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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): December 8, 1997
California Infrastructure and Economic Development Bank
Special Purpose Trust PG&E-1
Rate Reduction Certificates, Series 1997-1
PG&E Funding LLC
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(EXACT NAME OF THE REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 333-30715 94-3274751
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(STATE OR OTHER (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER
JURISDICTION OF IDENTIFICATION
INCORPORATION) NUMBER)
245 Market Street, Room 424, San Francisco, CA 94105
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (415) 972-5467
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(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
Exhibit Index Located on Page 2
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Items 1 through 6 and 8 are not included because they are not applicable.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
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(a) Not applicable
(b) Not applicable
(c) Exhibits
Exhibit Sequential
Number Numbered
- ------- Exhibit
Page
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1.1 Underwriting Agreement.
4.1 Note Indenture.
4.2 Series Supplement.
4.3 Note.
4.4 Amended and Restated Declaration and Agreement of Trust.
4.5 First Supplemental Trust Agreement.
4.6 Rate Reduction Certificate.
10.1 Transition Property Purchase and Sale Agreement.
10.2 Transition Property Servicing Agreement.
10.3 Note Purchase Agreement.
10.4 Fee and Indemnity Agreement.
99.1 Issuance Advice Letter.
99.2 Issuance Resolutions of Infrastructure Bank.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PG&E FUNDING LLC
By: /s/ Kent M. Harvey
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Kent M. Harvey
President
Dated: December 8, 1997
3
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EXHIBIT 1_1
EXECUTION COPY
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK SPECIAL PURPOSE TRUST PG&E-1
RATE REDUCTION CERTIFICATES
PG&E FUNDING LLC
PACIFIC GAS AND ELECTRIC COMPANY
UNDERWRITING AGREEMENT
New York, New York
November 25, 1997
To the Representatives
named in Schedule I
hereto of the Under-
writers named in
Schedule II hereto
Ladies and Gentlemen:
1. Introduction. California Infrastructure and Economic Development
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Bank Special Purpose Trust PG&E-1 (the "Trust") proposes to sell to the
underwriters named in Schedule II hereto (the "Underwriters"), for whom you (the
"Representatives") are acting as representatives, the principal amount of the
certificates identified in Schedule I hereto (the "Certificates"). If the firm
or firms listed in Schedule II hereto include only the firm or firms listed in
Schedule I hereto, then the terms "Underwriters" and "Representatives", as used
herein, shall each be deemed to refer to such firm or firms.
The Trust was formed pursuant to a declaration and agreement of trust
dated as of November 1, 1997, between the California Infrastructure and Economic
Development Bank (the "Infrastructure Bank") and Bankers Trust (Delaware), a
Delaware banking corporation, as Delaware trustee (the "Delaware Trustee"), and
the Certificates will be issued pursuant to an amended and restated declaration
and agreement of trust dated as of December 8, 1997, as
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supplemented by a first supplemental agreement of trust (and as further amended
and supplemented from time to time, the "Trust Agreement"), among the
Infrastructure Bank, the Delaware Trustee and Bankers Trust Company of
California, N.A., a national banking association, as certificate trustee (the
"Certificate Trustee"). The assets of the Trust will consist solely of the PG&E
Funding LLC Notes, Series 1997-1 (the "Notes"), issued by PG&E Funding LLC, a
Delaware limited liability company (the "Note Issuer"), and the proceeds thereof
and the Trust's rights under any Swap Agreement (as defined below). The Notes
will be issued pursuant to an indenture dated as of December 8, 1997 (as amended
and supplemented from time to time, including any Series Supplement, the
"Indenture"), between the Note Issuer and Bankers Trust Company of California,
N.A., a national banking association, as note trustee (the "Note Trustee"), and
purchased by the Certificate Trustee, on behalf of the Trust, pursuant to a note
purchase agreement dated as of December 8, 1997 (the "Note Purchase Agreement"),
between the Note Issuer and the Certificate Trustee. Each Class of Certificates
will correspond to a Class of Notes and will represent fractional undivided
beneficial interests in such underlying Class of Notes, the proceeds thereof and
payments pursuant to any related interest rate exchange agreement executed
solely to permit the issuance of variable rate Certificates (a "Swap Agreement")
between the Trust and the swap counterparty thereunder (the "Swap
Counterparty"). The Notes will be secured primarily by the Transition Property
described in the related Issuance Advice Letter. Such Transition Property will
be sold to the Note Issuer by Pacific Gas and Electric Company, a California
corporation (the "Company"), pursuant to a transition property purchase and sale
agreement dated as of December 8, 1997 (the "Sale Agreement"), between the
Company, as seller, and the Note Issuer. Other Transition Property may be sold
to the Note Issuer by the Company pursuant to an agreement substantially similar
to the Sale Agreement. The Transition Property will be serviced pursuant to a
transition property servicing agreement dated as of December 8, 1997 (as amended
and supplemented from time to time, the "Servicing Agreement"), between the
Company, as servicer, and the Note Issuer.
Capitalized terms used and not otherwise defined herein shall have the
meanings given to them in the Indenture.
2. Representations and Warranties. Each of the Company and the Note
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Issuer represents and warrants to, and agrees with, each Underwriter as set
forth below in this Section 2. Certain terms used in this Section 2 are defined
in paragraph (c) hereof.
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(a) If the offering of the Certificates is a Delayed Offering (as
specified in Schedule I hereto), paragraph (i) below is applicable and, if
the offering of the Certificates is a Non-Delayed Offering (as so
specified), paragraph (ii) below is applicable.
(i) The Note Issuer and the Notes and the Certificates meet the
requirements for the use of Form S-3 under the Securities Act of 1933
(the "Act"), and the Note Issuer has filed with the Securities and
Exchange Commission (the "SEC") a registration statement (the file
number of which is set forth in Schedule I hereto) on such Form,
including a basic prospectus, for registration under the Act of the
offering and sale of the Certificates. The Note Issuer may have filed
one or more amendments thereto, and may have used a Preliminary Final
Prospectus, each of which has previously been furnished to you. Such
registration statement, as so amended, has become effective. The
offering of the Certificates is a Delayed Offering and, although the
Basic Prospectus may not include all the information with respect to
the Certificates and the offering thereof required by the Act and the
rules thereunder to be included in the Final Prospectus, the Basic
Prospectus includes all such information required by the Act and the
rules thereunder to be included therein as of the Effective Date. The
Note Issuer will next file with the SEC pursuant to Rules 415 and
424(b)(2) or (5) a final supplement to the form of prospectus included
in such registration statement relating to the Certificates and the
offering thereof. As filed, such final prospectus supplement shall
include all required information with respect to the Certificates and
the offering thereof and, except to the extent the Representatives
shall agree in writing to a modification, shall be in all substantive
respects in the form furnished to you prior to the Execution Time or,
to the extent not completed at the Execution Time, shall contain only
such specific additional information and other changes (beyond that
contained in the Basic Prospectus and any Preliminary Final
Prospectus) as the Note Issuer has advised you, prior to the Execution
Time, will be included or made therein.
(ii) The Note Issuer and the Notes and the Certificates meet the
requirements for the use of Form S-3 under the Act and the Note Issuer
has filed with the SEC a registration statement (the
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file number of which is set forth in Schedule I hereto) on such Form,
including a basic prospectus, for registration under the Act of the
offering and sale of the Certificates. The Note Issuer may have filed
one or more amendments thereto, including a Preliminary Final
Prospectus, each of which has previously been furnished to you. The
Company will next file with the SEC either (x) a final prospectus
supplement relating to the Certificates in accordance with Rules 430A
and 424(b)(1) or (4), or (y) prior to the effectiveness of such
registration statement, an amendment to such registration statement,
including the form of final prospectus supplement. In the case of
clause (x), the Note Issuer has included in such registration
statement, as amended at the Effective Date, all information (other
than Rule 430A Information) required by the Act and the rules
thereunder to be included in the Final Prospectus with respect to the
Certificates and the offering thereof. As filed, such final prospectus
supplement or such amendment and form of final prospectus supplement
shall contain all Rule 430A Information, together with all other such
required information, with respect to the Certificates and the
offering thereof and, except to the extent the Representatives shall
agree in writing to a modification, shall be in all substantive
respects in the form furnished to you prior to the Execution Time or,
to the extent not completed at the Execution Time, shall contain only
such specific additional information and other changes (beyond that
contained in the Basic Prospectus and any Preliminary Final
Prospectus) as the Note Issuer has advised you, prior to the Execution
Time, will be included or made therein.
(b) On the Effective Date, the Registration Statement did or will,
and when the Final Prospectus is first filed (if required) in accordance
with Rule 424(b) and on the Closing Date, the Final Prospectus (and any
supplement thereto) will, comply in all material respects with the
applicable requirements of the Act, the Securities Exchange Act of 1934
(the "Exchange Act") and the Trust Indenture Act of 1939 (the "Trust
Indenture Act") and the respective rules thereunder; on the Effective Date,
the Registration Statement did not or will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not
misleading; on the Effective Date and on the Closing
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5
Date the Indenture and the Trust Agreement did or will comply in all
material respects with the requirements of the Trust Indenture Act and the
rules thereunder; and, on the Effective Date, the Final Prospectus, if not
filed pursuant to Rule 424(b), did not or will not, and on the date of any
filing pursuant to Rule 424(b) and on the Closing Date, the Final
Prospectus (together with any supplement thereto) will not, include any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
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however, that neither the Note Issuer nor the Company makes any
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representations or warranties as to (i) that part of the Registration
Statement which shall constitute the Statements of Eligibility and
Qualification (Forms T-1) under the Trust Indenture Act of the Note Trustee
and the Certificate Trustee or (ii) the information contained in or omitted
from the Registration Statement or the Final Prospectus (or any supplement
thereto) in reliance upon and in conformity with information furnished in
writing to the Note Issuer by or on behalf of any Underwriter through the
Representatives specifically for inclusion in the Registration Statement or
the Final Prospectus (or any supplement thereto).
(c) The terms which follow, when used in this Agreement, shall have
the meanings indicated. The term "the Effective Date" shall mean each date
that the Registration Statement and any post-effective amendment or
amendments thereto became or become effective and each date after the date
hereof on which a document incorporated by reference in the Registration
Statement is filed. "Execution Time" shall mean the date and time that this
Agreement is executed and delivered by the parties hereto. "Basic
Prospectus" shall mean the prospectus referred to in paragraph (a) above
contained in the Registration Statement at the Effective Date including, in
the case of a Non-Delayed Offering, any Preliminary Final Prospectus.
"Preliminary Final Prospectus" shall mean any preliminary prospectus
supplement to the Basic Prospectus which describes the Certificates and the
offering thereof and is used prior to filing of the Final Prospectus.
"Final Prospectus" shall mean the prospectus supplement relating to the
Certificates that is first filed pursuant to Rule 424(b) after the
Execution Time, together with the Basic Prospectus or, if, in the case of a
Non-Delayed Offering, no filing pursuant to Rule 424(b) is required, shall
mean the form of final prospectus relating to the Certificates, including
the Basic
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Prospectus, included in the Registration Statement at the Effective Date.
"Registration Statement" shall mean the registration statement referred to
in paragraph (a) above, including incorporated documents, exhibits and
financial statements, as amended at the Execution Time (or, if not
effective at the Execution Time, in the form in which it shall become
effective) and, in the event any post-effective amendment thereto becomes
effective prior to the Closing Date (as hereinafter defined), shall also
mean such registration statement as so amended. Such term shall include any
Rule 430A Information deemed to be included therein at the Effective Date
as provided by Rule 430A. "Rule 415", "Rule 424", "Rule 430A" and
"Regulation S-K" refer to such rules or regulation under the Act. "Rule
430A Information" means information with respect to the Certificates and
the offering thereof permitted to be omitted from the Registration
Statement when it becomes effective pursuant to Rule 430A. Any reference
herein to the Registration Statement, the Basic Prospectus, any Preliminary
Final Prospectus or the Final Prospectus shall be deemed to refer to and
include the documents incorporated by reference therein pursuant to Item 12
of Form S-3 which were filed under the Exchange Act on or before the
Effective Date of the Registration Statement or the issue date of the Basic
Prospectus, any Preliminary Final Prospectus or the Final Prospectus, as
the case may be; and any reference herein to the terms "amend", "amendment"
or "supplement" with respect to the Registration Statement, the Basic
Prospectus, any Preliminary Final Prospectus or the Final Prospectus shall
be deemed to refer to and include the filing of any document under the
Exchange Act after the Effective Date of the Registration Statement or the
issue date of the Basic Prospectus, any Preliminary Final Prospectus or the
Final Prospectus, as the case may be, deemed to be incorporated therein by
reference. A "Non-Delayed Offering" shall mean an offering of securities
which is intended to commence promptly after the effective date of a
registration statement, with the result that, pursuant to Rules 415 and
430A, all information (other than Rule 430A Information) with respect to
the securities so offered must be included in such registration statement
at the effective date thereof. A "Delayed Offering" shall mean an offering
of securities pursuant to Rule 415 which does not commence promptly after
the effective date of a registration statement, with the result that only
information required pursuant to Rule 415 need be included in such
registration statement at the effective date thereof
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with respect to the securities so offered. Whether the offering of the
Certificates is a Non-Delayed Offering or a Delayed Offering shall be set
forth in Schedule I hereto.
3. Purchase and Sale. Subject to the terms and conditions and in
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reliance upon the representations and warranties herein set forth, the Trust
agrees to sell to each Underwriter, and each Underwriter agrees, severally and
not jointly, to purchase from the Trust, at the purchase price set forth in
Schedule I hereto the principal amount of the Certificates set forth opposite
such Underwriter's name in Schedule II hereto.
4. Delivery and Payment. Delivery of and payment for the
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Certificates shall be made on the date and at the time specified in Schedule I
hereto (or such later date not later than five business days after such
specified date as the Representatives shall designate), which date and time may
be postponed by agreement between the Representatives and the Note Issuer or as
provided in Section 9 hereof (such date and time of delivery and payment for the
Certificates being herein called the "Closing Date"). Delivery of the
Certificates shall be made to the Representatives for the respective accounts of
the several Underwriters against payment by the several Underwriters through the
Representatives of the purchase price thereof to the Trust by wire transfer of
immediately available funds. Delivery of the Certificates shall be made at such
location as the Representatives shall reasonably designate at least one business
day in advance of the Closing Date. The Certificates to be so delivered shall
be initially represented by Certificates registered in the name of Cede & Co.,
as nominee of The Depository Trust Company ("DTC"). The interests of beneficial
owners of the Certificates will be represented by book entries on the records of
DTC and participating members thereof. Definitive Certificates will be
available only under limited circumstances.
The Trust agrees to have the Certificates available for inspection,
checking and packaging by the Representatives in New York, New York, not later
than 1:00 PM on the business day prior to the Closing Date.
5. Covenants.
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(a) Covenants of the Note Issuer. The Note Issuer covenants and
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agrees with the several Underwriters that:
(i) The Note Issuer will use its best efforts to cause the
Registration Statement, if not effective at
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the Execution Time, and any amendment thereto, to become effective. Prior
to the termination of the offering of the Certificates, the Note Issuer
will not file any amendment of the Registration Statement or supplement
(including the Final Prospectus or any Preliminary Final Prospectus) to the
Basic Prospectus unless the Note Issuer has furnished you a copy for your
review prior to filing and will not file any such proposed amendment or
supplement to which you reasonably object. Subject to the foregoing
sentence, the Note Issuer will cause the Final Prospectus, properly
completed, and any supplement thereto to be filed with the SEC pursuant to
the applicable paragraph of Rule 424(b) within the time period prescribed
and will provide evidence satisfactory to the Representatives of such
timely filing. The Note Issuer will promptly advise the Representatives (i)
when the Registration Statement, if not effective at the Execution Time,
and any amendment thereto, shall have become effective, (ii) when the Final
Prospectus, and any supplement thereto, shall have been filed with the SEC
pursuant to Rule 424(b), (iii) when, prior to termination of the offering
of the Certificates, any amendment to the Registration Statement shall have
been filed or become effective, (iv) of any request by the SEC for any
amendment of the Registration Statement or supplement to the Final
Prospectus or for any additional information, (v) of the issuance by the
SEC of any stop order suspending the effectiveness of the Registration
Statement or the institution or threatening of any proceeding for that
purpose and (vi) of the receipt by the Note Issuer of any notification with
respect to the suspension of the qualification of the Certificates for sale
in any jurisdiction or the initiation or threatening of any proceeding for
such purpose. The Note Issuer will use its best efforts to prevent the
issuance of any such stop order and, if issued, to obtain as soon as
possible the withdrawal thereof.
(ii) If, at any time when a prospectus relating to the Certificates
is required to be delivered under the Act, any event occurs as a result of
which the Final Prospectus as then supplemented would include any untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein in the light of the circumstances under
which they were made not misleading, or if it shall be necessary to amend
the Registration Statement or supplement the Final Prospectus to comply
with the Act or the Exchange Act or the respective rules thereunder, the
Note Issuer promptly will (i) prepare and file with
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the SEC, subject to the second sentence of paragraph (a) of this Section 5,
an amendment or supplement which will correct such statement or omission or
effect such compliance and (ii) supply any supplemented Prospectus to you
in such quantities as you may reasonably request.
(iii) As soon as practicable, the Note Issuer will cause the Trust to
make generally available to the Certificateholders and to the
Representatives an earnings statement or statements of the Trust which will
satisfy the provisions of Section 11(a) of the Act and Rule 158 under the
Act.
(iv) The Note Issuer will furnish to the Representatives and counsel
for the Underwriters, without charge, copies of the Registration Statement
(including exhibits thereto) and, so long as delivery of a prospectus by an
Underwriter or dealer may be required by the Act, as many copies of any
Preliminary Final Prospectus and the Final Prospectus and any supplement
thereto as the Representatives may reasonably request. The Note Issuer
shall furnish or cause to be furnished to the Representatives copies of all
reports on Form SR required by Rule 463 under the Act. The Note Issuer
will pay the expenses of printing or other production of all documents
relating to the offering.
(v) The Note Issuer will arrange for the qualification of the
Certificates for sale under the laws of such jurisdictions as the
Representatives may designate, will maintain such qualifications in effect
so long as required for the distribution of the Certificates and will
arrange for the determination of the legality of the Certificates for
purchase by institutional investors; provided that in no event shall the
Note Issuer be obligated to qualify to do business in any jurisdiction
where it is not now so qualified or to take any action that would subject
it to service of process in suits, other than those arising out of the
offering or sale of the Certificates, in any jurisdiction where it is not
now so subject.
(vi) Until the business date set forth on Schedule I hereto, the Note
Issuer will not, without the consent of the Representatives, offer, sell or
contract to sell, or otherwise dispose of, directly or indirectly, or
announce the offering of, any asset-backed securities of a trust or other
special purpose vehicle (other than the Certificates).
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(vii) For a period from the date of this Agreement until the
retirement of the Certificates, or until such time as the Underwriters
shall cease to maintain a secondary market in the Certificates, whichever
occurs first, the Note Issuer will deliver to the Representatives the
annual statements of compliance and the annual independent auditor's
servicing reports furnished to the Note Issuer or the Note Trustee pursuant
to the Servicing Agreement or the Indenture, as applicable, as soon as such
statements and reports are furnished to the Note Issuer or the Note
Trustee.
(viii) So long as any of the Certificates are outstanding, the Note
Issuer will furnish to the Representatives (i) as soon as available, a copy
of each report of the Trust filed with the SEC under the Exchange Act, or
mailed to Certificateholders, (ii) a copy of any filings with the
California Public Utility Commission pursuant to the Financing Order,
including, but not limited to, any Advice Letters, and (iii) from time to
time, any information concerning the Company or the Note Issuer, and, to
the extent readily available, the Infrastructure Bank or the Trust, as the
Representatives may reasonably request.
(ix) To the extent, if any, that any rating necessary to satisfy the
condition set forth in Section 6(r) of this Agreement is conditioned upon
the furnishing of documents or the taking of other actions by the Note
Issuer on or after the Closing Date, the Note Issuer shall furnish such
documents and take such other actions.
(b) Covenants of the Company. The Company covenants and agrees with
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the several Underwriters that, to the extent that the Note Issuer has not
already performed such act pursuant to Section 5(a):
(i) The Company will use its best efforts to cause the Registration
Statement, if not effective at the Execution Time, and any amendment
thereto, to become effective. The Company will use its best efforts to
prevent the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement and, if issued, to obtain as
soon as possible the withdrawal thereof.
(ii) Until the business date set forth on Schedule I hereto, the
Company will not, without the consent of the Representatives, offer, sell
or contract to sell, or otherwise dispose of, directly or
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indirectly, or announce the offering of, any asset-backed securities of a
trust or other special purpose vehicle (other than the Certificates).
(iii) So long as any of the Certificates are outstanding and the
Company is the Servicer, the Company will furnish to the Representatives
(i) as soon as available, a copy of each report of the Trust filed with the
SEC under the Exchange Act, or mailed to Certificateholders, (ii) a copy of
any filings with the California Public Utility Commission pursuant to the
Financing Order, including, but not limited to, any Advice Letters, and
(iii) from time to time, any information concerning the Company and, to the
extent readily available, the Note Issuer, the Infrastructure Bank or the
Trust, as the Representatives may reasonably request.
(iv) To the extent, if any, that any rating necessary to satisfy the
condition set forth in Section 6(r) of this Agreement is conditioned upon
the furnishing of documents or the taking of other actions by the Company
on or after the Closing Date, the Company shall furnish such documents and
take such other actions.
6. Conditions to the Obligations of the Underwriters. The
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obligations of the Underwriters to purchase the Certificates shall be subject to
the accuracy of the representations and warranties on the part of the Note
Issuer and the Company contained herein and on the part of the Company contained
in Article III of the Sale Agreement and in Section 6.01 of the Servicing
Agreement as of the Execution Time and the Closing Date, to the accuracy of the
statements of the Note Issuer, the Company and the Trust made in any
certificates pursuant to the provisions hereof, to the performance by the Note
Issuer, the Company and the Trust of their obligations hereunder and to the
following additional conditions:
(a) If the Registration Statement has not become effective prior to
the Execution Time, unless the Representatives agree in writing to a later
time, the Registration Statement will become effective not later than (i)
6:00 PM New York City time, on the date of determination of the public
offering price, if such determination occurred at or prior to 3:00 PM New
York City time on such date, or (ii) 12:00 Noon on the business day
following the day on which the public offering price was determined, if
such determination occurred after 3:00 PM New York City time on such date;
if filing of the Final Prospectus, or any supplement
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thereto, is required pursuant to Rule 424(b), the Final Prospectus, and any
such supplement, shall have been filed in the manner and within the time
period required by Rule 424(b); and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or threatened.
(b) The Representatives, the Infrastructure Bank, the California
State Treasurer's Office, as agent for sale (the "STO"), the Trust, the
Note Trustee and the Certificate Trustee shall have received opinions of
counsel for the Company, portions of which may be delivered by Orrick,
Herrington & Sutcliffe LLP, outside counsel for the Company, portions of
which may be delivered by Bruce R. Worthington, Esq., in-house counsel for
the Company, and portions of which may be delivered by Richards, Layton &
Finger, P.A., special Delaware counsel for the Company, each dated the
Closing Date, in form and substance reasonably satisfactory to the
Representatives, to the effect that:
(i) the Company (a) has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction in which it is chartered or organized, (b) has all
requisite corporate power and authority to own its properties, conduct
its business as presently conducted and execute, deliver and perform
its obligations under this Agreement, the Sale Agreement and the
Servicing Agreement, and (c) is duly qualified to do business in all
jurisdictions (and is in good standing under the laws of all such
jurisdictions) to the extent that such qualification and good standing
is or shall be necessary to protect the validity and enforceability of
this Agreement, the Basic Documents to which the Company is party and
each other instrument or agreement necessary or appropriate to the
proper administration of this Agreement and the transactions
contemplated hereby;
(ii) the Sale Agreement and the Servicing Agreement have been
duly authorized, executed and delivered, and constitute legal, valid
and binding instruments enforceable against the Company in accordance
with their terms (subject, as to enforcement of remedies, to
applicable bankruptcy, reorganization, insolvency, moratorium or other
similar laws or equitable principles affecting
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13
creditors' rights generally from time to time in effect);
(iii) to the knowledge of such counsel, there is no pending or
threatened action, suit or proceeding before any court or governmental
agency, authority or body or any arbitrator involving the Company or
any of its subsidiaries of a character required to be disclosed in the
Registration Statement which is not adequately disclosed in the Final
Prospectus, and there is no franchise, contract or other document of a
character required to be described in the Registration Statement or
Final Prospectus, or to be filed as an exhibit, which is not described
or filed as required;
(iv) this Agreement has been duly authorized, executed and
delivered by the Company;
(v) no consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation of the
transactions contemplated herein, except such as have been obtained
under the California Government Code, the PU Code and the Act and such
as may be required under the blue sky laws of any jurisdiction in
connection with the purchase and distribution of the Certificates by
the Underwriters and such other approvals (specified in such opinion)
as have been obtained;
(vi) neither the execution and delivery of this Agreement, the
Sale Agreement, the Servicing Agreement, nor the consummation of the
transactions contemplated by this Agreement, the Sale Agreement or the
Servicing Agreement, nor the fulfillment of the terms of this
Agreement, the Sale Agreement or the Servicing Agreement by the
Company, will (A) conflict with, result in any breach of any of the
terms or provisions of, or constitute (with or without notice or lapse
of time) a default under the articles of incorporation, bylaws or
other organizational documents of the Company, or conflict with or
breach any of the material terms or provisions of, or constitute (with
or without notice or lapse of time) a default under, any indenture,
material agreement or other material instrument to which the Company
is a party or by which the Company is bound, (B) result in the
creation or imposition of any lien upon any properties of the Company
pursuant to the terms of any such indenture,
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14
agreement or other instrument (other than as contemplated by the Basic
Documents and Section 843(g) of the PU Code and other than the lien of
that certain First and Refunding Mortgage dated December 1, 1920,
executed by Pacific Gas and Electric Company, as supplemented and
amended to the date hereof, in favor of BNY Western Trust Company,
successor by acquisition to Wells Fargo Bank, N.A., successor by
merger to First Interstate Bank of California, as Trustee (the
"Company Mortgage"), which lien shall be released on the Closing Date
contemporaneously with the payment of the purchase price of the
Notes), or (C) violate any law or any order, rule or regulation
applicable to the Company of any court or of any federal or state
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Company, or any of its
properties; and
(vii) upon the delivery of the fully executed Sale Agreement to
the Note Issuer and the payment of the purchase price of the
Transition Property by the Note Issuer to the Seller pursuant to the
Sale Agreement, then (A) the transfer of the Transition Property by
the Seller to the Note Issuer pursuant to the Sale Agreement conveys
the Seller's right, title and interest in the Transition Property to
the Note Issuer and will be treated as an absolute transfer of all of
the Seller's right, title, and interest in the Transition Property,
other than for federal and state income and franchise tax purposes,
(B) such transfer of the Transition Property is perfected, (C) such
transfer has priority over any other assignment of the Transition
Property, and (D) the Transition Property is free and clear of all
liens created prior to its transfer to the Note Issuer pursuant to the
Sale Agreement.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the State
of California or the United States, to the extent deemed proper and
specified in such opinion, upon the opinion of other counsel of good
standing believed to be reliable and who are satisfactory to counsel for
the Underwriters and (B) as to matters of fact, to the extent deemed
proper, on certificates of responsible officers of the Company. References
to the Final Prospectus in this paragraph (b) include any supplements
thereto at the Closing Date.
<PAGE>
15
(c) The Representatives, the Infrastructure Bank, the STO, the Trust
and the Note Trustee shall have received opinions of counsel for the Note
Issuer, portions of which may be delivered by Orrick, Herrington &
Sutcliffe LLP, outside counsel for the Note Issuer, portions of which may
be delivered by Bruce R. Worthington, Esq., in-house counsel for the Note
Issuer, and portions of which may be delivered by Richards, Layton &
Finger, P.A., special Delaware counsel for the Note Issuer, each dated the
Closing Date, in form and substance reasonably satisfactory to the
Representatives, to the effect that:
(i) the Note Issuer has been duly formed and is validly existing
as a single member limited liability company and is in good standing
under the laws of the State of Delaware, with full power and authority
to execute, deliver and perform its obligations under this Agreement,
the Sale Agreement, the Servicing Agreement, the Indenture, the Note
Purchase Agreement and the Notes;
(ii) the Sale Agreement, the Servicing Agreement, the Indenture
and the Note Purchase Agreement have been duly authorized, executed
and delivered, and constitute legal, valid and binding instruments
enforceable against the Note Issuer in accordance with their terms
(subject, as to enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium or other similar laws or
equitable principles affecting creditors' rights generally from time
to time in effect); and the Notes have been duly authorized and
executed, and when authenticated in accordance with the provisions of
the Indenture and delivered to and paid for by the Trust in accordance
with the terms of the Note Purchase Agreement, will constitute legal,
valid and binding obligations of the Note Issuer entitled to the
benefits of the Indenture and any related Series Supplement (subject,
as to enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium or other similar laws or
equitable principles affecting creditors' rights generally from time
to time in effect);
(iii) the Notes, the Indenture, the Sale Agreement and the Note
Purchase Agreement conform to the descriptions thereof contained in
the Final Prospectus;
<PAGE>
16
(iv) the Indenture has been duly qualified under the Trust
Indenture Act;
(v) to the knowledge of such counsel, there is no pending or
threatened action, suit or proceeding before any court or governmental
agency, authority or body or any arbitrator involving the Note Issuer,
or relating to the Notes, the Financing Order or the collection of FTA
Payments or the use and enjoyment of transition property under the
Statute of a character required to be disclosed in the Registration
Statement which is not adequately disclosed in the Final Prospectus,
and there is no franchise, contract or other document of a character
required to be described in the Registration Statement or Final
Prospectus, or to be filed as an exhibit, which is not described or
filed as required; and the statements included or incorporated in the
Final Prospectus under the headings "Energy Deregulation and New
California Market Structure" (to the extent the Statute is described),
"Description of the Transition Property", "The Note Issuer",
"Servicing" (to the extent the Servicing Agreement is described) and
"Description of the Notes" fairly summarize the matters described
therein;
(vi) the Registration Statement has become effective under the
Act; any required filing of the Basic Prospectus, any Preliminary
Final Prospectus and the Final Prospectus, and any supplements
thereto, pursuant to Rule 424(b) has been made in the manner and
within the time period required by Rule 424(b); to the knowledge of
such counsel, no stop order suspending the effectiveness of the
Registration Statement has been issued, no proceedings for that
purpose have been instituted or threatened, and the Registration
Statement and the Final Prospectus (other than the financial
statements and other financial and statistical information contained
therein as to which such counsel need express no opinion) comply as to
form in all material respects with the applicable requirements of the
Act, the Exchange Act and the Trust Indenture Act and the respective
rules thereunder; and such counsel has no reason to believe that at
the Effective Date the Registration Statement contained any untrue
statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the
<PAGE>
17
statements therein, in the light of the circumstances under which they
were made, not misleading or that the Final Prospectus as of its date
and the Closing Date includes any untrue statement of a material fact
or omits to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading (other than the financial statements and other
financial and statistical information contained therein as to which
such counsel need express no opinion);
(vii) this Agreement has been duly authorized, executed and
delivered by the Note Issuer;
(viii) no consent, approval, authorization or order of any court
or governmental agency or body is required for the consummation of the
transactions contemplated herein, except such as have been obtained
under the California Government Code, the PU Code and the Act and such
as may be required under the blue sky laws of any jurisdiction in
connection with the purchase and distribution of the Certificates by
the Underwriters and such other approvals (specified in such opinion)
as have been obtained;
(ix) neither the execution and delivery of this Agreement, the
Sale Agreement, the Servicing Agreement, the Indenture or the Note
Purchase Agreement, nor the issue and sale of the Notes, nor the
consummation of the transactions contemplated by this Agreement, the
Sale Agreement, the Servicing Agreement, the Indenture or the Note
Purchase Agreement, nor the fulfillment of the terms of this
Agreement, the Sale Agreement, the Servicing Agreement, the Indenture
or the Note Purchase Agreement by the Note Issuer, will (A) conflict
with, result in any breach of any of the terms or provisions of, or
constitute (with or without notice or lapse of time) a default under
the Amended and Restated Limited Liability Company Agreement of the
Note Issuer, or conflict with or breach any of the material terms or
provisions of, or constitute (with or without notice or lapse of time)
a default under, any indenture, agreement or other instrument known to
such counsel and to which the Note Issuer is a party or by which the
Note Issuer is bound, (B) result in the creation or imposition of any
lien upon any properties of the Note Issuer pursuant to the terms of
any such indenture,
<PAGE>
18
agreement or other instrument (other than as contemplated by the Basic
Documents and Section 843(g) of the PU Code), or (C) violate any law
or any order, rule or regulation applicable to the Note Issuer of any
court or of any federal or state regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over
the Note Issuer, or any of its properties;
(x) (A) to the extent that the provisions of Section 843 of the
PU Code apply to the grant of a security interest by the Note Issuer
in the Collateral pursuant to the Indenture, then upon the giving of
value by the Note Trustee to the Note Issuer with respect to the
Collateral, (I) the Indenture creates in favor of the Note Trustee a
security interest in the rights of the Note Issuer in the Collateral,
(II) such security interest is valid and enforceable against the Note
Issuer and third parties (subject to the rights of any third parties
holding security interests in such Collateral perfected in the manner
described in Section 843 of the PU Code), and has attached, (III) such
security interest is perfected, and (IV) such perfected security
interest is of first priority. (B) To the extent that the provisions
of Section 843 of the PU Code do not apply to the grant of a security
interest by the Note Issuer in the Collateral pursuant to the
Indenture, then upon the giving of value by the Note Trustee to the
Note Issuer with respect to the Collateral, (I) the Indenture creates
in favor of the Note Trustee a security interest in the rights of the
Note Issuer in the Collateral, and such security interest is
enforceable against the Note Issuer with respect to such Collateral,
(II) such security interest is perfected, and (III) such perfected
security interest is of first priority; and
(xi) the Note Issuer is not an "investment company" or under the
"control" of an "investment company" as such terms are defined under
the Investment Company Act of 1940, as amended.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the State
of California or the United States, to the extent deemed proper and
specified in such opinion, upon the opinion of other counsel of good
standing believed to be reliable and
<PAGE>
19
who are satisfactory to counsel for the Underwriters and (B) as to matters
of fact, to the extent deemed proper, on certificates of responsible
officers of the Note Issuer and public officials. References to the Final
Prospectus in this paragraph (c) include any supplements thereto at the
Closing Date.
(d) The Representatives, the Note Issuer, the Company, the
Infrastructure Bank, the STO, the Trust and the Certificate Trustee shall
have received opinions of counsel for the Trust and the Infrastructure
Bank, portions of which may be delivered by Brown & Wood LLP, outside
counsel for the Trust and the Infrastructure Bank, portions of which may be
delivered by Brooke Bassett, in-house counsel for the Infrastructure Bank,
and portions of which may be delivered by Richards, Layton & Finger, P.A.,
special Delaware counsel for the Trust, each dated the Closing Date, in
form and substance reasonably satisfactory to the Representatives, to the
effect that:
(i) the Certificates and the Trust Agreement conform to the
descriptions thereof contained in the Final Prospectus;
(ii) the Trust has been duly formed and is validly existing as a
Delaware business trust and is in good standing under the laws of the
State of Delaware, with full power and authority to execute, deliver
and perform its obligations under this Agreement and the Certificates;
(iii) the Infrastructure Bank has been duly formed and is validly
existing as a public body established within the state government of
the State of California, with full power and authority to execute,
deliver and perform its obligations under the Trust Agreement and the
IED Bank Issuance Resolution (as defined in the Sale Agreement);
(iv) the Trust Agreement has been duly authorized, executed and
delivered by the Infrastructure Bank and constitutes a legal, valid
and binding instrument enforceable against the Infrastructure Bank in
accordance with its terms (subject, as to enforcement of remedies, to
applicable bankruptcy, reorganization, insolvency, moratorium or other
similar laws or equitable principles affecting creditors' rights
generally from time to time in effect);
<PAGE>
20
(v) the Certificates have been duly authorized and executed and,
when authenticated in accordance with the provisions of the Trust
Agreement and delivered to and paid for by the Underwriters pursuant
to this Agreement, will be duly issued and entitled to the benefits of
the Trust Agreement;
(vi) the Note Purchase Agreement constitutes a legal, valid and
binding instrument enforceable against the Trust in accordance with
its terms (subject, as to enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency, moratorium or other similar
laws or equitable principles affecting creditors' rights generally
from time to time in effect);
(vii) the IED Bank Issuance Resolution has been duly and validly
adopted by the Infrastructure Bank, in compliance with all applicable
laws, rules and regulations, and is in full force and effect, not
having been amended, altered or repealed since November 10, 1997;
(viii) pursuant to the IED Bank Issuance Resolution, the
Infrastructure Bank has validly authorized and approved the formation
of the Trust, the issuance of the Certificates and all other
transactions and actions contemplated by the Basic Documents; such
authorizations and approvals are valid and in full force and effect;
the Certificates qualify as "rate reduction bonds" under Section
840(e) of the PU Code;
(ix) the Trust Agreement has been duly qualified under the Trust
Indenture Act;
(x) to the knowledge of such counsel, there is no pending or
threatened action, suit or proceeding before any court or governmental
agency, authority or body or any arbitrator challenging the validity
or enforceability of the IED Bank Issuance Resolution or actions taken
by the Infrastructure Bank in connection therewith or otherwise
involving the Infrastructure Bank or relating to the Certificates or
the Trust of a character required to be disclosed in the Registration
Statement which is not adequately disclosed in the Final Prospectus,
and there is no franchise, contract or other document relating to the
Infrastructure Bank, the Certificates or the Trust of a character
required to be described in
<PAGE>
21
the Registration Statement or Final Prospectus, or to be filed as an
exhibit, which is not described or filed as required; and the
statements included or incorporated in the Final Prospectus under the
headings "Description of the Certificates," "The Trust," and "The
Infrastructure Bank" fairly summarize the matters described therein
and the statements included or incorporated in the Final Prospectus
under the headings "Certain Federal Income Tax Consequences", "State
Taxation" and "ERISA Considerations", to the extent that they
constitute matters of California, Delaware or federal law or legal
conclusions with respect thereto, provide a fair and accurate summary
of such law or conclusions;
(xi) to the knowledge of such counsel, the Registration Statement
and the Final Prospectus (other than (A) the financial statements and
other financial and statistical information contained therein and (B)
information contained under the captions "The Note Issuer" and "The
Seller and Servicer", in each case as to which such counsel need
express no opinion) comply as to form in all material respects with
the applicable requirements of the Act, the Exchange Act and the Trust
Indenture Act and the respective rules thereunder, and such counsel
has no reason to believe that at the Effective Date the Registration
Statement contained any untrue statement of a material fact or omitted
to state any material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances
under which they were made, not misleading or that the Final
Prospectus as of its date and the Closing Date includes any untrue
statement of a material fact or omits to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading (other than
(A) the financial statements and other financial and statistical
information contained therein and (B) information contained under the
captions "The Note Issuer" and "The Seller and Servicer", in each case
as to which such counsel need express no opinion);
(xii) this Agreement has been duly authorized, executed and
delivered by the Trust;
(xiii) no consent, approval, authorization or order of any court
or governmental agency or body
<PAGE>
22
is required for the issuance of the Certificates, except such as have
been obtained under the California Government Code, the PU Code and
the Act and such as may be required under the blue sky laws of any
jurisdiction in connection with the purchase and distribution of the
Certificates by the Underwriters and such other approvals (specified
in such opinion) as have been obtained;
(xiv) neither the execution and delivery of this Agreement or the
Trust Agreement, nor the issue and sale of the Certificates, nor the
consummation of the transactions contemplated by this Agreement or the
Trust Agreement, nor the fulfillment of the terms of this Agreement or
the Trust Agreement by the Infrastructure Bank will (A) conflict with,
result in any breach of any of the terms or provisions of, or
constitute (with or without notice or lapse of time) a default under
the bylaws or procedural documents of the Infrastructure Bank, or
conflict with or breach any of the material terms or provisions of, or
constitute (with or without notice or lapse of time) a default under,
any indenture, agreement or other instrument known to such counsel and
to which the Infrastructure Bank is a party or by which the
Infrastructure Bank is bound, (B) result in the creation or imposition
of any lien upon any properties of the Infrastructure Bank pursuant to
the terms of any such indenture, agreement or other instrument, or (C)
violate any law or any order, rule or regulation applicable to the
Infrastructure Bank of any court or of any federal or state regulatory
body, administrative agency or other governmental instrumentality
having jurisdiction over the Infrastructure Bank, or any of its
properties; and
(xv) the Trust is not an "investment company" or under the
"control" of an "investment company" as such terms are defined under
the Investment Company Act of 1940, as amended.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the State
of California or the United States, to the extent deemed proper and
specified in such opinion, upon the opinion of other counsel of good
standing believed to be reliable and who are satisfactory to counsel for
the Underwriters, (B) as to matters relating to actions taken by the
Company, the Note Issuer, the Note Trustee, the CPUC
<PAGE>
23
and the Servicer, upon opinions rendered by counsel to such parties
hereunder or under the Basic Documents, and (C) as to matters of fact, to
the extent deemed proper, on certificates of responsible officers of the
Trust, the Infrastructure Bank and public officials. References to the
Final Prospectus in this paragraph (d) include any supplements thereto at
the Closing Date.
(e) The Representatives, the Trust, the Infrastructure Bank and the
STO shall have received an opinion of Seward & Kissel, counsel to the Note
Trustee, dated the Closing Date, in form and substance reasonably
satisfactory to the Representatives, to the effect that:
(i) the Note Trustee is validly existing as a national banking
association in good standing under the federal laws of the United
States of America;
(ii) the Indenture has been duly authorized, executed and
delivered, and constitutes a legal, valid and binding instrument
enforceable against the Note Trustee in accordance with its terms
(subject, as to enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium or other similar laws or
equitable principles affecting creditors' rights generally from time
to time in effect); and
(iii) the Notes have been duly authenticated by the Note Trustee.
(f) The Representatives, the Trust, the Infrastructure Bank and the
STO shall have received an opinion of Seward & Kissel, counsel to the
Certificate Trustee, dated the Closing Date, in form and substance
reasonably satisfactory to the Representatives, to the effect that:
(i) the Certificate Trustee is validly existing as a national
banking association in good standing under the federal laws of the
United States of America;
(ii) the Trust Agreement and, on behalf of the Trust, the Note
Purchase Agreement have been duly authorized, executed and delivered
by the Certificate Trustee, and the Trust Agreement constitutes a
legal, valid and binding instrument enforceable against the
Certificate Trustee in
<PAGE>
24
accordance with its terms (subject, as to enforcement of remedies, to
applicable bankruptcy, reorganization, insolvency, moratorium or other
similar laws or equitable principles affecting creditors' rights
generally from time to time in effect); and
(iii) the Certificate Trustee has duly executed, authenticated
and delivered the Certificates issued on the Closing Date on behalf of
the Trust;
(g) The Representatives, the Trust, the Infrastructure Bank, the STO
and the Certificate Trustee shall have received an opinion of Richards,
Layton & Finger, P.A., counsel to the Delaware Trustee, dated the Closing
Date, in form and substance reasonably satisfactory to the Representatives,
to the effect that:
(i) the Delaware Trustee is duly incorporated and is validly
existing as a banking corporation in good standing under the laws of
the State of Delaware, with full corporate trust power and authority
to enter into and perform its obligations under the Trust Agreement;
and
(ii) the Trust Agreement has been duly authorized, executed and
delivered by the Delaware Trustee, and constitutes a legal, valid and
binding instrument enforceable against the Delaware Trustee in
accordance with its terms (subject, as to enforcement of remedies, to
applicable bankruptcy, reorganization, insolvency, moratorium or other
similar laws or equitable principles affecting creditors' rights
generally from time to time in effect);
(h) The Representatives shall have received from Cravath, Swaine &
Moore, counsel for the Underwriters, such opinion or opinions, dated the
Closing Date, with respect to the issuance and sale of the Notes and the
Certificates, the Indenture, the Trust Agreement, the Registration
Statement, the Final Prospectus (together with any supplement thereto) and
other related matters as the Representatives may reasonably require, and
the Company, the Note Issuer and the Trust shall have furnished to such
counsel such documents as they request for the purpose of enabling them to
pass upon such matters.
(i) The Representatives, the Infrastructure Bank,
<PAGE>
25
the STO and the Note Trustee shall have received a certificate of the Note
Issuer, signed by the Chairman of the Board or the President and the
principal financial or accounting officer of the Note Issuer, dated the
Closing Date, to the effect that the signers of such certificate have
carefully examined the Registration Statement, the Final Prospectus, any
supplement to the Final Prospectus and this Agreement and that:
(i) the representations and warranties of the Note Issuer in this
Agreement and in the Indenture are true and correct in all material
respects on and as of the Closing Date with the same effect as if made
on the Closing Date, and the Note Issuer has complied with all the
agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to the Closing Date;
(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or, to the Note Issuer's knowledge,
threatened; and
(iii) since the dates as of which information is given in the
Final Prospectus (exclusive of any supplement thereto), there has been
no material adverse change in (x) the condition (financial or other),
prospects, earnings, business or properties of the Note Issuer,
whether or not arising from transactions in the ordinary course of
business, or (y) the Transition Property, except as set forth in or
contemplated in the Final Prospectus (exclusive of any supplement
thereto).
(j) The Representatives, the Infrastructure Bank, the STO, the Note
Trustee and the Certificate Trustee shall have received a certificate of
the Company, signed by the President and the principal financial or
accounting officer of the Company, dated the Closing Date, to the effect
that the signers of such certificate have carefully examined the
Registration Statement, the Final Prospectus, any supplement to the Final
Prospectus and this Agreement and that:
(i) the representations and warranties of the Company in this
Agreement, the Sale Agreement and the Servicing Agreement are true and
correct in all material respects on and as of the Closing Date with
the same effect as if made on the
<PAGE>
26
Closing Date, and the Company has complied with all the agreements and
satisfied all the conditions on its part to be performed or satisfied
at or prior to the Closing Date;
(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or, to the Company's knowledge,
threatened; and
(iii) since the dates as of which information is given in the
Final Prospectus (exclusive of any supplement thereto), there has been
no material adverse change in (x) the condition (financial or other),
prospects, earnings, business or properties of the Company and its
subsidiaries taken as a whole, whether or not arising from
transactions in the ordinary course of business, or (y) the Transition
Property, except as set forth in or contemplated in the Final
Prospectus (exclusive of any supplement thereto).
(k) At the Closing Date, Arthur Andersen LLP shall have furnished to
the Representatives (i) a letter or letters (which may refer to letters
previously delivered to one or more of the Representatives), dated as of
the Closing Date, in form and substance satisfactory to the
Representatives, confirming that they are independent accountants within
the meaning of the Act and the Exchange Act and the respective applicable
published rules and regulations thereunder and stating in effect that they
have performed certain specified procedures as a result of which they
determined that certain information of an accounting, financial or
statistical nature (which is limited to accounting, financial or
statistical information derived from the general accounting records of the
Company and its subsidiaries) set forth in the Registration Statement and
the Final Prospectus, including information specified by the Underwriters
and set forth under the captions "Prospectus Summary," "Description of the
Transition Property," "The Seller and the Servicer," "Description of the
Notes," and "Description of the Certificates" in the Final Prospectus,
agrees with the accounting records of the Company and its subsidiaries,
excluding any questions of legal interpretation, and (ii) the opinion or
certificate, dated as of the Closing Date, in form and substance
satisfactory to the Representatives, satisfying the requirements of Section
2.10(7) of the Indenture.
<PAGE>
27
References to the Final Prospectus in this paragraph (k) include any
supplement thereto at the date of the letter.
In addition, except as provided in Schedule I hereto, at the Execution
Time, Arthur Andersen LLP shall have furnished to the Representatives a
letter or letters, dated as of the Execution Time, in form and substance
satisfactory to the Representatives, to the effect set forth above.
(l) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the Registration Statement (exclusive of any
amendment thereof) and the Final Prospectus (exclusive of any supplement
thereto), there shall not have been any change, or any development
involving a prospective change, in or affecting either (i) the business,
properties or financial condition of the Company, the Note Issuer or the
Infrastructure Bank or (ii) the Transition Property, the Notes, the
Certificates, the Financing Order or the Statute, the effect of which is,
in the judgment of the Representatives, so material and adverse as to make
it impractical or inadvisable to proceed with the offering or delivery of
the Notes or the Certificates as contemplated by the Registration Statement
(exclusive of any amendment thereof) and the Final Prospectus (exclusive of
any supplement thereto).
(m) The Representatives, the Trust, the Infrastructure Bank and the
STO shall have received on the Closing Date an opinion letter or letters of
Orrick, Herrington & Sutcliffe, LLP, counsel to the Company and the Note
Issuer, dated the Closing Date, in form and substance reasonably
satisfactory to the Representatives, (i) with respect to the
characterization of the transfer of the Transition Property by the Company
to the Note Issuer as a "true sale" for bankruptcy purposes and (ii) to the
effect that a court would not order the substantive consolidation of the
assets and liabilities of the Note Issuer with those of the Company in the
event of a bankruptcy, reorganization or other insolvency proceeding
involving the Company.
(n) The Representatives, the Trust, the Infrastructure Bank and the
STO shall have received on the Closing Date an opinion letter of Brown &
Wood LLP, outside counsel to the Infrastructure Bank and the Trust, dated
the Closing Date, in form and substance reasonably satisfactory to the
Representatives, to the
<PAGE>
28
effect that a court would not order the substantive consolidation of the
assets and liabilities of the Infrastructure Bank with those of the Trust.
(o) The Representatives, the Trust, the Infrastructure Bank and the
STO shall have received on the Closing Date an opinion letter or letters of
counsel for the Company, portions of which may be delivered by Orrick,
Herrington & Sutcliffe LLP, outside counsel for the Company, and portions
of which may be delivered by Bruce R. Worthington, Esq., in-house counsel
for the Company, each dated the Closing Date, in form and substance
reasonably satisfactory to the Representatives, to the effect that: (i)
subject to the ultimate outcome of any Petition to the California Supreme
Court for Writ of Review filed by The Utility Reform Network, the Financing
Order has been duly authorized and adopted by the CPUC and the Financing
Order, giving effect to the Issuance Advice Letter, is in full force and
effect; in reliance on the opinion of Brown & Wood LLP that the
Certificates are "rate reduction bonds" under Section 840(e) of the PU
Code, as of the issuance of the Certificates, the Certificates are entitled
to the protections provided in the first sentences of PU Code Sections
841(c) and 842(d); (ii) no person may challenge the Financing Order in
California state courts other than in a proceeding pursuant to a Petition
for Writ of Review brought by The Utility Reform Network to the California
Supreme Court; (iii) the likelihood of any outcome of any Petition to the
California Supreme Court for Writ of Review filed by The Utility Reform
Network having a material adverse effect on the payment of principal and
interest on the Certificates on the dates and in the amounts set forth in
the Final Prospectus is remote; and (iv) the True-Up Adjustments (as
defined in the Servicing Agreement) are entitled under the Statute to take
into account in determining the amount of FTA Charges for future periods
any reduction in the amount of FTA Payments deposited in the Collection
Account from the amount collected from Customers ("Customer Collections")
as a result of (x) any default by the Servicer or an ESP (as defined in the
Servicing Agreement) under the Servicing Agreement or an ESP Service
Agreement (as defined in the Servicing Agreement) to turn over any or all
of such Customer Collections to the Collection Account or (y) as a result
of any surcharge, fee, offset, charge or other deduction imposed by a
bankruptcy court in a case in which the Company is the debtor. In
addition, the Representatives, the Trust, the Infrastructure Bank and the
STO shall have received on the Closing Date an opinion letter of counsel
for the Company, dated the Closing Date, in form and substance reasonably
satisfactory to the Representatives, to the effect that (i) the legal
requirements for The Utility Reform Network to obtain a stay as requested
in its Petition for Writ of Review to the California Supreme Court
<PAGE>
29
include that the proponent of the stay show that (A) great or irreparable
damage would otherwise result to the proponent of the stay and (B) the harm
that would be caused from granting the stay does not outweigh the harm
which would result from not granting the stay and (ii) the general legal
standards for obtaining such a stay would also include a requirement that
the proponent show that it is likely to prevail on the merits of the
underlying claim (such opinion may note that the court has broad equitable
discretion in granting or denying such a stay).
(p) The Representatives, the Infrastructure Bank and the STO shall
have received on the Closing Date an opinion letter or letters of counsel
for the Infrastructure Bank and the Trust, portions of which may be
delivered by Brown & Wood LLP, outside counsel for the Infrastructure Bank
and the Trust, and portions of which may be delivered by Brooke Bassett,
in-house counsel for the Infrastructure Bank, each dated the Closing Date,
in form and substance reasonably satisfactory to the Representatives, to
the effect that: (i) Proposition 218 of the initiative provisions of the
Constitution of California does not apply to AB 1890; and (ii) any state
action (whether by legislative, CPUC, initiative or otherwise) to revoke or
limit the Financing Order, the Issuance Advice Letters, the Transition
Property or the Fixed Transition Amounts in a manner which would
substantially impair the rights of Certificateholders would be subject to a
successful constitutional contracts clause defense.
(q) The Representatives, the Trust, the Infrastructure Bank, the STO
and the Note Trustee shall have received on the Closing Date an opinion
letter or letters of Richards, Layton & Finger, P.A., special Delaware
counsel to the Note Issuer, dated the Closing Date, in form and substance
reasonably satisfactory to the Representatives, to the effect that: (i) if
properly presented to a Delaware court, a Delaware court applying Delaware
law, would conclude that (x) in order for a person to file a voluntary
bankruptcy petition on behalf of the Note Issuer, the prior unanimous
written consent of the Member and the Board of Directors (including the
Independent Director), as provided in Section 9(j)(iii) of the Amended and
Restated Limited Liability Company Agreement of the Note Issuer (the "LLC
Agreement"), is required, and (y) such provision, contained in Section
9(j)(iii) of the LLC Agreement, that requires the unanimous written consent
of the Member and the Board of Directors (including the Independent
Director) in order for a person to file a voluntary bankruptcy petition on
behalf of the Note Issuer, constitutes a legal, valid and binding agreement
of the Member and is enforceable against the Member, in accordance with its
terms; and (ii) the LLC Agreement constitutes a legal, valid and
<PAGE>
30
binding agreement of the Member thereunder, and is enforceable against the
Member in accordance with its terms.
(r) The Notes and the Certificates shall have been rated in the
highest long-term rating category by each of the Rating Agencies.
(s) On or prior to the Closing Date, the Note Issuer shall have
delivered to the Representatives evidence, in form and substance reasonably
satisfactory to the Representatives, that appropriate filings have been or
are being made in accordance with the PU Code and other applicable law
reflecting the grant of a security interest by the Note Issuer in the
Collateral to the Note Trustee, including the filing of the UCC financing
statements in the office of the Secretary of State of California.
(t) On or prior to the Closing Date, the Note Issuer shall have
delivered to the Representatives evidence, in form and substance
satisfactory to the Representatives, of the California Public Utility
Commission's issuance of the Financing Order relating to the Transition
Property and the related Issuance Advice Letters.
(u) On or prior to the Closing Date, the Company shall have delivered
to the Representatives, the Trust, the Infrastructure Bank and the STO
evidence, in form and substance reasonably satisfactory to the
Representatives, that the Company has obtained a release of the Transition
Property from the lien of the Company Mortgage.
(v) Prior to the Closing Date, the Note Issuer, the Company and the
Trust shall have furnished to the Representatives such further information,
certificates, opinions and documents as the Representatives may reasonably
request.
If any of the conditions specified in this Section 6 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
or if any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Representatives and counsel for the Underwriters, this
Agreement and all obligations of the Underwriters hereunder may be canceled at,
or at any time prior to, the Closing Date by the Representatives. Notice of
such cancelation shall be given to the Note Issuer and the Trust in writing or
by telephone or telegraph confirmed in writing.
The documents required to be delivered by this Section 6 shall be
delivered at the office of Orrick, Herrington & Sutcliffe LLP, Old Federal
Reserve Bank Building, 400 Sansome Street, San Francisco, CA, on the Closing
Date.
<PAGE>
31
7. Reimbursement of Underwriters' Expenses. If the sale of the
---------------------------------------
Certificates provided for herein is not consummated because any condition to the
obligations of the Underwriters set forth in Section 6 hereof is not satisfied,
because of any termination pursuant to Section 10 hereof or because of any
refusal, inability or failure on the part of the Company or the Note Issuer or
the Trust to perform any agreement herein or comply with any provision hereof
other than by reason of a default (including under Section 9) by any of the
Underwriters, the Company and the Note Issuer will, jointly and severally,
reimburse the Underwriters upon demand for all out-of-pocket expenses (including
reasonable fees and disbursements of counsel) that shall have been incurred by
them in connection with the proposed purchase and sale of the Certificates.
8. Indemnification and Contribution. (a) The Company and the Note
--------------------------------
Issuer will, jointly and severally, indemnify and hold harmless each
Underwriter, the Infrastructure Bank and the STO, the directors, officers,
members, employees and agents of each Underwriter, the Infrastructure Bank and
the STO and each person who controls any Underwriter, the Infrastructure Bank
and the STO within the meaning of either the Act or the Exchange Act against any
and all losses, claims, damages or liabilities, joint or several, to which they
or any of them may become subject under the Act, the Exchange Act or other
Federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the registration statement for the
registration of the Certificates as originally filed or in any amendment
thereof, or in the Basic Prospectus, any Preliminary Final Prospectus or the
Final Prospectus, or in any amendment thereof or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and will reimburse each such indemnified party, as incurred, for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that neither the Company nor the Note Issuer will be liable
- -------- -------
in any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any such untrue statement or alleged untrue
statement or omission or alleged omission made therein in reliance upon and in
conformity with written information furnished to the Note Issuer or the Company
by or on behalf of any Underwriter through the Representatives specifically for
inclusion therein; provided further, that with respect to any untrue statement
----------------
or omission of material fact made in any Preliminary Final Prospectus, the
indemnity agreement contained in this Section 8(a) shall not inure to the
benefit of any Underwriter or any person controlling such
<PAGE>
32
Underwriter from whom the person asserting any such loss, claim, damage or
liability purchased the Certificates that are the subject thereof, to the extent
that any such loss, claim, damage or liability of such Underwriter occurs under
the circumstance where it shall have been determined by a court of competent
jurisdiction by final and nonappealable judgment that (w) the Company or the
Note Issuer had previously furnished copies of the Final Prospectus to the
Representatives, (x) delivery of the Final Prospectus was required by the Act to
be made to such person, (y) the untrue statement or omission of a material fact
contained in the Preliminary Final Prospectus was corrected in the Final
Prospectus and (z) there was not sent or given to such person, at or prior to
the written confirmation of the sale of such Certificates to such person, a copy
of the Final Prospectus. This indemnity agreement will be in addition to any
liability which the Company and the Note Issuer may otherwise have.
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Company, the Note Issuer, the Infrastructure Bank, the STO, each of their
directors (and in the case of the Infrastructure Bank or the STO, their
respective members, employees, officers or agents), each of their officers who
signs the Registration Statement, and each person who controls the Company or
the Note Issuer within the meaning of either the Act or the Exchange Act, to the
same extent as the foregoing indemnity from the Company and the Note Issuer to
each Underwriter, but only with reference to written information relating to
such Underwriter furnished to the Note Issuer or the Company by or on behalf of
such Underwriter through the Representatives specifically for inclusion in the
documents referred to in the foregoing indemnity. This indemnity agreement will
be in addition to any liability which any Underwriter may otherwise have. The
Note Issuer and the Company acknowledge that the statements set forth in the
last paragraph of the cover page, under the heading "Underwriting" or "Plan of
Distribution" in any Preliminary Final Prospectus or the Final Prospectus
constitute the only information furnished in writing by or on behalf of the
several Underwriters for inclusion in the documents referred to in the foregoing
indemnity, and you, as the Representatives, confirm that such statements are
correct.
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement thereof;
but the failure so to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification
<PAGE>
33
obligation provided in paragraph (a) or (b) above. The indemnifying party shall
be entitled to appoint counsel of the indemnifying party's choice at the
indemnifying party's expense to represent the indemnified party in any action
for which indemnification is sought (in which case the indemnifying party shall
not thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be reasonably satisfactory to the
- -------- -------
indemnified party. Notwithstanding the indemnifying party's election to appoint
counsel to represent the indemnified party in an action, the indemnified party
shall have the right to employ separate counsel (including local counsel), and
the indemnifying party shall bear the reasonable fees, costs and expenses of
such separate counsel if (i) the use of counsel chosen by the indemnifying party
to represent the indemnified party would present such counsel with a conflict of
interest, (ii) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, (iii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after notice of the institution of such action or (iv) the indemnifying
party shall authorize the indemnified party to employ separate counsel at the
expense of the indemnifying party. An indemnifying party will not, without the
prior written consent of the indemnified parties, settle or compromise or
consent to the entry of any judgment with respect to any pending or threatened
claim, action, suit or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified parties are
actual or potential parties to such claim or action) unless such settlement,
compromise or consent includes an unconditional release of each indemnified
party from all liability arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company, the Note Issuer and the
Underwriters agree to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending same) (collectively "Losses") to which the Note
Issuer and one or more of the Underwriters may be subject in such proportion as
is appropriate to reflect the relative benefits received by the Note Issuer and
by the Underwriters from the offering of the Certificates and the Notes;
provided, however, that in no case shall any Underwriter (except as may be
- -------- -------
provided in any agreement among underwriters relating to the offering of the
Certificates) be responsible for any amount in excess of the underwriting
<PAGE>
34
discount or commission applicable to the Certificates purchased by such
Underwriter hereunder. If the allocation provided by the immediately preceding
sentence is unavailable for any reason, the Company, the Note Issuer and the
Underwriters shall contribute in such proportion as is appropriate to reflect
not only such relative benefits but also the relative fault of the Note Issuer
and of the Underwriters in connection with the statements or omissions which
resulted in such Losses as well as any other relevant equitable considerations.
Benefits received by the Note Issuer shall be deemed to be equal to the total
net proceeds from the offering (before deducting expenses) of the Certificates
(which shall be equal to the net proceeds from the sale of the Notes to the
Trust (before deducting expenses)), and benefits received by the Underwriters
shall be deemed to be equal to the total underwriting discounts and commissions,
in each case as set forth on the cover page of the Final Prospectus. Relative
fault shall be determined by reference to whether any alleged untrue statement
or omission relates to information provided by the Note Issuer or the
Underwriters. The Company, the Note Issuer and the Underwriters agree that it
would not be just and equitable if contribution were determined by pro rata
allocation or any other method of allocation which does not take account of the
equitable considerations referred to above. Notwithstanding the provisions of
this paragraph (d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 8, each person who controls an Underwriter within the meaning of
either the Act or the Exchange Act and each director, officer, employee and
agent of an Underwriter shall have the same rights to contribution as such
Underwriter, and each person who controls the Note Issuer or the Company within
the meaning of either the Act or the Exchange Act, each officer of the Note
Issuer or the Company who shall have signed the Registration Statement and each
director of the Note Issuer or the Company shall have the same rights to
contribution as the Note Issuer or the Company, subject in each case to the
applicable terms and conditions of this paragraph (d).
9. Default by an Underwriter. If any one or more Underwriters shall
--------------------------
fail to purchase and pay for any of the Certificates agreed to be purchased by
such Underwriter or Underwriters hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the nondefaulting Underwriters shall be obligated severally to take
up and pay for (in the respective proportions which the amount of Certificates
set forth opposite their names in Schedule II hereto bears to the aggregate
amount of Certificates set forth opposite the names of all the remaining
Underwriters) the Certificates which the defaulting Underwriter or Underwriters
agreed but failed to purchase; provided, however, that in the event that the
-------- -------
aggregate amount of Certificates which the defaulting Underwriter or
<PAGE>
35
Underwriters agreed but failed to purchase shall exceed 10% of the aggregate
amount of Certificates set forth in Schedule II hereto, the nondefaulting
Underwriters shall have the right to purchase all, but shall not be under any
obligation to purchase any, of the Certificates, and if such nondefaulting
Underwriters do not purchase all the Certificates, this Agreement will terminate
without liability to any nondefaulting Underwriter, the Note Issuer or the
Company. In the event of a default by any Underwriter as set forth in this
Section 9, the Closing Date shall be postponed for such period, not exceeding
seven days, as the Representatives shall determine in order that the required
changes in the Registration Statement and the Final Prospectus or in any other
documents or arrangements may be effected. Nothing contained in this Agreement
shall relieve any defaulting Underwriter of its liability, if any, to the Note
Issuer and the Company and any nondefaulting Underwriter for damages occasioned
by its default hereunder.
10. Termination. This Agreement shall be subject to termination in
------------
the absolute discretion of the Representatives, by notice given to the Note
Issuer and the Trust prior to delivery of and payment for the Certificates, if
prior to such time (i) there shall have occurred any change, or any development
involving a prospective change, in or affecting either (A) the business,
properties or financial condition of the Note Issuer, the Infrastructure Bank or
the Company or (B) the Transition Property, the Notes, the Certificates, the
Financing Order or the Statute, the effect of which, in the judgment of the
Representatives, materially impairs the investment quality of the Certificates
or makes it impractical or inadvisable to market the Certificates, (ii) trading
in the Company's Common Stock shall have been suspended by the SEC or the New
York Stock Exchange or trading in securities generally on the New York Stock
Exchange shall have been suspended or limited or minimum prices shall have been
established on such Exchange, (iii) a banking moratorium shall have been
declared either by Federal, New York State or California State authorities or
(iv) there shall have occurred any outbreak or escalation of hostilities,
declaration by the United States of a national emergency or war or other
calamity or crisis the effect of which on financial markets is such as to make
it, in the judgment of the Representatives, impracticable or inadvisable to
proceed with the offering or delivery of the Certificates as contemplated by the
Final Prospectus (exclusive of any supplement thereto).
11. Representations and Warranties of Infrastructure Bank. The
------------------------------------------------------
Infrastructure Bank represents and warrants to, and agrees with, each
Underwriter, the Company and the Note Issuer that the information under the
caption "The Infrastructure Bank" in the Basic Prospectus, any Preliminary Final
Prospectus or the Final Prospectus, or in any amendment thereof or supplement
thereto does not contain any untrue statement of a material fact or omission of
a material fact required to be stated therein or necessary to
<PAGE>
36
make the statements therein, in light of the circumstances under which they were
made, not misleading.
12. Computational Materials and ABS Term Sheets.
--------------------------------------------
(a) Each Underwriter severally represents and warrants to the Note
Issuer, the Company, the Infrastructure Bank and the STO that is has not and
will not use any information that constitutes "Computational Materials," as
defined in the SEC's No-Action Letter, dated May 20, 1994, addressed to Kidder,
Peabody Acceptance Corporation I, Kidder Peabody & Co. Incorporated and Kidder
Structured Asset Corporation (as made generally applicable to registrants,
issuers and underwriters by the SEC's response to the request of the Public
Securities Association dated May 27, 1994), with respect to the offering of the
Certificates.
(b) Each Underwriter severally represents and warrants to the Note
Issuer, the Company, the Infrastructure Bank and the STO that is has not and
will not use any information that constitutes "ABS Term Sheets," as defined in
the SEC's No-Action Letter, dated February 17, 1995, addressed to the Public
Securities Association, with respect to the offering of the Certificates.
13. Representations and Indemnities to Survive. The respective
-------------------------------------------
agreements, representations, warranties, indemnities and other statements of the
Company or its officers, the Note Issuer or its officers, the Trust or its
officers and of the Underwriters set forth in or made pursuant to this Agreement
will remain in full force and effect, regardless of any investigation made by or
on behalf of any Underwriter or of the Company, the Note Issuer, the Trust or
any of the officers, directors or controlling persons referred to in Section 8
hereof, and will survive delivery of and payment for the Certificates. The
provisions of Sections 7 and 8 hereof shall survive the termination or
cancelation of this Agreement.
14. Notices. All communications hereunder will be in writing and may
--------
be given by United States mail, courier service, telegram, telex, telemessage,
telecopy, telefax, cable or facsimile (confirmed by telephone or in writing in
the case of notice by telegram, telex, telemessage, telecopy, telefax, cable or
facsimile) or any other customary means of communication, and any such
communication shall be effective when delivered, or if mailed, three days after
deposit in the United States mail with proper postage for ordinary mail prepaid,
and if sent to the Representatives, to them at the address specified in Schedule
I hereto; and if sent to the Company, to it at 77 Beale Street, San Francisco,
CA 94105, Attention: Treasurer; and if sent to the Note Issuer, to it at 245
Market Street, Room 424, San Francisco, CA 94105, Attention: President; and if
sent to the Trust, to it c/o Bankers Trust Company of California, N.A., as
Certificate Trustee, c/o Bankers Trust Company, Corporate Trust and Agency
<PAGE>
37
Services, at Four Albany Street, New York, NY 10006, Attention: Structured
Finance Group; and if sent to the Infrastructure Bank, to it c/o California
Trade and Commerce Agency, at 801 K Street, Suite 1700, Sacramento, CA 95814,
Attention: Executive Director; and if sent to the STO, to it at 915 Capitol
Mall, Room 110, Sacramento, CA 95814, Attention: Deputy Treasurer. The parties
hereto, by notice to the others, may designate additional or different addresses
for subsequent communications.
15. Successors. This Agreement will inure to the benefit of and be
-----------
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 8 hereof, and no
other person will have any right or obligation hereunder.
16. Applicable Law. This Agreement will be governed by and construed
---------------
in accordance with the laws of the State of New York.
17. Counterparts. This Agreement may be signed in any number of
-------------
counterparts, each of which shall be deemed an
<PAGE>
38
original, which taken together shall constitute one and the same instrument.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement among the
Company, the Note Issuer, the Trust, the several Underwriters, the
Infrastructure Bank and the STO.
Very truly yours,
PACIFIC GAS AND ELECTRIC COMPANY,
by
__________________________
Name:
Title:
PG&E FUNDING LLC,
by
__________________________
Name:
Title:
CALIFORNIA INFRASTRUCTURE AND
ECONOMIC DEVELOPMENT BANK
SPECIAL PURPOSE TRUST PG&E-1,
by California Infrastructure
and Economic Development
Bank, as Originator,
by
____________________
Name:
Title:
CALIFORNIA INFRASTRUCTURE AND
ECONOMIC DEVELOPMENT BANK,
by
________________________
Name:
Title:
<PAGE>
39
TREASURER OF THE STATE OF
CALIFORNIA,
by
________________________
Name:
Title: Deputy Treasurer
The foregoing Agreement is
hereby confirmed and accepted
as of the date specified in
Schedule I hereto.
MORGAN STANLEY & CO. INCORPORATED
LEHMAN BROTHERS INC.
by MORGAN STANLEY & CO. INCORPORATED
by
__________________________
Name:
Title:
by LEHMAN BROTHERS INC.
by
_________________________
Name:
Title:
For themselves and the other
several Underwriters, if any,
named in Schedule II to the
foregoing Agreement.
<PAGE>
SCHEDULE I
Underwriting Agreement dated November 25, 1997
Registration Statement No. 333-30715
Representative(s):
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Lehman Brothers Inc.
Three World Financial Center
200 Vesey Street
New York, NY 10285
Title, Purchase Price and Description of Certificates:
Title: California Infrastructure and Economic
Development Bank Special Purpose Trust PG&E-1
$2,901,000,000 Rate Reduction Certificates,
Series 1997-1
Principal amount, Price to
Public, Underwriting Discounts
and Commissions and Proceeds
to Trust:
<TABLE>
<CAPTION>
Total Principal Price to Public Underwriting Proceeds to Trust
Amount of ------------------ Discounts and -------------------
----------- Commissions
Class -----------
------
<S> <C> <C> <C> <C>
Per Class A- $125,000,000 99.99656% 0.20939% 99.78717%
1
Certificate
Per Class A- $265,000,000 99.99664% 0.30000% 99.69664%
2
Certificate
Per Class A- $280,000,000 99.98875% 0.35000% 99.63875%
3
Certificate
Per Class A- $300,000,000 99.97709% 0.40000% 99.57709%
4
Certificate
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Per Class A- $ 290,000,000 99.98630% 0.45000% 99.53630%
5
Certificate
Per Class A- $ 375,000,000 99.95817% 0.50000% 99.45817%
6
Certificate
Per Class A- $ 866,000,000 99.98876% 0.55000% 99.43876%
7
Certificate
Per Class A- $ 400,000,000 99.99358% 0.65000% 99.34358%
-------------- --------- -------- ---------
8
Certificate
-----------------------------------------------------------------------------------------
Total $2,901,000,000 $2,900,566,955.10 $13,779,737.50 $2,886,787,217.60
============== ================= ============== =================
</TABLE>
Plus, the Underwriters will be
----
reimbursed by the Note Issuer for:
$430,850 of expenses,
consisting of $287,000
of out-of-pocket expenses and
$143,850 for Underwriters Counsel
Original Issue Discount (if any): $433,044.90
Redemption provisions: Optional Redemption and
Mandatory Redemption as set
forth in Article X of the
Indenture
Other provisions:
Closing Date, Time and Location: December 8, 1997, 6:00 a.m., Pacific Coast
Time, San Francisco, CA.
Type of Offering: Delayed Offering
Date referred to in Section 5(a)(vi) after which the Company and the Note Issuer
may offer or sell asset-backed securities in a trust or special purpose
vehicle without the consent of the Representative(s): December 15, 1997
<PAGE>
SCHEDULE II
<TABLE>
<CAPTION>
Principal Amount of Certificates to be Purchased (in thousands)
---------------------------------------------------------------------
Underwriters Class A-1 Class A-2 Class A-3 Class A-4 Class A-5 Class A-6
- ----------------------------- Certificates Certificates Certificates Certificates Certificates Certificates
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Morgan Stanley & Co. $ 68,750.0 $145,750.0 $154,000.0 $165,000.0 $159,500.0 $206,250.0
Incorporated
Lehman Brothers Inc. $ 31,250.0 $ 66,250.0 $ 70,000.0 $ 75,000.0 $ 72,500.0 $ 93,750.0
Bear, Stearns & Co., Inc. $ 6,250.0 $ 13,250.0 $ 14,000.0 $ 15,000.0 $ 14,500.0 $ 18,750.0
J. P. Morgan & Co. $ 6,250.0 $ 13,250.0 $ 14,000.0 $ 15,000.0 $ 14,500.0 $ 18,750.0
Merrill Lynch & Co. $ 6,250.0 $ 13,250.0 $ 14,000.0 $ 15,000.0 $ 14,500.0 $ 18,750.0
Artemis Capital Group, Inc. $ 1,562.5 $ 3,312.5 $ 3,500.0 $ 3,750.0 $ 3,625.0 $ 4,687.5
Blaylock & Partners, L.P. $ 1,562.5 $ 3,312.5 $ 3,500.0 $ 3,750.0 $ 3,625.0 $ 4,687.5
Coast Partners Securities, $ 1,562.5 $ 3,312.5 $ 3,500.0 $ 3,750.0 $ 3,625.0 $ 4,687.5
Inc.
Redwood Securities Group, $ 1,562.5 $ 3,312.5 $ 3,500.0 $ 3,750.0 $ 3,625.0 $ 4,687.5
Inc. ---------- ---------- ---------- ---------- ---------- ----------
Total......................... $125,000.0 $265,000.0 $280,000.0 $300,000.0 $290,000.0 $375,000.0
========== ========== ========== ========== ========== ==========
Principal Amount of Certificates to be Purchased (in thousands)
---------------------------------------------------------------------
Underwriters Class A-7 Class A-8 Total
- ----------------------------- Certificates Certificates ------------
------------ ------------
<S> <C> <C> <C>
Morgan Stanley & Co. $476,300.0 $220,000.0 $1,595,550.0
Incorporated
Lehman Brothers Inc. $216,500.0 $100,000.0 $ 725,250.0
Bear, Stearns & Co., Inc. $ 43,300.0 $ 20,000.0 $ 145,050.0
J. P. Morgan & Co. $ 43,300.0 $ 20,000.0 $ 145,050.0
Merrill Lynch & Co. $ 43,300.0 $ 20,000.0 $ 145,050.0
Artemis Capital Group, Inc. $ 10,825.0 $ 5,000.0 $ 36,262.5
Blaylock & Partners, L.P. $ 10,825.0 $ 5,000.0 $ 36,262.5
Coast Partners Securities, $ 10,825.0 $ 5,000.0 $ 36,262.5
Inc.
Redwood Securities Group, $ 10,825.0 $ 5,000.0 $ 36,262.5
Inc. ---------- ---------- ------------
Total......................... $866,000.0 $400,000.0 $2,901,000.0
========== ========== ============
0
============
</TABLE>
<PAGE>
EXHIBIT 4.1
EXECUTION COPY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PG&E FUNDING LLC,
Note Issuer
and
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
Note Trustee
------------------------------
INDENTURE
Dated as of December 8, 1997
------------------------------
Issuable in Series
<PAGE>
i
TABLE OF CONTENTS
ARTICLE I Definitions and Incorporation by Reference
------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
SECTION 1.01. Definitions.............................................. 2
SECTION 1.02. Incorporation by Referene of Trust Indenture Act.........15
SECTION 1.03. Rules of Construction....................................16
ARTICLE II The Notes
---------
SECTION 2.01. Form.....................................................16
SECTION 2.02. Denominations; Notes Issuable in Series..................17
SECTION 2.03. Execution, Authentication and Delivery...................18
SECTION 2.04. Temporary Notes..........................................19
SECTION 2.05. Registration; Registration of Transfer and
Exchange.................................................20
SECTION 2.06. Mutilated, Destroyed, Lost or Stolen Notes...............21
SECTION 2.07. Persons Deemed Owner.....................................23
SECTION 2.08. Payment of Principal, Premium, if any, and Interest;
Interest on Overdue Principal; Principal, Premium,
if any, and Interest Rights Preserved....................23
SECTION 2.09. Cancellation.............................................24
SECTION 2.10. Amount Unlimited; Authentication and
Delivery of Notes........................................25
SECTION 2.11. Release of Collateral....................................32
ARTICLE III Covenants
---------
SECTION 3.01. Payment of Principal, Premium, if any, and
Interest.................................................33
SECTION 3.02. Maintenance of Office or Agency..........................33
SECTION 3.03. Money for Payments To Be Held in Trust...................33
SECTION 3.04. Existence................................................35
SECTION 3.05. Protection of Collateral.................................36
SECTION 3.06. Opinions as to Collateral................................36
SECTION 3.07. Performance of Obligations; Servicing; SEC Filings.......38
SECTION 3.08. Negative Covenants.......................................40
SECTION 3.09. Annual Statement as to Compliance........................41
SECTION 3.10. Note Issuer May Consolidate, etc., Only on
Certain Terms............................................42
SECTION 3.11. Successor or Transferee..................................44
SECTION 3.12. No Other Business........................................44
SECTION 3.13. No Borrowing.............................................44
SECTION 3.14. Servicer's Obligations...................................44
</TABLE>
<PAGE>
ii
<TABLE>
<S> <C>
SECTION 3.15. Guarantees, Loans, Advances and Other Liabilities........45
SECTION 3.16. Capital Expenditures.....................................45
SECTION 3.17. Non-Routine True-Up Adjustment...........................45
SECTION 3.18. Restricted Payments......................................45
SECTION 3.19. Notice of Events of Default..............................46
SECTION 3.20. Further Instruments and Acts.............................46
SECTION 3.21. Purchase of Subsequent Transition Property...............46
ARTICLE IV Satisfaction and Discharge; Defeasance
--------------------------------------
SECTION 4.01. Satisfaction and Discharge of Indenture;
Defeasance...............................................48
SECTION 4.02. Conditions to Defeasance.................................50
SECTION 4.03. Application of Trust Money...............................51
SECTION 4.04. Repayment of Moneys Held by Paying Agent.................52
ARTICLE V Remedies
--------
SECTION 5.01. Events of Default........................................52
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment.......54
SECTION 5.03. Collection of Indebtedness and Suits for
Enforcement by Note Trustee..............................55
SECTION 5.04. Remedies; Priorities.....................................58
SECTION 5.05. Optional Preservation of the Collateral..................59
SECTION 5.06. Limitation of Suits......................................60
SECTION 5.07. Unconditional Rights of Noteholders To Receive
Principal, Premium, if any, and Interest.................61
SECTION 5.08. Restoration of Rights and Remedies.......................61
SECTION 5.09. Rights and Remedies Cumulative...........................61
SECTION 5.10. Delay or Omission Not a Waiver...........................61
SECTION 5.11. Control by Noteholders...................................62
SECTION 5.12. Waiver of Past Defaults..................................62
SECTION 5.13. Undertaking for Costs....................................63
SECTION 5.14. Waiver of Stay or Extension Laws.........................64
SECTION 5.15. Action on Notes..........................................64
SECTION 5.16. Performance and Enforcement of Certain Obligations.......64
ARTICLE VI The Note Trustee
----------------
SECTION 6.01. Duties of Note Trustee...................................65
SECTION 6.02. Rights of Note Trustee...................................67
</TABLE>
<PAGE>
iii
<TABLE>
<S> <C>
SECTION 6.03. Individual Rights of Note Trustee........................67
SECTION 6.04. Note Trustee's Disclaimer................................68
SECTION 6.05. Notice of Defaults.......................................68
SECTION 6.06. Reports by Note Trustee to Holders.......................68
SECTION 6.07. Compensation and Indemnity...............................69
SECTION 6.08. Replacement of Note Trustee..............................70
SECTION 6.09. Successor Note Trustee by Merger.........................71
SECTION 6.10. Appointment of Co-Trustee or Separate Trustee............72
SECTION 6.11. Eligibility; Disqualification............................73
SECTION 6.12. Preferential Collection of Claims Against
Note Issuer..............................................74
SECTION 6.13 Representations and Warranties of Note Trustee...........74
ARTICLE VII Noteholders' Lists and Reports
------------------------------
SECTION 7.01. Note Issuer To Furnish Note Trustee
Names and Addresses of Noteholders.......................74
SECTION 7.02. Preservation of Information;
Communications to Noteholders............................74
SECTION 7.03. Reports by Note Issuer...................................75
SECTION 7.04. Reports by Note Trustee..................................76
ARTICLE VIII Accounts, Disbursements and Releases
------------------------------------
SECTION 8.01. Collection of Money......................................76
SECTION 8.02. Collection Account.......................................76
SECTION 8.03. General Provisions Regarding the Collection Account......80
SECTION 8.04. Release of Collateral....................................82
SECTION 8.05. Opinion of Counsel.......................................82
SECTION 8.06. Reports by Independent Accountants.......................83
ARTICLE IX Supplemental Indentures
-----------------------
SECTION 9.01. Supplemental Indentures Without
Consent of Noteholders...................................84
SECTION 9.02. Supplemental Indentures with Consent of Noteholders......85
SECTION 9.03. Execution of Supplemental Indentures.....................87
SECTION 9.04. Effect of Supplemental Indenture.........................88
SECTION 9.05. Conformity with Trust Indenture Act......................88
SECTION 9.06. Reference in Notes to Supplemental Indentures............88
ARTICLE X
</TABLE>
<PAGE>
iv
<TABLE>
Redemption of Notes
-------------------
<S> <C>
SECTION 10.01. Optional Redemption by Note Issuer.......................89
SECTION 10.02. Form of Optional Redemption Notice.......................89
SECTION 10.03. Notes Payable on Optional Redemption
Date or Payment Date.....................................90
SECTION 10.04. Mandatory Redemption by Note Issuer......................90
SECTION 10.05. Form of Mandatory Redemption Notice......................91
SECTION 10.06. Notes Payable on Mandatory Redemption
Date or Payment Date.....................................91
ARTICLE XI Miscellaneous
-------------
SECTION 11.01. Compliance Certificates and Opinions, etc................91
SECTION 11.02. Form of Documents Delivered to Note Trustee..............94
SECTION 11.03. Acts of Noteholders......................................95
SECTION 11.04. Notices, etc., to Note Trustee, Note
Issuer, Infrastructure Bank and Rating Agencies..........96
SECTION 11.05. Notices to Noteholders; Waiver...........................97
SECTION 11.06. [Intentionally omitted]..................................97
SECTION 11.07. Conflict with Trust Indenture Act........................98
SECTION 11.08. Effect of Headings and Table of Contents.................98
SECTION 11.09. Successors and Assigns...................................98
SECTION 11.10. Separability.............................................98
SECTION 11.11. Benefits of Indenture....................................98
SECTION 11.12. Legal Holidays...........................................98
SECTION 11.13. Governing Law............................................99
SECTION 11.14. Counterparts.............................................99
SECTION 11.15. Recording of Indenture...................................99
SECTION 11.16. Trust Obligation.........................................99
SECTION 11.17. [Intentionally omitted]..................................99
SECTION 11.18. No Recourse to Note Issuer...............................99
SECTION 11.19. Inspection..............................................100
</TABLE>
<PAGE>
INDENTURE dated as of December 8, 1997, between PG&E FUNDING LLC, a
Delaware limited liability company (the "Note Issuer"), and Bankers Trust
Company of California, N.A., a national banking association, as trustee (the
"Note Trustee").
