which the funds in the Collection Account
shall be invested pursuant to Section 8.03 of the Indenture.
SECTION
6.12. Maintenance of
Operations. Subject to Section 6.03, ETI agrees to
continue, unless prevented by circumstances beyond its control, to operate its
electric transmission and distribution system to provide service (or, if
transmission and distribution are split, to provide distribution service
directly to its Customers) so long as it is acting as the Servicer under this
Agreement.
ARTICLE
VII
DEFAULT
SECTION
7.01. Servicer
Default. If any one or more of the following events (a “Servicer Default”)
shall occur and be continuing:
(a) any
failure by the Servicer to remit to the Collection Account on behalf of the
Issuer any required remittance that shall continue unremedied for a period of
five (5) Business Days after written notice of such failure is received by
the Servicer from the Issuer or the Indenture Trustee or after discovery of such
failure by an officer of the Servicer; or
(b) any
failure on the part of the Servicer or, so long as the Servicer is ETI or an
affiliate thereof, any failure on the part of ETI, as the case may be, duly to
observe or to perform in any material respect any covenants or agreements of the
Servicer or ETI, as the case may be, set forth in this Agreement (other than as
provided in clause (a) of
this Section 7.01) or any other Basic Document to which it is a party,
which failure shall (i) materially and adversely affect the rights of the
Holders and (ii) continue unremedied for a period of sixty (60) days after
the date on which (A) written notice of such failure, requiring the same to
be remedied, shall have been given to the Servicer or ETI, as the case may be,
by the Issuer (with a copy to the Indenture Trustee) or to the Servicer or ETI,
as the case may be, by the Indenture Trustee or (B) such failure is
discovered by an officer of the Servicer; or
(c) any
failure by the Servicer duly to perform its obligations under
Section 4.01(b) of this Agreement in the time and manner set forth therein,
which failure continues unremedied for a period of five (5) days;
or
(d) any
representation or warranty made by the Servicer in this Agreement or any Basic
Document shall prove to have been incorrect when made, which has a material
adverse effect on the Holders and which material adverse effect continues
unremedied for a period of sixty (60) days after the date on which
(A) written notice thereof, requiring the same to be remedied, shall have
been delivered to the Servicer (with a copy to the Indenture Trustee) by the
Issuer or the Indenture Trustee or (B) such failure is discovered by an
officer of the Servicer; or
(e) an
Insolvency Event occurs with respect to the Servicer or ETI;
then, and
in each and every case, so long as the Servicer Default shall not have been
remedied, either the Indenture Trustee shall upon the instruction of the PUCT
(acting on behalf of Customers) or of Holders evidencing not less than a
majority of the Outstanding Amount of the Transition Bonds, by notice then given
in writing to the Servicer (and to the Indenture Trustee if given by the
Holders) (a “Termination Notice”),
terminate all the rights and obligations (other than the obligations set forth
in Section 6.02 and the obligation under Section 7.02 to continue
performing its functions as Servicer until a successor Servicer is appointed) of
the Servicer under this Agreement. In addition, upon a Servicer
Default described in Section 7.01(a), the Holders and the Indenture Trustee
as financing parties under the Securitization Law (or any of their
representatives) shall be entitled to (i) apply to the district court of
Xxxxxx County, Texas for sequestration and payment of revenues arising with
respect to the Transition Property, (ii) foreclose on or otherwise enforce
the lien and security interests in the Transition Property and (iii) 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 Secured Parties, in
accordance with the Securitization Law. 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 Bonds, the
Transition Property, the Transition Charges or otherwise, shall, without further
action, pass to and be vested in such successor Servicer as may be appointed
under Section 7.02; and, without limitation, the Indenture Trustee is
hereby authorized and empowered to execute and deliver, on behalf of the
predecessor Servicer, as attorney-in-fact or otherwise, any and all documents
and other instruments, and to do or accomplish all other acts or things
necessary or appropriate to effect the purposes of such Termination Notice,
whether to complete the transfer of the Transition Property Records and related
documents, or otherwise. The predecessor Servicer shall cooperate
with the successor Servicer, the Issuer and the Indenture Trustee in effecting
the termination of the responsibilities and rights of the predecessor Servicer
under this Agreement, including the transfer to the successor Servicer for
administration by it of all Transition Property Records and 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 Transition Charges. As soon as practicable after receipt by the
Servicer of such Termination Notice, the Servicer shall deliver the Transition
Property Records to the successor Servicer. In case a successor
Servicer is appointed as a result of a Servicer Default, all reasonable costs
and expenses (including reasonable attorney’s fees and expenses) incurred in
connection with transferring the Transition Property Records to the successor
Servicer and amending this Agreement to reflect such succession as Servicer
pursuant to this Section 7.01 shall be paid by the predecessor Servicer
upon presentation of reasonable documentation of such costs and expenses.
Termination of ETI as Servicer shall not terminate ETI’s rights or obligations
under the Sale Agreement (except rights thereunder deriving from its rights as
the Servicer hereunder).
SECTION
7.02. Appointment of
Successor.
(a) Upon the
Servicer’s receipt of a Termination Notice pursuant to Section 7.01 or the
Servicer’s resignation or removal in accordance with the terms of this
Agreement, the predecessor Servicer shall continue to perform its functions as
Servicer under this Agreement, and shall be entitled to receive the requisite
portion of the 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 Indenture Trustee shall, at the written direction and with the
consent of the Holders of at least a majority of the Outstanding Amount of the
Transition Bonds, appoint a successor Servicer with the Issuer’s prior written
consent thereto (which consent shall not be unreasonably withheld), and the
successor Servicer shall accept its appointment by a written assumption in form
reasonably acceptable to the Issuer and the Indenture Trustee and provide prompt
written notice of such assumption to the Issuer and the Rating Agencies. If
within thirty (30) days after the delivery of the Termination Notice, a new
Servicer shall not have been appointed, the Indenture Trustee may petition 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, (ii) the Rating Agency Condition shall have been
satisfied, (iii) such Person enters into a servicing agreement with the
Issuer having substantially the same provisions as this Agreement (as the
Servicer of the Transition Bonds) and (iv) the PUCT approves the appointment of
such Person. In no event shall the Indenture Trustee be liable for
its appointment of a successor Servicer. The Indenture Trustee’s
expenses incurred under this Section 7.02(a) shall be at the sole expense
of the Issuer and payable from the Collection Account as provided in
Section 8.02 of the Indenture.
(b) Upon
appointment, the successor Servicer shall be the successor in all respects to
the predecessor Servicer and shall be subject to all the responsibilities,
duties and liabilities arising thereafter relating thereto 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.
SECTION
7.03. Waiver of Past
Defaults. The PUCT, together with Holders evidencing not less
than a majority of the Outstanding Amount of the Transition Bonds may, on behalf
of all Holders, direct the Indenture Trustee to waive in writing any default by
the Servicer in the performance of its obligations hereunder and its
consequences, except a default in making any required deposits to the Collection
Account in accordance with 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
7.04. Notice of Servicer
Default. The Servicer shall deliver to the Issuer, the
Indenture Trustee, the PUCT and the Rating Agencies, promptly after having
obtained knowledge thereof, but in no event later than five (5) Business
Days thereafter, written notice of any event which with the giving of notice or
lapse of time, or both, would become a Servicer Default under
Section 7.01.