The Note Issuer has duly authorized the execution and delivery of this
Indenture to provide for one or more Series of Notes, issuable as provided in
this Indenture. Each such Series of Notes will be issued only under a separate
Series Supplement to this Indenture duly executed and delivered by the Note
Issuer and the Note Trustee. The Note Issuer is entering into this Indenture,
and the Note Trustee is accepting the trusts created hereby, for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged.
GRANTING CLAUSE
The Note Issuer hereby Grants to the Note Trustee at the Closing Date,
as Note Trustee for the benefit of the Holders of the Notes from time to time
issued and outstanding, all of the Note Issuer's right, title and interest in
and to (a) the Transition Property transferred by the Seller to the Note Issuer
pursuant to the Sale Agreement and all proceeds thereof, (b) any Subsequent
Transition Property transferred by the Seller to the Note Issuer pursuant to
each Subsequent Sale Agreement and all proceeds thereof, (c) the Sale Agreement
and each Subsequent Sale Agreement, (d) the Servicing Agreement, (e) the
Collection Account (including all subaccounts thereof) and all amounts or
investment property on deposit therein or credited thereto from time to time,
(f) all other property of whatever kind owned from time to time by the Note
Issuer, (g) all present and future claims, demands, causes and choses in action
in respect of any or all of the foregoing and all payments on or under and all
proceeds of every kind and nature whatsoever in respect of any or all of the
foregoing, including all proceeds of the conversion, voluntary or involuntary,
into cash or other liquid property, all cash proceeds, accounts, accounts
receivable, notes, drafts, acceptances, chattel paper, checks, deposit
<PAGE>
2
accounts, insurance proceeds, condemnation awards, rights to payment of any and
every kind, and other forms of obligations and receivables, instruments and
other property which at any time constitute all or part of or are included in
the proceeds of any of the foregoing and (h) all proceeds of the foregoing
(collectively, the "Collateral"; it being understood that the following do not
constitute Collateral: (i) the cash contributed to the Note Issuer by the Seller
which is not held in the Capital Subaccount, including cash that has been
released to the Note Issuer pursuant to Section 8.02(d) following retirement of
a Series of Notes, (ii) net investment earnings which have been released to the
Note Issuer pursuant to Section 8.02(d), (iii) the Overcollateralization Amount
with respect to a Series of Notes that has been released to the Note Issuer
pursuant to Section 8.02(d) following retirement of such Series of Notes) and
(iv) amounts deposited with the Note Issuer on the Closing Date for payment of
costs of issuance with respect to the Notes or the Certificates as set forth on
the flow of funds memorandum delivered on the Closing Date (together with any
interest earnings thereon), it being understood that such amounts described in
this clause (iv) shall not be subject to Section 3.15.
The foregoing Grant is made in trust to secure the payment of
principal of and premium, if any, interest on, and any other amounts owing in
respect of, the Notes equally and ratably without prejudice, priority or
distinction, except as expressly provided in this Indenture, and to secure
compliance with the provisions of this Indenture with respect to the Notes, all
as provided in this Indenture.
The Note Trustee, as trustee on behalf of the Holders of the Notes,
acknowledges such grant, accepts the trusts hereunder in accordance with the
provisions hereof and agrees to perform its duties herein required.
ARTICLE I
Definitions and Incorporation by Reference
------------------------------------------
SECTION 1.01. (a) Definitions. Except as otherwise specified
------------
herein or as the context may otherwise require, the following terms have the
respective meanings set forth below for all purposes of this Indenture.
<PAGE>
3
"Act" has the meaning specified in Section 11.03(a).
---
"Actual FTA Collections" means, with respect to any Collection Period,
----------------------
FTA Collections actually received with respect to such Collection Period.
"Administrative Services Agreement" means the Administrative Services
---------------------------------
Agreement dated as of December 8, 1997, as the same may be amended and
supplemented from time to time, between the Administrator and the Note Issuer.
"Administrator" means Pacific Gas and Electric Company, or any
-------------
successor Administrator under the Administrative Services Agreement.
"Affiliate" means, with respect to any specified Person, any other
---------
Person controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect
to any specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Authorized Officer" means, with respect to the Note Issuer, any
------------------
officer of the Note Issuer who is authorized to act for the Note Issuer in
matters relating to the Note Issuer and who is identified on the list of
Authorized Officers delivered by the Note Issuer to the Note Trustee on the
Closing Date (as such list may be modified or supplemented from time to time
thereafter).
"Basic Documents" means this Indenture, the Trust Agreement, the Sale
---------------
Agreement, the Servicing Agreement, the Administrative Services Agreement, the
Note Purchase Agreement, the DTC Agreement, the Fee and Indemnity Agreement, the
Underwriting Agreement and all other documents and certificates delivered in
connection therewith and, with respect to any subsequent Series of Notes and
Certificates, the comparable documents for each of the foregoing.
<PAGE>
4
"Business Day" means any day other than a Saturday, a Sunday or a day
------------
on which banking institutions or trust companies in New York, New York or San
Francisco, California are authorized or obligated by law, regulation or
executive order to remain closed.
"Capital Subaccount" has the meaning set forth in Section 8.02(a).
------------------
"Certificate Trustee" means the Person acting as certificate trustee
-------------------
under the Trust Agreement.
"Certificates" has the meaning set forth in the Trust Agreement.
------------
"Class" means, with respect to any Series, any one of the classes of
-----
Notes of that Series.
"Closing Date" means December 8, 1997.
------------
"Code" means the Internal Revenue Code of 1986, as amended from time
----
to time, and Treasury Regulations promulgated thereunder.
"Collateral" has the meaning specified in the Granting Clause of this
----------
Indenture.
"Collection Account" has the meaning specified in Section 8.02(a).
------------------
"Collection Period" means each calendar month immediately preceding
-----------------
the respective Remittance Date.
"Corporate Trust Office" means the principal office of the Note
----------------------
Trustee at which at any particular time its corporate trust business shall be
administered, which office at the date of the execution of this Indenture is
located at Four Albany Street, New York, NY 10006, Attention: Structured
Finance Group, or at such other address as the Note Trustee may designate from
time to time by notice to the Noteholders and the Note Issuer, or the principal
corporate trust office of any successor Note Trustee (the address of which the
successor Note Trustee will notify the Noteholders and the Note Issuer).
"Covenant Defeasance Option" has the meaning specified in Section
--------------------------
4.01(b).
<PAGE>
5
"Default" means any occurrence that is, or with notice or the lapse of
-------
time or both would become, an Event of Default.
"Delaware Trustee" means the Person acting as Delaware trustee under
----------------
the Trust Agreement.
"DTC Agreement" has the meaning set forth in the Trust Agreement.
-------------
"Eligible Deposit Account" means either (a) a segregated account with
------------------------
an Eligible Institution or (b) a segregated trust account with the corporate
trust department of a depository institution organized under the laws of the
United States of America or any one of the states thereof or the District of
Columbia (or any domestic branch of a foreign bank), having corporate trust
powers and acting as trustee for funds deposited in such account, so long as any
of the securities of such depository institution shall have a credit rating from
each Rating Agency in one of its generic rating categories which signifies
investment grade.
"Eligible Institution" means (a) the corporate trust department of the
--------------------
Note Trustee; provided that an account with the Note Trustee will only be an
--------
Eligible Deposit Account if it is a segregated trust account, or (b) a
depository institution organized under the laws of the United States of America
or any State (or any domestic branch of a foreign bank), which (i) has either
(A) a long-term unsecured debt rating of AAA by Standard & Poor's and A2 by
Moody's or (B) a certificate of deposit rating of A-1+ by Standard & Poor's and
P-1 by Moody's, or any other long-term, short-term or certificate of deposit
rating acceptable to the Rating Agencies and (ii) whose deposits are insured by
the FDIC. If so qualified under clause (b) above, the Note Trustee may be
considered an Eligible Institution for the purposes of clause (a) of this
definition.
"Eligible Investments" mean instruments or investment property which
--------------------
evidence:
(a) direct obligations of, and obligations fully and unconditionally
guaranteed as to timely payment by, the United States of America;
<PAGE>
6
(b) demand deposits, time deposits, certificates of deposit or
bankers' acceptances of depository institutions meeting the requirements of
clause (b) of the definition of Eligible Institutions;
(C) commercial paper (other than commercial paper of the Seller) having, at the
time of the investment or contractual commitment to invest therein, a rating
from each of the Rating Agencies in the highest investment category granted
thereby;
(d) investments in money market funds having a rating from each of the
Rating Agencies in the highest investment category granted thereby
(including funds for which the Note Trustee or any of its Affiliates is
investment manager or advisor);
(e) repurchase obligations with respect to any security that is a
direct obligation of, or fully guaranteed by, the United States of America
or any agency or instrumentality thereof the obligations of which are
backed by the full faith and credit of the United States of America, in
either case entered into with depository institutions meeting the
requirements of clause (b) of the definition of Eligible Institutions; and
(f) any other investment permitted by each of the Rating Agencies.
"Estimated FTA Collections" means the amount of FTA Payments the
-------------------------
Servicer is required to remit to the Collection Account on or before the
twentieth day of each calendar month (or, if such twentieth day is not a
Business Day, the Business Day immediately following such twentieth day)
pursuant to Section 7(e) of Annex I to the Servicing Agreement.
"Event of Default" has the meaning specified in Section 5.01.
----------------
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
<PAGE>
7
"FDIC" means the Federal Deposit Insurance Corporation or any
----
successor.
"Fee and Indemnity Agreement" has the meaning set forth in the Trust
---------------------------
Agreement.
"Final Maturity Date" means, with respect to any Series or Class of
-------------------
Notes, the Final Maturity Date therefor, as specified in the related Series
Supplement.
"Fitch" means Fitch Investors Service, L.P. or its successor.
-----
"FTA Collections" means FTA Payments received by the Servicer which
---------------
are remitted to the Collection Account.
"FTA Payments" means the payments made by Customers based on the FTA
------------
Charges.
"General Subaccount" has the meaning set forth in Section 8.02(a).
------------------
"Grant" means mortgage, pledge, bargain, sell, warrant, alienate,
-----
remise, release, convey, assign, transfer, create, and grant a lien upon and a
security interest in and right of set-off against, deposit, set over and con-
firm pursuant to this Indenture. A Grant of the Collateral or of any other
agreement or instrument shall include all rights, powers and options (but none
of the obligations) of the Granting party thereunder, including the immediate
and continuing right to claim for, collect, receive and give receipt for
payments in respect of the Collateral and all other moneys payable thereunder,
to give and receive notices and other communications, to make waivers or other
agreements, to exercise all rights and options, to bring Proceedings in the name
of the Granting party or otherwise and generally to do and receive anything that
the Granting party is or may be entitled to do or receive thereunder or with
respect thereto.
"Holder" or Noteholder" means the Person in whose name a Note is
------ ----------
registered on the Note Register.
"Indenture" or "this Indenture" means this instrument as originally
--------- --------------
executed and, as from time to time supplemented or amended by one or more
indentures supplemental
<PAGE>
8
hereto entered into pursuant to the applicable provisions hereof, as so
supplemented or amended, or both, and shall include the forms and terms of the
Notes established hereunder.
"Independent" means, when used with respect to any specified Person,
-----------
that the Person (a) is in fact independent of the Note Issuer, any other obligor
upon the Notes, the Seller, the Servicer and any Affiliate of any of the fore-
going Persons, (b) does not have any direct financial interest or any material
indirect financial interest in the Note Issuer, any such other obligor, the
Seller, the Servicer or any Affiliate of any of the foregoing Persons and (c) is
not connected with the Note Issuer, any such other obligor, the Seller, the
Servicer or any Affiliate of any of the foregoing Persons as an officer,
employee, promoter, underwriter, trustee, partner, director or person performing
similar functions.
"Independent Certificate" means a certificate or opinion to be
-----------------------
delivered to the Note Trustee under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 11.01, made by
an Independent appraiser or other expert appointed by an Issuer Order and
consented to by the Note Trustee, and such opinion or certificate shall state
that the signer has read the definition of "Independent" in this Indenture and
that the signer is Independent within the meaning thereof.
"Infrastructure Bank" means the California Infrastructure and Economic
-------------------
Development Bank or any successor in interest.
"Issuer Order" and "Issuer Request" means a written order or request
------------ --------------
signed in the name of the Note Issuer by any one of its Authorized Officers and
delivered to the Note Trustee.
"Legal Defeasance Option" has the meaning specified in Section
-----------------------
4.01(b).
"Mandatory Redemption Date" has the meaning specified in Section
-------------------------
10.04.
"Mandatory Redemption Price" has the meaning specified in Section
--------------------------
10.04.
<PAGE>
9
"Minimum Denomination" means, with respect to any Note, the minimum
--------------------
denomination therefor specified in the applicable Series Supplement, which
minimum denomination shall be not less than $1,000 and, except as otherwise
provided in such Series Supplement, integral multiples thereof.
"Moody's" means Moody's Investors Service Inc. or its successor.
-------
"Note Interest Rate" means, with respect to any Series or Class, the
------------------
rate at which interest accrues on the Notes of such Series or Class, as
specified in the related Series Supplement.
"Note Issuer" means the party named as such in this Indenture until a
-----------
successor replaces it and, there after, means the successor and, for purposes
of any provision contained herein and required by the TIA, each other obligor on
the Notes.
"Note Purchase Agreement" has the meaning set forth in the Trust
-----------------------
Agreement.
"Note Register" and "Note Registrar" have the respective meanings
------------- --------------
specified in Section 2.05.
"Note Trustee" means Bankers Trust Company of California, N.A., a
------------
national banking association, as Note Trustee under this Indenture, or any
successor Note Trustee under this Indenture.
"Notes" has the meaning specified in Section 2.02.
-----
"Officer's Certificate" means a certificate signed by any Authorized
---------------------
Officer of the Note Issuer, under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.01, and delivered to
the Note Trustee. Unless otherwise specified, any reference in this Indenture
to an Officer's Certificate shall be to an Officer's Certificate of any
Authorized Officer of the Note Issuer.
"Operating Expenses" means all fees, costs and expenses of the Note
------------------
Issuer, including all amounts owed by the Note Issuer to the Note Trustee, the
Certificate
<PAGE>
10
Trustee, the Delaware Trustee and the Infrastructure Bank, the Servicing Fee,
the Quarterly Administration Fee, any fees, costs and expenses payable or
reimbursable by the Note Issuer to the Administrator and legal and accounting
fees, costs and expenses of the Note Issuer and the Trust.
"Opinion of Counsel" means one or more written opinions of counsel who
------------------
may, except as otherwise expressly provided in this Indenture, be employees of
or counsel to the Note Issuer and who shall be satisfactory to the Note Trustee,
and which opinion or opinions shall be addressed to the Note Trustee as trustee,
shall comply with any applicable requirements of Section 11.01, and shall be in
form and substance satisfactory to the Note Trustee.
"Optional Redemption Date" means, with respect to any Series, the
------------------------
Payment Date specified by the Note Issuer for the redemption of the Notes of
such Series pursuant to Section 10.01.
"Optional Redemption Price" has the meaning specified in Section
-------------------------
10.01.
"Outstanding" means, as of the date of determination, all Notes
-----------
theretofore authenticated and delivered under this Indenture except:
(i) Notes theretofore canceled by the Note Registrar or delivered to
the Note Registrar for cancelation;
(ii) Notes or portions thereof the payment for which money in the
necessary amount has been thereto fore deposited with the Note Trustee or
any Paying Agent in trust for the Holders of such Notes (provided, however,
-------- -------
that if such Notes are to be redeemed, notice of such redemption has been
duly given pursuant to this Indenture or provision therefor, satisfactory
to the Note Trustee, made); and
(iii) Notes in exchange for or in lieu of other Notes which have been
authenticated and delivered pursuant to this Indenture unless proof
satisfactory to the Note Trustee is presented that any such Notes are held
by a bona fide purchaser;
<PAGE>
11
provided that in determining whether the Holders of the requisite Outstanding
- --------
Amount of the Notes or any Series or Class thereof have given any request,
demand, authorization, direction, notice, consent or waiver hereunder or under
any Basic Document, Notes owned by the Note Issuer, any other obligor upon the
Notes, the Seller or any Affiliate of any of the foregoing Persons shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the Note Trustee shall be protected in relying upon any such request,
demand, authorization, direction, notice, consent or waiver, only Notes that the
Note Trustee actually knows to be so owned shall be so disregarded. Notes so
owned that have been pledged in good faith may be regarded as Outstanding if the
pledgee establishes to the satisfaction of the Note Trustee the pledgee's right
so to act with respect to such Notes and that the pledgee is not the Note
Issuer, any other obligor upon the Notes, the Seller or any Affiliate of any of
the foregoing Persons.
"Outstanding Amount" means the aggregate principal amount of all Notes
------------------
or, if the context requires, all Notes of a Series or Class, Outstanding at the
date of determination.
"Overcollateralization Subaccount" has the meaning specified in
--------------------------------
Section 8.02(a).
"Paying Agent" means the Note Trustee or any other Person that meets
------------
the eligibility standards for the Note Trustee specified in Section 6.11 and is
authorized by the Note Issuer to make payment of principal of or premium, if
any, or interest on the Notes on behalf of the Note Issuer.
"Payment Date" means, with respect to any Series or Class, the March
------------
25, June 25, September 25 and December 26 of each year, provided that if any
--------
such date is not a Business Day, the Payment Date shall be the Business Day
immediately succeeding such date.
"Person" means any individual, corporation, limited liability company,
------
estate, partnership, joint venture, association, joint stock company, trust
(including any beneficiary thereof), unincorporated organization or government
or any agency or political subdivision thereof.
"Predecessor Note" means, with respect to any
----------------
<PAGE>
12
particular Note, every previous Note evidencing all or a portion of the same
debt as that evidenced by such particular Note; and, for the purpose of this
definition, any Note authenticated and delivered under Section 2.06 in lieu of a
mutilated, lost, destroyed or stolen Note shall be deemed to evidence the same
debt as the mutilated, lost, destroyed or stolen Note.
"Proceeding" means any suit in equity, action at law or other judicial
----------
or administrative proceeding.
"Quarterly Administration Fee" shall mean $25,000 per calendar
----------------------------
quarter.
"Quarterly Interest" means, with respect to any Payment Date and any
------------------
Series of Notes, the quarterly interest for such Payment Date and Series as
specified in the related Series Supplement.
"Quarterly Principal" means, with respect to any Payment Date and any
-------------------
Series of Notes, the excess, if any, of the Outstanding Amount of such Series of
Notes over the outstanding principal balance specified for such Payment Date on
the applicable Expected Amortization Schedule.
"Rating Agency" means Moody's, Standard & Poor's and Fitch. If no
-------------
such organization or successor is any longer in existence, "Rating Agency" shall
be a nationally recognized statistical rating organization or other comparable
Person designated by the Note Issuer, notice of which designation shall be given
to the Note Trustee, the Certificate Trustee and the Servicer.
"Rating Agency Condition" means, with respect to any action, that each
-----------------------
Rating Agency shall have been given ten days prior notice thereof and that each
of the Rating Agencies shall have notified the Servicer, the Note Issuer and the
Note Trustee in writing that such action will not result in a reduction or
withdrawal of the then current rating by such Rating Agency of either any Series
or Class of the Notes or any Series or Class of the Certificates.
"Record Date" means, with respect to a Payment Date, Optional
-----------
Redemption Date or Mandatory Redemption Date, the close of business on the last
day of the calendar month preceding the calendar month in which such Payment
Date, Optional Redemption Date or Mandatory Redemption Date
<PAGE>
13
occurs.
"Registered Holder" means the Person in whose name a Note is
-----------------
registered on the Note Register on the applicable Record Date.
"Remittance Date" means the twentieth day of each calendar month or,
---------------
if such day is not a Business Day, the next succeeding Business Day.
"Repurchase Date" has the meaning specified in the Sale Agreement.
---------------
"Required Capital Level" means, as of any Payment Date, the sum of 0.50% of
----------------------
the initial principal amount of each then-outstanding Series of Notes issued
pursuant to this Indenture prior to that Payment Date, less $100,000 in the
aggregate for all Series of Notes.
"Required Overcollateralization Level" means, as of any Payment Date,
------------------------------------
the amount required to be on deposit in the Overcollateralization Subaccount as
specified in a Series Supplement.
"Reserve Subaccount" has the meaning specified in Section 8.02(a).
------------------
"Responsible Officer" means any officer within the Corporate Trust
-------------------
Office, including any Managing Director, Vice President, Assistant Vice
President, Secretary, Assistant Secretary or Assistant Treasurer or any other
officer of the Note Trustee customarily performing functions similar to those
performed by any of the above designated officers and also, with respect to a
particular matter, any other officer to whom such matter is referred because of
such officer's knowledge and familiarity with the particular subject.
"Sale Agreement" means the Transition Property Purchase and Sale
--------------
Agreement dated as of December 8, 1997, between the Note Issuer and the Seller,
in the form of Exhibit A-1, as amended and supplemented from time to time.
"Scheduled Maturity Date" means, with respect to any Series or Class
-----------------------
of Notes, the Scheduled Maturity Date
<PAGE>
14
therefor, as specified in the related Series Supplement.
"SEC" means the Securities and Exchange Commission.
---
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Series" means each series of Notes issued and authenticated pursuant
------
to this Indenture and a related Series Supplement.
"Series Issuance Date" means, with respect to any Series, the date on
--------------------
which the Notes of such Series are to be originally issued in accordance with
Section 2.10 and the related Series Supplement.
"Series Supplement" means an indenture supplemental to this Indenture
-----------------
that authorizes a particular Series of Notes.
"Servicing Agreement" means the Transition Property Servicing
-------------------
Agreement dated as of December 8, 1997, between the Note Issuer and the
Servicer, in the form of Exhibit A-2, as amended and supplemented from time to
time.
"Standard & Poor's" means Standard & Poor's, a division of The McGraw-
-----------------
Hill Companies, Inc. or its successor.
"State" means any one of the 50 states of the United States of America
-----
or the District of Columbia.
"Successor Servicer" has the meaning specified in Section 3.07(e).
------------------
"Trust" has the meaning set forth in the Trust Agreement.
-----
"Trust Agreement" means the Amended and Restated Declaration and
---------------
Agreement of Trust dated as of December 8, 1997, among the Infrastructure Bank,
the Delaware Trustee and the Certificate Trustee, as the same may be further
amended and supplemented from time to time.
"Trust Indenture Act" or "TIA" means the Trust
------------------- ---
<PAGE>
15
Indenture Act of 1939 as in force on the date hereof, unless otherwise
specifically provided.
"UCC" means, unless the context otherwise requires, the Uniform
---
Commercial Code, as in effect in the relevant jurisdiction, as amended from time
to time.
"U.S. Government Obligations" means direct obligations (or
---------------------------
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable at the Note Issuer's option.
(b) Except as otherwise specified herein or as the context may
otherwise require, the following terms have the respective meanings set forth in
the Servicing Agreement as in effect on the Closing Date for all purposes of
this Indenture, and the definitions of such terms are equally applicable both to
the singular and plural forms of such terms:
<TABLE>
<CAPTION>
Section of
Term Servicing Agreement
---- -------------------
<S> <C>
Advice Letters.................. Section 1.01
Annual Adjustment Filing Date... Section 1.01
CPUC............................ Section 1.01
CPUC Regulations................ Section 1.01
Excess Remittance............... Section 1.01
Expected Amortization Schedule.. Section 1.01
Financing Order................. Section 1.01
FTA Charges..................... Section 1.01
Non-Routine True-Up Adjustment.. Section 1.01
Overcollateralization Amount.... Section 1.01
Principal Balance............... Section 1.01
Projected Principal Balance..... Section 1.01
PU Code......................... Section 1.01
Remittance Shortfall............ Section 1.01
Seller.......................... Section 1.01
Servicer........................ Section 1.01
Servicer Default................ Section 1.01
Servicing Fee................... Section 1.01
Subsequent Sale Agreement....... Section 1.01
Subsequent Sale Date............ Section 1.01
</TABLE>
<PAGE>
16
<TABLE>
<S> <C>
Subsequent Transition Property.. Section 1.01
Transition Property............. Section 1.01
</TABLE>
SECTION 1.02. Incorporation by Reference of Trust Indenture Act.
---------------------------------------------------
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Note Trustee.
"obligor" on the indenture securities means the Note Issuer and any
other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them by such definitions.
SECTION 1.03. Rules of Construction. Unless the context otherwise
----------------------
requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles as in
effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation;
(v) words in the singular include the plural and words in the plural
include the singular; and
<PAGE>
17
(vi) the words "herein," "hereof," "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
ARTICLE II
The Notes
---------
SECTION 2.01. Form. The Notes and the Note Trustee's certificate of
-----
authentication shall be in substantially the forms set forth in Exhibit B, with
such appropriate insertions, omissions, substitutions and other variations as
are required or permitted by this Indenture or by the related Series Supplement
and may have such letters, numbers or other marks of identification and such
legends or endorsements placed thereon as may, consistently herewith, be
determined by the officers executing such Notes, as evidenced by their execution
of such Notes. Any portion of the text of any Note may be set forth on the
reverse thereof, with an appropriate reference thereto on the face of the Note.
The Notes shall be typewritten, printed, lithographed or engraved or
produced by any combination of these methods (with or without steel engraved
borders), all as determined by the officers executing such Notes, as evidenced
by their execution of such Notes.
Each Note shall be dated the date of its authentication. The terms
of the Notes set forth in Exhibit B are part of the terms of this Indenture.
SECTION 2.02. Denominations; Notes Issuable in Series. The Notes
----------------------------------------
shall be issuable as registered definitive Notes in the Minimum Denomination
specified in the applicable Series Supplement and, except as otherwise provided
in such Series Supplement, in integral multiples thereof.
The Notes may, at the election of and as authorized by an Authorized
Officer of the Note Issuer, be issued in one or more Series (each comprised of
one or more Classes), and shall be designated generally as the "Notes" of the
Note Issuer, with such further particular
<PAGE>
18
designations added or incorporated in such title for the Notes of any particular
Series or Class as an Authorized Officer of the Note Issuer may determine. Each
Note shall bear upon its face the designation so selected for the Series or
Class to which it belongs. All Notes of the same Series shall be identical in
all respects except for the denominations thereof, unless such Series is
comprised of one or more Classes, in which case all Notes of the same Class
shall be identical in all respects except for the denominations thereof. All
Notes of a particular Series or, if such Series is comprised of one or more
Classes, all Notes of a particular Class thereof, in each case issued under this
Indenture, shall be in all respects equally and ratably entitled to the benefits
hereof without preference, priority, or distinction on account of the actual
time or times of authentication and delivery, all in accordance with the terms
and provisions of this Indenture.
Each Series of Notes shall be created by a Series Supplement
authorized by an Authorized Officer of the Note Issuer and establishing the
terms and provisions of such Series. The several Series and Classes thereof may
differ as between Series and Classes, in respect of any of the following
matters:
(1) designation of the Series and, if applicable, the Classes
thereof;
(2) the principal amount;
(3) the Note Interest Rate;
(4) the Payment Dates;
(5) the Scheduled Maturity Date;
(6) the Final Maturity Date;
(7) the Series Issuance Date;
(8) the place or places for the payment of interest, principal and
premium, if any;
(9) the Minimum Denominations;
(10) the provisions for optional redemption by the Note Issuer;
<PAGE>
19
(11) the Expected Amortization Schedule;
(12) provisions with respect to the definitions set forth in Article
One hereof; and
(13) any other provisions expressing or referring to the terms and
conditions upon which the Notes of the applicable Series or Class are to be
issued under this Indenture that are not in conflict with the provisions of
this Indenture and as to which the Rating Agency Condition is satisfied.
SECTION 2.03. Execution, Authentication and Delivery. The Notes
---------------------------------------
shall be executed on behalf of the Note Issuer by any of its Authorized
Officers. The signature of any such Authorized Officer on the Notes may be
manual or facsimile.
Notes bearing the manual or facsimile signature of individuals who
were at any time Authorized Officers of the Note Issuer shall bind the Note
Issuer, notwithstanding that such individuals or any of them have ceased to hold
such offices prior to the authentication and delivery of such Notes or did not
hold such offices at the date of such Notes.
At any time and from time to time after the execution and delivery of
this Indenture, the Note Issuer may deliver Notes executed by the Note Issuer to
the Note Trustee pursuant to an Issuer Order for authentication; and the Note
Trustee shall authenticate and deliver such Notes as in this Indenture provided
and not otherwise.
Each Note shall be dated the date of its authentication.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Note Trustee by the manual signature of one of its authorized
signatories, and such certificate upon any Note shall be conclusive evidence,
and the only evidence, that such Note has been duly authenticated and delivered
hereunder.
<PAGE>
20
SECTION 2.04. Temporary Notes. Pending the preparation of definitive
----------------
Notes, the Note Issuer may execute, and upon receipt of an Issuer Order the Note
Trustee shall authenticate and deliver, temporary Notes which are printed,
lithographed, typewritten, mimeographed or otherwise produced, of the tenor of
the definitive Notes in lieu of which they are issued and with such variations
not inconsistent with the terms of this Indenture as the officers executing such
Notes may determine, as evidenced by their execution of such Notes.
If temporary Notes are issued, the Note Issuer will cause definitive
Notes to be prepared without unreasonable delay. After the preparation of
definitive Notes, the temporary Notes shall be exchangeable for definitive Notes
upon surrender of the temporary Notes at the office or agency of the Note Issuer
to be maintained as provided in Section 3.02, without charge to the Holder. Upon
surrender for cancelation of any one or more temporary Notes, the Note Issuer
shall execute and the Note Trustee shall authenticate and deliver in exchange
therefor a like principal amount of definitive Notes of Minimum Denominations.
Until so exchanged, the temporary Notes shall in all respects be entitled to the
same benefits under this Indenture as definitive Notes.
SECTION 2.05. Registration; Registration of Transfer and Exchange.
----------------------------------------------------
The Note Issuer shall cause to be kept a register (the "Note Register") in
which, subject to such reasonable regulations as it may prescribe, the Note
Issuer shall provide for the registration of Notes and the registration of
transfers of Notes. The Note Trustee shall be "Note Registrar" for the purpose
of registering Notes and transfers of Notes as herein provided. Upon any
resignation of any Note Registrar, the Note Issuer shall promptly appoint a
successor or, if it elects not to make such an appointment, assume the duties of
Note Registrar.
If a Person other than the Note Trustee is appointed by the Note
Issuer as Note Registrar, the Note Issuer will give the Note Trustee prompt
written notice of the appointment of such Note Registrar and of the location,
and any change in the location, of the Note Register, and the Note Trustee shall
have the right to inspect the Note Register at all reasonable times and to
obtain copies
<PAGE>
21
thereof, and the Note Trustee shall have the right to rely upon a certificate
executed on behalf of the Note Registrar by a Responsible Officer thereof as to
the names and addresses of the Holders of the Notes and the principal amounts
and number of such Notes.
Upon surrender for registration of transfer of any Note at the office
or agency of the Note Issuer to be maintained as provided in Section 3.02, the
Note Issuer shall execute, and the Note Trustee shall authenticate and the
Noteholder shall obtain from the Note Trustee, in the name of the designated
transferee or transferees, one or more new Notes in any Minimum Denominations,
of a like Series (and, if applicable, Class) and aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other Notes in
any Minimum Denominations, of a like Series (and, if applicable, Class) and
aggregate principal amount, upon surrender of the Notes to be exchanged at such
office or agency. Whenever any Notes are so surrendered for exchange, the Note
Issuer shall execute, and the Note Trustee shall authenticate and the Noteholder
shall obtain from the Note Trustee, the Notes which the Noteholder making the
exchange is entitled to receive.
All Notes issued upon any registration of transfer or exchange of
Notes shall be the valid obligations of the Note Issuer, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Notes
surrendered upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed by, or be accompanied by (a) a written
instrument of transfer in form satisfactory to the Note Trustee duly executed
by, the Holder thereof or such Holder's attorney duly authorized in writing,
with such signature guaranteed by an institution which is a member of one of the
following recognized Signature Guaranty Programs: (i) The Securities Transfer
Agent Medallion Program (STAMP); (ii) The New York Stock Exchange Medallion
Program (MSP); (iii) The Stock Exchange Medallion Program (SEMP); or (iv) in
such other guarantee program acceptable to the Note Trustee, and (b) such other
documents as the Note Trustee may require.
<PAGE>
22
No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Note Issuer may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes, other than
exchanges pursuant to Section 2.04 or 9.06 not involving any transfer.
The preceding provisions of this Section notwithstanding, the Note
Issuer shall not be required to make and the Note Registrar need not register
transfers or exchanges of Notes selected for redemption or of any Note for a
period of 15 days preceding the due date for any payment with respect to the
Note.
SECTION 2.06. Mutilated, Destroyed, Lost or Stolen Notes. If (i) any
-------------------------------------------
mutilated Note is surrendered to the Note Trustee, or the Note Trustee receives
evidence to its satisfaction of the destruction, loss or theft of any Note, and
(ii) there is delivered to the Note Trustee such security or indemnity as may be
required by it to hold the Note Issuer and the Note Trustee harmless, then, in
the absence of notice to the Note Issuer, the Note Registrar or the Note Trustee
that such Note has been acquired by a protected purchaser, the Note Issuer shall
execute and, upon its request, the Note Trustee shall authenticate and deliver,
in exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Note, a replacement Note of like Series (and, if applicable, Class), tenor and
principal amount, bearing a number not contemporaneously outstanding; provided,
--------
however, that if any such destroyed, lost or stolen Note, but not a mutilated
- -------
Note, shall have become or within seven days shall be due and payable, or shall
have been called for redemption, instead of issuing a replacement Note, the Note
Issuer may pay such destroyed, lost or stolen Note when so due or payable or
upon the Optional Redemption Date or Mandatory Redemption Date, as applicable,
without surrender thereof. If, after the delivery of such replacement Note or
payment of a destroyed, lost or stolen Note pursuant to the proviso to the
preceding sentence, a protected purchaser of the original Note in lieu of which
such replacement Note was issued presents for payment such original Note, the
Note Issuer and the Note Trustee shall be entitled to recover such replacement
Note (or such payment) from the Person to whom it was delivered or any Person
taking such replacement Note from such Person to whom such
<PAGE>
23
replacement Note was delivered or any assignee of such Person, except a
protected purchaser, and shall be entitled to recover upon the security or
indemnity provided therefor to the extent of any loss, damage, cost or expense
incurred by the Note Issuer or the Note Trustee in connection therewith.
Upon the issuance of any replacement Note under this Section, the Note
Issuer may require the payment by the Holder of such Note of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other reasonable expenses (including the fees and expenses of
the Note Trustee) connected therewith.
Every replacement Note issued pursuant to this Section in replacement
of any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Note Issuer, whether or not the
mutilated, destroyed, lost or stolen Note shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.07. Persons Deemed Owner. Prior to due presentment for
---------------------
registration of transfer of any Note, the Note Issuer, the Note Trustee and any
agent of the Note Issuer or the Note Trustee may treat the Person in whose name
any Note is registered (as of the day of determination) as the owner of such
Note for the purpose of receiving payments of principal of and premium, if any,
and interest on such Note and for all other purposes whatsoever, whether or not
such Note be overdue, and neither the Note Issuer, the Note Trustee nor any
agent of the Note Issuer or the Note Trustee shall be affected by notice to the
contrary.
SECTION 2.08. Payment of Principal, Premium, if any, and Interest;
----------------------------------------------------
Interest on Overdue Principal; Principal, Premium, if any, and Interest Rights
- ------------------------------------------------------------------------------
Preserved. (a) The Notes shall accrue interest as provided in the related
- ----------
Series Supplement which shall be substantially in the form set forth in
Exhibit A hereto, at the applicable Note
<PAGE>
24
Interest Rate specified therein, and such interest shall be payable on each
Payment Date as specified therein. Any installment of interest, principal or
premium, if any, payable on any Note which is punctually paid or duly provided
for by the Note Issuer on the applicable Payment Date shall be paid to the
Person in whose name such Note (or one or more Predecessor Notes) is registered
on the Record Date for such Payment Date, by check mailed first-class, postage
prepaid to such Person's address as it appears on the Note Register on such
Record Date or in such other manner as may be provided in the related Series
Supplement, except that with respect to Notes registered on the Record Date in
the name of the Certificate Trustee payments will be made by wire transfer in
immediately available funds to the account designated by the Certificate Trustee
and except for the final installment of principal and premium, if any, payable
with respect to such Note on a Payment Date which shall be payable as provided
below. The funds represented by any such checks returned undelivered shall be
held in accordance with Section 3.03 hereof.
(b) The principal of each Note of each Series (and, if applicable,
Class) shall be paid, to the extent funds are available therefor in the
Collection Account, in installments on each Payment Date specified in the
related Series Supplement. Notwithstanding the foregoing, the entire unpaid
principal amount of the Notes of a Series shall be due and payable, if not
previously paid, on the date on which an Event of Default shall have occurred
and be continuing with respect to such Series, if the Note Trustee or the
Holders of the Notes representing not less than a majority of the Outstanding
Amount of the Notes of all Series have declared the Notes to be immediately due
and payable in the manner provided in Section 5.02. All payments of principal
and premium, if any, on the Notes of any Series shall be made pro rata to the
Noteholders entitled thereto. The Note Trustee shall notify the Person in whose
name a Note is registered at the close of business on the Record Date preceding
the Payment Date on which the Note Issuer expects that the final installment of
principal of and premium, if any, and interest on such Note will be paid. Such
notice shall be mailed no later than five days prior to such final Payment Date
and shall specify that such final installment will be payable only upon
presentation and surrender of such Note and shall specify the place where such
Note may be presented and surrendered for payment of
<PAGE>
25
such installment. Notices in connection with redemptions of Notes shall be
mailed to Noteholders as provided in Section 10.02.
(c) If the Note Issuer defaults in a payment of interest on the Notes
of any Series when due, the Note Issuer shall pay such defaulted interest (plus
interest on such defaulted interest at the applicable Note Interest Rate to the
extent lawful). The Note Issuer may pay such defaulted interest (plus interest
on such defaulted interest) to the Persons who are Noteholders on a subsequent
special record date, which date shall be at least five Business Days prior to
the payment date. The Note Issuer shall fix or cause to be fixed any such
special record date and payment date, and, at least 20 days before any such
special record date, the Note Issuer shall mail to each affected Noteholder a
notice that states the special record date, the payment date and the amount of
defaulted interest (plus interest on such defaulted interest) to be paid.
SECTION 2.09. Cancellation. All Notes surrendered for payment,
-------------
registration of transfer, exchange or redemption shall, if surrendered to any
Person other than the Note Trustee, be delivered to the Note Trustee and shall
be promptly canceled by the Note Trustee. The Note Issuer may at any time
deliver to the Note Trustee for cancelation any Notes previously authenticated
and delivered hereunder which the Note Issuer may have acquired in any manner
whatsoever, and all Notes so delivered shall be promptly canceled by the Note
Trustee. No Notes shall be authenticated in lieu of or in exchange for any
Notes canceled as provided in this Section, except as expressly permitted by
this Indenture. All canceled Notes may be held or disposed of by the Note
Trustee in accordance with its standard retention or disposal policy as in
effect at the time.
SECTION 2.10. Amount Unlimited; Authentication and Delivery of Notes.
-------------------------------------------------------
The aggregate principal amount of Notes that may be authenticated and delivered
under this Indenture is unlimited.
Notes of a new Series may from time to time be executed by the Note
Issuer and delivered to the Note Trustee for authentication and thereupon the
same shall be authenticated and delivered by the Note Trustee upon Issuer
<PAGE>
26
Request and upon delivery by the Note Issuer to the Note Trustee, and receipt by
the Note Trustee, or the causing to occur by the Note Issuer, of the following;
provided, however, that compliance with such conditions and delivery of such
- -------- -------
documents shall only be required in connection with the original issuance of a
Note or Notes of such Series:
(1) Note Issuer Action. An Issuer Order authorizing and directing
-------------------
the execution, authentication and delivery of the Notes by the Note Trustee
and specifying the principal amount of Notes to be authenticated.
(2) Authorizations. An Opinion of Counsel that no authorization,
---------------
approval or consent of any governmental body or bodies at the time having
jurisdiction in the premises is required for the valid issuance,
authentication and delivery of such Notes, except for such registrations as
are required under the Blue Sky and securities laws of any State or such
authorizations, approvals or consents of governmental bodies that have been
obtained and copies of which have been delivered with such Opinion of
Counsel.
(b) An Opinion of Counsel that no authorization, approval or consent
of any governmental body or bodies at the time having jurisdiction in the
premises is required for the valid execution and delivery by the Note
Issuer of each of the Basic Documents to which the Note Issuer is a party,
except for such authorizations, approvals or consents of governmental
bodies that have been obtained and copies of which have been delivered with
such Opinion of Counsel.
(3) Authorizing Certificate. A certificate of an Authorized Officer
------------------------
of the Note Issuer certifying that (i) the Note Issuer has duly authorized
the execution and delivery of this Indenture and the related Series
Supplement and the execution, authentication and delivery of the Notes of
such Series and (ii) that the Series Supplement for such Series of Notes
shall be in the form attached thereto, which Series Supplement shall comply
with the requirements of Section 2.02 hereof.
(4) The Collateral. The Note Issuer shall have
--------------
<PAGE>
27
caused all Collateral to have been Granted to the Note Trustee or, if
requested by the Note Trustee, its nominee and will have caused all related
filings with the CPUC pursuant to the PU Code and other filings in
connection with such Grant to have been duly made.
(5) Certificates of the Note Issuer and the Seller. (a) An Officer's
-----------------------------------------------
Certificate from the Note Issuer, dated as of the Series Issuance Date:
(i) to the effect that the Note Issuer is not in Default under
this Indenture and that the issuance of the Notes applied for will not
result in any Default or in any breach of any of the terms, conditions
or provisions of or constitute a default under any indenture,
mortgage, deed of trust or other agreement or instrument to which the
Note Issuer is a party or by which it or its property is bound or any
order of any court or administrative agency entered in any Proceeding
to which the Note Issuer is a party or by which it or its property may
be bound or to which it or its property may be subject; and that all
conditions precedent provided in this Indenture relating to the
authentication and delivery of the Notes applied for have been
complied with;
(ii) to the effect that the Note Issuer has not assigned any
interest or participation in the Collateral except for the lien of
this Indenture; the Note Issuer has the power and right to Grant the
Collateral to the Note Trustee as security hereunder; and the Note
Issuer, subject to the terms of this Indenture, has Granted to the
Note Trustee all of its right, title and interest in and to such
Collateral free and clear of any lien, mortgage, pledge, charge,
security interest, adverse claim or other encumbrance arising as a
result of actions of the Note Issuer or through the Note Issuer,
except the lien of this Indenture;
(iii) to the effect that the Note Issuer has appointed the firm
of Independent certified public accountants as contemplated in
Section 8.06 hereof;
<PAGE>
28
(iv) to the effect that attached thereto are duly executed, true
and complete copies of the Sale Agreement or Subsequent Sale
Agreement, as applicable, and the Servicing Agreement; and
(v) stating that all filings with the CPUC pursuant to the PU
Code and all UCC financing statements with respect to the Collateral
which are required to be filed by the terms of the Sale Agreement or
Subsequent Sale Agreement, as applicable, the Servicing Agreement or
this Indenture have been filed as required.
(b) An Officer's Certificate (as defined in the Sale Agreement) from
the Seller, dated as of the Series Issuance Date, to the effect that, in
the case of the Transition Property immediately prior to the conveyance
thereof to the Note Issuer pursuant to the Sale Agreement:
(i) the Seller was the owner of such Transition Property, free
and clear of any lien, mortgage, pledge, charge, security interest,
adverse claim or other encumbrance (subject to any statutory lien in
favor of the holders of the rate reduction bonds issued pursuant to
the Financing Order and the trustee or the representative for such
holders pursuant to Section 843(g) of the PU Code); the Seller had not
assigned any interest or participation in such Transition Property and
the proceeds thereof other than to the Note Issuer pursuant to the
Sale Agreement (or, if assigned, it has been released); the Seller has
the power and right to convey such Transition Property and the
proceeds thereof to the Note Issuer; and the Seller, subject to the
terms of the Sale Agreement, has validly conveyed to the Note Issuer
all of its right, title and interest in and to such Transition
Property and the proceeds thereof, free and clear of any lien,
mortgage, pledge, charge, security interest, adverse claim or other
encumbrance; and
(ii) the attached copies of the Financing Order and Issuance
Advice Letter creating such
<PAGE>
29
Transition Property are true and correct.
(6) Opinion of Counsel. Unless otherwise specified in a Series
-------------------
Supplement, an Opinion of Counsel, portions of which may be delivered by
counsel for the Note Issuer, portions of which may be delivered by counsel
for the Seller and the Servicer, and portions of which may be delivered by
counsel for the Trust, dated the Series Issuance Date, in each case subject
to the customary exceptions, qualifications and assumptions contained
therein, to the collective effect that:
(a) the Indenture has been duly qualified under the Trust
Indenture Act and either the Series Supplement has been duly qualified
under the Trust Indenture Act or no such qualification of the Series
Supplement is necessary;
(b) all instruments furnished to the Note Trustee pursuant to
this Indenture conform to the requirements set forth in this Indenture
and constitute all of the documents required to be delivered hereunder
for the Note Trustee to authenticate and deliver the Notes applied
for, and all conditions precedent provided for in this Indenture
relating to the authentication and delivery of the Notes have been
complied with;
(c) the Note Issuer has the power and authority to execute and
deliver the Series Supplement and this Indenture and to issue the
Notes, and each of the Series Supplement and this Indenture, and the
Notes have been duly authorized and the Note Issuer is duly formed and
is validly existing in good standing under the laws of the
jurisdiction of its organization;
(d) the Series Supplement and the Indenture have been duly
authorized, executed and delivered by the Note Issuer;
(e) the Notes applied for have been duly authorized and executed
and, when authenticated in accordance with the provisions of the
Indenture and delivered against payment of the purchase
<PAGE>
30
price therefor, will constitute valid and binding obligations of the
Note Issuer, entitled to the benefits of the Indenture and the related
Series Supplement;
(f) this Indenture, the Sale Agreement or the Subsequent Sale
Agreement, as applicable, the Servicing Agreement and the related
Series Supplement are valid and binding agreements of the Note Issuer,
enforceable in accordance with their respective terms, except as such
enforceability may be subject to bankruptcy, insolvency,
reorganization and other similar laws affecting the rights of
creditors generally and general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or
at law);
(g) (I) to the extent that the provisions of Section 843 of the
PU Code apply to the grant of a security interest by the Note Issuer
in the Collateral pursuant to this Indenture, then upon the giving of
value by the Note Trustee to the Note Issuer with respect to the
Collateral, (A) this Indenture creates in favor of the Note Trustee a
security interest in the rights of the Note Issuer in the Collateral,
(B) such security interest is valid and enforceable against the Note
Issuer and third parties (subject to the rights of any third parties
holding security interests in such Collateral perfected in the manner
described in Section 843 of the PU Code), and has attached, (C) such
security interest is perfected, and (D) such perfected security
interest is of first priority (subject to any statutory lien in favor
of the holders of the rate reduction bonds issued pursuant to the
Financing Order and the trustee or the representative for such holders
pursuant to Section 843(g) of the PU Code). (II) To the extent that
the provisions of Section 843 of the PU Code do not apply to the grant
of a security interest by the Note Issuer in the Collateral pursuant
to this Indenture, then upon the giving of value by the Note Trustee
to the Note Issuer with respect to the Collateral, (A) this Indenture
creates in favor of the Note Trustee a security
<PAGE>
31
interest in the rights of the Note Issuer in the Collateral, and such
security interest is enforceable against the Note Issuer with respect
to such Collateral, (B) such security interest is perfected, and (C)
such perfected security interest is of first priority (subject to any
statutory lien in favor of the holders of the rate reduction bonds
issued pursuant to the Financing Order and the trustee or the
representative for such holders pursuant to Section 843(g) of the PU
Code);
(h) either (A) the Registration Statement covering the Notes and
the Certificates is effective under the Securities Act and, to the
best of such counsel's knowledge and information, no stop order
suspending the effectiveness of such Registration Statement has been
issued under the Securities Act and no proceedings for that purpose
have been initiated or are pending or threatened by the SEC or (B) the
Notes or the Certificates are exempt from the registration
requirements under the Securities Act;
(i) the Note Issuer is not now and, assuming that the Note
Issuer uses the proceeds of the sale of the Notes for the purpose of
acquiring Transition Property in accordance with the terms of the Sale
Agreement, following the sale of the Notes to the Trust and the
Certificates to the underwriter, underwriters, placement agent or
agents or similar Person, neither the Note Issuer nor the Trust will
be required to be registered under the Investment Company Act of 1940,
as amended;
(j) the Sale Agreement is a valid and binding agreement of the
Seller enforceable against the Seller in accordance with its terms
except as such enforceability may be subject to bankruptcy,
insolvency, reorganization and other similar laws affecting the rights
of creditors generally and general principles of equity (regardless of
whether such enforcement is considered in a proceeding in equity or at
law);
<PAGE>
32
(k) the Servicing Agreement is a valid and binding agreement of
the Servicer enforceable against the Servicer in accordance with its
terms except as such enforceability may be subject to bankruptcy,
insolvency, reorganization and other similar laws affecting the rights
of creditors generally and general principles of equity (regardless of
whether such enforcement is considered in a proceeding in equity or at
law);
(l) upon the delivery of the fully executed Sale Agreement to
the Note Issuer and the payment of the purchase price of the
Transition Property by the Note Issuer to the Seller pursuant to the
Sale Agreement, then (I) the transfer of the Transition Property by
the Seller to the Note Issuer pursuant to the Sale Agreement conveys
the Seller's right, title and interest in the Transition Property to
the Note Issuer and will be treated under state law as an absolute
transfer of all of the Seller's right, title, and interest in the
Transition Property, other than for federal and state income and
franchise tax purposes, (II) such transfer of the Transition Property
is perfected, (III) such transfer has priority over any other
assignment of the Transition Property and (IV) the Transition Property
is free and clear of all liens created prior to its transfer to the
Note Issuer pursuant to the Sale Agreement; and
(m) such other matters as the Note Trustee may reasonably
require.
(7) Accountant's Certificate or Opinion. Unless otherwise specified
------------------------------------
in a Series Supplement, a certificate or opinion, addressed to the Note
Issuer and the Note Trustee complying with the requirements of Section
11.01(a) hereof, of a firm of Independent certified public accountants of
recognized national reputation to the effect that (a) such accountants are
Independent with respect to the Note Issuer within the meaning of the
Indenture, and are independent public accountants within the meaning of the
standards of The American Institute of Certified Public Accountants, and
(b) with respect to the Collateral, they have made such calculations as
they deemed necessary for the purpose and determined that, based on the
assumptions used in
<PAGE>
33
calculating the initial FTA Charges or, if applicable, the most recent
revised FTA Charges, as of the Series Issuance Date for such Series (after
giving effect to the issuance of such Series and the application of the
proceeds therefrom) such FTA Charges are sufficient to pay (a) Operating
Expenses when incurred, plus (b) the Overcollateralization Amount, plus (c)
interest on each Series of Notes at their respective Note Interest Rates
when due, plus (d) principal of each Series of Notes in accordance with the
Expected Amortization Schedule.
(8) Rating Agency Condition. The Note Trustee shall receive evidence
------------------------
reasonably satisfactory to it that the Rating Agency Condition will be
satisfied with respect to the issuance of such new Series.
(9) Requirements of Series Supplement. Such other funds, accounts,
----------------------------------
documents certificates, agreements, instruments or opinions as may be
required by the terms of the Series Supplement creating such Series.
(10) Other Requirements. Such other documents, certificates,
-------------------
agreements, instruments or opinions as the Note Trustee may reasonably
require.
SECTION 2.11. Release of Collateral. Subject to Section 11.01, the
----------------------
Note Trustee shall release property from the lien of this Indenture only as
specified in Section 8.02(d) or upon receipt of an Issuer Request accompanied by
an Officer's Certificate, an Opinion of Counsel and Independent Certificates in
accordance with TIA (S)314(c) and 314(d)(l) or an Opinion of Counsel in lieu of
such Independent Certificates to the effect that the TIA does not require any
such Independent Certificates.
<PAGE>
34
ARTICLE III
Covenants
---------
SECTION 3.01. Payment of Principal, Premium, if any, and Interest.
----------------------------------------------------
The Note Issuer will duly and punctually pay the principal of and premium, if
any, and interest on the Notes in accordance with the terms of the Notes and
this Indenture. Amounts properly withheld under the Code by any Person from a
payment to any Noteholder of interest or principal or premium, if any, shall be
considered as having been paid by the Note Issuer to such Noteholder for all
purposes of this Indenture.
SECTION 3.02. Maintenance of Office or Agency. The Note Issuer will
--------------------------------
maintain in the Borough of Manhattan, The City of New York, an office or agency
where Notes may be surrendered for registration of transfer or exchange. The
Note Issuer hereby initially appoints the Note Trustee to serve as its agent for
the foregoing purposes. The Note Issuer will give prompt written notice to the
Note Trustee of the location, and of any change in the location, of any such
office or agency. If at any time the Note Issuer shall fail to maintain any
such office or agency or shall fail to furnish the Note Trustee with the address
thereof, such surrenders may be made at the Corporate Trust Office, and the Note
Issuer hereby appoints the Note Trustee as its agent to receive all such
surrenders.
SECTION 3.03. Money for Payments To Be Held in Trust. As provided in
---------------------------------------
Section 8.02(a), all payments of amounts due and payable with respect to any
Notes that are to be made from amounts withdrawn from the Collection Account
pursuant to Section 8.02(d) shall be made on behalf of the Note Issuer by the
Note Trustee or by another Paying Agent, and no amounts so withdrawn from the
Collection Account for payments of Notes shall be paid over to the Note Issuer
except as provided in this Section and Section 8.02.
The Note Issuer will cause each Paying Agent other than the Note
Trustee to execute and deliver to the Note Trustee an instrument in which such
Paying Agent shall agree with the Note Trustee (and if the Note Trustee acts as
Paying Agent, it hereby so agrees), subject to the provisions of this Section,
that such Paying Agent will:
<PAGE>
35
(i) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise disposed
of as herein provided and pay such sums to such Persons as herein provided;
(ii) give the Note Trustee notice of any default by the Note Issuer of
which it has actual knowledge (or any other obligor upon the Notes) in the
making of any payment required to be made with respect to the Notes;
(iii) at any time during the continuance of any such default, upon the
written request of the Note Trustee, forthwith pay to the Note Trustee all
sums so held in trust by such Paying Agent;
(iv) immediately resign as a Paying Agent and forthwith pay to the
Note Trustee all sums held by it in trust for the payment of Notes if at
any time it ceases to meet the standards required to be met by a Paying
Agent at the time of its appointment; and
(v) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Notes of any applicable
withholding taxes imposed thereon and with respect to any applicable
reporting requirements in connection therewith.
The Note Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by Issuer
Order direct any Paying Agent to pay to the Note Trustee all sums held in trust
by such Paying Agent, such sums to be held by the Note Trustee upon the same
trusts as those upon which the sums were held by such Paying Agent; and upon
such payment by any Paying Agent to the Note Trustee, such Paying Agent shall be
released from all further liability with respect to such money.
Subject to applicable laws with respect to escheat of funds, any money
held by the Note Trustee or any Paying Agent in trust for the payment of any
amount due with respect to any Note and remaining unclaimed for two years after
such amount has become due and payable shall be
<PAGE>
36
discharged from such trust and be paid to the Note Issuer on Issuer Request;
and, subject to Section 11.18, the Holder of such Note shall thereafter, as an
unsecured general creditor, look only to the Note Issuer for payment thereof
(but only to the extent of the amounts so paid to the Note Issuer), and all
liability of the Note Trustee or such Paying Agent with respect to such trust
money shall thereupon cease; provided, however, that the Note Trustee or such
-------- -------
Paying Agent, before being required to make any such repayment, may at the
expense of the Note Issuer cause to be published once, in a newspaper published
in the English language, customarily published on each Business Day and of
general circulation in The City of New York, notice that such money remains
unclaimed and that, after a date specified therein, which shall not be less than
30 days from the date of such publication, any unclaimed balance of such money
then remaining will be repaid to the Note Issuer. The Note Trustee may also
adopt and employ, at the expense of the Note Issuer, any other reasonable means
of notification of such repayment (including mailing notice of such repayment to
Holders whose Notes have been called but have not been surrendered for
redemption or whose right to or interest in moneys due and payable but not
claimed is determinable from the records of the Note Trustee or of any Paying
Agent, at the last address of record for each such Holder).
SECTION 3.04. Existence. The Note Issuer will keep in full effect
----------
its existence, rights and franchises as a limited liability company under the
laws of the State of Delaware (unless it becomes, or any successor Note Issuer
hereunder is or becomes, organized under the laws of any other State or of the
United States of America, in which case the Note Issuer will keep in full effect
its existence, rights and franchises under the laws of such other jurisdiction)
and will obtain and preserve its qualification to do business in each
jurisdiction in which such qualification is or shall be necessary to protect the
validity and enforceability of this Indenture, the Notes, the Collateral and
each other instrument or agreement included in the Collateral.
<PAGE>
37
SECTION 3.05. Protection of Collateral. The Note Issuer will from
-------------------------
time to time execute and deliver all such supplements and amendments hereto and
all such filings with the CPUC pursuant to the PU Code, financing statements,
continuation statements, instruments of further assurance and other instruments,
and will take such other action necessary or advisable to:
(i) maintain or preserve the lien and security interest (and the
priority thereof) of this Indenture or carry out more effectively the
purposes hereof;
(ii) perfect, publish notice of or protect the validity of any Grant
made or to be made by this Indenture;
(iii) enforce any of the Collateral;
(iv) preserve and defend title to the Collateral and the rights of the
Note Trustee and the Noteholders in such Collateral against the claims of
all Persons and parties, including the challenge by any party to the
validity or enforceability of the Financing Order, any Advice Letter or the
Transition Property or any proceeding relating thereto and institute any
action or proceeding necessary to compel performance by the CPUC or the
State of California of any of its obligations or duties under the PU Code,
the Financing Order or any Advice Letter; or
(v) pay any and all taxes levied or assessed upon all or any part of
the Collateral.
The Note Issuer hereby designates the Note Trustee its agent and attorney-in-
fact to execute any filings with the CPUC, financing statement, continuation
statement or other instrument required by the Note Trustee pursuant to this
Section, it being understood that the Note Trustee shall have no such
obligation.
SECTION 3.06. Opinions as to Collateral. (a) On the Series Issuance
--------------------------
Date for each Series, the Note Issuer shall furnish to the Note Trustee an
Opinion of Counsel either stating that, in the opinion of such counsel, such
action has been taken with respect to the recording and filing of this
Indenture, any indentures supplemental hereto, and any other requisite
documents, and with respect
<PAGE>
38
to the execution and filing of any filings with the CPUC pursuant to the PU
Code, financing statements and continuation statements, as are necessary to
perfect and make effective the lien and security interest of this Indenture and
reciting the details of such action, or stating that, in the opinion of such
counsel, no such action is necessary to make such lien and security interest
effective.
(b) On or before September 30 in each calendar year, while any Series
is outstanding, beginning at least three months after the issuance of the first
Series of the Notes, the Note Issuer shall furnish to the Note Trustee an
Opinion of Counsel either stating that, in the opinion of such counsel, such
action has been taken with respect to the recording, filing, re-recording and
refiling of this Indenture, any indentures supplemental hereto and any other
requisite documents and with respect to the execution and filing of any filings
with the CPUC pursuant to the PU Code, financing statements and continuation
statements as is necessary to maintain the lien and security interest created by
this Indenture and reciting the details of such action or stating that in the
opinion of such counsel no such action is necessary to maintain such lien and
security interest. Such Opinion of Counsel shall also describe the recording,
filing, re-recording and refiling of this Indenture, any indentures supplemental
hereto and any other requisite documents and the execution and filing of any
filings with the CPUC, financing statements and continuation statements that
will, in the opinion of such counsel, be required to maintain the lien and
security interest of this Indenture until September 30 in the following calendar
year.
(c) Prior to the effectiveness of any Subsequent Sale Agreement or
any amendment to the Sale Agreement, the Note Issuer shall furnish to the Note
Trustee an Opinion of Counsel either (A) stating that, in the opinion of such
counsel, all filings, including filings with the CPUC pursuant to the PU Code,
have been executed and filed that are necessary fully to preserve and protect
the interest of the Note Issuer and the Note Trustee in the Transition Property
and the proceeds thereof, and reciting the details of such filings or referring
to prior Opinions of Counsel in which such details are given, or (B) stating
that, in the opinion of such counsel, no such action shall be necessary to
preserve and protect such interest.
<PAGE>
39
SECTION 3.07. Performance of Obligations; Servicing; SEC Filings.
----------------------------------------------------
(a) The Note Issuer (i) will diligently pursue any and all actions to enforce
its rights under each instrument or agreement included in the Collateral and
(ii) will not take any action and will use its best efforts not to permit any
action to be taken by others that would release any Person from any of such
Person's covenants or obligations under any such instrument or agreement or that
would result in the amendment, hypothecation, subordination, termination or
discharge of, or impair the validity or effectiveness of, any such instrument or
agreement, except, in each case, as expressly provided in this Indenture, the
Sale Agreement, the Servicing Agreement or such other instrument or agreement.
(b) The Note Issuer may contract with other Persons to assist it in
performing its duties under this Indenture, and any performance of such duties
by a Person identified to the Note Trustee in an Officer's Certificate of the
Note Issuer shall be deemed to be action taken by the Note Issuer. Initially,
the Note Issuer has contracted with the Servicer to assist the Note Issuer in
performing its duties under this Indenture.
(c) The Note Issuer will punctually perform and observe all of its
obligations and agreements contained in this Indenture, the Basic Documents and
in the instruments and agreements included in the Collateral, including filing
or causing to be filed all filings with the CPUC pursuant to the PU Code, UCC
financing statements and continuation statements required to be filed by it by
the terms of this Indenture, the Sale Agreement and the Servicing Agreement in
accordance with and within the time periods provided for herein and therein.
Except as otherwise expressly permitted therein, the Note Issuer shall not
waive, amend, modify, supplement or terminate any Basic Document or any
provision thereof without the written consent of the Note Trustee (which consent
shall not be withheld if (i) the Note Trustee shall have received an Officer's
Certificate stating that such waiver, amendment, modification, supplement or
termination shall not adversely affect in any material respect the interests of
the Noteholders or the holders of Certificates and (ii) the Rating Agency
Condition shall have been satisfied with respect thereto) or the Holders of at
<PAGE>
40
least a majority of the Outstanding Amount of Notes of all Series.
(d) If the Note Issuer shall have knowledge of the occurrence of a
Servicer Default under the Servicing Agreement, the Note Issuer shall promptly
give written notice thereof to the Note Trustee, the Infrastructure Bank and the
Rating Agencies, and shall specify in such notice the action, if any, the Note
Issuer is taking with respect of such default. If a Servicer Default shall
arise from the failure of the Servicer to perform any of its duties or
obligations under the Servicing Agreement with respect to the Transition
Property or the FTA Charges, the Note Issuer shall take all reasonable steps
available to it to remedy such failure.
(e) As promptly as possible after the giving of notice of termination
to the Servicer and the Rating Agencies of the Servicer's rights and powers
pursuant to Section 7.01 of the Servicing Agreement, the Note Issuer shall
appoint a successor Servicer (the "Successor Servicer") with the Note Trustee's
prior written consent thereto (which consent shall not be unreasonably
withheld), and such Successor Servicer shall accept its appointment by a written
assumption in a form acceptable to the Note Issuer and the Note Trustee. A
Person shall qualify as a Successor Servicer only if such Person satisfies the
requirements of the Servicing Agreement. If within 30 days after the delivery
of the notice referred to above, the Note Issuer shall not have obtained such a
new Servicer, the Note Trustee may petition the CPUC or a court of competent
jurisdiction to appoint a Successor Servicer. In connection with any such
appointment, the Note Issuer may make such arrangements for the compensation of
such successor as it and such successor shall agree, subject to the limitations
set forth below and in the Servicing Agreement, and in accordance with Section
5.02 of the Servicing Agreement, the Note Issuer shall enter into an agreement
with such successor for the servicing of the Transition Property (such agreement
to be in form and substance satisfactory to the Note Trustee).
(f) Upon any termination of the Servicer's rights and powers pursuant
to the Servicing Agreement, the Note Trustee shall promptly notify the Note
Issuer, the Noteholders, the Infrastructure Bank and the Rating
<PAGE>
41
Agencies. As soon as a Successor Servicer is appointed, the Note Issuer shall
notify the Note Trustee, the Noteholders and the Rating Agencies of such
appointment, specifying in such notice the name and address of such Successor
Servicer.
(g) Without derogating from the absolute nature of the assignment
granted to the Note Trustee under this Indenture or the rights of the Note
Trustee hereunder, the Note Issuer agrees that it will not, without the prior
written consent of the Note Trustee or the Holders of at least a majority in
Outstanding Amount of the Notes of all Series, amend, modify, waive, supplement,
terminate or surrender, or agree to any amendment, modification, supplement,
termination, waiver or surrender of, the terms of any Collateral or the Basic
Documents, or waive timely performance or observance by the Seller or the
Servicer under the Sale Agreement or the Servicing Agreement, respectively. If
any such amendment, modification, supplement or waiver shall be so consented to
by the Note Trustee or such Holders, the Note Issuer agrees to execute and
deliver, in its own name and at its own expense, such agreements, instruments,
consents and other documents as shall be necessary or appropriate in the
circumstances. The Note Issuer agrees that no such amendment, modification,
supplement or waiver shall adversely affect the rights of the Holders of the
Notes outstanding at the time of any such amendment, modification, supplement or
waiver.
(h) The Note Issuer shall file with the SEC such periodic reports, if
any, as are required from time to time under Section 13 of the Exchange Act.
(i) The Note Issuer shall make all filings required under the Statute
relating to the transfer of the ownership or security interest in the Transition
Property other than those required to be made by the Seller pursuant to the
Basic Documents.
SECTION 3.08. Negative Covenants. So long as any Notes are
-------------------
Outstanding, the Note Issuer shall not:
(i) except as expressly permitted by this Indenture, sell, transfer,
exchange or otherwise dispose of any of the properties or assets of the
Note Issuer, including those included in the Collateral, unless directed to
do so by the Note Trustee in accordance with Article V;
<PAGE>
42
(ii) claim any credit on, or make any deduction from the principal or
premium, if any, or interest payable in respect of, the Notes (other than
amounts properly withheld from such payments under the Code) or assert any
claim against any present or former Noteholder by reason of the payment of
the taxes levied or assessed upon any part of the Collateral;
(iii) terminate its existence or dissolve or liquidate in whole or in
part; or
(iv) (A) permit the validity or effectiveness of this Indenture to be
impaired, or permit the lien of this Indenture to be amended, hypothecated,
subordinated, terminated or discharged, or permit any Person to be
released from any covenants or obligations with respect to the Notes under
this Indenture except as may be expressly permitted hereby, (B) permit any
lien, charge, excise, claim, security interest, mortgage or other
encumbrance (other than the lien of this Indenture and any statutory lien
under Section 843(g) of the PU Code) to be created on or extend to or
otherwise arise upon or burden the Collateral or any part thereof or any
interest therein or the proceeds thereof or (C) subject to any statutory
lien under Section 843(g) of the PU Code, permit the lien of this Indenture
not to constitute a valid first priority security interest in the
Collateral.
SECTION 3.09. Annual Statement as to Compliance. The Note Issuer will
----------------------------------
deliver to the Note Trustee, the Certificate Trustee and the Rating Agencies not
later than September 30 of each year (commencing with September 30, 1998), an
Officer's Certificate stating, as to the Authorized Officer signing such
Officer's Certificate, that
(i) a review of the activities of the Note Issuer during the preceding
twelve months ended June 30 and of performance under this Indenture has
been made under such Authorized Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge, based on such
review, the Note Issuer has complied with all conditions and covenants
under this Indenture throughout such twelve month period, or, if
<PAGE>
43
there has been a default in the compliance of any such condition or
covenant, specifying each such default known to such Authorized Officer and
the nature and status thereof.
SECTION 3.10. Note Issuer May Consolidate, etc., Only on Certain
--------------------------------------------------
Terms. (a) The Note Issuer shall not consolidate or merge with or into any
- ------
other Person, unless
(i) the Person (if other than the Note Issuer) formed by or surviving
such consolidation or merger shall be a Person organized and existing under
the laws of the United States of America or any State and shall expressly
assume, by an indenture supplemental hereto, executed and delivered to the
Note Trustee, in form and substance satisfactory to the Note Trustee, the
due and punctual payment of the principal of and premium, if any, and
interest on all Notes and the performance or observance of every agreement
and covenant of this Indenture on the part of the Note Issuer to be
performed or observed, all as provided herein and in the applicable Series
Supplement or Series Supplements;
(ii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Note Issuer shall have received an Opinion of Counsel (and
shall have delivered copies thereof to the Note Trustee) to the effect that
such transaction will not have any material adverse tax consequence to the
Note Issuer, the Trust, any Noteholder or any Certificateholder;
(v) any action as is necessary to maintain the lien and security
interest created by this Indenture shall have been taken; and
(vi) the Note Issuer shall have delivered to the Note Trustee an
Officer's Certificate and an Opinion of Counsel each stating that such
consolidation or merger and such supplemental indenture comply with this
<PAGE>
44
Section 3.10 and that all conditions precedent herein provided for relating
to such transaction have been complied with (including any filing required
by the Exchange Act).
(b) Except as specifically provided herein, the Note Issuer shall not
convey or transfer any of its properties or assets, including those included in
the Collateral, to any Person, unless
(i) the Person that acquires by conveyance or transfer the properties
and assets of the Note Issuer the conveyance or transfer of which is hereby
restricted shall (A) be a United States citizen or a Person organized and
existing under the laws of the United States of America or any State, (B)
expressly assumes, by an indenture supplemental hereto, executed and
delivered to the Note Trustee, in form and substance satisfactory to the
Note Trustee, the due and punctual payment of the principal of and premium,
if any, and interest on all Notes and the performance or observance of
every agreement and covenant of this Indenture on the part of the Note
Issuer to be performed or observed, all as provided herein and in the
applicable Series Supplement or Series Supplements, (C) expressly agrees by
means of such supplemental indenture that all right, title and interest so
conveyed or transferred shall be subject and subordinate to the rights of
Holders of the Notes, (D) unless otherwise provided in the supplemental
indenture referred to in clause (B) above, expressly agrees to indemnify,
defend and hold harmless the Note Issuer against and from any loss,
liability or expense arising under or related to this Indenture and the
Notes and (E) expressly agrees by means of such supplemental indenture that
such Person (or if a group of Persons, then one specified Person) shall
make all filings with the SEC (and any other appropriate Person) required
by the Exchange Act in connection with the Notes;
(ii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been
<PAGE>
45
satisfied with respect to such transaction;
(iv) the Note Issuer shall have received an Opinion of Counsel (and
shall have delivered copies thereof to the Note Trustee) to the effect that
such transaction will not have any material adverse tax consequence to the
Note Issuer, the Trust, any Noteholder or any Certificateholder;
(v) any action as is necessary to maintain the lien and security
interest created by this Indenture shall have been taken; and
(vi) the Note Issuer shall have delivered to the Note Trustee an
Officer's Certificate and an Opinion of Counsel each stating that such
conveyance or transfer and such supplemental indenture comply with this
Section 3.10 and that all conditions precedent herein provided for relating
to such transaction have been complied with (including any filing required
by the Exchange Act).
SECTION 3.11. Successor or Transferee. (a) Upon any consolidation
------------------------
or merger of the Note Issuer in accordance with Section 3.10(a), the Person
formed by or surviving such consolidation or merger (if other than the Note
Issuer) shall succeed to, and be substituted for, and may exercise every right
and power of, the Note Issuer under this Indenture with the same effect as if
such Person had been named as the Note Issuer herein.
(b) Except as set forth in Section 6.07, upon a conveyance or
transfer of all the assets and properties of the Note Issuer pursuant to Section
3.10(b), PG&E Funding LLC will be released from every covenant and agreement of
this Indenture to be observed or performed on the part of the Note Issuer with
respect to the Notes immediately upon the delivery of written notice to the Note
Trustee stating that PG&E Funding LLC is to be so released.
SECTION 3.12. No Other Business. The Note Issuer shall not engage in
------------------
any business other than financing, purchasing, owning and managing the
Transition Property in the manner contemplated by this Indenture and the Basic
Documents and activities incidental thereto.
SECTION 3.13. No Borrowing. The Note Issuer
-------------
<PAGE>
46
shall not issue, incur, assume, guarantee or otherwise become liable, directly
or indirectly, for any indebtedness except for the Notes.
SECTION 3.14. Servicer's Obligations. The Note Issuer shall enforce
-----------------------
the Servicer's compliance with all of the Servicer's material obligations under
the Servicing Agreement.
SECTION 3.15. Guarantees, Loans, Advances and Other Liabilities.
--------------------------------------------------
Except as otherwise contemplated by the Sale Agreement, the Servicing Agreement
or this Indenture, the Note Issuer shall not make any loan or advance or credit
to, or guarantee (directly or indirectly or by an instrument having the effect
of assuring another's payment or performance on any obligation or capability of
so doing or otherwise), endorse or otherwise become contingently liable,
directly or indirectly, in connection with the obligations, stocks or dividends
of, or own, purchase, repurchase or acquire (or agree contingently to do so) any
stock, obligations, assets or securities of, or any other interest in, or make
any capital contribution to, any other Person.
SECTION 3.16. Capital Expenditures. Other than expenditures in an
---------------------
aggregate amount not to exceed $25,000 in any calendar year, the Note Issuer
shall not make any expenditure (by long-term or operating lease or otherwise)
for capital assets (either realty or personalty).
SECTION 3.17. Non-Routine True-Up Adjustment. The Note Issuer agrees
-------------------------------
that it shall not consent to a Non-Routine True-Up Adjustment pursuant to
Section 4.01(c) of the Servicing Agreement unless the Rating Agency Condition
shall have been satisfied.
SECTION 3.18. Restricted Payments. The Note Issuer shall not,
--------------------
directly or indirectly, (i) pay any dividend or make any distribution (by
reduction of capital or otherwise), whether in cash, property, securities or a
combination thereof, to any owner of a beneficial interest in the Note Issuer or
otherwise with respect to any ownership or equity interest or security in or of
the Note Issuer, (ii) redeem, purchase, retire or otherwise acquire for value
any such ownership or equity interest or security or (iii) set aside or
otherwise segregate any amounts for any such purpose; provided, however, that,
-------- -------
if no Event of
<PAGE>
47
Default shall have occurred and be continuing, the Note Issuer may make, or
cause to be made, any such distributions to any owner of a beneficial interest
in the Note Issuer or otherwise with respect to any ownership or equity interest
or security in or of the Note Issuer using funds distributed to the Note Issuer
pursuant to Section 8.02(d) to the extent that such distributions would not
cause the book value of the remaining equity in the Note Issuer to decline below
0.5 percent of the original principal amount of all Series of Notes which remain
outstanding. The Note Issuer will not, directly or indirectly, make payments to
or distributions from the Collection Account except in accordance with this
Indenture and the Basic Documents.
SECTION 3.19. Notice of Events of Default. The Note Issuer agrees to
----------------------------
give the Note Trustee and the Rating Agencies prompt written notice of each
Event of Default hereunder and each default on the part of the Seller or the
Servicer of its obligations under the Sale Agreement or the Servicing Agreement,
respectively.
SECTION 3.20. Further Instruments and Acts. Upon request of the Note
-----------------------------
Trustee, the Note Issuer will execute and deliver such further instruments and
do such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
SECTION 3.21. Purchase of Subsequent Transition Property. (a) The
-------------------------------------------
Note Issuer may from time to time purchase Subsequent Transition Property from
the Seller pursuant to a Subsequent Sale Agreement, subject to the conditions
specified in paragraph (b) below.
<PAGE>
48
(b) The Note Issuer shall be permitted to purchase from the Seller
Subsequent Transition Property and the proceeds thereof only upon the
satisfaction of each of the following conditions on or prior to the related
Subsequent Sale Date:
(i) the Seller shall have provided the Note Issuer, the Note Trustee
and the Rating Agencies with written notice, which shall be given not later
than 10 days prior to the related Subsequent Sale Date, specifying the
Subsequent Sale Date for such Subsequent Transition Property and the
aggregate amount of the FTA Charges related to such Subsequent Transition
Property, and shall have provided any information reasonably requested by
any of the foregoing Persons with respect to the Subsequent Transition
Property then being conveyed to the Note Issuer;
(ii) the Seller and the Note Issuer shall have delivered to the Note
Trustee a duly executed Subsequent Sale Agreement in substantially the form
of the Sale Agreement;
(iii) as of such Subsequent Sale Date, the Seller was not insolvent
and will not have been made insolvent by such transfer and the Seller is
not aware of any pending insolvency with respect to itself;
(iv) the Rating Agency Condition shall have been satisfied with
respect to such conveyance;
(v) such conveyance will not result in an adverse tax consequence to
the Note Issuer, the Trust, the Noteholders or the Certificateholders;
(vi) as of such Subsequent Sale Date, no breach by the Seller of its
representations, warranties or covenants in the Sale Agreement and no
Servicer Default shall exist;
(vii) as of such Subsequent Sale Date, the Note Issuer shall have
sufficient funds available to pay the purchase price for the Subsequent
Transition Property to be conveyed on such date and all conditions to the
issuance of one or more Series of Notes intended to
<PAGE>
49
provide such funds set forth in Section 2.10 of this Indenture shall have
been satisfied;
(viii) the Note Issuer shall have delivered to the Note Trustee an
Officer's Certificate confirming the satisfaction of each condition
precedent specified in this paragraph (b);
(ix) (A) the Note Issuer shall have delivered to the Rating Agencies
any Opinions of Counsel requested by the Rating Agencies and (B) the Note
Issuer shall have delivered to the Note Trustee the Opinion of Counsel
required by Section 3.06(c) of this Indenture; and
(x) subject to any statutory lien under Section 843(g) of the PU Code,
the Seller and the Note Issuer shall have taken any action required to
maintain the first perfected ownership interest of the Note Issuer in the
Transition Property and the proceeds thereof, and the Note Issuer shall
have taken any action required to maintain first perfected security
interest of the Note Trustee in the Transition Property and the proceeds
thereof.
ARTICLE IV
Satisfaction and Discharge; Defeasance
--------------------------------------
SECTION 4.01. (a) Satisfaction and Discharge of Indenture;
----------------------------------------
Defeasance. This Indenture shall cease to be of further effect with respect to
- -----------
the Notes of any Series and the Note Trustee, on reasonable demand of and at the
expense of the Note Issuer, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture with respect to the Notes of such
Series, when
(A) either
(1) all Notes of such Series theretofore authenticated and
delivered (other than (i) Notes that have been destroyed, lost or
stolen and that have been replaced or paid as provided in Section 2.06
and (ii) Notes for whose payment money has theretofore been deposited
in trust or segregated and held in trust by the Note Issuer
<PAGE>
50
and thereafter repaid to the Note Issuer or discharged from such
trust, as provided in Section 3.03) have been delivered to the Note
Trustee for cancelation; or
(2) the Scheduled Maturity Date has occurred with respect to all
Notes of such Series not theretofore delivered to the Note Trustee for
cancelation, and the Note Issuer has irrevocably deposited or caused
to be irrevocably deposited with the Note Trustee cash, in trust for
such purpose, in an amount sufficient to pay and discharge the entire
indebtedness on such Notes not theretofore delivered to the Note
Trustee for cancelation on the Scheduled Maturity Date therefor;
(B) the Note Issuer has paid or caused to be paid all other sums
payable hereunder by the Note Issuer with respect to such Series; and
(C) the Note Issuer has delivered to the Note Trustee an Officer's
Certificate, an Opinion of Counsel and (if required by the TIA or the Note
Trustee) an Independent Certificate from a firm of certified public
accountants, each meeting the applicable requirements of Section 11.01(a)
and each stating that all conditions precedent herein provided for relating
to the satisfaction and discharge of this Indenture with respect to Notes
of such Series have been complied with.