SECTION
7.05. Cooperation with
Successor. The 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
VIII
MISCELLANEOUS
PROVISIONS
SECTION
8.01. Amendment.
(a) This
Agreement may be amended in writing by the Servicer and the Issuer with the
prior written consent of the Indenture Trustee, the satisfaction of the Rating
Agency Condition and, if the contemplated amendment may in the judgment of the
PUCT increase ongoing Qualified Costs, the consent of the PUCT pursuant to
Section 8.02. 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 Indenture
Trustee shall be entitled to receive and conclusively rely upon an Opinion of
Counsel of Independent counsel stating that such amendment is authorized or
permitted by this Agreement and upon the Opinion of Counsel from Independent
counsel referred to in Section 3.01(c)(i). The Issuer and the
Indenture Trustee may, but shall not be obligated to, enter into any such
amendment which affects their own rights, duties, indemnities or immunities
under this Agreement or otherwise.
(b) Notwithstanding
Section 8.01(a) or anything to the contrary in this Agreement (including
Section 8.02), the Servicer and the Issuer may amend Annex I to this
Agreement in writing with prior written notice given to the Indenture Trustee,
the PUCT and the Rating Agencies, but without the consent of the Indenture
Trustee, any Rating Agency or any Holder, solely to address changes to the
Servicer’s method of calculating TC Payments as a result of changes to the
Servicer’s current computerized customer information system, including changes
which would replace the remittances contemplated by the estimation procedures
set forth in Annex I with
remittances of TC Collections determined to have been actually received; provided that any
such amendment shall not have a material adverse effect on the Holders of then
Outstanding Transition Bonds.
(c) If the
PUCT adopts a rule or regulation the effect of which is to modify or supplement
any provision of this Agreement related to the REP Credit Requirements and the
REP Deposit Requirements, this Agreement will be deemed so modified or
supplemented on the effective date of such rule or regulation in the manner
necessary to comply therewith without the necessity of any further action by any
party hereto; provided that
(i) the Rating Agency Condition has been satisfied, (ii) the Servicer
shall have notified the Issuer and the Indenture Trustee of such modification or
supplement and delivered an Opinion of Counsel as described in the second
paragraph of Section 8.01 and (iii) neither the Issuer nor the
Indenture Trustee shall be bound by any such modification to the extent it
affects their own rights, duties, indemnities or immunities under this Agreement
or otherwise.
SECTION
8.02. PUCT
Condition. Notwithstanding anything to the contrary in
Section 8.01(a), no amendment or modification of this Agreement shall be
effective unless the process set forth in this Section 8.02 has been
followed.
(a) At least
thirty-one (31) days prior to the effectiveness of any such amendment or
modification and after obtaining the other necessary approvals set forth in
Section 8.01(a) (except that the consent of the Indenture Trustee may be
subject to the consent of Holders if such consent is required or sought by the
Indenture Trustee in connection with such amendment or modification), the
Servicer shall have delivered to the PUCT’s executive director and general
counsel written notification of any proposed amendment, which notification shall
contain:
(i) a
reference to Docket No. 37247;
(ii) an
Officer’s Certificate stating that the proposed amendment 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 any
response to the proposed amendment or to request additional time;
(b) The PUCT
or its staff shall, within thirty (30) days of receiving the notification
complying with Section 8.02(a), either:
(i) provide
notice of its determination that the proposed amendment or modification will not
under any circumstances have the effect of increasing the ongoing Qualified
Costs related to the Transition Bonds,
(ii) provide
notice of its consent or lack of consent to the person specified in
Section 8.02(a)(iii), or
(iii) be
conclusively deemed to have consented to the proposed amendment or
modification,
unless,
within thirty (30) days of receiving the notification complying with
Section 8.02(a), the PUCT or its staff delivers to the office of the person
specified in Section 8.02(a)(iii) a written statement requesting an
additional amount of time not to exceed thirty (30) 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 or notice of its determination that the proposed amendment or
modification will not under any circumstances increase ongoing Qualified Costs
to the person specified in Section 8.02(a)(iii) 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. Any amendment or modification requiring the consent of the PUCT
shall become effective on the later of (i) the date proposed by the parties
to such amendment or modification and (ii) the first day after the
expiration of the thirty (30)-day period provided for in this
Section 8.02(b), or, if such period has been extended pursuant hereto, the
first day after the expiration of such period as so extended.
(c) Following
the delivery of a notice to the PUCT by the Servicer under Section 8.02(a),
the Servicer and the Issuer shall have the right at any time to withdraw from
the PUCT further consideration of any notification of a proposed
amendment. Such withdrawal shall be evidenced by the Servicer’s
giving prompt written notice thereof to the PUCT, the Issuer and the Indenture
Trustee.
SECTION
8.03. Maintenance of Accounts and
Records. (a) The Servicer shall maintain accounts and
records as to the Transition Property accurately and in accordance with its
standard accounting procedures and in sufficient detail to permit reconciliation
between TC Payments received by the Servicer and TC Collections from time to
time deposited in the Collection Account.
(b) The
Servicer shall permit the Indenture Trustee and its agents at any time during
normal business hours, upon reasonable notice to the Servicer and to the extent
it does not unreasonably interfere with the Servicer’s normal operations, to
inspect, audit and make copies of and abstracts from the Servicer’s records
regarding the Transition Property and the Transition Charges. Nothing
in this Section 8.03(b) shall affect the obligation of the Servicer to
observe any applicable law (including any PUCT Regulation) prohibiting
disclosure of information regarding the Customers, and the failure of the
Servicer to provide access to such information as a result of such obligation
shall not constitute a breach of this Section 8.03(b).
SECTION
8.04. Notices. Unless
otherwise specifically provided herein, all demands, notices and communications
upon or to the Servicer, the Issuer, the Indenture Trustee or the Rating
Agencies under this Agreement shall be sufficiently given for all purposes
hereunder if in writing and delivered personally, sent by documented delivery
service or, to the extent receipt is confirmed telephonically, sent by telecopy
or other form of electronic transmission:
(a) in the
case of the Servicer, to Entergy Texas, Inc., at 000 Xxxx Xxxxxx,
Xxxxxxxx, Xxxxx 00000, Attention: President, Telephone: (000) 000-0000,
Facsimile: (000) 000-0000;
(b) in the
case of the Issuer, to Entergy Texas Restoration Funding, LLC at Capital
Center, 000 Xxxxxxxx Xxxxxx, Xxxxx 000-X, Xxxxxx, Xxxxx 00000,
Attention: President, Telephone: (000) 000-0000, Facsimile:
(000) 000-0000;
(c) in the
case of the Indenture Trustee, to the Corporate Trust Office;
(d) in the
case of the PUCT, to 0000 X. Xxxxxxxx Xxxxxx, X.X. Xxx 00000, Xxxxxx, Texas
78711-3326, Attention: Executive Director, Telephone: (000) 000-0000,
Facsimile: (000) 000-0000 and General Counsel, Telephone: (000) 000-0000,
Facsimile: (000) 000-0000;
(e) in the
case of Moody’s, to Xxxxx’x Investors Service, Inc., ABS Monitoring
Department, 7 World Trade Center at 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, Telephone: (000) 000-0000, Facsimile: (000) 000-0000;
(f) in the
case of Standard & Poor’s, to Standard & Poor’s Ratings
Services, a Standard & Poor’s Financial Services LLC business, 00 Xxxxx
Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Asset Backed
Surveillance Department, Telephone: (000) 000-0000, Facsimile:
(000) 000-0000;
(g) in the
case of Fitch, to Fitch Ratings, Xxx Xxxxx Xxxxxx Xxxxx, Xxx Xxxx, XX 00000,
Attention: ABS Surveillance, Telephone: (000) 000-0000, Facsimile:
(000) 000-0000; or
(h) as to
each of the foregoing, at such other address as shall be designated by written
notice to the other parties.
SECTION
8.05. Assignment. Notwithstanding
anything to the contrary contained herein, except as provided in
Section 6.03 and as provided in the provisions of this Agreement concerning
the resignation of the Servicer, this Agreement may not be assigned by the
Servicer.
SECTION
8.06. Limitations on Rights of
Others. The provisions of this Agreement are solely for the
benefit of the Servicer and the Issuer and, to the extent provided herein or in
the Basic Documents, Customers, the Indenture Trustee and the Holders, and the
other Persons expressly referred to herein, and such Persons shall have the
right to enforce the relevant provisions of this Agreement. 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 Transition
Property or Transition Bond Collateral or under or in respect of this Agreement
or any covenants, conditions or provisions contained
herein. Notwithstanding anything to the contrary contained herein,
for the avoidance of doubt, any right, remedy or claim to which any Customer may
be entitled pursuant to the Financing Order and to this Agreement may be
asserted or exercised only by the PUCT (or by the Attorney General of the State
of Texas in the name of the PUCT) for the benefit of such Customer.
SECTION
8.07. 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 remainder of such
provision (if any) or the remaining provisions hereof (unless such a
construction shall be unreasonable), and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION
8.08. Separate
Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute but
one and the same instrument.
SECTION
8.09. 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
8.10. GOVERNING
LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
SECTION
8.11. Assignment to Indenture
Trustee. (a) The Servicer hereby acknowledges and
consents to any mortgage, pledge, assignment and grant of a security interest by
the Issuer to the Indenture Trustee for the benefit of the Secured Parties
pursuant to the Indenture of any or all of the Issuer’s rights hereunder and
(b) in no event shall the Indenture Trustee have any liability for the
representations, warranties, covenants, agreements or other obligations of the
Issuer hereunder or in any of the certificates delivered pursuant hereto, as to
all of which any recourse shall be had solely to the assets of the Issuer
subject to the availability of funds therefor under Section 8.02 of the
Indenture.
SECTION
8.12. Nonpetition
Covenants. Notwithstanding any prior termination of this
Agreement or the Indenture, the Servicer shall not, prior to the date which is
one year and one day after the satisfaction and discharge of the Indenture,
acquiesce, petition or otherwise invoke or cause the Issuer to invoke or join
with any Person in provoking the process of any Governmental Authority for the
purpose of commencing or sustaining an involuntary 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 dissolution, winding up or liquidation of the affairs of
the Issuer.
SECTION
8.13. Limitation of
Liability. It is expressly understood and agreed by the
parties hereto that this Agreement is executed and delivered by the Indenture
Trustee, not individually or personally but solely as Indenture Trustee in the
exercise of the powers and authority conferred and vested in it, and that the
Indenture Trustee, in acting hereunder, is entitled to all rights, benefits,
protections, immunities and indemnities accorded to it under the
Indenture.
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.
|
ENTERGY
TEXAS RESTORATION FUNDING, LLC, as Issuer
|
|
|
By:
/s/ Xxxxxx X. XxXxxx
Name: Xxxxxx
X. XxXxxx
Title: Vice
President and Treasurer
|
|
|
ENTERGY
TEXAS, INC., as Servicer
|
|
|
By:
/s/ Xxxxx Xxxxxxxxx
Name: Xxxxx
Xxxxxxxxx
Title: Assistant
Treasurer
|
|
|
ACKNOWLEDGED
AND ACCEPTED:
|
|
|
The
Bank of New York Mellon,
as
Indenture Trustee
|
|
|
By:
/s/ Xxxxx Xxxxxxx
Name: Xxxxx
Xxxxxxx
Title: Senior
Associate
|
EXHIBIT A
FORM
OF MONTHLY SERVICER’S CERTIFICATE
See
Attached.
Remittance Dates:
Monthly
Servicer’s Certificate
(to be
delivered each month pursuant to Section 3.01(b) of the Transition Property
Servicing Agreement)
Entergy
Texas, Inc., as Servicer
Pursuant
to the Transition Property Servicing Agreement dated as of November 6,
2009 (the “Transition Property Servicing Agreement”)
between
Entergy
Texas, Inc., as Servicer, and Entergy Texas Restoration Funding, LLC,
as Note Issuer, the Servicer does hereby certify as follows:
Reconciliation Period:
Remittance Dates:
|
TC
Class
Total
|
a.
TCs in Effect
|
b.
TCs Billed
|
c.
Estimated TC
Payments
Received
|
Results of Annual Reconciliation (if
applicable):
Reconciliation Period:
|
TC
Class
Total
|
d.
Estimated TC
Payments
Received
|
e.
Actual TC
Collections
|
f.
Remittance Shortfall
for
this Collection
|
g.
Excess Remittance
for
this Collection
|
h. Daily remittances previously made by
the Servicer to the Collection Account in respect of this Collection Period
(c):
i. The amount to be remitted by the
Servicer to the Collection Account for this Collection Period is (c + f -
g):
j. If (i>h), (i-h) equals net amount
due from the Servicer to the Collection Account:
k. If (h>i), (h-i) equals net amount
due to the Servicer from the Collection Account:
Capitalized terms used herein have
their respective meanings set forth in the Transition Property Servicing
Agreement.