(b) Subject to Sections 4.01(c) and 4.02, the Note Issuer at any time
may terminate (i) all its obligations under this Indenture with respect to the
Notes of any Series ("Legal Defeasance Option") or (ii) its obligations under
Sections 3.04, 3.05, 3.06, 3.07, 3.08, 3.09, 3.10, 3.12, 3.13, 3.14, 3.15, 3.16,
3.17 and 3.18 and the operation of Section 5.01(iv) ("Covenant Defeasance
Option") with respect to any Series of Notes. The Note Issuer may exercise the
Legal Defeasance Option with respect to any Series of Notes notwithstanding its
prior exercise of the Covenant Defeasance Option with respect to such Series.
If the Note Issuer exercises the Legal Defeasance Option with respect
to any Series, the maturity of the Notes
<PAGE>
51
of such Series may not be accelerated because of an Event of Default. If the
Note Issuer exercises the Covenant Defeasance Option with respect to any Series,
the maturity of the Notes of such Series may not be accelerated because of an
Event of Default specified in Section 5.01(iv).
Upon satisfaction of the conditions set forth herein to the exercise
of the Legal Defeasance Option or the Covenant Defeasance Option with respect to
any Series of Notes the Note Trustee, on reasonable demand of and at the expense
of the Note Issuer, shall execute proper instruments acknowledging satisfaction
and discharge of the obligations that are terminated pursuant to such exercise.
(c) Notwithstanding Sections 4.01(a) and 4.01(b) above, (i) rights of
registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments
of principal, premium, if any, and interest, (iv) Sections 4.03 and 4.04, (v)
the rights, obligations and immunities of the Note Trustee hereunder (including
the rights of the Note Trustee under Section 6.07 and the obligations of the
Note Trustee under Section 4.03) and (vi) the rights of Noteholders as
beneficiaries hereof with respect to the property deposited with the Note
Trustee payable to all or any of them, shall survive until the Notes of the
Series as to which this Indenture or certain obligations hereunder have be
satisfied and discharged pursuant to Section 4.01(a) or 4.01(b) have been paid
in full. Thereafter, the obligations in Sections 6.07 and 4.04 with respect to
such Series shall survive.
SECTION 4.02. Conditions to Defeasance. The Note Issuer may exercise
-------------------------
the Legal Defeasance Option or the Covenant Defeasance Option with respect to
any Series of Notes only if:
(a) the Note Issuer irrevocably deposits or causes to be deposited in
trust with the Note Trustee cash or U.S. Government Obligations for the
payment of principal of and premium, if any, and interest on such Notes to
the Scheduled Maturity Dates, Optional Redemption Date or Mandatory
Redemption Date therefor, as applicable;
(b) the Note Issuer delivers to the Note Trustee a
<PAGE>
52
certificate from a nationally recognized firm of Independent accountants
expressing its opinion that the payments of principal and interest when due
and without reinvestment on the deposited U.S. Government Obligations plus
any deposited cash without investment will provide cash at such times and
in such amounts (but, in the case of the Legal Defeasance Option only, not
more than such amounts) as will be sufficient to pay in respect of the
Notes of such Series (i) subject to clause (ii), principal in accordance
with the Expected Amortization Schedule therefor, (ii) if such Series is to
be redeemed, the Optional Redemption Price or Mandatory Redemption Price,
as applicable, therefor on the Optional Redemption Date or Mandatory
Redemption Date, as applicable, therefor and (iii) interest when due;
(c) in the case of the Legal Defeasance Option, 91 days pass after the
deposit is made and during the 91-day period no Default specified in
Section 5.01(v) or (vi) occurs which is continuing at the end of the
period;
(d) no Default has occurred and is continuing on the day of such
deposit and after giving effect thereto;
(e) in the case of an exercise of the Legal Defeasance Option, the
Note Issuer shall have delivered to the Note Trustee an Opinion of Counsel
stating that (i) the Note Issuer has received from, or there has been
published by, the Internal Revenue Service a ruling, or (ii) since the date
of execution of this Indenture, there has been a change in the applicable
Federal income tax law, in either case to the effect that, and based
thereon such opinion shall confirm that, the Holders of the Notes of such
Series will not recognize income, gain or loss for Federal income tax
purposes as a result of such legal defeasance and will be subject to
Federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such legal defeasance had not
occurred;
(f) in the case of an exercise of the Covenant
<PAGE>
53
Defeasance Option, the Note Issuer shall have delivered to the Note Trustee
an Opinion of Counsel to the effect that the Holders of the Notes of such
Series will not recognize income, gain or loss for Federal income tax
purposes as a result of such covenant defeasance and will be subject to
Federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such covenant defeasance had not
occurred; and
(g) the Note Issuer delivers to the Note Trustee an Officer's
Certificate and an Opinion of Counsel, each stating that all conditions
precedent to the satisfaction and discharge of the Notes of such Series to
the extent contemplated by this Article IV have been complied with.
Before or after a deposit pursuant to this Section 4.02 with respect
to any Series of Notes, the Note Issuer may make arrangements satisfactory to
the Note Trustee for the redemption of such Notes at a future date in accordance
with Article X.
SECTION 4.03. Application of Trust Money. All moneys or U.S.
---------------------------
Government Obligations deposited with the Note Trustee pursuant to Section 4.01
or 4.02 hereof shall be held in trust and applied by it, in accordance with the
provisions of the Notes and this Indenture, to the payment, either directly or
through any Paying Agent, as the Note Trustee may determine, to the Holders of
the particular Notes for the payment or redemption of which such moneys have
been deposited with the Note Trustee, of all sums due and to become due thereon
for principal, premium, if any, and interest; but such moneys need not be
segregated from other funds except to the extent required herein or in the
Servicing Agreement or required by law.
SECTION 4.04. Repayment of Moneys Held by Paying Agent. In
-----------------------------------------
connection with the satisfaction and discharge of this Indenture or the Covenant
Defeasance Option or Legal Defeasance Option with respect to the Notes of any
Series, all moneys then held by any Paying Agent other than the Note Trustee
under the provisions of this Indenture with respect to such Notes shall, upon
demand of the Note Issuer, be paid to the Note Trustee to be held and applied
according to Sec-
<PAGE>
54
tion 3.03 and thereupon such Paying Agent shall be released from all further
liability with respect to such moneys.
ARTICLE V
Remedies
--------
SECTION 5.01. Events of Default. "Event of Default" with respect to
------------------
any Series, wherever used herein, means any one of the following events
(whatever the reason for such Event of Default and whether it shall be voluntary
or involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(i) default in the payment of any interest on any Note when the same
becomes due and payable, and such default shall continue for a period of
five days; or
(ii) default in the payment of the then unpaid principal of any Note
of any Series on the Final Maturity Date for such Series; or
(iii) default in the payment of the Optional Redemption Price for any
Note on the Optional Redemption Date therefor, or a default in the payment
of the Mandatory Redemption Price for the Notes on the Mandatory Redemption
Date;
(iv) default in the observance or performance of any covenant or
agreement of the Note Issuer made in this Indenture (other than a covenant
or agreement, a default in the observance or performance of which is
elsewhere in this Section specifically dealt with), or any representation
or warranty of the Note Issuer made in this Indenture or in any certificate
or other writing delivered pursuant hereto or in connection herewith
proving to have been incorrect in any material respect as of the time when
the same shall have been made, and such default shall continue or not be
cured, or the circumstance or condition in respect of which such
misrepresentation or warranty was incorrect shall not have been eliminated
or otherwise cured, for a period of 30 days after there shall have been
given, by registered or certified mail, to the Note Issuer by the
<PAGE>
55
Note Trustee or to the Note Issuer and the Note Trustee by the Holders of
at least 25 percent of the Outstanding Amount of the Notes of such Series,
a written notice specifying such default or incorrect representation or
warranty and requiring it to be remedied and stating that such notice is a
"Notice of Default" hereunder; or
(v) the filing of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Note Issuer or any
substantial part of the Collateral in an involuntary case under any
applicable Federal or state bankruptcy, insolvency or other similar law now
or hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Note Issuer or
for any substantial part of the Collateral, or ordering the winding-up or
liquidation of the Note Issuer's affairs, and such decree or order shall
remain unstayed and in effect for a period of 60 consecutive days; or
(vi) the commencement by the Note Issuer of a voluntary case under any
applicable Federal or state bankruptcy, insolvency or other similar law now
or hereafter in effect, or the consent by the Note Issuer to the entry of
an order for relief in an involuntary case under any such law, or the
consent by the Note Issuer to the appointment or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official of the Note Issuer or for any substantial part of the Collateral,
or the making by the Note Issuer of any general assignment for the benefit
of creditors, or the failure by the Note Issuer generally to pay its debts
as such debts become due, or the taking of action by the Note Issuer in
furtherance of any of the foregoing.
The Note Issuer shall deliver to a Responsible Officer of the Note
Trustee and the Rating Agencies, within five days after an Authorized Officer
has knowledge of the occurrence thereof, written notice in the form of an
Officer's Certificate of any event which with the giving of notice and the lapse
of time would become an Event of Default under clause (iv), its status and what
action the Note Issuer is taking or proposes to take with respect thereto.
<PAGE>
56
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment.
----------------------------------------------------
If an Event of Default should occur and be continuing with respect to any
Series, then and in every such case the Note Trustee or the Holders of Notes
representing not less than a majority of the Outstanding Amount of the Notes of
all Series may declare all the Notes to be immediately due and payable, by a
notice in writing to the Note Issuer (and to the Note Trustee if given by Note
holders), and upon any such declaration the unpaid principal amount of the Notes
of all Series, together with accrued and unpaid interest thereon through the
date of acceleration, shall become immediately due and payable.
At any time after such declaration of acceleration of maturity has
been made and before a judgment or decree for payment of the money due has been
obtained by the Note Trustee as hereinafter in this Article V provided, the
Holders of Notes representing a majority of the Outstanding Amount of the Notes
of all Series, by written notice to the Note Issuer and the Note Trustee, may
rescind and annul such declaration and its consequences if:
(i) the Note Issuer has paid or deposited with the Note Trustee a sum
sufficient to pay
(A) all payments of principal of and premium, if any, and
interest on all Notes of all Series and all other amounts that would
then be due hereunder or upon such Notes if the Event of Default
giving rise to such acceleration had not occurred; and
(B) all sums paid or advanced by the Note Trustee hereunder and
the reasonable compensation, expenses, disbursements and advances of
the Note Trustee and its agents and counsel; and
(ii) all Events of Default with respect to all Series, other than the
nonpayment of the principal of the Notes of all Series that has become due
solely by such acceleration, have been cured or waived as provided in
Section 5.12.
No such rescission shall affect any subsequent default or impair any
right consequent thereto.
<PAGE>
57
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement by
-------------------------------------------------------
Note Trustee. (a) The Note Issuer covenants that if (i) default is made in the
- -------------
payment of any interest on any Note of a Series when the same becomes due and
payable, and such default continues for a period of five days, (ii) default is
made in the payment of the then unpaid principal of any Note of any Series on
the Final Maturity Date for such Note or (iii) default is made in the payment of
the Optional Redemption Price or Mandatory Redemption Price, as applicable, for
any Note on the Optional Redemption Date or Mandatory Redemption Date, as
applicable, therefor, the Note Issuer will, upon demand of the Note Trustee, pay
to it, for the benefit of the Holders of the Notes of such Series, the whole
amount then due and payable on such Notes for principal, premium, if any, and
interest, with interest upon the overdue principal and premium, if any, and, to
the extent payment at such rate of interest shall be legally enforceable, upon
overdue installments of interest, at the respective rate borne by the Notes of
such Series or the applicable Class of such Series and in addition thereto such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Note Trustee and its agents and counsel.
(b) Subject to Section 11.18, in case the Note Issuer shall fail
forthwith to pay such amounts upon such demand, the Note Trustee, in its own
name and as trustee of an express trust, may institute a Proceeding for the
collection of the sums so due and unpaid, and may prosecute such Proceeding to
judgment or final decree, and may enforce the same against the Note Issuer or
other obligor upon such Notes and collect in the manner provided by law out of
the property of the Note Issuer or other obligor upon such Notes, wherever
situated, the moneys adjudged or decreed to be payable.
(c) If an Event of Default occurs and is continuing with respect to
any Series, the Note Trustee may, as more particularly provided in Section 5.04,
in its discretion, proceed to protect and enforce its rights and the rights of
the Noteholders of such Series, by such appropriate Proceedings as the Note
Trustee shall deem most effective to protect and enforce any such rights,
whether for the specific enforcement of any covenant or agreement in this
Indenture or in aid of the exercise of any power
<PAGE>
58
granted herein, or to enforce any other proper remedy or legal or equitable
right vested in the Note Trustee by this Indenture or by law.
(d) In case there shall be pending, relative to the Note Issuer or
any other obligor upon the Notes or any Person having or claiming an ownership
interest in the Collateral, Proceedings under Title 11 of the United States Code
or any other applicable Federal or state bankruptcy, insolvency or other similar
law, or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Note Issuer or its property or such other obligor or
Person, or in case of any other comparable judicial Proceedings relative to the
Note Issuer or other obligor upon the Notes of any Series, or to the creditors
or property of the Note Issuer or such other obligor, the Note Trustee,
irrespective of whether the principal of any Notes of any Series shall then be
due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Note Trustee shall have made any demand pursuant to
the provisions of this Section, shall be entitled and empowered, by intervention
in such Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount of
principal, premium, if any, and interest owing and unpaid in respect of the
Notes and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Note Trustee (including any
claim for reasonable compensation to the Note Trustee and each predecessor
Note Trustee, and their respective agents, attorneys and counsel, and for
reimbursement of all expenses and liabilities incurred, and all advances
made, by the Note Trustee and each predecessor Note Trustee, except as a
result of negligence or bad faith) and of the Noteholders allowed in such
Proceedings;
(ii) unless prohibited by applicable law and regulations, to vote on
behalf of the Holders of Notes in any election of a trustee, a standby
trustee or Person performing similar functions in any such Proceedings;
and
(iii) to collect and receive any moneys or other
<PAGE>
59
property payable or deliverable on any such claims and to distribute all
amounts received with respect to the claims of the Noteholders and of the
Note Trustee on their behalf;
and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Noteholders to make
payments to the Note Trustee, and, in the event that the Note Trustee shall
consent to the making of payments directly to such Noteholders, to pay to the
Note Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Note Trustee, each predecessor Note Trustee and their
respective agents, attorneys and counsel, and all other expenses and liabilities
incurred, and all advances made, by the Note Trustee and each predecessor Note
Trustee except as a result of negligence or bad faith.
(e) Nothing herein contained shall be deemed to authorize the Note
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof or to
authorize the Note Trustee to vote in respect of the claim of any Noteholder in
any such proceeding except, as aforesaid, to vote for the election of a trustee
in bankruptcy or similar Person.
(f) All rights of action and of asserting claims under this
Indenture, or under any of the Notes of any Series, may be enforced by the Note
Trustee without the possession of any of the Notes of such Series or the
production thereof in any trial or other Proceedings relative thereto, and any
such action or proceedings instituted by the Note Trustee shall be brought in
its own name as trustee of an express trust, and any recovery of judgment,
subject to the payment of the expenses, disbursements and compensation of the
Note Trustee, each predecessor Note Trustee and their respective agents and
attorneys, shall be for the ratable benefit of the Holders of the Notes of such
Series.
(g) In any Proceedings brought by the Note Trustee (and also any
Proceedings involving the interpretation of any provision of this Indenture to
which the Note Trustee shall be a party), the Note Trustee shall
<PAGE>
60
be held to represent all the Holders of the Notes, and it shall not be necessary
to make any Noteholder a party to any such Proceedings.
SECTION 5.04. Remedies; Priorities. (a) If an Event of Default shall
---------------------
have occurred and be continuing with respect to a Series, the Note Trustee may
do one or more of the following (subject to Section 5.05):
(i) institute Proceedings in its own name and as trustee of an express
trust for the collection of all amounts then payable on the Notes of such
Series or under this Indenture with respect thereto, whether by declaration
or otherwise, enforce any judgment obtained, and collect from the Note
Issuer and any other obligor upon such Notes moneys adjudged due;
(ii) institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture with respect to the Collateral;
(iii) exercise any remedies of a secured party under the UCC or the PU
Code and take any other appropriate action to protect and enforce the
rights and remedies of the Note Trustee and the Holders of the Notes of
such Series; and
(iv) sell the Collateral or any portion thereof or rights or interest
therein, at one or more public or private sales called and conducted in any
manner permitted by law;
provided, however, that the Note Trustee may not sell or otherwise liquidate any
- -------- -------
portion of the Collateral following an Event of Default, other than an Event of
Default described in Section 5.01(i), (ii) or (iii), with respect to any Series
unless (A) the Holders of 100 percent of the Outstanding Amount of the Notes of
all Series consent thereto, (B) the proceeds of such sale or liquidation
distributable to the Noteholders of all Series are sufficient to discharge in
full all amounts then due and unpaid upon such Notes for principal, premium, if
any, and interest after taking into account payment of all amounts due prior
thereto pursuant to the priorities set forth in Section 8.02(d) or (C) the Note
Trustee determines that the Collateral will not continue to provide sufficient
funds for
<PAGE>
61
all payments on the Notes of all Series as they would have become due if the
Notes had not been declared due and payable, and the Note Trustee obtains the
consent of Holders of 66-2/3 percent of the Outstanding Amount of the Notes of
all Series. In determining such sufficiency or insufficiency with respect to
clause (B) and (C), the Note Trustee may, but need not, obtain and conclusively
rely upon an opinion of an Independent investment banking or accounting firm of
national reputation as to the feasibility of such proposed action and as to the
sufficiency of the Collateral for such purpose.
(b) If the Note Trustee collects any money pursuant to this Article
V, it shall pay out such money in accordance with the priorities set forth in
Section 8.02(d).
SECTION 5.05. Optional Preservation of the Collateral. If the Notes
----------------------------------------
of all Series have been declared to be due and payable under Section 5.02
following an Event of Default and such declaration and its consequences have not
been rescinded and annulled, the Note Trustee may, but need not, elect to
maintain possession of the Collateral. It is the desire of the parties hereto
and the Noteholders that there be at all times sufficient funds for the payment
of principal of and premium, if any, and interest on the Notes, and the Note
Trustee shall take such desire into account when determining whether or not to
maintain possession of the Collateral. In determining whether to maintain
possession of the Collateral, the Note Trustee may, but need not, obtain and
conclusively rely upon an opinion of an Independent investment banking or
accounting firm of national reputation as to the feasibility of such proposed
action and as to the sufficiency of the Collateral for such purpose.
SECTION 5.06. Limitation of Suits. No Holder of any Note of any
--------------------
Series shall have any right to institute any Proceeding, judicial or otherwise,
with respect to this Indenture, or for the appointment of a receiver or trustee,
or for any other remedy hereunder, unless:
(i) such Holder previously has given written notice to the Note
Trustee of a continuing Event of Default with respect to such Series;
(ii) the Holders of not less than 25 percent of
<PAGE>
62
the Outstanding Amount of the Notes of all Series have made written request
to the Note Trustee to institute such Proceeding in respect of such Event
of Default in its own name as Note Trustee hereunder;
(iii) such Holder or Holders have offered to the Note Trustee
indemnity satisfactory to it against the costs, expenses and liabilities to
be incurred in complying with such request;
(iv) the Note Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute such Proceedings;
and
(v) no direction inconsistent with such written request has been given
to the Note Trustee during such 60-day period by the Holders of a majority
of the Outstanding Amount of the Notes of all Series;
it being understood and intended that no one or more Holders of Notes shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other
Holders of Notes or to obtain or to seek to obtain priority or preference over
any other Holders or to enforce any right under this Indenture, except in the
manner herein provided.
In the event the Note Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of Notes,
each representing less than a majority of the Outstanding Amount of the Notes of
all Series, the Note Trustee in its sole discretion may determine what action,
if any, shall be taken, notwithstanding any other provisions of this Indenture.
SECTION 5.07. Unconditional Rights of Noteholders To Receive
----------------------------------------------
Principal, Premium, if any, and Interest. Notwithstanding any other provisions
- -----------------------------------------
in this Indenture, the Holder of any Note shall have the right, which is
absolute and unconditional, (a) to receive payment of (i) the interest, if any,
on such Note on or after the due dates thereof expressed in such Note or in this
Indenture, (ii) the unpaid principal, if any, of such Notes on or after the
Final Maturity Date therefor or (iii) in the case of redemption, receive payment
of the unpaid principal and
<PAGE>
63
premium, if any, and interest, if any, on such Note on or after the Optional
Redemption Date or Mandatory Redemption Date, as applicable, therefor and (b) to
institute suit for the enforcement of any such payment, and such right shall not
be impaired without the consent of such Holder.
SECTION 5.08. Restoration of Rights and Remedies. If the Note Trustee
-----------------------------------
or any Noteholder has instituted any Proceeding to enforce any right or remedy
under this Indenture and such Proceeding has been discontinued or abandoned for
any reason or has been determined adversely to the Note Trustee or to such
Noteholder, then and in every such case the Note Issuer, the Note Trustee and
the Noteholders shall, subject to any determination in such Proceeding, be
restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Note Trustee and the Noteholders shall
continue as though no such Proceeding had been instituted.
SECTION 5.09. Rights and Remedies Cumulative. No right or remedy
-------------------------------
herein conferred upon or reserved to the Note Trustee or to the Noteholders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 5.10. Delay or Omission Not a Waiver. No delay or omission
-------------------------------
of the Note Trustee or any Noteholder to exercise any right or remedy accruing
upon any Default or Event of Default shall impair any such right or remedy or
constitute a waiver of any such Default or Event of Default or an acquiescence
therein. Every right and remedy given by this Article V or by law to the Note
Trustee or to the Noteholders may be exercised from time to time, and as often
as may be deemed expedient, by the Note Trustee or by the Noteholders, as the
case may be.
<PAGE>
64
SECTION 5.11. Control by Noteholders. The Holders of a majority of
-----------------------
the Outstanding Amount of the Notes of all Series (or, if less than all Series
or Classes are affected, the affected Series or Class or Classes) shall have the
right to direct the time, method and place of conducting any Proceeding for any
remedy available to the Note Trustee with respect to the Notes of such Series or
Class or Classes or exercising any trust or power conferred on the Note Trustee
with respect to such Series or Class or Classes; provided that
--------
(i) such direction shall not be in conflict with any rule of law or
with this Indenture;
(ii) subject to the express terms of Section 5.04, any direction to
the Note Trustee to sell or liquidate the Collateral shall be by the
Holders of Notes representing not less than 100 percent of the
Outstanding Amount of the Notes of all Series;
(iii) if the conditions set forth in Section 5.05 have been satisfied
and the Note Trustee elects to retain the Collateral pursuant to such
Section, then any direction to the Note Trustee by Holders of Notes
representing less than 100 percent of the Outstanding Amount of the Notes
of all Series to sell or liquidate the Collateral shall be of no force and
effect; and
(iv) the Note Trustee may take any other action deemed proper by the
Note Trustee that is not inconsistent with such direction;
provided, however, that, subject to Section 6.01, the Note Trustee need not take
- -------- -------
any action that it determines might involve it in liability or might materially
adversely affect the rights of any Noteholders not consenting to such action.
SECTION 5.12. Waiver of Past Defaults. Prior to the declaration of
------------------------
the acceleration of the maturity of the Notes of all Series as provided in
Section 5.02, the Holders of Notes of not less than a majority of the
Outstanding Amount of the Notes of all Series may waive any past Default or
Event of Default and its consequences except a Default (a) in payment of
principal of or premium, if any, or interest on any of the Notes or (b) in
respect of a covenant or provision hereof which cannot be modified or amended
<PAGE>
65
without the consent of the Holder of each Note of all Series or Classes
affected. In the case of any such waiver, the Note Issuer, the Note Trustee and
the Holders of the Notes shall be restored to their former positions and rights
hereunder, respectively; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereto.
Upon any such waiver, such Default shall cease to exist and be deemed
to have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereto.
SECTION 5.13. Undertaking for Costs. All parties to this Indenture
----------------------
agree, and each Holder of any Note by such Holder's acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Indenture, or in any suit
against the Note Trustee for any action taken, suffered or omitted by it as Note
Trustee, the filing by any party litigant in such suit of an undertaking to pay
the costs of such suit, and that such court may in its discretion assess
reasonable costs, including reasonable attorneys' fees, against any party
litigant in such suit, having due regard to the merits and good faith of the
claims or defenses made by such party litigant; but the provisions of this
Section shall not apply to (a) any suit instituted by the Note Trustee, (b) any
suit instituted by any Noteholder, or group of Noteholders, in each case holding
in the aggregate more than 10 percent of the Outstanding Amount of the Notes of
a Series or (c) any suit instituted by any Noteholder for the enforcement of the
payment of (i) interest on any Note on or after the due dates expressed in such
Note and in this Indenture, (ii) the unpaid principal, if any, of any Note on or
after the Final Maturity Date therefor or (iii) in the case of redemption, the
unpaid principal of and premium, if any, and interest on any Note on or after
the Optional Redemption Date or Mandatory Redemption Date, as applicable,
therefor.
SECTION 5.14. Waiver of Stay or Extension Laws. The Note Issuer
---------------------------------
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or
<PAGE>
66
plead or in any manner whatsoever, claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, that may affect the covenants or the performance of this Indenture; and
the Note Issuer (to the extent that it may lawfully do so) hereby expressly
waives all benefit or advantage of any such law, and covenants that it will not
hinder, delay or impede the execution of any power herein granted to the Note
Trustee, but will suffer and permit the execution of every such power as though
no such law had been enacted.
SECTION 5.15. Action on Notes. The Note Trustee's right to seek and
----------------
recover judgment on the Notes or under this Indenture shall not be affected by
the seeking, obtaining or application of any other relief under or with respect
to this Indenture. Neither the lien of this Indenture nor any rights or
remedies of the Note Trustee or the Noteholders shall be impaired by the
recovery of any judgment by the Note Trustee against the Note Issuer or by the
levy of any execution under such judgment upon any portion of the Collateral or
upon any of the assets of the Note Issuer.
SECTION 5.16. Performance and Enforcement of Certain Obligations.
---------------------------------------------------
(a) Promptly following a request from the Note Trustee to do so and at the Note
Issuer's expense, the Note Issuer agrees to take all such lawful action as the
Note Trustee may request to compel or secure the performance and observance by
the Seller and the Servicer, as applicable, of each of their obligations to the
Note Issuer under or in connection with the Sale Agreement and the Servicing
Agreement, respectively, in accordance with the terms thereof, and to exercise
any and all rights, remedies, powers and privileges lawfully available to the
Note Issuer under or in connection with the Sale Agreement and the Servicing
Agreement, respectively, to the extent and in the manner directed by the Note
Trustee, including the transmission of notices of default on the part of the
Seller or the Servicer thereunder and the institution of legal or administrative
actions or proceedings to compel or secure performance by the Seller or the
Servicer of each of their obligations under the Sale Agreement and the Servicing
Agreement, respectively.
(b) If an Event of Default has occurred, the Note Trustee may, and,
at the direction (which direction shall be
<PAGE>
67
in writing or by telephone (confirmed in writing promptly thereafter)) of the
Holders of 66-2/3 percent of the Outstanding Amount of the Notes of all Series
shall, subject to Article VI, exercise all rights, remedies, powers, privileges
and claims of the Note Issuer against the Seller or the Servicer under or in
connection with the Sale Agreement and the Servicing Agreement, respectively,
including the right or power to take any action to compel or secure performance
or observance by the Seller or the Servicer of each of their obligations to the
Note Issuer thereunder and to give any consent, request, notice, direction,
approval, extension or waiver under the Sale Agreement or the Servicing
Agreement, respectively, and any right of the Note Issuer to take such action
shall be suspended.
ARTICLE VI
The Note Trustee
----------------
SECTION 6.01. Duties of Note Trustee. (a) If an Event of Default
-----------------------
has occurred and is continuing, the Note Trustee shall exercise the rights and
powers vested in it by this Indenture and use the same degree of care and skill
in their exercise as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Note Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the Note
Trustee; and
(ii) in the absence of bad faith on its part, the Note Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Note Trustee and conforming to the requirements of this Indenture;
however, the Note Trustee shall examine the certificates and opinions to
determine whether or not they conform to the
<PAGE>
68
requirements of this Indenture.
(c) The Note Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section;
(ii) the Note Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer unless it is proved that the
Note Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Note Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 5.11.
(d) Every provision of this Indenture that in any way relates to the
Note Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Note Trustee shall not be liable for interest on any money
received by it except as the Note Trustee may agree in writing with the Note
Issuer.
(f) Money held in trust by the Note Trustee need not be segregated
from other funds except to the extent required by law or the terms of this
Indenture, the Sale Agreement and the Servicing Agreement.
(g) No provision of this Indenture shall require the Note Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayments
of such funds or indemnity satisfactory to it against such risk or liability is
not reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Note Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
<PAGE>
69
(i) In the event that the Trustee is also acting as Paying Agent or
Note Registrar hereunder, this Article VI shall also be afforded to such Paying
Agent or Note Registrar.
SECTION 6.02. Rights of Note Trustee. (a) The Note Trustee may
-----------------------
conclusively rely and shall be fully protected in relying on any document
believed by it to be genuine and to have been signed or presented by the proper
person. The Note Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Note Trustee acts or refrains from acting, it may
require an Officer's Certificate or an Opinion of Counsel. The Note Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on the Officer's Certificate or Opinion of Counsel.
(c) The Note Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys or a custodian or nominee, and the Note Trustee shall not be
responsible for any misconduct or negligence on the part of, or for the
supervision of, any such agent, attorney, custodian or nominee appointed with
due care by it hereunder.
(d) The Note Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that the Note Trustee's conduct does not
--------- -------
constitute wilful misconduct, negligence or bad faith.
(e) The Note Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture and
the Notes shall be full and complete authorization and protection from liability
in respect to any action taken, omitted or suffered by it hereunder in good
faith and in accordance with the advice or opinion of such counsel.
SECTION 6.03. Individual Rights of Note Trustee. The Note Trustee in
----------------------------------
its individual or any other capacity may become the owner or pledgee of Notes
and may otherwise deal with the Note Issuer or its affiliates with the same
rights it would have if it were not Note Trustee. Any
<PAGE>
70
Paying Agent, Note Registrar, co-registrar or co-paying agent may do the same
with like rights. However, the Note Trustee must comply with Sections 6.11 and
6.12.
SECTION 6.04. Note Trustee's Disclaimer. The Note Trustee shall not
--------------------------
be responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Notes, it shall not be accountable for the Note Issuer's
use of the proceeds from the Notes, and it shall not be responsible for any
statement of the Note Issuer in the Indenture or in any document issued in
connection with the sale of the Notes or in the Notes other than the Note
Trustee's certificate of authentication.
SECTION 6.05. Notice of Defaults. If a Default occurs and is
-------------------
continuing with respect to any Series and if it is actually known to a
Responsible Officer of the Note Trustee, the Note Trustee shall mail to each
Holder of Notes of all Series notice of the Default within 90 days after it
occurs. Except in the case of a Default in payment of principal of and premium,
if any, or interest on any Note, the Note Trustee may withhold the notice if and
so long as a committee of its Responsible Officers in good faith determines that
withholding the notice is in the interests of Noteholders.
SECTION 6.06. Reports by Note Trustee to Holders.
-----------------------------------
(a) So long as the Note Trustee is the Note Registrar and Paying
Agent, it shall deliver to each Noteholder such information in its possession as
may be required to enable such holder to prepare its Federal and state income
tax returns.
(b) With respect to each Series of Notes, on or prior to each Payment
Date therefor, the Note Trustee will deliver to each Holder of Notes on such
Payment Date a statement as provided and prepared by the Servicer which will
include (to the extent applicable) the following information (and any other
information so specified in the applicable Series Supplement) as to the Notes of
such Series with respect to such Payment Date or the period since the previous
Payment Date, as applicable:
(i) the amount of the distribution to Noteholders allocable to
principal;
<PAGE>
71
(ii) the amount of the distribution to Noteholders allocable to
interest;
(iii) the aggregate outstanding Principal Balance of the Notes, after
giving effect to payments allocated to principal reported under (i) above;
and
(iv) the Principal Balance and the Projected Principal Balance as of
such Payment Date, after giving effect to distributions to be made on such
Payment Date.
(c) The Note Issuer shall send a copy of each of the Certificate of
Compliance delivered to it pursuant to Section 3.03 of the Servicing Agreement
and the Annual Accountant's Report delivered to it pursuant to Section 3.04 of
the Servicing Agreement to the Rating Agencies. A copy of such certificate and
report may be obtained by any Noteholder by a request in writing to the Note
Trustee.
SECTION 6.07. Compensation and Indemnity. The Note Issuer shall pay
---------------------------
to the Note Trustee from time to time reasonable compensation for its services.
The Note Trustee's compensation shall not be limited by any law on compensation
of a trustee of an express trust. The Note Issuer shall reimburse the Note
Trustee for all reasonable out-of-pocket expenses incurred or made by it,
including costs of collection, in addition to the compensation for its services.
Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Note Trustee's agents, counsel, accountants
and experts. The Note Issuer shall indemnify the Note Trustee and its officers,
directors, employees and agents against any and all loss, liability or expense
(including attorneys' fees and expenses) incurred by it in connection with the
administration of this trust and the performance of its duties hereunder. The
Note Trustee shall notify the Note Issuer as soon as is reasonably practicable
of any claim for which it may seek indemnity. Failure by the Note Trustee to so
notify the Note Issuer shall not relieve the Note Issuer of its obligations
hereunder. The Note Issuer shall defend the claim and the Note Trustee may have
separate counsel and the Note Issuer shall pay the fees and expenses of such
counsel. The Note Issuer need not reimburse any expense or
<PAGE>
72
indemnify against any loss, liability or expense incurred by the Note Trustee
through the Note Trustee's own wilful misconduct, negligence or bad faith.
The Note Issuer's payment obligations to the Note Trustee pursuant to
this Section shall survive the discharge of this Indenture or the earlier
resignation or removal of the Note Trustee. When the Note Trustee incurs
expenses after the occurrence of a Default specified in Section 5.01(v) or (vi)
with respect to the Note Issuer, the expenses are intended to constitute
expenses of administration under Title 11 of the United States Code or any other
applicable Federal or state bankruptcy, insolvency or similar law.
SECTION 6.08. Replacement of Note Trustee. The Note Trustee may
----------------------------
resign at any time by so notifying the Note Issuer, provided that no such
resignation shall be effective until either (a) the Collateral has been
completely liquidated and the proceeds of the liquidation distributed to the
Noteholders or (b) a successor trustee having the qualifications set forth in
Section 6.11 has been designated and has accepted such trusteeship. The Holders
of a majority in Outstanding Amount of the Notes of all Series may remove the
Note Trustee by so notifying the Note Trustee and may appoint a successor Note
Trustee. The Note Issuer shall remove the Note Trustee if:
(i) the Note Trustee fails to comply with Section 6.11;
(ii) the Note Trustee is adjudged a bankrupt or insolvent;
(iii) a receiver or other public officer takes charge of the Note
Trustee or its property; or
(iv) the Note Trustee otherwise becomes incapable of acting.
If the Note Trustee resigns or is removed or if a vacancy exists in
the office of Note Trustee for any reason (the Note Trustee in such event being
referred to herein as the retiring Note Trustee), the Note Issuer shall promptly
appoint a successor Note Trustee.
A successor Note Trustee shall deliver a written
<PAGE>
73
acceptance of its appointment to the retiring Note Trustee and to the Note
Issuer. Thereupon the resignation or removal of the retiring Note Trustee shall
become effective, and the successor Note Trustee shall have all the rights,
powers and duties of the Note Trustee under this Indenture. The successor Note
Trustee shall mail a notice of its succession to Noteholders. The retiring Note
Trustee shall promptly transfer all property held by it as Note Trustee to the
successor Note Trustee.
If a successor Note Trustee does not take office within 60 days after
the retiring Note Trustee resigns or is removed, the retiring Note Trustee, the
Note Issuer or the Holders of a majority in Outstanding Amount of the Notes of
all Series may petition any court of competent jurisdiction for the appointment
of a successor Note Trustee.
If the Note Trustee fails to comply with Section 6.11, any Noteholder
may petition any court of competent jurisdiction for the removal of the Note
Trustee and the appointment of a successor Note Trustee.
Notwithstanding the replacement of the Note Trustee pursuant to this
Section, the Note Issuer's obligations under Section 6.07 shall continue for the
benefit of the retiring Note Trustee.
SECTION 6.09. Successor Note Trustee by Merger. If the Note Trustee
---------------------------------
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Note Trustee.
In case at the time such successor or successors by merger, conversion
or consolidation to the Note Trustee shall succeed to the trusts created by this
Indenture any of the Notes shall have been authenticated but not delivered, any
such successor to the Note Trustee may adopt the certificate of authentication
of any predecessor trustee, and deliver such Notes so authenticated; and in case
at that time any of the Notes shall not have been authenticated, any successor
to the Note Trustee may authenticate such Notes either in the name of any
predecessor hereunder or in the name of the successor to the Note Trustee; and
in all such
<PAGE>
74
cases such certificates shall have the full force which it is anywhere in the
Notes or in this Indenture provided that the certificate of the Note Trustee
shall have.
SECTION 6.10. Appointment of Co-Trustee or Separate Trustee. (a)
----------------------------------------------
Notwithstanding any other provisions of this Indenture, at any time, for the
purpose of meeting any legal requirement of any jurisdiction in which any part
of the Trust may at the time be located, the Note Trustee shall have the power
and may execute and deliver all instruments to appoint one or more Persons to
act as a co-trustee or co-trustees, or separate trustee or separate trustees, of
all or any part of the Trust, and to vest in such Person or Persons, in such
capacity and for the benefit of the Noteholders, such title to the Trust, or any
part hereof, and, subject to the other provisions of this Section, such powers,
duties, obligations, rights and trusts as the Note Trustee may consider
necessary or desirable. No co-trustee or separate trustee hereunder shall be
required to meet the terms of eligibility as a successor trustee under Section
6.11 and no notice to Noteholders of the appointment of any co-trustee or
separate trustee shall be required under Section 6.08 hereof.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations conferred or imposed
upon the Note Trustee shall be conferred or imposed upon and exercised or
performed by the Note Trustee and such separate trustee or co-trustee
jointly (it being understood that such separate trustee or co-trustee is
not authorized to act separately without the Note Trustee joining in such
act), except to the extent that under any law of any jurisdiction in which
any particular act or acts are to be performed the Note Trustee shall be
incompetent or unqualified to perform such act or acts, in which event such
rights, powers, duties and obligations (including the holding of title to
the Collateral or any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate trustee or co-trustee, but
solely at the direction of the Note Trustee;
<PAGE>
75
(ii) no trustee hereunder shall be personally liable by reason of any
act or omission of any other trustee hereunder; and
(iii) the Note Trustee may at any time accept the resignation of or
remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Note Trustee
shall be deemed to have been given to each of the then separate trustees and co-
trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Indenture and
the conditions of this Article VI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Note Trustee or separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every provision of this
Indenture relating to the conduct of, affecting the liability of, or affording
protection to, the Note Trustee. Every such instrument shall be filed with the
Note Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Note Trustee, its agent or attorney-in-fact with full power and authority, to
the extent not prohibited by law, to do any lawful act under or in respect of
this Indenture on its behalf and in its name. If any separate trustee or co-
trustee shall die, become incapable of acting, resign or be removed, all of its
estates, properties, rights, remedies and trusts shall vest in and be exercised
by the Note Trustee, to the extent permitted by law, without the appointment of
a new or successor trustee.
SECTION 6.11. Eligibility; Disqualification. The Note Trustee shall
------------------------------
at all times satisfy the requirements of TIA (S) 310(a) and Section 26(a)(i) of
the Investment Company Act of 1940. The Note Trustee shall have a combined
capital and surplus of at least $50,000,000 as set forth in its most recent
published annual report of condition and it shall have a long term debt rating
of A (or the equivalent thereof) or better by all of the Rating Agencies from
which a rating is available. The Note Trustee shall comply with TIA (S) 310(b),
including the
<PAGE>
76
optional provision permitted by the second sentence of TIA (S) 310(b)(9);
provided, however, that there shall be excluded from the operation of TIA (S)
- -------- -------
310(b)(1) any indenture or indentures under which other securities of the Note
Issuer are outstanding if the requirements for such exclusion set forth in TIA
(S) 310(b)(1) are met.
SECTION 6.12. Preferential Collection of Claims Against Note Issuer.
------------------------------------------------------
The Note Trustee shall comply with TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Note Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated.
SECTION 6.13 Representations and Warranties of Note Trustee. The
----------------------------------------------
Note Trustee hereby represents and warrants that:
(a) The Note Trustee is a national banking association, validly
existing and in good standing under the laws of the United States; and
(b) The Note Trustee has full power, authority and legal rights to
execute, deliver and perform this Indenture and the Basic Documents to which the
Note Trustee is a party and has taken all necessary action to authorize the
execution, delivery, and performance by it of this Indenture and such Basic
Documents.
ARTICLE VII
Noteholders' Lists and Reports
------------------------------
SECTION 7.01. Note Issuer To Furnish Note Trustee Names and Addresses
-------------------------------------------------------
of Noteholders. The Note Issuer will furnish or cause to be furnished to the
- ---------------
Note Trustee (a) not more than five days after the earlier of (i) each Record
Date with respect to each Series and (ii) three months after the last Record
Date with respect to each Series, a list, in such form as the Note Trustee may
reasonably require, of the names and addresses of the Holders of Notes of such
Series as of such Record Date, (b) at such other times as the Note Trustee may
request in writing, within 30 days after receipt by the Note Issuer of any such
request, a list of similar form and content as of a date not more than 10 days
prior to the time such list is furnished; provided, however, that so long as the
-------- -------
Note Trustee is the Note Registrar, no such list
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77
shall be required to be furnished.
SECTION 7.02. Preservation of Information; Communications to
----------------------------------------------
Noteholders. (a) The Note Trustee shall preserve, in as current a form as is
- ------------
reasonably practicable, the names and addresses of the Holders of Notes
contained in the most recent list furnished to the Note Trustee as provided in
Section 7.01 and the names and addresses of Holders of Notes received by the
Note Trustee in its capacity as Note Registrar. The Note Trustee may destroy
any list furnished to it as provided in such Section 7.01 upon receipt of a new
list so furnished.
(b) Noteholders may communicate pursuant to TIA (S) 312(b) with
other Noteholders with respect to their rights under this Indenture or under the
Notes.
(c) The Note Issuer, the Note Trustee and the Note Registrar shall
have the protection of TIA (S) 312(c).
SECTION 7.03. Reports by Note Issuer. (a) The Note Issuer shall:
-----------------------
(i) so long as the Note Issuer is required to file such documents with
the SEC, file with the Note Trustee, within 15 days after the Note Issuer
is required to file the same with the SEC, copies of the annual reports and
of the information, documents and other reports (or copies of such portions
of any of the foregoing as the SEC may from time to time by rules and
regulations prescribe) which the Note Issuer may be required to file with
the SEC pursuant to Section 13 or 15(d) of the Exchange Act;
(ii) file with the Note Trustee and the SEC in accordance with rules
and regulations prescribed from time to time by the SEC such additional
information, documents and reports with respect to compliance by the Note
Issuer with the conditions and covenants of this Indenture as may be
required from time to time by such rules and regulations; and
(iii) supply to the Note Trustee (and the Note Trustee shall transmit
by mail to all Noteholders described in TIA (S) 313(c)) such summaries of
any information, documents and reports required to be filed
<PAGE>
78
by the Note Issuer pursuant to clauses (i) and (ii) of this Section 7.03(a)
as may be required by rules and regulations prescribed from time to time by
the SEC.
(b) Unless the Note Issuer otherwise determines, the fiscal year of
the Note Issuer shall end on December 31 of each year.
SECTION 7.04. Reports by Note Trustee. If required by TIA (S)
------------------------
313(a), within 60 days after September 30 of each year, commencing with the year
after the issuance of the Notes of any Series, the Note Trustee shall mail to
each Holder of Notes of such Series as required by TIA (S) 313(c) a brief report
dated as of such date that complies with TIA (S) 313(a). The Note Trustee also
shall comply with TIA (S) 313(b); provided, however, that the initial report so
-------- -------
issued shall be delivered not more than 12 months after the initial issuance of
each Series.
A copy of each report at the time of its mailing to Noteholders shall
be filed by the Note Trustee with the SEC and each stock exchange, if any, on
which the Notes are listed. The Note Issuer shall notify the Note Trustee if
and when the Notes are listed on any stock exchange.
ARTICLE VIII
Accounts, Disbursements and Releases
------------------------------------
SECTION 8.01. Collection of Money. Except as otherwise expressly
--------------------
provided herein, the Note Trustee may demand payment or delivery of, and shall
receive and collect, directly and without intervention or assistance of any
fiscal agent or other intermediary, all money and other property payable to or
receivable by the Note Trustee pursuant to this Indenture. The Note Trustee
shall apply all such money received by it as provided in this Indenture. Except
as otherwise expressly provided in this Indenture, if any default occurs in the
making of any payment or performance under any agreement or instrument that is
part of the Collateral, the Note Trustee may take such action as may be
appropriate to enforce such payment or performance, subject to Article VI,
including the institution and prosecution of appropriate Proceedings. Any such
action shall be without prejudice to any right to claim a Default
<PAGE>
79
or Event of Default under this Indenture and any right to proceed thereafter as
provided in Article V.
SECTION 8.02. Collection Account. (a) Prior to the Series Issuance
-------------------
Date for the first Series issued hereunder, the Note Issuer shall open, at the
Note Trustee's Corporate Trust Office, or at another Eligible Institution, one
or more segregated trust accounts in the Note Trustee's name for the deposit of
Estimated FTA Collections (collectively, the "Collection Account"). The
Collection Account will consist of four subaccounts: a general subaccount (the
"General Subaccount"), a reserve subaccount (the "Reserve Subaccount"), a
subaccount for the Overcollateralization Amount (the "Overcollateralization
Subaccount") and a capital subaccount (the "Capital Subaccount"). All amounts
in the Collection Account not allocated to any other subaccount shall be
allocated to the General Subaccount. Prior to the initial Payment Date, all
amounts in the Collection Account (other than funds deposited into the Capital
Subaccount, up to the Required Capital Level) shall be allocated to the General
Subaccount. All references to the Collection Account shall be deemed to include
reference to all subaccounts contained therein. Withdrawals from and deposits to
each of the foregoing subaccounts of the Collection Account shall be made as set
forth in Section 8.02(d) and (e). The Collection Account shall at all times be
maintained in an Eligible Deposit Account and only the Note Trustee shall have
access to the Collection Account for the purpose of making deposits in and
withdrawals from the Collection Account in accordance with this Indenture.
Funds in the Collection Account shall not be commingled with any other moneys.
All moneys deposited from time to time in the Collection Account, all deposits
therein pursuant to this Indenture, and all investments made in Eligible
Investments with such moneys, including all income or other gain from such
investments, shall be held by the Note Trustee in the Collection Account as part
of the Collateral as herein provided.
(b) The Note Trustee shall have sole dominion and exclusive control
over all moneys in the Collection Account and shall apply such amounts therein
as provided in this Section 8.02. The Note Trustee shall also pay from the
Collection Account any amounts requested to be paid by the Servicer pursuant to
Section 6.11(d)(ii) of the Servicing Agreement.
<PAGE>
80
(c) FTA Collections shall be deposited in the General Subaccount as
provided in Section 6.11 of the Servicing Agreement. All deposits to and
withdrawals from the Collection Account and all allocations to the subaccounts
of the Collection Account shall be made by the Note Trustee in accordance with
the written instructions provided by the Servicer in the Monthly Servicer's
Certificate and the Quarterly Servicer's Certificate, as applicable.
(d) On each Payment Date for any Series of Notes, the Note Trustee
shall apply all amounts on deposit in the Collection Account, including all net
earnings thereon, to pay the following amounts, in accordance with the Quarterly
Servicer's Certificate, in the following priority:
(i) all amounts owed by the Note Issuer to the Note Trustee (including
legal fees and expenses) shall be paid to the Note Trustee (subject to
Section 6.07) and all amounts owed to the Certificate Trustee and the
Delaware Trustee under the Trust Agreement shall be paid to the Certificate
Trustee and Delaware Trustee, as appropriate;
(ii) the Servicing Fee for such Payment Date and all unpaid Servicing
Fees for prior Payment Dates shall be paid to the Servicer;
(iii) the Quarterly Administration Fee and all unpaid Quarterly
Administration Fees from prior Payment Dates shall be paid to the
Administrator;
(iv) so long as no Default or Event of Default shall have occurred and
be continuing or would result from such payment, all other Operating
Expenses shall be paid to the Persons entitled thereto or, if such have
been previously paid by the Note Issuer, to the Note Issuer in
reimbursement thereof; provided that the amount paid on each Payment Date
--------
pursuant to this clause (iv) shall not exceed $100,000;
(v) any overdue Quarterly Interest (together with, to the extent
lawful, interest on such overdue Quarterly Interest at the applicable Note
Interest Rate) and then Quarterly Interest for such Payment Date
<PAGE>
81
with respect to each Series of Notes shall be paid to the Noteholders of
such Series of Notes;
(vi) principal due and payable on the Notes of any Series as a result
of an Event of Default or on the Final Maturity Date of the Notes of such
Series, shall be paid to the Noteholders of such Series of Notes;
(vii) Quarterly Principal for such Payment Date with respect to each
Series of Notes shall be paid to the Noteholders of such Series of Notes;
(viii) unpaid Operating Expenses shall be paid to the Persons entitled
thereto or, if such have been previously paid by the Note Issuer, to the
Note Issuer in reimbursement thereof;
(ix) the amount, if any, by which the Required Overcollateralization
Level exceeds the amount in the Overcollateralization Subaccount as of such
Payment Date shall be allocated to the Overcollateralization Subaccount;
(x) the amount, if any, by which the Required Capital Level with
respect to all Outstanding Series of Notes exceeds the amount in the
Capital Subaccount as of such Payment Date shall be allocated to the
Capital Subaccount;
(xi) funds up to the amount of net earnings on amounts in the
Collection Account for the prior quarter without cumulation shall be paid
to the Note Issuer, free from the lien of this Indenture;
(xii) if any Series of Notes has been paid in full as of such Payment
Date, the amount by which the amount in the Overcollateralization
Subaccount exceeds the aggregate Required Overcollateralization Level with
respect to all Series of Notes remaining outstanding shall be paid to the
Note Issuer, free from the lien of this Indenture;
(xiii) if any Series of Notes has been paid in full as of such Payment
Date, the amount by which the amount in the Capital Subaccount exceeds the
aggregate Required Capital Level with respect to all Series of
<PAGE>
82
Notes remaining outstanding shall be paid to the Note Issuer, free from the
lien of this Indenture;
(xiv) the balance, if any, shall be allocated to the Reserve
Subaccount for distribution on subsequent Payment Dates; and
(xv) after principal of and premium, if any, and interest on all Notes
of all Series, and all of the other foregoing amounts, have been paid in
full, the balance, if any, shall be paid to the Note Issuer, free from the
lien of this Indenture.
All payments to the Noteholders of a Series pursuant to clauses (v), (vi) and
(vii) above or, in the case of clause (vi), if there is more than one Series of
Notes outstanding all payments to the Noteholders of all Series, shall be made
to such holders pro rata based on the respective principal amounts of Notes of
such Series held by such Holders, unless, in the case of a Series comprised of
two or more Classes, the Series Supplement for such Series provides otherwise.
Payments in respect of principal of and premium, if any, and interest on any
Class of Notes will be made on a pro rata basis among all the Noteholders of
such Class.
(e) If on any Payment Date funds on deposit in the General Subaccount
are insufficient to make the payments contemplated by clauses (i) through (vii)
of Section 8.02(d) above, the Note Trustee shall (i) first, draw from amounts on
-----
deposit in the Reserve Subaccount, (ii) second, draw from amounts on deposit in
------
the Overcollateralization Subaccount and (iii) third, draw from amounts on
-----
deposit in the Capital Subaccount, in each case, up to the amount of such
shortfall in order to make the payments contemplated by clauses (i) through
(vii) of Section 8.02(d). In addition, if on any Payment Date funds on deposit
in the General Subaccount are insufficient to make the allocations contemplated
by clauses (ix) and (x) above, the Note Trustee shall draw from amounts on
deposit in the Reserve Subaccount to make such allocations notwithstanding the
fact that on such Payment Date the allocation contemplated by clause (viii)
above may not have been fully satisfied.
(f) On any Mandatory Redemption Date, the Note Trustee shall pay to
the Noteholders the Mandatory
<PAGE>
83
Redemption Price.
SECTION 8.03. General Provisions Regarding the Collection Account.
----------------------------------------------------
(a) So long as no Default or Event of Default shall have occurred and be
continuing, all or a portion of the funds in the Collection Account shall be
invested in Eligible Investments and reinvested by the Note Trustee upon Issuer
Order; provided, however, that (i) such Eligible Investments shall not mature
-------- -------
later than the Business Day prior to the next Payment Date for the related
Series of Notes, (ii) such Eligible Investments shall not be sold, liquidated or
otherwise disposed of at a loss prior to the maturity thereof and (iii) if such
Eligible Investments have a maturity of one month or less, such Eligible
Investments (or the provider thereof) must have a long-term unsecured debt
rating of at least A2 by Moody's (or the equivalent thereof by the other Rating
Agencies) or a certificate of deposit rating of at least P-1 by Moody's (or the
equivalent thereof by the other Rating Agencies), and if such Eligible
Investments have a maturity of greater than one month, such Eligible Investments
(or the provider thereof) must have a long-term unsecured debt rating of at
least A1 by Moody's (or the equivalent thereof by the other Rating Agencies) and
a certificate of deposit rating of at least P-1 by Moody's (or the equivalent
thereof by the other Rating Agencies). All income or other gain from
investments of moneys deposited in the Collection Account shall be deposited by
the Note Trustee in the Collection Account, and any loss resulting from such
investments shall be charged to the Collection Account. The Note Issuer will
not direct the Note Trustee to make any investment of any funds or to sell any
investment held in the Collection Account unless the security interest Granted
and perfected in such account will continue to be perfected in such investment
or the proceeds of such sale, in either case without any further action by any
Person, and, in connection with any direction to the Note Trustee to make any
such investment or sale, if requested by the Note Trustee, the Note Issuer shall
deliver to the Note Trustee an Opinion of Counsel, acceptable to the Note
Trustee, to such effect. In no event shall the Note Trustee be liable for the
selection of Eligible Investments or for investment losses incurred thereon.
The Note Trustee shall have no liability in respect of losses incurred as a
result of the liquidation of any Eligible Investment prior to its stated
maturity or the failure of the Note Issuer to provide timely written investment
direction. The Note
<PAGE>
84
Trustee shall have no obligation to invest or reinvest any amounts held
hereunder in the absence of written investment direction pursuant to an Issuer
Order.
(b) Subject to Section 6.01(c), the Note Trustee shall not in any way
be held liable by reason of any insufficiency in the Collection Account
resulting from any loss on any Eligible Investment included therein except for
losses attributable to the Note Trustee's failure to make payments on such
Eligible Investments issued by the Note Trustee, in its commercial capacity as
principal obligor and not as trustee, in accordance with their terms.
(c) If (i) the Note Issuer shall have failed to give written
investment directions for any funds on deposit in the Collection Account to the
Note Trustee by 11:00 a.m. Eastern Time (or such other time as may be agreed by
the Note Issuer and Note Trustee) on any Business Day; or (ii) a Default or
Event of Default shall have occurred and be continuing with respect to the Notes
of any Series but the Notes of such Series shall not have been declared due and
payable pursuant to Section 5.02; then the Note Trustee shall, to the fullest
extent practicable, invest and reinvest funds in the Collection Account in one
or more investments which qualify as investments in money market funds described
under paragraph (d) of the definition of Eligible Investments.
SECTION 8.04. Release of Collateral. (a) The Note Trustee may, and
----------------------
when required by the provisions of this Indenture shall, execute instruments to
release property from the lien of this Indenture, or convey the Note Trustee's
interest in the same, in a manner and under circumstances that are not
inconsistent with the provisions of this Indenture. No party relying upon an
instrument executed by the Note Trustee as provided in this Article VIII shall
be bound to ascertain the Note Trustee's authority, inquire into the
satisfaction of any conditions precedent or see to the application of any
moneys.
(b) The Note Trustee shall, at such time as there are no Notes
Outstanding, release any remaining portion of the Collateral that secured the
Notes from the lien of this Indenture and release to the Note Issuer or any
other Person entitled thereto any funds then on deposit in the Collection
Account. The Note Trustee shall release property from the
<PAGE>
85
lien of this Indenture pursuant to this Section 8.04(b) only upon receipt of an
Issuer Request accompanied by an Officer's Certificate, an Opinion of Counsel
and (if required by the TIA) Independent Certificates in accordance with TIA
(S) 314(c) and 314(d)(1) meeting the applicable requirements of Section 11.01.
SECTION 8.05. Opinion of Counsel. The Note Trustee shall receive at
-------------------
least seven days' notice when requested by the Note Issuer to take any action
pursuant to Section 8.04(a), accompanied by copies of any instruments involved,
and the Note Trustee shall also require, as a condition to such action, an
Opinion of Counsel, in form and substance satisfactory to the Note Trustee,
stating the legal effect of any such action, outlining the steps required to
complete the same, and concluding that all conditions precedent to the taking of
such action have been complied with and such action will not materially and
adversely impair the security for the Notes or the rights of the Noteholders in
contravention of the provisions of this Indenture; provided, however, that such
-------- -------
Opinion of Counsel shall not be required to express an opinion as to the fair
value of the Collateral. Counsel rendering any such opinion may rely, without
independent investigation, on the accuracy and validity of any certificate or
other instrument delivered to the Note Trustee in connection with any such
action.
SECTION 8.06. Reports by Independent Accountants. As of the Closing
-----------------------------------
Date, the Note Issuer shall appoint a firm of Independent certified public
accountants of recognized national reputation for purposes of preparing and
delivering the reports or certificates of such accountants required by this
Indenture and the related Series Supplements. In the event such firm requires
the Note Trustee to agree to the procedures performed by such firm, the Note
Issuer shall direct the Note Trustee in writing to so agree; it being understood
and agreed that the Note Trustee will deliver such letter of agreement in
conclusive reliance upon the direction of the Note Issuer, and the Note Trustee
makes no independent inquiry or investigation to, and shall have no obligation
or liability in respect of, the sufficiency, validity or correctness of such
procedures. Upon any resignation by such firm the Note Issuer shall provide
written notice thereof to the Note Trustee and shall promptly appoint a
successor thereto that shall also be a
<PAGE>
86
firm of Independent certified public accountants of recognized national
reputation. If the Note Issuer shall fail to appoint a successor to a firm of
Independent certified public accountants that has resigned within 15 days after
such resignation, the Note Trustee shall promptly notify the Note Issuer of such
failure in writing. If the Note Issuer shall not have appointed a successor
within 10 days thereafter the Note Trustee shall promptly appoint a successor
firm of Independent certified public accountants of recognized national
reputation; provided that the Note Trustee shall have no liability with respect
--------
to such appointment if the Note Trustee acted with due care with respect
thereto. The fees of such Independent certified public accountants and its
successor shall be payable by the Note Issuer.
ARTICLE IX
Supplemental Indentures
-----------------------
SECTION 9.01. Supplemental Indentures Without Consent of Noteholders.
-------------------------------------------------------
(a) Without the consent of the Holders of any Notes but with prior notice to
the Rating Agencies, the Note Issuer and the Note Trustee, when authorized by an
Issuer Order, at any time and from time to time, may enter into one or more
indentures supplemental hereto (which shall conform to the provisions of the
Trust Indenture Act as in force at the date of the execution thereof), in form
satisfactory to the Note Trustee, for any of the following purposes:
(i) to correct or amplify the description of any property at any time
subject to the lien of this Indenture, or better to assure, convey and
confirm unto the Note Trustee any property subject or required to be
subjected to the lien of this Indenture, or to subject to the lien of this
Indenture additional property;
(ii) to evidence the succession, in compliance with the applicable
provisions hereof, of another person to the Note Issuer, and the assumption
by any such successor of the covenants of the Note Issuer herein and in the
Notes contained;
(iii) to add to the covenants of the Note Issuer,
<PAGE>
87
for the benefit of the Holders of the Notes, or to surrender any right or
power herein conferred upon the Note Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any property to
or with the Note Trustee;
(v) to cure any ambiguity, to correct or supplement any provision
herein or in any supplemental indenture which may be inconsistent with any
other provision herein or in any supplemental indenture or to make any
other provisions with respect to matters or questions arising under this
Indenture or in any supplemental indenture; provided that such action shall
--------
not adversely affect the interests of the Holders of the Notes or holders
of the Certificates;
(vi) to evidence and provide for the acceptance of the appointment
hereunder by a successor trustee with respect to the Notes and to add to or
change any of the provisions of this Indenture as shall be necessary to
facilitate the administration of the trusts hereunder by more than one
trustee, pursuant to the requirements of Article VI;
(vii) to modify, eliminate or add to the provisions of this Indenture
to such extent as shall be necessary to effect the qualification of this
Indenture under the TIA or under any similar Federal statute hereafter
enacted and to add to this Indenture such other provisions as may be
expressly required by the TIA; or
(viii) to set forth the terms of any Series that has not theretofore
been authorized by a Series Supplement.
The Note Trustee is hereby authorized to join in the execution of any
such supplemental indenture and to make any further appropriate agreements and
stipulations that may be therein contained.
(b) The Note Issuer and the Note Trustee, when authorized by an
Issuer Order, may, also without the consent of any of the Holders of the Notes,
enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to, or changing in any manner or eliminating
<PAGE>
88
any of the provisions of, this Indenture or of modifying in any manner the
rights of the Holders of the Notes under this Indenture; provided, however, that
-------- -------
(i) such action shall not, as evidenced by an Opinion of Counsel, adversely
affect in any material respect the interests of the Noteholders or the holders
of Certificates and (ii) the Rating Agency Condition shall have been satisfied
with respect thereto.
SECTION 9.02. Supplemental Indentures with Consent of Noteholders.
----------------------------------------------------
The Note Issuer and the Note Trustee, when authorized by an Issuer Order, also
may, with prior notice to the Rating Agencies and with the consent of the
Holders of not less than a majority of the Outstanding Amount of the Notes of
each Series or Class to be affected, by Act of such Holders delivered to the
Note Issuer and the Note Trustee, enter into an indenture or indentures supple-
mental hereto for the purpose of adding any provisions to, or changing in any
manner or eliminating any of the provisions of, this Indenture or of modifying
in any manner the rights of the Holders of the Notes under this Indenture;
provided, however, that no such supplemental indenture shall, without the
- -------- -------
consent of the Holder of each Outstanding Note of each Series or Class affected
thereby:
(i) change the date of payment of any installment of principal of or
premium, if any, or interest on any Note, or reduce the principal amount
thereof, the interest rate thereon or premium, if any, with respect
thereto, change the provisions of this Indenture and the related applicable
Series Supplement relating to the application of collections on, or the
proceeds of the sale of, the Collateral to payment of principal of or
premium, if any, or interest on the Notes, or change any place of payment
where, or the coin or currency in which, any Note or the interest thereon
is payable, or impair the right to institute suit for the enforcement of
the provisions of this Indenture requiring the application of funds
available therefor, as provided in Article V, to the payment of any such
amount due on the Notes on or after the respective due dates thereof (or,
in the case of optional or mandatory redemption, on or after the Optional
Redemption Date or Mandatory Redemption Date, as applicable);
(ii) reduce the percentage of the Outstanding Amount of the Notes or
of a Series or Class thereof,
<PAGE>
89
the consent of the Holders of which is required for any such supplemental
indenture, or the consent of the Holders of which is required for any
waiver of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences provided for in this Indenture;
(iii) modify or alter the provisions of the proviso to the definition
of the term "Outstanding";
(iv) reduce the percentage of the Outstanding Amount of the Notes
required to direct the Note Trustee to direct the Note Issuer to sell or
liquidate the Collateral pursuant to Section 5.04;
(v) modify any provision of this Section except to increase any
percentage specified herein or to provide that certain additional
provisions of this Indenture or the Basic Documents cannot be modified or
waived without the consent of the Holder of each Outstanding Note affected
thereby;
(vi) modify any of the provisions of this Indenture in such manner as
to affect the calculation of the amount of any payment of interest,
principal or premium, if any, due on any Note on any Payment Date
(including the calculation of any of the individual components of such
calculation) or to affect the rights of the Holders of Notes to the benefit
of any provisions for the mandatory redemption of the Notes contained
herein; or
(vii) permit the creation of any lien ranking prior to or on a parity
with the lien of this Indenture with respect to any part of the Collateral
or, except as otherwise permitted or contemplated herein, terminate the
lien of this Indenture on any property at any time subject hereto or
deprive the Holder of any Note of the security provided by the lien of this
Indenture.
The Note Trustee may in its discretion determine whether or not any
Notes or Certificates of a Series or Class would be affected by any supplemental
indenture and any such determination shall be conclusive upon the Holders of all
Notes and holders of all Certificates of such Series or Class, whether
theretofore or thereafter authenticated
<PAGE>
90
and delivered hereunder. The Note Trustee shall not be liable for any such
determination made in good faith.
It shall not be necessary for any Act of Noteholders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Note Issuer and the Note Trustee
of any supplemental indenture pursuant to this Section, the Note Issuer shall
mail to the Rating Agencies and the Holders of the Notes to which such amendment
or supplemental indenture relates a notice setting forth in general terms the
substance of such supplemental indenture. Any failure of the Note Trustee to
mail such notice, or any defect therein, shall not, however, in any way impair
or affect the validity of any such supplemental indenture.
SECTION 9.03. Execution of Supplemental Indentures. In executing,
--------------------------------------
or permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modifications thereby of the trusts created
by this Indenture, the Note Trustee shall be entitled to receive, and subject to
Sections 6.01 and 6.02, shall be fully protected in relying upon, an Opinion of
Counsel stating that the execution of such supplemental indenture is authorized
or permitted by this Indenture. The Note Trustee may, but shall not be
obligated to, enter into any such supplemental indenture that affects the Note
Trustee's own rights, duties, liabilities or immunities under this Indenture or
otherwise.
SECTION 9.04. Effect of Supplemental Indenture. Upon the execution of
---------------------------------
any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and be deemed to be modified and amended in accordance therewith with
respect to each Series or Class of Notes affected thereby, and the respective
rights, limitations of rights, obligations, duties, liabilities and immunities
under this Indenture of the Note Trustee, the Note Issuer and the Holders of the
Notes shall thereafter be determined, exercised and enforced hereunder subject
in all respects to such modifications and amendments, and all the terms and
conditions of any such supplemental indenture shall be and be deemed to be part
of the terms and conditions of this
<PAGE>
91
Indenture for any and all purposes.
SECTION 9.05. Conformity with Trust Indenture Act. Every amendment
------------------------------------
of this Indenture and every supplemental indenture executed pursuant to this
Article IX shall conform to the requirements of the Trust Indenture Act as then
in effect so long as this Indenture shall then be qualified under the Trust
Indenture Act.
SECTION 9.06. Reference in Notes to Supplemental Indentures. Notes
----------------------------------------------
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Note Trustee shall, bear
a notation in form approved by the Note Trustee as to any matter provided for in
such supplemental indenture. If the Note Issuer or the Note Trustee shall so
determine, new Notes so modified as to conform, in the opinion of the Note
Trustee and the Note Issuer, to any such supplemental indenture may be prepared
and executed by the Note Issuer and authenticated and delivered by the Note
Trustee in exchange for Outstanding Notes.
ARTICLE X
Redemption of Notes
-------------------
SECTION 10.01. Optional Redemption by Note Issuer. The Note Issuer
-----------------------------------
may, at its option, redeem all, but not less than all, of the Notes of a Series
on any Payment Date if, after giving effect to payments that would otherwise be
made on such Payment Date, the Outstanding Amount of any such Series of Notes
has been reduced to less than five percent of the initial principal balance
thereof on any Redemption Date at a price equal to the outstanding principal
amount of the Notes to be redeemed plus accrued and unpaid interest thereon at
the Note Interest Rate to the Optional Redemption Date (such price being called
the "Optional Redemption Price"). If the Note Issuer shall elect to redeem the
Notes of a Series pursuant to this Section 10.01, it shall furnish written
notice (which notice shall state all items listed in Section 10.02) of such
election to the Note Trustee and the Rating Agencies not later than 25 days
prior to the Optional Redemption Date and shall deposit with the Note Trustee
not later than one Business Day prior to the Optional Redemption Date the
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92
Optional Redemption Price of the Notes to be redeemed whereupon all such Notes
shall be due and payable on the Optional Redemption Date upon the furnishing of
a notice complying with Section 10.02 hereof to each Holder of the Notes of such
Series pursuant to this Section 10.01.
SECTION 10.02. Form of Optional Redemption Notice. Unless otherwise
-----------------------------------
specified in the Series Supplement relating to a Series of Notes, notice of
redemption under Section 10.01 hereof shall be given by the Note Trustee by
first-class mail, postage prepaid, mailed not less than five days nor more than
25 days prior to the applicable Optional Redemption Date to each Holder of Notes
to be redeemed, as of the close of business on the Record Date preceding the
applicable Optional Redemption Date at such Holder's address appearing in the
Note Register.
All notices of redemption shall state:
(1) the Optional Redemption Date;
(2) the Optional Redemption Price; and
(3) the place where such Notes are to be surrendered for payment of
the Optional Redemption Price (which shall be the office or agency of the
Note Issuer to be maintained as provided in Section 3.02 hereof).
Notice of redemption of the Notes to be redeemed shall be given by the
Note Trustee in the name and at the expense of the Note Issuer. Failure to give
notice of redemption, or any defect therein, to any Holder of any Note selected
for redemption shall not impair or affect the validity of the redemption of any
other Note.
SECTION 10.03. Notes Payable on Optional Redemption Date or Payment
----------------------------------------------------
Date. Notice of redemption having been given as provided in Section 10.02
- -----
hereof, the Notes to be redeemed shall on the Optional Redemption Date become
due and payable at the Optional Redemption Price and (unless the Note Issuer
shall default in the payment of the Optional Redemption Price) no interest shall
accrue on the Optional Redemption Price for any period after the date to which
accrued interest is calculated for purposes of calculating the Optional
Redemption Price.
<PAGE>
93
SECTION 10.04. Mandatory Redemption by Note Issuer. If the Seller is
------------------------------------
required to repurchase the Transition Property pursuant to Section 5.01(b) of
the Sale Agreement, the Note Issuer shall be required to redeem all outstanding
Series of Notes on or before the fifth Business Day following the Repurchase
Date (such date of mandatory redemption, the "Mandatory Redemption Date") for a
purchase price equal to the then outstanding principal amount of the Notes plus
accrued and unpaid interest thereon at the Note Interest Rate to the Mandatory
Redemption Date (such price being called the "Mandatory Redemption Price"). If
the Note Issuer is required to redeem the Notes pursuant to this Section 10.04,
it shall furnish written notice (which notice shall state all items listed in
Section 10.05) of such redemption to the Note Trustee and the Rating Agencies
not later than one Business Day before such Repurchase Date and shall deposit
with the Note Trustee, not later than one Business Day prior to the Mandatory
Redemption Date, the Mandatory Redemption Price of the Notes to be redeemed
whereupon all such Notes shall be due and payable on the Mandatory Redemption
Date upon the furnishing of a notice complying with Section 10.05 hereof to each
Holder of the Notes of all such Series pursuant to this Section 10.04.
SECTION 10.05. Form of Mandatory Redemption Notice. Notice of
------------------------------------
redemption under Section 10.04 hereof shall be given by the Note Trustee by
first-class mail, postage prepaid, mailed not less than five days prior to the
Mandatory Redemption Date to each Holder of Notes to be redeemed, as of the
close of business on the Record Date preceding the Mandatory Redemption Date at
such Holder's address appearing in the Note Register.
All notices of redemption shall state:
(1) the Mandatory Redemption Date;
(2) the Mandatory Redemption Price; and
(3) the place where such Notes are to be surrendered for payment of
the Mandatory Redemption Price (which shall be the office or agency of the Note
Issuer to be maintained as provided in Section 3.02 hereof).
Notice of redemption of the Notes to be redeemed shall be given by the
Note Trustee in the name and at the
<PAGE>
94
expense of the Note Issuer. Failure to give notice of redemption, or any defect
therein, to any Holder of any Note selected for redemption shall not impair or
affect the validity of the redemption of any other Note.
SECTION 10.06. Notes Payable on Mandatory Redemption Date or Payment
-----------------------------------------------------
Date. Notice of redemption having been given as provided in Section 10.05
- -----
hereof, the Notes to be redeemed shall on the Mandatory Redemption Date become
due and payable at the Mandatory Redemption Price and (unless the Note Issuer
shall default in the payment of the Mandatory Redemption Price) no interest
shall accrue on the Mandatory Redemption price for any period after the date to
which accrued interest is calculated for purposes of calculating the Mandatory
Redemption Price.
ARTICLE XI
Miscellaneous
-------------
SECTION 11.01. Compliance Certificates and Opinions, etc. (a) Upon
------------------------------------------
any application or request by the Note Issuer to the Note Trustee to take any
action under any provision of this Indenture, the Note Issuer shall furnish to
the Note Trustee (i) an Officer's Certificate stating that all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with, (ii) an Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent, if any, have been
complied with and (iii) (if required by the TIA) an Independent Certificate from
a firm of certified public accountants meeting the applicable requirements of
this Section, except that, in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(i) a statement that each signatory of such certificate or opinion has
read or has caused to be read such covenant or condition and the
definitions herein relating thereto;
<PAGE>
95
(ii) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(iii) a statement that, in the opinion of each such signatory, such
signatory has made such examination or investigation as is necessary to
enable such signatory to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such
signatory, such condition or covenant has been complied with.
(b) (i) Prior to the deposit of any Collateral or other property or
securities with the Note Trustee that is to be made the basis for the release of
any property or securities subject to the lien of this Indenture, the Note
Issuer shall, in addition to any obligation imposed in Section 11.01(a) or
elsewhere in this Indenture, furnish to the Note Trustee an Officer's
Certificate certifying or stating the opinion of each person signing such
certificate as to the fair value (within 90 days of such deposit) to the Note
Issuer of the Collateral or other property or securities to be so deposited.
(ii) Whenever the Note Issuer is required to furnish to the Note
Trustee an Officer's Certificate certifying or stating the opinion of any signer
thereof as to the matters described in clause (i) above, the Note Issuer shall
also deliver to the Note Trustee an Independent Certificate as to the same
matters, if the fair value to the Note Issuer of the securities to be so
deposited and of all other such securities made the basis of any such withdrawal
or release since the commencement of the then-current fiscal year of the Note
Issuer, as set forth in the certificates delivered pursuant to clause (i) above
and this clause (ii), is ten percent or more of the Outstanding Amount of the
Notes of all Series, but such a certificate need not be furnished with respect
to any securities so deposited, if the fair value thereof to the Note Issuer as
set forth in the related Officer's Certificate is less than $25,000 or less than
one percent of the Outstanding Amount of the Notes of all Series.
<PAGE>
96
(iii) Whenever any property or securities are to be released from the
lien of this Indenture other than pursuant to Section 8.02(d), the Note Issuer
shall also furnish to the Note Trustee an Officer's Certificate certi fying or
stating the opinion of each person signing such certificate as to the fair value
(within 90 days of such release) of the property or securities proposed to be
released and stating that in the opinion of such person the proposed release
will not impair the security under this Indenture in contravention of the
provisions hereof.
(iv) Whenever the Note Issuer is required to furnish to the Note
Trustee an Officer's Certificate certifying or stating the opinion of any signer
thereof as to the matters described in clause (iii) above, the Note Issuer shall
also furnish to the Note Trustee an Independent Certificate as to the same
matters if the fair value of the property or securities and of all other
property with respect to such Series, or securities released from the lien of
this Indenture (other than pursuant to Section 8.02(d) hereof) since the
commencement of the then-current calendar year, as set forth in the certificates
required by clause (iii) above and this clause (iv), equals 10 percent or more
of the Outstanding Amount of the Notes of all Series, but such certificate need
not be furnished in the case of any release of property or securities if the
fair value thereof as set forth in the related Officer's Certificate is less
than $25,000 or less than one percent of the then Outstanding Amount of the
Notes of all Series.
(v) Notwithstanding Section 2.11 or any other provision of this
Section, the Note Issuer may (A) collect, liquidate, sell or otherwise dispose
of the Transition Property and the FTA Charges as and to the extent permitted or
required by the Basic Documents and (B) make cash payments out of the Collection
Account as and to the extent permitted or required by the Basic Documents.
SECTION 11.02. Form of Documents Delivered to Note Trustee. In any
--------------------------------------------
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may certify
or give
<PAGE>
97
an opinion with respect to some matters and one or more other such Persons as to
other matters, and any such Person may certify or give an opinion as to such
matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Note Issuer
may be based, insofar as it relates to legal matters, upon a certificate or
opinion of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his or her certificate or
opinion is based are erroneous. Any such certificate of an Authorized Officer or
Opinion of Counsel may be based, insofar as it relates to factual matters, upon
a certificate or opinion of, or representations by, an officer or officers of
the Servicer, the Seller, the Note Issuer or the Administrator, stating that the
information with respect to such factual matters is in the possession of the
Servicer, the Seller, the Note Issuer or the Administrator, unless such counsel
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to such matters are erroneous.
Whenever in this Indenture, in connection with any application or
certificate or report to the Note Trustee, it is provided that the Note Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Note Issuer's compliance with any term hereof, it is
intended that the truth and accuracy, at the time of the granting of such
application or at the effective date of such certificate or report (as the case
may be), of the facts and opinions stated in such document shall in such case be
conditions precedent to the right of the Note Issuer to have such application
granted or to the sufficiency of such certificate or report. The foregoing
shall not, however, be construed to affect the Note Trustee's right to rely upon
the truth and accuracy of any statement or opinion contained in any such
document as provided in Article VI.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consoli dated and
form one instrument.
<PAGE>
98
SECTION 11.03. Acts of Noteholders. (a) Any request, demand,
--------------------
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Noteholders may be embodied in and evi-
denced by one or more instruments of substantially similar tenor signed by such
Noteholders in person or by agents duly appointed in writing; and except as
herein otherwise ex pressly provided such action shall become effective when
such instrument or instruments are delivered to the Note Trustee, and, where it
is hereby expressly required, to the Note Issuer. Such instrument or instruments
(and the action embodied therein and evidenced thereby) are herein sometimes
referred to as the "Act" of the Noteholders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 6.01) conclusive in favor of the Note Trustee and the
Note Issuer, if made in the manner provided in this Section.
(b) The fact and date of the execution by any person of any such
instrument or writing may be proved in any manner that the Note Trustee deems
sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direc tion, notice, consent,
waiver or other action by the Holder of any Notes shall bind the Holder of every
Note issued upon the registration thereof or in exchange therefor or in lieu
thereof, in respect of anything done, omitted or suffered to be done by the Note
Trustee or the Note Issuer in reliance thereon, whether or not notation of such
action is made upon such Note.
SECTION 11.04. Notices, etc., to Note Trustee, Note Issuer,
--------------------------------------------
Infrastructure Bank and Rating Agencies. (a) Any request, demand,
- ----------------------------------------
authorization, direction, notice, consent, waiver or Act of Noteholders or other
documents provided or permitted by this Indenture to be made upon, given or
furnished to or filed with:
(i) the Note Trustee by any Noteholder or by the
<PAGE>
99
Note Issuer shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing by facsimile transmission, first-class mail
or overnight delivery service to or with the Note Trustee at its Corporate
Trust Office, or
(ii) the Note Issuer by the Note Trustee or by any Noteholder shall
be sufficient for every purpose here under if in writing and mailed, first-
class, postage prepaid, to the Note Issuer addressed to: PG&E Funding LLC,
245 Market Street, Room 424, San Francisco, California 94105, Attention:
President, or at any other address previously furnished in writing to the
Note Trustee by the Note Issuer. The Note Issuer shall promptly transmit
any notice received by it from the Noteholders to the Note Trustee.
(b) Notices required to be given to the Rating Agencies or the
Infrastructure Bank by the Note Issuer or the Note Trustee shall be in writing,
personally delivered or mailed by certified mail, return receipt requested to
(i) in the case of Moody's, to: Moody's Investors Service, Inc., ABS Monitoring
Department, 99 Church Street, New York, New York 10007, (ii) in the case of
Standard & Poor's, to: Standard & Poor's Corporation, 26 Broadway (10th Floor),
New York, New York 10004, Attention of Asset Backed Surveillance Department and
(iii) in the case of Fitch, to Fitch Investors Service, L.P., One State Street
Plaza, New York, NY 10004, Attention of Commercial Asset-Backed Securities, and
(iv) in the case of the Infrastructure Bank, to California Infrastructure and
Economic Development Bank, c/o California Trade and Commerce Agency, 801 K
Street, Suite 1700, Sacramento, CA 95814, Attention: Executive Director.
SECTION 11.05. Notices to Noteholders; Waiver. Where this Indenture
-------------------------------
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at such Noteholder's address as it appears on the Note Register, not
later than the latest date, and not earlier than the earliest date, prescribed
for the giving of such notice. In any case where notice to Noteholders is given
by mail, neither the failure to mail such notice nor any defect in any notice so
mailed to any particular Noteholder shall affect the sufficiency of such
<PAGE>
100
notice with respect to other Noteholders, and any notice that is mailed in the
manner herein provided shall conclusively be presumed to have been duly given.