In WITNESS HEREOF, the undersigned has
duly executed and delivered this Monthly Servicer’s Certificate
the day of
ENTERGY TEXAS, INC., as
Servicer
By
__________________________________________________________
Title:
________________________________________________________
EXHIBIT
B
FORM
OF SEMI-ANNUAL SERVICER’S CERTIFICATE
Pursuant
to Section 4.01(c)(ii)
of the Transition Property Servicing Agreement, dated as of November 6, 2009
(the “Servicing
Agreement”), between ENTERGY TEXAS, INC., as servicer and ENTERGY TEXAS
RESTORATION FUNDING, LLC, the Servicer does hereby certify, for the ________,
20__ Payment Date (the “Current Payment Date”), as follows:
Capitalized
terms used herein have their respective meanings as set forth in the
Indenture. References herein to certain sections and subsections are
references to the respective sections of the Servicing Agreement or the
Indenture, as the context indicates.
|
1.
|
Allocation
of Remittances as of Current Payment Date allocable to principal and
interest:
|
|
a)
|
Principal
|
|
Aggregate
|
|||
|
i.
|
Tranche
A-1
|
||
|
ii.
|
Tranche
A-2
|
||
|
iii.
|
Tranche
A-3
|
||
|
iv.
|
Total:
|
||
|
b)
|
Interest
|
|
Aggregate
|
|||
|
i.
|
Tranche
A-1
|
||
|
ii.
|
Tranche
A-2
|
||
|
iii.
|
Tranche
A-3
|
||
|
iv.
|
Total:
|
||
|
2.
|
Outstanding
Amount of Bonds prior to, and after giving effect to the payment on the
Current Payment Date and the difference, if any, between the Outstanding
Amount specified in the Expected Amortization Schedule (after giving
effect to payments to be made on such Payment Date under 1a) above) and
the Principal Balance to be Outstanding (following payment on Current
Payment Date):
|
|
a)
|
Principal
Balance Outstanding (as of the date of this
certification):
|
|
i.
|
Tranche
A-1
|
|
ii.
|
Tranche
A-2
|
|
iii.
|
Tranche
A-3
|
|
iv.
|
Total:
|
|
b)
|
Principal
Balance to be Outstanding (following payment on Current Payment
Date):
|
|
i.
|
Tranche
A-1
|
|
ii.
|
Tranche
A-2
|
|
iii.
|
Tranche
A-3
|
|
iv.
|
Total:
|
|
c)
|
Difference
between (b) above and Outstanding Amount specified in Expected
Amortization Schedule:
|
|
i.
|
Tranche
A-1
|
|
ii.
|
Tranche
A-2
|
|
iii.
|
Tranche
A-3
|
|
iv.
|
Total:
|
|
3.
|
All
other transfers to be made on the Current Payment Date, including amounts
to be paid to the Indenture Trustee and to the
Servicer:
|
|
a)
|
Operating
Expenses
|
|
i.
|
Trustee
Fees and Expenses: (subject to $1,000,000 cap on Indemnity Amounts per
Section 8.02(e)(1))
|
||
|
ii.
|
Servicing
Fee:
|
||
|
iii.
|
Administration
Fee:
|
||
|
iv.
|
Other
Operating Expenses:
|
||
|
v.
|
Total:
|
||
|
b)
|
Other
Payments
|
|
i.
|
Operating
Expenses (payable pursuant to Section 8.02(e)(4)):
|
|
ii.
|
Funding
of Capital Subaccount (to required amount):
|
|
iii.
|
Interest
Earnings on Capital Subaccount to Entergy Texas
Restoration
Funding:
|
|
iv.
|
Operating
Expenses and Indemnity Amounts over $1,000,000 (payable pursuant to
Section 8.02(e)(8)):
|
|
v.
|
Deposits
to Excess Funds Subaccount:
|
|
vi.
|
Total:
|
|
4.
|
Estimated
amounts on deposit in the Capital Subaccount and Excess Funds Subaccount
after giving effect to the foregoing
payments:
|
|
a)
|
Capital
Subaccount
|
|
i.
|
Total:
|
|
b)
|
Excess
Funds Subaccount
|
|
i.
|
Total:
|
IN WITNESS WHEREOF, the undersigned has
duly executed and delivered this Servicer’s Certificate this __ day of
__________.
|
|
ENTERGY
TEXAS, INC.,
|
|
|
as
Servicer
|
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
EXHIBIT C-1
FORM
OF SERVICER’S REGULATION AB COMPLIANCE CERTIFICATE
The
undersigned hereby certifies that he/she is the duly elected and acting [__________] of ENTERGY TEXAS, INC.,
as servicer (the “Servicer”) under the
Transition Property Servicing Agreement dated as of November 6, 2009 (the “Servicing Agreement”)
between the Servicer and Entergy Texas Restoration Funding, LLC (the “Issuer”) and further
that:
1. The
undersigned is responsible for assessing the Servicer’s compliance with the
servicing criteria set forth in Item 1122(d) of Regulation AB (the “Servicing
Criteria”).
2. With
respect to each of the Servicing Criteria, the undersigned has made the
following assessment of the Servicing Criteria in accordance with Item 1122(d)
of Regulation AB, with such discussion regarding the performance of such
Servicing Criteria during the fiscal year covered by the Sponsor’s annual report
on Form 10-K Report (such fiscal year, the “Assessment
Period”):
|
Servicing
Criteria
|
Applicable
Servicing
Criteria
|
|
|
Reference
|
Criteria
|
|
|
General
Servicing Considerations
|
||
|
1122(d)(1)(i)
|
Policies
and procedures are instituted to monitor any performance or other triggers
and events of default in accordance with the transaction
agreements.
|
Applicable;
assessment below.
|
|
1122(d)(1)(ii)
|
If
any material servicing activities are outsourced to third parties,
policies and procedures are instituted to monitor the third party’s
performance and compliance with such servicing activities.
|
Not
applicable; no servicing activities were outsourced.
|
|
1122(d)(1)(iii)
|
Any
requirements in the transaction agreements to maintain a back-up servicer
for pool assets are maintained.
|
Not
applicable; documents do not provide for a back-up
servicer.
|
|
1122(d)(1)(iv)
|
A
fidelity bond and errors and omissions policy is in effect on the party
participating in the servicing function throughout the reporting period in
the amount of coverage required by and otherwise in accordance with the
terms of the transaction agreements.
|
Not
applicable; PUCT rules impose credit standards on ETI and any future
retail electric providers who handle customer collections and govern
performance requirements of utilities.
|
|
Cash
Collection and Administration
|
||
|
1122(d)(2)(i)
|
Payments
on pool assets are deposited into the appropriate custodial bank accounts
and related bank clearing accounts no more than two business days
following receipt, or such other number of days specified in the
transaction agreements.
|
Applicable
|
|
1122(d)(2)(ii)
|
Disbursements
made via wire transfer on behalf of an obligor or to an investor are made
only by authorized personnel.
|
Applicable
|
|
1122(d)(2)(iii)
|
Advances
of funds or guarantees regarding collections, cash flows or distributions,
and any interest or other fees charged for such advances, are made,
reviewed and approved as specified in the transaction
agreements.
|
Applicable,
but no current assessment required; no advances by the Servicer are
permitted under the transaction agreements.
|
|
1122(d)(2)(iv)
|
The
related accounts for the transaction, such as cash reserve accounts or
accounts established as a form of overcollateralization, are separately
maintained (e.g., with respect to commingling of cash) as set forth in the
transaction agreements.
|
Applicable,
but no current assessment is required since transaction accounts are
maintained by and in the name of the Indenture Trustee.
|
|
1122(d)(2)(v)
|
Each
custodial account is maintained at a federally insured depository
institution as set forth in the transaction agreements. For purposes of
this criterion, “federally insured depository institution” with respect to
a foreign financial institution means a foreign financial institution that
meets the requirements of Rule 13k-1(b)(1) of the Securities Exchange
Act.
|
Applicable,
but no current assessment required; all “custodial accounts”
are maintained by the Indenture Trustee.
|
|
1122(d)(2)(vi)
|
Unissued
checks are safeguarded so as to prevent unauthorized
access.
|
Not
applicable; all transfers made by wire transfer.
|
|
1122(d)(2)(vii)
|
Reconciliations
are prepared on a monthly basis for all asset-backed securities related
bank accounts, including custodial accounts and related bank clearing
accounts. These reconciliations are (A) mathematically accurate;
(B) prepared within 30 calendar days after the bank statement cutoff
date, or such other number of days specified in the transaction
agreements; (C) reviewed and approved by someone other than the
person who prepared the reconciliation; and (D) contain explanations
for reconciling items. These reconciling items are resolved within 90
calendar days of their original identification, or such other number of
days specified in the transaction agreements.
|
Applicable;
assessment below.
|
|
Investor
Remittances and Reporting
|
||
|
1122(d)(3)(i)
|
Reports
to investors, including those to be filed with the Commission, are
maintained in accordance with the transaction agreements and applicable
Commission requirements. Specifically, such reports (A) are prepared
in accordance with timeframes and other terms set forth in the transaction
agreements; (B) provide information calculated in accordance with the
terms specified in the transaction agreements; (C) are filed with the
Commission as required by its rules and regulations; and (D) agree
with investors’ or the trustee’s records as to the total unpaid principal
balance and number of pool assets serviced by the
Servicer.
|
Applicable;
assessment below.
|
|
1122(d)(3)(ii)
|
Amounts
due to investors are allocated and remitted in accordance with timeframes,
distribution priority and other terms set forth in the transaction
agreements.
|
Applicable;
assessment below.
|
|
1122(d)(3)(iii)
|
Disbursements
made to an investor are posted within two business days to the Servicer’s
investor records, or such other number of days specified in the
transaction agreements.
|
Applicable
|
|
1122(d)(3)(iv)
|
Amounts
remitted to investors per the investor reports agree with cancelled
checks, or other form of payment, or custodial bank
statements.
|
Applicable;
assessment below.
|
|
Pool
Asset Administration
|
||
|
1122(d)(4)(i)
|
Collateral
or security on pool assets is maintained as required by the transaction
agreements or related documents.
|
Applicable;
assessment below.
|
|
1122(d)(4)(ii)
|
Pool
assets and related documents are safeguarded as required by the
transaction agreements.
|
Applicable;
assessment below.
|
|
1122(d)(4)(iii)
|
Any
additions, removals or substitutions to the asset pool are made, reviewed
and approved in accordance with any conditions or requirements in the
transaction agreements.
|
Not
applicable; no removals or substitutions of transition property are
contemplated or allowed under the transaction
documents.
|
|
1122(d)(4)(iv)
|
Payments
on pool assets, including any payoffs, made in accordance with the related
pool asset documents are posted to the Servicer’s obligor records
maintained no more than two business days after receipt, or such other
number of days specified in the transaction agreements, and allocated to
principal, interest or other items (e.g., escrow) in accordance with the
related transaction agreements.
|
Applicable;
assessment below.
|
|
1122(d)(4)(v)
|
The
Servicer’s records regarding the pool assets agree with the Servicer’s
records with respect to an obligor’s unpaid principal
balance.
|
Not
applicable; because underlying obligation (transition charge) is not an
interest bearing instrument
|
|
1122(d)(4)(vi)
|
Changes
with respect to the terms or status of an obligor’s pool assets (e.g.,
loan modifications or re-agings) are made, reviewed and approved by
authorized personnel in accordance with the transaction agreements and
related pool asset documents.
|
Applicable;
assessment below
|
|
1122(d)(4)(vii)
|
Loss
mitigation or recovery actions (e.g., forbearance plans, modifications and
deeds in lieu of foreclosure, foreclosures and repossessions, as
applicable) are initiated, conducted and concluded in accordance with the
timeframes or other requirements established by the transaction
agreements.
|
Applicable;
assessment below.
|
|
1122(d)(4)(viii)
|
Records
documenting collection efforts are maintained during the period any pool
asset is delinquent in accordance with the transaction agreements. Such
records are maintained on at least a monthly basis, or such other period
specified in the transaction agreements, and describe the entity’s
activities in monitoring delinquent pool assets including, for example,
phone calls, letters and payment rescheduling plans in cases where
delinquency is deemed temporary (e.g., illness or
unemployment).
|
Applicable,
but does not require assessment since no explicit
documentation requirement with respect to delinquent accounts
are imposed under the transactional documents due to availability of
“true-up” mechanism.
|
|
1122(d)(4)(ix)
|
Adjustments
to interest rates or rates of return for pool assets with variable rates
are computed based on the related pool asset documents.
|
Not
applicable; transition charges are not interest bearing
instruments.
|
|
1122(d)(4)(x)
|
Regarding
any funds held in trust for an obligor (such as escrow accounts):
(A) such funds are analyzed, in accordance with the obligor’s pool
asset documents, on at least an annual basis, or such other period
specified in the transaction agreements; (B) interest on such funds
is paid, or credited, to obligors in accordance with applicable pool asset
documents and state laws; and (C) such funds are returned to the
obligor within 30 calendar days of full repayment of the related pool
assets, or such other number of days specified in the transaction
agreements.
|
Applicable;
Servicer will maintain REP deposit accounts in accordance with PUCT rules
and regulations.
|
|
1122(d)(4)(xi)
|
Payments
made on behalf of an obligor (such as tax or insurance payments) are made
on or before the related penalty or expiration dates, as indicated on the
appropriate bills or notices for such payments, provided that such support
has been received by the servicer at least 30 calendar days prior to these
dates, or such other number of days specified in the transaction
agreements.
|
Not
applicable; Servicer does not make payments on behalf of
obligors.
|
|
1122(d)(4)(xii)
|
Any
late payment penalties in connection with any payment to be made on behalf
of an obligor are paid from the servicer’s funds and not charged to the
obligor, unless the late payment was due to the obligor’s error or
omission.
|
Not
applicable; servicer cannot make advances of its own funds on behalf of
customers under the transaction documents.
|
|
1122(d)(4)(xiii)
|
Disbursements
made on behalf of an obligor are posted within two business days to the
obligor’s records maintained by the servicer, or such other number of days
specified in the transaction agreements.
|
Not
applicable; servicer cannot make advances of its own funds on behalf of
customers to pay principal or interest on the bonds.
|
|
1122(d)(4)(xiv)
|
Delinquencies,
charge-offs and uncollectible accounts are recognized and recorded in
accordance with the transaction agreements.
|
Applicable;
assessment below.
|
|
1122(d)(4)(xv)
|
Any
external enhancement or other support, identified in Item 1114(a)(1)
through (3) or Item 1115 of Regulation AB, is maintained as set forth
in the transaction agreements.
|
Not
applicable; no external enhancement is required under the transaction
documents.
|
3. To
the best of the undersigned’s knowledge, based on such review, the Servicer is
in compliance in all material respects with the applicable servicing criteria
set forth above as of and for the period ending the end of the fiscal year
covered by the Sponsor’s annual report on Form 10-K. [If not true, include
description of any material instance of noncompliance.]