Where this Indenture provides for notice in any manner, such notice
may be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the Note Trustee
but such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event of Noteholders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of giving
such notice as shall be satisfactory to the Note Trustee shall be deemed to be a
sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies,
failure to give such notice shall not affect any other rights or obligations
created hereunder, and shall not under any circumstance constitute a Default or
Event of Default.
SECTION 11.06. [Intentionally omitted]
-----------------------
SECTION 11.07. Conflict with Trust Indenture Act. If any provision
----------------------------------
hereof limits, qualifies or conflicts with another provision hereof that is
required to be included in this Indenture by any of the provisions of the Trust
Indenture Act, such required provision shall control.
The provisions of TIA (S)(S) 310 through 317 that impose duties on any
person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
SECTION 11.08. Effect of Headings and Table of Contents. The Article
-----------------------------------------
and Section headings herein and the
<PAGE>
101
Table of Contents are for convenience only and shall not affect the construction
hereof.
SECTION 11.09. Successors and Assigns. All covenants and agreements
-----------------------
in this Indenture and the Notes by the Note Issuer shall bind its successors and
assigns, whether so expressed or not.
All agreements of the Note Trustee in this Indenture shall bind its
successors.
SECTION 11.10. Separability. In case any provision in this
-------------
Indenture or in the Notes shall be invalid, illegal or unenforceable, the
validity, legality, and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 11.11. Benefits of Indenture. Nothing in this Indenture or
----------------------
in the Notes, express or implied, shall give to any Person, other than the
parties hereto and their successors hereunder, and the Noteholders, and any
other party secured hereunder, and any other Person with an ownership interest
in any part of the Collateral, any benefit or any legal or equitable right,
remedy or claim under this Indenture.
SECTION 11.12. Legal Holidays. In any case where the date on which
---------------
any payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
SECTION 11.13. Governing Law. THIS INDENTURE SHALL BE CONSTRUED IN
--------------
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.14. Counterparts. This Indenture may be executed in any
-------------
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same
<PAGE>
102
instrument.
SECTION 11.15. Recording of Indenture. If this Indenture is subject
-----------------------
to recording in any appropriate public recording offices, such recording is to
be effected by the Note Issuer and at its expense accompanied by an Opinion of
Counsel (which may be counsel to the Note Trustee or any other counsel
reasonably acceptable to the Note Trustee) to the effect that such recording is
necessary either for the protection of the Noteholders or any other Person
secured hereunder or for the enforcement of any right or remedy granted to the
Note Trustee under this Indenture.
SECTION 11.16. Trust Obligation. No recourse may be taken, directly
-----------------
or indirectly, with respect to the obligations of the Note Issuer or the Note
Trustee on the Notes or under this Indenture or any certificate or other writing
delivered in connection herewith or therewith, against (i) the Note Trustee in
its individual capacity, (ii) any owner of a beneficial interest in the Note
Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or
employee of the Note Trustee in its individual capacity, any holder of a
beneficial interest in the Note Issuer or the Note Trustee or of any successor
or assign of the Note Trustee in its individual capacity, except as any such
Person may have expressly agreed (it being understood that the Note Trustee has
no such obligations in its individual capacity).
SECTION 11.17. [Intentionally omitted].
SECTION 11.18. No Recourse to Note Issuer. Notwithstanding any
---------------------------
provision of this Indenture or any Series Supplement to the contrary,
Noteholders shall have no recourse against the Note Issuer, but shall look only
to the Collateral, with respect to any amounts due to the Noteholders hereunder.
SECTION 11.19. Inspection. The Note Issuer agrees that, on
-----------
reasonable prior notice, it will permit any representative of the Note Trustee,
during the Note Issuer's normal business hours, to examine all the books of
account, records, reports, and other papers of the Note Issuer, to make copies
and extracts therefrom, to cause such books to be audited by Independent
certified public accountants, and to discuss the Note Issuer's affairs, finances
and accounts
<PAGE>
103
with the Note Issuer's officers, employees, and Independent certified public
accountants, all at such reasonable times and as often as may be reasonably
requested. The Note Trustee shall and shall cause its representatives to hold in
confidence all such information except to the extent disclosure may be required
by law (and all reasonable applications for confidential treatment are
unavailing) and except to the extent that the Note Trustee may reasonably
determine that such disclosure is consistent with its obligations hereunder.
Notwithstanding anything herein to the contrary, the foregoing shall not be
construed to prohibit (i) disclosure of any and all information that is or
becomes publicly known, or information obtained by the Note Trustee from sources
other than the Note Issuer, provided such parties are rightfully in possession
of such information, (ii) disclosure of any and all information (A) if required
to do so by any applicable statute, law, rule or regulation, (B) pursuant to any
subpoena, civil investigative demand or similar demand or request of any court
or regulatory authority exercising its proper jurisdiction, (C) in any
preliminary or final offering circular, registration statement or contract or
other document pertaining to the transactions contemplated by this Indenture or
the Basic Documents approved in advance by the Note Issuer or (D) to any
affiliate, independent or internal auditor, agent, employee or attorney of the
Note Trustee having a need to know the same, provided that such parties agree to
be bound by the confidentiality provisions contained in this Section 11.19, or
(iii) any other disclosure authorized by the Note Issuer.
<PAGE>
104
IN WITNESS WHEREOF, the Note Issuer and the Note Trustee have caused
this Indenture to be duly executed by their respective officers, thereunto duly
authorized and duly attested, all as of the day and year first above written.
PG&E FUNDING LLC,
by
---------------------------------
Name:
Title:
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A., not in its
individual capacity but solely
as Note Trustee,
by
----------------------------------
Name:
Title:
<PAGE>
105
STATE OF CALIFORNIA, )
) ss.:
COUNTY OF [ ], )
On the ____ day of ____, 1997, before me, __________ a Notary Public in and
for said county and state, personally appeared ,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person and officer whose name is subscribed to the within instrument
and acknowledged to me that he executed the same in his authorized capacity, and
that by his signature on the instrument PG&E Funding LLC, a Delaware limited
liability company and the entity upon which the person acted, executed this
instrument.
WITNESS my hand and official seal.
--------------------------------
Notary Public
My commission expires:
<PAGE>
STATE OF CALIFORNIA, )
) ss.:
COUNTY OF [ ], )
On the ____ day of ____, 1997, before me, __________ a Notary Public in and
for said county and state, personally appeared ,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person and officer whose name is subscribed to the within instrument
and acknowledged to me that he executed the same in his authorized capacity, and
that by his signature on the instrument Bankers Trust Company of California,
N.A., a national banking association and the entity upon which the person acted,
executed this instrument.
WITNESS my hand and official seal.
----------------------------------
Notary Public
My commission expires:
<PAGE>
EXHIBIT 4.2
EXECUTION COPY
SERIES SUPPLEMENT dated as of December 8, 1997 (this "Supplement"), by and
between PG&E FUNDING LLC, a Delaware limited liability company (the "Note
Issuer"), and BANKERS TRUST COMPANY OF CALIFORNIA, N.A., a national banking
association (the "Note Trustee"), as Note Trustee under the Indenture dated as
of December 8, 1997, between the Note Issuer and the Note Trustee (the
"Indenture").
PRELIMINARY STATEMENT
Section 9.01 of the Indenture provides, among other things, that the Note
Issuer and the Note Trustee may at any time and from time to time enter into one
or more indentures supplemental to the Indenture for the purposes of authorizing
the issuance by the Note Issuer of a Series of Notes and specifying the terms
thereof. The Note Issuer has duly authorized the creation of a Series of Notes
with an initial aggregate principal amount of $2,901,000,000 to be known as the
Note Issuer's Notes, Series 1997-1 (the "Series 1997-1 Notes"), and the Note
Issuer and the Note Trustee are executing and delivering this Supplement in
order to provide for the Series 1997-1 Notes.
All terms used in this Supplement that are defined in the Indenture, either
directly or by reference therein, have the meanings assigned to them therein,
except to the extent such terms are defined or modified in this Supplement or
the context clearly requires otherwise. In the event that any term or provision
contained herein shall conflict with or be inconsistent with any term or
provision contained in the Indenture, the terms and provisions of this
Supplement shall govern.
SECTION 1. Designation. The Series 1997-1 Notes shall be designated
-----------
generally as the Note Issuer's Notes, Series 1997-1 and further denominated as
Classes A-1 through A-8.
<PAGE>
2
SECTION 2. Initial Principal Amount; Note Interest Rate; Scheduled
-------------------------------------------------------
Maturity Date; Final Maturity Date. The Notes of each Class of the Series 1997-
- ----------------------------------
1 shall have the initial principal amount, bear interest at the rates per annum
and shall have Scheduled Maturity Dates and Final Maturity Dates as set forth
below:
<TABLE>
<CAPTION>
Initial
Principal Interest Scheduled Final
Class Amount Rate Maturity Date Maturity Date
- ----- ------------- -------- ------------- -------------
<S> <C> <C> <C> <C>
A-1 $ 125,000,000 5.94% September 25, 1998 September 25, 2000
A-2 $ 265,000,000 6.01% June 25, 1999 June 25, 2001
A-3 $ 280,000,000 6.15% June 25, 2000 June 25, 2002
A-4 $ 300,000,000 6.16% June 25, 2001 June 25, 2003
A-5 $ 290,000,000 6.25% June 25, 2002 June 25, 2004
A-6 $ 375,000,000 6.32% September 25, 2003 September 25, 2005
A-7 $866,0000,000 6.42% September 25, 2006 September 25, 2008
A-8 $ 400,000,000 6.48% December 26, 2007 December 26, 2009
</TABLE>
The Note Interest Rate shall be computed on the basis of a 360-day year of
twelve 30-day months.
SECTION 3. Authentication Date; Payment Dates; Expected Amortization
---------------------------------------------------------
Schedule for Principal; Quarterly Interest; Required Overcollateralization
- --------------------------------------------------------------------------
Level; No Premium. (a) Authentication Date. The Series 1997-1 Notes that are
- ----------------- -------------------
authenticated and delivered by the Note Trustee to or upon the order of the Note
Issuer on December 8, 1997 (the "Series Issuance Date") shall have as their date
of authentication December 8, 1997.
(b) Payment Dates. The Payment Dates for the Series 1997-1 Notes are the
-------------
March 25, June 25, September 25 and December 26 of each year or, if any such
date is not a Business Day, the next succeeding Business Day, commencing on
March 25, 1998 and continuing until the earlier of repayment of the Series 1997-
1 Notes in full and the Final Maturity Date for the Series 1997-1 Notes.
(c) Expected Amortization Schedule for Principal. Unless an Event of
--------------------------------------------
Default shall have occurred and be continuing, on each Payment Date, the Note
Trustee shall distribute to the Noteholders of record as of the related
<PAGE>
3
Record Date amounts payable pursuant to Section 8.02(d)(vii) of the Indenture as
principal, in the following order and priority: (1) to the holders of the Class
A-1 Notes, until the Outstanding Amount of such Class of Notes thereof has been
reduced to zero; (2) to the holders of the Class A-2 Notes, until the
Outstanding Amount of such Class of Notes thereof has been reduced to zero; (3)
to the holders of the Class A-3 Notes, until the Outstanding Amount of such
Class of Notes thereof has been reduced to zero; (4) to the holders of the Class
A-4 Notes, until the Outstanding Amount of such Class of Notes thereof has been
reduced to zero; (5) to the holders of the Class A-5 Notes until the Outstanding
Amount of such Class of Notes thereof has been reduced to zero; (6) to the
holders of the Class A-6 Notes, until the Outstanding Amount of such Class of
Notes thereof has been reduced to zero; (7) to the holders of the Class A-7
Notes until the Outstanding Amount of such Class of Notes thereof has been
reduced to zero; and (8) to the holders of the Class A-8 Notes, until the
Outstanding Amount of such Class of Notes thereof has been reduced to zero;
provided, however, that in no event shall a principal payment pursuant to this
- -------- -------
Section 3(c) on any Class on a Payment Date be greater than the amount necessary
to reduce the Outstanding Amount of such Class of Notes below the amount
specified in the Expected Amortization Schedule which is attached as Schedule A
hereto for such Class and Payment Date.
(d) Quarterly Interest. Quarterly Interest will be payable on each Class
------------------
of the Series 1997-1 Notes on each Payment Date in an amount equal to one-fourth
of the product of (i) the applicable Note Interest Rate and (ii) the Outstanding
Amount of the related Class of Notes as of the close of business on the
preceding Payment Date after giving effect to all payments of principal made to
the holders of the related Class of Series 1997-1 Notes on such preceding
Payment Date; provided, however, that with respect to the initial Payment Date
-------- -------
or, if no payment has yet been made, interest on the outstanding principal
balance will accrue from and including the Series Issuance Date to, but
excluding, the following Payment Date.
(e) Required Overcollateralization Level. The Required
-------------------------------------
Overcollateralization Level for any Payment Date shall be as set forth in
Schedule B hereto.
(f) No Premium. No premium will be payable in connection with the early
-----------
redemption of the Series 1997-1 Notes.
<PAGE>
4
SECTION 4. Minimum Denominations. The Series 1997-1 Notes shall be
---------------------
issuable in the Minimum Denomination and integral multiples thereof.
SECTION 5. Certain Defined Terms. Article One of the Indenture provides
---------------------
that the meanings of certain defined terms used in the Indenture shall, when
applied to the Notes of a particular Series, be as defined in Article One but
with such additional provisions as are specified in the related Supplement.
Additionally, Article Two of the Indenture provides that with respect to a
particular Series of Notes, certain terms will have the meanings specified in
the related Supplement. With respect to the Series 1997-1 Notes, the following
definitions shall apply:
"Minimum Denomination" shall mean $1,000.
--------------------
"Note Interest Rate" has the meaning set forth in Section 2 of this
------------------
Supplement.
"Payment Date" has the meaning set forth in Section 3(b) of this
------------
Supplement.
"Quarterly Interest" has the meaning set forth in Section 3(d) of this
------------------
Supplement.
"Series Issuance Date" has the meaning set forth in Section 3(a) of this
--------------------
Supplement.
SECTION 6. Delivery and Payment for the Series 1997-1 Notes; Form of the
-------------------------------------------------------------
Series 1997-1 Notes. The Note Trustee shall deliver the Series 1997-1 Notes to
- -------------------
the Note Issuer when authenticated in accordance with Section 2.03 of the
Indenture. The Series 1997-1 Notes of each Class shall be in the form of
Exhibits A-1 through A-8 hereto.
SECTION 7. Ratification of Agreement. As supplemented by this Supplement,
-------------------------
the Indenture is in all respects ratified and confirmed and the Indenture, as so
supplemented by this Supplement, shall be read, taken, and construed as one and
the same instrument.
SECTION 8. Counterparts. This Supplement may be executed in any number of
------------
counterparts, each of which so executed shall be deemed to be an original, but
all of such counterparts shall together constitute but one and the same
instrument.
<PAGE>
5
SECTION 9. Governing Law. This Supplement shall be construed in
-------------
accordance with the laws of the State of California, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
SECTION 10. Trust Obligation. No recourse may be taken, directly or
-----------------
indirectly, with respect to the obligations of the Note Issuer or the Note
Trustee on the Notes or under this Supplement or any certificate or other
writing delivered in connection herewith or therewith, against (i) the Note
Trustee in its individual capacity, (ii) any owner of a beneficial interest in
the Note Issuer or (iii) any partner, owner, beneficiary, agent, officer,
director, employee or agent of the Note Trustee in its individual capacity, any
holder of a beneficial interest in the Note Issuer or the Note Trustee or of any
successor or assign of the Note Trustee in its individual capacity, except as
any such Person may have expressly agreed (it being understood that the Note
Trustee has no such obligations in its individual capacity).
<PAGE>
6
IN WITNESS WHEREOF, the Note Issuer and the Note Trustee have caused this
Supplement to be duly executed by their respective officers thereunto duly
authorized as of the first day of the month and year first above written.
PG&E FUNDING LLC, as Note Issuer,
by
____________________________
Name:
Title:
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A., not in its
individual capacity but solely
as Note Trustee,
by
____________________________
Name:
Title:
<PAGE>
SCHEDULE A
Expected Amortization Schedule
------------------------------
<TABLE>
<CAPTION>
OUTSTANDING PRINCIPAL BALANCE
----------------------------------------------------------------
PAYMENT DATE CLASS A-1 CLASS A-2 CLASS A-3 CLASS A-4 CLASS A-5
- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Series Issuance Date. $125,000,000 $265,000,000 $280,000,000 $300,000,000 $290,000,000
Mar. 1998....... 106,301,458 265,000,000 280,000,000 300,000,000 290,000,000
June 1998....... 24,180,963 265,000,000 280,000,000 300,000,000 290,000,000
Sept. 1998...... 0 197,119,806 280,000,000 300,000,000 290,000,000
Dec. 1998....... 0 99,900,000 280,000,000 300,000,000 290,000,000
Mar. 1999....... 0 14,470,651 280,000,000 300,000,000 290,000,000
June 1999....... 0 0 232,189,255 300,000,000 290,000,000
Sept. 1999...... 0 0 163,057,145 300,000,000 290,000,000
Dec. 1999....... 0 0 89,800,000 300,000,000 290,000,000
Mar. 2000....... 0 0 16,411,349 300,000,000 290,000,000
June 2000....... 0 0 0 250,558,413 290,000,000
Sept. 2000...... 0 0 0 177,245,891 290,000,000
Dec. 2000....... 0 0 0 99,700,000 290,000,000
Mar. 2001....... 0 0 0 24,432,693 290,000,000
June 2001....... 0 0 0 0 248,916,995
Sept. 2001...... 0 0 0 0 176,300,487
Dec. 2001....... 0 0 0 0 99,600,000
Mar. 2002....... 0 0 0 0 24,770,146
June 2002....... 0 0 0 0 0
Sept. 2002...... 0 0 0 0 0
Dec. 2002....... 0 0 0 0 0
Mar. 2003....... 0 0 0 0 0
June 2003....... 0 0 0 0 0
Sept. 2003...... 0 0 0 0 0
Dec. 2003....... 0 0 0 0 0
Mar. 2004....... 0 0 0 0 0
June 2004....... 0 0 0 0 0
Sept. 2004...... 0 0 0 0 0
Dec. 2004....... 0 0 0 0 0
Mar. 2005....... 0 0 0 0 0
June 2005....... 0 0 0 0 0
Sept. 2005...... 0 0 0 0 0
Dec. 2005....... 0 0 0 0 0
Mar. 2006....... 0 0 0 0 0
June 2006....... 0 0 0 0 0
Sept. 2006...... 0 0 0 0 0
Dec. 2006....... 0 0 0 0 0
Mar. 2007....... 0 0 0 0 0
June 2007....... 0 0 0 0 0
Sept. 2007...... 0 0 0 0 0
Dec. 2007....... 0 0 0 0 0
<CAPTION>
OUTSTANDING PRINCIPAL BALANCE
-----------------------------------------------------
SERIES
PAYMENT DATE CLASS A-6 CLASS A-7 CLASS A-8 1997-1
- ------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
Series Issuance Date. $375,000,000 $866,000,000 $400,000,000 $2,901,000,000
Mar. 1998....... 375,000,000 866,000,000 400,000,000 2,882,301,458
June 1998....... 375,000,000 866,000,000 400,000,000 2,800,180,963
Sept. 1998...... 375,000,000 866,000,000 400,000,000 2,708,119,806
Dec. 1998....... 375,000,000 866,000,000 400,000,000 2,610,900,000
Mar. 1999....... 375,000,000 866,000,000 400,000,000 2,525,470,651
June 1999....... 375,000,000 866,000,000 400,000,000 2,463,189,255
Sept. 1999...... 375,000,000 866,000,000 400,000,000 2,394,057,145
Dec. 1999....... 375,000,000 866,000,000 400,000,000 2,320,800,000
Mar. 2000....... 375,000,000 866,000,000 400,000,000 2,247,411,349
June 2000....... 375,000,000 866,000,000 400,000,000 2,181,558,413
Sept. 2000...... 375,000,000 866,000,000 400,000,000 2,108,245,891
Dec. 2000....... 375,000,000 866,000,000 400,000,000 2,030,700,000
Mar. 2001....... 375,000,000 866,000,000 400,000,000 1,955,432,693
June 2001....... 375,000,000 866,000,000 400,000,000 1,889,916,995
Sept. 2001...... 375,000,000 866,000,000 400,000,000 1,817,300,487
Dec. 2001....... 375,000,000 866,000,000 400,000,000 1,740,600,000
Mar. 2002....... 375,000,000 866,000,000 400,000,000 1,665,770,146
June 2002....... 333,909,318 866,000,000 400,000,000 1,599,909,318
Sept. 2002...... 261,190,055 866,000,000 400,000,000 1,527,190,055
Dec. 2002....... 184,500,000 866,000,000 400,000,000 1,450,500,000
Mar. 2003....... 109,704,693 866,000,000 400,000,000 1,375,704,693
June 2003....... 43,605,239 866,000,000 400,000,000 1,309,605,239
Sept. 2003...... 0 836,923,567 400,000,000 1,236,923,567
Dec. 2003....... 0 760,400,000 400,000,000 1,160,400,000
Mar. 2004....... 0 685,717,128 400,000,000 1,085,717,128
June 2004....... 0 619,362,446 400,000,000 1,019,362,446
Sept. 2004...... 0 546,689,411 400,000,000 946,689,411
Dec. 2004....... 0 470,300,000 400,000,000 870,300,000
Mar. 2005....... 0 395,711,287 400,000,000 795,711,287
June 2005....... 0 329,092,847 400,000,000 729,092,847
Sept. 2005...... 0 256,436,544 400,000,000 656,436,544
Dec. 2005....... 0 180,200,000 400,000,000 580,200,000
Mar. 2006....... 0 105,715,908 400,000,000 505,715,908
June 2006....... 0 38,832,155 400,000,000 438,832,155
Sept. 2006...... 0 0 366,190,629 366,190,629
Dec. 2006....... 0 0 290,100,000 290,100,000
Mar. 2007....... 0 0 215,130,076 215,130,076
June 2007....... 0 0 146,755,743 146,755,743
Sept. 2007...... 0 0 72,786,689 72,786,689
Dec. 2007....... 0 0 0 0
</TABLE>
<PAGE>
SCHEDULE B
Required Overcollateralization Level Schedule
---------------------------------------------
<TABLE>
<CAPTION>
PAYMENT REQUIRED
DATE OVERCOLLATERALIZATION LEVEL
------- ---------------------------
<S> <C>
Mar. 1998 $ 362,625.00
June 1998 $ 725,250.00
Sept. 1998 $ 1,087,875.00
Dec. 1998 $ 1,450,500.00
Mar. 1999 $ 1,813,125.00
June 1999 $ 2,175,750.00
Sept. 1999 $ 2,538,375.00
Dec. 1999 $ 2,901,000.00
Mar. 2000 $ 3,263,625.00
June 2000 $ 3,626,250.00
Sept. 2000 $ 3,988,875.00
Dec. 2000 $ 4,351,500.00
Mar. 2001 $ 4,714,125.00
June 2001 $ 5,076,750.00
Sept. 2001 $ 5,439,375.00
Dec. 2001 $ 5,802,000.00
Mar. 2002 $ 6,164,625.00
June 2002 $ 6,527,250.00
Sept. 2002 $ 6,889,875.00
Dec. 2002 $ 7,252,500.00
Mar. 2003 $ 7,615,125.00
June 2003 $ 7,977,750.00
Sept. 2003 $ 8,340,375.00
Dec. 2003 $ 8,703,000.00
Mar. 2004 $ 9,065,625.00
June 2004 $ 9,428,250.00
Sept. 2004 $ 9,790,875.00
Dec. 2004 $10,153,500.00
Mar. 2005 $10,516,125.00
June 2005 $10,878,750.00
Sept. 2005 $11,241,375.00
Dec. 2005 $11,604,000.00
Mar. 2006 $11,966,625.00
June 2006 $12,329,250.00
Sept. 2006 $12,691,875.00
Dec. 2006 $13,054,500.00
Mar. 2007 $13,417,125.00
June 2007 $13,779,750.00
Sept. 2007 $14,142,375.00
Dec. 2007 $14,505,000.00
</TABLE>
<PAGE>
EXHIBIT A
Form of Note
------------
[To be provided]
<PAGE>
EXHIBIT A
F o r m o f N o t e
- - - - - - - - - -
REGISTERED $____________
No. ______
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP NO. ________
THE PRINCIPAL OF THIS CLASS A - [ ] NOTE WILL BE PAID IN INSTALLMENTS
AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS
CLASS A - [ ] NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE
HEREOF.
[NAME OF SPE]
NOTES, SERIES 199[ ] - [ ], Class A - [ ].
INTEREST ORIGINAL PRINCIPAL FINAL MATURITY
RATE AMOUNT DATE
---- ------ ----
[Name of SPE], a limited liability company organized and existing
under the laws of the State of Delaware (herein referred to as the "Note
Issuer"), for value received, hereby promises to pay to [ ], or
registered assigns, the Original Principal Amount shown above in quarterly
installments on the Payment Dates and in the amounts specified on the reverse
hereof or, if less, the amounts determined pursuant to Section 8.02 of the
Indenture, in each year, commencing on the date determined as provided on the
reverse hereof and ending on or before the Final Maturity Date shown above and
to pay interest, at the Interest Rate shown above, on each March 25, June 25,
September 25 and December 26 or if any such day is not a Business Day, the next
succeeding Business Day, commencing on [ ] and continuing until the earlier
of the payment of the principal hereof and the Final Maturity Date (each a
"Payment Date"), on the principal amount of this Class A -[ ] Note. Interest
on this Class A - [ ] Note will accrue for each Payment Date from the most
recent Payment Date on which interest has been paid to but excluding such
Payment
<PAGE>
2
Date or, if no interest has yet been paid, from [ ]. Interest will be computed
on the basis of a [specify method of computation]. Such principal of and
interest on this Class A - [ ] Note shall be paid in the manner specified on the
reverse hereof.
The principal of and interest on this Class A -[ ] Note are payable in
such coin or currency of the United States of America as at the time of payment
is legal tender for payment of public and private debts. All payments made by
the Note Issuer with respect to this Class A - [ ] Note shall be applied first
to interest due and payable on this Class A - [ ] Note as provided above and
then to the unpaid principal of and premium, if any, on this Class A - [ ] Note,
all in the manner set forth in Section 8.02 of the Indenture.
Reference is made to the further provisions of this Class A - [ ] Note
set forth on the reverse hereof, which shall have the same effect as though
fully set forth on the face of this Class A - [ ] Note.
Unless the certificate of authentication hereon has been executed by
the Note Trustee whose name appears below by manual signature, this Class A - [
] Note shall not be entitled to any benefit under the Indenture referred to on
the reverse hereof, or be valid or obligatory for any purpose.
<PAGE>
3
IN WITNESS WHEREOF, the Note Issuer has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer.
Date:
[NAME OF SPE],
by _______________________
Name:
Title:
<PAGE>
4
NOTE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
Dated: _________, 199_
This is one of the Class A - [ ] Notes of the Series 199[_]-[_] Notes,
designated above and referred to in the within-mentioned Indenture.
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A.,
not in its individual capacity but
solely as Note Trustee,
by __________________________
Authorized Signatory
<PAGE>
5
[REVERSE OF NOTE]/1/
This Series 199[ ] - [ ], Class A - [ ] Note is one of a duly
authorized issue of Notes of the Note Issuer, designated as its Notes (herein
called the "Notes"), issued and to be issued in one or more Series, which Series
are issuable in one or more Classes, and this Series 199[ ] - [ ] Note, in
which this Class A - [ ] Note represents an interest, consists of [ ]
Classes, including this Class A - [ ] Note (herein called the "Class A - [ ]
Notes"), all issued and to be issued under an Indenture dated as of [ ],
1997, and a Series Supplement thereto (such Indenture and Series Supplement,
each as supplemented or amended, are herein referred to collectively as the
"Indenture"), each between the Note Issuer and Bankers Trust Company of
California, N.A., as Note Trustee (the "Note Trustee", which term includes any
successor trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights and obligations thereunder of the Note Issuer, the Note Trustee and the
Holders of the Notes. All terms used in this Class A - [ ] Note that are
defined in the Indenture, as supplemented or amended, shall have the meanings
assigned to them in the Indenture.
The Class A - [ ] Notes, the other Classes of Series 199[ ]-[ ]
Notes and any other Series of Notes issued by the Note Issuer are and will be
equally and ratably secured by the collateral pledged as security therefor as
provided in the Indenture.
The principal of this Class A - [ ] Note shall be payable on each
Payment Date only to the extent that amounts in the Collection Account are
available therefor, and only until the outstanding principal balance thereof on
such Payment Date (after giving effect to all payments of principal, if any,
made on such Payment Date)
_______________
/1/The form of the reverse of a Note is substantially as follows, unless
otherwise specified in the related Series Supplement.
<PAGE>
6
has been reduced to the principal balance specified in the Expected Amortization
Schedule which is attached to the related Series Supplement as Schedule A,
unless payable earlier either because (x) an Event of Default shall have
occurred and be continuing and the Note Trustee or the Holders of Notes
representing not less than a majority of the Outstanding Amount of the Notes of
all Series have declared the Notes of all Series to be immediately due and
payable in accordance with Section 5.02 of the Indenture, (y) the Note Issuer,
at its option, shall have called for the redemption of the Series 199[ ] - [ ]
Notes pursuant to Section 10.01 of the Indenture or (z) the Note Issuer shall
have called for the redemption of the Series 199[ ] - [ ] Notes pursuant to
Section 10.04 of the Indenture if the Seller is required to repurchase the
Transition Property pursuant to Section 5.01(b) of the Sale Agreement. However,
actual principal payments may be made in lesser than expected amounts and at
later than expected times as determined pursuant to Section 8.02 of the
Indenture. The entire unpaid principal amount of this Class A - [ ] Note shall
be due and payable on the earlier of the Final Maturity Date hereof, the
Optional Redemption Date, if any, and the Mandatory Redemption Date, if any,
herefor. Notwithstanding the foregoing, the entire unpaid principal amount of
the Notes shall be due and payable, if not then previously paid, on the date on
which an Event of Default shall have occurred and be continuing and the Note
Trustee or the Holders of the Notes representing not less than a majority of the
Outstanding Amount of the Notes of all Series have declared the Notes of all
Series to be immediately due and payable in the manner provided in Section 5.02
of the Indenture. All principal payments on the Class A - [ ] Notes shall be
made pro rata to the Class A - [ ] Noteholders entitled thereto based on the
respective principal amounts of the Class A - [ ] Notes held by them.
Payments of interest on this Class A - [ ] Note due and payable on
each Payment Date, together with the installment of principal or premium, if
any, shall be made by check mailed first-class, postage prepaid, to the Person
whose name appears as the Registered Holder of this Class A - [ ] Note (or one
or more Predecessor Notes) on the Note Register as of the close of business on
the Record Date or in such other manner as may be provided in the related Series
Supplement, except that with respect to Notes registered on the Record Date in
the name of the Certificate Trustee, payments will be made by wire transfer in
<PAGE>
7
immediately available funds to the account designated by the Certificate Trustee
and except for the final installment of principal and premium, if any, payable
with respect to this Class A - [ ] Note on a Payment Date which shall be payable
as provided below. Such checks shall be mailed to the Person entitled thereto at
the address of such Person as it appears on the Note Register as of the
applicable Record Date without requiring that this Class A - [ ] Note be
submitted for notation of payment. Any reduction in the principal amount of this
Class A - [ ] Note (or any one or more Predecessor Notes) effected by any
payments made on any Payment Date shall be binding upon all future Holders of
this Class A - [ ] Note and of any Note issued upon the registration of transfer
hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If
funds are expected to be available, as provided in the Indenture, for payment in
full of the then remaining unpaid principal amount of this Class A - [ ] Note on
a Payment Date, then the Note Trustee, in the name of and on behalf of the Note
Issuer, will notify the Person who was the Registered Holder hereof as of the
Record Date preceding such Payment Date by notice mailed no later than five days
prior to such final Payment Date and shall specify that such final installment
will be payable only upon presentation and surrender of this Class A - [ ] Note
and shall specify the place where this Class A - [ ] Note may be presented and
surrendered for payment of such installment.
The Note Issuer shall pay interest on overdue installments of interest
at the Note Interest Rate to the extent lawful.
As provided in the Indenture, the Class A - [ ] Notes may be redeemed,
in whole but not in part, at the option of the Note Issuer on any Payment Date
at the Optional Redemption Price if, after giving effect to payments that would
otherwise be made on such Payment Date, the Outstanding Amount of the Class A -
[ ] Notes has been reduced to less than five percent of the initial principal
balance thereof. In addition, as provided in the Indenture, if the Seller is
required to repurchase the Transition Property pursuant to Section 5.01(b) of
the Sale Agreement, the Note Issuer will be required to redeem all outstanding
Series of Notes, including the Class A - [ ] Notes, on or before the fifth
Business Day following the Repurchase Date (as defined in the Sale Agreement).
<PAGE>
8
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Class A - [ ] Note may be registered on the
Note Register upon surrender of this Class A - [ ] Note for registration of
transfer at the office or agency designated by the Note Issuer pursuant to the
Indenture, duly endorsed by, or accompanied by (a) a written instrument of
transfer in form satisfactory to the Note Trustee duly executed by the Holder
hereof or his attorney duly authorized in writing, with such signature
guaranteed by an institution which is a member of one of the following
recognized Signature Guaranty Programs: (i) The Securities Transfer Agent
Medallion Program (STAMP); (ii) The New York Stock Exchange Medallion Program
(MSP); (iii) The Stock Exchange Medallion Program (SEMP); or (iv) in such other
guarantee program acceptable to the Note Trustee, and (b) such other documents
as the Note Trustee may require, and thereupon one or more new Class A - [ ]
Notes of Minimum Denominations and in the same aggregate principal amount will
be issued to the designated transferee or transferees. No service charge will be
charged for any registration of transfer or exchange of this Class A - [ ] Note,
but the transferor may be required to pay a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection with any such
registration of transfer or exchange, other than exchanges pursuant to Section
2.04 or 9.06 of the Indenture not involving any transfer.
Each Noteholder, by acceptance of a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Note Issuer or the Note Trustee on the Notes or under the Indenture or
any certificate or other writing delivered in connection therewith, against (i)
the Note Trustee in its individual capacity, (ii) any owner of a beneficial
interest in the Note Issuer or (iii) any partner, owner, beneficiary, agent,
officer, director or employee of the Note Trustee in its individual capacity,
any holder of a beneficial interest in the Note Issuer or the Note Trustee or of
any successor or assign of the Note Trustee in its individual capacity, except
as any such Person may have expressly agreed (it being understood that the Note
Trustee has no such obligations in its individual capacity).
Prior to the due presentment for registration of transfer of this
Class A - [ ] Note, the Note Issuer, the Note Trustee and any agent of the Note
Issuer or the Note Trustee may treat the Person in whose name this Class A -
<PAGE>
9
[ ] Note is registered (as of the day of determination) as the owner hereof for
the purpose of receiving payments of principal of and premium, if any, and
interest on this Class A - [ ] Note and for all other purposes whatsoever,
whether or not this Class A - [ ] Note be overdue, and neither the Note Issuer,
the Note Trustee nor any such agent shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Note Issuer and the rights of the Holders of the Notes under the Indenture at
any time by the Note Issuer with the consent of the Holders of Notes
representing a majority of the Outstanding Amount of all Notes at the time
Outstanding of each Series or Class to be affected. The Indenture also contains
provisions permitting the Holders of Notes representing specified percentages of
the Outstanding Amount of the Notes of all Series, on behalf of the Holders of
all the Notes, to waive compliance by the Note Issuer with certain provisions of
the Indenture and certain past defaults under the Indenture and their
consequences. Any such consent or waiver by the Holder of this Class A - [ ]
Note (or any one of more Predecessor Notes) shall be conclusive and binding upon
such Holder and upon all future Holders of this Class A - [ ] Note and of any
Note issued upon the registration of transfer hereof or in exchange hereof or in
lieu hereof whether or not notation of such consent or waiver is made upon this
Class A - [ ] Note. The Indenture also permits the Note Trustee to amend or
waive certain terms and conditions set forth in the Indenture without the
consent of Holders of the Notes issued thereunder.
The term "Note Issuer" as used in this Class A -[ ] Note includes any
successor to the Note Issuer under the Indenture.
The Note Issuer is permitted by the Indenture, under certain
circumstances, to merge or consolidate, subject to the rights of the Note
Trustee and the Holders of Notes under the Indenture.
The Class A - [ ] Notes are issuable only in registered form in
denominations as provided in the Indenture and the related Series Supplement,
subject to certain limitations therein set forth.
<PAGE>
10
This Class A - [ ] Note, the Indenture and the related Series
Supplement shall be construed in accordance with the laws of the State of
California, without reference to its conflict of law provisions, and the
obligations, rights and remedies of the parties hereunder and thereunder shall
be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Class A
- - [ ] Note or of the Indenture shall alter or impair the obligation of the Note
Issuer, which is absolute and unconditional, to pay the principal of and
interest on this Class A - [ ] Note at the times, place, and rate, and in the
coin or currency herein prescribed.
The Holder of this Class A - [ ] Note by the acceptance hereof agrees
that, notwithstanding any provision of the Indenture or the related Series
Supplement to the contrary, the Holder shall have no recourse against the Note
Issuer, but shall look only to the Collateral, with respect to any amounts due
to the Holder under this Class A - [ ] Note.
<PAGE>
11
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto _________________________________________________________________
________________________________________________________________________________
(name and address of assignee)
the within Class A - [ ] Note and all rights thereunder, and hereby irrevocably
constitutes and appoints ___________________________, attorney, to transfer said
Class A - [ ] Note on the books kept for registration thereof, with full power
of substitution in the premises.
Dated: _______________ ___________________________*
Signature Guaranteed:
____________________________
_______________________
*NOTE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within Class A - [ ] Note
in every particular, without alteration, enlargement or any change whatsoever.
<PAGE>
EXHIBIT 4.3
REGISTERED $____________
No. ______
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP NO. ________
THE PRINCIPAL OF THIS CLASS A - [ ] NOTE WILL BE PAID IN INSTALLMENTS
AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS
CLASS A - [ ] NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE
HEREOF.
[NAME OF SPE]
NOTES, SERIES 199[ ] - [ ], Class A - [ ].
INTEREST ORIGINAL PRINCIPAL FINAL MATURITY
RATE AMOUNT DATE
---- ------ ----
[Name of SPE], a limited liability company organized and existing
under the laws of the State of Delaware (herein referred to as the "Note
Issuer"), for value received, hereby promises to pay to [ ], or
registered assigns, the Original Principal Amount shown above in quarterly
installments on the Payment Dates and in the amounts specified on the reverse
hereof or, if less, the amounts determined pursuant to Section 8.02 of the
Indenture, in each year, commencing on the date determined as provided on the
reverse hereof and ending on or before the Final Maturity Date shown above and
to pay interest, at the Interest Rate shown above, on each March 25, June 25,
September 25 and December 26 or if any such day is not a Business Day, the next
succeeding Business Day, commencing on [ ] and continuing until the earlier
of the payment of the principal hereof and the Final Maturity Date (each a
"Payment Date"), on the principal amount of this Class A -[ ] Note. Interest
on this Class A - [ ] Note will accrue for each Payment Date from the most
recent Payment Date on which interest has been paid to but excluding such
Payment
<PAGE>
2
Date or, if no interest has yet been paid, from [ ]. Interest will be computed
on the basis of a [specify method of computation]. Such principal of and
interest on this Class A - [ ] Note shall be paid in the manner specified on the
reverse hereof.
The principal of and interest on this Class A -[ ] Note are payable in
such coin or currency of the United States of America as at the time of payment
is legal tender for payment of public and private debts. All payments made by
the Note Issuer with respect to this Class A - [ ] Note shall be applied first
to interest due and payable on this Class A - [ ] Note as provided above and
then to the unpaid principal of and premium, if any, on this Class A - [ ] Note,
all in the manner set forth in Section 8.02 of the Indenture.
Reference is made to the further provisions of this Class A - [ ] Note
set forth on the reverse hereof, which shall have the same effect as though
fully set forth on the face of this Class A - [ ] Note.
Unless the certificate of authentication hereon has been executed by
the Note Trustee whose name appears below by manual signature, this Class A - [
] Note shall not be entitled to any benefit under the Indenture referred to on
the reverse hereof, or be valid or obligatory for any purpose.
<PAGE>
3
IN WITNESS WHEREOF, the Note Issuer has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer.
Date:
[NAME OF SPE],
by _______________________
Name:
Title:
<PAGE>
4
NOTE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
Dated: _________, 199_
This is one of the Class A - [ ] Notes of the Series 199[_]-[_] Notes,
designated above and referred to in the within-mentioned Indenture.
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A.,
not in its individual capacity but
solely as Note Trustee,
by __________________________
Authorized Signatory
<PAGE>
5
[REVERSE OF NOTE]/1/
This Series 199[ ] - [ ], Class A - [ ] Note is one of a duly
authorized issue of Notes of the Note Issuer, designated as its Notes (herein
called the "Notes"), issued and to be issued in one or more Series, which Series
are issuable in one or more Classes, and this Series 199[ ] - [ ] Note, in
which this Class A - [ ] Note represents an interest, consists of [ ]
Classes, including this Class A - [ ] Note (herein called the "Class A - [ ]
Notes"), all issued and to be issued under an Indenture dated as of [ ],
1997, and a Series Supplement thereto (such Indenture and Series Supplement,
each as supplemented or amended, are herein referred to collectively as the
"Indenture"), each between the Note Issuer and Bankers Trust Company of
California, N.A., as Note Trustee (the "Note Trustee", which term includes any
successor trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights and obligations thereunder of the Note Issuer, the Note Trustee and the
Holders of the Notes. All terms used in this Class A - [ ] Note that are
defined in the Indenture, as supplemented or amended, shall have the meanings
assigned to them in the Indenture.
The Class A - [ ] Notes, the other Classes of Series 199[ ]-[ ]
Notes and any other Series of Notes issued by the Note Issuer are and will be
equally and ratably secured by the collateral pledged as security therefor as
provided in the Indenture.
The principal of this Class A - [ ] Note shall be payable on each
Payment Date only to the extent that amounts in the Collection Account are
available therefor, and only until the outstanding principal balance thereof on
such Payment Date (after giving effect to all payments of principal, if any,
made on such Payment Date)
_______________
/1/The form of the reverse of a Note is substantially as follows, unless
otherwise specified in the related Series Supplement.
<PAGE>
6
has been reduced to the principal balance specified in the Expected Amortization
Schedule which is attached to the related Series Supplement as Schedule A,
unless payable earlier either because (x) an Event of Default shall have
occurred and be continuing and the Note Trustee or the Holders of Notes
representing not less than a majority of the Outstanding Amount of the Notes of
all Series have declared the Notes of all Series to be immediately due and
payable in accordance with Section 5.02 of the Indenture, (y) the Note Issuer,
at its option, shall have called for the redemption of the Series 199[ ] - [ ]
Notes pursuant to Section 10.01 of the Indenture or (z) the Note Issuer shall
have called for the redemption of the Series 199[ ] - [ ] Notes pursuant to
Section 10.04 of the Indenture if the Seller is required to repurchase the
Transition Property pursuant to Section 5.01(b) of the Sale Agreement. However,
actual principal payments may be made in lesser than expected amounts and at
later than expected times as determined pursuant to Section 8.02 of the
Indenture. The entire unpaid principal amount of this Class A - [ ] Note shall
be due and payable on the earlier of the Final Maturity Date hereof, the
Optional Redemption Date, if any, and the Mandatory Redemption Date, if any,
herefor. Notwithstanding the foregoing, the entire unpaid principal amount of
the Notes shall be due and payable, if not then previously paid, on the date on
which an Event of Default shall have occurred and be continuing and the Note
Trustee or the Holders of the Notes representing not less than a majority of the
Outstanding Amount of the Notes of all Series have declared the Notes of all
Series to be immediately due and payable in the manner provided in Section 5.02
of the Indenture. All principal payments on the Class A - [ ] Notes shall be
made pro rata to the Class A - [ ] Noteholders entitled thereto based on the
respective principal amounts of the Class A - [ ] Notes held by them.
Payments of interest on this Class A - [ ] Note due and payable on
each Payment Date, together with the installment of principal or premium, if
any, shall be made by check mailed first-class, postage prepaid, to the Person
whose name appears as the Registered Holder of this Class A - [ ] Note (or one
or more Predecessor Notes) on the Note Register as of the close of business on
the Record Date or in such other manner as may be provided in the related Series
Supplement, except that with respect to Notes registered on the Record Date in
the name of the Certificate Trustee, payments will be made by wire transfer in
<PAGE>
7
immediately available funds to the account designated by the Certificate Trustee
and except for the final installment of principal and premium, if any, payable
with respect to this Class A - [ ] Note on a Payment Date which shall be payable
as provided below. Such checks shall be mailed to the Person entitled thereto at
the address of such Person as it appears on the Note Register as of the
applicable Record Date without requiring that this Class A - [ ] Note be
submitted for notation of payment. Any reduction in the principal amount of this
Class A - [ ] Note (or any one or more Predecessor Notes) effected by any
payments made on any Payment Date shall be binding upon all future Holders of
this Class A - [ ] Note and of any Note issued upon the registration of transfer
hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If
funds are expected to be available, as provided in the Indenture, for payment in
full of the then remaining unpaid principal amount of this Class A - [ ] Note on
a Payment Date, then the Note Trustee, in the name of and on behalf of the Note
Issuer, will notify the Person who was the Registered Holder hereof as of the
Record Date preceding such Payment Date by notice mailed no later than five days
prior to such final Payment Date and shall specify that such final installment
will be payable only upon presentation and surrender of this Class A - [ ] Note
and shall specify the place where this Class A - [ ] Note may be presented and
surrendered for payment of such installment.
The Note Issuer shall pay interest on overdue installments of interest
at the Note Interest Rate to the extent lawful.
As provided in the Indenture, the Class A - [ ] Notes may be redeemed,
in whole but not in part, at the option of the Note Issuer on any Payment Date
at the Optional Redemption Price if, after giving effect to payments that would
otherwise be made on such Payment Date, the Outstanding Amount of the Class A -
[ ] Notes has been reduced to less than five percent of the initial principal
balance thereof. In addition, as provided in the Indenture, if the Seller is
required to repurchase the Transition Property pursuant to Section 5.01(b) of
the Sale Agreement, the Note Issuer will be required to redeem all outstanding
Series of Notes, including the Class A - [ ] Notes, on or before the fifth
Business Day following the Repurchase Date (as defined in the Sale Agreement).
<PAGE>
8
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Class A - [ ] Note may be registered on the
Note Register upon surrender of this Class A - [ ] Note for registration of
transfer at the office or agency designated by the Note Issuer pursuant to the
Indenture, duly endorsed by, or accompanied by (a) a written instrument of
transfer in form satisfactory to the Note Trustee duly executed by the Holder
hereof or his attorney duly authorized in writing, with such signature
guaranteed by an institution which is a member of one of the following
recognized Signature Guaranty Programs: (i) The Securities Transfer Agent
Medallion Program (STAMP); (ii) The New York Stock Exchange Medallion Program
(MSP); (iii) The Stock Exchange Medallion Program (SEMP); or (iv) in such other
guarantee program acceptable to the Note Trustee, and (b) such other documents
as the Note Trustee may require, and thereupon one or more new Class A - [ ]
Notes of Minimum Denominations and in the same aggregate principal amount will
be issued to the designated transferee or transferees. No service charge will be
charged for any registration of transfer or exchange of this Class A - [ ] Note,
but the transferor may be required to pay a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection with any such
registration of transfer or exchange, other than exchanges pursuant to Section
2.04 or 9.06 of the Indenture not involving any transfer.
Each Noteholder, by acceptance of a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Note Issuer or the Note Trustee on the Notes or under the Indenture or
any certificate or other writing delivered in connection therewith, against (i)
the Note Trustee in its individual capacity, (ii) any owner of a beneficial
interest in the Note Issuer or (iii) any partner, owner, beneficiary, agent,
officer, director or employee of the Note Trustee in its individual capacity,
any holder of a beneficial interest in the Note Issuer or the Note Trustee or of
any successor or assign of the Note Trustee in its individual capacity, except
as any such Person may have expressly agreed (it being understood that the Note
Trustee has no such obligations in its individual capacity).
Prior to the due presentment for registration of transfer of this
Class A - [ ] Note, the Note Issuer, the Note Trustee and any agent of the Note
Issuer or the Note Trustee may treat the Person in whose name this Class A -
<PAGE>
9
[ ] Note is registered (as of the day of determination) as the owner hereof for
the purpose of receiving payments of principal of and premium, if any, and
interest on this Class A - [ ] Note and for all other purposes whatsoever,
whether or not this Class A - [ ] Note be overdue, and neither the Note Issuer,
the Note Trustee nor any such agent shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Note Issuer and the rights of the Holders of the Notes under the Indenture at
any time by the Note Issuer with the consent of the Holders of Notes
representing a majority of the Outstanding Amount of all Notes at the time
Outstanding of each Series or Class to be affected. The Indenture also contains
provisions permitting the Holders of Notes representing specified percentages of
the Outstanding Amount of the Notes of all Series, on behalf of the Holders of
all the Notes, to waive compliance by the Note Issuer with certain provisions of
the Indenture and certain past defaults under the Indenture and their
consequences. Any such consent or waiver by the Holder of this Class A - [ ]
Note (or any one of more Predecessor Notes) shall be conclusive and binding upon
such Holder and upon all future Holders of this Class A - [ ] Note and of any
Note issued upon the registration of transfer hereof or in exchange hereof or in
lieu hereof whether or not notation of such consent or waiver is made upon this
Class A - [ ] Note. The Indenture also permits the Note Trustee to amend or
waive certain terms and conditions set forth in the Indenture without the
consent of Holders of the Notes issued thereunder.
The term "Note Issuer" as used in this Class A -[ ] Note includes any
successor to the Note Issuer under the Indenture.
The Note Issuer is permitted by the Indenture, under certain
circumstances, to merge or consolidate, subject to the rights of the Note
Trustee and the Holders of Notes under the Indenture.
The Class A - [ ] Notes are issuable only in registered form in
denominations as provided in the Indenture and the related Series Supplement,
subject to certain limitations therein set forth.
<PAGE>
10
This Class A - [ ] Note, the Indenture and the related Series
Supplement shall be construed in accordance with the laws of the State of
California, without reference to its conflict of law provisions, and the
obligations, rights and remedies of the parties hereunder and thereunder shall
be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Class A
- - [ ] Note or of the Indenture shall alter or impair the obligation of the Note
Issuer, which is absolute and unconditional, to pay the principal of and
interest on this Class A - [ ] Note at the times, place, and rate, and in the
coin or currency herein prescribed.
The Holder of this Class A - [ ] Note by the acceptance hereof agrees
that, notwithstanding any provision of the Indenture or the related Series
Supplement to the contrary, the Holder shall have no recourse against the Note
Issuer, but shall look only to the Collateral, with respect to any amounts due
to the Holder under this Class A - [ ] Note.
<PAGE>
11
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto _________________________________________________________________
________________________________________________________________________________
(name and address of assignee)
the within Class A - [ ] Note and all rights thereunder, and hereby irrevocably
constitutes and appoints ___________________________, attorney, to transfer said
Class A - [ ] Note on the books kept for registration thereof, with full power
of substitution in the premises.
Dated: _______________ ___________________________*
Signature Guaranteed:
____________________________
_______________________
*NOTE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within Class A - [ ] Note
in every particular, without alteration, enlargement or any change whatsoever.
<PAGE>
EXHIBIT 4.4
EXECUTION COPY
================================================================================
AMENDED AND RESTATED DECLARATION AND AGREEMENT OF TRUST
by and among
California Infrastructure and Economic Development Bank,
as Originator,
Bankers Trust (Delaware),
as Delaware Trustee,
and
Bankers Trust Company of California, N.A.,
as Certificate Trustee
Dated as of December 8, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
=================
ARTICLE I
DEFINITIONS
<TABLE>
<CAPTION>
Page
____
<S> <C>
Section 1.01. Definitions......................................... 1
Section 1.02. Compliance Certificates and Opinions................ 11
Section 1.03. Form of Documents Delivered to Certificate Trustee.. 12
Section 1.04. Acts of Certificateholders.......................... 13
<CAPTION>
ARTICLE II
ORGANIZATION; ACQUISITION OF NOTES;
ORIGINAL ISSUANCE OF CERTIFICATES
<S> <C>
Section 2.01. Name; Declaration and Statement of Intent; Office;
Operations........................................ 15
Section 2.02. Trust Property.................................... 15
Section 2.03. Tax Treatment; Construction....................... 16
Section 2.04. Purpose and Powers................................ 16
Section 2.05. Acquisition and Acceptance of Notes by Certificate
Trustee........................................... 16
Section 2.06. Issuance of Certificates.......................... 16
Section 2.07. Representations and Warranties of the
Originator........................................ 19
Section 2.08. Execution of Basic Documents...................... 20
<CAPTION>
ARTICLE III
THE CERTIFICATES
<S> <C>
Section 3.01. Form, Denomination and Execution of
Certificates..................................... 21
Section 3.02. Authentication of Certificates................... 21
Section 3.03. Temporary Certificates........................... 22
Section 3.04. Registration of Transfer and Exchange
of Certificates.................................. 22
Section 3.05. Certificateholders' Lists and Reports by
Certificate Trustee.............................. 23
Section 3.06. Mutilated, Destroyed, Lost or Stolen
Certificates..................................... 24
Section 3.07. Persons Deemed Owners............................ 24
Section 3.08. Cancellation..................................... 25
Section 3.09. Limitation of Liability for Payments............. 25
Section 3.10. Book-Entry and Definitive Certificates........... 25
</TABLE>
i
<PAGE>
ARTICLE IV
DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS
<TABLE>
<CAPTION>
Page
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<S> <C>
Section 4.01. Certificate Accounts..................... 28
Section 4.02. Distributions from Certificate Accounts.. 28
Section 4.03. Statements to Certificateholders......... 30
Section 4.04. Investment of Special Payment Moneys..... 31
Section 4.05. Reduction in Principal................... 32
<CAPTION>
ARTICLE V
DEFAULT
<S> <C>
Section 5.01. Events of Default........................ 33
Section 5.02. Incidents of Sale of Notes............... 34
Section 5.03. Judicial Proceedings Instituted by
Certificate Trustee; Certificate Trustee
May Bring Suit........................... 34
Section 5.04. Control by Certificateholders............ 34
Section 5.05. Waiver of Past Defaults.................. 35
Section 5.06. Right of Certificateholders To Receive
Payments Not To Be Impaired.............. 36
Section 5.07. Certificateholders May Not Bring Suit
Except Under Certain Conditions.......... 36
Section 5.08. Remedies Cumulative...................... 37
<CAPTION>
ARTICLE VI
THE CERTIFICATE TRUSTEE
<S> <C>
Section 6.01. Notice of Defaults....................... 38
Section 6.02. Certain Rights of Certificate Trustee.... 38
Section 6.03. Not Responsible for Recitals or Issuance
of Certificates.......................... 40
Section 6.04. May Hold Certificates.................... 40
Section 6.05. Money Held in Trust...................... 40
Section 6.06. Compensation and Reimbursement;
Indemnification.......................... 40
Section 6.07. Corporate Certificate Trustee Required;
Eligibility.............................. 41
Section 6.08. Resignation and Removal; Appointment of
Successor................................ 41
Section 6.09. Acceptance of Appointment by Successor... 43
Section 6.10. Merger, Conversion, Consolidation or
Succession to Business................... 44
Section 6.11. Maintenance of Agencies.................. 44
Section 6.12. Money for Certificate Payments To Be
Held in Trust............................ 45
Section 6.13. Registration of Notes in Certificate
Trustee's Name........................... 46
Section 6.14. Representations and Warranties of
Certificate Trustee...................... 46
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 6.15. Withholding Taxes; Information Reporting........... 47
<CAPTION>
ARTICLE VII
THE DELAWARE TRUSTEE
<S> <C>
Section 7.01. Appointment........................................ 48
Section 7.02. Duties and Responsibilities........................ 48
Section 7.03. Acceptance of the Trusts........................... 48
Section 7.04. Limitation of Liability............................ 48
Section 7.05. Other Protections.................................. 49
Section 7.06. Compensation and Reimbursement; Indemnification.... 49
Section 7.07. Resignation........................................ 50
<CAPTION>
ARTICLE VIII
SUPPLEMENTAL TRUST AGREEMENTS
<S> <C>
Section 8.01. Supplemental Trust Agreements Without Consent of
Certificateholders................................. 51
Section 8.02. Supplemental Trust Agreements With Consent of
Certificateholders................................. 51
Section 8.03. Documents Affecting Immunity or Indemnity.......... 52
Section 8.04. Execution of Supplemental Trust Agreements......... 53
Section 8.05. Effect of Supplemental Trust Agreements............ 53
Section 8.06. Conformity with Trust Indenture Act................ 53
Section 8.07. Reference in Certificates to Supplemental Trust
Agreements......................................... 53
<CAPTION>
ARTICLE IX
AMENDMENTS AND SUPPLEMENTS TO NOTES, NOTE INDENTURE
AND OTHER BASIC DOCUMENTS
<S> <C>
Section 9.01. Amendments and Supplements to Notes, Note
Indenture and Other Basic Documents................ 54
<CAPTION>
ARTICLE X
TERMINATION OF TRUST
<S> <C>
Section 10.01. Termination of the Trust.......................... 55
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
ARTICLE XI
MISCELLANEOUS PROVISIONS
<S> <C>
Section 11.01. Pledge of State of California; Certificates and
Notes Not Obligation of State of California,
Originator, or Seller............................. 57
Section 11.02. Limitation on Rights of Certificateholders........ 57
Section 11.03. [Intentionally Omitted]........................... 58
Section 11.04. Certificates Nonassessable and Fully Paid......... 58
Section 11.05. Notices........................................... 58
Section 11.06. Governing Law..................................... 60
Section 11.07. Severability of Provisions........................ 60
Section 11.08. Conflict With Trust Indenture Act................. 61
Section 11.09. Effect of Headings and Table of Contents.......... 61
Section 11.10. Successors and Assigns; Delegation................ 61
Section 11.11. Benefits of Trust Agreement....................... 61
Section 11.12. Legal Holidays.................................... 61
Section 11.13. Counterparts...................................... 61
Exhibit A--Form of Certificate........................... A-1
</TABLE>
iv
<PAGE>
AMENDED AND RESTATED DECLARATION AND AGREEMENT OF TRUST, dated as of December
8, 1997 (the "Trust Agreement"), by and among Bankers Trust (Delaware), as
Delaware Trustee, Bankers Trust Company of California, N.A., as Certificate
Trustee, and the California Infrastructure and Economic Development Bank, as
Originator.
WHEREAS, the Delaware Trustee and the Originator entered into a Declaration
and Agreement of Trust, dated as of November 7, 1997 (the "Declaration and
Agreement of Trust"), creating the California Infrastructure and Economic
Development Bank Special Purpose Trust PG&E-1, a not-for-profit business trust
organized under the laws of the State of Delaware (the "Trust"); and
WHEREAS, pursuant to Section 1(b) of the Declaration and Agreement of Trust,
the Delaware Trustee filed a certificate of trust with the Secretary of State on
November 7, 1997; and
WHEREAS, pursuant to Section 1(c) of the Declaration and Agreement of Trust,
the Delaware Trustee, the Originator and the Certificate Trustee desire to enter
into this Trust Agreement in order to provide for the operation of the Trust;
and
WHEREAS, the Note Issuer (as herein defined) intends to issue notes (the
"Notes") of one or more series or classes from time to time pursuant to the Note
Indenture (as herein defined); and
WHEREAS, it is contemplated that the Trust shall purchase the Notes of each
series pursuant to the Note Purchase Agreement (as herein defined) or a
Subsequent Note Purchase Agreement (as herein defined) relating to such Notes;
and
WHEREAS, in order to finance the purchase of the Notes of one or more series
or classes from the Note Issuer, the Trust shall issue pursuant to this Trust
Agreement rate reduction certificates (the "Certificates"), each of which shall
represent a fractional undivided beneficial interest in a corresponding series
and class of Notes and the proceeds thereof, together with payments made on any
related Swap (as defined herein);
NOW THEREFORE, in consideration of the mutual agreements herein contained, and
of other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. (a) For all purposes of this Trust Agreement,
-----------
except as otherwise expressly provided or unless the context otherwise requires:
(i) the terms used herein that are defined in this Article have the
meanings assigned to them in this Article, and include the plural as well
as the singular;
1
<PAGE>
(ii) Whenever this Trust Agreement refers to a provision of the Trust
Indenture Act, the provision is incorporated by reference in and made a part
of this Trust Agreement. The following Trust Indenture Act terms have the
following corresponding terms and meanings when used in this Trust Agreement:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Certificates.
"indenture security holder" means a Certificateholder.
"indenture to be qualified" means this Trust Agreement.
"indenture trustee" or "institutional trustee" means the Certificate
Trustee.
"obligor" on the indenture securities means the Originator and any other
obligor on the indenture securities.
All other Trust Indenture Act terms used in this Trust Agreement that are
defined by the Trust Indenture Act, defined by Trust Indenture Act reference to
another statute or defined by Commission rule have the meaning assigned to them
by such definitions.
(iii) all references in this Trust Agreement to designated
"Articles", "Sections" and other subdivisions are to the designated Articles,
Sections and other subdivisions of this Trust Agreement;
(iv) the words "include", "including" and similar terms shall be construed
as if followed by the phrase "without limitation"; and
(v) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Trust Agreement as a whole and not to any
particular Article, Section or other subdivision.
"Act", when used with respect to any Certificateholder, has the meaning
specified in Section 1.04.
"Authentication Agent" means the authentication agent appointed pursuant to
Section 6.11(b).
"Authorized Agent" means any Paying Agent or Registrar.
"Authorized Officer" means, with respect to any entity, any officer of such
entity who is authorized to act for such entity in matters relating to such
entity and who is identified on the list of Authorized Officers delivered by
such entity to the Certificate Trustee on the Initial Closing Date (as such list
may be modified or supplemented from time to time thereafter).
2
<PAGE>
"Avoidable Tax" has the meaning set forth in Section 6.08(f).
"Book-Entry Certificates" means, with respect to any Certificate, a
beneficial interest in such Certificate, ownership and transfers of which shall
be made through book entries by a Clearing Agency as described in Section 3.10.
"Business Trust Statute" shall mean Chapter 38 of Title 12 of the Delaware
Code, 12 Del. C., (S) 3801 et seq., as the same may be amended from time to time
------- ------
and any successor statute.
"Certificate Account" means, with respect to any Series or Class of
Certificates, the account or accounts created and maintained with respect to
such Series or Class of Certificates pursuant to Section 4.01(a).
"Certificate Business Day" or "Business Day" means any day other than a
Saturday, a Sunday or a day on which banking institutions or trust companies in
New York, New York or San Francisco, California are authorized or obligated by
law, regulation or executive order to remain closed.
"Certificate Owner" means the Person who owns a Book-Entry Certificate.
"Certificate Trustee" means Bankers Trust Company of California, N.A., as
Certificate Trustee under this Trust Agreement, and its successors in interest,
and any successor Certificate Trustee appointed as provided herein.
"Certificate Trustee Expenses" has the meaning set forth in Section 6.06.
"Certificate Trustee Indemnified Persons" has the meaning set forth in
Section 6.06.
"Certificateholder" or "Holder" means the Person in whose name a
Certificate is registered on the Register.
"Certificates" has the meaning set forth in the preamble to this Trust
Agreement.
"Class" means, with respect to any Series of Certificates, any one of the
classes of Certificates of that Series; and, with respect to any Series of
Notes, any one of the classes of Notes of that Series.
"Clearing Agency" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" means a broker, dealer, bank, other financial
institution or other Person for whom from time to time a Clearing Agency effects
book entry transfers and pledges of securities deposited with the Clearing
Agency.
"Corporate Trust Office" means the principal office of the Certificate
Trustee or the Delaware Trustee, as the case may be, at which at any particular
time its corporate trust business
3
<PAGE>
shall be administered which office of the Certificate Trustee at the date of the
execution of this Trust Agreement is located at Bankers Trust Company of
California, N.A., c/o Bankers Trust Company, Four Albany Street, New York, New
York 10006, Attention: Structured Finance Group and which office of the
Delaware Trustee at the date of the execution of this Trust Agreement is located
at E.A. Delle Donne Corporate Center, Montgomery Building, 1011 Centre Road,
Suite 200, Wilmington, Delaware 19805-1266, or at any other time at such other
address as the Certificate Trustee or the Delaware Trustee may designate from
time to time by notice given pursuant to Section 11.05.
"Declaration and Agreement of Trust" has the meaning set forth in the
preamble to this Trust Agreement.
"Definitive Certificates" has the meaning set forth in Section 3.10(a).
"Delaware Trustee" means Bankers Trust (Delaware), as Delaware Trustee
under this Trust Agreement, and its successors in interest, and any successor
Delaware Trustee appointed as provided herein.
"Delaware Trustee Expenses" has the meaning set forth in Section 7.06.
"Delaware Trustee Indemnified Persons" has the meaning set forth in Section
7.06.
"Distribution Date" means, with respect to any Series or Class of
Certificates, a Payment Date with respect to the Notes.
"DTC Agreement" means the agreement between the Certificate Trustee on
behalf of the Trust and The Depository Trust Company, as the initial Clearing
Agency, dated as of December 8, 1997, relating to the Certificates, as the same
may be amended and supplemented from time to time.
"Eligible Institution" means (a) the corporate trust department of the
Certificate Trustee; provided, that an account with the Certificate Trustee will
--------
only be an eligible deposit account if it is a segregated trust account, or (b)
a depository institution organized under the laws of the United States of
America or any State (or any domestic branch of a foreign bank), that (i) has
either (A) a long-term unsecured debt rating of AAA by Standard & Poor's and A2
by Moody's or (B) a certificate of deposit rating of A-1+ by Standard & Poor's
and P-1 by Moody's, or any other long-term, short-term or certificate of deposit
rating acceptable to the Rating Agencies and (ii) whose deposits are insured by
the FDIC.
"Eligible Investments" means instruments or investment property that
evidence:
(i) direct obligations of, and obligations fully and unconditionally
guaranteed as to timely payment by, the United States of America;
(ii) demand deposits, time deposits, certificates of deposit or
bankers' acceptances of depository institutions meeting the requirements of
clause (b)
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<PAGE>
of the definition of Eligible Institutions;
(iii) commercial paper (other than commercial paper of the Seller)
having, at the time of the investment or contractual commitment to invest
therein, a rating from each of the Rating Agencies in the highest
investment category granted thereby;
(iv) investments in money market funds having a rating from each of
the Rating Agencies in the highest investment category granted thereby
(including funds for which the Certificate Trustee or any of its Affiliates
is investment manager or advisor);
(v) repurchase obligations with respect to any security that is a
direct obligation of, or fully guaranteed by, the United States of America
or any agency or instrumentality thereof the obligations of which are
backed by the full faith and credit of the United States of America, in
either case entered into with depository institutions meeting the
requirements of clause (b) of the definition of Eligible Institution; and
(vi) any other investment permitted by each of the Rating Agencies.
"Event of Default" means, with respect to any Series or Class of
Certificates, (i) a Note Event of Default with respect to the corresponding
Series or Class of Notes, or (ii) a breach by the State of California of the
State Pledge described in Section 11.01(a).
"FDIC" means the Federal Deposit Insurance Corporation, and its successors.
"Fee and Indemnity Agreement" means the fee and indemnity agreement dated
as of December 8, 1997, among the Note Issuer, the Note Trustee, the Originator,
the Delaware Trustee and the Certificate Trustee.
"Initial Closing Date" means December 8, 1997.
"London Banking Day" means any day on which dealings in deposits in U.S.
dollars are transacted in the London interbank market.
"Minimum Denomination" means, with respect to any Certificate, the minimum
denomination therefor specified in the applicable Trust Supplement, which
minimum denomination shall not be less than $1,000.
"Note Event of Default" means, with respect to any Series or Class of
Notes, any Event of Default (as such term is defined in the Note Indenture) with
respect to such Series or Class of Notes.
"Note Indenture" means the Indenture dated as of December 8, 1997, between
the Note Issuer and the Note Trustee, as amended and supplemented from time to
time, including by any Series Supplement.
"Note Issuer" means PG&E Funding LLC, a Delaware limited liability company,
and its
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<PAGE>
successors in interest.
"Note Purchase Agreement" means the Note Purchase Agreement dated as of
December 8, 1997, between the Note Issuer and the Trust, as the same may be
amended or supplemented from time to time to accommodate the issuance of
additional Series or Classes of Notes and Certificates.
"Note Trustee" means the institution acting as Note Trustee under the Note
Indenture.
"Notes" has the meaning set forth in the preamble to this Trust Agreement.
"Officer's Certificate" means a certificate signed by any Authorized
Officer of the Originator, under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 1.02, and delivered to
the Certificate Trustee.
"Opinion of Counsel" means one or more written opinions of counsel who may,
except as otherwise expressly provided in this Trust Agreement, be employees of
or counsel to the Originator and who shall be satisfactory to the Certificate
Trustee and the Delaware Trustee, if applicable, and which opinion or opinions
shall be addressed to the Certificate Trustee, as trustee, and the Delaware
Trustee, as trustee, if applicable, shall comply with any applicable
requirements of Section 1.02, and shall be in form and substance satisfactory to
the Certificate Trustee.
"Original Principal Amount" means, with respect to any Certificate, the
amount set forth as such on the face of such Certificate on the date of its
issuance.
"Originator" means the California Infrastructure and Economic Development
Bank, a public body established within the state government of the State of
California, and its successors in interest.
"Outstanding" means, as of the date of determination, all Certificates
theretofore authenticated and delivered under this Trust Agreement except:
(i) Certificates theretofore canceled by the Registrar or delivered to
the Registrar for cancellation;
(ii) Certificates or portions thereof the payment for which money in
the necessary amount has been theretofore deposited with the Certificate
Trustee or any Paying Agent in trust for the Holders of such Certificates
(provided, however, that if such Certificates are to be redeemed, notice of
-------------------
such redemption has been duly given pursuant to this Trust Agreement or
provision therefor, satisfactory to the Certificate Trustee, has been
made); and
(iii) Certificates in exchange for or in lieu of other Certificates
that have been authenticated and delivered pursuant to this Trust Agreement
unless proof satisfactory to the Certificate Trustee is presented that any
such Certificates are held by a protected purchaser;
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<PAGE>
provided that in determining whether the Holders of the requisite Outstanding
- --------
Amount of the Certificates or any Series or Class thereof have given any
request, demand, authorization, direction, notice, consent or waiver hereunder
or under any Basic Document, Certificates owned by the Note Issuer, the
Originator, the Seller, the Swap Counterparty (if applicable) or any Affiliate
of any of the foregoing Persons shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Certificate Trustee shall
be protected in relying upon any such request, demand, authorization, direction,
notice, consent or waiver, only Certificates that a Responsible Officer of the
Certificate Trustee actually knows to be so owned shall be so disregarded.
Certificates so owned that have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Certificate
Trustee the pledgee's right so to act with respect to such Certificates and that
the pledgee is not the Note Issuer, any other obligor upon the Certificates, the
Originator, the Seller, the Swap Counterparty (if applicable) or any Affiliate
of any of the foregoing Persons.
"Outstanding Amount" means the aggregate principal amount of all
Certificates, or, if the context requires, all Certificates of a Series or
Class, Outstanding at the date of determination.
"Paying Agent" means the Certificate Trustee or any other Person that meets
the eligibility standards specified in Section 6.11(b) and is authorized by the
Originator (with the prior written approval of the Note Issuer) to make
distributions of principal of or interest with respect to the Certificates.
"Payment" means, with respect to any Series or Class of Notes, any payment
(other than a Special Payment but including any Redemption Payment) of principal
of or interest thereon.
"Payment Date" means, with respect to any Series or Class of Notes, the
date or dates specified as Payment Dates therefor in the applicable Series
Supplement.
"Record Date" means, with respect to any Distribution Date, the Business
Day immediately preceding such Distribution Date or, if Definitive Certificates
are issued, the last day of the calendar month preceding the calendar month in
which such Distribution Date occurs.
"Redemption Payment" means, with respect to any Series or Class of Notes,
any payment of principal of and interest on the Notes of such Series or Class
due from the Note Issuer upon the early redemption of such Series or Class of
Notes, other than any such payment due by reason of the occurrence of a Note
Event of Default with respect to such Series or Class of Notes.
"Register" has the meaning set forth in Section 3.04.
"Registrar" means, initially, the Certificate Trustee, pursuant to Section
3.04, and any successor registrar appointed pursuant to Section 6.11(b).
"Request" means a written request by the Originator setting forth the
subject matter of the request accompanied by an Officer's Certificate and an
Opinion of Counsel as provided in Section 1.02.
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<PAGE>
"Responsible Officer" means, when used with respect to a Trustee, any
officer within the Corporate Trust Office of the related Trustee including any
Managing Director, Vice President, Assistant Vice President, Secretary,
Assistant Secretary or Assistant Treasurer or any other officer of the related
Trustee customarily performing functions similar to those performed by any of
the above designated officers and also, with respect to a particular matter, any
other officer to whom such matter is referred because of such officer's
knowledge of and familiarity with the particular subject.
"Sale Agreement" means the Transition Property Purchase and Sale Agreement
dated as of December 8, 1997, between the Seller and the Note Issuer, as amended
and supplemented from time to time.
"Scheduled Final Distribution Date" means, with respect to any Series or
Class of Certificates, the Scheduled Maturity Date of the related Series and
Class of Notes.
"Secretary of State" shall mean the Secretary of State of the State of
Delaware.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" means Pacific Gas and Electric Company, in its capacity as seller
under the Sale Agreement, including its successors in interest.
"Series," when referring to Certificates, means each series of Certificates
issued and authenticated pursuant to this Trust Agreement and a related Trust
Supplement, and, when referring to Notes, means each series of Notes issued and
authenticated pursuant to the Note Indenture and a related Series Supplement.
"Servicer" means Pacific Gas and Electric Company, in its capacity as
servicer under the Servicing Agreement, including its successors in interest,
until a successor Person shall have become the servicer pursuant to the
Servicing Agreement, and thereafter "Servicer" shall mean such successor Person.
"Servicing Agreement" means the Transition Property Servicing Agreement
dated as of December 8, 1997, between the Servicer and the Note Issuer, as
amended and supplemented from time to time.
"Special Distribution Date" means, with respect to the distribution of any
Special Payment with respect to any Series or Class of Notes, the later of (i)
the date receipt of such Special Payment is confirmed by the Certificate Trustee
and (ii) the date that is the earlier of (A) if the Certificate Trustee shall
have received such Special Payment without prior notice thereof, 20 days after
such receipt is confirmed or (B) unless such Special Payment represents the
proceeds of a sale of such Notes by the Certificate Trustee (in which event the
Special Payment Date for such proceeds shall be the earliest date for which it
is practicable for the Certificate Trustee to give the 20-day notice required by
Section 4.02(d)), the date that is 20 days after the Certificate Trustee
receives notice from the Note Issuer of the anticipated payment of such Special
Payment, provided that in the event of the repurchase of the Transition Property
by the Seller, the Special Distribution Date shall mean
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<PAGE>
a date not later than five Business Days after receipt of such proceeds.
"Special Payment" means, with respect to any Series or Class of Notes, (i)
any payment of principal of or interest on (including any interest accruing upon
default), or any other amount in respect of, the Notes of such Series or Class
(including a payment under any Swap) that is not actually paid within five days
of the Payment Date applicable thereto or (ii) any proceeds from the sale of
such Notes by the Certificate Trustee pursuant to Article V hereof or the
repurchase of the Transition Property by the Seller pursuant to Article V of the
Sale Agreement.
"Special Record Date" means, with respect to any Special Distribution Date,
the close of business on the 15th day (whether or not a Business Day) preceding
such Special Distribution Date.
"State Pledge" has the meaning set forth in Section 11.01(a).
"Subsequent Closing Date" means any date (other than the Initial Closing
Date) specified in a Trust Supplement on which Certificates of any Series or
Class are issued.
"Subsequent Note Purchase Agreement" means any agreement substantially
similar to the Note Purchase Agreement executed in connection with the purchase
of a Series or Class of Notes on a Subsequent Closing Date.
"Swap" means an interest rate swap, cap, floor, collar or other hedging
transaction that may be entered into by the Trust, at the direction of the
Originator, for the purpose of managing interest rate risk with respect to a
specified Series or Class of Certificates that are being issued concurrently
with the execution of the Swap.
"Swap Counterparty" means the entity that is a party to a Swap with the
Trust.
"Swap Payment" means the payments made by the Trust to the Swap
Counterparty pursuant to any Swap, subject to any netting of payments provided
in the applicable Swap.
"Swap Revenues" means the payments paid by a Swap Counterparty to the Trust
pursuant to any Swap, subject to any netting of payments provided in the
applicable Swap.
"Termination Date" means, with respect to any Series or Class of
Certificates, the Final Maturity Date of the related Series and/or Class of
Notes.
"Trust" means the trust created by this Trust Agreement, the estate of
which consists of the Trust Property.
"Trust Agreement" means this Trust Agreement, as the same shall be amended
or supplemented from time to time.
"Trust Indenture Act", except as otherwise provided in Section 8.06, means
the Trust Indenture Act of 1939 as in force at the date as of which this
instrument was executed.
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"Trust Property" means, with respect to any Series or Class of
Certificates, (i) the Series or Class of Notes corresponding to such Series or
Class of Certificates held as the property of the Trust and all monies at any
time paid thereon and all monies due and to become due thereunder, all rights of
the Certificate Trustee or the Trust, as holder of such Series or Class of
Notes, in and to the Collateral and any proceeds thereof, funds from time to
time deposited in the Certificate Account for such Series or Class of
Certificates and any proceeds from the sale by the Certificate Trustee pursuant
to Article V hereof of Notes of such Series or Class and (ii) any Swap executed
in connection with such Series or Class of Certificates together with any Swap
Revenues payable to the Trust with respect thereto.
"Trust Supplement" means a supplement to this Trust Agreement that provides
for the issuance of a particular Series of Certificates.
"Trustee" means the Certificate Trustee and/or the Delaware Trustee, as the
context may require.
"Underwriters" means the underwriters who purchase Certificates of any
Series or Class from the Trust and sell such Certificates in a public offering.
(b) Except as otherwise specified herein or as the context may otherwise
require, the following terms have the respective meanings set forth in the Note
Indenture as in effect on the Initial Closing Date for all purposes of this
Trust Agreement.
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<TABLE>
<CAPTION>
Section of
Term Note Indenture
---- -----------------
<S> <C>
Administrative Services Agreement.. 1.01(a)
Administrator...................... 1.01(a)
Advice Letters..................... 1.01(b)
Affiliate.......................... 1.01(a)
Basic Documents.................... 1.01(a)
Capital Subaccount................. 1.01(a)
Collateral......................... 1.01(a)
Commission......................... 1.01(a)
Duff & Phelps...................... 1.01(a)
Exchange Act....................... 1.01(a)
Expected Amortization Schedule..... 1.01(a)
FDIC............................... 1.01(a)
Final Maturity Date................ 1.01(a)
Financing Order.................... 1.01(b)
Fitch.............................. 1.01(b)
FTA Charge......................... 1.01(b)
Moody's............................ 1.01(a)
Person............................. 1.01(a)
PU Code............................ 1.01(b)
Rating Agency...................... 1.01(a)
Rating Agency Condition............ 1.01(a)
Series Issuance Date............... 1.01(a)
Series Supplement.................. 1.01(a)
Standard & Poor's.................. 1.01(a)
State.............................. 1.01(a)
Transition Property................ 1.01(b)
</TABLE>
(c) When reference is made herein to the Certificates of any Series or
Class, such reference shall mean the Certificates of such Series if there exists
only one Series, or the Certificates of any Class within a Series, if such
Series of Certificates contains more than one Class.
Section 1.02. Compliance Certificates and Opinions. Upon any application
------------------------------------
or request by the Originator to the Certificate Trustee to take any action under
any provision of this Trust Agreement, the Originator shall furnish to the
Certificate Trustee an Officer's Certificate stating that, in the opinion of the
signer thereof, all conditions precedent, if any, provided for in this Trust
Agreement relating to the proposed action have been complied with and an Opinion
of Counsel stating that in the opinion of such counsel all such conditions
precedent, if any, have been complied with, except that in the case of any such
application or request as to which the furnishing of such documents is
specifically required by any provision of this Trust Agreement relating to such
particular application or request, no additional certificate or opinion need be
furnished. Any such application or request by the Originator to the Certificate
Trustee shall also be accompanied by evidence reasonably satisfactory to the
Certificate Trustee that the Note Issuer has given its prior written approval of
such application or request.
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Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Trust Agreement shall include:
(a) a statement that each signatory of such certificate or opinion has
read or caused to be read such covenant or condition and the definitions
herein relating thereto;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of each such signatory, such
signatory has made such examination or investigation as is necessary to
enable such signatory to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such signatory,
such condition or covenant has been complied with.
Section 1.03. Form of Documents Delivered to Certificate Trustee. In any
--------------------------------------------------
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may certify
or give an opinion with respect to some matters and one or more other such
Persons as to other matters, and any such Person may certify or give an opinion
as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Originator may
be based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate of an Authorized Officer
or Opinion of Counsel may be based, insofar as it relates to factual matters,
upon a certificate or opinion of, or representations by, an officer or officers
of the Servicer, the Seller, the Note Issuer or the Administrator, stating that
the information with respect to such factual matters is in the possession of the
Servicer, the Seller, the Note Issuer or the Administrator, as the case may be,
unless such counsel knows, or in the exercise of reasonable care should know,
that the certificate or opinion or representations with respect to such matters
are erroneous.
Whenever in this Trust Agreement, in connection with any application or
certificate or report to the Certificate Trustee, it is provided that the
Originator shall deliver any document as a condition of the granting of such
application, or as evidence of the Originator's compliance with any term hereof,
it is intended that the truth and accuracy, at the time of the granting of such
application or at the effective date of such certificate or report (as the case
may be), of the facts and opinions stated in such document shall in such case be
conditions precedent to the right of the Originator to have such application
granted or to the sufficiency of such certificate or report. The
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<PAGE>
foregoing shall not, however, be construed to affect the Originator's right to
rely upon the truth and accuracy of any statement or opinion contained in any
such document as provided in Article VI.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Trust Agreement, they may, but need not, be consolidated
and form one instrument.
Section 1.04. Acts of Certificateholders. (a) Any request, demand,
--------------------------
authorization, direction, notice, consent, waiver or other action provided by
this Trust Agreement to be given or taken by Certificateholders may be embodied
in and evidenced by one or more instruments of substantially similar tenor
signed by such Certificateholders in person or by agents duly appointed in
writing; and except as herein otherwise expressly provided such request, demand,
authorization, direction, notice, consent, waiver or other action shall become
effective when such instrument or instruments are delivered to the Certificate
Trustee, and, where it is hereby expressly required, to the Originator and the
Note Trustee. Such instrument or instruments (and the action embodied therein
and evidenced thereby) are herein sometimes referred to as the "Act" of the
Certificateholders signing such instrument or instruments. Proof of execution
of any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Trust Agreement and (subject to Article VI)
conclusive in favor of the Certificate Trustee, the Originator and the Note
Trustee, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such instrument
or writing may be proved in any manner that the Certificate Trustee deems
sufficient.
(c) The ownership of Certificates shall be proved by the Register.
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Certificates shall bind the Holder of every
Certificate issued upon the registration thereof or in exchange therefor or in
lieu thereof, in respect of anything done, omitted or suffered to be done by the
Certificate Trustee, the Originator or the Note Trustee in reliance thereon,
whether or not notation of such action is made upon such Certificate.
(e) The Originator may at its option by delivery of an Officer's
Certificate to the Certificate Trustee set a record date to determine the
Holders of any Series or Class of Certificates entitled to give any consent,
request, demand, authorization, direction, notice, waiver or other Act.
Notwithstanding Section 316(c) of the Trust Indenture Act, such record date
shall be the record date specified in such Officer's Certificate, which shall be
the date not more than 30 days prior to the first solicitation of
Certificateholders in connection therewith. If such a record date is fixed,
such consent, request, demand, authorization, direction, notice, waiver or other
Act may be given before or after such record date, but only the Holders of
record of Certificates of the applicable Series or Class at the close of
business on such record date shall be deemed to be Certificateholders of such
Series or Class for the purposes of determining whether Holders of the requisite
aggregate Outstanding Amount of Certificates of such Series or Class
have authorized or agreed or consented to such consent, request, demand,
authorization, direction, notice, waiver or other Act, and for that purpose the
aggregate Outstanding Amount of Certificates of such Series or Class shall be
computed as of such record date; provided that no such consent, request, demand,
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authorization,
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direction, notice, waiver or other Act by the Holders of Certificates of such
Series or Class on such record date shall be deemed effective unless it shall
become effective pursuant to the provisions of this Trust Agreement not later
than one year after the record date.
(f) Except as otherwise provided in the definition of Outstanding,
Certificates of any Series or Class owned by or pledged to any Person shall have
an equal and proportional benefit under the provisions of this Trust Agreement,
without preference, priority or distinction as among all of the Certificates of
that Series or Class.
ARTICLE II
ORGANIZATION; ACQUISITION OF NOTES;
ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.01. Name; Declaration and Statement of Intent; Office;
--------------------------------------------------
Operations. (a) The Trust created hereby shall be known as the "California
- ----------
Infrastructure and Economic Development Bank Special Purpose Trust - PG&E-1," in
which name the Delaware Trustee and the Certificate Trustee may engage in the
transactions contemplated hereby. It is the intention of the parties hereto
that the Trust constitute a not-for-profit business trust under the Business
Trust Statute and that this Trust Agreement constitute the governing instrument
of such business trust. Effective as of the date hereof, the Delaware Trustee
and the Certificate Trustee declare themselves co-trustees for the Trust.
(b) The office of the Trust shall be in care of the Delaware Trustee at its
Corporate Trust Office or at such other address in Delaware as the Delaware
Trustee may designate by written notice to the Originator, the Certificate
Trustee, the Note Issuer and the Certificateholders, and the Trust shall conduct
its business in such office separate and apart from that of the Originator and
its affiliates.
(c) The Certificate Trustee, as trustee on behalf of the
Certificateholders, accepts the trust created hereby in accordance with the
provisions hereof, accepts appointment as Certificate Trustee, as Paying Agent
and as Registrar hereunder, and agrees to perform its duties as herein required.
Section 2.02. Trust Property. (a) All bank accounts and other Trust
--------------
Property shall be established by the Certificate Trustee on behalf of the Trust
and held and maintained by the Certificate Trustee on behalf of the Trust at its
Corporate Trust Office or at another Eligible Institution. The Trust shall use
separate stationery and other business forms and shall maintain separate records
and books of account from those of the Originator. The Trust's assets shall not
be commingled with those of the Originator, and the Trust shall act solely in
its own name through its duly authorized agents in the conduct of its business.
(b) The Trust and the Originator each covenant and agree to hold itself out
to the public under its own name as a separate and distinct entity and will each
conduct its business so as not to mislead others as to its identity. The Trust
shall cause the preparation of its financial documents separate and apart from
those of the Originator.
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(c) Except as otherwise contemplated by the Basic Documents, the Trust will
not engage in any business transactions with the Originator.
(d) The Certificate Trustee hereby declares that it shall hold the Trust
Property in trust upon and subject to the conditions set forth herein for the
use and benefit of the Certificateholders. The Certificate Trustee hereby
acknowledges that it has deposited the sum of $1 in the Certificate Account on
November 7, 1997, such sum constituting the initial Trust Property contributed
by the Originator.
Section 2.03. Tax Treatment; Construction. (a) It is the intention of
---------------------------
the parties hereto that the Trust shall be treated as a "grantor trust" for
federal income tax purposes and all transactions contemplated by this Trust
Agreement will be reported consistent with such treatment.
(b) The provisions of this Trust Agreement shall be construed, and the
affairs of the Trust shall be conducted, so as to achieve treatment of the Trust
as a "grantor trust" for federal income tax purposes.
Section 2.04. Purpose and Powers. The Trust is constituted solely for the
------------------
purpose of making the investment in the Notes and issuing the Certificates,
applying the proceeds of the Notes to the payment of the Certificates and
entering into and performing its obligations under the Basic Documents to which
it is a party, and, except as set forth herein, neither Trustee is authorized or
empowered to acquire any other investments or engage in any other activities on
behalf of the Trust (although the Trust may enter into a Swap with respect to a
Series or Class of Certificates as set forth in the related any Trust
Supplement) and, in particular, neither Trustee is authorized or empowered to do
anything that would cause the Trust to fail to qualify as a "grantor trust" for
federal income tax purposes.
Section 2.05. Acquisition and Acceptance of Notes by Certificate Trustee.
----------------------------------------------------------
The Certificate Trustee, upon the execution and delivery of this Trust
Agreement, hereby acknowledges its acceptance of all right, title, and interest
in and to the Notes acquired from time to time pursuant to the Note Purchase
Agreement and any Subsequent Note Purchase Agreement and hereby declares that it
will hold such right, title and interest in each Series or Class of Notes,
together with all other property constituting the Trust Property relating to
each such Series or Class of Notes, for the benefit of all present and future
holders of the corresponding Series or Class of Certificates.
Section 2.06. Issuance of Certificates. On the Initial Closing Date and
------------------------
on each Subsequent Closing Date, the Trust, subject to the provisions of the
Trust Supplement relating to the Series or Class of Certificates to be issued
and to the provisions of the Note Purchase Agreement or any Subsequent Note
Purchase Agreement, as the case may be, shall issue, and the Certificate Trustee
shall execute on behalf of the Trust and authenticate and deliver, in fully
registered form only, the Certificates of the Series or Class corresponding to
the Series or Class of Notes issued on such Initial Closing Date or Subsequent
Closing Date, as the case may be, all in accordance with the Note Purchase
Agreement or Subsequent Note Purchase Agreement, as the case may be. Each
Certificate represents a fractional undivided beneficial interest in a
corresponding Series or Class of Notes and the proceeds thereof, together with
payments made on any related Swap. Prior to the
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<PAGE>
execution and authentication of the Certificates of any Series or Class, the
Certificate Trustee shall have received the following:
(a) The Series or Class of Notes, duly executed by the Note Issuer and
authenticated by the Note Trustee, corresponding to the Series or Class of
Certificates to be issued;
(b) A certificate of an Authorized Officer of the Note Issuer to the effect
that all conditions required to be satisfied under Section 2.10 of the Note
Indenture for the issuance of such Series or Class of Notes and all conditions
required to be satisfied under the Note Purchase Agreement or any Subsequent
Note Purchase Agreement (as the case may be) for the purchase of the Notes by
the Trust have been satisfied, together with executed copies of all documents,
certificates, opinions, orders or approvals establishing satisfaction of such
conditions;
(c) An order of an Authorized Officer of the Originator (i) directing the
Delaware Trustee and the Certificate Trustee to execute any Trust Supplement to
be executed in connection with such Series or Class of Certificates, and the
Series or Class of Certificates to be issued hereunder or thereunder, (ii)
directing the Certificate Trustee on behalf of the Trust to execute the Note
Purchase Agreement and (iii) directing the Certificate Trustee to execute on
behalf of the Trust, authenticate, as Authentication Agent, and deliver such
Series or Class of such Certificates to the Underwriters named in said order for
the purchase price specified therein and directing the application of the
proceeds thereof;
(d) [Reserved.]
(e) An Opinion of Counsel, portions of which may be delivered by counsel to
the Originator and portions of which may be delivered by counsel to the Delaware
Trustee, the Certificate Trustee, the Originator or the Trust, dated the Initial
Closing Date or the related Subsequent Closing Date, as the case may be, in each
case subject to the customary exceptions, qualifications and assumptions
contained therein (which may include, for the purpose of the Initial Closing
Date, the assumption that the Financing Order has been duly authorized by the
CPUC and is in full force and effect), to the effect that:
(i) this Trust Agreement and any Trust Supplement have been duly
authorized, executed and delivered by the parties hereto;
(ii) this Trust Agreement and any Trust Supplement are valid and
binding agreements of the parties hereto, enforceable in accordance with
their respective terms except as enforcement thereof may be subject to or
limited by bankruptcy, insolvency, moratorium, reorganization, fraudulent
conveyance or other similar laws relating to or affecting the enforcement
of creditors' rights generally, by general equitable principles (regardless
of whether such enforceability is considered in a proceeding in equity or
at law) and the limitations on legal remedies against public agencies in
the State of California;
(iii) all instruments furnished to the Delaware Trustee or the
Certificate Trustee as conditions precedent to the delivery of the
Certificates conform to the requirements of the Trust Agreement and
constitute all documents required to be delivered thereunder to
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authorize the Certificate Trustee to execute, authenticate and deliver the
Certificates;
(iv) the Certificates to be issued have been duly authorized and
executed and, when authenticated in accordance with the provisions of this
Trust Agreement and any Trust Supplement and delivered, will be validly
issued by the Trust and entitled to the benefits of this Trust Agreement
and any Trust Supplement;
(v) the Note Purchase Agreement, including any supplements or
amendments thereto entered into in connection with the issuance of any
Series or Class of Notes, has been duly executed and delivered by the Trust
and constitutes the legal, valid and binding agreement of the Trust,
enforceable against the Trust in accordance with its terms;
(vi) the Trust is a duly organized and validly existing business
trust under the Business Trust Statute and is in good standing;
(vii) this Trust Agreement and any Trust Supplement to be executed
in connection with such Series or Class of Certificates have been duly
qualified under the Trust Indenture Act or no such qualification is
necessary;
(viii) the Trust constitutes a "special purpose trust" under
Section 63010 of the California Government Code and a "financing entity"
under Section 840 of the PU Code, and the Certificates constitute "rate
reduction bonds" under Section 840 of the PU Code and the Holders of the
Certificates are entitled to the rights and benefits thereunder;
(ix) the issuance of the Series or Class of Certificates shall not
adversely affect the status of the Trust as a grantor trust not taxable as
a corporation for federal income tax purposes; and
(x) such other matters as the Certificate Trustee or the Delaware
Trustee may reasonably require.
(f) [Reserved.]
(g) Sufficient funds to pay the purchase price for the related Series or
Class of Notes, as specified in Section 1(b) of the Note Purchase Agreement;
(h) The Rating Agency Condition shall have been satisfied with respect to
the issuance of the Series or Class of Certificates and the execution of any
related Swap; and
(i) If any Swap is to be executed in connection with the issuance of any
Series or Class of Certificates:
(i) a Trust Supplement providing the following:
(A) the form of the Swap to be executed by the Trust, together
with a direction to the Certificate Trustee from the Originator to
execute and deliver the
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Swap on behalf of the Trust upon the satisfaction of any conditions
set forth in such Trust Supplement;
(B) a description of the manner by which interest will be
calculated on the Series or Class of Certificates to which the Swap
relates, together with the form of such Series or Class of
Certificates;
(C) the form of the Certificate for such Series or Class;
(D) such other matters as the Originator may reasonably deem
appropriate, or the Certificate Trustee or Delaware Trustee may
reasonably request, and that are not inconsistent with the provisions
hereof; and
(ii) the Originator shall provide evidence satisfactory to the
Certificate Trustee that the Rating Agency Condition will be satisfied with
respect to the issuance of such Series or Class of Certificates.
Section 2.07. Representations and Warranties of the Originator. The
------------------------------------------------
Originator will represent and warrant, as of each Series Issuance Date, the
following:
(a) the Originator has full power and authority, and has taken all
action necessary, to execute and deliver this Trust Agreement and any Trust
Supplement and to fulfill its obligations under, and to consummate the
transactions contemplated by, this Trust Agreement and any Trust
Supplement;
(b) the making and performance by the Originator of this Trust
Agreement and any Trust Supplement and all documents required to be
executed and delivered by it hereunder do not and will not violate any law
or regulation of the jurisdiction of its organization or any other law or
regulation applicable to it or violate any provision of, or constitute,
with or without notice or lapse of time, a default under, or result in the
creation or imposition of any lien on any properties included in the Trust
Property pursuant to, any mortgage, indenture, contract, agreement or other
undertaking to which it is a party;
(c) this Trust Agreement and any Trust Supplement have been duly
executed and delivered by the Originator and constitute its legal, valid
and binding obligations, enforceable in accordance with their terms;
(d) all consents, licenses, approvals, authorizations, exemptions,
registrations, filings, opinions and declarations from or with any agency,
department, administrative authority, statutory corporation or judicial
entity necessary for the validity or enforceability of its obligations
under this Trust Agreement and any Trust Supplement have been obtained, and
no governmental authorizations other than any already obtained are required
in connection with the execution, delivery and performance of this Trust
Agreement and any Trust Supplement; and
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(e) the representations and warranties in Section 11.01 are true and
correct.
Section 2.08. Execution of Basic Documents. The Certificate Trustee
----------------------------
is hereby authorized and directed to execute and deliver on behalf of the Trust
each of the Basic Documents to which the Trust is a party, in each case in the
form presented to it by the Originator. The execution and delivery of the
Underwriting Agreement by the Originator on behalf of the Trust is hereby
ratified and confirmed in all respects.
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ARTICLE III
THE CERTIFICATES
Section 3.01. Form, Denomination and Execution of Certificates. The
------------------------------------------------
Certificates of each Series shall be issued in registered form without coupons
and shall be substantially in the form attached hereto as Exhibit A, with the
following filled in: (a) the designation of such Series and, if applicable, the
Classes thereof, which shall be the same designation as the related Series or
Class or Classes of Notes, (b) the Certificate number or numbers thereof, (c)
the date of authentication thereof, which shall be the same as the Series
Issuance Date of the related Series or Class or Classes of Notes, and (d) the
Original Principal Amount thereof, which shall equal, in the aggregate, the
principal amount of the related Series of Notes; and with such omissions,
variations and insertions as are permitted by this Trust Agreement or any Trust
Supplement, and may have such letters, numbers or other marks of identification
and such legends or endorsements printed, lithographed or engraved thereon as
may be required to comply with the rules of any securities exchange on which any
Class or Classes of the Certificates of such Series may be listed or to conform
to any usage in respect thereof, or as may, consistently herewith, be prescribed
by the Certificate Trustee or by the Originator (with the prior written approval
of the Note Issuer), and as evidenced by the execution and authentication of
such Certificates.
Except as provided in Section 3.10, the definitive Certificates of
each Series or Class shall be printed, lithographed or engraved or produced by
any combination of these methods or may be produced in any other manner
permitted by the rules of any securities exchange on which the Certificates of
such Series or Class may be listed, as evidenced by an order by an Authorized
Officer of the Originator, relating to the authentication and execution of such
Certificates by the Certificate Trustee on behalf of the Trust.
The Certificates of each Series or Class shall be issued in Minimum
Denominations.
The Certificates shall be executed on behalf of the Trust by the
Certificate Trustee by manual or facsimile signature of a Responsible Officer of
the Certificate Trustee. Certificates bearing the manual or facsimile signature
of an individual who was, at the time when such signature was affixed,
authorized to sign on behalf of the Trust shall be validly issued by the Trust,
notwithstanding that such individual has ceased to be so authorized prior to the
authentication and delivery of such Certificates or did not hold such office at
the date of such Certificates. No Certificate shall be entitled to any benefit
under this Trust Agreement, or be valid for any purpose, unless there appears on
such Certificate a certificate of authentication substantially in the form set
forth in Exhibit A hereto, executed by the Certificate Trustee (or any
Authentication Agent) by manual signature, and such certificate of
authentication upon any Certificate shall be conclusive evidence, and the only
evidence, that such Certificate has been duly authenticated and delivered
hereunder. All Certificates shall be dated the date of their authentication.
Section 3.02. Authentication of Certificates. The Certificate
------------------------------
Trustee shall duly authenticate and deliver Certificates of each Series or Class
in authorized denominations equaling in the aggregate for each Series or Class
of Certificates the aggregate Original Principal Amount of the Notes of such
Series or Class.
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Section 3.03. Temporary Certificates. Pending the preparation of
----------------------
definitive Certificates of any Series or Class, the Certificate Trustee on
behalf of the Trust may execute, and the Certificate Trustee or any
Authentication Agent upon written order of the Originator shall authenticate and
deliver, temporary Certificates of such Series or Class that are printed,
lithographed, typewritten or otherwise produced, in any denomination, containing
substantially the same terms and provisions as set forth in Exhibit A, except
for such appropriate insertions, omissions, substitutions and other variations
relating to their temporary nature as the Trust may determine, as evidenced by
the execution of such temporary Certificates by the Certificate Trustee on
behalf of the Trust.
If temporary Certificates of any Series or Class are issued, the Trust
will cause definitive Certificates of such Series or Class to be prepared
without unreasonable delay. After the preparation of definitive Certificates of
such Series or Class, the temporary Certificates shall be exchangeable for
definitive Certificates of such Series or Class upon surrender of the temporary
Certificates at the Corporate Trust Office of the Certificate Trustee, or at the
office or agency of the Certificate Trustee maintained in accordance with
Section 6.11, without charge to the Holder. Upon surrender for cancellation of
any one or more temporary Certificates, the Certificate Trustee, on behalf of
the Trust, shall execute, and the Certificate Trustee shall authenticate and
deliver in exchange therefor definitive Certificates (of the same Series or
Class as the temporary Certificates surrendered) of authorized denominations of
a like aggregate Original Principal Amount. Until so exchanged, such temporary
Certificates shall in all respects be entitled to the same benefits under this
Trust Agreement as definitive Certificates of the same Series or Class.
Section 3.04. Registration of Transfer and Exchange of Certificates.
-----------------------------------------------------
The Certificate Trustee shall cause to be kept at the office or agency to be
maintained by it in accordance with the provisions of Section 6.11 a register
(the "Register") in which, subject to such reasonable regulations as it may
prescribe, the Certificate Trustee shall provide for the registration of
Certificates and of transfers and exchanges of Certificates as herein provided.
The Certificate Trustee shall initially be the registrar (the "Registrar") for
the purpose of registering Certificates and transfers and exchanges of
Certificates as herein provided.
Subject to this Section 3.04, upon surrender for registration of
transfer of any Certificate at the Corporate Trust Office or such other office
or agency maintained by the Certificate Trustee in accordance with Section 6.11,
the Certificate Trustee, on behalf of the Trust, shall execute, and the
Certificate Trustee shall authenticate and deliver, in the name of the
designated transferee, one or more new Certificates (of the same Series or Class
as the Certificates surrendered for registration of transfer) in authorized
denominations of a like aggregate Original Principal Amount; provided, however,
-------- -------
that if any such surrendered Certificate shall have become or within seven days
shall be due and payable or shall have been called for redemption, instead of
issuing a replacement Certificate, the Certificate Trustee may pay such
surrendered Certificate when so due and payable or upon the Special Distribution
Date without surrender thereof.
At the option of a Certificateholder, Certificates may be exchanged
for other Certificates (of the same Series or Class as the Certificates
surrendered for registration of exchange) of authorized denominations of a like
aggregate Original Principal Amount, upon surrender of the Certificates to be
exchanged at any such office or agency. Whenever any Certificates are so
surrendered for
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exchange, the Certificate Trustee, on behalf of the Trust, shall execute, and
the Certificate Trustee shall authenticate and deliver the Certificates that the
Certificateholder making the exchange is entitled to receive.
Every Certificate presented or surrendered for registration of
transfer or exchange shall be duly endorsed or accompanied by a written
instrument of transfer in form satisfactory to the Certificate Trustee and the
Registrar duly executed by the Certificateholder thereof or its attorney duly
authorized in writing.
No service charge shall be made to a Certificateholder for any
registration of transfer or exchange of Certificates, but the Certificate
Trustee shall require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer or
exchange of Certificates.
All Certificates surrendered for registration of transfer or exchange
shall be canceled and subsequently destroyed by the Certificate Trustee in
accordance with its customary practices.
Section 3.05. Certificateholders' Lists and Reports by Certificate
----------------------------------------------------
Trustee.
- -------
(a) The Trust To Furnish Certificate Trustee with Names and Addresses
-----------------------------------------------------------------
of Certificateholders. The Registrar, on behalf of the Trust, will furnish to
- ----------------------
the Certificate Trustee within 15 days after each Record Date, and at such other
times as the Certificate Trustee may request in writing, within 30 days after
receipt by the Trust of any such request, a list, in such form as the
Certificate Trustee may reasonably require, of all information in the possession
or control of the Trust as to the names and addresses of the Certificateholders,
in each case as of a date not more than 15 days prior to the time such list is
furnished; provided, however, that so long as the Certificate Trustee is the
------------------
sole Registrar, no such list need be furnished; and provided further, however,
--------------------------
that no such list need be furnished for so long as a copy of the Register is
being furnished to the Certificate Trustee pursuant to Section 6.11.
(b) Preservation of Information. The Certificate Trustee shall
----------------------------
preserve, in as current a form as is reasonably practicable, the names and
addresses of Certificateholders contained in the most recent list furnished to
the Certificate Trustee as provided in Section 6.11 or Section 3.05(a), as the
case may be, and the names and addresses of Certificateholders received by the
Certificate Trustee in its capacity as Registrar, if so acting. The Certificate
Trustee may destroy any list furnished to it as provided in Section 6.11 or
Section 3.05(a), as the case may be, upon receipt of a new list so furnished.
(c) Communications Among Certificateholders. Certificateholders may
---------------------------------------
communicate pursuant to Section 312(b) of the Trust Indenture Act with other
Certificateholders with respect to their rights under this Trust Agreement or
under the Certificates.
(d) Reports by Certificate Trustee. To the extent that any of the
-------------------------------
events described in Section 313(a) of the Trust Indenture Act shall have
occurred, within 60 days after December 31 of each year, commencing with the
year 1998, the Certificate Trustee shall transmit to the Certificateholders, as
provided in Section 313(c) of the Trust Indenture Act, a brief report dated as
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of such December 31, if required by Section 313(a) of the Trust Indenture Act.
The Certificate Trustee also shall comply with Section 313(b) of the Trust
Indenture Act.
A copy of each report at the time of its mailing to Certificateholders
shall be filed by the Certificate Trustee with the Commission and with each
stock exchange, if any, on which the Certificates are listed and of which
listing the Certificate Trustee has been informed. The Originator shall notify
the Certificate Trustee if and when the Certificates are listed on any stock
exchange.
(e) Reports by the Trust. The Certificate Trustee shall furnish to
---------------------
the Certificate Owners, not less often than annually, a certificate of the
Certificate Trustee on behalf of the Trust as to his or her knowledge of the
Trust's compliance with all conditions and covenants under this Trust Agreement
and in accordance with Section 313 of the Trust Indenture Act. For purposes of
this Section 3.05(e) such compliance shall be determined without regard to any
period of grace or requirement of notice provided under this Trust Agreement.
(f) Protections. The Originator, the Certificate Trustee and the
-----------
Registrar shall have the protection of Section 312(c) of the Trust Indenture
Act.
Section 3.06. Mutilated, Destroyed, Lost or Stolen Certificates. If
-------------------------------------------------
(a) any mutilated Certificate is surrendered to the Registrar, or the Registrar
receives evidence to its satisfaction of the destruction, loss or theft of any
Certificate, and (b) there is delivered to the Registrar and the Certificate
Trustee such security, indemnity or bond as may be required by them to save each
of them harmless, then, in the absence of notice to the Registrar or the
Certificate Trustee that such Certificate has been acquired by a protected
purchaser, the Certificate Trustee, on behalf of the Trust, shall execute, and
the Certificate Trustee shall authenticate and deliver, in exchange for or in
lieu of any such mutilated, destroyed, lost or stolen Certificate, a new
Certificate (of the same Series or Class as the Certificate so mutilated,
destroyed, lost or stolen) of like Original Principal Amount. In connection
with the issuance of any new Certificate under this Section 3.06, the
Certificate Trustee shall require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in relation thereto and any
other expenses (including the fees and expenses of the Delaware Trustee, the
Certificate Trustee and the Registrar) connected therewith. Any duplicate
Certificate issued pursuant to this Section 3.06 shall constitute conclusive
evidence of the same interest in the Trust, as if originally issued, whether or
not the lost, stolen or destroyed Certificate shall be found at any time.
Section 3.07. Persons Deemed Owners. Prior to due presentation of a
---------------------
Certificate for registration of transfer, the Certificate Trustee, the Registrar
and any Paying Agent of the Certificate Trustee may treat the Person in whose
name any Certificate is registered as the owner of such Certificate for the
purpose of receiving distributions pursuant to Section 4.02 and for all other
purposes whatsoever, and none of the Certificate Trustee, the Registrar nor any
Paying Agent of the Certificate Trustee shall be affected by any notice to the
contrary.
Section 3.08. Cancellation. All Certificates surrendered for payment
------------
or transfer or exchange shall, if surrendered to any party hereto other than the
Registrar, be delivered to the Registrar for cancellation. No Certificates
shall be authenticated in lieu of or in exchange for any
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Certificates canceled as provided in this Section, except as expressly permitted
by this Trust Agreement. All canceled Certificates held by the Registrar shall
be delivered to the Certificate Trustee and, in accordance with Section 3.04,
destroyed.
Section 3.09. Limitation of Liability for Payments. All payments or
------------------------------------
distributions made to Holders of Certificates under this Trust Agreement shall
be made only from the Trust Property with respect to that Series or Class of
Certificates and only to the extent that the Certificate Trustee shall have
sufficient income or proceeds from such Trust Property to make such payments in
accordance with the terms of Article IV of this Trust Agreement. Each Holder of
a Certificate of any Series or Class, by its acceptance of a Certificate of that
Series or Class, agrees that it will look solely to the income and proceeds from
the Trust Property with respect to that Series or Class to the extent available
for distribution to the Holder thereof as provided in this Trust Agreement. It
is expressly understood and agreed by the parties hereto that (a) the
Certificates are executed and delivered by Bankers Trust Company of California,
N.A. not individually or personally but solely as Certificate Trustee of the
Trust, in the exercise of the powers and authority conferred and vested in it,
and (b) under no circumstances shall Bankers Trust Company of California, N.A.,
be personally liable for the payment of any of the Certificates or any
indebtedness or expenses of the Trust or be liable for the breach or failure of
any obligation, representation, warranty or covenant made or undertaken by the
Trust under this Trust Agreement.
Section 3.10. Book-Entry and Definitive Certificates. (a) The
--------------------------------------
Certificates of any Series or Class may be issued in the form of one or more
typewritten certificates representing the Book-Entry Certificates of that Series
or Class, to be delivered to The Depository Trust Company, the initial Clearing
Agency, by, or on behalf of, the Originator. In such case, the Certificates of
such Series or Class delivered to The Depository Trust Company shall initially
be registered on the Register in the name of Cede & Co., the nominee of the
initial Clearing Agency, and no Certificate Owner will receive a definitive
Certificate representing such Certificate Owner's interest in the Certificate of
such Series or Class, except as provided in Section 3.10(c) below. Unless and
until definitive, fully registered Certificates ("Definitive Certificates") of
such Series or Class have been issued pursuant to Section 3.10(c) below:
(i) the provisions of this Section 3.10 shall be in full force and
effect with respect to the Certificates of such Series or Class;
(ii) the Originator, the Paying Agent, the Registrar and the
Certificate Trustee may deal with the Clearing Agency for all purposes
(including the making of distributions on the Certificates of such Series
or Class) as the authorized representative of the Certificate Owners of
Certificates of such Series or Class;
(iii) to the extent that the provisions of this Section 3.10
conflict with any other provisions of this Trust Agreement, the provisions
of this Section 3.10 shall control;
(iv) the rights of Certificate Owners of Certificates of such Series
or Class shall be exercised only through the Clearing Agency and shall be
limited to those established by law and agreements between such Certificate
Owners and the Clearing Agency Participants; and until Definitive
Certificates of such Series or Class are issued pursuant to Section 3.10(c)
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below, the Clearing Agency will make book-entry transfers among the
Clearing Agency Participants and receive and transmit distributions of
principal of and interest on the Certificates of such Series or Class to
such Clearing Agency Participants; and
(v) whenever this Trust Agreement requires or permits actions to be
taken based upon instructions or directions of Certificateholders holding
Certificates of such Series or Class representing a specified percentage of
the aggregate Outstanding Amount of Certificates of such Series or Class,
the Clearing Agency shall be deemed to represent such percentage only to
the extent that it has received instructions to such effect from
Certificate Owners or Clearing Agency Participants owning or representing,
respectively, Certificates representing such percentage of the aggregate
Outstanding Amount of Certificates of such Series or Class, and has
delivered such instructions to the Certificate Trustee; the Certificate
Trustee shall have no obligation to determine whether the Clearing Agency
has in fact received any such instructions.
(b) Whenever notice or other communication to the Holders of Certificates
of any Series or Class issued in the form of Certificates representing Book-
Entry Certificates is required under this Trust Agreement, unless and until
Definitive Certificates of such Series or Class shall have been issued pursuant
to Section 3.10(c), the Certificate Trustee shall give all such notices and
communications specified herein to be given to Holders of Certificates of such
Series or Class to the Clearing Agency.
(c) If (i) the Clearing Agency advises the Certificate Trustee in writing
that the Clearing Agency is no longer willing or able to properly discharge its
responsibilities with respect to the Certificates of a Series or Class, and the
Certificate Trustee or the Originator is unable to locate a qualified successor,
(ii) the Originator (with the prior written approval of the Note Issuer) at its
option advises the Certificate Trustee in writing that it elects to terminate
the book-entry system through the Clearing Agency with respect to the
Certificates of such Series or Class or (iii) after the occurrence of a Note
Event of Default with respect to any Series or Class of Certificates,
Certificate Owners representing beneficial interests aggregating at least a
majority of the Outstanding Amount of the Certificates of all Series advise the
Clearing Agency and the Certificate Trustee in writing that the continuation of
a book-entry system through the Clearing Agency is no longer in the best
interests of the Certificate Owners, then the Clearing Agency shall notify all
Certificate Owners and the Certificate Trustee of the occurrence of any such
event and of the availability of Definitive Certificates to Certificate Owners
requesting the same. Upon surrender to the Certificate Trustee of the
typewritten certificate or certificates representing the Book-Entry Certificates
by the Clearing Agency, accompanied by registration instructions, and upon
written direction by the Note Issuer, the Certificate Trustee shall execute on
behalf of the Trust and the Certificate Trustee shall authenticate the
Definitive Certificates in accordance with the instructions of the Clearing
Agency. None of the Originator, the Registrar, the Delaware Trustee or the
Certificate Trustee shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be fully protected in
relying on, such instructions. Upon the issuance of Definitive Certificates, the
Certificate Trustee shall recognize the Holders of the Definitive Certificates
as Certificateholders.
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ARTICLE IV
DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS
Section 4.01. Certificate Accounts. (a) The Trust shall establish and
--------------------
maintain with the Certificate Trustee on behalf of the Holders of Certificates
of each Series or Class a Certificate Account with respect to such Series or
Class as one or more segregated trust accounts, which shall be non-interest
bearing except as provided in Section 4.04, in the corporate trust department of
an Eligible Institution, in the name of the Certificate Trustee for the benefit
of such Certificateholders. The Certificate Trustee shall hold each Certificate
Account in trust for the benefit of the Holders of Certificates of the
corresponding Series or Class, and shall make or permit withdrawals therefrom
only as provided in this Trust Agreement. On each day when a Payment or Special
Payment (other than a Special Payment that represents the proceeds of any sale
pursuant to Article V hereof by the Certificate Trustee of any Note) is made to
the Certificate Trustee, as holder of Notes of any Series or Class, the
Certificate Trustee upon receipt shall immediately deposit the aggregate amount
of such Payment or Special Payment in the Certificate Account for the
corresponding Series or Class of Certificates. If a Swap has been executed with
respect to any Series or Class of Certificates, the proceeds of such Payment or
Special Payment in any Certificate Account shall be applied to satisfy any Swap
Payment, or if a payment is due to the Trust under the Swap, any Swap Revenue
shall be credited to such Certificate Account. Upon the sale of any Note by the
Certificate Trustee pursuant to Article V and the realization of any proceeds
thereof, the Certificate Trustee shall deposit the aggregate amount of such
proceeds as a Special Payment in the Certificate Account for the Series or Class
of Certificates corresponding to the Series or Class of the Note so sold.
(b) The Certificate Trustee shall present to the Note Trustee for payment
each Note on its Final Maturity Date, or, in the case of any redemption or
repayment of such Note in full prior to its Final Maturity Date, on the
applicable Payment Date therefor.
(c) The Certificate Trustee (or any Paying Agent other than the Certificate
Trustee) shall have sole dominion and exclusive control over all monies in the
Certificate Accounts and shall apply such amounts therein as provided in this
Article.
Section 4.02. Distributions from Certificate Accounts. (a) On any
---------------------------------------
Distribution Date, the Certificate Trustee shall distribute out of the
Certificate Account for the corresponding Series or Class of Certificates, in
the manner described in Section 4.02(e), the entire amount of such Payment (as
reduced by any Swap Payment or increased by any Swap Revenues) deposited therein
pursuant to Section 4.01(a); provided, however, that in the event receipt of any
------------------
such Payment is not confirmed by the Certificate Trustee by 10:00 a.m. (New York
City time) on such Distribution Date, distribution thereof shall be made on the
day receipt thereof is confirmed by the Certificate Trustee by 10:00 a.m. (New
York City time) or, if receipt thereof is confirmed by the Certificate Trustee
after 10:00 a.m. (New York City time), on the following Certificate Business
Day. There shall be so distributed to each Holder of record of such Series or
Class of Certificates on the Record Date with respect to such Distribution Date
(other than as provided in Section 10.01 with respect to a final distribution)
such Certificateholder's pro rata share (based on the aggregate Outstanding
Amount of Certificates of such Series or Class held by such Certificateholder)
of the aggregate amount in the related Certificate Account. The foregoing
notwithstanding, if a Payment (or Swap
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Revenue) is not received by the Certificate Trustee by the day that is five days
after the related Payment Date, it will be treated as a Special Payment pursuant
to Section 4.02(b).
The final distribution with respect to any Certificate, however, will be
made only upon presentation and surrender of such Certificate at the office or
agency of the Certificate Trustee specified in the notice given by the
Certificate Trustee with respect to such final payment. The Certificate
Trustee will provide notice of a final distribution to each Holder of record as
of the date such notice is given with respect to any Certificate as soon as
practicable following receipt of notice from the Note Trustee of a final payment
on a corresponding Note.
(b) On each Special Distribution Date with respect to the distribution of
any Special Payment with respect to any Series or Class of Notes, the
Certificate Trustee shall distribute out of the Certificate Account for the
corresponding Series or Class of Certificates, in the manner described in
Section 4.02(e), the entire amount of such Special Payment (as reduced by any
Swap Payment or increased by any Swap Revenues) deposited therein pursuant to
Section 4.01(a) and any income and earnings received from the investment of such
Special Payment pursuant to Section 4.04; provided, however, that in the event
------------------
receipt of any such Special Payment is not confirmed by the Certificate Trustee
by 10:00 a.m. (New York City time) on such Special Distribution Date,
distribution thereof shall be made on the day receipt thereof is confirmed by
the Certificate Trustee by 10:00 a.m. (New York City time) or, if receipt
thereof is confirmed by the Certificate Trustee after 10:00 a.m. (New York City
time), on the following Certificate Business Day. There shall be so distributed
to each Holder of record of such Series or Class of Certificates on the Special
Record Date with respect to such Special Distribution Date (other than as
provided in Section 10.01 with respect to a final distribution) such
Certificateholder's pro rata share (based on the aggregate Outstanding Amount of
Certificates of such Series or Class held by such Certificateholder) of the
aggregate amount of such Special Payment (as reduced by any Swap Payment or
increased by any Swap Revenues) and any income and earnings received from the
investment of such Special Payment pursuant to Section 4.04.
(c) The Certificate Trustee shall allocate amounts distributed to Holders
of Certificates of any Series or Class on any Distribution Date or Special
Distribution Date as follows: (i) to the extent such amounts represent payments
of principal of the corresponding Series or Class of Notes (including
prepayments or redemption price), or the proceeds of the sale of any such Note
by the Certificate Trustee pursuant to Article V (to the extent such proceeds
exceed the unpaid interest on the related class of Notes), such amounts shall be
allocated to principal of such Certificates and (ii) all other such amounts
shall be allocated to interest on such Certificates. The Certificate Trustee
may conclusively rely on the payment statement received by it from the Servicer
pursuant to the Servicing Agreement with any payment in respect of any Series or
Class of Notes as to whether the amount so paid in respect of such Notes is in
respect of principal of or interest on such Notes, provided that any Swap
Payment or Swap Revenues shall be attributable to interest. If no statement is
received, such payments received with respect to any Series or Class of Notes
shall first be allocable to interest to the extent of any interest accrued and
payable on such Series or Class of Notes, and then to principal.
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(d) The Certificate Trustee shall cause notice of each Special Payment with
respect to any Series or Class of Notes to be mailed to each Holder of
Certificates of the corresponding Series or Class at its address as it appears
in the Register. In the event of (i) the optional redemption of the Notes of
any Series or Class, such notice shall be mailed not less than five days nor
more than 25 days prior to the Special Distribution Date on which any such
Redemption Payment is scheduled to be distributed, and (ii) the mandatory
redemption of the Notes of any Series or Class, such notice shall be mailed not
less than five days prior to the Special Distribution Date on which any such
Redemption Payment is scheduled to be distributed. In the case of any other
Special Payment, such notice shall be mailed not less than 20 days prior to the
Special Distribution Date on which any Special Payment is scheduled to be
distributed in respect of Certificates of such Series or Class stating such
anticipated Special Distribution Date. Any such notice mailed by the
Certificate Trustee shall set forth:
(i) the Special Distribution Date or the Distribution Date, as
applicable, and the Special Record Date or Record Date therefor, as
applicable (except as otherwise provided in Section 10.01);
(ii) the amount of the Special Distribution for each $1,000 Original
Principal Amount of Certificates of the applicable Series or Class and the
amount thereof constituting principal and interest;
(iii) the reason for the Special Distribution; and
(iv) the total amount to be received on such date for each $1,000
Original Principal Amount of Certificates of the applicable Series or Class
but only, in the case of a Special Payment, if the related Special
Distribution Date is also a Distribution Date.
(e) Distributions to Holders of Certificates shall be by check sent by
first-class mail to the address of such Holder appearing on the Register at the
relevant Record Date or Special Record Date or, upon written application of a
Holder of Certificates of any Series or Class in the Original Principal Amount
of $1,000,000 or more to the Certificate Trustee made at any time not later than
such Record Date or Special Record Date or continuing in effect from a prior
request, by wire transfer in immediately available funds to the account of such
Holder at such bank located in New York, New York having wire transfer
capability as may be designated by such Holder; provided, however, that the
------------------
final distribution in respect of any Certificate shall be made only as provided
in Section 10.01. The foregoing notwithstanding, any distributions made to Cede
& Co., as the nominee of the initial Clearing Agency, shall be made by wire
transfer of immediately available funds.
Section 4.03. Statements to Certificateholders. (a) On each Distribution
--------------------------------
Date, Special Distribution Date or any other date specified herein for
distribution of any payments with respect to any Series or Class of
Certificates, or as soon as practicable following such Distribution Date,
Special Distribution Date or other date, if the Certificate Trustee and the Note
Trustee are different entities, the Certificate Trustee will send, with respect
to each distribution, to Holders of Certificates of such Series or Class a
statement with respect to such distribution to be made
on such Distribution Date, Special Distribution Date or other date, as the case
may be, setting forth the
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following information:
(i) the amount of such distribution to Holders of Certificates
allocable to (A) principal and (B) interest, in each case per $1,000
Original Principal Amount of each Series or Class of Certificates;
(ii) the amount of any Swap Payment or Swap Revenues with respect to
any Series or Class of Certificates;
(iii) the aggregate outstanding principal balance of the
Certificates, after giving effect to payments allocated to principal
reported under (i) above; and
(iv) the difference, if any, between the amount specified in (iii)
above and the principal amount scheduled to be outstanding on such date
according to the Expected Amortization Schedule.
On each date on which the Certificate Trustee distributes any such report to the
Holders of the Certificates of any Series or Class, the Certificate Trustee
shall also distribute such report to each Rating Agency.
(b) Within a reasonable period of time after the end of each calendar year
but not later than the latest date permitted by law, the Certificate Trustee
shall furnish to each Person who at any time during such calendar year was a
Holder of any Series or Class of Certificates a statement containing the sum of
the amounts determined pursuant to clause (a)(i) above with respect to such
Series or Class of Certificates for such calendar year, or, in the event such
Person was a Holder of such Series or Class of Certificates during a portion of
such calendar year, for the applicable portion of such year, and such other
items as are readily available to the Certificate Trustee and that a
Certificateholder shall reasonably request as necessary for the purpose of such
Certificateholder's preparation of its federal income tax returns.
Section 4.04. Investment of Special Payment Moneys. Any money received by
------------------------------------
the Certificate Trustee pursuant to Section 4.01(a) representing a Special
Payment (or Swap Revenue) that is not to be promptly distributed, to the extent
practicable, shall be invested in Eligible Investments at the written direction
of the Servicer by the Certificate Trustee pending distribution of such Special
Payment pursuant to Section 4.02. Any investment made pursuant to this Section
4.04 shall be in such Eligible Investments maturing in not more than 60 days or
such lesser time as is required for the distribution of any such funds on a
Special Payment Date pending the distribution of such funds to
Certificateholders as described herein. The Certificate Trustee shall hold any
such Eligible Investments until maturity. Such Eligible Investments (i) shall
not mature later than the Certificate Business Day immediately preceding the
Special Distribution Date relating to such invested funds, (ii) (A) if such
Eligible Investments have a maturity of one month or less, such Eligible
Investments (or the provider thereof) must have a long term unsecured debt
rating of at least A2 by Moody's or a certificate of deposit rating of at least
P-1 by Moody's, and (B) if such Eligible Investments have a maturity of greater
than one month, such Eligible Investments (or the provider thereof) must have a
long term unsecured debt rating of at least A1 by Moody's and a certificate of
deposit rating of at least P-1 by Moody's. The Certificate Trustee shall have no
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liability with respect to any investment made pursuant to this Section 4.04
(including any losses on such investments), other than by reason of the willful
misconduct or negligence of the Certificate Trustee. All income and earnings
from such investments shall be distributed, if and as received, on such Special
Distribution Date as part of such Special Payment and shall be treated as
payments of interest on the Certificates.
Section 4.05. Reduction in Principal. Any reduction in the principal
----------------------
amount of any Certificate effected by any distribution in respect of principal
thereof shall be binding upon all Holders of such Certificate and of any
Certificate issued upon the registration or transfer thereof or in lieu thereof,
whether or not noted thereon.
ARTICLE V
DEFAULT
Section 5.01. Events of Default. (a) If any Note Event of Default shall
-----------------
occur and be continuing with respect to any Series or Class of Certificates,
then, and in each and every case, the Certificate Trustee may, and, upon the
written direction of Holders representing not less than a majority of the
Outstanding Amount of the Certificates of all Series then Outstanding, shall
vote all the Notes of all Series in favor of declaring the unpaid principal
amount of all the Notes of all Series then outstanding and accrued interest
thereon to be due and payable in accordance with the provisions thereof. In
addition, if a Note Event of Default shall have occurred and be continuing with
respect to any Series or Class of Certificates, the Certificate Trustee may,
and, upon the written direction of Holders representing not less than a majority
of the Outstanding Amount of the Certificates of all Series then Outstanding,
shall vote all the Notes of all Series in favor of directing the Note Trustee
acting in accordance with the written direction of the Certificateholders as to
the time, method and place of conducting any proceeding for any remedy available
to the Note Trustee or of exercising any trust or power conferred on the Note
Trustee under the Note Indenture.
(b) In addition, after a Note Event of Default shall have occurred and be
continuing with respect to the Certificates of any Series or Class, subject to
Section 5.01(c), the Certificate Trustee may, and upon the written direction of
Holders of Certificates representing not less than a majority of the Outstanding
Amount of Certificates of such Series or Class, by such officer or agent as it
may appoint, shall sell, convey, transfer and deliver any Note or Notes, without
recourse to or warranty by the Certificate Trustee or any Certificateholder, to
any Person, all upon such terms and conditions as the Certificateholders may
reasonably deem advisable and at such prices as the Certificateholders may
reasonably deem advisable, for cash. If the Certificate Trustee so decides or
is required to sell or otherwise dispose of the Notes pursuant to this Section,
the Certificate Trustee may, but is not obligated to, take such of the actions
described above as it may reasonably deem most effectual to complete the sale or
other disposition of the Notes, so as to provide for the payment in full of all
amounts due on the Certificates of all Series.
(c) The foregoing provisions of Section 5.01(b) notwithstanding, the
Certificate Trustee shall not sell any Notes following the occurrence of any
Event of Default, other than a Note Event of Default described in Section
5.01(i), (ii) or (iii) of the Note Indenture, with respect to any Series or
Class of Certificates unless (i) the Certificate Trustee determines that the
amounts receivable from the Collateral with respect to each Series or Class of
Notes are not sufficient to pay in full the
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principal of and accrued interest on the Notes of each such Series or Class and
to pay an allocable share of all sums due to the Certificate Trustee and any
other administrative expenses specified in this Trust Agreement and the
Certificate Trustee obtains the written consent of Holders of Certificates of
each such Series or Class representing 66 2/3 percent of the aggregate
Outstanding Amount of the Certificates of each such Series or Class, or (ii) the
Certificate Trustee obtains the written consent of Holders of Certificates
representing 100 percent of the aggregate Outstanding Amount of the Certificates
of each such Series or Class.
Section 5.02. Incidents of Sale of Notes. Upon any sale of the Notes made
--------------------------
either under the power of sale given under this Trust Agreement or otherwise for
the enforcement of this Trust Agreement, the following shall be applicable:
(a) Certificateholders and Certificate Trustee May Purchase Notes.
-------------------------------------------------------------
Any Certificateholder, the Certificate Trustee in its individual or any
other capacity or any other Person (other than the Seller) may bid for and
purchase any of the Notes, and upon compliance with the terms of sale, may
hold, retain, possess and dispose of such Notes in their own absolute right
without further accountability.
(b) Receipt of Certificate Trustee Shall Discharge Purchaser. The
--------------------------------------------------------
receipt of the Certificate Trustee, on behalf of the Trust, shall be a
sufficient discharge to any purchaser for its purchase money, and, after
paying such purchase money and receiving such receipt, such purchaser or
its personal representative or assigns shall not be obliged to see to the
application of such purchase money, or be in any way answerable for any
loss, misapplication or nonapplication thereof.
(c) Application of Moneys Received upon Sale. Any moneys collected by
----------------------------------------
the Trust upon any sale made either under the power of sale given by this
Trust Agreement or otherwise for the enforcement of this Trust Agreement,
shall be applied as provided in Section 4.02.
Section 5.03. Judicial Proceedings Instituted by Certificate Trustee;
-------------------------------------------------------
Certificate Trustee May Bring Suit. (a) If there shall be a failure to make
- ----------------------------------
payment of the principal of or interest on any Note, then the Certificate
Trustee, in its own name, and as trustee of an express trust, as holder of such
Note, if directed in writing by the Holders of a majority of the Outstanding
Amount of the Certificates of all Series but subject to the provisions of
Article VI, shall be, to the extent permitted by and in accordance with the
terms of the Notes, entitled and empowered to institute any suits, actions or
proceedings at law, in equity or otherwise, including the power to make a demand
on the Note Trustee to take action under the Note Indenture to enforce the
Notes, for the collection of the sums so due and unpaid on such Note and may
prosecute any such claim or proceeding to judgment or final decree with respect
to the whole amount of any such sums so due and unpaid.
(b) If there shall be a breach of the State Pledge by the State of
California, then the Certificate Trustee, in its own name and as trustee of an
express trust, as holder of the Notes, if directed in writing by the Holders of
a majority of the Outstanding Amount of the Certificates of all Series but
subject to the provisions of Article VI hereof, shall be, to the extent
permitted by state and federal law, entitled and empowered to institute any
suits, actions or proceedings at law, in
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equity or otherwise, to enforce the State Pledge and to collect any monetary
damages as a result of a breach thereof, and may prosecute any such suit, action
or proceeding to judgment or final decree.
Section 5.04. Control by Certificateholders. Subject to Section 2.03, the
-----------------------------
Holders of a majority of the Outstanding Amount of the Certificates of all
Series (or, if less than all Series or Classes are affected, the affected Series
or Class or Classes) shall have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Certificate
Trustee, or exercising any trust or power conferred on the Certificate Trustee
under this Trust Agreement, including any right of the Certificate Trustee as
holder of the Notes of the corresponding Series or Class or Classes, in each
case unless a different percentage is specified herein; provided that:
--------
(a) such direction shall not be in conflict with any rule of law or
with this Trust Agreement and would not involve the Certificate Trustee in
personal liability or expense;
(b) the Certificate Trustee shall not determine that the action so
directed would be unjustly prejudicial to the Holders of Certificates of
such Series or Class or Classes not taking part in such direction;
(c) the Certificate Trustee may take any other action deemed proper by
the Certificate Trustee that is not inconsistent with such direction; and
(d) if a Note Event of Default with respect to such Series or Class of
Notes shall have occurred and be continuing, such direction shall not
obligate the Certificate Trustee to vote more than a corresponding majority
of the related Notes held by the Trust in favor of declaring the unpaid
principal amount of the Notes of all Series and accrued interest thereon to
be due and payable or directing any action by the Note Trustee with respect
to such Note Event of Default.
Section 5.05. Waiver of Past Defaults. Prior to the declaration of the
-----------------------
acceleration of the maturity of the Notes of all Series as provided in Section
5.01, the Holders of Certificates of not less than a majority of the Outstanding
Amount of the Certificates of all Series may waive any past default or Note
Event of Default and its consequences except a default (a) in payment of
principal of or interest on any of the Notes, (b) in respect of a covenant or
provision hereof that cannot be modified or amended without the consent of the
Holder of each Certificate of all Series or Classes affected or (c) in the
deposit or distribution of any Payment or Special Payment under Section 4.01
with respect to any Series or Class of Certificates or in the distribution of
any payment under Section 4.02 on any Series or Class of Certificates. Upon any
such direction, the Certificate Trustee shall vote such percentage of the Notes
of the corresponding Series or Class held by the Certificate Trustee as
corresponds to the percentage of the aggregate Outstanding Amount of the
Certificates of such Series or Class held by Holders who directed the
Certificate Trustee to waive such default or Note Event of Default hereunder.
Upon any waiver that is effective under the terms of such Series or Class
of Notes to waive such default or Note Event of Default, such default or Note
Event of Default shall cease to exist with respect to this Trust Agreement, and,
in the case of a default, any Note Event of Default arising therefrom shall be
deemed to have been cured for every purpose of this Trust Agreement
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and any written direction given by the Certificate Trustee on behalf of such
Certificateholders to the Note Trustee or in respect of any Notes shall be
annulled with respect thereto; but no such waiver shall extend to any subsequent
or other default or Note Event of Default or impair any right consequent
thereon.
Section 5.06. Right of Certificateholders To Receive Payments Not To Be
---------------------------------------------------------
Impaired. Anything in this Trust Agreement to the contrary notwithstanding,
- --------
including Section 5.07 hereof, the right of any Certificateholder to receive
distributions of payments required pursuant to Section 4.02 hereof on the
Certificates when due, or to institute suit for the enforcement of any such
payment on or after the applicable Distribution Date, Special Distribution Date
or other date specified herein for the making of such payment, shall not be
impaired or affected without the consent of such Certificateholder.
Section 5.07. Certificateholders May Not Bring Suit Except Under Certain
----------------------------------------------------------
Conditions. A Certificateholder shall not have the right to institute any suit,
- ----------
action or proceeding at law or in equity or otherwise with respect to this Trust
Agreement, for the appointment of a receiver or for the enforcement of any other
remedy under this Trust Agreement, unless:
(a) such Certificateholder has previously given written notice to
the Certificate Trustee of a continuing Note Event of Default with respect
to the Series or Class of Certificates held by such Holder;
(b) the Holders of not less than 25 percent of the Outstanding
Amount of the Certificates of all Series have made written request to the
Certificate Trustee to institute such action, suit or proceeding in respect
of such Note Event of Default in its own name as Certificate Trustee
hereunder;
(c) such Certificateholder or Certificateholders have offered to the
Certificate Trustee indemnity satisfactory to it against the costs,
expenses (including legal fees and expenses) and liabilities to be incurred
in complying with such request;
(d) the Certificate Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute such action,
suit or proceedings; and
(e) no direction inconsistent with such written request has been
given to the Certificate Trustee during such 60-day period by the Holders
of a majority of the Outstanding Amount of the Certificates of all Series;
it being understood and intended that no one or more Holders of Certificates
shall have any right in any manner whatever by virtue of, or by availing of, any
provision of this Trust Agreement to affect, disturb or prejudice the rights of
any other Holders of Certificates or to obtain or to seek to obtain priority or
preference over any other Certificateholders or to enforce any right under this
Trust Agreement, except in the manner herein provided. The provisions of this
Section 5.07 shall be deemed to modify, to the fullest extent permitted by law,
the rights of the Certificateholders under Section 3816 of the Business Trust
Statute.
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In the event the Certificate Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of
Certificates, each representing less than a majority of the Outstanding Amount
of the Certificates of all Series, the Certificate Trustee in its sole
discretion may determine what action, if any, shall be taken, notwithstanding
any other provisions of this Trust Agreement.
Section 5.08. Remedies Cumulative. Every remedy given hereunder to the
-------------------
Certificate Trustee or to any of the Certificateholders shall not be exclusive
of any other remedy or remedies, and every such remedy shall be cumulative and
in addition to every other remedy given hereunder or now or hereafter given by
statute, law, equity or otherwise.
ARTICLE VI
THE CERTIFICATE TRUSTEE
Section 6.01. Notice of Defaults. As promptly as practicable after, and
------------------
in any event within 30 days after, receipt by a Responsible Officer of the
Certificate Trustee of written notice or actual knowledge of the occurrence of
any default (as such term is defined below) hereunder with respect to any Series
or Class of Certificates, the Certificate Trustee shall transmit by mail to the
Originator, the Note Trustee and the Holders of Certificates of all Series in
accordance with Section 313(c) of the Trust Indenture Act, notice of such
default, unless such default shall have been cured or waived; provided, however,
------------------
that, except in the case of a default in the payment of the principal of or
interest on any Note of the corresponding Series or Class, the Certificate
Trustee shall be fully protected in withholding such notice if and so long as a
trust committee of Responsible Officers of the Certificate Trustee in good faith
determines that the withholding of such notice is in the interests of the
Holders of the Certificates. For the purpose of this Section, the term
"default" means, with respect to any Series or Class of Certificates, any event
that is, or after notice or lapse of time or both would become, a Note Event of
Default with respect to such Series or Class of Certificates.
Section 6.02. Certain Rights of Certificate Trustee. Subject to the
-------------------------------------
provisions of Section 315 of the Trust Indenture Act:
(a) the Certificate Trustee may conclusively rely and shall be fully
protected in acting or refraining from acting in reliance upon any
resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture or other paper or
document believed by it to be genuine and to have been signed or presented
by the proper party or parties;
(b) any request or direction of the Originator mentioned herein shall
be sufficiently evidenced by a Request, accompanied by evidence reasonably
satisfactory to the Certificate Trustee that the Note Issuer has given its
prior written approval of such request or direction;
(c) whenever in the administration of this Trust Agreement the
Certificate Trustee shall deem it desirable that a matter be proved or
established prior to taking,
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suffering or omitting any action hereunder, the Certificate Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, conclusively rely upon an Officers' Certificate of
the Originator;
(d) the Certificate Trustee may consult with counsel and the advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Certificate Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Trust Agreement at the
request or direction of any of the Certificateholders pursuant to this
Trust Agreement, unless such Certificateholders shall have offered to the
Certificate Trustee reasonable security or indemnity satisfactory to it
against the cost, expenses (including reasonable legal fees and expenses)
and liabilities that might be incurred by it in compliance with such
request or direction;
(f) the Certificate Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture or other paper or document;
(g) the Certificate Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents, attorneys, custodians or nominees and the Certificate Trustee shall
not be responsible, for any misconduct or negligence on the part of, or for
the supervision of, any agent, attorney, custodian or nominee appointed
with due care by it hereunder;
(h) the Certificate Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance with
the direction of the Holders of Certificates relating to the time, method
and place of conducting any proceeding for any remedy available to the
Certificate Trustee, or exercising any trust or power conferred upon the
Certificate Trustee, under this Trust Agreement;
(i) the Certificate Trustee shall not be required to expend or risk
its own funds in the performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or indemnity
satisfactory to it against such risk is not reasonably assured to it;
(j) the Certificate Trustee shall not be personally liable for any
action taken or suffered or omitted to be taken by it in good faith and
reasonably believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Trust Agreement; provided, that
--------
the Certificate Trustee's conduct does not constitute willful misconduct,
gross negligence or bad faith;
(k) in the event that the Certificate Trustee is also acting as Paying
Agent, Authenticating Agent or Registrar hereunder, the rights and
protections afforded to the Certificate Trustee pursuant to this Article VI
shall also be afforded to such Paying Agent,
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Authenticating Agent or Registrar;
(l) the Certificate Trustee shall not be charged with knowledge of an
Event of Default unless a Responsible Officer obtains actual knowledge of
such event or the Certificate Trustee receives written notice of such event
from the Originator, the Note Trustee, the Servicer or a majority of the
Holders of Certificates of the Series or Class or Classes so affected; and
(m) without limiting its rights under bankruptcy law, when the
Certificate Trustee incurs expenses or renders services in connection with
the insolvency or bankruptcy of any party hereto or with the Basic
Documents to which it is a party, such expenses (including the fees and
expenses of its counsel) and the compensation for such services are
intended to constitute expenses of administration under any bankruptcy or
insolvency law.
Section 6.03. Not Responsible for Recitals or Issuance of Certificates.
--------------------------------------------------------
The recitals contained herein and in the Certificates, except the execution
thereof and the certificates of authentication, shall not be taken as the
statements of the Certificate Trustee, and the Certificate Trustee assumes no
responsibility for their correctness. Subject to Section 6.14, the Certificate
Trustee makes no representations as to the validity or sufficiency of this Trust
Agreement, the Notes, any Basic Document or the Certificates.
Section 6.04. May Hold Certificates. The Certificate Trustee, any Paying
---------------------
Agent, any Registrar or any of their Affiliates or any other agent, in their
respective individual or any other capacity, may become the owner or pledgee of
Certificates and, subject to Sections 310(b) and 311 of the Trust Indenture Act,
may otherwise deal with the Originator, the Note Issuer or the Note Trustee with
the same rights it would have if it were not Certificate Trustee, Paying Agent,
Registrar or such other agent.
Section 6.05. Money Held in Trust. Money held by the Certificate Trustee
-------------------
or the Paying Agent in trust hereunder need not be segregated from other funds
except to the extent required herein or by law and neither the Certificate
Trustee nor the Paying Agent shall have any liability for interest upon any such
moneys except as provided for herein.
Section 6.06. Compensation and Reimbursement; Indemnification. (a)
-----------------------------------------------
Pursuant to the Fee and Indemnity Agreement, the Note Issuer has agreed to pay,
or cause to be paid, to the Certificate Trustee from time to time reasonable
compensation for its services and to reimburse it for its reasonable expenses.
(b) The Originator shall execute the Fee and Indemnity Agreement, pursuant
to which the Note Issuer shall, but solely from amounts payable under the Fee
and Indemnity Agreement, shall indemnify, defend and hold harmless the
Certificate Trustee and any of the affiliates, officers, directors, employees
and agents of the Certificate Trustee (the "Certificate Trustee Indemnified
Persons") from and against any and all losses, claims, taxes, damages, expenses
and liabilities (including liabilities under state or federal securities laws)
of any kind and nature whatsoever (collectively, "Certificate Trustee
Expenses"), to the extent that such Certificate Trustee Expenses arise out of or
are imposed upon or asserted against such Certificate Trustee Indemnified
Persons
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<PAGE>
with respect to the creation, operation or termination of the Trust, the
execution, delivery or performance of this Trust Agreement or the transactions
contemplated hereby; provided, however, that the Note Issuer shall not be
------------------
required to indemnify any Certificate Trustee Indemnified Person for any
Certificate Trustee Expenses that result from the willful misconduct or gross
negligence of such Certificate Trustee Indemnified Person. The obligations of
the Note Issuer to indemnify the Certificate Trustee Indemnified Persons in the
Trust Agreement shall survive the termination of this Trust Agreement and the
resignation or removal of the Certificate Trustee Indemnified Persons.
Notwithstanding anything to the contrary in this Trust Agreement, the
Certificate Trustee shall have no recourse against the Originator or the Trust
Property for payment of any amounts required to be paid to the Certificate
Trustee under this Section 6.06(b).
Section 6.07. Corporate Certificate Trustee Required; Eligibility. (a)
---------------------------------------------------
This Trust Agreement shall at all times have a certificate trustee that shall be
eligible to act as a trustee under Section 310(a) of the Trust Indenture Act,
shall have a combined capital and surplus of at least $50,000,000 and shall have
a long-term debt rating of at least A by Moody's and Standard & Poor's. If such
entity publishes reports of conditions at least annually, pursuant to law or to
the requirements of federal, state, territorial or District of Columbia
supervising or examining authority, then for the purposes of this Section 6.07,
the combined capital and surplus of such entity shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published.
(b) In determining whether the Certificate Trustee has a conflicting
interest with respect to any Series or Class of Certificates under Section
310(b) of the Trust Indenture Act and this Section, each other Series or Class
of Certificates will be treated as having been issued under an indenture other
than this Trust Agreement.
(c) If at any time the Certificate Trustee shall cease to be eligible in
accordance with the provisions of this Section 6.07, the Certificate Trustee
shall resign immediately in the manner and with the effect specified in Section
6.08.
Section 6.08. Resignation and Removal; Appointment of Successor. (a) No
-------------------------------------------------
resignation or removal of the Certificate Trustee and no appointment of a
successor Certificate Trustee pursuant to this Article shall become effective
(i) until the acceptance of appointment by the successor Certificate Trustee
under Section 6.09 and (ii) other than in the case of paragraph (b) below,
unless a successor Certificate Trustee has been appointed and has accepted such
appointment and the Delaware Trustee, the Note Issuer and the Originator has
received written confirmation from each of the Rating Agencies that no lowering
or withdrawal of the then current Ratings of any Series or Class of Certificates
will result from such appointment.
(b) The Certificate Trustee may resign at any time in the case of a
conflicting interest as determined in accordance with Section 6.07(b), with
respect to one or more Series or Classes of Certificates, by giving written
notice thereof to the Originator, the Authorized Agents, the Note Issuer and the
Note Trustee. If an instrument of acceptance by a successor Certificate Trustee
with respect to such Series or Class or Classes of Certificates shall not have
been delivered to the Originator and the Certificate Trustee within 30 days
after the giving of such notice of resignation,
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the resigning Certificate Trustee may petition any court of competent
jurisdiction for the appointment of a successor Certificate Trustee with respect
to such Series or Class or Series or Classes of Certificates.
(c) The Certificate Trustee may be removed at any time in the case of a
conflicting interest as determined in accordance with Section 6.07(b), with
respect to any Series or Class of Certificates, by Act of Certificateholders
holding Certificates of such Series or Class representing not less than 51
percent of the Outstanding Amount of the Certificates of that Series or Class
delivered to the Certificate Trustee and to the Originator, the Note Issuer and
the Note Trustee.
(d) Upon 30 days' written notice, the Certificate Trustee (i) may resign
with respect to the Certificates as a whole by giving such written notice to the
Originator, the Delaware Trustee, the Authorized Agents, the Note Issuer and the
Note Trustee or (ii) may be removed with respect to the Certificates as a whole
by Act of Certificateholders holding Certificates representing not less than a
majority of the Outstanding Amount of Certificates of all the Series delivered
to the Delaware Trustee, the Originator, the Note Issuer and the Note Trustee.
If an instrument of acceptance by a successor Certificate Trustee with respect
to the Certificates as a whole shall not have been delivered to the Originator,
the Delaware Trustee, the Note Issuer and the Note Trustee within 90 days after
the giving of such notice of resignation or Act by the Certificateholders as a
whole for removal of the Certificate Trustee, the Delaware Trustee or the
Originator may petition any court of competent jurisdiction for the appointment
of a successor Certificate Trustee with respect to the Certificates as a whole.
(e) If at any time:
(i) the Certificate Trustee shall fail to comply with Section 310 of
the Trust Indenture Act after written request therefor by the Originator or
by any Holder of Certificates of any Series or Class affected thereby who
has been a bona fide Holder of Certificates of such Series or Class for at
least six months; or
(ii) the Certificate Trustee shall cease to be eligible under Section
6.07 and shall fail to resign after written request therefor by the
Originator or by any Certificateholder; or
(iii) the Certificate Trustee shall become incapable of acting or
shall be adjudged a bankrupt or insolvent or a receiver of the Certificate
Trustee or of its property shall be appointed or any public officer shall
take charge or control of the Certificate Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation;
then, in any case, (x) the Originator may remove the Certificate Trustee with
respect to any Series or Class of Certificates affected thereby or (y) any
Holder of Certificates of any Series or Class affected thereby who has been a
bona fide Holder of Certificates of such Series or Class for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Certificate Trustee with
respect to such Series or Class of Certificates and the appointment of a
successor Certificate Trustee with respect to such Series or Class.
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(f) If a Responsible Officer of the Certificate Trustee shall have received
written notice of an Avoidable Tax that has been or is likely to be asserted,
the Certificate Trustee shall promptly notify the Originator and the Note Issuer
thereof and shall, within 30 days of such notification, resign hereunder unless
within such 30-day period the Certificate Trustee shall have received notice
that either the Originator or the Note Issuer has agreed to pay such tax. In
such event, the Originator (with the prior written approval of the Note Issuer)
shall promptly appoint a successor Certificate Trustee in a jurisdiction where
there are no Avoidable Taxes. As used herein, an "Avoidable Tax" means a state
or local tax: (i) upon (w) the Trust, (x) the Trust Property, (y) the
Certificateholders or (z) the Certificate Trustee for which the Certificate
Trustee is entitled to seek reimbursement from the Trust Property, and (ii) that
would be avoided if the Certificate Trustee were located in another state, or
jurisdiction within a state, within the United States. A tax shall not be an
Avoidable Tax if either the Originator or the Note Issuer shall agree to pay,
and shall pay, such tax.
(g) With respect to any Series or Class of Certificates, if the Certificate
Trustee shall resign, be removed or become incapable of acting, or if a vacancy
shall occur in the office of the Certificate Trustee for any cause, the
Originator (with the prior written approval of the Note Issuer) shall promptly
appoint a successor Certificate Trustee. If, within one year after such
resignation, removal or incapability, or the occurrence of such vacancy with
respect to any Series or Class of Certificates, a successor Certificate Trustee
shall be appointed by Act of the Certificateholders holding Certificates of such
Series or Class representing not less than a majority of the Outstanding Amount
of the Certificates of such Series or Class delivered to the Originator, the
Note Trustee and the retiring Certificate Trustee, the successor Certificate
Trustee so appointed shall, forthwith upon its acceptance of such appointment,
become the successor Certificate Trustee with respect to such Series or Class
and supersede the successor Certificate Trustee appointed as provided above. If
no successor Certificate Trustee shall have been so appointed as provided above
and accepted appointment in the manner hereinafter provided, any Holder of
Certificates of any affected Series or Class who has been a bona fide Holder of
Certificates of such Series or Class for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Certificate Trustee with respect
to the affected Series or Class of Certificates.
(h) The successor Certificate Trustee shall give notice of the resignation
and removal of the Certificate Trustee and appointment of the successor
Certificate Trustee, in each case with respect to any Series or Class of
Certificates, by mailing written notice of such event by first-class mail,
postage prepaid, to the Holders of the affected Series or Class as their names
and addresses appear in the Register and to each Rating Agency. Each notice
shall include the name of such successor Certificate Trustee and the address of
the corporate trust office of such successor Certificate Trustee.
(i) The Originator shall notify the Rating Agencies of any resignation and
removal of the Certificate Trustee and appointment of a successor Certificate
Trustee under this Section 6.08.
Section 6.09. Acceptance of Appointment by Successor. Every successor
--------------------------------------
Certificate Trustee appointed hereunder shall execute, acknowledge and deliver
to the Originator and to the retiring Certificate Trustee an instrument
accepting such appointment, and thereupon the resigna-
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tion or removal of the retiring Certificate Trustee shall become effective and
such successor Certificate Trustee, without any further act, deed or conveyance,
shall become vested with all the rights, powers, trusts and duties of the
retiring Certificate Trustee with respect to any Series or Class of Certificates
as to which the retiring Certificate Trustee is retiring; but, on request of the
Originator or the successor Certificate Trustee, such retiring Certificate
Trustee shall execute and deliver an instrument transferring to such successor
Certificate Trustee all the rights, powers and trusts of the retiring
Certificate Trustee with respect to such Series or Class of Certificates and
shall duly assign, transfer and deliver to such successor Certificate Trustee
all property and money held by such retiring Certificate Trustee hereunder with
respect to such Series or Class of Certificates. Upon request of any such
successor Certificate Trustee, the Originator, the retiring Certificate Trustee
and such successor Certificate Trustee shall execute and deliver any and all
instruments containing such provisions as shall be necessary or desirable to
transfer and confirm to, and for more fully and certainly vesting in, such
successor Certificate Trustee all such rights, powers and trusts. No Certificate
Trustee hereunder shall be liable for the acts or omissions of any successor
Certificate Trustee.
No successor Certificate Trustee shall accept its appointment unless at the
time of such acceptance such successor Certificate Trustee shall be qualified
and eligible under this Article and any and all amounts due and payable to the
predecessor trustee have been paid.
Section 6.10. Merger, Conversion, Consolidation or Succession to Business.
-----------------------------------------------------------
Any corporation into which the Certificate Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Certificate Trustee shall be a party,
or any corporation succeeding to all or substantially all of the corporate trust
business of the Certificate Trustee, shall be the successor of the Certificate
Trustee hereunder, provided such corporation shall be otherwise qualified and
eligible under this Article, without the execution or filing of any paper or any
further act on the part of any of the parties hereto. In case any Certificates
shall have been authenticated, but not delivered, by the Certificate Trustee
then in office, any successor by merger, conversion or consolidation to such
authenticating Certificate Trustee may adopt such authentication and deliver the
Certificates so authenticated with the same effect as if such successor
Certificate Trustee had itself authenticated such Certificates.
Section 6.11. Maintenance of Agencies. (a) There shall at all times be
-----------------------
maintained in the Borough of Manhattan, The City of New York, an office or
agency where Certificates may be presented or surrendered for registration of
transfer or for exchange, and for payment thereof and where notices and demands
to or upon the Certificate Trustee on behalf of the Trust in respect of the
Certificates or of this Trust Agreement may be served. At no time shall there
be any other such office or agency outside the United States. Such office or
agency shall be initially at Bankers Trust Company, Corporate Trust and Agency
Services, Four Albany Street, New York, New York 10006. Written notice of any
change of location thereof shall be given by the Certificate Trustee on behalf
of the Trust to the Originator, the Note Trustee, the Note Issuer, the
Certificateholders and the Rating Agencies. In the event that no such office or
agency shall be maintained or no such notice of location or of change of
location shall be given, presentations and demands may be made and notices may
be served at the Corporate Trust Office of the Certificate Trustee.
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(b) There shall at all times be a Registrar, an Authentication Agent and a
Paying Agent hereunder. Each such Authorized Agent shall be a bank or trust
company, shall be a corporation organized and doing business under the laws of
the United States or any state, with a combined capital and surplus of at least
$50,000,000, shall have a long-term debt rating of at least A by Moody's and
Standard & Poor's and shall be authorized under such laws to exercise corporate
trust powers, subject to supervision by federal or state authorities. The
Certificate Trustee shall initially be the Paying Agent, Authentication Agent,
and, as provided in Section 3.04, Registrar hereunder. Each Registrar, if other
than the Certificate Trustee, shall furnish to the Certificate Trustee, at
stated intervals of not more than six months, and at such other times as the
Certificate Trustee may request in writing, a copy of the Register.
(c) Any corporation into which any Authorized Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any Authorized Agent shall
be a party, or any corporation succeeding to the corporate trust business of any
Authorized Agent, shall be the successor of such Authorized Agent hereunder, if
such successor corporation is otherwise eligible under this Section, without the
execution or filing of any paper or any further act on the part of the parties
hereto or such Authorized Agent or such successor corporation.
(d) Any Authorized Agent may at any time resign by giving written notice of
resignation to the Certificate Trustee, the Originator and the Note Trustee.
The Originator (with the prior written approval of the Note Issuer) may, and at
the request of the Certificate Trustee shall, at any time terminate the agency
of any Authorized Agent by giving written notice of termination to such
Authorized Agent, the Note Trustee and to the Certificate Trustee. Upon the
resignation or termination of an Authorized Agent or in case at any time any
such Authorized Agent shall cease to be eligible under this Section (when, in
either case, no other Authorized Agent performing the functions of such
Authorized Agent shall have been appointed by the Certificate Trustee), the
Originator (with the prior written approval of the Note Issuer) shall promptly
appoint one or more qualified successor Authorized Agents, reasonably
satisfactory to the Certificate Trustee, to perform the functions of the
Authorized Agent that has resigned or whose agency has been terminated or who
shall have ceased to be eligible under this Section. The Originator shall give
written notice of any such appointment made by it to the Certificate Trustee and
the Note Trustee; and in each case the Certificate Trustee shall mail notice of
such appointment to all Certificateholders as their names and addresses appear
on the Register.
(e) Pursuant to the Fee and Indemnity Agreement, the Note Issuer has agreed
to pay, or cause to be paid, from time to time to each Authorized Agent
reasonable compensation for its services and to reimburse it for its reasonable
expenses; provided, that the Note Issuer shall have given prior consent to the
--------
appointment of such Authorized Agent pursuant to the Fee and Indemnity
Agreement, and no Authorized Agent shall have any recourse against the
Originator or the Trust Property for payment of such amounts.
Section 6.12. Money for Certificate Payments To Be Held in Trust. (a) All
--------------------------------------------------
moneys deposited with any Paying Agent for the purpose of any payment on
Certificates shall be deposited and held in trust for the benefit of the
Certificateholders entitled to such payment, subject to the provisions of this
Section. Moneys so deposited and held in trust shall constitute a separate
trust
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fund for the benefit of the Certificateholders with respect to which such money
was deposited.
The Certificate Trustee may at any time, for the purpose of obtaining the
satisfaction and discharge of this Trust Agreement or for any other purpose,
direct any Paying Agent to pay to the Certificate Trustee all sums held in trust
by such Paying Agent, such sums to be held by the Certificate Trustee upon the
same trusts as those upon which such sums were held by such Paying Agent; and,
upon such payment by any Paying Agent to the Certificate Trustee, such Paying
Agent shall be released from all further liability with respect to such money.
(b) The Certificate Trustee will cause each Paying Agent other than the
Certificate Trustee to execute and deliver to the Certificate Trustee an
instrument in which such Paying Agent shall agree with the Certificate Trustee
(and, if the Certificate Trustee acts as Paying Agent, it hereby so agrees),
subject to the provisions of this Section, that such Paying Agent will:
(i) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise disposed
of as herein provided and pay such sums to such Persons as herein provided;
(ii) give the Certificate Trustee notice of any default under the
Notes of which it has actual knowledge (or any other obligor on the
Certificates) in the making of any payment required to be made with respect
to the Certificates;
(iii) at any time during the continuance of such default, upon the
written request of the Certificate Trustee, forthwith pay to the
Certificate Trustee all sums held by it in trust for the payment of the
Certificates if at any time it ceases to meet the standards required to be
met by a Paying Agent at the time of its appointment; and
(iv) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Certificates of any
applicable withholding taxes imposed thereon and with respect to any
applicable reporting requirements in connection therewith.
Section 6.13. Registration of Notes in Certificate Trustee's Name. The
---------------------------------------------------
Certificate Trustee agrees that all Notes and Eligible Investments, if any,
shall be issued in the name of the Certificate Trustee or its nominee, on behalf
of the Trust, and held by the Certificate Trustee, or, if not so held, the
Certificate Trustee or its nominee, on behalf of the Trust, shall be reflected
as the owner of such Notes or Eligible Investments, as the case may be, in the
register of the issuer of such Notes or Eligible Investments. In no event shall
the Certificate Trustee invest in, or hold, Notes or Eligible Investments in a
manner that would cause the Certificate Trustee not to have the ownership
interest in such Notes or Eligible Investments under the applicable provisions
of the Uniform Commercial Code in effect where the Certificate Trustee holds
such Notes or Eligible Investments or other applicable law then in effect.
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Section 6.14. Representations and Warranties of Certificate Trustee. The
-----------------------------------------------------
Certificate Trustee hereby represents and warrants that:
(a) the Certificate Trustee is a national banking association
validly existing under the laws of the United States;
(b) the Certificate Trustee has full power, authority and legal
right to execute, deliver and perform this Trust Agreement and the Basic
Documents to which the Certificate Trustee is a party and has taken all
necessary action to authorize the execution, delivery, and performance by
it of this Trust Agreement and such Basic Documents; and
(c) when delivered by the Certificate Trustee, the Certificates of
any Series or Class will have been duly executed by the Certificate Trustee
on behalf of the Trust and duly authenticated by the Certificate Trustee.
Section 6.15. Withholding Taxes; Information Reporting. The Certificate
----------------------------------------
Trustee, as trustee of a grantor trust, shall exclude and withhold from each
distribution of principal and interest and other amounts due hereunder or under
the Certificates any and all withholding taxes applicable thereto as required by
law. The Certificate Trustee agrees that it will act as such withholding agent
and, in connection therewith, whenever any present or future taxes or similar
charges are required to be withheld with respect to any amounts payable in
respect of the Certificates, to withhold such amounts and timely pay the same to
the appropriate authority in the name of and on behalf of the
Certificateholders, that it will file any necessary withholding tax returns or
statements when due, and that, as promptly as possible after the payment
thereof, it will deliver to each Certificateholder appropriate documentation
showing the payment thereof, together with such additional documentary evidence
as such Certificateholders may reasonably request from time to time. The
Certificate Trustee agrees to file any other information reports as it may be
required to file with respect to taxes. For purposes of reporting on Internal
Revenue Service Form 1041 (and any statement attached thereto) or any successor
form thereto, the Certificate Trustee will separately set forth information
reported with respect to each Series or Class of Certificates.
ARTICLE VII
THE DELAWARE TRUSTEE
Section 7.01. Appointment. For valuable consideration received, it is
-----------
mutually covenanted and agreed in accordance with the terms of Section 2.01 of
this Trust Agreement that the Delaware Trustee has been and by this document is,
appointed to serve as the trustee of the Trust in the State of Delaware pursuant
to Section 3807 of the Business Trust Statute.
Section 7.02. Duties and Responsibilities. It is understood and agreed
---------------------------
that the duties and responsibilities of the Delaware Trustee shall be limited to
(a) accepting legal process served on the Trust in the State of Delaware and (b)
the execution and delivery of all certificates required to be filed with the
Secretary of State in order to form and maintain the existence of the Trust
under the Business Trust Statute.
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Section 7.03. Acceptance of the Trusts. By the execution hereof, the
------------------------
Delaware Trustee accepts the trusts created hereinabove and in Section 2.01.
Except as otherwise expressly required by Section 7.02, the Delaware Trustee
shall not have any duty or liability with respect to the administration of the
Trust, the investment of the Trust's property or the payment of dividends or
other distributions of income or principal to the Certificateholders.