Executed
as of this ______________ day of _________________, ____.
|
ENTERGY
TEXAS, INC.
|
|
|
By:
________________________________
Name:
Title:
|
EXHIBIT C-2
FORM
OF CERTIFICATE OF COMPLIANCE
The
undersigned hereby certifies that he/she is the duly elected and acting [__________] of Entergy Texas, Inc. as
servicer (the “Servicer”) under the
Transition Property Servicing Agreement dated as of November 6, 2009 (the “Servicing Agreement”)
between the Servicer and Entergy Texas Restoration Funding, LLC (the “Issuer”) and further
that:
1. A
review of the activities of the Servicer and of its performance under the
Servicing Agreement during the twelve months ended [_______], [
]
has been made under the supervision of the undersigned pursuant to
Section 3.03 of the Servicing Agreement; and
2. To
the best of the undersigned’s knowledge, based on such review, the Servicer has
fulfilled all of its obligations in all material respects under the Servicing
Agreement throughout the twelve months ended [________],[ _____], except as set forth on Annex A
hereto.
Executed
as of this ______________ day of _________________, ____.
|
ENTERGY
TEXAS, INC.
|
|
|
By:
________________________________
Name:
Title:
|
ANNEX
A
TO
CERTIFICATE OF COMPLIANCE
LIST
OF SERVICER DEFAULTS
The
following Servicer Defaults, or events which with the giving of notice, the
lapse of time, or both, would become Servicer Defaults known to the undersigned
occurred during the year ended [__________]:
|
Nature of Default
|
Status
|
ANNEX
I
SERVICING
PROCEDURES
The
Servicer agrees to comply with the following servicing procedures:
SECTION
1. DEFINITIONS.
(a) Capitalized
terms used herein and not otherwise defined herein shall have the meanings
ascribed to such terms in the Transition Property Servicing Agreement (the
“Agreement”).
(b) Whenever
used in this Annex I, the
following words and phrases shall have the following meanings:
“Applicable MDMA”
means with respect to each Customer, any meter data management agent providing
meter reading services for that Customer’s account.
“Billed TCs” means the
amounts of Transition Charges billed by the Servicer, whether billed directly to
Customers by the Servicer or indirectly through REPs.
“Days Sales
Outstanding” means the average number of days ETI’s monthly bills to
Customers in its Texas service area (or, following the advent of customer
choice, monthly bills to REPs) remain outstanding during the calendar year
immediately preceding the calculation thereof pursuant to
Section 4.01(b)(i) of the Agreement. The initial Days Sales
Outstanding shall be 22 days until updated pursuant to Section 4.01(b)(i)
of the Agreement.
“Other Providers”
means each electric utility, municipally owned utility and/or cooperative,
which, pursuant to any Tariff, any other tariffs filed with the PUCT, or any
agreement with ETI, is obligated to xxxx, pay or collect Transition
Charges.
“Servicer Policies and
Practices” means, with respect to the Servicer’s duties under this Annex I, the
policies and practices of the Servicer applicable to such duties that the
Servicer follows with respect to comparable assets that it services for itself
and, if applicable, others.
SECTION
2. DATA ACQUISITION.
(a) Installation and Maintenance
of Meters. Except to the extent that a REP is responsible for
such services, the Servicer shall cause to be installed, replaced and maintained
meters in such places and in such condition as will enable the Servicer to
obtain usage measurements for each Customer at least once every Billing
Period. To the extent an Other Provider is responsible for such
services, such Other Provider may obtain usage measurements for each Customer
less frequently than once every Billing Period in accordance with its current
practices so long as the PUCT Regulations so permit and the number of retail
Customers of any such Other Provider for whom such modified terms apply shall be
less than 5,000 as of the end of the preceding calendar year. To the
extent a REP is responsible for such services, but not performing such services,
the Servicer shall take all reasonably necessary actions to obtain usage
measurements for each Customer at least once every Billing Period.
(b) Meter
Reading. At least once each Billing Period, the Servicer shall
obtain usage measurements for each Customer, either directly or if applicable,
from the Applicable MDMA; provided, however, that the
Servicer may estimate any Customer’s usage determined in accordance with
applicable PUCT Regulations.
(c) Cost of
Metering. The Issuer shall not be obligated to pay any costs
associated with the routine metering duties set forth in this Section 2,
including the costs of installing, replacing and maintaining meters, nor shall
the Issuer be entitled to any credit against the Servicing Fee for any cost
savings realized by the Servicer or any REP as a result of new metering and/or
billing technologies.
(d) ERCOT. When
and if the Service Area becomes subject to retail competition, the Servicer
shall take all reasonable actions available under PUCT Regulations to obtain
timely information from ERCOT (or, if such information is not available from
ERCOT, directly from the Applicable MDMA) which is necessary for the Servicer to
fulfill its obligations under this Agreement.
SECTION
3. USAGE AND XXXX
CALCULATION.
The
Servicer (a) shall obtain a calculation of each Customer’s usage (which may
be based on data obtained from such Customer’s meter read or on usage estimates
determined in accordance with applicable PUCT Regulations) at least once each
Billing Period; provided, however that the
Servicer may obtain such calculations less frequently for those Customers whose
usage is calculated by Other Providers in accordance with such Other Provider’s
current practices so long as the PUCT Regulations so permit and the number of
retail Customers of any such Other Provider for whom such modified terms apply
shall be less than 5,000 as of the end of the preceding calendar year; and
(b) shall either (i) determine therefrom each Customer’s individual
Transition Charges to be included on Bills issued by it to such Customer or to
the Applicable REP or Other Provider responsible for billing such Customer, or
(ii) where the Applicable REP or Other Provider is responsible for billing
the Customers, allow the Applicable REP or Other Provider, rather than the
Servicer, to determine such Customers’ individual Transition Charges to be
included on such Customers’ Bills based on billing factors provided by the
Servicer, and, in such case, the Servicer shall deliver to the Applicable REP or
Other Provider such billing factors as are necessary for the Applicable REP or
Other Provider to calculate such Customers’ respective Transition Charges as
such charges may change from time to time pursuant to the True-Up
Adjustments.