Section 7.04. Limitation of Liability. The Delaware Trustee shall not be
-----------------------
liable for the acts or omissions of the Certificate Trustee, nor shall the
Delaware Trustee be liable for supervising or monitoring the performance of the
duties and obligations of the Certificate Trustee or the Trust under this Trust
Agreement or any related document. The Delaware Trustee shall not be personally
liable under any circumstances, except for its own willful misconduct or gross
negligence. In particular, but not by way of limitation:
(a) the Delaware Trustee shall not be personally liable for any error
of judgment made in good faith by a Responsible Officer of the Delaware
Trustee;
(b) no provision of this Trust Agreement shall require the Delaware
Trustee to expend or risk its personal funds or otherwise incur any
financial liability in the performance of its rights or powers hereunder,
if the Delaware Trustee shall have reasonable grounds for believing that
repayment of such funds or indemnity satisfactory to it against such risk
or liability is not reasonably assured or provided to it;
(c) it is expressly understood and agreed by the parties hereto that
(i) this Trust Agreement is executed and delivered by Bankers Trust
(Delaware), not individually or personally but solely as Delaware Trustee
of the Trust, in the exercise of the powers and authority conferred and
vested in it, (ii) the representations, undertakings and agreements herein
made on the part of the Trust are made and intended not as personal
representations, undertakings and agreements by Bankers Trust (Delaware),
but are made and intended for the purpose of binding only the Trust, (iii)
nothing herein contained shall be construed as creating any liability on
Bankers Trust (Delaware), individually or personally, to perform any
covenant either expressed or implied contained herein, all such liability,
if any, being expressly waived by the parties who are signatories to this
Trust Agreement and by any Person claiming by, through or under such
parties and (iv) under no circumstances shall Bankers Trust (Delaware) be
personally liable for the payment of any indebtedness or expenses of the
Trust or be liable for the breach or failure of any obligation,
representation, warranty or covenant made or undertaken by the Trust under
this Trust Agreement;
(d) the Delaware Trustee shall not be personally responsible for or in
respect of the validity or sufficiency of this Trust Agreement or the
Certificates or for the due execution hereof by the Originator or the
Certificate Trustee;
(e) the Delaware Trustee shall incur no liability to anyone in acting
upon any signature, instrument, notice, resolution, request, consent,
order, certificate, report, opinion, bond or other document or paper
believed by it to be genuine and believed by it to be signed by the proper
party or parties; the Delaware Trustee may accept a certified copy of a
resolution of the board of directors or other governing body of any
corporate party as
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conclusive evidence that such resolution has been duly adopted by such body
and that the same is in full force and effect;
(f) in the exercise or administration of the trusts hereunder, the
Delaware Trustee (i) may act directly or through agents, attorneys,
custodians or nominees pursuant to agreements entered into with any of
them, and the Delaware Trustee shall not be liable for the default or
misconduct or supervision of such agents, attorneys, custodians or nominees
if such agents, attorneys, custodians or nominees shall have been selected
by the Delaware Trustee in good faith and (ii) may consult with counsel,
accountants and other skilled persons to be selected in good faith and
employed by it, and it shall not be liable for anything done, suffered or
omitted in good faith by it in accordance with the advice or opinion of any
such counsel, accountants or other skilled persons; and
(g) except as expressly provided in this Section 7.04, in accepting
and performing the trusts hereby created the Delaware Trustee acts solely
as trustee for the Trust and not in its individual capacity, and all
persons having any claim against the Delaware Trustee by reason of the
transactions contemplated by this Trust Agreement shall look only to the
Trust's property for payment or satisfaction thereof.
Section 7.05. Other Protections. The Delaware Trustee shall be entitled
-----------------
to all of the other benefits and protections provided to the Certificate Trustee
in this Trust Agreement.
Section 7.06. Compensation and Reimbursement; Indemnification. (a)
-----------------------------------------------
Pursuant to the Fee and Indemnity Agreement, the Note Issuer has agreed to pay,
or cause to be paid, to the Delaware Trustee from time to time compensation for
its services and to reimburse it for its reasonable expenses.
(b) The Originator shall execute the Fee and Indemnity Agreement, pursuant
to which the Note Issuer shall, but solely from amounts payable under the Fee
and Indemnity Agreement, shall indemnify, defend and hold harmless the Delaware
Trustee and any of the affiliates, officers, directors, employees and agents of
the Delaware Trustee (the "Delaware Trustee Indemnified Persons") from and
against any and all losses, claims, taxes, damages, expenses and liabilities
(including liabilities under state or federal securities laws) of any kind and
nature whatsoever (collectively, "Delaware Trustee Expenses"), to the extent
that such Delaware Trustee Expenses arise out of or are imposed upon or asserted
against such Delaware Trustee Indemnified Persons with respect to the creation,
operation or termination of the Trust, the execution, delivery or performance of
this Trust Agreement or the transactions contemplated hereby; provided, however,
------------------
that the Note Issuer shall not be required to indemnify any Delaware Trustee
Indemnified Person for any Delaware Trustee Expenses that result from the
willful misconduct or negligence of such Delaware Trustee Indemnified Person.
The obligations of the Note Issuer to indemnify the Delaware Trustee Indemnified
Persons in the Trust Agreement shall survive the termination of this Trust
Agreement and the resignation or removal of the Delaware Trustee Indemnified
Persons.
Notwithstanding anything to the contrary in this Trust Agreement, the
Delaware Trustee shall have no recourse against the Originator or the Trust
Property for payment of any amounts required to be paid to the Delaware Trustee
under this Section 7.06(b).
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Section 7.07. Resignation. The Delaware Trustee may resign upon 30 days'
-----------
prior written notice to the Certificate Trustee, the Originator and the Note
Issuer; provided, however, that a successor Delaware Trustee satisfactory to the
------------------
Certificate Trustee shall have been appointed and agreed to serve. If a
successor Delaware Trustee shall not have been appointed within such 30-day
period, the Delaware Trustee may apply to the Court of Chancery of the State of
Delaware for the appointment of a successor Delaware Trustee. Any successor
Delaware Trustee must satisfy the requirement of Section 3807(a) of the Business
Trust Statute.
ARTICLE VIII
SUPPLEMENTAL TRUST AGREEMENTS
Section 8.01. Supplemental Trust Agreements Without Consent of
------------------------------------------------
Certificateholders. Without the consent of Certificateholders, the Originator
- ------------------
(with the prior written approval of the Note Issuer) may, and the Certificate
Trustee and the Delaware Trustee (subject to Section 8.03) shall, at any time
and from time to time enter into one or more agreements supplemental hereto, in
form satisfactory to the Certificate Trustee and the Delaware Trustee, for any
of the following purposes:
(a) to add to the covenants of the Originator for the benefit of the
Certificateholders, or to surrender any right or power herein conferred
upon the Originator;
(b) to correct or supplement any provision herein or in any
supplemental agreement that may be defective or inconsistent with any other
provision herein or in any supplemental agreement or to make any other
provisions with respect to matters or questions arising under this Trust
Agreement; provided that any such action shall not adversely affect in any
--------
material respect the interests of the Certificateholders;
(c) to cure any ambiguity or correct any mistake;
(d) to qualify, if necessary, this Trust Agreement (including any
supplemental agreement) under the Trust Indenture Act, or under any similar
federal statute hereafter enacted, and to add to this Trust Agreement such
other provisions as may be expressly permitted by the Trust Indenture Act,
excluding, however, the provisions referred to in Section 316(a)(2) of the
Trust Indenture Act as in effect at the date as of which this instrument
was executed or any corresponding provision in any similar federal statute
hereafter enacted; or
(e) to provide for the issuance of the Certificates of any Class or
Series, or to provide for the execution and delivery of any Swap in
connection with such an issuance.
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Section 8.02. Supplemental Trust Agreements With Consent of
---------------------------------------------
Certificateholders. With the consent of the Certificateholders holding
- ------------------
Certificates representing not less than a majority of the aggregate Outstanding
Amount of Certificates of each Series or Class affected thereby, by Act of said
Certificateholders delivered to the Originator, the Note Trustee, the Delaware
Trustee and the Certificate Trustee, the Originator (with the prior written
approval of the Note Issuer) may, and the Certificate Trustee and the Delaware
Trustee (subject to Section 8.03) shall, enter into an agreement or agreements
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Trust Agreement or of
modifying in any manner the rights and obligations of the Holders of
Certificates of each such Series or Class under this Trust Agreement; provided,
---------
however, that no such supplemental agreement shall, without the consent of the
- --------
Certificateholder of each Outstanding Certificate affected thereby:
(a) reduce in any manner the amount of, or delay the timing of, any
receipt by the Certificate Trustee of payments on the Notes or
distributions that are required to be made herein on any Certificate, or
change any date of payment on any Certificate, or change the place of
payment where, or the coin or currency in which, any Certificate is
payable, or impair the right to institute suit for the enforcement of any
such payment or distribution on or after the Distribution Date, Special
Distribution Date or other date specified herein applicable thereto;
(b) permit the disposition of any Note in the Trust Property except as
permitted by this Trust Agreement, or otherwise deprive any Holder of
Certificates of any Series or Class of the benefit of the ownership of the
Notes of the corresponding Series or Class in the Trust;
(c) reduce the percentage of the aggregate Outstanding Amount of the
Certificates of any Series or Class that is required for any such
supplemental agreement, or reduce such percentage required for any waiver
or consent (of compliance with certain provisions of this Trust Agreement
or certain defaults hereunder and their consequences) provided for in this
Trust Agreement;
(d) modify any of the provisions of this Section, except to increase
any percentage set forth herein or to provide that certain other provisions
of this Trust Agreement cannot be modified or waived without the consent of
the Holder of each Certificate affected thereby; or
(e) adversely affect the status of the Trust as a grantor trust for
federal income tax purposes.
It shall not be necessary for any Act of Certificateholders under this
Section to approve the particular form of any proposed supplemental agreement,
but it shall be sufficient if such Act shall approve the substance thereof. The
Note Issuer shall give each Rating Agency five business days prior written
notice of any such proposed supplemental agreement. Promptly after the
execution by the Originator, the Delaware Trustee and the Certificate Trustee of
any supplemental agreement pursuant to this Section, the Certificate Trustee
shall mail to the Holders of the Certificates to which such agreement relates a
notice setting forth in general terms the substance of such agreement. Any
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failure of the Certificate Trustee to mail such notice, or any defect therein,
shall not, however, in any way impair or affect the validity of any such
agreement.
Section 8.03. Documents Affecting Immunity or Indemnity. If in the
-----------------------------------------
opinion of the Certificate Trustee or the Delaware Trustee any document required
to be executed by it pursuant to the terms of Section 8.01 or 8.02 affects any
interest, right, duty, immunity or indemnity in favor of such entity under this
Trust Agreement, the Certificate Trustee or the Delaware Trustee may in its
discretion decline to execute such document.
Section 8.04. Execution of Supplemental Trust Agreements. In executing,
------------------------------------------
or accepting the additional trusts created by, any supplemental agreement
permitted by this Article or the modifications thereby of the trusts created by
this Trust Agreement, the Certificate Trustee and the Delaware Trustee shall be
entitled to receive, and shall be fully protected in relying upon, an Opinion of
Counsel stating that the execution of such supplemental agreement is authorized
or permitted by this Trust Agreement.
Section 8.05. Effect of Supplemental Trust Agreements. Upon the execution
---------------------------------------
of any supplemental agreement under this Article, this Trust Agreement shall be
modified in accordance therewith, and such supplemental agreement shall form a
part of this Trust Agreement for all purposes; and every Holder of any
Certificate theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
Section 8.06. Conformity with Trust Indenture Act. Every supplemental
-----------------------------------
agreement executed pursuant to this Article shall conform to the requirements of
the Trust Indenture Act as then in effect.
Section 8.07. Reference in Certificates to Supplemental Trust Agreements.
----------------------------------------------------------
Certificates authenticated and delivered after the execution of any supplemental
agreement pursuant to this Article may bear a notation in form approved by the
Certificate Trustee as to any matter provided for in such supplemental
agreement; and, in such case, suitable notation may be made upon Outstanding
Certificates after proper presentation and demand.
ARTICLE IX
AMENDMENTS AND SUPPLEMENTS TO NOTES, NOTE INDENTURE
AND OTHER BASIC DOCUMENTS
Section 9.01. Amendments and Supplements to Notes, Note Indenture and
-------------------------------------------------------
Other Basic Documents. In the event that the Certificate Trustee, as holder of
- ---------------------
the Notes of any Series or Class in trust for the benefit of the Holders of
Certificates of the corresponding Series or Class, receives a request for a
consent to any amendment, modification, waiver or supplement under such Notes,
the Note Indenture or any other Basic Document to which the Certificate Trustee
is a party, the Certificate Trustee shall forthwith send a notice of such
proposed amendment, modification, waiver or supplement, to each Holder of
Certificates of such Series or Class registered on the Register as of such date.
The Certificate Trustee shall request from such Certificateholders directions as
to (a) whether or not the Certificate Trustee should take or refrain from taking
any action that a holder
48
<PAGE>
of such Note has the option to direct, (b) whether or not to give or execute any
waivers, consents, amendments, modifications or supplements as a holder of such
Note and (c) how to vote such Note if a vote has been called for with respect
thereto; provided however, in the case of any change to the terms of, or
-------- -------
modification to, the Notes, the Certificateholders may not direct any such
action to be taken or direct whether or not to give or execute any such waiver,
consent, amendment, modification or supplement that is not pursuant to the
original terms of the Notes, unless the Certificate Trustee obtains an opinion
at the expense of the Trust of independent tax counsel to the effect that after
any such action, waiver, consent, amendment, modification or supplement the
Trust will continue to be treated as a "grantor trust" for federal income tax
purposes. Provided such a request for Certificateholder direction shall have
been made, in directing any action or casting any vote or giving any consent as
the holder of the Notes, the Certificate Trustee shall vote or consent with
respect to such Notes in the same proportion as the Certificates of the
corresponding Series or Class were actually voted by Acts of the Holders thereof
delivered to the Certificate Trustee prior to two Certificate Business Days
before the Certificate Trustee takes such action or casts such vote or gives
such consent.
ARTICLE X
TERMINATION OF TRUST
Section 10.01. Termination of the Trust. The respective obligations and
------------------------
responsibilities of the Originator, the Certificate Trustee, the Delaware
Trustee and the Trust created hereby shall terminate with respect to any Series
or Class of Certificates upon the earlier of (i) the distribution to all Holders
of Certificates of such Series or Class and the Certificate Trustee of all
amounts required to be distributed to them pursuant to this Trust Agreement and
the disposition of all property held as part of the Trust Property with respect
to such Series or Class and (ii) the expiration of 21 years from the death of
the survivor of the descendants of Joseph P. Kennedy, the late Ambassador of the
United States to the Court of St. James's, living on the date hereof. Upon the
termination of all Series of Certificates and the election of the Originator,
the Trust shall dissolve. The Originator shall pay or provide for the payment
of all remaining liabilities of the Trust, the Certificate Trustee and the
Delaware Trustee, but solely from amounts payable under the Fee and Indemnity
Agreement, and thereupon the Delaware Trustee shall file a certificate of
cancellation under the Business Trust Statute and the Trust shall terminate, and
any fees associated with such filing shall be paid from amounts payable under
the Fee and Indemnity Agreement.
Notice of any termination of the Trust shall be mailed promptly by the
Certificate Trustee to Holders of Certificates of any Series or Class then
outstanding. Such notice shall specify the Distribution Date or Special
Distribution Date, as the case may be, upon which the Holders of Certificates of
such Series or Class may surrender their Certificates to the Certificate Trustee
for payment of the final distribution and cancellation. Such notice shall be
mailed (a) if with respect to a final distribution, as soon as practicable
following receipt of notice from the Note Trustee of a final payment on a
corresponding Note, (b) if with respect to a Special Payment other than a
Special Payment constituting a redemption, not earlier than the 60th day and not
later than the 20th day next preceding such final distribution or (c) if with
respect to a Special Payment constituting a redemption of Notes, then in
accordance with the provisions of the relevant Section of Article IV hereof.
Such notice shall specify (a) the Distribution Date or Special Distribution
49
<PAGE>
Date, as the case may be, upon which the proposed final payment of the
Certificates of such Series or Class will be made upon presentation and
surrender of such Certificates at the office or agency of the Certificate
Trustee therein specified, (b) the amount of any such proposed final payment and
(c) that the Record Date otherwise applicable to such Distribution Date or the
Special Record Date otherwise applicable to such Special Distribution Date, as
the case may be, is not applicable, payments being made only upon presentation
and surrender of the Certificates of such Series or Class at the office or
agency of the Certificate Trustee therein specified. The Certificate Trustee
shall give such notice to the Registrar at the time such notice is given to
Holders of Certificates of such Series or Class. Upon presentation and surrender
of such Certificates, the Certificate Trustee shall cause to be distributed to
the Holders thereof amounts distributable thereon on such Distribution Date or
Special Distribution Date, as the case may be, pursuant to Section 4.02.
In the event that all of the Holders of Certificates of such Series or
Class shall not surrender their Certificates for cancellation within six months
after the date specified in the above mentioned written notice, the Certificate
Trustee shall give a second written notice to the remaining Holders of such
Certificates to surrender their Certificates for cancellation and receive the
final distribution with respect thereto. In the event that any money held by
the Certificate Trustee for the payment of distributions on the Certificates of
any Series or Class shall remain unclaimed for two years (or such lesser time as
the Certificate Trustee shall be satisfied, after 60 days' notice from the
Originator (with the prior written approval of the Note Issuer), is one month
prior to the escheat period provided under applicable law) after the final
distribution date with respect thereto, the Certificate Trustee shall pay such
money to the Note Trustee for deposit into the collection account relating to
the related Notes or, if such collection account no longer exists, to the Note
Issuer and the Certificate Trustee or Note Issuer shall give written notice
thereof to the Note Trustee, the Note Issuer and the Originator.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01. Pledge of State of California; Certificates and Notes Not
---------------------------------------------------------
Obligation of State of California, Originator, or Seller. (a) The Originator
- --------------------------------------------------------
hereby finds and determines, and hereby represents and warrants, that the Trust
constitutes a "special purpose trust" under Section 63010 of the California
Government Code and a "financing entity" under Section 840 of the PU Code, and
that the Certificates constitute "rate reduction bonds" under Section 840 of the
PU Code and that the Holders of the Certificates are entitled to the rights and
benefits thereunder. Pursuant to Section 841(c) of the PU Code, the Originator,
on behalf of the State of California, does hereby pledge and agree with the Note
Issuer, the Trust and the Holders of the Certificates that the State of
California shall neither limit nor alter the FTA Charges, the Transition
Property, or the Financing Order or Advice Letters relating thereto, and all
rights thereunder, until the Certificates, together with the interest thereon,
are fully paid and discharged, provided nothing contained in this Section shall
preclude such limitation or alteration if and when adequate provision shall be
made by law for the protection of the Note Issuer, the Trustee and the Holders
(the "State Pledge"). Further, the Originator does hereby pledge and agree with
the Note Issuer, the Trust and the Holders of the Certificates that the
Originator will not act in a manner inconsistent with the State Pledge and will
not take any action that would impair any rights of the Note Issuer, the Trust
or the Holders of the
50
<PAGE>
Certificates in the Notes, the Transition Property or the Certificates. The
Originator hereby further agrees to treat the Notes as debt of the Note Issuer
secured by, among other things, the Transition Property and the equity of the
Note Issuer on deposit in the Capital Subaccount for all purposes.
(b) Each Certificate represents a fractional undivided beneficial interest
in a corresponding Series or Class of Notes and the proceeds thereof, together
with payments made on any related Swap. The Certificates do not represent an
interest in or obligation of the State of California, the Originator, any other
governmental agency or instrumentality or the Seller or any of its affiliates.
None of the Certificates, the Notes or the underlying Transition Property will
be guaranteed or insured by the State of California, the Originator, the Trust
or any other governmental agency or instrumentality or by the Seller or its
affiliates.
Neither the full faith and credit nor the taxing power of the State of
California, the Originator or any other governmental agency or instrumentality
is pledged to the payment of the principal, purchase price of, or interest on,
the Certificates or the Notes, or to the payments in respect of the Transition
Property, nor is the State of California, the Originator or any other
governmental agency or instrumentality in any manner obligated to make any
appropriation for the payment thereof.
Section 11.02. Limitation on Rights of Certificateholders. The death or
------------------------------------------
incapacity of any Certificateholder shall not operate to terminate this Trust
Agreement or the Trust, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the Trust,
nor otherwise affect the rights, obligations, and liabilities of the parties
hereto or any of them.
Section 11.03. [Intentionally omitted.]
Section 11.04. Certificates Nonassessable and Fully Paid.
-----------------------------------------
Certificateholders shall not be personally liable for obligations of the Trust,
the interests in the Trust represented by the Certificates shall be
nonassessable for any losses or expenses of the Trust or for any reason
whatsoever, and Certificates upon authentication thereof by the Certificate
Trustee pursuant to Section 3.02 are and shall be deemed fully paid and non-
assessable. No Certificateholder shall have any right (except as expressly
provided herein) to vote or in any manner otherwise control the operation and
management of the Trust Property, the Trust established hereunder, or the
obligations of the parties hereto, nor shall anything set forth herein, or
contained in the terms of the Certificates, be construed so as to constitute the
Certificateholders from time to time as partners or members of an association.
51
<PAGE>
Section 11.05. Notices. Unless otherwise specifically provided
-------
herein, all notices, directions, consents and waivers required under the terms
and provisions of this Trust Agreement shall be in English and in writing, and
any such notice, direction, consent or waiver may be given by United States
mail, courier service, telegram, telex, telemessage, telecopy, telefax, cable or
facsimile (confirmed by telephone or in writing in the case of notice by
telegram, telex, telemessage, telecopy, telefax, cable or facsimile) or any
other customary means of communication, and any such notice, direction, consent
or waiver shall be effective when delivered, or if mailed, three days after
deposit in the United States mail with proper postage for ordinary mail prepaid;
provided, however, that such notices, directions, consents and waivers to the
- ------------------
Delaware Trustee and/or the Certificate Trustee shall be given by United States
first-class mail, courier service, facsimile or overnight mail,
if to the Originator, to:
California Infrastructure and Economic Development Bank
c/o California Trade and Commerce Agency
801 K Street, Suite 1700
Sacramento, California 95814
Attention: Executive Director
Facsimile: (916) 323-2887
Telephone: (916) 324-9775
if to the Delaware Trustee, to:
Bankers Trust (Delaware)
E.A. Delle Donne Corporate Center
Montgomery Building
1011 Centre Road, Suite 200
Wilmington, Delaware 19805-1266
Attention: President
Facsimile: (302) 636-3222
Telephone: (302) 636-3305
(with a copy to the Certificate Trustee)
if to the Certificate Trustee, to:
Bankers Trust Company of California, N.A.
c/o Bankers Trust Company
Corporate Trust and Agency Services
Four Albany Street
New York, New York 10006
Attention: Structured Finance Group
Facsimile: (212) 250-0338
Telephone: (212) 250-8360
52
<PAGE>
if to the Note Issuer, to:
PG&E Funding LLC
245 Market Street, Room 424
San Francisco, California 94105
Attention: Leslie Everett
Telephone: (415) 972-5467
if to the Note Trustee, to:
Bankers Trust Company of California, N.A.
c/o Bankers Trust Company
Corporate Trust and Agency Services
Four Albany Street
New York, New York 10006
Attention: Structured Finance Group
Facsimile: (212) 250-0338
Telephone: (212) 250-8360
if to the Rating Agencies, to:
Standard & Poor's Ratings Services
25 Broadway (10th Floor)
New York, New York 10004
Attention: Asset-Backed Surveillance Department
Facsimile: (212) 208-0053
Telephone: (212) 208-8124
Moody's Investors Service, Inc.
99 Church Street
New York, New York 10007
Attention: ABS Monitoring Department
Facsimile: (212) 553-0573
Telephone: (212) 553-3686,
Fitch Investors Service, L.P.
One State Street Plaza
New York, New York 10004
Attn: Commercial Asset Backed Securities
Facsimile: (212) 514-9879
Telephone: (212) 908-0500, and
Duff & Phelps Credit Rating Co.
17 State Street, 12th Floor
New York, New York 10004
53
<PAGE>
(b) The Originator, the Delaware Trustee, the Certificate Trustee, the Note
Issuer or the Note Trustee, by notice to the others, may designate additional or
different addresses for subsequent notices or communications.
(c) Any notice or communication to Certificateholders shall be mailed by
first-class mail to the addresses for each Certificateholder shown on the
Register kept by the Registrar. Failure so to mail a notice or communication or
any defect in such notice or communication shall not affect its sufficiency with
respect to other Certificateholders.
(d) If a notice or communication is mailed in the manner provided above
within the time prescribed, it is conclusively presumed to have been duly given,
whether or not the addressee receives it.
(e) If the Originator mails a notice or communication to the
Certificateholders, it shall mail a copy to the Certificate Trustee, to each
Paying Agent and to the Note Issuer at the same time.
(f) Notwithstanding the foregoing, all communications or notices to the
Certificate Trustee shall be deemed to be given only when received by a
Responsible Officer of the Certificate Trustee.
Section 11.06. Governing Law. THIS TRUST AGREEMENT SHALL BE GOVERNED BY
-------------
AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAW OF THE STATE OF DELAWARE,
WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAW; PROVIDED, HOWEVER, THAT MATTERS REGARDING THE AUTHORITY OF THE
-------- -------
ORIGINATOR AND THE VALIDITY OF ACTIONS TAKEN BY THE ORIGINATOR HEREUNDER AND
OTHER MATTERS REFERENCED IN SECTION 11.01 ABOVE SHALL BE GOVERNED BY THE
DOMESTIC LAW OF THE STATE OF CALIFORNIA.
Section 11.07. Severability of Provisions. If any one or more of the
--------------------------
covenants, agreements, provisions or terms of this Trust Agreement shall be for
any reason whatsoever held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Trust Agreement and shall in no way affect the
validity or enforceability of the other provisions of this Trust Agreement or
the Trust, or of the Certificates or the rights of the Certificateholders
thereof.
Section 11.08. Conflict With Trust Indenture Act. If any provision
---------------------------------
hereof limits, qualifies or conflicts with another provision hereof that is
required to be included in this Trust Agreement by any of the provisions of the
Trust Indenture Act, such required provision shall control.
The provisions of Sections 310 through 317 of the Trust Indenture Act that
impose duties on any Person (including the provisions automatically deemed
included herein unless expressly excluded by this Trust Agreement) are a part of
and govern this Trust Agreement, whether or not physically contained herein.
54
<PAGE>
Section 11.09. Effect of Headings and Table of Contents. The Article
----------------------------------------
and Section headings herein and in the Table of Contents are for convenience
only and shall not affect the construction hereof.
Section 11.10. Successors and Assigns; Delegation. All covenants,
----------------------------------
agreements, representations and warranties in this Trust Agreement by the
Certificate Trustee, the Delaware Trustee and the Originator shall bind and, to
the extent permitted hereby, shall inure to the benefit of and be enforceable by
their respective successors and assigns, whether so expressed or not.
(b) No party to this Trust Agreement shall assign or delegate this Trust
Agreement or all or any part of its rights or obligations hereunder to any
Person without the prior written consent of the other parties.
Section 11.11. Benefits of Trust Agreement. Nothing in this Trust
---------------------------
Agreement or in the Certificates, express or implied, shall give to any Person,
other than the parties hereto and their successors hereunder, the
Certificateholders and, to the extent provided herein, the Note Issuer, any
benefit or any legal or equitable right, remedy or claim under this Trust
Agreement.
Section 11.12. Legal Holidays. In any case where any date for any
--------------
distribution in respect of any Certificate shall not be a Certificate Business
Day, then (notwithstanding any other provision of this Trust Agreement) payment
need not be made on such date, but may be made on the next succeeding
Certificate Business Day with the same force and effect as if made on such first
date, and no interest shall accrue during the intervening period.
Section 11.13. Counterparts. For the purpose of facilitating the
------------
execution of this Trust Agreement and for other purposes, this Trust Agreement
may be executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and all of which counterparts
shall constitute but one and the same instrument.
55
<PAGE>
IN WITNESS WHEREOF, the Originator, the Delaware Trustee and the
Certificate Trustee have caused this Trust Agreement to be duly executed by duly
authorized officers, all as of the day and year first above written.
CALIFORNIA INFRASTRUCTURE AND ECONOMIC
DEVELOPMENT BANK,
as Originator
By:____________________________________
Name:
Title:
BANKERS TRUST (DELAWARE),
as Delaware Trustee
By:____________________________________
Name:
Title:
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
as Certificate Trustee
By:____________________________________
Name:
Title:
S-1
<PAGE>
EXHIBIT A
FORM OF FIXED RATE CERTIFICATE
REGISTERED REGISTERED
NO . $.
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
SPECIAL PURPOSE TRUST PG&E-1
SERIES 199[]-[]
CLASS .
RATE REDUCTION CERTIFICATE
<TABLE>
<CAPTION>
SCHEDULED
FINAL
INTEREST DISTRIBUTION TERMINATION
RATE DATE DATE CUSIP
---------- ------------ ----------- -----
<S> <C> <C> <C>
</TABLE>
REGISTERED OWNER: Cede & Co.
PRINCIPAL AMOUNT:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUST
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
This Certificate evidences a fractional undivided beneficial interest
in an underlying note of a corresponding class and series issued by PG&E Funding
LLC and the proceeds thereof, held by a trust, as more fully described herein.
This Certificate does not represent an interest in or obligation of
the State of California, the California Infrastructure and Economic Development
Bank, a public body established within the
A-1
<PAGE>
state government of the State of California(the "Originator"), any other
governmental agency or instrumentality or Pacific Gas & Electric Company, a
California corporation ("PG&E"), or any of its affiliates. None of the
Certificates, the Underlying Note or the underlying Transition Property (as
defined in the Trust Agreement) will be guaranteed or insured by the State of
California, the Originator, the Trust or any other governmental agency or
instrumentality or by PG&E or its affiliates.
Neither the full faith and credit nor the taxing power of the State of
California, the Originator or any other governmental agency or instrumentality
is pledged to the payment of the principal of, purchase price of, or interest
on, this Certificate or the Underlying Note, or to the payments in respect of
the Transition Property, nor is the State of California, the Originator or any
other governmental agency or instrumentality in any manner obligated to make any
appropriation for the payment thereof.
THIS CERTIFIES THAT CEDE & CO., as nominee for The Depository Trust
Company, for value received, is the registered owner of a Principal Amount
(stated above) of nonassessable, fully-paid, fractional undivided beneficial
interest in certain property held by the California Infrastructure and Economic
Development Bank Special Purpose Trust PG&E-1 (the "Trust"). The Trust is
created pursuant to, and this Certificate is issued under and is subject to the
terms, provisions, and conditions of, an Amended and Restated Declaration and
Agreement of Trust, as supplemented by a First Supplemental Agreement of Trust,
each dated as of December 8, 1997 (collectively, the "Trust Agreement"), by and
among Bankers Trust (Delaware), as Delaware Trustee (the "Delaware Trustee"),
Bankers Trust Company of California, N.A., as Certificate Trustee (the
"Certificate Trustee"), and the Originator, a summary of certain of the
pertinent provisions of which is set forth below. This Certificate is one of
the duly authorized class of Certificates designated as "California
Infrastructure and Economic Development Bank Special Purpose Trust PG&E-1 Class
. Rate Reduction Certificates, Series 199[]-[]" (herein called the "Class .
Certificates"). The Class . Certificates are one of a series of classes of
Certificates issued under the Trust Agreement (such Class . Certificates,
together with other Certificates heretofore or hereafter issued under the Trust
Agreement being herein called the "Certificates"). The holder of this
Certificate, by virtue of its acceptance hereof, assents and agrees to be bound
by the terms of the Trust Agreement. This Class . Certificate represents a
fractional undivided beneficial interest in the note of a related class (the
"Underlying Note") issued by PG&E Funding LLC, as Note Issuer, together with the
proceeds of the Underlying Note. The Underlying Note is one of a series of
notes secured by a security interest in the property right created under the PU
Code, pursuant to a Financing Order (Decision 97-09-.) issued by the CPUC on
September 3, 1997, and Advice Letters issued pursuant thereto, representing the
irrevocable right of PG&E or its assignee to be paid the amount that is
determined in the Financing Order through the collection of certain
nonbypassable charges, as adjusted from time to time, on residential and small
commercial customers within PG&E's historic service territory, together with
certain related collateral, all as more fully described in the Note Indenture.
To the extent not otherwise defined herein, the capitalized terms used
herein have the meanings assigned to them in the Trust Agreement.
A-2
<PAGE>
As provided in the Trust Agreement, additional Certificates may be
issued thereunder from time to time pursuant to trust supplements in one or more
series or classes, in various principal amounts equal to the corresponding
series or class of underlying notes, may bear interest at different rates and
may otherwise vary as provided in the Trust Agreement. The aggregate principal
amount of Certificates equals the aggregate amount of the corresponding series
or class of underlying notes, and all Certificates of a Series issued and to be
issued under the Trust Agreement are and will be equally secured by the pledge
and covenants made therein, except as otherwise expressly provided or permitted
in the Trust Agreement.
Subject to and in accordance with the terms of the Trust Agreement,
there will be distributed on each March 25, June 25, September 25 and December
26 of each year or, if any such day is not a Business Day, the next succeeding
Business Day (each, a "Distribution Date"), commencing on March 25, 1998 to the
person in whose name this Certificate is registered at the close of business on
the last Business Day immediately preceding the related Distribution Date or, if
Definitive Certificates are issued, the last day of the immediately preceding
calendar month (each, a "Record Date"), such Holder's pro rata interest in the
payments made on the Underlying Note due on the related Payment Date, the
receipt of which has been confirmed by the Certificate Trustee. Subject to and
in accordance with the terms of the Trust Agreement, in the event that a Special
Payment on the Underlying Note is received by the Certificate Trustee, from
funds then available to the Certificate Trustee, there will be distributed on
the applicable Special Payment Date, to the Person in whose name this
Certificate is registered on the Record Date preceding the Special Payment Date,
as applicable, such Holder's pro rata share of such amount. The Special Payment
Date will be determined as provided in the Trust Agreement. The Certificate
Trustee will mail notice of each Special Payment and the related Special Payment
Date to the Certificateholder of this Certificate as provided in the Trust
Agreement.
Distributions on this Certificate will be made as provided in the
Trust Agreement by the Certificate Trustee by wire transfer or check mailed to
the Certificateholder of record in the Certificate Register without the
presentation or surrender of this Certificate or the making of any notation
hereon, except that with respect to Certificates registered on the Record Date
in the name of the nominee of the Clearing Agency (initially, such nominee to be
Cede & Co.), payments will be made by wire transfer in immediately available
funds to the account designated by such nominee. Except as otherwise provided
in the Trust Agreement and notwithstanding the above, the final distribution on
this Certificate will be made after due notice by the Certificate Trustee of the
pendency of such distribution and only upon presentation and surrender of this
Certificate at the office of the Paying Agent or the office or agency maintained
for that purpose by the Certificate Trustee in The City of New York.
Subject to and in accordance with the terms of the Trust Agreement,
the Originator has represented and warranted under the Trust Agreement that the
Trust constitutes a "special purpose trust" under Section 63010 of the
California Government Code and a "financing entity" under Section 840 of the PU
Code, and that the Certificates constitute "rate reduction bonds" under Section
840 of the PU Code and that the Holders of the Certificates are entitled to the
rights and benefits thereunder. Pursuant to Section 841(c) of the PU Code, the
Originator, on behalf of the State of California, has additionally pledged and
agreed with the Note Issuer, Trust and the Certificateholders that the State of
California will neither limit nor alter the FTA Charges, the
A-3
<PAGE>
Transition Property, or the Financing Order or Advice Letters relating thereto,
and all rights thereunder, until the Certificates, together with the interest
thereon, are fully paid and discharged, provided that nothing in the pledge and
agreement will preclude such limitation or alteration if and when adequate
provision is made by law for the protection of the Note Issuer, the Trust and
the Holders. In addition, the Originator has pledged and agreed with the Note
Issuer, the Trust and the Holders of the Certificates that the Originator will
not act in a manner inconsistent with the State Pledge and will not take any
action that would impair any rights of the Note Issuer, the Trust or the Holders
of the Certificates in the Notes, the Transition Property or the Certificates.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Certificate Trustee, by manual
signature, this Certificate shall not entitle the holder hereof to any benefit
under the Trust Agreement or any other Basic Document or be valid for any
purpose.
THIS TRUST CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE DOMESTIC LAW OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO
ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAW; PROVIDED,
--------
HOWEVER, THAT MATTERS REGARDING THE AUTHORITY OF THE ORIGINATOR AND THE VALIDITY
- -------
OF ACTIONS TAKEN BY THE ORIGINATOR HEREUNDER SHALL BE GOVERNED BY THE DOMESTIC
LAW OF THE STATE OF CALIFORNIA.
A-4
<PAGE>
Any reduction in the principal amount of any Certificate effected by
any distribution in respect of principal thereof shall be binding upon all
Holders of such Certificate and of any Certificate issued upon the registration
or transfer thereof or in lieu thereof, whether or not noted thereon.
It is expressly agreed and understood by the parties hereto that (a)
this Certificate is executed and delivered by Bankers Trust Company of
California, N.A., not individually or personally but solely as Certificate
Trustee on behalf of the Trust in the exercise of the powers and authority
concerned and vested in it, (b) the representations, undertakings and agreements
herein made by the Certificate Trustee on behalf of the Trust are made and
intended not as personal representations, undertakings and agreements by Bankers
Trust Company of California, N.A., but are made and intended for the purpose of
binding only the Trust, (c) nothing herein contained shall be construed as
creating any liability on Bankers Trust Company of California, N.A.,
individually or personally, to perform any covenant either expressed or implied
herein, except in its capacity as Certificate Trustee, all such liability being
expressly waived by all Persons, and (d) under no circumstances shall Bankers
Trust Company of California, N.A., be personally liable for the payment of any
indebtedness or expenses of the Trust, or be personally liable for the breach or
failure of any obligation, representation, warranty or covenant made or
undertaken by the Trust under this Trust Agreement.
A-5
<PAGE>
IN WITNESS WHEREOF, the Certificate Trustee has on behalf of the Trust
caused this Certificate to be duly executed.
CALIFORNIA INFRASTRUCTURE AND ECONOMIC
DEVELOPMENT BANK SPECIAL PURPOSE TRUST PG&E-1
By: BANKERS TRUST COMPANY OF CALIFORNIA,
N.A., not in its individual capacity but
solely as Certificate Trustee
By:__________________________________________
Name:
Title:
CERTIFICATE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
Dated: __________, 1997
This is one of the Certificates referred
to in the within-mentioned Trust Agreement.
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
not in its individual capacity but solely as
Certificate Trustee
By:________________________________________
Authorized Officer
A-6
<PAGE>
[FORM OF REVERSE OF CERTIFICATE]
The Certificates are limited in right of payment, all as more
specifically set forth on the face hereof and in the Trust Agreement. All
payments or distributions made to Certificateholders under the Trust Agreement
shall be made only from the Trust Property and only to the extent that the
Certificate Trustee shall have sufficient income or proceeds from the Trust
Property to make such payments in accordance with the terms of the Trust
Agreement. Each Holder of this Certificate, by its acceptance hereof, agrees
that it will look solely to the income and proceeds from the Trust Property to
the extent available for distribution to such Certificateholder as provided in
the Trust Agreement. This Certificate does not purport to summarize the Trust
Agreement and reference is made to the Trust Agreement for information with
respect to the interests, rights, benefits, obligations, proceeds, and duties
evidenced hereby. A copy of the Trust Agreement may be examined during normal
business hours at the principal office of the Certificate Trustee, and at such
other places, if any, designated by the Certificate Trustee, by any Holder upon
request.
The Trust Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights of the
Certificateholders under the Trust Agreement at any time by the Originator (with
the prior written approval of the Note Issuer) and the Certificate Trustee with
the consent of the Certificateholders holding Certificates evidencing fractional
undivided beneficial interests aggregating not less than a majority in interest
in each affected Series or Class of Certificates issued by the Trust. Any such
consent by the Certificateholder of this Certificate shall be conclusive and
binding on such Certificateholder and upon all future Certificateholders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange hereof or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Trust Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of the
Certificateholders of any of the Certificates.
As provided in the Trust Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registerable in the
Register upon surrender of this Certificate for registration of transfer at the
offices or agencies maintained by the Certificate Trustee in its capacity as
Registrar, or by any successor Registrar, in the Borough of Manhattan, The City
of New York, duly endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Certificate Trustee and the Registrar duly executed by
the Certificateholder hereof or such Certificateholder's attorney duly
authorized in writing, and thereupon one or more new Certificates of authorized
denominations evidencing the same aggregate fractional undivided beneficial
interest in the Underlying Note will be issued to the designated transferee or
transferees.
The Certificates are issuable only as registered Certificates without
coupons in Minimum Denominations of [] Original Principal Amount and integral
multiples thereof. As provided in the Trust Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of authorized denominations evidencing the same aggregate
fractional undivided beneficial interest in the Underlying Note, as requested by
the Certificateholder surrendering the same.
THE HOLDER OF THIS CERTIFICATE, BY PURCHASE OF THIS CERTIFICATE, WILL
BE DEEMED TO REPRESENT THAT SUCH PURCHASE WILL NOT RESULT IN A NON-EXEMPT
PROHIBITED TRANSACTION UNDER THE
A-7
<PAGE>
INTERNAL REVENUE CODE OF 1986, AS AMENDED, OR THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED, AND, IN EACH CASE, THE RULES AND REGULATIONS
THEREUNDER.
No service charge will be made for any such registration of transfer
or exchange, but the Certificate Trustee shall require payment of a sum
sufficient to cover any tax or governmental charge payable in connection
therewith.
The Certificate Trustee, the Registrar, and any agent of the
Certificate Trustee or the Registrar may treat the person in whose name this
Certificate is registered as the owner hereof for all purposes, and neither the
Certificate Trustee, the Registrar, nor any such agent shall be affected by any
notice to the contrary.
The obligations and responsibilities created by the Trust Agreement
and the Trust created thereby shall terminate with respect to the Certificates
upon the distribution to the Certificateholders of all amounts required to be
distributed to them pursuant to the Trust Agreement and the disposition of all
property held as part of the Trust Property, except certain indemnity
obligations of the Originator to the Certificate Trustee and the Delaware
Trustee.
A-8
<PAGE>
EXHIBIT 4.5
EXECUTION COPY
================================================================================
FIRST SUPPLEMENTAL AGREEMENT OF TRUST
by and among
California Infrastructure and Economic Development Bank,
as Originator,
Bankers Trust (Delaware),
as Delaware Trustee,
and
Bankers Trust Company of California, N.A.
as Certificate Trustee
Dated as of December 8, 1997
(Supplemental to the Amended and Restated Declaration and
Agreement of Trust
dated as of December 8, 1997)
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE XII
INITIAL ISSUANCE OF CERTIFICATES
Section 12.01. Definitions................................................ 2
Section 12.02. Authorization of Certificates, Classes A-1 through A-8..... 2
Section 12.03. Terms of Certificates Subject to Trust Agreement........... 3
Section 12.04. Execution in Counterparts.................................. 3
i
<PAGE>
First Supplemental Agreement of Trust
(Supplemental to the Amended and Restated Declaration and
Agreement of Trust dated as of December 8, 1997)
Authorizing the Issuance of
$2,901,000,000 Aggregate Principal Amount of
Rate Reduction Certificates, Classes A-1 through A-8
--------------------------------------------
The First Supplemental Agreement of Trust, dated as of December 8,
1997 (the "First Supplemental Trust Agreement"), is by and among Bankers Trust
(Delaware), as Delaware Trustee, Bankers Trust Company of California, N.A., as
Certificate Trustee, and the California Infrastructure and Economic Development
Bank, as Originator;
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Delaware Trustee and the Originator entered into a
Declaration and Agreement of Trust, dated as of November 7, 1997 (the
"Declaration and Agreement of Trust"), creating the California Infrastructure
and Economic Development Bank Special Purpose Trust PG&E-1, a not-for-profit
business trust organized under the laws of the State of Delaware (the "Trust");
and
WHEREAS, pursuant to Section 1(c) of the Declaration and Agreement of
Trust, the Delaware Trustee, the Originator and the Certificate Trustee entered
into an Amended and Restated Declaration and Agreement of Trust, dated as of
December 8, 1997 (the "Trust Agreement") in order to provide for the operation
of the Trust and the issuance of rate reduction certificates (the
"Certificates"); and
WHEREAS, pursuant to Section 8.01 of the Trust Agreement, the
Originator may, and the Certificate Trustee and the Delaware Trustee shall, at
any time from time to time enter into one or more agreements supplemental to the
Trust Agreement to provide for the issuance of the Certificates of any Class or
Series; and
WHEREAS, in order to finance the purchase of the Notes, consisting of
Classes A-1 through A-8 from the Note Issuer, the Trust shall issue, pursuant to
this First Supplemental Trust Agreement, Rate Reduction Certificates consisting
of Classes A-1 through A-8; and
WHEREAS, the Originator desires to establish the terms and conditions
for the issuance of such Certificates;
NOW THEREFORE, in consideration of the mutual agreements contained
herein and of other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto agree as follows:
<PAGE>
ARTICLE XII
INITIAL ISSUANCE OF CERTIFICATES
Section 12.01. Definitions. The terms defined in this Section shall,
-----------
for all purposes of this First Supplemental Trust Agreement and of any
certificate, opinion or other document herein mentioned, have the meanings
herein specified, to be equally applicable to both the singular and plural forms
of any of the terms herein defined. Terms defined in Section 1.01 of the Trust
Agreement not otherwise defined herein shall have the meanings specified
therein.
"First Supplement" means the First Supplemental Agreement of Trust dated
as of December 8, 1997.
"Interest Rate" shall have the meaning assigned in Section 12.02 hereof.
"Minimum Denomination" means $1,000, and integral multiples thereof.
"Payment Dates" means March 25, June 25, September 25 and December 26 of
each year or, if such date is not a Business Day, the immediately succeeding
Business Day, commencing on March 25, 1998.
Section 12.02. Authorization of Certificates, Classes A-1 through A-8.
------------------------------------------------------
The issuance by the Trust of the Certificates consisting of the Class A-1
Certificates, the Class A-2 Certificates, the Class A-3 Certificates, the Class
A-4 Certificates, the Class A-5 Certificates, the Class A-6 Certificates, the
Class A-7 Certificates and the Class A-8 Certificates is hereby authorized, each
such Class to be in an aggregate amount equal to the corresponding Class of
Notes as set forth in the Note Purchase Agreement. Each such Class of
Certificates shall be denominated as "California Infrastructure and Economic
Development Bank Special Purpose Trust PG&E-1 Class [_] Rate Reduction
Certificates" (the "Fixed Rate Certificates") and shall be substantially in the
form as provided in Section 3.01 and Exhibit A to the Trust Agreement.
For each Class of Certificates authorized to be issued hereby, there
is hereby created, pursuant to Section 4.01 of the Trust Agreement, an
individual account denominated as "Class [_] Certificate Account" (each, a
"Certificate Account"). Deposits into and distributions from each Certificate
Account shall be made as provided in Article IV of the Trust Agreement.
2
<PAGE>
Set forth below for each class of Certificates are the Scheduled Final
Distribution Date and the Termination Date as well as the Interest Rate payable
with respect to each such Class of Certificates:
<TABLE>
<CAPTION>
Initial
Principal Scheduled Final Interest
Class Amount Distribution Date Termination Date Rate
----- ------ ----------------- ---------------- ----
<S> <C> <C> <C> <C>
A-1 $125,000,000 September 25, 1998 September 25, 2000 5.94%
A-2 265,000,000 June 25, 1999 June 25, 2001 6.01
A-3 280,000,000 June 25, 2000 June 25, 2002 6.15
A-4 300,000,000 June 25, 2001 June 25, 2003 6.16
A-5 290,000,000 June 25, 2002 June 25, 2004 6.25
A-6 375,000,000 September 25, 2003 September 25, 2005 6.32
A-7 866,000,000 September 25, 2006 September 25, 2008 6.42
A-8 400,000,000 December 26, 2007 December 26, 2009 6.48
</TABLE>
Section 12.03. Terms of Certificates Subject to Trust Agreement. Except
------------------------------------------------
as expressly provided in this First Supplemental Trust Agreement, every term and
condition contained in the Trust Agreement shall apply to this First
Supplemental Trust Agreement and to the Certificates with the same force and
effect as if the same were herein set forth in full, with such omissions,
variations and modifications thereof as may be appropriate to make the same
conform to this First Supplemental Trust Agreement.
This First Supplemental Trust Agreement and all the terms and provisions
contained herein shall form part of the Trust Agreement and shall have the same
force and effect as if set forth in the Trust Agreement. The Trust Agreement is
hereby ratified and confirmed and shall continue in full force and effect in
accordance with the terms and provisions thereof, as supplemented and amended
hereby.
Section 12.04. Execution in Counterparts. This First Supplemental
--------------------------
Trust Agreement may be executed in several counterparts, each of which shall be
deemed an original and all of which shall constitute but one and the same
instrument.
3
<PAGE>
IN WITNESS WHEREOF, the Originator, the Delaware Trustee and the
Certificate Trustee have caused this First Supplemental Trust Agreement to be
duly executed by duly authorized officers, all as of the day and year first
above written.
CALIFORNIA INFRASTRUCTURE AND
ECONOMIC DEVELOPMENT BANK,
as Originator
By:
--------------------------------
Name:
Title:
BANKER TRUST (DELAWARE),
as Delaware Trustee
By: /s/ James H. Stallkamp
--------------------------------
Name: James H. Stallkamp
Title: President
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A.
as Certificate Trustee
By:
--------------------------------
Name:
Title:
4
<PAGE>
IN WITNESS WHEREOF, the Originator, the Delaware Trustee and the
Certificate Trustee have caused this First Supplemental Trust Agreement to be
duly executed by duly authorized officers, all as of the day and year first
above written.
CALIFORNIA INFRASTRUCTURE AND
ECONOMIC DEVELOPMENT BANK,
as Originator
By: /s/ Christopher S. Holben
--------------------------------
Name: Christopher S. Holben
Title: Chair
BANKER TRUST (DELAWARE),
as Delaware Trustee
By:
--------------------------------
Name:
Title:
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A.
as Certificate Trustee
By: /s/ Linda A. Rakolta
--------------------------------
Name: Linda A. Rakolta
Title: Vice President
S-1
<PAGE>
EXHIBIT 4.6
FORM OF CERTIFICATE
REGISTERED REGISTERED
NO . $.
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
SPECIAL PURPOSE TRUST PG&E-1
SERIES 199[]-[]
CLASS .
RATE REDUCTION CERTIFICATE
<TABLE>
<CAPTION>
SCHEDULED
FINAL
INTEREST DISTRIBUTION TERMINATION
RATE DATE DATE CUSIP
---------- ------------ ----------- -----
<S> <C> <C> <C>
</TABLE>
REGISTERED OWNER: Cede & Co.
PRINCIPAL AMOUNT:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUST
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
This Certificate evidences a fractional undivided beneficial interest
in an underlying note of a corresponding class and series issued by PG&E Funding
LLC and the proceeds thereof, held by a trust, as more fully described herein.
This Certificate does not represent an interest in or obligation of
the State of California, the California Infrastructure and Economic Development
Bank, a public body established within the
A-1
<PAGE>
state government of the State of California(the "Originator"), any other
governmental agency or instrumentality or Pacific Gas & Electric Company, a
California corporation ("PG&E"), or any of its affiliates. None of the
Certificates, the Underlying Note or the underlying Transition Property (as
defined in the Trust Agreement) will be guaranteed or insured by the State of
California, the Originator, the Trust or any other governmental agency or
instrumentality or by PG&E or its affiliates.
Neither the full faith and credit nor the taxing power of the State of
California, the Originator or any other governmental agency or instrumentality
is pledged to the payment of the principal of, purchase price of, or interest
on, this Certificate or the Underlying Note, or to the payments in respect of
the Transition Property, nor is the State of California, the Originator or any
other governmental agency or instrumentality in any manner obligated to make any
appropriation for the payment thereof.
THIS CERTIFIES THAT CEDE & CO., as nominee for The Depository Trust
Company, for value received, is the registered owner of a Principal Amount
(stated above) of nonassessable, fully-paid, fractional undivided beneficial
interest in certain property held by the California Infrastructure and Economic
Development Bank Special Purpose Trust PG&E-1 (the "Trust"). The Trust is
created pursuant to, and this Certificate is issued under and is subject to the
terms, provisions, and conditions of, an Amended and Restated Declaration and
Agreement of Trust, as supplemented by a First Supplemental Agreement of Trust,
each dated as of December 8, 1997 (collectively, the "Trust Agreement"), by and
among Bankers Trust (Delaware), as Delaware Trustee (the "Delaware Trustee"),
Bankers Trust Company of California, N.A., as Certificate Trustee (the
"Certificate Trustee"), and the Originator, a summary of certain of the
pertinent provisions of which is set forth below. This Certificate is one of
the duly authorized class of Certificates designated as "California
Infrastructure and Economic Development Bank Special Purpose Trust PG&E-1 Class
. Rate Reduction Certificates, Series 199[]-[]" (herein called the "Class .
Certificates"). The Class . Certificates are one of a series of classes of
Certificates issued under the Trust Agreement (such Class . Certificates,
together with other Certificates heretofore or hereafter issued under the Trust
Agreement being herein called the "Certificates"). The holder of this
Certificate, by virtue of its acceptance hereof, assents and agrees to be bound
by the terms of the Trust Agreement. This Class . Certificate represents a
fractional undivided beneficial interest in the note of a related class (the
"Underlying Note") issued by PG&E Funding LLC, as Note Issuer, together with the
proceeds of the Underlying Note. The Underlying Note is one of a series of
notes secured by a security interest in the property right created under the PU
Code, pursuant to a Financing Order (Decision 97-09-.) issued by the CPUC on
September 3, 1997, and Advice Letters issued pursuant thereto, representing the
irrevocable right of PG&E or its assignee to be paid the amount that is
determined in the Financing Order through the collection of certain
nonbypassable charges, as adjusted from time to time, on residential and small
commercial customers within PG&E's historic service territory, together with
certain related collateral, all as more fully described in the Note Indenture.
To the extent not otherwise defined herein, the capitalized terms used
herein have the meanings assigned to them in the Trust Agreement.
A-2
<PAGE>
As provided in the Trust Agreement, additional Certificates may be
issued thereunder from time to time pursuant to trust supplements in one or more
series or classes, in various principal amounts equal to the corresponding
series or class of underlying notes, may bear interest at different rates and
may otherwise vary as provided in the Trust Agreement. The aggregate principal
amount of Certificates equals the aggregate amount of the corresponding series
or class of underlying notes, and all Certificates of a Series issued and to be
issued under the Trust Agreement are and will be equally secured by the pledge
and covenants made therein, except as otherwise expressly provided or permitted
in the Trust Agreement.
Subject to and in accordance with the terms of the Trust Agreement,
there will be distributed on each March 25, June 25, September 25 and December
26 of each year or, if any such day is not a Business Day, the next succeeding
Business Day (each, a "Distribution Date"), commencing on March 25, 1998 to the
person in whose name this Certificate is registered at the close of business on
the last Business Day immediately preceding the related Distribution Date or, if
Definitive Certificates are issued, the last day of the immediately preceding
calendar month (each, a "Record Date"), such Holder's pro rata interest in the
payments made on the Underlying Note due on the related Payment Date, the
receipt of which has been confirmed by the Certificate Trustee. Subject to and
in accordance with the terms of the Trust Agreement, in the event that a Special
Payment on the Underlying Note is received by the Certificate Trustee, from
funds then available to the Certificate Trustee, there will be distributed on
the applicable Special Payment Date, to the Person in whose name this
Certificate is registered on the Record Date preceding the Special Payment Date,
as applicable, such Holder's pro rata share of such amount. The Special Payment
Date will be determined as provided in the Trust Agreement. The Certificate
Trustee will mail notice of each Special Payment and the related Special Payment
Date to the Certificateholder of this Certificate as provided in the Trust
Agreement.
Distributions on this Certificate will be made as provided in the
Trust Agreement by the Certificate Trustee by wire transfer or check mailed to
the Certificateholder of record in the Certificate Register without the
presentation or surrender of this Certificate or the making of any notation
hereon, except that with respect to Certificates registered on the Record Date
in the name of the nominee of the Clearing Agency (initially, such nominee to be
Cede & Co.), payments will be made by wire transfer in immediately available
funds to the account designated by such nominee. Except as otherwise provided
in the Trust Agreement and notwithstanding the above, the final distribution on
this Certificate will be made after due notice by the Certificate Trustee of the
pendency of such distribution and only upon presentation and surrender of this
Certificate at the office of the Paying Agent or the office or agency maintained
for that purpose by the Certificate Trustee in The City of New York.
Subject to and in accordance with the terms of the Trust Agreement,
the Originator has represented and warranted under the Trust Agreement that the
Trust constitutes a "special purpose trust" under Section 63010 of the
California Government Code and a "financing entity" under Section 840 of the PU
Code, and that the Certificates constitute "rate reduction bonds" under Section
840 of the PU Code and that the Holders of the Certificates are entitled to the
rights and benefits thereunder. Pursuant to Section 841(c) of the PU Code, the
Originator, on behalf of the State of California, has additionally pledged and
agreed with the Note Issuer, Trust and the Certificateholders that the State of
California will neither limit nor alter the FTA Charges, the
A-3
<PAGE>
Transition Property, or the Financing Order or Advice Letters relating thereto,
and all rights thereunder, until the Certificates, together with the interest
thereon, are fully paid and discharged, provided that nothing in the pledge and
agreement will preclude such limitation or alteration if and when adequate
provision is made by law for the protection of the Note Issuer, the Trust and
the Holders. In addition, the Originator has pledged and agreed with the Note
Issuer, the Trust and the Holders of the Certificates that the Originator will
not act in a manner inconsistent with the State Pledge and will not take any
action that would impair any rights of the Note Issuer, the Trust or the Holders
of the Certificates in the Notes, the Transition Property or the Certificates.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Certificate Trustee, by manual
signature, this Certificate shall not entitle the holder hereof to any benefit
under the Trust Agreement or any other Basic Document or be valid for any
purpose.
THIS TRUST CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE DOMESTIC LAW OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO
ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAW; PROVIDED,
--------
HOWEVER, THAT MATTERS REGARDING THE AUTHORITY OF THE ORIGINATOR AND THE VALIDITY
- -------
OF ACTIONS TAKEN BY THE ORIGINATOR HEREUNDER SHALL BE GOVERNED BY THE DOMESTIC
LAW OF THE STATE OF CALIFORNIA.
A-4
<PAGE>
Any reduction in the principal amount of any Certificate effected by
any distribution in respect of principal thereof shall be binding upon all
Holders of such Certificate and of any Certificate issued upon the registration
or transfer thereof or in lieu thereof, whether or not noted thereon.
It is expressly agreed and understood by the parties hereto that (a)
this Certificate is executed and delivered by Bankers Trust Company of
California, N.A., not individually or personally but solely as Certificate
Trustee on behalf of the Trust in the exercise of the powers and authority
concerned and vested in it, (b) the representations, undertakings and agreements
herein made by the Certificate Trustee on behalf of the Trust are made and
intended not as personal representations, undertakings and agreements by Bankers
Trust Company of California, N.A., but are made and intended for the purpose of
binding only the Trust, (c) nothing herein contained shall be construed as
creating any liability on Bankers Trust Company of California, N.A.,
individually or personally, to perform any covenant either expressed or implied
herein, except in its capacity as Certificate Trustee, all such liability being
expressly waived by all Persons, and (d) under no circumstances shall Bankers
Trust Company of California, N.A., be personally liable for the payment of any
indebtedness or expenses of the Trust, or be personally liable for the breach or
failure of any obligation, representation, warranty or covenant made or
undertaken by the Trust under this Trust Agreement.
A-5
<PAGE>
IN WITNESS WHEREOF, the Certificate Trustee has on behalf of the Trust
caused this Certificate to be duly executed.
CALIFORNIA INFRASTRUCTURE AND ECONOMIC
DEVELOPMENT BANK SPECIAL PURPOSE TRUST PG&E-1
By: BANKERS TRUST COMPANY OF CALIFORNIA,
N.A., not in its individual capacity but
solely as Certificate Trustee
By:__________________________________________
Name:
Title:
CERTIFICATE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
Dated: __________, 1997
This is one of the Certificates referred
to in the within-mentioned Trust Agreement.
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
not in its individual capacity but solely as
Certificate Trustee
By:________________________________________
Authorized Officer
A-6
<PAGE>
[FORM OF REVERSE OF CERTIFICATE]
The Certificates are limited in right of payment, all as more
specifically set forth on the face hereof and in the Trust Agreement. All
payments or distributions made to Certificateholders under the Trust Agreement
shall be made only from the Trust Property and only to the extent that the
Certificate Trustee shall have sufficient income or proceeds from the Trust
Property to make such payments in accordance with the terms of the Trust
Agreement. Each Holder of this Certificate, by its acceptance hereof, agrees
that it will look solely to the income and proceeds from the Trust Property to
the extent available for distribution to such Certificateholder as provided in
the Trust Agreement. This Certificate does not purport to summarize the Trust
Agreement and reference is made to the Trust Agreement for information with
respect to the interests, rights, benefits, obligations, proceeds, and duties
evidenced hereby. A copy of the Trust Agreement may be examined during normal
business hours at the principal office of the Certificate Trustee, and at such
other places, if any, designated by the Certificate Trustee, by any Holder upon
request.
The Trust Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights of the
Certificateholders under the Trust Agreement at any time by the Originator (with
the prior written approval of the Note Issuer) and the Certificate Trustee with
the consent of the Certificateholders holding Certificates evidencing fractional
undivided beneficial interests aggregating not less than a majority in interest
in each affected Series or Class of Certificates issued by the Trust. Any such
consent by the Certificateholder of this Certificate shall be conclusive and
binding on such Certificateholder and upon all future Certificateholders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange hereof or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Trust Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of the
Certificateholders of any of the Certificates.
As provided in the Trust Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registerable in the
Register upon surrender of this Certificate for registration of transfer at the
offices or agencies maintained by the Certificate Trustee in its capacity as
Registrar, or by any successor Registrar, in the Borough of Manhattan, The City
of New York, duly endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Certificate Trustee and the Registrar duly executed by
the Certificateholder hereof or such Certificateholder's attorney duly
authorized in writing, and thereupon one or more new Certificates of authorized
denominations evidencing the same aggregate fractional undivided beneficial
interest in the Underlying Note will be issued to the designated transferee or
transferees.
The Certificates are issuable only as registered Certificates without
coupons in Minimum Denominations of [] Original Principal Amount and integral
multiples thereof. As provided in the Trust Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of authorized denominations evidencing the same aggregate
fractional undivided beneficial interest in the Underlying Note, as requested by
the Certificateholder surrendering the same.
THE HOLDER OF THIS CERTIFICATE, BY PURCHASE OF THIS CERTIFICATE, WILL
BE DEEMED TO REPRESENT THAT SUCH PURCHASE WILL NOT RESULT IN A NON-EXEMPT
PROHIBITED TRANSACTION UNDER THE
A-7
<PAGE>
INTERNAL REVENUE CODE OF 1986, AS AMENDED, OR THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED, AND, IN EACH CASE, THE RULES AND REGULATIONS
THEREUNDER.
No service charge will be made for any such registration of transfer
or exchange, but the Certificate Trustee shall require payment of a sum
sufficient to cover any tax or governmental charge payable in connection
therewith.
The Certificate Trustee, the Registrar, and any agent of the
Certificate Trustee or the Registrar may treat the person in whose name this
Certificate is registered as the owner hereof for all purposes, and neither the
Certificate Trustee, the Registrar, nor any such agent shall be affected by any
notice to the contrary.
The obligations and responsibilities created by the Trust Agreement
and the Trust created thereby shall terminate with respect to the Certificates
upon the distribution to the Certificateholders of all amounts required to be
distributed to them pursuant to the Trust Agreement and the disposition of all
property held as part of the Trust Property, except certain indemnity
obligations of the Originator to the Certificate Trustee and the Delaware
Trustee.
A-8
<PAGE>
EXHIBIT 10.1
EXECUTION COPY
--------------------------------------------------------------
TRANSITION PROPERTY PURCHASE AND SALE AGREEMENT
between
PG&E FUNDING LLC
Note Issuer
and
PACIFIC GAS AND ELECTRIC COMPANY
Seller
Dated as of December 8, 1997
--------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I Definitions
SECTION 1.01. Definitions...................................... 1
SECTION 1.02. Other Definitional Provisions.................... 7
ARTICLE II Conveyance of Transition Property
SECTION 2.01. Conveyance of Transition Property................ 8
ARTICLE III Representations and Warranties of Seller
SECTION 3.01. Organization and Good Standing................... 10
SECTION 3.02. Due Qualification................................ 10
SECTION 3.03. Power and Authority.............................. 11
SECTION 3.04. Binding Obligation............................... 11
SECTION 3.05. No Violation..................................... 12
SECTION 3.06. No Proceedings................................... 13
SECTION 3.07. Approvals........................................ 13
SECTION 3.08. The Transition Property.......................... 14
SECTION 3.09. Outstanding Indenture............................ 19
ARTICLE IV Covenants of the Seller
SECTION 4.01. Corporate Existence.............................. 19
SECTION 4.02. No Liens......................................... 20
SECTION 4.03. Delivery of Collections.......................... 20
SECTION 4.04. Notice of Liens.................................. 21
SECTION 4.05. Compliance with Law.............................. 21
SECTION 4.06. Covenants Related to Transition Property......... 21
SECTION 4.07. Protection of Title.............................. 23
SECTION 4.08. Nonpetition Covenants............................ 24
SECTION 4.09. Taxes............................................ 25
ARTICLE V The Seller
SECTION 5.01. Liability of Seller; Indemnities................. 26
SECTION 5.02. Merger or Consolidation of, or Assumption of
the Obligations of, Seller....................... 31
SECTION 5.03. Limitation on Liability of Seller and Others..... 32
ARTICLE VI Miscellaneous Provisions
SECTION 6.01. Amendment........................................ 33
SECTION 6.02. Notices.......................................... 35
SECTION 6.03. Assignment....................................... 36
SECTION 6.04. Limitations on Rights of Others.................. 37
SECTION 6.05. Severability..................................... 37
SECTION 6.06. Separate Counterparts............................ 37
SECTION 6.07. Headings......................................... 38
SECTION 6.08. Governing Law.................................... 38
SECTION 6.09. Assignment to Note Trustee....................... 38
SECTION 6.10. Limitation of Liability.......................... 38
</TABLE>
<PAGE>
TRANSITION PROPERTY PURCHASE AND SALE AGREEMENT dated as of
December 8, 1997, between PG&E FUNDING LLC, a Delaware limited
liability company (the "Note Issuer"), and PACIFIC GAS AND
ELECTRIC COMPANY, a California corporation, as Seller (the
"Seller").
WHEREAS the Note Issuer desires to purchase the Transition Property
created pursuant to the PU Code, the Financing Order and the Issuance Advice
Letter; and
WHEREAS the Seller is willing to sell such Transition Property to the
Note Issuer.
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. Whenever used in this Agreement, the
------------
following words and phrases shall have the following meanings:
"Agreement" means this Transition Property Purchase and Sale
Agreement, as the same may be amended and supplemented from time to time.
<PAGE>
2
"Certificates" means the Series of Certificates issued under the Trust
Agreement whose Series Issuance Date is the date of this Agreement.
"Certificate Trustee" means the Person acting as certificate trustee
under the Trust Agreement.
"CPUC" means the California Public Utilities Commission or any
successor in interest.
"CPUC Regulations" has the meaning assigned to that term in the
Servicing Agreement.
"Customers" means existing and future Residential Customers and Small
Commercial Customers.
"Date of Breach" means, with respect to the repurchase obligation
specified in Section 5.01(b), the date of breach of a representation and
warranty that triggers such repurchase obligation.
"Delaware Trustee" means the Person acting as Delaware trustee under
the Trust Agreement.
"Financing Order" means the order of the CPUC, Decision 97-09-055,
issued as of as of September 3, 1997, which became effective on October 8, 1997.
"FTA Charges" means the charges permitted to be levied upon the
Customers pursuant to the Financing Order.
"IED Bank Issuance Resolution" means Resolution No. B97-18 adopted by
the Infrastructure Bank on
<PAGE>
3
November 10, 1997.
"Indenture" means the Indenture dated as of December 8, 1997, between
the Note Issuer and the Note Trustee, as the same may be amended and
supplemented from time to time.
"Infrastructure Bank" means the California Infrastructure and Economic
Development Bank or any successor in interest.
"Insolvency Event" means, with respect to a specified Person, (a) the
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property in an
involuntary case under any applicable Federal or state bankruptcy, insolvency or
other similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official for
such Person or for any substantial part of its property, or ordering the
winding-up or liquidation of such Person's affairs, and such decree or order
shall remain unstayed and in effect for a period of 60 consecutive days; or (b)
the commencement by such Person of a voluntary case under any applicable Federal
or state bankruptcy, insolvency or other similar law now or hereafter in effect,
or the consent by such Person to the entry of an order for relief
<PAGE>
4
in an involuntary case under any such law, or the consent by such Person to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for such Person or for any
substantial part of its property, or the making by such Person of any general
assignment for the benefit of creditors, or the failure by such Person generally
to pay its debts as such debts become due, or the taking of action by such
Person in furtherance of any of the foregoing.
"Issuance Advice Letter" means Advice 1715-E, dated December 1, 1997,
filed with the CPUC by the Seller pursuant to the Financing Order.
"Lien" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind.
"Losses" has the meaning assigned to that term in Section 5.01(e).
"Note Issuer" has the meaning set forth in the heading of this
Agreement.
"Notes" means the Series of Notes issued under the Indenture whose
Series Issuance Date is the date of this Agreement.
"Note Trustee" means the Person acting as trustee under the Indenture.
"Officer's Certificate" means a certificate signed
<PAGE>
5
by the chairman of the board, the president, the vice chairman of the board, any
vice president, the treasurer, any assistant treasurer, the secretary or any
assistant secretary of the Seller.
"Opinion of Counsel" means one or more written opinions of counsel who
may be an employee of or counsel to the party providing such opinion of counsel,
which counsel shall be acceptable to the party receiving such opinion of
counsel.
"PU Code" means the California Public Utilities Code, as amended from
time to time.
"Repurchase Date" means the date that is five Business Days after the
date that is (i) if the terms of Section 5.01(b)(i)(A) and Section
5.01(b)(i)(B)(ii) are applicable, two Business Days after the Date of Breach if
the Seller fails to make the deposit required by such Section or 90 days after
the Date of Breach if the Seller makes the deposit required by such Section,
(ii) if the terms of Section 5.01(b)(ii) are applicable, 30 days after the
Seller receives written notice from the Note Trustee or the Certificate Trustee
or otherwise becomes aware of such breach and (iii) if the terms of Section
5.01(b)(i)(A) and Section 5.01(b)(i)(B)(i) are applicable, 90 days after the
Date of Breach.
<PAGE>
6
"Repurchase Price" has the meaning specified in Section 5.01(b)(i).
"Residential Customers" means the existing and future residential
consumers of electricity, as identified in the Financing Order, located in the
service territory in which the Seller provided electricity services as of
December 20, 1995.
"Seller" means Pacific Gas and Electric Company and its successors in
interest to the extent permitted hereunder.
"Seller Mortgage" has the meaning set forth in Section 3.05.
"Servicer Default" means an event specified in Section 7.01 of the
Servicing Agreement.
"Servicing Agreement" means that certain Transition Property Servicing
Agreement dated as of the date hereof between Pacific Gas and Electric Company,
as Servicer, and the Note Issuer, as amended and supplemented from time to time.
"Small Commercial Customers" means the existing and future small
commercial consumers of electricity, as identified in the Financing Order,
located in the service territory in which the Seller provided electricity
services as of December 20, 1995.
<PAGE>
7
"Statute" means Chapter 854, California Statutes of 1996 and Chapter
275, California Statutes of 1997, as further amended from time to time.
"STO" means the California State Treasurer's Office, as agent for sale
for the Certificates.
"Transition Costs" has the meaning assigned to that term in Section
840(f) of the PU Code.
"Transition Property" means the "Transition Property" contemplated by
the Financing Order and specifically described in the Issuance Advice Letter.
"Trust Agreement" means the Amended and Restated Declaration and
Agreement of Trust dated as of December 8, 1997, among the Infrastructure Bank,
the Delaware Trustee and the Certificate Trustee, as the same may be further
amended and supplemented from time to time.
SECTION 1.02. Other Definitional Provisions.
------------------------------
(a) Capitalized terms used herein and not otherwise defined herein
have the meanings assigned to them in the Indenture.
(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
<PAGE>
8
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 and Exhibit references contained in this Agreement are
references to Sections, Schedules and Exhibits 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 and to the masculine as well
as to the feminine and neuter forms of such terms.
ARTICLE II
Conveyance of Transition Property
---------------------------------
SECTION 2.01. Conveyance of Transition Property. In consideration of
----------------------------------
the Note Issuer's delivery to or upon the order of the Seller of $2,891,200,000,
the Seller does hereby irrevocably sell, transfer, assign, set over and
otherwise convey to the Note Issuer, without recourse (subject to the
obligations herein), all right, title and interest of the Seller in and to the
Transition Property (such sale, transfer, assignment, set over and conveyance of
the Transition Property includes, to the fullest extent permitted by the
Statute, the assignment of all revenues, collections, claims, rights, payments,
money or proceeds of
<PAGE>
9
or arising from the FTA Charges pursuant to the Financing Order and the Issuance
Advice Letter). Such sale, transfer, assignment, set over and conveyance is
hereby expressly stated to be a sale and, pursuant to Section 844(a) of the PU
Code, shall be treated as an absolute transfer of all of the Seller's right,
title and interest (as in a true sale), and not as a pledge or other financing,
of the Transition Property. This is the statement referred to in Section 844(a)
of the PU Code. If such sale, transfer, assignment, set over and conveyance is
held not to be a true sale as contemplated by Section 844(a) of the PU Code,
then such sale, transfer, assignment, set over and conveyance shall be treated
as a pledge of the Transition Property and the Seller shall be deemed to have
granted a security interest to the Note Issuer in the Transition Property. The
Seller takes the position that it has no rights in the Transition Property to
which such a security interest could attach because it has sold all rights in
the Transition Property to the Note Issuer pursuant to Section 844(a) of the PU
Code.
ARTICLE III
Representations and Warranties of Seller
----------------------------------------
The Seller makes the following representations and warranties, as of
the Closing Date, on which the Note Issuer
<PAGE>
10
has relied in acquiring the Transition Property. The representations and
warranties shall survive the sale of the Transition Property to the Note Issuer
and the pledge thereof to the Note Trustee pursuant to the Indenture.
SECTION 3.01. Organization and Good Standing. The Seller is duly
-------------------------------
organized and validly existing as a corporation in good standing under the laws
of the State of California, with the 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 had at all relevant times, and has, the
requisite power, authority and legal right to own the Transition Property.
SECTION 3.02. Due Qualification. The Seller is duly qualified to do
------------------
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions in which the ownership or
lease of property or the conduct of its business 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 Seller's
business, operations, assets, revenues, properties or prospects).
SECTION 3.03. Power and Authority. The Seller
--------------------
<PAGE>
11
has the requisite power and authority to execute and deliver this Agreement and
to carry out its terms; the Seller has full power and authority to sell and
assign the Transition Property to be sold and assigned to the Note Issuer and
the Seller has duly authorized such sale and assignment to the Note Issuer by
all necessary corporate action; and the execution, delivery and performance of
this Agreement has been duly authorized by the Seller by all necessary corporate
action.
SECTION 3.04. Binding Obligation. This Agreement constitutes a
-------------------
legal, valid and binding obligation of the Seller enforceable in accordance with
its terms, subject to applicable insolvency, reorganization, moratorium,
fraudulent transfer and other similar laws relating to or affecting creditors'
rights generally from time to time in effect and to general principles of equity
(including, without limitation, concepts of materiality, reasonableness, good
faith and fair dealing), regardless of whether considered in a proceeding in
equity or at law.
SECTION 3.05. No Violation. After giving effect to the release of
-------------
the lien of the First and Refunding Mortgage dated as of December 1, 1920,
executed by Pacific Gas and Electric Company, as supplemented and amended to the
date hereof, in favor of BNY Western Trust Company,
<PAGE>
12
successor by acquisition to Wells Fargo Bank, N.A., successor by merger to First
Interstate Bank of California, as trustee (the "Seller Mortgage"), on the
Transition Property, 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 articles of incorporation
or bylaws of the Seller, or any indenture, agreement or other instrument to
which the Seller is a party or by which it shall be 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; nor violate any law
or any order, rule or regulation applicable to the Seller of any court or of any
Federal or state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Seller or its properties.
SECTION 3.06. No Proceedings. Except as set forth on Schedule 3.06,
---------------
there are no proceedings or investigations pending or, to the Seller's
knowledge, threatened, before any court, Federal or state regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over the Seller or its
<PAGE>
13
properties involving or relating to the Seller or the Note Issuer or, to the
Seller's knowledge, any other Person: (i) asserting the invalidity of this
Agreement, the Indenture, the Trust Agreement or any of the other Basic
Documents or the Notes or the Certificates, (ii) seeking to prevent the issuance
of the Notes or the Certificates or the consummation of any of the transactions
contemplated by this Agreement, the Indenture, the Trust Agreement or any of the
other Basic Documents, (iii) seeking any determination or ruling that might
materially and adversely affect the performance by the Seller of its obligations
under, or the validity or enforceability of, this Agreement, the Indenture, the
Trust Agreement, any of the other Basic Documents or the Notes or the
Certificates or (iv) which might adversely affect the Federal or state income
tax attributes of the Notes or the Certificates.
SECTION 3.07. Approvals. No approval, authorization, consent, order
----------
or other action of, or filing with, any court, Federal or state regulatory body,
administrative agency or other governmental instrumentality is required in
connection with the execution and delivery by the Seller of this Agreement, the
performance by the Seller of the transactions contemplated hereby or the
fulfillment by the Seller of the terms hereof, except those that have
<PAGE>
14
been obtained or made and those that the Seller, in its capacity as Servicer
under the Servicing Agreement, is required to make in the future pursuant to
Article IV of the Servicing Agreement.
SECTION 3.08. The Transition Property.
-----------------------
(a) Information. At the Closing Date, all information provided by the
-----------
Seller to the Note Issuer with respect to the Transition Property (including the
Expected Amortization Schedule, the Financing Order and the Issuance Advice
Letter) is correct in all material respects.
(b) Title. It is the intention of the parties hereto that the
------
transfer and assignment herein contemplated constitute a sale of the Transition
Property from the Seller to the Note Issuer and that the beneficial interest in
and title to the Transition Property not be part of the debtor's estate in the
event of the filing of a bankruptcy petition by or against the Seller under any
bankruptcy law. No portion of the Transition Property has been sold,
transferred, assigned or pledged by the Seller to any Person other than the Note
Issuer. At the Closing Date immediately prior to the sale hereunder and after
giving effect to the release of the lien of the Seller Mortgage, the Seller owns
the Transition Property, free and clear of all Liens and rights of others, no
offsets, defenses or counterclaims
<PAGE>
15
exist or have been asserted with respect thereto and Pacific Gas and Electric
Company, in its capacity as Seller or Servicer, will not at any time assert any
Lien against or with respect to any of the Transition Property.
(c) Transfer Filings. At the Closing Date, the Transition Property
-----------------
has been validly transferred and sold to the Note Issuer, the Note Issuer shall
own all such Transition Property, free and clear of all Liens and rights of
others, except for any statutory lien in favor of the holders of the rate
reduction bonds issued pursuant to the Financing Order and the trustee or the
representative for such holders pursuant to Section 843(g) of the PU Code; and
all filings to be made by the Seller (including filings with the CPUC under the
PU Code) necessary in any jurisdiction to give the Note Issuer a first priority
perfected ownership or security interest in the Transition Property have been
made (subject to any statutory lien in favor of the holders of the rate
reduction bonds issued pursuant to the Financing Order and the trustee or the
representative for such holders pursuant to Section 843(g) of the PU Code). No
further action, other than any filings required by Sections 9-403(2)-(3), 9-306,
9-402(7) and 9-103 of the Uniform Commercial Code and Sections 843 and 844 of
the PU Code, is required to maintain such first priority
<PAGE>
16
perfected ownership or security interest (subject to any statutory lien in favor
of the holders of the rate reduction bonds issued pursuant to the Financing
Order and the trustee or the representative for such holders pursuant to Section
843(g) of the PU Code).
(d) Financing Order and Issuance Advice Letters; Other Approvals. At
-------------------------------------------------------------
the Closing Date, under the laws of the State of California and the United
States in effect on the Closing Date, (i) the Financing Order and the Issuance
Advice Letter pursuant to which the Transition Property has been created have
been duly authorized and adopted by the CPUC and are in full force and effect;
(ii) as of the issuance of the Certificates, the Certificates are entitled to
the protections provided in the first sentence and the penultimate sentence of
Section 841(c) and the first sentence of Section 842(d) of the PU Code and,
accordingly, the Financing Order and the Issuance Advice Letter are not
revocable by the CPUC; (iii) none of the State of California, the CPUC or the
Infrastructure Bank may revoke, limit, alter or modify the Transition Property,
the Financing Order or the Advice Letters relating thereto, and all rights
thereunder, in a manner adversely affecting the Noteholders or the
Certificateholders, other than a temporary impairment described in the following
sentence,
<PAGE>
17
until the Certificates, together with interest thereon, are fully discharged,
unless adequate provision shall be made by law for the protection of the Note
Issuer, the Trust and the Certificateholders; (iv) the process by which the
Financing Order and the IED Bank Issuance Resolution were adopted and approved
and the Issuance Advice Letter was filed, and the Financing Order, the Issuance
Advice Letter and the IED Bank Issuance Resolution themselves, comply with all
applicable laws, rules and regulations, and, prior to the discharge in full of
the Certificates unless adequate provision shall be made by law for the
protection of the Note Issuer, the Trust and the Certificateholders, no court or
other administrative body can order the revocation, alteration, limitation or
other impairment of the Financing Order, the Issuance Advice Letter, the IED
Bank Issuance Resolution, the Transition Property or the FTA Charges or any
rights arising under any of them or enjoin the performance of any obligations
thereunder; and (v) no other approval, authorization, consent, order or other
action of, or filing with, any court, Federal or state regulatory body,
administrative agency or other governmental instrumentality is required in
connection with the creation of the Transition Property, except those that have
been obtained or made. For purposes of clause (d)(iii) above, a "temporary
impairment" shall
<PAGE>
18
mean a breach by the State of California of its pledge contained in Section
841(c) of the PU Code effecting a temporary impairment of the
Certificateholders' rights which under current law would be permitted if it can
be shown to be necessary to advance an important public interest; such a public
interest may arise in connection with a great public calamity, which might, for
example, include economic upheaval or natural disasters.
(e) Assumptions. At the Closing Date, the assumptions used in
------------
calculating the FTA Charges related to the Transition Property are reasonable
and made in good faith.
(f) Creation of Transition Property. Upon the effectiveness of the
--------------------------------
Issuance Advice Letter: (i) all of the Transition Property constitutes a current
property right; (ii) the Transition Property includes, without limitation, (A)
the right, title and interest in and to the FTA Charges, as adjusted from time
to time, (B) the right to be paid the total amounts set forth in the Issuance
Advice Letter, (C) the right, title and interest in and to all revenues,
collections, claims, payments, money, or proceeds of or arising from the FTA
Charges set forth in the Issuance Advice Letter, and (D) all rights to obtain
adjustments to the FTA Charges pursuant to the Financing Order; and
<PAGE>
19
(iii) the holders of the Transition Property are entitled to recover the
Transition Costs described in the Financing Order or the Issuance Advice Letter
in the aggregate amount equal to the principal amount of the Notes and the
Certificates, all interest thereon, the Overcollateralization Amount (as such
term is defined in the Servicing Agreement) relating to the Notes and all
related fees, costs and expenses in respect of the Notes and the Certificates
until they have been paid in full.
SECTION 3.09. Outstanding Indenture. On or prior to the Closing
----------------------
Date, the Lien of the Seller Mortgage on the Transition Property shall have been
released.
ARTICLE IV
Covenants of the Seller
-----------------------
SECTION 4.01. Corporate Existence. So long as any of the Notes are
--------------------
outstanding, the Seller (a) will keep in full force and effect its existence,
rights and franchises as a corporation under the laws of the jurisdiction of its
incorporation and (b) will obtain and preserve its qualification to do business,
in each case to the extent that in each such jurisdiction such existence or
qualification is or shall be necessary to protect the validity and
enforceability of this Agreement, the Basic Documents to which the Seller is a
party and each other
<PAGE>
20
instrument or agreement necessary or appropriate to the proper administration of
this Agreement and the transactions contemplated hereby.
SECTION 4.02. No Liens. Except for the conveyances hereunder or any
---------
statutory lien under Section 843(g) of the PU Code, the Seller will not sell,
pledge, assign or transfer to any other Person, or grant, create, incur, assume
or suffer to exist any Lien on, any of the Transition Property, or any interest
therein, and the Seller shall defend the right, title and interest of the Note
Issuer and the Note Trustee in, to and under the Transition Property, against
all claims of third parties claiming through or under the Seller.
SECTION 4.03. Delivery of Collections. If the Seller receives
------------------------
collections in respect of the FTA Charges or the proceeds thereof, the Seller
agrees to pay the Servicer all payments received by the Seller in respect
thereof as soon as practicable after receipt thereof by the Seller, but in no
event later than two Business Days after such receipt.
SECTION 4.04. Notice of Liens. The Seller shall notify the Note
----------------
Issuer and the Note Trustee promptly after becoming aware of any Lien on any of
the Transition Property other than the conveyances hereunder or under the
Indenture or any statutory lien under Section 843(g) of the PU Code.
<PAGE>
21
SECTION 4.05. Compliance with Law. The Seller hereby agrees to
--------------------
comply with its organizational or governing documents and all laws, treaties,
rules, regulations and determinations of any governmental instrumentality
applicable to the Seller, except to the extent that failure to so comply would
not adversely affect the Note Issuer's or the Note Trustee's interests in the
Transition Property or under any of the Basic Documents or the Seller's
performance of its obligations hereunder or under any of the other Basic
Documents to which it is party.
SECTION 4.06. Covenants Related to Transition Property.
-----------------------------------------
(a) So long as any of the Notes are outstanding, the Seller shall
treat the Notes as debt of the Note Issuer for all purposes.
(b) So long as any of the Notes are outstanding, the Seller shall
indicate in its financial statements that it is not the owner of the Transition
Property.
(c) So long as any of the Notes are outstanding, the Seller shall not
own or purchase any Notes or Certificates.
(d) The Seller agrees that upon the sale by the Seller of the
Transition Property to the Note Issuer pursuant to this Agreement, (i) to the
fullest extent
<PAGE>
22
permitted by law, including applicable CPUC Regulations, the Note Issuer shall
have all of the rights originally held by the Seller with respect to such
Transition Property, including the right to exercise any and all rights and
remedies to collect any amounts payable by any Customer in respect of such
Transition Property, notwithstanding any objection or direction to the contrary
by the Seller and (ii) any payment by any Customer to the Note Issuer shall
discharge such Customer's obligations in respect of such Transition Property to
the extent of such payment, notwithstanding any objection or direction to the
contrary by the Seller.
(e) So long as any of the Notes are outstanding, (i) the Seller shall
not make any statement or reference in respect of the Transition Property that
is inconsistent with the ownership interest of the Note Issuer, and (ii) the
Seller shall not take any action in respect of the Transition Property except
solely in its capacity as the Servicer thereof pursuant to the Servicing
Agreement or as otherwise contemplated by the Basic Documents.
SECTION 4.07. Protection of Title. The Seller shall execute and file
--------------------
such filings, including filings with the CPUC pursuant to the PU Code, and cause
to be executed and filed such filings, all in such manner and in such
<PAGE>
23
places as may be required by law fully to preserve, maintain, and protect the
interests of the Note Issuer in the Transition Property, including all filings
required under the Statute relating to the transfer of the ownership or security
interest in the Transition Property by the Seller to the Note Issuer. The Seller
shall deliver (or cause to be delivered) to the Note Issuer file-stamped copies
of, or filing receipts for, any document filed as provided above, as soon as
available following such filing. The Seller shall institute any action or
proceeding necessary to compel performance by the CPUC or the State of
California of any of their obligations or duties under the PU Code, the
Financing Order or the Issuance Advice Letter, and the Seller agrees to take
such legal or administrative actions, including defending against or instituting
and pursuing legal actions and appearing or testifying at hearings or similar
proceedings, as may be reasonably necessary to protect the Note Issuer and the
Certificateholders from claims, state actions or other actions or proceedings of
third parties which, if successfully pursued, would result in a breach of any
representation set forth in Article III. The costs of any such actions or
proceedings will be payable by the Seller.
SECTION 4.08. Nonpetition Covenants.
---------------------
<PAGE>
24
Notwithstanding any prior termination of this Agreement or the Indenture, but
subject to the CPUC's right to order the sequestration and payment of revenues
arising with respect to the Transition Property notwithstanding any bankruptcy,
reorganization or other insolvency proceedings with respect to the debtor,
pledgor or transferor of the Transition Property pursuant to Section 843(e) and
(g) of the PU Code, the Seller shall not, prior to the date which is one year
and one day after the termination of the Indenture, acquiesce, petition or
otherwise invoke or cause the Note Issuer or the Trust to invoke the process of
any court or government authority for the purpose of commencing or sustaining a
case against the Note Issuer or the Trust 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 Note Issuer or
the Trust or any substantial part of the property of the Note Issuer or the
Trust, or ordering the winding up or liquidation of the affairs of the Note
Issuer or the Trust.
SECTION 4.09. Taxes. So long as any of the Notes are outstanding,
------
the Seller shall, and shall cause each of its subsidiaries to, pay all material
taxes, assessments and governmental charges imposed upon it or any of its
<PAGE>
25
properties or assets or with respect to any of its franchises, business, income
or property before any penalty accrues thereon if the failure to pay any such
taxes, assessments and governmental charges would, after any applicable grace
periods, notices or other similar requirements, result in a lien on the
Transition Property; provided that no such tax need be paid if the Seller or one
of its subsidiaries is contesting the same in good faith by appropriate
proceedings promptly instituted and diligently conducted and if the Seller or
such subsidiary has established appropriate reserves as shall be required in
conformity with generally accepted accounting principles.
ARTICLE V
The Seller
----------
SECTION 5.01. Liability of Seller; Indemnities.
---------------------------------
(a) The Seller shall be liable in accordance herewith only to the
extent of the obligations specifically undertaken by the Seller under the
Agreement.
(b) (i) In the event of a breach by the Seller of any representation
and warranty specified in Sections 3.08(d) or 3.08(f) that has a
material adverse effect on the Certificateholders, the Seller shall
repurchase the Transition Property from the Note Issuer at a purchase
price (the
<PAGE>
26
"Repurchase Price") equal to the then outstanding principal amount of
the Notes and all accrued and unpaid interest thereon as of the
Repurchase Date; provided, however, that the Seller shall not be
-------- -------
obligated to repurchase the Transition Property if (A) within 90 days
after the date of the occurrence thereof such breach is cured or the
Seller takes remedial action such that there is not and will not be a
material adverse effect on the Certificateholders as a result of such
breach and (B) either (i) if the Seller had, immediately prior to the
breach, a long term debt rating of at least "A3" by Moody's and BBB by
Standard & Poor's and the equivalent of BBB by any other Rating
Agency, the Seller enters into a binding agreement with the Note
Issuer to pay any amounts necessary so that all interest payments due
on the Notes during such 90-day period will be paid in full, or (ii)
if the Seller does not have such long term debt ratings, the Seller
deposits, within two Business Days after such breach, an amount in
escrow with the Note Trustee sufficient, taking into account amounts
on deposit in the Collection Account which will be available for such
purpose,
<PAGE>
27
to pay all interest payments which will become due on the Notes during
such 90-day period. The Seller will not be in breach of any
representation and warranty as a result of a change in law by means of
a legislative enactment, constitutional amendment or voter initiative.
(ii) In the event of a breach by the Seller of any
representation and warranty specified in Sections 3.01, 3.03, 3.04,
3.05, 3.08(b) or 3.08(c) that has a material and adverse effect on the
Certificateholders, if within 30 days after the Seller receives
written notice from the Note Trustee or the Certificate Trustee or
otherwise becomes aware of such breach, such breach has not been cured
and the Seller has not taken remedial action such that there is not
and will not be a material adverse effect on the Certificateholders as
a result of such breach, then the Seller shall repurchase the
Transition Property from the Note Issuer for the Repurchase Price on
the Repurchase Date;
(iii) Upon the payment by the Seller of the Repurchase Price
pursuant to this Section 5.01(b), neither the Note Issuer nor any
other Person
<PAGE>
28
shall have any other claims, rights or remedies against the Seller for
a breach of the foregoing representations and warranties.
(c) The Seller shall indemnify the Note Issuer, the Trust, the Note
Trustee, the Certificate Trustee, the Delaware Trustee, the Infrastructure Bank,
the STO, the Noteholders and the Certificateholders 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 taxes (other than any taxes imposed on
Noteholders or Certificateholders solely as a result of their ownership of Notes
or Certificates, respectively) that may at any time be imposed on or asserted
against any such Person as a result of the sale of the Transition Property to
the Note Issuer, including any sales, gross receipts, general corporation,
tangible personal property, privilege or license taxes.
(d) The Seller shall indemnify the Note Issuer, the Trust, the Note
Trustee, the Certificate Trustee, the Delaware Trustee, the Infrastructure Bank,
the STO, the Noteholders and the Certificateholders 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 taxes (other than any taxes imposed on
<PAGE>
29
Noteholders or Certificateholders solely as a result of their ownership of Notes
or Certificates, respectively) that may be imposed on or asserted against any
such Person under existing law as of the Closing Date as a result of the
issuance and sale by the Note Issuer of the Notes, the issuance and sale by the
Trust of the Certificates or the other transactions contemplated herein,
including any sales, gross receipts, general corporation, tangible personal
property, privilege or license taxes.
(e) The Seller shall indemnify the Note Issuer, the Trust, the Note
Trustee, the Certificate Trustee, the Delaware Trustee, the Infrastructure Bank,
the STO, the Noteholders and the Certificateholders 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,
claims, damages, payments, costs or expenses of any kind whatsoever
(collectively, "Losses") that may be imposed on, incurred by or asserted against
any such Person as a result of (i) the Seller's willful misconduct, bad faith or
gross negligence in the performance of its duties or observance of its covenants
under this Agreement, or the Seller's reckless disregard of its obligations and
duties under this Agreement or (ii) the Seller's breach of any of its
representations or
<PAGE>
30
warranties contained in this Agreement (other than the representations and
warranties specified in Sections 3.01, 3.03, 3.04, 3.05, 3.08(b), 3.08(c),
3.08(d) or 3.08(f) the breach of which are subject to the repurchase obligation
set forth in Section 5.01(b)).
(f) The Seller shall pay any and all taxes levied or assessed upon
all or any part of the Trust Estate based on existing law as of the Closing
Date.
(g) Indemnification under Sections 5.01(c) through 5.01(f) shall
survive the resignation or removal of the Note Trustee, the Certificate Trustee
or the Delaware Trustee and the termination of this Agreement and shall include
reasonable fees and expenses of investigation and litigation (including
attorneys fees and expenses).
SECTION 5.02. Merger or Consolidation of, or Assumption of the
------------------------------------------------
Obligations of, Seller. Any Person (a) into which the Seller may be merged or
- -----------------------
consolidated, (b) which may result from any merger or consolidation to which the
Seller shall be a party or (c) which may succeed to the properties and assets of
the Seller substantially as a whole, which Person in any of the foregoing cases
executes an agreement of assumption to perform every obligation of the Seller
hereunder, shall be the successor to the Seller under this Agreement without
further act on the part of any
<PAGE>
31
of the parties to this Agreement; provided, however, that (i) immediately after
-------- -------
giving effect to such transaction, no representation or warranty made pursuant
to Article III shall have been breached and (if the Seller is the Servicer) 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
Seller shall have delivered to the Note Issuer and the Note Trustee an Officers'
Certificate and an Opinion of Counsel each stating that such consolidation,
merger or succession and such agreement of assumption comply with this Section
and that all conditions precedent, if any, provided for in this Agreement
relating to such transaction have been complied with, (iii) the Seller shall
have delivered to the Note Issuer and the Note Trustee an Opinion of Counsel
either (A) stating that, in the opinion of such counsel, all filings to be made
by the Seller, including filings with the CPUC pursuant to the PU Code, have
been executed and filed that are necessary to fully preserve and protect the
interest of the Note Issuer in 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 and (iv) the
Rating Agencies shall have received prior written
<PAGE>
32
notice of such transaction. Notwithstanding anything herein to the contrary, the
execution of the foregoing agreement of assumption and compliance with clauses
(i), (ii), (iii) and (iv) above shall be conditions to the consummation of any
transaction referred to in clauses (a), (b) or (c) above.
SECTION 5.03. Limitation on Liability of Seller and Others. The
--------------------------------- -----------
Seller and any director or officer or employee or agent of the Seller may rely
in good faith on the advice of counsel or on any document of any kind, prima
facie properly executed and submitted by any Person, respecting any matters
arising hereunder. Subject to Section 4.07, the Seller shall not be under any
obligation to appear in, prosecute or defend any legal action that shall not be
incidental to its obligations under this Agreement, and that in its opinion may
involve it in any expense or liability.
ARTICLE VI
Miscellaneous Provisions
------------------------
SECTION 6.01. Amendment. The Agreement may be amended by the Seller
----------
and the Note Issuer, with prior written notice given to the Rating Agencies and
the prior written consent of the Note Trustee, but without the consent of any of
the Noteholders or Certificateholders, to cure any ambiguity, to correct or
supplement any provisions in this
<PAGE>
33
Agreement or for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions in this Agreement or of modifying in
any manner the rights of the Noteholders or the Certificateholders; provided,
--------
however, that such action shall not, as evidenced by an Officer's Certificate
- -------
delivered to the Note Issuer and the Note Trustee, adversely affect in any
material respect the interests of any Noteholder or Certificateholder.
This Agreement may also be amended from time to time by the Seller and
the Note Issuer, with prior written notice given to the Rating Agencies and the
prior written consent of the Note Trustee and the prior written consent of the
Holders of Notes evidencing not less than a majority of the Outstanding Amount
of the Notes of all Series affected thereby, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of modifying in any manner the rights of the Noteholders or
the Certificateholders; provided, however, that no such amendment shall (a)
-------- -------
increase or reduce in any manner the amount of, or accelerate or delay the
timing of, FTA Collections or (b) reduce the aforesaid percentage of the
Outstanding Amount of the Notes, the Holders of which are required to consent to
any such amendment, without the consent of the Holders of all the
<PAGE>
34
outstanding Notes.
Promptly after the execution of any such amendment or consent, the
Note Issuer shall furnish written notification of the substance of such
amendment or consent to the Note Trustee, the Infrastructure Bank, the STO and
each of the Rating Agencies.
Notwithstanding anything to the contrary contained herein, no such
amendment may amend or in any way modify the rights of the Infrastructure Bank
or the STO under this Agreement without their prior written consent.
It shall not be necessary for the consent of Noteholders pursuant to
this Section to approve the particular form of any proposed amendment or
consent, but it shall be sufficient if such consent shall approve the substance
thereof.
Prior to the execution of any amendment to this Agreement, the Note
Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating
that the execution of such amendment is authorized or permitted by this
Agreement. The Note Trustee may, but shall not be obligated to, enter into any
such amendment which affects the Note Trustee's own rights, duties or immunities
under this Agreement or otherwise.
SECTION 6.02. Notices. All demands, notices and
-------
<PAGE>
35
communications upon or to the Seller, the Note Issuer, the Note Trustee or the
Rating Agencies under this Agreement shall be in writing, personally delivered,
mailed or sent by telecopy or other similar form of rapid transmission, and
shall be deemed to have been duly given upon receipt (a) in the case of the
Seller, to Pacific Gas and Electric Company, at 77 Beale Street, San Francisco,
California 94105, Attention of Treasurer, (b) in the case of the Note Issuer, to
PG&E Funding LLC, 245 Market Street, Room 424, San Francisco, California 94105,
Attention of President, (c) in the case of the Note Trustee, at the Corporate
Trust Office, (d) in the case of the Certificate Trustee, to Bankers Trust
Company of California, N.A., c/o Bankers Trust Company, Corporate Trust and
Agency Services, at Four Albany Street, New York, NY 10006, Attention of
Structured Finance Group, (e) in the case of the Infrastructure Bank, to
California Infrastructure and Economic Development Bank, c/o California Trade
and Commerce Agency, 801 K Street, Suite 1700, Sacramento, CA 95814, Attention
of Executive Director, (f) in the case of the STO, to the California State
Treasurer's Office, 915 Capitol Mall, Room 110, Sacramento, CA 95814, Attention
of Deputy Treasurer, (g) in the case of Moody's, to Moody's Investors Service,
Inc., ABS Monitoring Department, 99 Church Street, New York,
<PAGE>
36
New York 10007, (h) in the case of Standard & Poor's, to Standard & Poor's
Corporation, 26 Broadway (10th Floor), New York, New York 10004, Attention of
Asset Backed Surveillance Department, (i) in the case of Fitch, to Fitch
Investors Service, L.P., One State Street Plaza, New York, NY 10004, Attention
of Commercial Asset-Backed Securities, or (j) as to each of the foregoing, at
such other address as shall be designated by written notice to the other
parties.
SECTION 6.03. Assignment. Notwithstanding anything to the contrary
-----------
contained herein, except as provided in Section 5.02, this Agreement may not be
assigned by the Seller.
SECTION 6.04. Limitations on Rights of Others. The provisions of this
--------------------------------
Agreement are solely for the benefit of the Seller, the Note Issuer, the Note
Trustee, the Trust, the Certificate Trustee, the Delaware Trustee, the
Infrastructure Bank, the STO, the Noteholders and the Certificateholders and
nothing in this Agreement, whether express or implied, shall be construed to
give to any other Person any legal or equitable right, remedy or claim in the
Transition Property or under or in respect of this Agreement or any covenants,
conditions or provisions contained herein.
SECTION 6.05. Severability. Any provision of this Agreement that is
-------------
prohibited or unenforceable in any
<PAGE>
37
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 6.06. Separate Counterparts. This Agreement may be executed
----------------------
by the parties hereto in separate counterparts, each of which when so executed
and delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 6.07. Headings. The headings of the various Articles and
---------
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 6.08. Governing Law. This Agreement shall be construed in
--------------
accordance with the laws of the State of California, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
SECTION 6.09. Assignment to Note Trustee. The Seller hereby
---------------------------
acknowledges and consents to any mortgage, pledge, assignment and grant of a
security interest by the
<PAGE>
38
Note Issuer to the Note Trustee pursuant to the Indenture for the benefit of the
Noteholders of all right, title and interest of the Note Issuer in, to and under
the Transition Property and the proceeds thereof and the assignment of any or
all of the Note Issuer's rights and obligations hereunder to the Note Trustee.
SECTION 6.10. Limitation of Liability. It is expressly understood
------------------------
and agreed by the parties hereto that (a) this Agreement is executed and
delivered by Bankers Trust Company of California, N.A., not individually or
personally but solely as Note Trustee on behalf of the holders of the Notes, in
the exercise of the powers and authority conferred and vested in it, (b) the
representations, undertakings and agreements herein made by the Note Trustee on
behalf of the holders of the Notes are made and intended not as personal
representations, undertakings and agreements by Bankers Trust Company of
California, N.A., but are made and intended for the purpose of binding only the
holders of the Notes, (c) nothing herein contained shall be construed as
creating any liability on Bankers Trust Company of California, N.A.,
individually or personally, to perform any covenant either expressed or implied
contained herein, except in its capacity as Note Trustee, all such liability, if
any, being expressly waived
<PAGE>
39
by the parties who are signatories to this Agreement and by any Person claiming
by, through or under such parties and (d) under no circumstances shall Bankers
Trust Company of California, N.A., be personally liable for the payment of any
indebtedness or expenses of the holders of the Notes or be personally liable for
the breach or failure of any obligation, representation, warranty or covenant
made or undertaken by the Note Trustee under this Agreement; provided, however,
-------- -------
that this provision shall not protect Trust Company of California, N.A. against
any liability that would otherwise be imposed by reason of willful misconduct,
bad faith or gross negligence in the performance of duties or by reason of
reckless disregard of obligations and duties under this Agreement.
<PAGE>
40
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.
PG&E FUNDING LLC, Note Issuer,
by
--------------------------
Title:
PACIFIC GAS AND ELECTRIC
COMPANY, Seller,
by
--------------------------
Title:
Acknowledged and Accepted:
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A., not in
its individual capacity but
solely as Note Trustee,
by
____________________
<PAGE>
41
SCHEDULE 3.06
No Proceedings
--------------
1. Petition for writ of review filed with the California Supreme Court by The
Utility Reform Network on November 24, 1997.
<PAGE>
Exhibit 10.2
EXECUTION COPY
================================================================================
TRANSITION PROPERTY SERVICING AGREEMENT
between
PG&E FUNDING LLC
Note Issuer
and
PACIFIC GAS AND ELECTRIC COMPANY
Servicer
Dated as of December 8, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I Definitions
-----------
SECTION 1.01. Definitions.....................................................2
-----------
SECTION 1.02. Other Definitional Provisions..................................17
-----------------------------
ARTICLE II Appointment and Authorization
-----------------------------
SECTION 2.01. Appointment of Servicer; Acceptance of
--------------------------------------
Appointment...................................................................18
- -----------
SECTION 2.02. Authorization..................................................18
-------------
SECTION 2.03. Dominion and Control Over the Transition
----------------------------------------
Property......................................................................19
- --------
ARTICLE III Billing Services
----------------
SECTION 3.01. Duties of Servicer.............................................20
------------------
SECTION 3.02. Servicing and Maintenance Standards............................23
-----------------------------------
SECTION 3.03. Certificate of Compliance......................................24
-------------------------
SECTION 3.04. Annual Report by Independent Public
-----------------------------------
Accountants...................................................................25
- -----------
ARTICLE IV Services Related to True-Up Adjustments
---------------------------------------
SECTION 4.01. Periodic True-Up Adjustments...................................27
----------------------------
SECTION 4.02. Limitation of Liability........................................37
-----------------------
ARTICLE V The Transition Property
-----------------------
SECTION 5.01. Custody of Transition Property Records.........................39
--------------------------------------
SECTION 5.02. Duties of Servicer as Custodian................................39
-------------------------------
SECTION 5.03. Instructions; Authority to Act.................................43
------------------------------
SECTION 5.04. Custodian's Indemnification....................................43
---------------------------
SECTION 5.05. Effective Period and Termination...............................44
--------------------------------
SECTION 5.06. General Indemnification of Note Trustee,
---------------------------------------
Certificate Trustee...........................................................45
- -------------------
ARTICLE VI The Servicer
------------
SECTION 6.01. Representations and Warranties of Servicer.....................46
------------------------------------------
SECTION 6.02. Indemnities of Servicer; Release of Claims.....................51
------------------------------------------
SECTION 6.03. Merger or Consolidation of, or Assumption of
--------------------------------------------
the Obligations of, Servicer..................................................53
- ----------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 6.04. Limitation on Liability of Servicer and
---------------------------------------
Others........................................................................55
- ------
SECTION 6.05. Pacific Gas and Electric Company Not to
---------------------------------------
Resign as Servicer............................................................56
- ------------------
SECTION 6.06. Servicing Compensation.........................................57
----------------------
SECTION 6.07. Compliance with Applicable Law.................................59
------------------------------
SECTION 6.08. Access to Certain Records and Information
-----------------------------------------
Regarding Transition Property.................................................59
- -----------------------------
SECTION 6.09. Appointments...................................................60
------------
SECTION 6.10. No Servicer Advances...........................................61
--------------------
SECTION 6.11. Remittances....................................................61
-----------
ARTICLE VII Default
-------
SECTION 7.01. Servicer Default...............................................64
----------------
SECTION 7.02. Appointment of Successor.......................................67
------------------------
SECTION 7.03. Waiver of Past Defaults........................................69
-----------------------
SECTION 7.04. Notice of Servicer Default.....................................69
--------------------------
ARTICLE VIII Miscellaneous Provisions
------------------------
SECTION 8.01. Amendment......................................................70
---------
SECTION 8.02. Protection of Title to Trust...................................72
----------------------------
SECTION 8.03. Notices........................................................73
-------
SECTION 8.04. Assignment.....................................................75
----------
SECTION 8.05. Limitations on Rights of Others................................75
-------------------------------
SECTION 8.06. Severability...................................................75
------------
SECTION 8.07. Separate Counterparts..........................................76
---------------------
SECTION 8.08. Headings.......................................................76
--------
SECTION 8.09. Governing Law..................................................76
-------------
SECTION 8.10. Assignment to Note Trustee.....................................76
--------------------------
SECTION 8.11. Nonpetition Covenants..........................................76
---------------------
SECTION 8.12. Limitation of Liability........................................77
-----------------------
</TABLE>
Exhibits and Schedules
----------------------
Exhibit A Form of Monthly Servicer's Certificate
Exhibit B Form of Certificate of Compliance
Exhibit C Form of Routine Annual True-Up Mechanism Advice Letter
Exhibit D Form of Anniversary True-Up Mechanism Advice Letter
Exhibit E Form of Quarterly Servicer's Certificate
Schedule 4.01(a) Expected Amortization Schedule
Schedule 6.01(f) No Proceedings
Annexes
-------
Annex I Servicing Procedures
Schedule 6 to
<PAGE>
Annex I Calculation of Aggregate Remittance Amount
Annex II Routine Quarterly True-Up Mechanism Advice Letters
<PAGE>
TRANSITION PROPERTY SERVICING AGREEMENT dated as of December
8, 1997, between PG&E FUNDING LLC, a Delaware limited liability
company (the "Note Issuer"), and PACIFIC GAS AND ELECTRIC
COMPANY, a California corporation, as Servicer (the "Servicer").
RECITALS
A. Pursuant to the Statute and the Financing Order, the Seller and
the Note Issuer are concurrently entering into the Sale Agreement pursuant to
which the Seller is selling to the Note Issuer the Transition Property created
pursuant to the PU Code, the Financing Order and the Issuance Advice Letter
described in such agreement, and the Seller may sell other Transition Property
to the Note Issuer pursuant to Subsequent Sale Agreements.
B. In connection with its ownership of the Transition Property and in
order to collect the associated FTA Charges, the Note Issuer desires to engage
the Servicer to carry out the functions described herein. The Servicer
currently performs similar functions for itself with respect to its own charges
to its customers and may in the future perform for others. In addition, the
Note Issuer desires to engage the Servicer to act on its behalf in obtaining
True-
<PAGE>
2
Up Adjustments from the CPUC. The Servicer desires to perform all of these
activities on behalf of the Note Issuer.
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. Whenever used in this Agreement, the
------------
following words and phrases shall have the following meanings:
"Actual FTA Payments" means the actual FTA Payments received by the
Servicer attributable to a particular Billing Period.
"Advice Letter" means any filing made to the CPUC by the Servicer on
behalf of the Note Issuer with respect to the FTA Charges or any True-Up
Adjustment in the form of an advice letter, including an Issuance Advice Letter,
a Routine Annual True-Up Mechanism Advice Letter, an Anniversary True-Up
Mechanism Advice Letter, a Routine Quarterly True-Up Mechanism Advice Letter or
a Non-Routine True-Up Mechanism Advice Letter.
"Aggregate Remittance Amount" has the meaning set
<PAGE>
3
forth in Annex I hereto.
"Agreement" means this Transition Property Servicing Agreement,
together with all Exhibits, Schedules, Annexes and Attachments hereto, as the
same may be amended and supplemented from time to time.
"Anniversary True-Up Mechanism Advice Letter" means an Advice Letter
filed with the CPUC at least fifteen days prior to the Financing Order
Anniversary Date in respect of a True-Up Adjustment, substantially in the form
of Exhibit D hereto. Any True-Up Adjustment required as a result of the
---------
Anniversary True-Up Mechanism Advice Letter will become effective on the date
specified by the CPUC in accordance with the Financing Order.
"Annual Accountant's Report" has the meaning set forth in Section
3.04.
"Annual Adjustment Filing Date" means each December 15, from and
including December 15, 1998 to and including the last December 15 preceding the
Retirement of the Notes; provided, however, that if any such day is not a
-------- -------
Servicer Business Day, "Annual Adjustment Filing Date" shall mean the Servicer
Business Day immediately preceding such day.
"Applicable ESP" means, with respect to each Customer, the ESP, if
any, providing "direct access" service
<PAGE>
4
to that Customer.
"Billing Period" means a calendar month.
"Bills" means each of the regular monthly bills, the summary bills,
the opening bills and the closing bills issued to Customers or ESPs by Pacific
Gas and Electric Company on its own behalf and in its capacity as Servicer.
"Capital Subaccount" has the meaning set forth in the Indenture.
"Certificate of Compliance" has the meaning set forth in Section 3.03.
"Certificate Trustee" means the Person acting as certificate trustee
under the Trust Agreement.
"Collection Period" means the calendar month immediately preceding the
respective Remittance Date.
"Collections Curves" means the Daily Collections Curve together with
the Monthly Collections Curve.
"Consolidated ESP Billing" has the meaning set forth in Annex I
hereto.
"CPUC" means the California Public Utilities Commission or any
successor governmental agency that has regulatory authority over the True-Up
Adjustments contemplated by the Statute.
"CPUC Regulations" means all regulations, rules, tariffs and laws
applicable to public utilities or ESPs, as
<PAGE>
5
the case may be, and promulgated by, enforced by or otherwise within the
jurisdiction of the CPUC.
"Customers" means existing and future Residential Customers and Small
Commercial Customers.
"Daily Collections Curve" has the meaning set forth on Schedule 6 to
----------
Annex I hereto.
"Daily Remittance" has the meaning set forth in Section 6.11(b).
"Delaware Trustee" means the Person acting as Delaware trustee under
the Trust Agreement.
"ESP" means an alternative energy service provider who has entered
into an ESP Service Agreement with the Seller.
"ESP Service Agreement" means an agreement between an ESP and the
Seller for the provision of "direct access" service to customers in accordance
with CPUC Decision 97-10-087.
"Estimated FTA Payments" means the sum of the amounts remitted with
respect to a Billing Period during the six months following such Billing Period
based on the Collections Curves.
"Excess Remittance" means the amount, if any, calculated for a
particular Remittance Date, by which all Estimated FTA Payments remitted to the
Collection Account on
<PAGE>
6
and prior to such Remittance Date with respect to the FTA Charges billed to
Customers during the sixth preceding Billing Period exceed Actual FTA Payments
received by the Servicer attributable to such Billing Period.
"Expected Amortization Schedule" means Schedule 4.01(a) hereto, as the
----------------
same may be amended from time to time pursuant to Section 4.01(a).
"Financing Order" means the order of the CPUC, Decision 97-09-055,
issued as of September 3, 1997, which became effective on October 8, 1997.
"Financing Order Anniversary Date" means September 3 of each year.
"FTA Charges" means the charges permitted to be levied upon the
Customers pursuant to the Financing Order.
"FTA Collections" means FTA Payments received by the Servicer which
are remitted to the Collection Account.
"FTA Effective Date" means the date on which the initial FTA Charges
go into effect pursuant to the terms of the Financing Order and the first
Issuance Advice Letter.
"FTA End Date" means, depending on the context in which used, either:
(i) the date on which specific FTA Charges end because such FTA Charges have
been replaced with revised FTA Charges; or (ii) the FTA Termination Date.
"FTA Payments" means the payments made by
<PAGE>
7
Customers based on the FTA Charges.
"FTA Start Date" means, depending on the context in which used,
either: (i) the FTA Effective Date; or (ii) the date on which specific revised
FTA Charges go into effect to replace previously existing FTA Charges.
"FTA Termination Date" means the date on which the FTA Charges will
cease to be billed pursuant to the terms of the Financing Order, provided that
the Notes and the Certificates shall have been paid in full.
"Infrastructure Bank" means the California Infrastructure and Economic
Development Bank or any successor in interest.
"Indenture" means the Indenture dated as of December 8, 1997, between
the Note Issuer and the Note Trustee, as the same may be amended and
supplemented from time to time.
"Initial Transition Property" means the Transition Property described
in the Sale Agreement.
"Insolvency Event" means, with respect to a specified Person, (a) the
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property in an
involuntary case under any applicable Federal or state bankruptcy, insolvency or
other similar law now or
<PAGE>
8
hereafter in effect, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official for such Person or for any substantial
part of its property, or ordering the winding-up or liquidation of such Person's
affairs, and such decree or order shall remain unstayed and in effect for a
period of 60 consecutive days; or (b) the commencement by such Person of a
voluntary case under any applicable Federal or state bankruptcy, insolvency or
other similar law now or hereafter in effect, or the consent by such Person to
the entry of an order for relief in an involuntary case under any such law, or
the consent by such Person to the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official for such Person or for any substantial part of its property, or the
making by such Person of any general assignment for the benefit of creditors, or
the failure by such Person generally to pay its debts as such debts become due,
or the taking of action by such Person in furtherance of any of the foregoing.
"Issuance Advice Letter" means an Advice Letter submitted to the CPUC
in connection with and immediately prior to the issuance of a Series of Notes,
which Advice Letter becomes effective five Business Days after filing pursuant
to the terms of the Financing Order. The first
<PAGE>
9
Issuance Advice Letter will establish the initial FTA Charges, and subsequent
Issuance Advice Letters will modify the FTA Charges to support the issuance of
additional Series of Notes.
"Lien" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind.
"Losses" has the meaning assigned to that term in Section 5.04.
"Monthly Collections Curve" has the meaning set forth on Schedule 6 to
----------
Annex I hereto.
"Monthly Servicer's Certificate" means a certificate, substantially in
the form of Exhibit A hereto, completed and executed by a Responsible Officer of
---------
the Servicer pursuant to Section 3.01(b)(i).
"Non-Routine True-Up Adjustment" has the meaning set forth in Section
4.01(c)(i).
"Non-Routine True-Up Mechanism Advice Letter" means an Advice Letter
filed with the CPUC in accordance with the Financing Order with respect to any
Non-Routine True-Up Adjustment, pursuant to which the related Non-Routine True-
Up Adjustment generally will become effective at the beginning of the first
Quarter that is at least 90 days after filing.
"Note Issuer" means PG&E Funding LLC, a Delaware
<PAGE>
10
limited liability company.
"Note Trustee" means the Person acting as trustee under the Indenture,
its successors in interest and any successor trustee under the Indenture.
"Officer's Certificate" means a certificate signed by a Responsible
Officer.
"Opinion of Counsel" means one or more written opinions of counsel who
may be employees of or counsel to the party providing such opinion(s) of
counsel, which counsel shall be acceptable to the party receiving such
opinion(s) of counsel.
"Overcollateralization Subaccount" has the meaning set forth in the
Indenture.
"Payment Date" means, with respect to any Series or Class, each March
25, June 25, September 25 and December 26 of each year, provided that if any
such date is not a Business Day, the Payment Date shall be the Business Day
immediately succeeding such date.
"Principal Balance" means, as of any Payment Date, the sum of the
outstanding principal amount of each Series of Notes.
"Projected Principal Balance" means, as of any Payment Date, the sum
of the projected outstanding principal amount of each Series of Notes for such
Payment Date set
<PAGE>
11
forth in the Expected Amortization Schedule.
"PU Code" means the California Public Utilities Code, as amended from
time to time.
"Quarter" means each calendar quarter, specifically:
January 1 to and including March 31;
April 1 to and including June 30;
July 1 to and including September 30; and
October 1 to and including December 31.
"Quarterly Servicer's Certificate" means a certificate, substantially
in the form of Exhibit E hereto, completed and executed by a Responsible Officer
---------
of the Servicer pursuant to Section 4.01(d)(ii).
"Remittance Date" means the twentieth day of each calendar month or,
if such day is not a Business Day, the next succeeding Business Day, commencing
on January 20, 1998.
"Remittance Shortfall" means the amount, if any, calculated for a
particular Remittance Date, by which Actual FTA Payments received by the
Servicer attributable to FTA Charges billed to Customers during the sixth
preceding Billing Period exceed all Estimated FTA Payments remitted to the
Collection Account on and prior to such Remittance Date with respect to such
Billing Period.
<PAGE>
12
"Required Capital Level" means, as of any Payment Date, the sum of 0.5
percent of the initial principal amount of each then-outstanding Series of Notes
issued pursuant to the Indenture prior to that Payment Date, less $100,000 in
the aggregate for all Series of Notes.
"Required Overcollateralization Level" means, as of any Payment Date,
the amount required to be on deposit in the Overcollateralization Subaccount as
specified in each Series Supplement.
"Reserve Subaccount" has the meaning set forth in the Indenture.
"Residential Customers" means the existing and future residential
consumers of electricity, as identified in the Financing Order, located in the
service territory in which the Seller provided electricity services as of
December 20, 1995.
"Responsible Officer" means the chairman of the board, the chief
executive officer, the president, the vice chairman of the board, any vice
president, the treasurer, any assistant treasurer, the secretary, any assistant
secretary or the controller of the Servicer.
"Retirement of the Notes" means the day on which the final
distribution is made to the Note Trustee in respect of the last outstanding
Note.
<PAGE>
13
"Routine Annual True-Up Mechanism Advice Letter" means an Advice
Letter filed with the CPUC at least fifteen days prior to the end of each
calendar year in respect of an annual True-Up Adjustment, substantially in the
form of Exhibit C hereto. The Routine Annual True-Up Mechanism Advice Letter
---------
will become effective on the first calendar day of the next calendar year.
"Routine Quarterly True-Up Mechanism Advice Letter" means an Advice
Letter filed with the CPUC at least fifteen days prior to the end of each of the
first three Quarters of each calendar year in respect of a quarterly True-Up
Adjustment as specified in Annex II hereto. The Routine Quarterly True-Up
Mechanism Advice Letter will become effective on the first calendar day of the
next Quarter. The Servicer shall file Routine Quarterly True-Up Mechanism
Advice Letters with respect to a Series of Notes only if so specified on Annex
II hereto.
"Sale Agreement" means the Transition Property Purchase and Sale
Agreement dated as of the date hereof between Pacific Gas and Electric Company
and the Note Issuer, as amended and supplemented from time to time.
"SEC" means the Securities and Exchange Commission or any successor
thereto.
"Seller" means Pacific Gas and Electric Company
<PAGE>
14
and its successors in interest to the extent permitted under the Sale Agreement.
"Series Supplement" has the meaning set forth in the Indenture.
"Servicer" means Pacific Gas and Electric Company, as the servicer of
the Transition Property, and each successor to Pacific Gas and Electric Company
(in the same capacity) pursuant to Section 6.03 or 7.02.
"Servicer Business Day" means any Business Day on which the Servicer's
offices in the State of California are open for business.
"Servicer Default" means an event specified in Section 7.01.
"Servicing Fee" means the fee payable on each Payment Date to the
Servicer for services rendered during the period from, but not including, the
preceding Payment Date to and including the current Payment Date, determined
pursuant to Section 6.06.
"Small Commercial Customers" means the existing and future small
commercial consumers of electricity, as identified in the Financing Order,
located in the service territory in which the Seller provided electricity
services as of December 20, 1995.
"Statute" means Chapter 854, California Statutes
<PAGE>
15
of 1996 and Chapter 275, California Statutes of 1997, as further amended from
time to time.
"STO" means the California State Treasurer's Office, as agent for sale
of the Certificates.
"Subsequent Sale Agreement" has the meaning assigned to that term in
the definition of Subsequent Transition Property.
"Subsequent Sale Date" means any date on which Subsequent Transition
Property is to be sold to the Note Issuer pursuant to a Subsequent Sale
Agreement.
"Subsequent Transition Property" means any transition property (as
defined in Section 840 of the PU Code) created under the PU Code and the
Financing Order and specifically described in the related Issuance Advice Letter
and sold to the Note Issuer by the Seller pursuant to an agreement substantially
similar to the Sale Agreement (a "Subsequent Sale Agreement").
"Termination Notice" has the meaning assigned to that term in Section
7.01.
"Transition Costs" has the meaning assigned to that term in Section
840(f) of the PU Code.
"Transition Property" means the Initial Transition Property and, from
and after the applicable Subsequent Sale Date therefor, any Subsequent
Transition Property.
<PAGE>
16
"Transition Property Records" has the meaning assigned to that term in
Section 5.01.
"True-Up Adjustment" means each adjustment to the FTA Charges made
pursuant to the terms of the Financing Order and in accordance with Section 4.01
hereof or in connection with the conveyance to the Note Issuer of Subsequent
Transition Property.
"Trust Agreement" means the Amended and Restated Declaration and
Agreement of Trust dated as of December 8, 1997, among the Infrastructure Bank,
the Delaware Trustee and the Certificate Trustee, as the same may be further
amended and supplemented from time to time.
"Trust Officer" means any officer assigned to the Corporate Trust
Office, including any managing director, vice president, assistant vice
president, assistant treasurer, assistant secretary or any other officer of the
Note Trustee customarily performing functions similar to those performed by any
of the above designated officers and having direct responsibility for the
administration of this Agreement, and also, with respect to a particular matter,
any other officer, to whom such matter is referred because of such officer's
knowledge of and familiarity with the particular subject.
SECTION 1.02. Other Definitional Provisions.
------------------------------
<PAGE>
17
(a) Capitalized terms used herein and not otherwise defined herein have the
meanings assigned to them in the Indenture.
(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 and to the masculine as well
as to the feminine and neuter forms of such terms.
ARTICLE II
Appointment and Authorization
-----------------------------
SECTION 2.01. Appointment of Servicer; Acceptance of Appointment.
---------------------------------------------------
Subject to Section 6.05 and Article 7, the Note Issuer hereby appoints the
Servicer, and the Servicer
<PAGE>
18
hereby accepts such appointment, to perform the Servicer's obligations pursuant
to this Agreement on behalf of and for the benefit of the Note Issuer 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 Note Issuer to (a) execute and deliver, on behalf of itself
and/or the Note Issuer, as the case may be, any and all instruments, documents
or notices, and (b) on behalf of itself and/or the Note Issuer, as the case may
be, make any filing and participate in proceedings of any kind with any
governmental authorities, including with the CPUC. The Note Issuer shall
furnish the Servicer with such documents as have been prepared by the Servicer
for execution by the Note Issuer, and with such other documents as may be in the
Note Issuer's possession, as necessary or appropriate to enable the Servicer to
carry out its servicing and administrative duties hereunder. Upon the written
request of the Servicer, the Note 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.
<PAGE>
19
SECTION 2.03. Dominion and Control Over the Transition Property.
--------------------------------------------------
Notwithstanding any other provision herein, the Servicer and the Note Issuer
agree that the Note 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 Note Issuer with respect to
the Transition Property and the Transition Property Records. The Servicer
hereby agrees that it shall not take any action that is not authorized by this
Agreement, that is not consistent with its customary procedures and practices,
or that shall impair the rights of the Note Issuer in the Transition Property,
in each case unless such action is required by law or court or regulatory order.
ARTICLE III
Billing Services
----------------
SECTION 3.01. Duties of Servicer. The Servicer, as agent for the
-------------------
Note 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, billing, collections
and posting of all payments in respect of
<PAGE>
20
the Transition Property; responding to inquiries by Customers, the CPUC, or
any federal, local or other state governmental authorities with respect to
the Transition Property; delivering Bills to Customers and ESPs, processing
and depositing collections and making periodic remittances; furnishing
periodic reports to the Note Issuer, the Note Trustee, the Certificate
Trustee, the Infrastructure Bank and the Rating Agencies; and taking action
in connection with True-Up Adjustments as set forth herein. Certain of the
duties set forth above may be performed by ESPs pursuant to ESP Service
Agreements. Anything to the contrary notwithstanding, the duties of the
Servicer set forth in this Agreement shall be qualified in their entirety
by any CPUC Regulations as in effect at the time such duties are to be
performed. Without limiting the generality of this Section 3.01(a), in
furtherance of the foregoing, the Servicer hereby agrees that it shall also
have, and shall comply with, the duties and responsibilities relating to
data acquisition, usage and bill calculation, billing, customer service
functions, collections, payment processing and remittance set forth in
Annex I hereto.
(b) Reporting Functions.
--------------------
<PAGE>
21
(i) Monthly Servicer's Certificate. On or before each
-------------------------------
Remittance Date, the Servicer shall prepare and deliver to the Note
Issuer, the Note Trustee, the Certificate Trustee, the Infrastructure
Bank 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 FTA Payments received by the
Servicer during the Collection Period preceding such Remittance Date.
(ii) Notification of Laws and Regulations. The Servicer shall
-------------------------------------
immediately notify the Note Issuer, the Note Trustee, the Certificate
Trustee, the Infrastructure Bank and the Rating Agencies in writing of
any laws or CPUC 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
------------------
Note Issuer, the Note Trustee, the Certificate Trustee, the
Infrastructure Bank or the Rating Agencies, the Servicer shall provide
to such Note Issuer, Note Trustee, Certificate
<PAGE>
22
Trustee, Infrastructure Bank or the Rating Agencies, 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 for the Note Issuer, the
Note Trustee, the Certificate
Trustee, the Infrastructure Bank or the Rating Agencies to monitor the
performance by the Servicer hereunder. In addition, so long as any of
the Notes of any Series are outstanding, the Servicer shall provide
the Note Issuer, the Note Trustee and the Certificate 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 FTA Charges applicable to each class of
Customer.
(iv) Preparation of Reports to be Filed with the SEC. The
------------------------------------------------
Servicer shall prepare any reports required to be filed by the Note
Issuer under the securities laws, including a copy of each Quarterly
Servicer's Certificate described in Section 4.01(d)(ii), the annual
Certificate of
<PAGE>
23
Compliance described in Section 3.03, and the Annual Accountant's
Report described in Section 3.04.
SECTION 3.02. Servicing and Maintenance Standards. On behalf of the
------------------------------------
Note Issuer, the Servicer shall (a) manage, service, administer and make
collections in respect of the Transition Property with reasonable care and in
accordance with applicable law, including all applicable CPUC 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 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 (d) comply with all laws and
regulations applicable to and binding on it relating to the Transition Property.
The Servicer shall follow such customary and usual practices and procedures as
it shall deem necessary or advisable in its servicing of all or any portion of
the Transition Property, which, in the Servicer's judgment, may include the
taking of legal action.
SECTION 3.03. Certificate of Compliance. The
--------------------------
<PAGE>
24
Servicer shall deliver to the Note Issuer, the Note Trustee, the Certificate
Trustee, the Infrastructure Bank and the Rating Agencies on or before September
30 of each year, commencing September 30, 1998 to and including the September 30
succeeding the Retirement of the Notes, an Officer's Certificate substantially
in the form of Exhibit B hereto (a "Certificate of Compliance"), stating that:
---------
(i) a review of the activities of the Servicer during the twelve months ended
the preceding June 30 (or, in the case of the first Certificate of Compliance to
be delivered on or before September 30, 1998, the period of time from the date
of this Agreement until June 30, 1998) and of its performance under this
Agreement has been made under such officer's supervision, and (ii) to the best
of such officer's knowledge, based on such review, the Servicer has fulfilled
all of its obligations in all material respects under this Agreement throughout
such twelve months (or, in the case of the Certificate of Compliance to be
delivered on or before September 30, 1998, the period of time from the date of
this Agreement until June 30, 1998), or, if there has been a default in the
fulfillment of any such material obligation, specifying each such material
default known to such officer and the nature and status thereof.
SECTION 3.04. Annual Report by Independent Public
-----------------------------------
<PAGE>
25
Accountants. (a) The Servicer shall cause a firm of independent certified public
- -----------
accountants (which may provide other services to the Servicer or the Seller) to
prepare, and the Servicer shall deliver to the Note Issuer, the Note Trustee,
the Certificate Trustee, the Infrastructure Bank and the Rating Agencies, a
report addressed to the Servicer (the "Annual Accountant's Report"), which may
be included as part of the Servicer's customary auditing activities, for the
information and use of the Note Issuer, the Note Trustee, the Certificate
Trustee and the Infrastructure Bank on or before September 30 of each year,
beginning September 30, 1998 to and including the September 30 succeeding the
Retirement of the Notes, to the effect that such firm has performed certain
procedures in connection with the Servicer's compliance with its obligations
under this Agreement during the preceding twelve months ended June 30 (or, in
the case of the first Annual Accountant's Report to be delivered on or before
September 30, 1998, the period of time from the date of this Agreement until
June 30, 1998), identifying the results of such procedures and including any
exceptions noted. In the event such accounting firm requires the Note Trustee or
the Certificate Trustee to agree or consent to the procedures performed by such
firm, the Note Issuer shall direct the Note Trustee or
<PAGE>
26
the Certificate Trustee in writing to so agree; it being understood and agreed
that the Note Trustee or the Certificate Trustee, as the case may be, will
deliver such letter of agreement or consent in conclusive reliance upon the
direction of the Note Issuer, and neither the Note Trustee nor the Certificate
Trustee will make any independent inquiry or investigation as to, and shall have
no obligation or liability in respect of the sufficiency, validity or
correctness of such procedures.
(b) The Annual Accountant's Report shall also indicate that the
accounting firm providing such report is independent of the Servicer within the
meaning of the Code of Professional Ethics of the American Institute of
Certified Public Accountants.
ARTICLE IV
Services Related to True-Up Adjustments
---------------------------------------
SECTION 4.01. Periodic True-Up Adjustments. From time to time, until
-----------------------------
the Retirement of the Notes, the Servicer shall identify the need for True-Up
Adjustments and shall take all reasonable action to obtain and implement such
True-Up Adjustments, all in accordance with the following:
(a) Expected Amortization Schedule. The initial Expected
-------------------------------
Amortization Schedule is attached hereto as
<PAGE>
27
Schedule 4.01(a). In connection with the issuance by the Note Issuer of any
- ----------------
additional Series of Notes after the Closing Date, the Servicer, on or prior to
the Series Issuance Date therefor, shall revise the Expected Amortization
Schedule to add the requisite information for each new Series of Notes and set
forth, as of each Payment Date through the scheduled Retirement of the Notes,
the aggregate principal amounts of the Notes of all Series, including such
additional Series, expected to be outstanding on such Payment Date. If the
Expected Amortization Schedule is revised as set forth above, the Servicer shall
send a copy of such revised Expected Amortization Schedule to the Note Issuer,
the Note Trustee, the Certificate Trustee, the Infrastructure Bank and the
Rating Agencies promptly thereafter.
(b) Routine True-Up Adjustments and Yearly Filings.
-----------------------------------------------
(i) Routine Yearly True-Up Adjustments and Filings.
-----------------------------------------------
(1) Each year on or immediately before the Annual Adjustment
Filing Date, the Servicer shall: (A) estimate collections through the
December 31 immediately following
<PAGE>
28
such Annual Adjustment Filing Date and through December 31 of the year
following the year of such Annual Adjustment Filing Date; (B) update
the assumptions underlying the FTA Charges, including energy usage
volume, the rate of delinquencies and write-offs, estimated expenses
and fees of the Note Issuer, the Trust and the Infrastructure Bank to
the extent not fixed, and the Collections Curves; (C) determine the
revised FTA Charges that, together with the funds on deposit in the
Reserve Subaccount, would restore: (1) the Principal Balance to the
Projected Principal Balance, (2) the balance in the
Overcollateralization Subaccount to the Required Overcollateralization
Level and (3) the balance in the Capital Subaccount to the Required
Capital Level, in each case within twelve months after such revised
FTA Charges go into effect (and with respect to any True-Up
Adjustments occurring after the last Scheduled Maturity Date for any
Class of a Series, determine the revised FTA Charges that would be
sufficient to retire the unpaid
<PAGE>
29
Principal Balance within the earlier of (x) a date which is not more than
twelve months after the Scheduled Maturity Date and (y) the last Final
Maturity Date for any Class of such Series); (D) file a Routine Annual
True-Up Mechanism Advice Letter with the CPUC, substantially in the form
attached hereto as Exhibit C, to notify the CPUC of the FTA Charges for the
---------
coming year; and (E) take all reasonable actions and make all reasonable
efforts to secure such True-Up Adjustment and to enforce the provisions of
the Statute which obligate the CPUC to approve rates at levels sufficient
to recover the FTA Payments in accordance with the Expected Amortization
Schedule.
(2) Each year on or immediately before August 19, which is the date
that is fifteen days before the Financing Order Anniversary Date (or if
such date is not a Servicer Business Day, on the Servicer Business Day
immediately preceding such date), the Servicer shall: (A) if required by
the Servicer in its judgment or found to be necessary by the CPUC, estimate
collections through the end of the Quarter in which the Financing Order
Anniversary Date occurs; (B) if required by the Servicer in its judgment or
found to be
<PAGE>
30
necessary by the CPUC, update the assumptions underlying the FTA Charges,
including energy usage volume, the rate of delinquencies and write-offs,
and estimated expenses and fees of the Note Issuer, the Trust and the
Infrastructure Bank to the extent not fixed; (C) if required by the
Servicer in its judgment or found to be necessary by the CPUC, determine
the revised FTA Charges that, together with the funds on deposit in the
Reserve Subaccount, would restore: (1) the Principal Balance to the
Projected Principal Balance, (2) the balance in the Overcollateralization
Subaccount to the Required Overcollateralization Level and (3) the balance
in the Capital Subaccount to the Required Capital Level, in each case
within twelve months after such revised FTA Charges go into effect (and
with respect to any True-Up Adjustments occurring after the
<PAGE>
31
last Scheduled Maturity Date for any Class of a Series, determine the
revised FTA Charges that would be sufficient to retire the unpaid Principal
Balance within the earlier of (x) a date which is not more than twelve
months after the Scheduled Maturity Date and (y) the last Final Maturity
Date for any Class of such Series); (D) file an Anniversary True-Up
Mechanism Advice Letter with the CPUC, substantially in the form attached
hereto as Exhibit D; and (E) take all reasonable actions and make all
---------
reasonable efforts to secure the resulting True-Up Adjustment (if such an
adjustment is sought by the Servicer or found to be necessary by the CPUC)
and to enforce the provisions of the Statute which obligate the CPUC to
approve rates at levels sufficient to recover the FTA Payments in
accordance with the Expected Amortization Schedule.
(3) In the case of a True-Up Adjustment pursuant to a Routine Annual
True-Up Mechanism Advice Letter, the Servicer shall implement the revised
FTA Charges, if any, as
<PAGE>
32
of the first day of the following calendar year.
(4) In the case of a True-Up Adjustment required by the Servicer in
its judgment or found to be necessary by the CPUC pursuant to an
Anniversary True-Up Mechanism Advice Letter, the Servicer shall implement
the revised FTA Charges, if any, on the date specified by the CPUC in
accordance with the Financing Order.
(ii) Routine Quarterly True-Up Adjustments. If the Issuance Advice Letter
-------------------------------------
with respect to a Series of Notes provides that the Servicer will file Routine
Quarterly True-Up Mechanism Advice Letters, then the Servicer shall make such
filings in accordance with the procedures set forth in Annex II hereto. On each
Series Issuance Date, the Servicer and the Note Issuer shall amend Annex II to
specify in detail the Servicer's obligations to perform routine quarterly True-
Up Adjustments, if any, with respect to the new Series of Notes issued on such
Series Issuance Date.
(c) Non-Routine True-Up Adjustments.
--------------------------------
<PAGE>
33
(i) Whenever the Servicer determines that the existing model
for calculating the FTA Charges should be amended or revised, subject
to the consent of the Note Issuer under the conditions set forth in
Section 3.17 of the Indenture, the Servicer shall file a Non-Routine
True-Up Mechanism Advice Letter with the CPUC designating the
adjustments to the model and any corresponding adjustments to the FTA
Charges (collectively, a "Non-Routine True-Up Adjustment").
(ii) The Servicer shall take all reasonable actions and make
all reasonable efforts to secure any Non-Routine True-Up Adjustments.
(iii) The Servicer shall implement any resulting adjustments to
the model and any resulting revised FTA Charges as of the first day of
the Quarter which begins at least 90 days after the Non-Routine True-
Up Mechanism Advice Letter is filed.
(d) Reports.
--------
(i) Notification of Advice Letter Filings
-------------------------------------
<PAGE>
34
and True-Up Adjustments. Whenever the Servicer files an Advice Letter with
-----------------------
the CPUC, the Servicer shall send a copy of such filing (together with a
copy of all notices and documents which, in the Servicer's reasonable
judgment, are material to the adjustments effected by such Advice Letter)
to the Note Issuer, the Note Trustee, the Certificate Trustee, the
Infrastructure Bank and the Rating Agencies concurrently therewith. If any
True-Up Adjustment requested in any such Advice Letter filing does not
become effective on the applicable date as provided by the Financing Order,
the Servicer shall notify the Note Issuer, the Note Trustee, the
Certificate Trustee, the Infrastructure Bank and the Rating Agencies by the
end of the second Servicer Business Day after such applicable date.
(ii) Quarterly Servicer's Certificate. Not later than the Remittance
--------------------------------
Date immediately prior to each Payment Date, the Servicer shall deliver a
written report substantially in the form of Exhibit E hereto (the
---------
"Quarterly Servicer's Certificate") to the Note Issuer, the Note Trustee,
the
<PAGE>
35
Certificate Trustee, the Infrastructure Bank and the Rating Agencies.
(iii) Reports to Customers. (A) After each revised FTA Charge has
--------------------
gone into effect pursuant to a True-Up Adjustment, the Servicer shall, to
the extent and in the manner and timeframe required by applicable CPUC
Regulations, if any, cause to be prepared and delivered to Customers a
notice announcing such revised FTA Charges.
(B) In addition, at least once each year, to the extent permitted
by CPUC Regulations, the Servicer shall cause to be prepared and delivered
to Customers a notice stating, in effect, that the Transition Property and
the FTA Charges are owned by the Note Issuer and not the Seller. 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 ESP
may from time to time use to communicate with their respective customers.
(C) Except to the extent that applicable CPUC Regulations make the
Applicable ESP responsible for such costs, the Servicer shall pay
<PAGE>
36
from its own funds all costs of preparation and delivery incurred in
connection with clauses (A) and (B) above, including but not limited
to printing and postage costs as the same may increase or decrease
from time to time.
(iv) ESP Reports. The Servicer shall provide to the Rating
------------
Agencies any publicly available reports filed by the Servicer with the
CPUC (or otherwise made publicly available by the Servicer) relating
to ESPs and any other non-confidential and non-proprietary information
relating to ESPs reasonably requested by the Rating Agencies.
SECTION 4.02. Limitation of Liability. (a) The Note 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 Note Issuer 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 file
the applications
<PAGE>
37
required by Section 4.01 in a timely and correct manner or other breach by
the Servicer of its duties under this Agreement), by the CPUC 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 FTA Charges and the
scheduled adjustments thereto.
(iii) The Servicer shall have no liability whatsoever relating to the
calculation of any revised FTA 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 volume and the
rate of delinquencies and write-offs, so long as the Servicer has acted in
good faith and has not acted in a grossly negligent manner in connection
therewith, nor shall the Servicer have any liability whatsoever as a result
of any Person, including the Noteholders or the Certificateholders, not
receiving any payment, amount or return anticipated or expected or in
respect of any Note or Certificate generally, except only to the extent
that the same is caused by the Servicer's gross negligence, willful
misconduct or bad faith.
<PAGE>
38
(b) Notwithstanding the foregoing, the Servicer hereby acknowledges
that the terms of this Section 4.02 are not intended to, and 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 Note Issuer hereby revocably appoints the Servicer,
and the Servicer hereby accepts such appointment, to act as the agent of the
Note Issuer and the Note Trustee 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 and Advice Letters relating thereto and all documents filed with
the CPUC in connection with any True-Up Adjustment (collectively, the
"Transition Property Records"), which are hereby constructively delivered
<PAGE>
39
to the Note Trustee, as pledgee of the Note Issuer (or, in the case of the
Subsequent Transition Property, will as of the applicable Subsequent Sale Date
be constructively delivered to the Note Trustee, as pledgee of the Note 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 Note Issuer
and maintain such accurate and complete accounts, records and computer systems
pertaining to the Transition Property Records as shall enable the Note Issuer to
comply with this 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 Note Issuer and the Note Trustee 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 Note Issuer or the Note Trustee of the
Transition Property Records. The Servicer's duties to hold the Transition
Property Records on behalf of the Note Issuer set forth in this Section 5.02, to
the extent such Transition Property Records have not been previously
<PAGE>
40
transferred to a successor Servicer pursuant to Article VII, shall terminate
three years after the earlier of the date on which (i) the Servicer is succeeded
by a successor Servicer in accordance with Article VII hereof and (ii) no Notes
of any Series are outstanding.
(b) Maintenance of and Access to Records. The Servicer shall
-------------------------------------
maintain the Transition Property Records at 77 Beale Street, San Francisco,
California or at such other office as shall be specified to the Note Issuer and
the Note Trustee by written notice at least 30 days prior to any change in
location. The Servicer shall make available for inspection to the Note Issuer
and the Note Trustee or their respective duly authorized representatives,
attorneys or auditors the Transition Property Records at such times during
normal business hours as the Note Issuer or the Note 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 CPUC Regulations)
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).
<PAGE>
41
(c) Release of Documents. Upon instruction from the Note Trustee,
---------------------
the Servicer shall release any Transition Property Records to the Note Trustee,
the Note Trustee's agent or the Note Trustee's designee, as the case may be, at
such place or places as the Note Trustee may designate, as soon as practicable.
(d) Defending Transition Property Against Claims. The Servicer shall
---------------------------------------------
institute any action or proceeding necessary to compel performance by the CPUC
or the State of California of any of their obligations or duties under the PU
Code, the Financing Order or any Advice Letter, and the Servicer agrees to take
such legal or administrative actions, including defending against or instituting
and pursuing legal actions and appearing or testifying at hearings or similar
proceedings, as may be reasonably necessary to block or overturn any attempts to
cause a repeal of, modification of or supplement to the Statute or the Financing
Order or the rights of holders of Transition Property by legislative enactment,
voter initiative or constitutional amendment that would be adverse to
Certificateholders. The costs of any such action shall be payable from FTA
Collections as an Operating Expense in accordance with the priorities set forth
in Section 8.02(d) of the Indenture. The Servicer's obligations pursuant to
<PAGE>
42
this Section 5.02 shall survive and continue notwithstanding the fact that the
payment of Operating Expenses pursuant to Section 8.02(d) of the Indenture may
be delayed (it being understood that the Servicer may be required to advance its
own funds to satisfy its obligations hereunder).
SECTION 5.03. Instructions; Authority to Act. For so long as any
-------------------------------
Notes remain outstanding, the Servicer shall be deemed to have received proper
instructions with respect to the Transition Property Records upon its receipt of
written instructions signed by a Trust Officer of the Note Trustee.
SECTION 5.04. Custodian's Indemnification. The Servicer as custodian
----------------------------
shall indemnify the Note Issuer, the Trust, the Certificate Trustee, the
Delaware Trustee, the Note Trustee, the Infrastructure Bank, the STO, the
Noteholders and the Certificateholders 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, claims, costs or expenses of any kind whatsoever (collectively,
"Losses") that may be imposed on, incurred by or asserted against any such
Person as the result of any improper act or omission in any way relating to the
maintenance and custody by the Servicer, as
<PAGE>
43
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 gross negligence of the Note Issuer, the
Trust, the Certificate Trustee, the Delaware Trustee, the Note Trustee, the
Infrastructure Bank, the STO, the Noteholders or the Certificateholders, as the
case may be.
Indemnification under this Section shall survive resignation or
removal of the Note Trustee, the Delaware Trustee or the Certificate Trustee and
shall include reasonable fees and expenses of investigation and litigation.
SECTION 5.05. 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. If
any Servicer shall resign as Servicer in accordance with the provisions of this
Agreement or if all of the rights and obligations of any Servicer shall have
been terminated under Section 7.01, the appointment of such Servicer as
custodian shall be terminated by the Note Trustee or by the Holders of Notes
evidencing not less than 25 percent of the Outstanding Amount of the Notes of
all Series in the same manner as the
<PAGE>
44
Note Trustee or such Holders may terminate the rights and obligations of the
Servicer under Section 7.01.
SECTION 5.06. General Indemnification of Note Trustee, Certificate
----------------------------------------------------
Trustee and the Delaware Trustee. The Servicer hereby agrees to indemnify and
- ---------------------------------
hold harmless the Note Trustee, the Certificate Trustee and the Delaware Trustee
and their respective directors, officers, employees and agents from and against
any and all Losses incurred by or asserted against any such Person as a result
of or in connection with the transactions contemplated by this Agreement or any
Basic Document, other than any Loss incurred by reason or result of the gross
negligence or willful misconduct of the Note Trustee, the Certificate Trustee or
the Delaware Trustee, as the case may be; provided, however, that the foregoing
-------- -------
indemnity is extended to the Note Trustee, the Certificate Trustee and the
Delaware Trustee solely in their respective capacities as trustees and not for
the benefit of the Noteholders or the Certificateholders. The obligations of
the Servicer set forth herein shall survive the termination of this Agreement or
the earlier resignation or removal of the Note Trustee under the Indenture or
the Certificate Trustee or the Delaware Trustee under the Trust Agreement.
ARTICLE VI
<PAGE>
45
The Servicer
------------
SECTION 6.01. Representations and Warranties of Servicer. The
-------------------------------------------
Servicer makes the following representations and warranties, as of the Closing
Date, as of each Subsequent Sale Date relating to the sale of Subsequent
Transition Property pursuant to a Subsequent Sale Agreement, and as of such
other dates as expressly provided in this Section 6.01, on which the Note Issuer
and the Note 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 and the
pledge thereof to the Note Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Servicer is duly organized
-------------------------------
and validly existing as a corporation in good standing under the laws of
the state of its incorporation, with the 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 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.
<PAGE>
46
(b) Due Qualification. The Servicer is duly qualified to do business
------------------
as a foreign corporation in good standing, and has obtained all necessary
licenses and approvals in, all jurisdictions in which the owner ship 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, properties or
prospects or adversely affect the servicing of the Transition Property).
(c) Power and Authority. The Servicer has the requisite power and
--------------------
authority to execute and deliver this Agreement and to carry out its terms;
and the execution, delivery and performance of this Agreement have been
duly authorized by the Servicer by all necessary corporate action.
(d) Binding Obligation. This Agreement constitutes a legal, valid
-------------------
and binding obligation of the Servicer enforceable in accordance with its
terms, subject to applicable insolvency, reorganization, moratorium,
fraudulent transfer and other similar laws
<PAGE>
47
relating to or affecting creditors' rights generally from time to time in
effect and to general principles of equity (including, without limitation,
concepts of materiality, reasonableness, good faith and fair dealing),
regardless of whether considered in a proceeding in equity or at law.
(e) No Violation. After giving effect to the release of the lien of
-------------
the First and Refunding Mortgage dated as of December 1, 1920, executed by
Pacific Gas and Electric Company, as supplemented and amended to the date
hereof, in favor of BNY Western Trust Company, successor by acquisition to
Wells Fargo Bank, N.A., successor by merger to First Interstate Bank of
California, as trustee, the consummation of the transactions contemplated
by this Agreement and the fulfillment of the terms hereof shall not
conflict with, result in any breach of any of the terms and provisions of,
nor constitute (with or without notice or lapse of time) a default under,
the articles of incorporation or bylaws of the Servicer, or any indenture,
agreement or other instrument to which the Servicer is a party or by which
it shall be bound; nor result in the creation or imposition of any Lien
upon any of its properties pursuant to the terms of any such
<PAGE>
48
indenture, agreement or other instrument; nor violate any law or any order,
rule or regulation applicable to the Servicer of any court or of any
Federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Servicer or its
properties.
(f) No Proceedings. Except as set forth on Schedule 6.01(f), there
---------------
are no proceedings or investigations pending or, to the Servicer's best
knowledge, threatened before any court, Federal or state regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Servicer or its properties involving or relating to
the Servicer or the Note Issuer or, to the Servicer's knowledge, any other
Person: (i) asserting (A) the invalidity of this Agreement, or (B) the
invalidity of the Indenture, the Trust Agreement, any of the other Basic
Documents or the Notes or the Certificates, (ii) seeking to prevent the
issuance of the Notes or the Certificates or the consummation of any of the
transactions contemplated by this Agreement, the Indenture, the Trust
Agreement or any of the other Basic Documents, (iii) seeking any
determination or ruling that might materially and adversely affect the
<PAGE>
49
performance by the Servicer of its obligations under, or the validity or
enforceability of, this Agreement, the Indenture, the Trust Agreement, any
of the other Basic Documents or the Notes or the Certificates or (iv)
relating to the Servicer and which might adversely affect the Federal or
state income tax attributes of the Notes or the Certificates.
(g) Approvals. No approval, authorization, consent, order or other
----------
action of, or filing with, any court, Federal or state regulatory body,
administrative agency or other governmental instrumentality is required in
connection with the execution and delivery by the Servicer of this
Agreement, the performance by the Servicer of the transactions contemplated
hereby or the fulfillment by the Servicer of the terms hereof, except those
that have been obtained or made and those that the Servicer is required to
make in the future pursuant to Article IV hereof.
(h) Collections Curves. Each Collections Curve used in connection
-------------------
with Schedule 6 to Annex I hereto is accurate in all material respects, and
----------
the future delivery of each revised Collections Curve shall constitute a
representation and warranty that each such revised Collections Curve is
accurate in all material
<PAGE>
50
respects.
(i) Premises. The premises set forth in Schedule 6 to Annex I hereto
--------- ----------
are reasonable based upon historical performance and will be reasonable as
they change from time to time.
(j) Reports and Certificates. Each report and certificate delivered
-------------------------
in connection with an Advice Letter will constitute a representation and
warranty by the Servicer that each such report or certificate, as the case
may be, is true and correct; provided, however, that to the extent any such
-------- -------
report or certificate is based in part upon or contains assumptions,
forecasts or other predictions of future events, the representation and
warranty of the Servicer with respect thereto will be limited to the
representation and warranty that such assumptions, forecasts or other
predictions of future events are reasonable based upon historical
performance.
SECTION 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 Note Issuer, the Trust, the Note
Trustee, the Certificate Trustee, the
<PAGE>
51
Delaware Trustee, the Infrastructure Bank, the STO, the Seller, the Noteholders
and the Certificateholders 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 Losses that may be imposed on, incurred by or asserted
against any such Person as a result of (i) the Servicer's willful misconduct,
bad faith or gross negligence in the performance of its duties or observance of
its covenants under this Agreement or the Servicer's reckless disregard of its
obligations and duties under this Agreement or (ii) the Servicer's breach of any
of its representations or warranties in this Agreement.
(c) For purposes of Section 6.02(b), in the event of the termination
of the rights and obligations of Pacific Gas and Electric Company (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 Sections 6.02(b) and 6.02(c) shall survive
the resignation or removal of the Note Trustee, the Delaware Trustee or the
Certificate Trustee or the termination of this Agreement and shall include
<PAGE>
52
reasonable fees and expenses of investigation and litigation (including
reasonable attorneys fees and expenses).
(e) Except to the extent expressly provided for in this Agreement or
the other Basic Documents (including, without limitation, 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 Note Issuer and the Trust 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 Seller, 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.
SECTION 6.03. Merger or Consolidation of, or Assumption of the
------------------------------------------------
Obligations of, Servicer. Any Person (a) into which the Servicer may be merged
- -------------------------
or consolidated, (b) which may result from any merger or consolidation to which
the Servicer shall be a party or (c) which may succeed
<PAGE>
53
to the properties and assets of the Servicer substantially as a whole, which
Person in any of the foregoing cases executes an agreement of assumption to
perform every obligation of the Servicer hereunder, shall be the successor to
the Servicer under this Agreement without further act on the part of any of the
parties to this Agreement; provided, however, that (i) immediately after giving
-------- -------
effect to such transaction, no 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 Note Issuer,
the Note Trustee and the Rating Agencies an Officers' Certificate and an Opinion
of Counsel each stating that such consolidation, merger or succession and such
agreement of assumption complies with this Section and that all conditions
precedent provided for in this Agreement relating to such transaction have been
complied with and (iii) the Servicer shall have delivered to the Note Issuer,
the Note Trustee and the Rating Agencies an Opinion of Counsel either (A)
stating that, in the opinion of such counsel, all filings to be made by the
Servicer, including filings with the CPUC pursuant to the PU Code, have been
executed and filed that are necessary to preserve and protect fully the
interests of the Note Issuer in the Transition Property and reciting the details
<PAGE>
54
of such filings or (B) stating that, in the opinion of such counsel, no such
action shall be necessary to preserve and protect such interests.
Notwithstanding anything herein to the contrary, the execution of the foregoing
agreement of assumption and compliance with clauses (i), (ii) and (iii) above
shall be conditions to the consummation of the transactions referred to in
clauses (a), (b) or (c) above.
SECTION 6.04. Limitation on Liability of Servicer and Others.
-----------------------------------------------
Neither the Servicer nor any of the directors or officers or employees or agents
of the Servicer shall be liable to the Note Issuer, the Note Trustee, the
Infrastructure Bank, the Noteholders, the Trust, the Certificate Trustee, the
Delaware Trustee, the Certificateholders or any other Person, except as provided
under this Agreement, for any action taken or for refraining from the taking of
any action pursuant to this Agreement or for errors in judgment; provided,
--------
however, that this provision shall not protect the Servicer or any such person
- -------
against any liability that would otherwise be imposed by reason of willful
misconduct, bad faith or gross negligence in the performance of duties or by
reason of reckless disregard of obligations and duties under this Agreement. The
Servicer and any director or officer or employee or agent of the Servicer may
rely in good faith on the advice
<PAGE>
55
of counsel reasonably acceptable to the Note 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, the Servicer shall not be under
any obligation to appear in, prosecute or defend any legal action that shall not
be related to or incidental to its duties to service the Transition Property in
accordance with this Agreement, and that in its opinion may involve it in any
expense or liability.
SECTION 6.05. Pacific Gas and Electric Company Not to Resign as
-------------------------------------------------
Servicer. Subject to the provisions of Section 6.03, Pacific Gas and Electric
- ---------
Company shall not resign from the obligations and duties hereby imposed on it as
Servicer under this Agreement except upon either (a) a determination that the
performance of its duties under this Agreement shall no longer be permissible
under applicable law or (b) satisfaction of the following: (i) the Rating Agency
Condition shall have been satisfied, (ii) the CPUC shall have approved such
resignation and (iii) notice of such resignation shall have been given to the
Infrastructure Bank. Notice of any such determination permitting the
resignation of Pacific Gas and Electric Company shall be communicated to the
Note Issuer, the Note Trustee, the
<PAGE>
56
Certificate Trustee, the Infrastructure Bank and the Rating Agencies at the
earliest practicable time (and, if such communication is not in writing, shall
be confirmed in writing at the earliest practicable time) and any such
determination shall be evidenced by an Opinion of Counsel to such effect
delivered to the Note Issuer, the Note Trustee and the Certificate Trustee
concurrently with or promptly after such notice. No such resignation shall
become effective until a successor Servicer shall have assumed the
responsibilities and obligations of Pacific Gas and Electric Company in
accordance with Section 7.02.
SECTION 6.06. Servicing Compensation. (a) In consideration for its
-----------------------
services hereunder, until the Retirement of the Notes, the Servicer shall
receive a fee (the "Servicing Fee") quarterly on each Payment Date in an amount
equal to (i) one-fourth of 0.25 percent of the outstanding Principal Balance
(before giving effect to payments made on such date) for so long as FTA Charges
are included as a line item on Bills otherwise sent to Customers or (ii) one-
fourth of 1.50 percent of the outstanding Principal Balance (before giving
effect to payments made on such date) if FTA Charges are not included as a line
item on Bills otherwise sent to Customers but, instead, are billed separately to
Customers. The Servicer also shall be
<PAGE>
57
entitled to retain as additional compensation (i) any interest earnings on FTA
Payments received by the Servicer and invested by the Servicer pursuant to
Section 6(d) of Annex I hereto during each Collection Period prior to remittance
to the Collection Account and (ii) all late payment charges, if any, collected
from Customers or ESPs.
(b) The Servicing Fee set forth in Section 6.06(a) above shall be
paid to the Servicer by the Note Trustee, on each Payment Date in accordance
with the priorities set forth in Section 8.02(d) of the Indenture, by wire
transfer of immediately available funds from the Collection Account to an
account designated by the Servicer. Any portion of the Servicing Fee not paid on
such date shall be added to the Servicing Fee payable on the subsequent Payment
Date.
(c) Except as provided in Section 5.02(d), the Servicer shall be
required to pay from its own account all expenses incurred by it 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 Noteholders and
Certificateholders) 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
<PAGE>
58
or reimbursement therefor.
SECTION 6.07. Compliance with Applicable Law. The Servicer covenants
-------------------------------
and agrees, in servicing the Transition Property, to comply 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 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 Noteholders, the Note
- --------------------
Trustee, the Certificate Trustee, the Infrastructure Bank and the STO access to
the Transition Property Records in such cases where the Noteholders, the Note
Trustee, the Certificate Trustee and the Infrastructure Bank shall be required
by applicable law to be provided access to such records. 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 shall affect the obligation of the Servicer to observe any
<PAGE>
59
applicable law (including any CPUC 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.
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 the Rating Agency Condition shall have been satisfied in
- -------- -------
connection therewith; provided further that the Servicer shall remain obligated
-------- -------
and be liable to the Note Issuer, the Note Trustee, the Certificate Trustee and
the Noteholders 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; and provided further, however, that
---------------- -------
nothing herein shall preclude the execution by the Servicer of an ESP Service
Agreement with ESPs. The fees and expenses of such Person shall be as agreed
between the Servicer and such Person from time to time and none of the Note
Issuer, the Note Trustee, the Noteholders or any other Person shall have any
<PAGE>
60
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 Notes or the Certificates.
SECTION 6.11. Remittances. (a) Subject to clause (b) below, on each
------------
Remittance Date, the Servicer shall cause to be made a wire transfer of
immediately available funds equal to the Aggregate Remittance Amount for the
applicable Collection Period to the General Subaccount of the Collection
Account. Prior to each remittance to the General Subaccount of the Collection
Account pursuant to this Section, the Servicer shall provide written notice to
the Note Trustee of each such remittance (including the exact dollar amount to
be remitted).
(b) Notwithstanding the foregoing clause (a), during any period in
which there exists the occurrence and continuance of a Servicer Default, the
failure to satisfy the Rating Agency Condition or the failure of the Servicer to
maintain a short-term rating of A-1 or better by Standard & Poor's and P-1 or
better by Moody's, the Servicer shall remit to the General Subaccount of the
Collection Account the total FTA Payments estimated to have been received by
<PAGE>
61
the Servicer from or on behalf of Customers on a given Servicer Business Day in
respect of all previously Billed FTA Charges within two Servicer Business Days
of receipt thereof by the Servicer (the "Daily Remittance"). On or before each
Remittance Date during any period described in this clause (b), the Servicer
shall calculate the amount of any Remittance Shortfall or Excess Remittance
attributable to the prior Collection Period and (A) if a Remittance Shortfall
exists, the Servicer shall make a supplemental remittance to the General
Subaccount of the Collection Account on such Remittance Date in the amount of
such Remittance Shortfall, or (B) if an Excess Remittance exists, the Servicer
shall reduce the amount of each Daily Remittance (beginning with the Daily
Remittance occurring on the Remittance Date) by the outstanding amount of such
Excess Remittance until the balance of the Excess Remittance has been reduced to
zero.
(c) The Servicer agrees and acknowledges that it holds all FTA
Payments collected by it for the benefit of the Note Issuer and that all such
amounts will be remitted by the Servicer in accordance with this Section without
any surcharge, fee, offset, charge or other deduction except (i) as set forth in
clause (b) above or clause (d) below and (ii) for late fees permitted by Section
6.06. The Servicer
<PAGE>
62
further agrees not to make any claim to reduce its obligation to remit all FTA
Payments collected by it in accordance with this Agreement except (i) as set
forth in clause (b) above or clause (d) below and (ii) for late fees permitted
by Section 6.06.
(d) If there is an Excess Remittance, the Servicer shall be entitled
either (i) to reduce the amount which the Servicer remits to the General
Subaccount of the Collection Account on such Remittance Date by the amount of
such Excess Remittance, the amount of such reduction becoming the property of
the Servicer or (ii) immediately to be paid from the Collection Account or any
subaccount therein 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
such Remittance Date will be increased by the amount of such Remittance
Shortfall, such increase coming from the Servicer's own funds.