SECTION
4. BILLING.
The
Servicer shall implement the Transition Charges as of the Closing Date and shall
thereafter xxxx each Customer or, with respect to Customers billed by a REP or
Other Provider, the Applicable REP or Other Provider, for the respective
Customer’s outstanding current and past due Transition Charges accruing through
the date on which such Transition Charges may no longer be billed under the
Tariff, all in accordance with the following:
(a) Frequency of Bills; Billing
Practices. In accordance with the Servicer’s then-existing
Servicer Policies and Practices for its own charges, as such Servicer Policies
and Practices may be modified from time to time, the Servicer shall generate and
issue a Xxxx to each Customer, or, where an Applicable REP or Other Provider, if
any, is responsible for billing the Customers, to the Applicable REP or Other
Provider, for such Customers’ Transition Charges once every applicable Billing
Period, at the same time, with the same frequency and on the same Xxxx as that
containing the Servicer’s own charges to such Customers, REPs or Other
Providers, as the case may be; provided, however, that the
Servicer may xxxx Other Providers less frequently in accordance with its current
practices so long as the PUCT Regulations so permit and the number of retail
Customers of any such Other Provider for whom such modified billing terms apply
shall be less than 5,000 as of the end of the preceding calendar
year. In the event that the Servicer makes any material modification
to these practices, it shall notify the Issuer, the Indenture Trustee, and the
Rating Agencies prior to the effectiveness of any such modification; provided, however, that the
Servicer may not make any modification that will materially adversely affect the
Holders.
(b) Format.
(i) Each Xxxx
issued by the Servicer shall contain the charge corresponding to the respective
Transition Charges owed by such Customer for the applicable Billing
Period. The Transition Charges shall be separately identified if
required by and in accordance with the terms of the Financing Order and
Tariffs. If such charges are not separately identified, the Servicer
shall provide, and unless prohibited by applicable PUCT Regulations, shall cause
any and each Applicable REP to provide, Customers with the annual notice
required by Section 4.01(c)(iii)(B) of this Agreement.
(ii) If a REP
is responsible for billing the Customers, the Servicer shall deliver to the
Applicable REP itemized charges for such Customer setting forth such Customers’
Transition Charges.
(iii) The
Servicer shall conform to such requirements in respect of the format, structure
and text of Bills delivered to Customers and any REPs in accordance with, if
applicable, the Financing Order, Tariffs, other tariffs and any other PUCT
Regulations. To the extent that Xxxx format, structure and text are
not prescribed by the Utilities Code or by applicable PUCT Regulations, the
Servicer shall, subject to clauses (i) and (ii) above,
determine the format, structure and text of all Bills in accordance with its
reasonable business judgment, its Servicer Policies and Practices with respect
to its own charges and prevailing industry standards.
(c) Delivery. The
Servicer shall deliver all Bills issued by it (i) by United States mail in
such class or classes as are consistent with the Servicer Policies and Practices
followed by the Servicer with respect to its own charges to its customers or
(ii) by any other means, whether electronic or otherwise, that the Servicer
may from time to time use to present its own charges to its
customers. If a REP is responsible for billing the Customers, the
Servicer shall deliver all Bills to the Applicable REP by such means as are
prescribed by applicable PUCT Regulations, or if not prescribed by applicable
PUCT Regulations, by such means as are mutually agreed upon by the Servicer and
the Applicable REP and are consistent with PUCT Regulations. The
Servicer or any and each REP, as applicable, shall pay from its own funds all
costs of issuance and delivery of all Bills, including but not limited to
printing and postage costs as the same may increase or decrease from time to
time.
SECTION
5. CUSTOMER SERVICE
FUNCTIONS.
The
Servicer shall handle all Customer inquiries and other Customer service matters
according to the same procedures it uses to service Customers with respect to
its own charges.
SECTION
6. COLLECTIONS; PAYMENT
PROCESSING; REMITTANCE.
(a) Collection Efforts,
Policies, Procedures.
(i) The
Servicer shall use reasonable efforts to collect all Billed TCs from Customers
and any Third-Party Collectors as and when the same become due and shall follow
such collection procedures as it follows with respect to comparable assets that
it services for itself or others, including with respect to the
following:
|
(A)
|
The
Servicer shall prepare and deliver overdue notices to Customers and any
REPs in accordance with applicable PUCT Regulations and Servicer Policies
and Practices.
|
|
(B)
|
The
Servicer shall apply late payment charges to outstanding Customer and REP
balances in accordance with applicable PUCT Regulations and as required by
the Financing Order.
|
|
(C)
|
In
circumstances where the Servicer is allowed to xxxx Customers directly,
the Servicer shall deliver verbal and written final notices of delinquency
and possible disconnection in accordance with applicable PUCT Regulations
and Servicer Policies and
Practices.
|
|
(D)
|
The
Servicer shall adhere to and carry out disconnection policies and
termination of any future REP billing in accordance with the Utilities
Code, the Financing Order, applicable PUCT Regulations and the Servicer
Policies and Practices.
|
|
(E)
|
The
Servicer may employ the assistance of collection agents to collect any
past-due Transition Charges in accordance with applicable PUCT Regulations
and Servicer Policies and Practices and the
Tariffs.
|
|
(F)
|
The
Servicer shall apply Customer and any REP deposits to the payment of
delinquent accounts in accordance with applicable PUCT Regulations and
Servicer Policies and Practices and according to the priorities set forth
in Sections 6(b)(ii), (iii), (iv) and (v) of this Annex I.
|
(ii) The
Servicer shall not waive any late payment charge or any other fee or charge
relating to delinquent payments, if any, or waive, vary or modify any terms of
payment of any amounts payable by a Customer, in each case unless such waiver or
action: (A) would be in accordance with the Servicer’s customary practices
or those of any successor Servicer with respect to comparable assets that it
services for itself and for others; (B) would not materially adversely
affect the rights of the Holders; and (C) would comply with applicable law;
provided, however, that
notwithstanding anything in the Agreement or this Annex I to the
contrary, the Servicer is authorized to write off any Billed TCs, in accordance
with its Servicer Policies and Practices, that have remained outstanding for
one hundred eighty (180) days or more.
(iii) The
Servicer shall accept payment from Customers in respect of Billed TCs in such
forms and methods and at such times and places as it accepts for payment of its
own charges. The Servicer shall accept payment from any REPs in
respect of Billed TCs in such forms and methods and at such times and places as
the Servicer and any and each REP shall mutually agree in accordance with, if
applicable, the Financing Order, Tariffs, other tariffs and any other PUCT
Regulations.
(b) Payment Processing;
Allocation; Priority of Payments.
(i) The
Servicer shall post all payments received to Customer accounts as promptly as
practicable, and, in any event, substantially all payments shall be posted no
later than three (3) Business Days after receipt.
(ii) Until
retail competition is introduced into the Service Area, any amounts collected by
the Servicer that represent partial payments of the total Xxxx to a Customer
shall be applied by the Servicer in the following order of priority: (1) to
any amounts due with respect to customer deposits, (2) to all electric
service charges of ETI on the Xxxx and to all Transition Charges on the Xxxx,
pro rata based upon the total amount billed, and (3) to tax and remaining
charges billed to the Customers. Any amounts allocated to Transition
Charge payments pursuant to (2) above shall be further allocated as
follows: (A) first to amounts owed to the Issuer, ETI and any other
affiliate of ETI which is owed “Transition Charges” as defined in
Section 39.302(7) whether as supplemented by 36.403(f) of the
Securitization Law or another section of the Utilities Code (excluding any late
fees and interest charges), regardless of age, pro rata in proportion to their
respective percentages of the total amount of their combined outstanding charges
on such Xxxx; then (B) all late charges shall be allocated to the Servicer;
provided that
penalty payments owed on late payments of Transition Charges shall be allocated
to the Issuer in accordance with the terms of the Tariffs. It is
understood that such allocations may be made on a delayed basis in accordance
with the reconciliations described in Section 6 of this Annex.