ARTICLE VII
Default
-------
SECTION 7.01. Servicer Default. If any one of the following events
-----------------
(a "Servicer Default") shall occur and be continuing:
<PAGE>
63
(a) any failure by the Servicer to deposit in the Collection Account
on behalf of the Note Issuer any required remittance that shall continue
unremedied for a period of three Business Days after written notice of such
failure is received by the Servicer from the Note Issuer or the Note
Trustee or after discovery of such failure by an officer of the Servicer;
or
(b) any failure on the part of the Servicer or the Seller, as the case
may be, duly to observe or to perform in any material respect any other
covenants or agreements of the Servicer or the Seller (as the case may be)
set forth in this Agreement (including Section 4.01) or any other Basic
Document to which it is a party, which failure shall (i) materially and
adversely affect the rights of Noteholders or Certificateholders and (ii)
continue unremedied for a period of 30 days after the date on which written
notice of such failure, requiring the same to be remedied, shall have been
given (A) to the Servicer or the Seller (as the case may be) by the Note
Issuer or (B) to the Servicer or the Seller (as the case may be) by the
Note Trustee or by the Holders of Notes evidencing not less than 25 percent
of the Outstanding Amount of the Notes of all Series; or
<PAGE>
64
(c) any representation or warranty made by the Servicer in this
Agreement shall prove to have been incorrect when made, which has a
material adverse effect on the Note Issuer or the Certificateholders and
which material adverse effect continues unremedied for a period of 60 days
after the date on which written notice thereof, requiring the same to be
remedied, shall have been delivered to the Servicer by the Note Issuer or
the Note Trustee; or
(d) an Insolvency Event occurs with respect to the Servicer or the
Seller;
then, and in each and every case, so long as the Servicer Default shall not have
been remedied, either the Note Trustee, or the Holders of Notes evidencing not
less than 25 percent of the Outstanding Amount of the Notes of all Series, by
notice then given in writing to the Servicer (and to the Note Trustee if given
by the Noteholders) (a "Termination Notice") may terminate all the rights and
obligations (other than the obligations set forth in Section 6.02 hereof) of the
Servicer under this Agreement. In addition, upon a Servicer Default described in
Section 7.01(a), each of the following shall be entitled to apply to the CPUC
for sequestration and payment of revenues arising with respect to the Transition
Property: (1) the
<PAGE>
65
Certificateholders and the Certificate Trustee as beneficiary of any statutory
lien permitted by the PU Code; (2) the Note Issuer or its assignees; or (3)
pledgees or transferees, including transferees under Section 844 of the PU Code,
of the Transition Property. 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 Notes, the Transition Property, the FTA
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 Note 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 Note Issuer and the Note 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 cash amounts that shall at the
<PAGE>
66
time be held by the predecessor Servicer for remittance, or shall thereafter be
received by it with respect to the Transition Property or the FTA Charges. All
reasonable costs and expenses (including attorneys 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 shall be paid by the predecessor Servicer upon
presentation of reasonable documentation of such costs and expenses.
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 termination hereunder, the Note Issuer shall appoint a successor
Servicer with the Note Trustee'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
<PAGE>
67
acceptable to the Note Issuer and the Note Trustee. If within 30 days after the
delivery of the Termination Notice, the Note Issuer shall not have obtained such
a new Servicer, the Note Trustee may petition the CPUC 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
CPUC Regulations to perform the duties of the Servicer, (ii) the Rating Agency
Condition shall have been satisfied and (iii) such Person enters into a
servicing agreement with the Note Issuer having substantially the same
provisions as this Agreement.
(b) Upon appointment, the successor Servicer shall be the successor
in all respects to the predecessor Servicer and shall be subject to all the
responsibilities, duties and liabilities arising thereafter relating thereto
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 Holders of Notes
------------------------
evidencing not less than a majority of the Outstanding Amount of the Notes of
all Series may, on behalf of all Noteholders, waive in writing any default by
the
<PAGE>
68
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 Note Issuer, the Note Trustee, the Certificate Trustee, the
Infrastructure Bank, the STO and the Rating Agencies, promptly after having
obtained knowledge thereof, but in no event later than five Business Days
thereafter, written notice in an Officers' Certificate of any event which with
the giving of notice or lapse of time, or both, would become a Servicer Default
under Section 7.01(a) or (b).
ARTICLE VIII
Miscellaneous Provisions
------------------------
SECTION 8.01. Amendment. (a) This Agreement may be amended in
----------
writing by the Servicer and the Note Issuer with five Business Days' prior
written notice given to the Rating Agencies and the prior written consent of the
Note
<PAGE>
69
Trustee, but without the consent of any of the Noteholders or
Certificateholders, to cure any ambiguity, to correct or supplement any
provisions in this Agreement or for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions in this Agreement or
of modifying in any manner the rights of the Noteholders or the
Certificateholders; provided, however, that such action shall not, as evidenced
-------- -------
by an Officer's Certificate delivered to the Note Issuer and the Note Trustee,
adversely affect in any material respect the interests of any Noteholder or
Certificateholder.
This Agreement may also be amended in writing from time to time by the
Servicer and the Note Issuer with prior written notice given to the Rating
Agencies and the prior written consent of the Note Trustee and the prior written
consent of the Holders of Notes evidencing not less than a majority of the
Outstanding Amount of the Notes of all Series, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of modifying in any manner the rights of the Noteholders or
the Certificateholders; provided, however, that no such amendment shall (a)
-------- -------
increase or reduce in any manner the amount of, or accelerate or delay the
timing of, FTA Collections or (b) reduce the aforesaid
<PAGE>
70
percentage of the Outstanding Amount of the Notes, the Holders of which are
required to consent to any such amendment, without the consent of the Holders of
all the outstanding Notes.
Promptly after the execution of any such amendment and the requisite
consents, the Note Issuer shall furnish written notification of the substance of
such amendment to the Note Trustee and each of the Rating Agencies.
It shall not be necessary for the consent of Noteholders pursuant to
this Section to approve the particular form of any proposed amendment or
consent, but it shall be sufficient if such consent shall approve the substance
thereof.
Prior to its consent to any amendment to this Agreement, the Note
Trustee shall be entitled to receive and conclusively rely upon an Opinion of
Counsel stating that such amendment is authorized or permitted by this
Agreement. The Note Trustee may, but shall not be obligated to, enter into any
such amendment which affects the Note Trustee's own rights, duties or immunities
under this Agreement or otherwise.
(b) Notwithstanding Section 8.01(a) or anything to the contrary in
this Agreement, the Servicer and the Note Issuer may amend Annex I to this
Agreement in writing with
<PAGE>
71
prior written notice given to the Note Trustee and the Rating Agencies, but
without the consent of the Note Trustee, any Rating Agency or any Noteholder or
Certificateholder, solely to address changes to the Servicer's method of
calculating FTA Payments received as a result of changes to the Servicer's
current computerized customer information system, as contemplated by Section
6(e)(iii) of Annex I hereto; provided that any such amendment shall not have or
--------
cause a material adverse effect on the Certificateholders.
SECTION 8.02. Protection of Title to Trust. (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 FTA Payments received by the Servicer and FTA
Collections from time to time deposited in the Collection Account.
(b) The Servicer shall permit the Note 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 FTA Charges.
Nothing in this
<PAGE>
72
Section 8.02(b) shall affect the obligation of the Servicer to observe any
applicable law (including any CPUC 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 8.02(b).
SECTION 8.03. Notices. All demands, notices and communications upon
--------
or to the Servicer, the Note Issuer, the Note Trustee, the Infrastructure Bank,
the STO, the Certificate Trustee or the Rating Agencies under this Agreement
shall be in writing and personally delivered, sent by overnight mail or sent by
telecopy or other similar form of rapid transmission, and shall be deemed to
have been duly given upon receipt (a) in the case of the Servicer, to Pacific
Gas and Electric Company, at 77 Beale Street, San Francisco, CA 94105,
Attention: Treasurer, (b) in the case of the Note Issuer, to PG&E Funding LLC,
at 245 Market Street, Room 424, San Francisco, CA 94105, Attention: President,
(c) in the case of the Note Trustee, at the Corporate Trust Office, (d) in the
case of the Infrastructure Bank, to California Infrastructure and Economic
Development Bank, c/o California Trade and Commerce Agency, at 801 K Street,
Suite 1700, Sacramento, CA 95814, Attention: Executive Director, (e) in the
case of the
<PAGE>
73
Certificate Trustee, to Bankers Trust Company of California, N.A., c/o Bankers
Trust Company, Corporate Trust and Agency Services, at Four Albany Street, New
York, NY 10006, Attention of Structured Finance Group, (f) in the case of the
STO, to the California State Treasurer's Office, 915 Capitol Mall, Room 110,
Sacramento, CA 95814, Attention of Deputy Treasurer, (g) in the case of Moody's,
to Moody's Investors Service, Inc., ABS Monitoring Department, 99 Church Street,
New York, New York 10007, (h) in the case of Standard & Poor's, to Standard &
Poor's Corporation, 26 Broadway (10th Floor), New York, New York 10004,
Attention of Asset Backed Surveillance Department, (i) in the case of Fitch, to
Fitch Investors Service, L.P., One State Street Plaza, New York, NY 10004,
Attention of Commercial Asset-Backed Securities, or (j) as to each of the
foregoing, at such other address as shall be designated by written notice to the
other parties.
SECTION 8.04. Assignment. Notwithstanding anything to the contrary
-----------
contained herein, except as pro vided 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 8.05. Limitations on Rights of Others. The provisions of this
--------------------------------
Agreement are solely for the benefit
<PAGE>
74
of the Servicer and the Note Issuer and, to the extent provided herein or in the
Basic Documents, the Trust, the Note Trustee, the Certificate Trustee, the
Noteholders, the Certificateholders, the Infrastructure Bank and the STO, and
nothing in this Agreement, whether express or implied, shall be construed to
give to any other Person any legal or equitable right, remedy or claim in the
Transition Property or under or in respect of this Agreement or any covenants,
conditions or provisions contained herein.
SECTION 8.06. Severability. Any provision of this Agreement that is
-------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 8.07. Separate Counterparts. This Agreement may be executed
----------------------
by the parties hereto in separate counterparts, each of which when so executed
and delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 8.08. Headings. The headings of the various Articles and
---------
Sections herein are for convenience of
<PAGE>
75
reference only and shall not define or limit any of the terms or provisions
hereof.
SECTION 8.09. Governing Law. This Agreement shall be construed in
--------------
accordance with the laws of the State of California, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
SECTION 8.10. Assignment to Note Trustee. The Servicer hereby
---------------------------
acknowledges and consents to the collateral assignment of any or all of the Note
Issuer's rights and obligations hereunder to the Note Trustee and to the further
assignment of the Note Trustee's rights and obligations under the Indenture to
the Certificate Trustee.
SECTION 8.11. Nonpetition Covenants. Notwithstanding any prior
----------------------
termination of this Agreement or the Indenture, but subject to the CPUC's right
to order the sequestration and payment of revenues arising with respect to the
Transition Property notwithstanding any bankruptcy, reorganization or other
insolvency proceedings with respect to the debtor, pledgor or transferor of the
Transition Property pursuant to Section 843(e) and (g) of the PU Code, the
Servicer shall not, prior to the date which is one year and one day after the
termination of the Indenture with
<PAGE>
76
respect to the Note Issuer, acquiesce, petition or otherwise invoke or cause the
Note Issuer or the Trust to invoke the process of any court or governmental
authority for the purpose of commencing or sustaining a case against the Note
Issuer or the Trust 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 Note Issuer or the Trust or any
substantial part of the property of the Note Issuer or the Trust, or ordering
the winding up or liquidation of the affairs of the Note Issuer or the Trust.
SECTION 8.12. Limitation of Liability. It is expressly understood
------------------------
and agreed by the parties hereto that (a) this Agreement is executed and
delivered by Bankers Trust Company of California, N.A., not individually or
personally but solely as Note Trustee on behalf of the holders of the Notes, in
the exercise of the powers and authority conferred and vested in it, (b) the
representations, undertakings and agreements herein made by the Note Trustee on
behalf of the holders of the Notes are made and intended not as personal
representations, undertakings and agreements by Bankers Trust Company of
California, N.A., but are made and intended for the purpose of binding only the
holders of the Notes, (c) nothing herein
<PAGE>
77
contained shall be construed as creating any liability on Bankers Trust Company
of California, N.A., individually or personally, to perform any covenant either
expressed or implied contained herein, except in its capacity as Note Trustee,
all such liability, if any, being expressly waived by the parties who are
signatories to this Agreement and by any Person claiming by, through or under
such parties and (d) under no circumstances shall Bankers Trust Company of
California, N.A., be personally liable for the payment of any indebtedness or
expenses of the holders of the Notes or be personally liable for the breach or
failure of any obligation, representation, warranty or covenant made or
undertaken by the Note Trustee under this Agreement; provided, however, that
-------- -------
this provision shall not protect Bankers Trust Company of California, N.A.
against any liability that would otherwise be imposed by reason of willful
misconduct, bad faith or gross negligence in the performance of duties or by
reason of reckless disregard of obligations and duties under this Agreement.
<PAGE>
78
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.
PG&E FUNDING LLC,
by
---------------------------
Title:
PACIFIC GAS AND ELECTRIC COMPANY,
by
---------------------------
Title:
Acknowledged and Accepted:
BANKERS TRUST COMPANY
OF CALIFORNIA, N.A., not in
its individual capacity
but solely as Note Trustee,
by
------------------------
<PAGE>
ANNEX I
TO
SERVICING AGREEMENT
The Servicer agrees to comply with the following servicing procedures:
SECTION 1. DEFINITIONS.
(a) Capitalized terms used herein and not otherwise defined shall have the
meanings set forth in the Agreement.
(b) Whenever used in this Annex I, the following words and phrases shall
have the following meanings:
"Aggregate Remittance Amount" has the meaning set forth in Section
---------------------------
6(e)(i) of this Annex I.
"Balanced Payment Plan" means a level payment plan offered by the
---------------------
Seller, which, if elected by a Residential Customer, provides for level monthly
Bill charges.
"Billed FTA Revenues" means the amounts billed to Customers pursuant
-------------------
to the FTA Charges, whether billed directly to such Customers by the Servicer or
indirectly through an ESP pursuant to Consolidated ESP Billing.
"Closing Bill" means the final bill issued to a Customer at the time
------------
service is terminated.
"Consolidated ESP Billing" means the billing option available to
------------------------
Customers served by an ESP pursuant to which the Applicable ESP will be
responsible for billing and collecting all charges to Customers electing such
billing option, including the FTA Charges, and will become obligated to the
Servicer for such Billed FTA Revenues, all in accordance with applicable CPUC
Regulations. Unless the context indicates otherwise, the term Consolidated ESP
Billing includes the Full Consolidated ESP Billing option.
"Daily Collections Curve" means the tally for the number of customer
-----------------------
accounts specified in Schedule 6 to this Annex I, resulting from counting the
number of days between when a particular bill is generated and when payment is
received, as described in Schedule 6 to this Annex I.
"Estimation Template" means the template shown on Schedule 6 to this
------------------- ----------
Annex I, which template is used to calculate the FTA Payments estimated to have
been received by the Servicer during any Collection Period.
I-1
<PAGE>
"Full Consolidated ESP Billing" means the billing option available to
-----------------------------
Customers served by an ESP, if such option is approved by the utility with
respect to such ESP, pursuant to which such ESP performs the same tasks it would
perform under Consolidated ESP Billing and, in addition, calculates all utility
charges to Customers, including the FTA Charges, from billing factors provided
by the utility and the Servicer.
"Monthly Collections Curve" means the cumulative summation of the
-------------------------
Daily Collections Curve to derive monthly percentages of revenue collected, as
described in Schedule 6 to this Annex I.
"Net Write-Off Percent" means the number (expressed as a percent)
---------------------
allocable to a particular Billing Period equal to: (i) the amount by which
Write-Offs in the current Billing Period exceed Write-Off recoveries in the
current Billing Period, divided by (ii) the total billed revenue in the current
Billing Period.
"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 or others.
"Variables" means the following variables underlying the Daily
---------
Collections Curves:
(i) sample sizes for Residential and Small Commercial Customers;
(ii) tallied number of days recorded between when bills are generated
and when bill payments are received; and
(iii) the actual Write-Off percentage, calculated in the same manner
as Net Write-Off Percent except that it is calculated for the applicable
calendar year, for Residential and Small Commercial Customers for the most
recent year.
"Write-Offs" means net amounts written off (including amounts written
----------
off that are subsequently recovered) of Billed FTA Revenues that remain unpaid
by Customers and ESPs as of 180 days after the issuance of the Closing Bills
containing such charges.
SECTION 2. DATA ACQUISITION.
----------------
(a) Installation and Maintenance of Meters. Except to the extent that an
--------------------------------------
ESP is responsible for such services pursuant to an ESP Service Agreement, 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 every 27-33 days.
(b) Meter Reading. At least once each 27-33 days, the Servicer shall
-------------
obtain usage measurements for each Customer; provided, however, that the
-------- -------
Servicer may determine any Customer's usage on the basis of estimates in
accordance with applicable CPUC Regulations; and provided further that the
-------- -------
Servicer may obtain usage measurements from the Applicable ESP
I-2
<PAGE>
for Customers receiving meter reading services from such ESP if the respective
ESP Service Agreement so provides.
(c) Cost of Metering. The Note Issuer shall not be obligated to pay any
----------------
costs associated with the metering duties set forth in this Section 2,
including, but not limited to, the costs of installing, replacing and
maintaining meters, nor shall the Note Issuer be entitled to any credit against
the Servicing Fee for any cost savings realized by the Servicer or any ESP as a
result of new metering and/or billing technologies.
SECTION 3. USAGE AND BILL CALCULATION.
--------------------------
The Servicer 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 CPUC Regulations) once every 27 to 33
days and shall determine therefrom each Customer's individual FTA Charge to be
included on such Customer's Bill; provided, however, that in the case of
-------- -------
Customers served by an ESP under the Full Consolidated ESP Billing option, the
Applicable ESP, rather than the Servicer, shall determine such Customers'
individual FTA Charges to be included on such Customers' Bills based on billing
factors provided by the Servicer, and the Servicer shall deliver to the
Applicable ESPs such billing factors as are necessary for the Applicable ESPs to
calculate such Customers' respective FTA Charges as such charges may change from
time to time pursuant to the True-Up Adjustments.
SECTION 4. BILLING.
-------
The Servicer shall implement the FTA Charges as of the FTA Effective Date
and shall thereafter bill each Customer or the Applicable ESP for the respective
Customer's outstanding current and past due FTA Charges accruing through the FTA
Termination Date, 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 Bill to each Customer, or, in the case of a
Customer who has elected Consolidated ESP Billing, to the Applicable ESP, with
respect to such Customer's respective FTA Charge once every 27 to 33 days, at
the same time, with the same frequency and on the same Bill as that containing
the Servicer's own charges to such Customer or ESP, as the case may be. In the
event that the Servicer makes any material modification to its Servicer Policies
and Practices for its own charges, it shall notify the Note Issuer, the Note
Trustee, the Certificate Trustee, the Infrastructure Bank and the Rating
Agencies as soon as practicable, and in no event later than 60 Business Days
after such modification goes into effect; provided, however, that the Servicer
-------- -------
may not make any modification that will materially adversely affect the
Certificateholders.
(b) Format.
------
(i) Each Bill to a Customer shall contain the charge corresponding to
the respective FTA Charge owed by such Customer for the applicable Billing
Period. Unless it is not
I-3
<PAGE>
practicable for the Servicer's billing system to do so, the FTA Charge shall
appear as a separate line-item on each Bill.
(ii) In the case of each Customer that has elected Consolidated ESP
Billing, the Servicer shall deliver to the Applicable ESP itemized charges for
such Customer setting forth such Customer's FTA Charge as a separate line-item.
(iii) The Servicer shall conform to such requirements in respect of
the format, structure and text of Bills delivered to Customers and ESPs as
applicable CPUC Regulations shall from time to time prescribe. To the extent
that Bill format, structure and text are not prescribed by the PU Code or by
applicable CPUC 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 to Customers (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. In the case of Customers that have elected Consolidated ESP Billing,
the Servicer shall deliver all Bills or charges to the Applicable ESPs by such
means as are mutually agreed upon by the Servicer and the Applicable ESP and are
consistent with CPUC Regulations. The Servicer or an ESP, 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
FTA Revenues from Customers and ESPs 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 ESPs in accordance with applicable CPUC
Regulations and Servicer Policies and Practices.
(B) The Servicer shall apply late payment charges, if any, to
outstanding ESP balances in accordance with applicable CPUC
I-4
<PAGE>
Regulations. All late payment charges and interest
collected shall be payable to and retained by the Servicer
as a component of its compensation under the Agreement, and
the Note Issuer shall have no right to share in the same.
(C) The Servicer shall deliver oral and written past-due and
shut-off notices in accordance with applicable CPUC
Regulations and Servicer Policies and Practices.
(D) The Servicer shall adhere to and carry out disconnection
policies and termination of Consolidated ESP Billing in
accordance with PU Code (S) 779.2, CPUC Decision 97-10-087
and applicable CPUC Regulations and Servicer Policies and
Practices.
(E) The Servicer may employ the assistance of collection agents
in accordance with applicable CPUC Regulations and Servicer
Policies and Practices.
(F) The Servicer shall apply Customer and ESP deposits to the
payment of delinquent accounts in accordance with applicable
CPUC Regulations and Servicer Polices and Practices and
according to the priorities set forth in Section 6(b)(ii),
(iii) and (iv) 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 Certificateholders; 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 FTA Revenues, in accordance with its Servicer Policies and
Practices, that remain outstanding for 180 days after issuance of a Closing
Bill.
(iii) The Servicer shall accept payment from Customers in respect of
Billed FTA Revenues 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
ESPs in respect of Billed FTA Revenues in such forms and methods and at such
times and places as the Servicer and each ESP shall mutually agree in accordance
with applicable CPUC Regulations.
(b) Payment Processing; Allocation; Priority of Payments.
----------------------------------------------------
(i) The Servicer shall post all payments received to Customer or ESP
accounts as promptly as practicable, and, in any event, substantially all
payments shall be posted no later than two Servicer Business Days after
receipt.
I-5
<PAGE>
(ii) Subject to clause (iii) below, the Servicer shall apply payments
received to each Customer's or ESP's account in proportion to the charges
contained on the outstanding Bill to such Customer or ESP.
(iii) Any amounts collected by the Servicer that represent partial
payments of the total Bill to a Customer shall be allocated as follows: (A)
first to amounts owed to the Note Issuer, the Seller and the applicable
ESP, regardless of age, in proportion to their respective percentages of
the total amount of their combined outstanding charges on such Bill; then
(B) to all other outstanding amounts owed to parties other than the Note
Issuer, the Seller and the applicable ESP.
(iv) The Servicer shall hold all over-payments for the benefit of the
Note Issuer and the Seller and shall apply such funds to future Bill
charges in accordance with clauses (ii) and (iii) above as such charges
become due.
(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 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.
(d) Investment of FTA Payments Received.
-----------------------------------
Prior to remittance on the applicable Remittance Date, the Servicer
may invest FTA Payments received at its own risk and for its own benefit, and
such investments and funds shall not be required to be segregated from the other
investments and funds of the Servicer.
(e) Calculation of Collections; Determination of Aggregate Remittance
-----------------------------------------------------------------
Amount.
- ------
(i) On or before each Remittance Date, the Servicer shall calculate,
in accordance with Schedule 6, the total FTA Payments estimated to have been
----------
received by the Servicer from or on behalf of Customers during the prior
Collection Period in respect of all previously Billed FTA Revenues, increased or
decreased, as applicable, by (A) the amount of any Remittance Shortfall
calculated for such Remittance Date or (B) the amount of any Excess Remittance
calculated for such Remittance Date and (C) Billed FTA Revenues not accounted
for or erroneously accounted for in prior periods (collectively, the "Aggregate
Remittance Amount").
(ii) At the end of each year, on or before the Annual Adjustment Date
in accordance with Section 4.01(b)(i)(1) of the Agreement, the Servicer shall
update the Variables underlying the Daily Collections Curve in Schedule 6 and
----------
shall revise such curve to reflect the updated Variables. The Servicer shall
use the revised Daily Collections Curve to update the Monthly Collections Curve.
I-6
<PAGE>
(iii) The Servicer and the Note Issuer acknowledge that the Servicer
has undertaken to make certain changes to its current computerized customer
information system, which changes, when functional, would affect the Servicer's
method of calculating the FTA Payments estimated to have been received by the
Servicer during each Collection Period as set forth in Schedule 6 hereto.
-----------
Should these changes to the computerized customer information system become
functional during the term of the Agreement, the Servicer and the Note Issuer
agree that they shall review the procedures used to calculate the FTA Payments
estimated to have been received, as set forth on Schedule 6, in light of the
----------
capabilities of such new system and shall make such modifications and/or
substitutions to such procedures and to clause (ii) above 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 Certificateholders. As
soon as practicable, and in no event later than 60 Business Days after the date
on which all Customer accounts have been converted for billing under such new
system, the Servicer shall notify the Note Trustee, the Certificate Trustee, the
Infrastructure Bank and the Rating Agencies of the same.
(iv) All calculations of collections, each update of the Variables and
any changes in procedures used to calculate the FTA Payments pursuant to this
Section 6(e) shall be made in good faith and in the case of any update pursuant
to clause (ii) or any change in procedures pursuant to clause (iii) 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 Variables and procedures.
(f) Remittances.
-----------
(i) The Note Issuer shall cause to be established the Collection
Account in the name of the Note Trustee in accordance with the Indenture.
(ii) The Servicer shall make or cause to be made 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 Note Issuer shall provide written notice
thereof to the Servicer by the earlier of: (A) five Business Days from the
effective date of such change, or (B) five Business Days prior to the next
Remittance Date.
I-7
<PAGE>
SCHEDULE 6
TO
ANNEX I
CALCULATION OF AGGREGATE REMITTANCE AMOUNT
I. MONTHLY COLLECTIONS CURVE UNDERLYING ESTIMATION TEMPLATE DESCRIBED IN
SECTION II OF THIS SCHEDULE 6.
The following model shall be used to determine the Monthly Collections
Curve for each Collection Period.
ASSUMPTIONS
- -----------
1. Customer billing is conducted on a daily basis, and each month contains 30
days.
2. The Monthly Collections Curve has not varied materially over the course of
the year.
3. The Monthly Collections Curve is composed of a summation of historical
daily collections receipts curves ("Daily Collections Curves").
4. The historical daily collections receipts curve was derived from a sample
of customer accounts spanning from August 1996 to March 1997.
5. The sampled accounts include 1,700 residential accounts (representing
approximately .038% of all residential accounts) and 400 small commercial
accounts (representing approximately .12% of all small commercial
accounts.)
6. Each billing month has an estimated collection percentage as shown below:
METHODOLOGY
- -----------
In order to determine the Monthly Collections Curve, the Servicer must
first determine the Daily Collections Curve. To derive the Daily Collections
Curve, the Servicer recorded the number of days between when a particular bill
was generated and when full payment was received. A tally was developed to
record each payment experience for the sample (residential and small commercial
accounts were tallied separately). Once the tally was complete, the Servicer
expressed each day's tally sum as a percentage of the total number of bills
generated in the sample (i.e., 1,700 for residential and 400 for small
commercial). Attachments A and B to this Schedule 6 show the resulting
percentages from the above calculation.
To derive the Monthly Collections Curve, the Servicer assumed that the
daily collection payment pattern was the same for bills sent on each day of the
month and that the billed amounts for a given month are spread evenly over each
day of the month, thus the daily payments received as a percent of the monthly
billed can be determined for each day's billing. Each daily percentage shown in
Attachments A and B, was multiplied by 1/30 to simulate one day's worth of
collections. Then, the Servicer took the cumulative sum for each day (Day 1,
Day 1 + Day 2, Day 1 + Day 2 + Day 3, etc.) to produce the Monthly Collections
curves shown in Attachments C and D to this Schedule 6.
I-8
<PAGE>
[Graph showing Residential Collections Curve]
[Graph showing Commercial Monthly Collections Curve]
II. ESTIMATION TEMPLATE (USING MONTHLY COLLECTIONS CURVE DESCRIBED IN SECTION I
OF THIS SCHEDULE)
Where:
M\\n\\ = a Collection Period
A = percentage collected of the total Billed FTA Revenues
billed during the Current Billing Period
B = percentage collected of the total Billed FTA Revenues
billed during the Billing Period prior to the Current
Billing Period
C = percentage collected of the total Billed FTA Revenues
billed during the Billing Period two periods prior to the
Current Billing Period
D = percentage collected of the total Billed FTA Revenues
billed during the Billing Period three periods prior to the
Current Billing Period
E = percentage collected of the total Billed FTA Revenues
billed during the Billing Period four periods prior to the
Current Billing Period
F = percentage collected of the total Billed FTA Revenues
billed during the Billing Period five periods prior to the
Current Billing Period
R = Billed FTA Revenues for a Billing Period
S = Estimated Collections for a Collection Period
Then:
I-9
<PAGE>
FTA Payments estimated to have been received (prior to any adjustment for
any Remittance Shortfall or Excess Remittance, or FTA Revenues Not
Accounted For in Prior Periods) equal S, as shown in the Estimation
Template below. An amount of FTA Payments estimated to have been received
(S) is calculated separately for Residential Customers and Small Commercial
Customers.
<TABLE>
<CAPTION>
COLLECTION PERIOD COLLECTION BILLED FTA ESTIMATED
PERCENT REVENUES COLLECTIONS
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
M\\n-5\\ F\\n-5\\ R\\ n-5\\ (F\\n-5\\)(R\\n-5\\)
+
M\\n-4\\ E\\n-4\\ R\\n-4\\ (E\\n-4\\)(R\\n-4\\)
+
M\\n-3\\ D\\n-3\\ R\\n-3\\ (D\\n-3\\)(R\\n-3\\)
+
M\\n-2\\ C\\n-2\\ R\\n-2\\ (C\\n-2\\)(R\\n-2\\)
+
M\\n-1\\ B\\n-1\\ R\\n-1\\ (B\\n-1\\)(R\\n-1\\)
+
M\\n\\ A\\n\\ R\\n\\ (A\\n\\)(R\\n\\)
=
--------------------
Total S\\n\\
====================
</TABLE>
Notes:
1. The Billed FTA Revenues (R) for multiple prior Billing Periods will be zero
during the phase-in of the FTA Charges following the FTA Effective Date.
Similarly, the Billed FTA Revenues for multiple succeeding Billing Periods
will be zero during the phase-out of the FTA Charges following the FTA
Termination Date.
2. The Collection Percent (either A, B, C, D, E, or F) is the collection percent
in effect at the time the FTA Charges were billed based on the Monthly
Collections Curve then in effect.
III. AGGREGATE REMITTANCE AMOUNT CALCULATION (USING ESTIMATION TEMPLATE
DESCRIBED IN SECTION II OF THIS SCHEDULE)
Where:
X = Excess Remittance or Remittance Shortfall for a Collection Period
Y = FTA Revenue Not Accounted For in Prior Periods or a Collection
Period
Z = Aggregate Remittance Amount
Then, the Aggregate Remittance Amount to be remitted in month n+1 (M\\n+1\\)
equals Z:
S\\n\\ for Residential Customers
+ or -
X\\n\\ for Residential Customers
I-10
<PAGE>
+
S\\n\\ for Small Commercial Customers
+ or -
X\\n\\ for Small Commercial Customers
+ or -
Y\\n\\
=
- -------------------------------------
Z to be remitted at M\\n+1\\
=====================================
I-11
<PAGE>
ANNEX II
to
SERVICING AGREEMENT
SECTION 1. Routine Quarterly True-Up Adjustments. (a) The Servicer
--------------------------------------
shall not perform any routine quarterly True-Up Adjustments for the PG&E Funding
LLC Notes, Series 1997-1.
<PAGE>
SCHEDULE 6.01(f)
No Proceedings
--------------
1. Petition for writ of review filed with the California Supreme Court by The
Utility Reform Network on November 24, 1997.
<PAGE>
EXHIBIT B
CERTIFICATE OF COMPLIANCE
The undersigned hereby certifies that he/she is the duly elected and
acting ___________ of Pacific Gas and Electric Company, as servicer (the
"Servicer") under the Transition Property Servicing Agreement dated as of
December 8, 1997 (the Servicing Agreement") between the Servicer and PG&E
Funding LLC (the "Note 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 June 30, ___ 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 material obligations in all material
respects under the Servicing Agreement throughout the twelve months ended June
30, ___, except for those material defaults in the fulfillment of material
obligations listed on Annex A hereto.
-------
Executed as of this ___ day of ______________.
PACIFIC GAS AND ELECTRIC COMPANY
By:
----------------------------------
Name:
Title:
<PAGE>
ANNEX A
TO
CERTIFICATE OF COMPLIANCE
LIST OF SERVICER DEFAULTS
The following material defaults known to the undersigned occurred during the
year ended June 30, ___:
Nature of Default Status
- ----------------- ------
<PAGE>
EXHIBIT 10.3
NOTE PURCHASE AGREEMENT
This Note Purchase Agreement (this "Agreement"), dated as of December
---------
8, 1997, is made by and between PG&E Funding LLC, a Delaware limited liability
company (the "Note Issuer"), and the California Infrastructure and Economic
-----------
Development Bank Special Purpose Trust PG&E-1, a not-for-profit business trust
organized under the laws of the State of Delaware (the "Trust"), for which
Bankers Trust Company of California, N.A., a national banking association, is
acting as certificate trustee (in such capacity, the "Certificate Trustee")
-------------------
pursuant to that certain Amended and Restated Declaration and Agreement of Trust
(the "Trust Agreement"), dated as of December 8, 1997 among Bankers Trust
---------------
(Delaware), as Delaware Trustee, the Certificate Trustee and the California
Infrastructure and Economic Development Bank (the "Infrastructure Bank"), as
-------------------
Originator.
RECITALS
A. Capitalized terms used herein without definition shall have the
meanings ascribed to them in that certain Indenture (the "Note Indenture"),
--------------
dated as of December 8, 1997, between the Note Issuer and Bankers Trust Company
of California, N.A., a national banking association, as trustee (the "Note
----
Trustee"), which is incorporated herein by this reference.
- -------
B. On the Closing Date, and on the terms set forth herein, the Note
Issuer has agreed to sell to the Trust and the Trust has agreed to purchase from
the Note Issuer $2,901,000,000 in principal amount of PG&E Funding LLC Notes,
Series 1997-1 (the "Notes"), issued pursuant to the Note Indenture.
-----
AGREEMENT
NOW, THEREFORE, on the terms and conditions set forth below and for
good and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the Note Issuer and the Certificate Trustee agree as follows:
1. SALE OF NOTES
a. Authorization of Notes.
----------------------
On or before the Closing Date, the Note Issuer shall have caused to be
authorized pursuant to the Note Indenture the issuance of a series of Notes in
such classes and principal amounts as set forth in Schedule 1(a) attached hereto
and incorporated herein by this reference.
b. Issuance and Purchase.
---------------------
On the basis of the representations, warranties and covenants
contained in this Agreement and in the Note Indenture (collectively, the "Note
----
Purchase Documents"), and subject to the terms and conditions of the Note
- ------------------
Purchase Documents, the Note Issuer agrees to issue and
<PAGE>
sell to the Trust and the Trust agrees to purchase from the Note Issuer, the
Notes set forth in Schedule 1(a) hereto. The purchase price of each class of
Notes is set forth in Schedule 1(a) attached hereto, and the aggregate purchase
price of the Notes shall be an amount equal to the proceeds to the Trust set
forth in Schedule I to the Underwriting Agreement dated as of November 25, 1997
(the "Underwriting Agreement"), among Pacific Gas and Electric Company, the Note
Issuer, the Trust, the California Inftrastructure and Economic Development Bank,
the California State Treasurer's Office and the underwriters named therein, for
whom Morgan Stanley & Co. Incorporated and Lehman Brothers Inc. are acting as
representatives , less an amount equal to $143,850 (representing reimbursable
expenses payable by the Note Issuer to the Underwriters) resulting in a net
transfer to the Note Issuer of $2,886,643,367.60.
c. Delivery.
--------
Delivery of, and payment of the purchase price for the Notes shall be
made by federal wire transfer of immediately available funds as early as
possible after 6:00 a.m. (P.S.T.) on the Closing Date to account designated
by the Note Issuer not later than the Business Day prior to the Closing
Date
2. CONDITIONS PRECEDENT
The obligations of the Trust to purchase the Notes under this
Agreement are subject to the satisfaction of each of the following conditions:
a. All the representations and warranties of the Note Issuer contained in
this Agreement shall be true and correct on the Closing Date with the same force
and effect as if made on and as of the Closing Date.
b. Neither the Notes nor the Certificates shall have received a lower
rating by any Rating Agency than that on which the Notes or the Certificates,
respectively, were marketed.
c. The Certificate Trustee shall have received on the Closing Date on
behalf of the Trust an Officer's Certificate dated the Closing Date confirming
the matters set forth in Sections 2(a) and 2(b).
d. The Certificate Trustee shall have received on behalf of the Trust a
copy of the executed Note Indenture (certified by an Authorized Officer of the
Note Issuer) which shall have been entered into by the Note Issuer and the Note
Trustee.
e. The Note Issuer shall not have failed at or prior to the Closing Date
to perform or comply in any material respect with any of the agreements herein
contained and required to be performed or complied with by the Note Issuer at or
prior to the Closing Date.
3. REPRESENTATIONS AND WARRANTIES
To induce the Trust to enter into this Agreement and to purchase the
Notes, the Note Issuer represents and warrants to the Trust on the date of this
Agreement that the following
2
<PAGE>
statements are true, correct and complete:
a. The Note Issuer has been duly formed and is validly existing in good
standing as a limited liability company under the laws of the State of Delaware
and has the organizational power and authority to carry on its business as
described in the Registration Statement covering the Notes (the "Registration
------------
Statement") and to own, lease and operate its properties, and is registered to
- ---------
transact intrastate business in the State of California.
b. This Agreement has been duly authorized, executed and delivered by the
Note Issuer.
c. The Note Indenture has been duly authorized by the Note Issuer and, on
the Closing Date, will have been validly executed and delivered by the Note
Issuer. When the Note Indenture has been duly executed and delivered by the Note
Issuer, the Note Indenture will be a valid and binding agreement of the Note
Issuer, enforceable against the Note Issuer in accordance with its terms except
as (i) the enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (ii) rights of
acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability. On the Closing Date, the Note
Indenture will conform in all material respects to the requirements of the Trust
Indenture Act, and the rules and regulations of the Commission applicable to an
indenture which is qualified thereunder.
d. The Notes have been duly authorized and, on the Closing Date, will have
been validly executed and delivered by the Note Issuer. When the Notes have been
issued, executed and authenticated in accordance with the provisions of the Note
Indenture and delivered to and paid for by the Trust in accordance with the
terms of this Agreement, the Notes will be entitled to the benefits of the Note
Indenture and will be valid and binding obligations of the Note Issuer,
enforceable in accordance with their terms except as (i) the enforceability
thereof may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (ii) rights of acceleration and the availability
of equitable remedies may be limited by equitable principles of general
applicability.
e. No Default or Event of Default under the Note Indenture has occurred, is
occurring or would reasonably occur as a result of the sale of the Notes
pursuant to the terms hereof.
f. The execution, delivery and performance of this Agreement and the other
Basic Documents by the Note Issuer, compliance by the Note Issuer with all
provisions hereof and thereof and the consummation of the transactions
contemplated hereby and thereby will not (i) require any consent, approval,
authorization or other order of, or qualification with, any court or
governmental body or agency (except such as may be required under the California
Government Code, the PU Code, the Securities Act of 1933, as amended (the
"Securities Act"), or the securities or Blue Sky laws of the various states),
--------------
(ii) conflict with or constitute a breach of any of the terms or provisions of,
or a default under, the limited liability company agreement of the Note Issuer,
(iii) violate or conflict with any applicable law or any rule, regulation,
judgment, order or decree of any court or any governmental body or agency having
jurisdiction over the Note Issuer or its property, (iv) result in the imposition
or creation of (or the obligation to create or impose) a lien under, any
agreement or instrument to which the Note Issuer is a party or by
3
<PAGE>
which the Note Issuer or its respective property is bound, except under the
Basic Documents and any statutory lien under Section 843(g) of the PU Code and
under that certain First and Refunding Mortgage dated December 1, 1920, executed
by Pacific Gas and Electric Company, as supplemented and amended to the date
hereof, in favor of BNY Western Trust Company, successor by acquisition to Wells
Fargo Bank, N.A., successor by merger to First Interstate Bank of California, as
Trustee (which lien shall be released on the Closing Date contemporaneously with
the payment of the purchase price of the Notes).
g. To the best knowledge of the Note Issuer, there are no legal or
governmental proceedings pending or threatened to which the Note Issuer is or
reasonably could be a party or to which any of its property is or reasonably
could be subject, which might result, singly or in the aggregate, in a material
adverse effect on the value of the Notes.
h. The Note Issuer is not and, after giving effect to the offering and sale
of the Notes and the application of the net proceeds thereof as described in the
Registration Statement, will not be, an "investment company," as such term is
defined in the Investment Company Act of 1940, as amended.
i. The Note Issuer is not and, after giving effect to the offering and sale
of the Notes and the application of the net proceeds thereof as described in the
Registration Statement, will not be, a "holding company," as such term is
defined in the Public Utilities Holding Company Act of 1935, as amended.
j. The Note Issuer has not taken any action that might cause this Agreement
or the issuance or sale of the Notes to violate Regulation G (12 C.F.R. Part
207), Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or
Regulation X (12 C.F.R. Part 224) of the Board of Governors of the Federal
Reserve System.
k. Since the date as of which information is given in the Registration
Statement and other than as set forth in the Registration Statement (exclusive
of any amendments or supplements thereto subsequent to the date of this
Agreement), (i) there has not occurred any material adverse change or any
development involving a prospective material adverse change in the condition,
financial or otherwise, or the earnings, business, management or operations of
the Note Issuer and (ii) the Note Issuer has not incurred any material liability
or obligation, direct or contingent.
l. No Rating Agency has indicated to the Note Issuer that it has assigned
(or is considering assigning) a lower rating to the Notes or the Certificates
than that on which the Notes or the Certificates, respectively, were marketed.
m. Each certificate signed by any officer of the Note Issuer and delivered
to the Certificate Trustee or counsel for the Certificate Trustee shall be
deemed to be a representation and warranty by the Note Issuer to the Certificate
Trustee on behalf of the Trust as to the matters covered thereby.
4
<PAGE>
4. COVENANTS
The Note Issuer covenants and agrees that, until payment in full of
the Notes, unless the Certificate Trustee shall otherwise give prior written
consent, the Note Issuer shall perform all covenants in this Section 4.
a. To advise the Certificate Trustee promptly and, if requested by the
Certificate Trustee, confirm such advice in writing, of the issuance by the
Commission or any state securities commission of any stop order suspending the
qualification or exemption from qualification of any Note for offering or sale
in any jurisdiction in which the Certificates have been offered for sale, or the
initiation of any proceeding by the Commission, any state securities commission
or any other federal or state regulatory authority for such purpose. The Note
Issuer shall use its best efforts to prevent the issuance of any stop order or
order suspending the qualification or exemption of any Note or Certificate under
the Securities Act, or any state securities or Blue Sky laws and, if at any time
the Commission or any state securities commission or other federal or state
regulatory authority shall issue an order suspending the qualification or
exemption of any Note or Certificate under the Securities Act, or any state
securities or Blue Sky laws, the Note Issuer shall use its best efforts to
obtain the withdrawal or lifting of such order at the earliest possible time.
b. Not to claim voluntarily the benefit of any usury laws against the
holders of any Notes. To resist actively any attempts to claim the benefit of
any usury laws against the holders of any Notes.
c. To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by it prior to the
Closing Date and to satisfy all conditions precedent to the delivery of the
Notes.
d. At the written request of the Certificate Trustee or the Infrastructure
Bank, to provide, or cause to be provided, to the Certificate Trustee or the
Infrastructure Bank, as applicable, a copy of any requested certificate, notice,
opinion or other document delivered to the Note Trustee pursuant to the terms of
the Note Indenture.
5. MISCELLANEOUS
a. Fees.
----
If for any reason the Notes are not delivered by or on behalf of the
Note Issuer as provided herein (other than as a result of any termination of
this Agreement pursuant to the terms hereof), the Note Issuer agrees to
reimburse the Certificate Trustee for all out-of-pocket expenses (including the
reasonable fees and disbursements of counsel) reasonably incurred by it. The
Note Issuer also agrees to reimburse the Certificate Trustee, the Delaware
Trustee and the Infrastructure Bank and their respective officers, directors and
each person, if any, who controls the Certificate Trustee, the Delaware Trustee
or the Infrastructure Bank within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act for any and all fees and expenses
(including without limitation the reasonable fees and expenses of counsel)
reasonably
5
<PAGE>
incurred by them in connection with enforcing their rights under this Agreement
(including without limitation its rights under this Section 5(a)); provided,
however, that the Note Issuer's obligations pursuant to this Section 5(a) shall
be treated as Operating Expenses under the Note Indenture and shall be payable
only to the extent that funds are available for such Operating Expenses in the
priority set forth in Section 8.02(d) of the Note Indenture.
b. Effective Date of Agreement.
---------------------------
This Agreement shall become effective upon the execution and delivery
of this Agreement by the parties hereto. This Agreement shall terminate
automatically upon the termination of the Underwriting Agreement prior to the
Closing.
c. Survival of Representations and Agreements.
------------------------------------------
All agreements, representations and warranties made herein shall
survive the execution and delivery of this Agreement and the purchase of the
Notes hereunder. Notwithstanding anything in this Agreement or implied by law to
the contrary, the agreements of the Note Issuer set forth in Section 5(a) shall
survive the payment of the Notes and the termination of this Agreement.
d. Notice.
------
Unless otherwise specifically provided herein, all notices,
directions, consents and waivers required under the terms and provisions of this
Agreement shall be in English and in writing, and any such notice, direction,
consent or waiver may be given by United States mail, courier service, telegram,
telex, telemessage, telecopy, telefax, cable or facsimile (confirmed by
telephone or in writing in the case of notice by telegram, telex, telemessage,
telecopy, telefax, cable or facsimile) or any other customary means of
communication, and any such notice, direction, consent or waiver shall be
effective when delivered, or if mailed, three days after deposit in the United
States mail with proper postage for ordinary mail prepaid,
if to the Note Issuer, to:
PG&E Funding LLC
245 Market Street, Room 424
San Francisco, California 94105
Attention: Corporate Secretary
Facsimile: (415) 973-7059
Telephone: (415) 972-5467
6
<PAGE>
if to the Trust, in care of the Certificate Trustee at the address
specified below
if to the Certificate Trustee, to:
Bankers Trust Company of California, N.A.
c/o Bankers Trust Company
Corporate Trust and Agency Services
Four Albany Street
New York, New York 10006
Attention: Structured Finance Group
Facsimile: (212) 250-0338
Telephone: (212) 250-8360
if to the Delaware Trustee, to:
Bankers Trust (Delaware)
E. A. Delle Donne Corporate Center
Montgomery Building
1011 Centre Road, Suite 200
Wilmington, Delaware 19805-1266
Attention: M. Lisa Wilkins
Facsimile: (302) 636-3222
Telephone: (302) 636-3305
(with a copy to the Certificate Trustee)
if to the Infrastructure Bank, to:
California Infrastructure and Economic Development Bank
c/o California Trade and Commerce Agency
801 K Street, Suite 1700
Sacramento, California 95814
Attention: Executive Director
Facsimile: (916) 323-2887
Telephone: (916) 324-9775
3. Parties.
-------
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Note Issuer, the Trust,
the Certificate Trustee, the Delaware Trustee, the Infrastructure Bank, the
directors and officers of the Certificate Trustee, the Delaware Trustee, the
Infrastructure Bank, any controlling persons referred to herein, the directors,
officers and any manager of the Note Issuer (not in their individual capacities
but in their respective capacities as directors, officers or manager of the Note
Issuer) and their respective successors and assigns, all as and to the extent
provided in this Agreement, and no other person shall acquire or have any right
under or by virtue of this Agreement, except as
7
<PAGE>
contemplated by the Trust Agreement and the other Basic Documents. The term
"successors and assigns" shall not include a purchaser of any of the Notes from
the Trust merely because of such purchase.
f. Governing Law.
-------------
This Agreement shall be governed by, and shall be construed and
enforced in accordance with, the internal laws of the State of California,
without regard to conflicts of laws or principles.
g. Severability.
------------
If any provision of this Agreement shall be prohibited or invalid
under applicable law, the Agreement shall be ineffective only to such extent,
without invalidating the remainder of the Agreement.
h. Nonpetition Covenants.
---------------------
Notwithstanding any prior termination of this Agreement or the Note
Indenture, but subject to the CPUC's right to order the sequestration and
payment of revenues arising with respect to the Transition Property
notwithstanding any bankruptcy, reorganization or other insolvency proceedings
with respect to the debtor, pledgor or transferor of the Transition Property
pursuant to Section 843(e) and (g) of the PU Code, each of the Certificate
Trustee and the Infrastructure Bank agrees that it shall not, prior to the date
which is one year and one day after the termination of the Note Indenture with
respect to the Note Issuer, acquiesce, petition or otherwise invoke or cause the
Note Issuer or the Trust to invoke the process of any court or government
authority for the purpose of commencing or sustaining a case against the Note
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 Note Issuer or any substantial part of the
property or the Note Issuer, or ordering the winding up or liquidation of the
affairs of the Note Issuer or the Trust.
i. Further Assurances.
------------------
The Note Issuer agrees to execute and deliver such instruments and
take such actions as the Certificate Trustee may, from time to time, reasonably
request in order to effectuate the purpose and to carry out the terms of this
Agreement.
j. Headings.
--------
Section and subsection headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
k. Counterparts.
------------
This Agreement may be signed in various counterparts which together
shall
8
<PAGE>
constitute one and the same instrument.
9
<PAGE>
IN WITNESS WHEREOF, the Note Issuer and the Trust have caused this
Note Purchase Agreement to be duly executed by their respective officers,
thereunto duly authorized, all as of the day and year first above written.
PG&E FUNDING LLC,
a Delaware limited liability company
By:_________________________________
Name: Gabriel B. Togneri
Title: Treasurer
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A.,
not in its individual capacity but
solely as Certificate Trustee on behalf of the
California Infrastructure and Economic
Development Bank Special Purpose Trust PG&E-1
By:_________________________________
Name: Linda A. Rakolta
Title: Vice President
10
<PAGE>
SCHEDULE 1(a)
NOTES
<TABLE>
<CAPTION>
CLASS OF NOTE PRINCIPAL AMOUNT PURCHASE PRICE
------------- ---------------- --------------
<S> <C> <C>
A-1 $125,000,000 99.78717%
A-2 $265,000,000 99.69664%
A-3 $280,000,000 99.63875%
A-4 $300,000,000 99.57709%
A-5 $290,000,000 99.53630%
A-6 $375,000,000 99.45817%
A-7 $866,000,000 99.43876%
A-8 $400,000,000 99.34358%
</TABLE>
<PAGE>
EXHIBIT 10.4
EXECUTION COPY
FEE AND INDEMNITY AGREEMENT
This Fee and Indemnity Agreement (the "Fee and Indemnity Agreement"), dated
as of December 8, 1997, is among Bankers Trust (Delaware), as Delaware Trustee
under the Amended and Restated Declaration and Agreement of Trust (the "Trust
Agreement") of even date herewith (the "Delaware Trustee"), Bankers Trust
Company of California, N.A., as Certificate Trustee under the Trust Agreement
(the "Certificate Trustee") and as Note Trustee under the Note Indenture (the
"Note Trustee"), PG&E Funding LLC, as Note Issuer under the Note Indenture (the
"Note Issuer"); and California Infrastructure and Economic Development Bank, as
Originator under the Trust Agreement (the "Originator").
All capitalized terms used herein and not otherwise defined herein shall
have the meanings attributed to them in the Trust Agreement.
Section 1. Payment of Fees and Expenses of Certificate Trustee; Authorized
---------------------------------------------------------------
Agents. (a) Subject to Section 4 hereof, the Note Issuer hereby covenants and
- ------
agrees to pay to the Certificate Trustee (or any successor trustee) from time to
time reasonable compensation for its services under the Trust Agreement and to
reimburse it for its reasonable expenses (including, without limitation, legal
fees and expenses), all in accordance with Schedule A hereto, it being
understood that the Certificate Trustee shall have no recourse against the
Originator, the California State Treasurer's Office (the "STO") or the Trust
Property for payment of such amounts.
(b) In addition, subject to Section 4 hereof, the Note Issuer covenants and
agrees to reimburse the Certificate Trustee for any tax incurred without
negligence, bad faith or willful misconduct on its part, arising out of or in
connection with the acceptance or administration of the Trust under the Trust
Agreement (other than any tax attributable to the Certificate Trustee's
compensation for serving as such), including any costs and expenses incurred in
contesting the imposition of any such tax.
(c) Subject to Section 4 hereof, the Note Issuer further covenants and
agrees to pay, or cause to be paid, from time to time to each Authorized Agent
reasonable compensation for its services and to reimburse it for its reasonable
expenses, all in accordance with Schedule A hereto, and no Authorized Agent
shall have any recourse against the Originator, the STO or the Trust Property
for payment of such amounts. The appointment of any Authorized Agent shall be
subject to the approval of the Originator and the Note Issuer.
<PAGE>
(d) Notwithstanding anything herein to the contrary, if the Certificate
Trustee shall have entered into a fee agreement with the Trust with respect to
its compensation for services under the Trust Agreement, the terms of such fee
agreement shall control and the provisions of this Fee and Indemnity Agreement
shall not entitle the Certificate Trustee to greater compensation than that due
and owing pursuant to such fee agreement.
Section 2. Payment of Fees and Expenses of Delaware Trustee. (a) The Note
------------------------------------------------
Issuer covenants and agrees to pay to the Delaware Trustee (or any successor
trustee) from time to time reasonable compensation for its services under the
Trust Agreement and to reimburse it for its reasonable expenses (including,
without limitation, legal fees and expenses), all in accordance with Schedule A
hereto, it being understood that the Delaware Trustee shall have no recourse
against the Originator, the STO or the Trust Property for payment of such
amounts.
(b) Notwithstanding anything herein to the contrary, if the Delaware
Trustee shall have entered into a fee agreement with the Trust with respect to
its compensation for services under the Trust Agreement, the terms of such other
fee agreement shall control and the provisions of this Fee and Indemnity
Agreement shall not entitle the Delaware Trustee to greater compensation than
that due and owing pursuant to such fee agreement.
Section 3. Indemnity. The Note Issuer hereby covenants and agrees to
----------
indemnify, defend and hold harmless the Delaware Trustee, the Certificate
Trustee, the Originator, the STO and any of their respective affiliates,
officers, directors, employees and agents (the "Indemnified Persons") from and
against any and all losses, claims, taxes, damages, expenses (including, without
limitation, legal fees and expenses) and liabilities (including liabilities
under state or federal securities laws) of any kind and nature whatsoever
(collectively, "Expenses"), to the extent that such Expenses arise out of or are
imposed upon or asserted against such Indemnified Persons with respect to the
creation, operation or termination of the Trust, the execution, delivery or
performance of the Trust Agreement or the transactions contemplated thereby, or
the failure of the Note Issuer to perform its obligations hereunder; provided,
however, that the Note Issuer is not required to indemnify any Indemnified
Person for any Expenses that result from the willful misconduct or gross
negligence of such Indemnified Person. The obligations of the Note Issuer to
indemnify the Indemnified Persons as provided herein shall survive the
termination of the Trust Agreement or the resignation or removal of the Delaware
Trustee or the Certificate Trustee.
Section 4. Payment. All amounts owed by the Note Issuer to the
-------
Certificate Trustee, the Delaware Trustee, any Authorized Agent, the STO and the
Originator under the Trust Agreement shall be paid to the Certificate Trustee,
the Delaware Trustee, any Authorized Agent, the STO or the Originator, as
appropriate, pursuant to the Indenture or, if a fee agreement or fee schedule
has been provided to the Note Issuer in which event payment shall be made in
accordance with said agreement or schedule until the Note Issuer is otherwise
notified by the Certificate Trustee, the Delaware Trustee, any Authorized Agent,
the STO or the Originator; provided that notwithstanding anything to the
contrary in this Agreement or in any fee agreement or fee schedule, each of the
parties to this Agreement agrees that the Note Issuer's obligations to make
payments to it and the STO shall be subject to the priorities set forth in
Section 8.02 of the Indenture and the Note Issuer shall have no obligation to
make any payment except to the extent consistent with Section 8.02 of the
Indenture. The Note Issuer hereby irrevocably directs the
2
<PAGE>
Note Trustee to pay such amounts from monies on deposit in the Collection
Account as provided pursuant to Section 8.02(d) of the Note Indenture.
Section 5. Notices. Unless otherwise specifically provided herein, all
-------
notices, directions, consents and waivers required under the terms and
provisions of this Fee and Indemnity Agreement shall be in English and in
writing, and any such notice, direction, consent or waiver may be given by
United States mail, courier service, telegram, telex, telemessage, telecopy,
telefax, cable or facsimile (confirmed by telephone or in writing in the case of
notice by telegram, telex, telemessage, telecopy, telefax, cable or facsimile)
or any other customary means of communication, and any such notice, direction,
consent or waiver shall be effective when delivered, or if mailed, three days
after deposit in the United States mail with proper postage for ordinary mail
prepaid; provided, however, that such notices, directions, consents and waivers
-------- -------
to the Delaware Trustee and/or Certificate Trustee shall be given by United
States first-class mail, overnight mail, courier service or facsimile:
if to the Originator, to:
California Infrastructure and Economic Development Bank
c/o California Trade and Commerce Agency
801 K Street, Suite 1700
Sacramento, California 95814
Attention: Executive Director
Facsimile: 916-323-2887
Telephone: 916-324-9775
if to the STO, to:
California State Treasurer's Office
915 Capitol Mall, Room 110
Sacramento, California 95814
Attention: Deputy Treasurer
Facsimile: (916) 653-3125
Telephone: (916) 653-2995
if to the Delaware Trustee, to:
Bankers Trust (Delaware)
E.A. Delle Donne Corporate Center
Montgomery Building
1011 Centre Road, Suite 200
Wilmington, Delaware 19805-1266
Attention: President
Facsimile: (302) 636-3222
Telephone: (302) 636-3300
3
<PAGE>
if to the Certificate Trustee, to:
Bankers Trust Company of California, N.A.
c/o Bankers Trust Company
Corporate Trust and Agency Services
Four Albany Street
New York, New York 10006
Attention: Structured Finance Group
Facsimile: (212) 250-0338
Telephone: (212) 250-8360
if to the Note Issuer, to:
PG&E Funding LLC
Attention: President
245 Market Street, Room 424
San Francisco, California 94105
Telephone: (415) 972-5467
if to the Note Trustee, to:
Bankers Trust Company of California, N.A.
c/o Bankers Trust Company
Corporate Trust and Agency Services
Four Albany Street
New York, New York 10006
Attention: Structured Finance Group
Facsimile: (212) 250-0338
Telephone: (212) 250-8360
Section 6. Survival of Agreements. This Fee and Indemnity Agreement shall
----------------------
terminate upon the termination of the Trust and the payment and discharge of all
Certificates, provided, however, the agreements of the Note Issuer set forth in
------------------
Section 3 herein shall survive the termination of this Fee and Indemnity
Agreement or the resignation or removal of the Delaware Trustee or the
Certificate Trustee.
Section 7. Nonpetition Covenant. Notwithstanding any prior termination of
--------------------
this Fee and Indemnity Agreement, the Originator agrees that it shall not, prior
to the date which is one year and one day after the termination of the Note
Indenture with respect to the Note Issuer, acquiesce, petition or otherwise
invoke or cause the Note Issuer to invoke the process of any court or government
authority for the purpose of commencing or sustaining a case against the Note
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 Note Issuer or any substantial part of the
property of the Note Issuer, or ordering the winding up or liquidation of the
affairs of the Note Issuer.
4
<PAGE>
Section 8. Counterparts. This Fee and Indemnity Agreement may be executed
------------
in one or more counterparts, each of which shall be an original and all of which
taken together shall constitute one and the same agreement.
Section 9. Governing Law. This Fee and Indemnity Agreement shall be
-------------
governed by and construed in accordance with the laws of the laws of the State
of California.
[SIGNATURE PAGE FOLLOWS]
5
<PAGE>
IN WITNESS WHEREOF, the Originator, the Delaware Trustee, the Certificate
Trustee, the Note Issuer and the Note Trustee have caused this Fee and Indemnity
Agreement to be duly executed by duly authorized officers, all as of the day and
year first above written.
CALIFORNIA INFRASTRUCTURE AND ECONOMIC
DEVELOPMENT BANK,
as Originator
By:___________________________________
Name:______________________________
Title:_____________________________
BANKERS TRUST (DELAWARE),
as Delaware Trustee
By:___________________________________
Name:______________________________
Title:_____________________________
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
as Certificate Trustee
By:___________________________________
Name:______________________________
Title:_____________________________
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
6
<PAGE>
PG&E FUNDING LLC, as Note Issuer
By:___________________________________
Name:______________________________
Title:_____________________________
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
as Note Trustee
By:___________________________________
Name:______________________________
Title:_____________________________
ACKNOWLEDGED AND APPROVED:
PG&E FUNDING LLC, as Note Issuer
By:___________________________________
Name:______________________________
Title:_____________________________
7
<PAGE>
Schedule A
----------
SCHEDULE OF FEES
for
$2,901,000,000
California Infrastructure and Economic
Development Bank Special
Purpose Trust PG&E-1
Rate Reduction Certificates
<TABLE>
<CAPTION>
Note Trustee and Certificate Trustee/1/
<S> <C>
ANNUAL TRUST ADMINISTRATION FEES:
- --------------------------------
A. Trustee, Registrar and Paying Agent $2,666.67/annum/2/
B. Tax Reporting (if required) $1,666.67/annum/3/
OUT-OF-POCKET EXPENSES:
- ----------------------
Wire Transfers (excluding monthly P&I distribution) $10.00/wire
Investments $40.00/trade/4/
Delaware Trustee/1/
ANNUAL TRUST ADMINISTRATION FEES:
- --------------------------------
A. Delaware Business Trustee $1,666.67/annum
B. Tax Reporting (if required) $1,666.67/annum/5/
OUT-OF-POCKET EXPENSES: Same as above.
- -----------------------
</TABLE>
_______________________
/1/ All upfront fees will be paid in full at closing and are not reflected
herein.
/2/ Fees do not include out-of-pocket expenses for the administration of the
trust and are payable upon closing or shortly thereafter. Typical out-of-
pocket expenses include photocopying, faxing, conference calls, overnight
mail, and travel. Expenses typically average $2,000 plus travel for one
administrative person attending a closing.
/3/ Fees charged during subsequent years of transaction (i.e., year 2 until
----
maturity) for tax reporting without original issue discount.
/4/ Fees waived if Bankers Trust Company of California, N.A. has entered into a
Shareholder Servicing Agreement with one of the Money Market Funds chosen
or if Bankers Trust Company of California, N.A. is receiving a 12-b-1 fee.
/5/ Same as footnote 3.
<PAGE>
EXHIBIT 99.1
December 1, 1997
ADVICE 1715-E (DRAFT)
Public Utilities Commission of the State of California
Pacific Gas and Electric Company (PG&E) hereby submits for filing revisions to
its electric tariff sheets. The affected tariff sheets are listed on the
enclosed Attachment I.
Pursuant to California Public Utilities Commission Decision (D.) 97-09-055,
Ordering Paragraph 4, PG&E hereby transmits for filing, subsequent to on
the pricing date of this series of Rate Reduction Bonds (RRBs), the initial
Fixed Transition Amount (FTA) charges/1/ for the series. This Issuance Advice
Filing is for the RRB series Rate Reduction Certificates Series 1997-
1______, class(es) ________.A-1, A-2, A-3, A-4, A-5, A-6, A-7, and A-
8.
This filing establishes initial FTA charges for rate schedules for residential
and small commercial customers. This filing also establishes the Transition
Property to be sold to the Transition Property Owner (Special Purpose
Entity (SPE).
Pursuant to the instruction of the Administrative Law Judge Division, PG&E
also submits, on behalf of itself and on behalf of PG&E Funding LLC, copies of
the UCC-1 Financing Statements relating to the Transition Property, as that
term is defined in Public Utilities Code (PU Code) section 840(g), in
compliance with PU Code sections 843(b) and 844(c).
BACKGROUND
In D. 97-09-055, the Commission authorized PG&E to file Issuance Advice
Letters when pricing terms for RRBs have been established. Issuance Advice
Letter filings are those in which PG&E uses the bond sizing methodology and
FTA charge formulas found reasonable by the Commission in D. 97-09-055 to
establish initial FTA charges for a series of RRBs. Using the methodology
approved by the Commission in D. 97-09-055, this filing establishes FTA
charges.
Because this series of RRBs is being issued prior to January 1, 1998, to
preserve the rate freeze mandated by Assembly Bill 1890, concurrent with the
implementation of the FTA charges, the Energy Cost Adjustment Clause
- ----------------------
/1/ After a series of discussions with members of the Legislature and other
parties, the utilities agreed to use the term "Trust Transfer Amount" (TTA)
rather than "FTA" on customers' bills.
<PAGE>
Public Utilities Commission
Advice 1715-E
December 1, 1997
Page 2
rate component will be reduced by an amount equal to the FTA charges so that
total rates remain frozen.
<TABLE>
<CAPTION>
ISSUANCE INFORMATION
<S> <C>
Rate Reduction Bond Name: Rate Reduction Certificates, Series 1997-1
- -------------------------
Rate Reduction Bond Issuer: California Infrastructure and Economic Development
- --------------------------- Bank Special Purpose Trust PG&E-1
Transition Property Owner (SPE): PG&E Funding LLC
- --------------------------------
Trustee(s):
- -----------
Note Trustee: Bankers Trust Company
of California, NA
Delaware Trustee: Bankers Trust (Delaware)
Certificate Trustee: Bankers Trust Company of California, NA
Closing Date: December 8, 1997
- -------------
Bond Rating:
- ------------
Moody's Aaa
S&P AAA
Fitch AAA
Face value of Amount Issued: $2,901,000,000.00
- ----------------------------
Issuance Costs/2/: $20,200,000.00
- ------------------
Issuance Costs Approved by
Infrastructure Bank or STO: $17,785,000.00
- ---------------------------
Issuance Costs as a Percent of
Amount Issued: 0.696%
- ------------------------------
Cumulative Aggregate Cumulative
Issuance Costs for all Series: $20,200,000.00
- -------------------------------
Transition Costs Financed: $2,880,800,000.00
- --------------------------
Coupon Rate(s), Expected Final
Maturities, and Legal Final Maturities:
</TABLE>
- ------------------------------------
/2/ This is an estimate. The actual issuance cost will not be known until after
the RRBs have been issued and final invoices have been received. The sum of
the issuance costs and the financed transition costs is the amount of RRBs
issued, which is fixed at the time of filing of this Issuance Advice
Letter. Therefore, any difference between the estimated issuance costs and
the actual issuance costs will cause an adjustment to the financed
transition costs.
<PAGE>
Public Utilities Commission
Advice 1715-E
December 1, 1997
Page 3
<TABLE>
<CAPTION>
Coupon Expected Final Legal Final
Rates Maturities Maturities
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Series 1997-1/3/ 6.37% Not applicable Not applicable
Class A-1 5.94% September 25, 1998 September 25, 2000
Class A-2 6.01% June 25, 1999 June 25, 2001
Class A-3 6.15% June 25, 2000 June 25, 2002
Class A-4 6.16% June 25, 2001 June 25, 2003
Class A-5 6.25% June 25, 2002 June 25, 2004
Class A-6 6.32% September 25, 2003 September 25, 2005
Class A-7 6.42% September 25, 2006 September 25, 2008
Class A-8 6.48% December 26, 2007 December 26, 2009
</TABLE>
Call Features: 5% cleanup (optional) of the initial
- -------------- aggregate principal balance
California Tax Exempt: In the opinion of special counsel, interest and
- ---------------------- original issue discount will be exempt from
California personal income tax, but not exempt
from the California franchise tax applicable to
banks and corporations.
Expected Principal
Amortization Schedule: See Attachment II
- ----------------------
Distributions to Investors: Quarterly
- ---------------------------
Annual Servicing Fee as a
Percent of the Issuance
Amount: 0.25 percent for so long as the FTA charges are
- ----------------------- included as a line item on bills otherwise
sent to customers, 1.50 percent if FTA
charges are not included as a line item on
bills otherwise sent to customers, but,
instead, are billed separately to customers.
Overcollateralization Amount
- ----------------------------
for the Series: $14,505,000.00, which is 0.50% of the initial
- --------------- amount issued, to be collected ratably
(equal quarterly amounts) over the
term of the series
/3/ The coupon rate for the series is calculated as the modified duration
weighted average of the coupon rates of each class.
<PAGE>
Public Utilities Commission
Advice 1715-E
December 1, 1997
Page 4
Equity Contribution to SPE: $14,505,000.00, which is 0.50% of
- --------------------------- the initial amount issued
Pledges by Issuer of SPE Debt
- -----------------------------
Securities and all security therefor: Not applicable
- -------------------------------------
Additional Structural Detail:
- -----------------------------
The Commission recognized that the structure of the transaction might need
to be modified to obtain the desired tax treatment, the desired bond
rating, or for other reasons, and provided for such flexibility (D. 97-09-
054, pp. 31-32; D. 97-09-055 p. 3). The following minor structural details
were determined after D. 97-09-054 and D. 97-09-055 were issued, have been
approved by the California Infrastructure and Economic Development Bank,
and are reflected in this Issuance Advice Letter.
1. FTA charge collections in excess of the scheduled principal and
interest payments and current administrative costs will be retained (as
described in 3., below), rather than being used immediately to pay down
additional principal on the RRBs. The FTA charge will be adjusted at
least annually to reflect any retained excess FTA charge collections.
2. The overcollateralization amount will be scheduled to accumulate
ratably (equal quarterly amounts) over the expected term of the RRBs,
to eventually reach 0.50% of the initial principal amount of the RRBs.
3. The collection account established at the SPE will consist of four
subaccounts; a general subaccount, a reserve subaccount (for retained
excess FTA charge collections), an overcollateralization subaccount
(for accumulated overcollateralization), and a capital subaccount (for
certain equity contributed to the SPE). Retained excess FTA charge
collections, accumulated overcollateralization, and all but $100,000 of
SPE equity the capital subaccount will be available throughout the
transaction to satisfy, but not accelerate, scheduled principal and
interest payments on the RRBs if the sum of the FTA charge collections
and investment earnings are insufficient. To the extent that
accumulated overcollateralization or SPE capital is so applied, future
FTA charges will be adjusted and applied to restore the scheduled
accumulation of the overcollateralization and to restore the SPE
equity.
These minor structural details do not change the basic nature of the
transaction, the nature of the entities involved, the issuer of the RRBs,
or
<PAGE>
Public Utilities Commission
Advice 1715-E
December 1, 1997
Page 5
the applicability of the statutory provisions underlying the PG&E Financing
Order.
QUARTERLY VARIANCE TRIGGER MECHANISM
The pro forma Issuance Advice Letter attached to D. 97-09-055 included
language to state that each quarter the servicer would compare the actual RRB
outstanding balance with the expected RRB outstanding balance, and if the
variance was greater than a to-be-specified percentage trigger, a change to
the FTA charges would be requested. D. 97-09-055 requires that criteria for
the quarterly true-up trigger be established based on input from rating
agencies. The rating agencies have determined that the quarterly true-up
mechanism is unnecessary for obtaining an AAA rating (the highest possible
rating) on the RRBs. Based on this input from rating agencies, PG&E will not
implement the quarterly true-up mechanism./4/
CONFIRMATION OF RATEPAYER BENEFITS
D. 97-09-055 requires PG&E to demonstrate, using the bond sizing model found
reasonable in that decision, that the actual pricing terms of the RRBs result
in net present value benefits. Attached to this Advice Filing is a
spreadsheet calculation which shows expected net present value benefits of
$562____ million for this series of RRBs. The net present value
benefits calculation is shown in Attachment III.
FTA CHARGES
Table I below shows the current assumptions for each of the variables used in
the FTA charges calculation.
- ------------------------
/4/ Due to the timing of the issuance of the RRBs, the data necessary for an
Annual True-up Mechanism Advice Letter in 1997 will not be available. Thus,
the first annual true-up of the FTA charge will occur effective January 1,
1999.
<PAGE>
Public Utilities Commission
Advice 1715-E
December 1, 1997
Page 6
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
TABLE I
INPUT VALUES FOR FTA CHARGES
- --------------------------------------------------------------------------
Eligible Small
Residential Commercial
Customers Customers
- --------------------------------------------------------------------------
<S> <C> <C>
Monthly kWh sales:
- --------------------------------------------------------------------------
December 1997 882,765,147 223,653,493
- --------------------------------------------------------------------------
January 1998 2,231,886,270 520,230,795
- --------------------------------------------------------------------------
February 1998 2,253,808,573 593,714,109
- --------------------------------------------------------------------------
March 1998 2,121,397,871 601,348,939
- --------------------------------------------------------------------------
April 1998 1,996,611,276 565,714,139
- --------------------------------------------------------------------------
May 1998 1,966,797,848 586,340,834
- --------------------------------------------------------------------------
June 1998 2,113,898,069 629,126,654
- --------------------------------------------------------------------------
July 1998 2,346,776,497 678,894,185
- --------------------------------------------------------------------------
August 1998 2,488,389,876 706,920,654
- --------------------------------------------------------------------------
September 1998 2,327,863,360 706,977,852
- --------------------------------------------------------------------------
October 1998 2,019,891,086 674,001,309
- --------------------------------------------------------------------------
November 1998 2,038,298,860 622,592,248
- --------------------------------------------------------------------------
December 1998 2,345,044,767 607,617,910
- --------------------------------------------------------------------------
Residential and eligible small
commercial bill charge June 1996 11.92 c/kWh 12.46 c/kWh
- --------------------------------------------------------------------------
Percent of residential customers' and
eligible small commercial customers'
billed amounts expected to be
uncollected 0.64%
- --------------------------------------------------------------------------
Percent of billed amounts collected in
current month 37.84% 38.63%
- --------------------------------------------------------------------------
Percent of billed amounts collected in
second month after billing 50.19% 54.58%
- --------------------------------------------------------------------------
Percent of billed amounts collected in
third month after billing 9.05% 5.08%
- --------------------------------------------------------------------------
Percent of billed amounts collected in
fourth month after billing 1.71% 1.10%
- --------------------------------------------------------------------------
Percent of billed amounts collected in
fifth month after billing 0.39% 0.47%
- --------------------------------------------------------------------------
Percent of billed amounts collected in
sixth month after billing 0.17% 0.00%
- --------------------------------------------------------------------------
</TABLE>
<PAGE>
Public Utilities Commission
Advice 1715-E
December 1, 1997
Page 7
<TABLE>
<CAPTION>
For Series
- ----------------------------------------------------------------------------------------
<S> <C>
Quarterly Overcollateralization amount $362,625.00
- ----------------------------------------------------------------------------------------
Quarterly Servicing Fee as percent of outstanding balance 0.0625%
- ----------------------------------------------------------------------------------------
Quarterly Monthly ongoing transaction expenses $31,250.00
- ----------------------------------------------------------------------------------------
Expected FTA outstanding RRB principal balance as of 12/31/98 $2,610,900,000.00
- ----------------------------------------------------------------------------------------
</TABLE>
Table II shows the initial FTA charges calculated for residential and eligible
small commercial customers. The FTA calculations are shown in Attachment IV.
<TABLE>
<CAPTION>
TABLE II
- --------------------------------------------------------------
<S> <C>
Residential Customer FTA Charge 1.61508 c/kWh
- --------------------------------------------------------------
Eligible Small Commercial Customer FTA
Charge 1.68825 c/kWh
- --------------------------------------------------------------
</TABLE>
Proposed changes to Preliminary Statement Part I to show FTA charges to be
effective [December 82, 1997], are included in Attachment I.
TRANSITION PROPERTY
Transition property is the property described in Public Utilities Code (S) 840
(g) relating to the FTA charges set forth herein, including, without
limitation, all of the following:
1) The right, title, and interest in and to the FTA charges set forth
herein, as adjusted from time to time.
2) The right to be paid the total amounts shown on Attachment V.
3) The right, title, and interest in and to all revenues,
collections, claims, payments, money, or proceeds of or arising from
the FTA charges, set forth herein.
4) All rights to obtain adjustments to the FTA charges under the True-Up
Mechanism.
These FTA charges, as adjusted from time to time, shall remain in place until
the total amounts in Attachment V are paid in full to the owner of the
transition property, or its assignee(s).
<PAGE>
Public Utilities Commission
Advice 1715-E
December 1, 1997
Page 8
COPIES OF UCC-1 FINANCING STATEMENTS
Attached as Attachment VI, PG&E submits, in compliance with PU Code (S)844
(c), a copy of the UCC-1 Financing Statement filed in connection with the sale
of certain Transition Property from Pacific Gas and Electric Company to PG&E
Funding LLCcreating a security interest in certain Transition Property,
the original of which will be filed with the California Secretary of State, in
connection with the issuance of RRBs pursuant to D. 97-09-055. The attached
UCC-1 Financing Statement identifies certain Transition Property as the
Collateral therein, and identifies Pacific Gas and Electric Company, as
Debtor, PG&E Funding LLC as Secured Party, and Bankers Trust Company of
California, N.A., as Note Trustee, as Assignee of Secured Party.
Attached as Attachment VII, PG&E submits, in compliance with PU Code (S)843
(b), a copy of the UCC-1 Financing Statement creating a security interest in
certain Transition Property, the original of which will be filed with the
California Secretary of State in accordance with Chapter 4 (commencing with
(S)9401) of Division 9 of the Commercial Code, in connection with the issuance
of RRBs pursuant to D. 97-09-055. The attached UCC-1 Financing Statement
identifies certain Transition Property as the Collateral therein, and
identifies Pacific Gas and Electric Company, as debtor, PG&E Funding LLC as
Secured Party, and Bankers Trust Company of California, N.A., as Note Trustee,
as Assignee of Secured Party.
Attached as Attachment VIII, PG&E submits on behalf of PG&E Funding LLC, in
compliance with PU Code (S)843 (b), a copy of the UCC-1 Financing Statement
creating a security interest in certain Transition Property, the original of
which will be filed with the California Secretary of State in accordance with
Chapter 4 (commencing with (S) 9401) of Division 9 of the Commercial Code, in
connection with the issuance of RRBs pursuant to D. 97-09-055. The attached
UCC-1 Financing Statement identifies certain Transition Property as the
Collateral therein, and identifies PG&E Funding LLC as Debtor and Bankers
Trust Company of California, N.A., as Note Trustee, as Secured Party.
This filing will not increase any rate or charge, cause the withdrawal of
service, or conflict with any rate schedule or rule.
In accordance with D. 97-09-055, these FTA charges shall be effective on
[DECEMBER 82, 1997], which is 5 business days after the date of filing
and will continue to be effective, unless they are changed by a subsequent FTA
<PAGE>
Public Utilities Commission
Advice 1715-E
December 1, 1997
Page 9
Charge Issuance Advice Letter, or an FTA Charge True-Up Mechanism Advice
Letter.
Anyone wishing to protest this filing may do so by sending a letter within 20
days of this filing. Protests should be mailed to:
IMC Branch Chief
Energy Division
California Public Utilities Commission
505 Van Ness Avenue, Room 4002
San Francisco, California 94102
Facsimile: (415) 703-2200
Copies should also be mailed to the attention of the Director, Energy Division
(address above), and Les Guliasi, Regulatory Relations Manager, 77 Beale
Street, Mail Code B10C, P.O. Box 770000, San Francisco, California 94177,
Facsimile (415) 973-7451. The protest should set forth the grounds upon which
it is based and shall be submitted expeditiously. There are no restrictions
on who may file a protest.
In accordance with Section III, Paragraph G of General Order 96-A, PG&E is
mailing copies of this advice filing to the utilities and interested parties
shown on the attached list, and interested parties in A. 97-05-006. Address
change requests should be directed to Rose Abao at (415) 973-3529.
Vice President - Rates and Account Services
Attachments
cc: CPUC, SF - Attn: Paul Clanon, Energy Division
CPUC, SF - Attn: Elena Schmid, ORA
CPUC, SF - Attn: Juanita Porter, Energy Division
CPUC, SF - Attn: Wade McCartney, Energy Division
<PAGE>
EXHIBIT 99.2
RESOLUTION B97-18
RESOLUTION OF THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
APPROVING THE TERMS AND CONDITIONS FOR THE ISSUANCE OF NOT TO EXCEED $3.5
BILLION OF RATE REDUCTION BONDS TO FINANCE THE RECOVERY OF TRANSITION COSTS
BY PACIFIC GAS AND ELECTRIC COMPANY , THE EXECUTION OF VARIOUS RATE
REDUCTION BOND FINANCING DOCUMENTS AND THE MAKING OF RELATED APPROVALS,
FINDINGS AND DETERMINATIONS
WHEREAS, AB 1890 (Chapter 854, Statutes of 1996), as amended by SB 477
(Chapter 275, Statutes of 1997) (collectively, "Restructuring Legislation"),
provides the legislative foundation for transforming the regulatory framework of
California's electric utility industry; and
WHEREAS, the Restructuring Legislation allows each California investor-
owned electric utility (each, an "IOU") to recoup net costs of its uneconomic
generation-related assets and obligations (defined in the Restructuring
Legislation as "transition costs") from its customers within its historic
service territory and authorizes the issuance of rate reduction bonds (as
defined in the Restructuring Legislation) ("Bonds") to facilitate the recovery
of a portion of these transition costs and the implementation of a ten percent
rate reduction for residential and small commercial electric customers; and
WHEREAS, pursuant to the Restructuring Legislation, a project for the
financing of transition costs and the acquisition of transition property (as
defined in the Restructuring Legislation) upon the request of an IOU is deemed
to be in the public interest and eligible for financing by the California
Infrastructure and Economic Development Bank ("Bank"); and
WHEREAS, pursuant to Resolutions B97-06 and B97-15 the Bank approved the
form of application for the financing of transition costs ("Application Form")
and has established procedures for the expeditious review of applications
submitted by the IOUs for the issuance and approval of the Bonds ("Procedures");
and
WHEREAS, pursuant to the