(iii) When and
if the Service Area becomes subject to retail competition, the Servicer shall
apply payments received to each Customer’s or any and each Applicable REP’s
account in proportion to the charges contained on the outstanding Xxxx to such
Customer or Applicable REP. Any amounts collected by the Servicer
that represent partial payments of the total Xxxx to a Customer or any REP shall
be allocated as follows: (A) first to amounts owed to the Issuer, ETI and
any other affiliate of ETI which is owed “Transition Charges” as defined in
Sections 39.302(7) whether as supplemented by 36.403(f) of the
Securitization Law or another section of the Utilities Code (excluding any late
fees and interest charges), regardless of age, pro rata in proportion to their
respective percentages of the total amount of their combined outstanding charges
on such Xxxx; then (B) all late charges shall be allocated to the Servicer;
provided that
penalty payments owed on late payments of Transition Charges shall be allocated
to the Issuer in accordance with the terms of the Tariffs. It is
understood that such allocations may be made on a delayed basis in accordance
with the reconciliations described in Section 6(e) of this Annex I.
(iv) The
Servicer shall hold all over-payments for the benefit of the Issuer and ETI and
shall apply such funds to future Xxxx charges in accordance with clauses (ii) and
(iii) (as
applicable) as such charges become due.
(v) For
Customers on a Budget Billing Plan, the Servicer shall treat TC Payments
received from such Customers as if such Customers had been billed for their
respective Transition Charges in the absence of the Budget Billing Plan; partial
payment of a Budget Billing Plan payment shall be allocated according to clause (ii) or
(iii) (as applicable) and overpayment of a Budget Billing Plan
payment shall be allocated according to clause (iv).
(c) Accounts;
Records.
The
Servicer shall maintain accounts and records as to the Transition Property
accurately and in accordance with its standard accounting procedures and in
sufficient detail (i) to permit reconciliation between payments or
recoveries with respect to the Transition Property and the amounts from time to
time remitted to the Collection Account in respect of the Transition Property
and (ii) to permit the TC Collections held by the Servicer to be accounted
for separately from the funds with which they may be commingled, so that the
dollar amounts of TC Collections commingled with the Servicer’s funds may be
properly identified and traced.
(d) Investment of TC Payments
Received.
Prior to
each Daily Remittance, the Servicer may invest TC Payments received at its own
risk and (except as required by applicable PUCT Regulations) for its own
benefit. So long as the Servicer complies with its obligations under
Section 6(c) of this Annex I, neither such
investments nor such funds shall be required to be segregated from the other
investment and funds of the Servicer.
(e) Calculation of Daily
Remittance.
(i) For
purposes of calculating the Daily Remittance, (i) all Billed TCs shall be
estimated to be collected the same number of days after billing as is equal to
the Days Sales Outstanding then in effect (or on the next Servicer Business Day)
and (ii) the Servicer will, on each Servicer Business Day, remit to the
Indenture Trustee for deposit in the Collection Account an amount equal to the
product of the applicable Billed TCs multiplied by one hundred percent less
the system wide write-off percentage (or if available in the ordinary course of
business, gross write-off percentage for each revenue class) used by the
Servicer to calculate the most recent Periodic Billing Requirement. Such product
shall constitute the amount of Estimated TC Collections for such Servicer
Business Day. Pursuant to Section 6.11(c) of the Agreement,
commencing no later than June 30 of each year, the Servicer shall calculate and
report in the next succeeding Monthly Servicer’s Certificate the amount of
Actual TC Collections for all completed Collection Periods during the
Reconciliation Period as compared to the Estimated TC Collections forwarded to
the Collection Account in respect of such Reconciliation Period. No
Excess Remittance shall be withdrawn from the Collection Account if such
withdrawal would cause the amounts on deposit in the General Subaccount or the
Excess Funds Subaccount to be insufficient for the payment of the next
installment of interest or principal due at maturity on the next Payment Date or
upon acceleration on or before the next Payment Date on the Transition
Bonds. The Servicer shall be allowed to use the proceeds from any
Excess Remittance to reimburse any Applicable REPs for the excess of their
remittances over actual TC Payments received by such REPs in accordance with the
terms of PUCT Regulations.
(ii) On or
before the beginning of the first billing cycle in November of each year in
accordance with Section 4.01(b)
of the Agreement, the Servicer shall, in a timely manner so as to perform all
required calculations under such Section 4.01(b),
update the Days Sales Outstanding and the system-wide write-off percentage (or
if available in the ordinary course of business, gross write-off percentage for
each revenue class) in order to be able to calculate the Periodic Billing
Requirement for the next True-Up Adjustment and to calculate any change in the
Daily Remittances for the next Calculation Period.
(iii) The
Servicer and the Issuer acknowledge that, as contemplated in Section 8.01(b)
of the Agreement, the Servicer may make certain changes to its current
computerized customer information system, which changes, when functional, would
affect the Servicer’s method of calculating the TC Payments estimated to have
been received by the Servicer during each Collection Period as set forth in this
Annex I. Should
these changes to the computerized customer information system become functional
during the term of the Agreement, the Servicer and the Issuer agree that they
shall review the procedures used to calculate the TC Payments estimated to have
been received in light of the capabilities of such new system and shall amend
this Annex I in
writing to make such modifications and/or substitutions to such procedures as
may be appropriate in the interests of efficiency, accuracy, cost and/or system
capabilities; provided, however, that the Servicer may not make any modification
or substitution that will materially adversely affect the Holders. As
soon as practicable, and in no event later than sixty (60) Business Days after
the date on which all Customer accounts are being billed under such new system,
the Servicer shall notify the Issuer, the Indenture Trustee and the Rating
Agencies of the same.
(iv) All
calculations of collections, each update of the Days Sales Outstanding, the
system-wide write-off percentage (or if available in the ordinary course of
business, gross write-off percentage for each revenue class) and any changes in
procedures used to calculate the Estimated TC Payments pursuant to this
Section 6(e) shall be made in good faith, and in the case of any update
pursuant to clause (ii)
above or any change in procedures pursuant to clause (iii)
above, in a manner reasonably intended to provide estimates and calculations
that are at least as accurate as those that would be provided on the Closing
Date utilizing the initial procedures.
(f) Remittances.
(i) The
Issuer shall cause to be established the Collection Account in the name of the
Indenture Trustee in accordance with the Indenture.
(ii) The
Servicer shall make remittances to the Collection Account in accordance with
Section 6.11 of the Agreement.
(iii) In the
event of any change of account or change of institution affecting the Collection
Account, the Issuer shall provide written notice thereof to the Servicer not
later than five (5) Business Days from the effective date of such
change.
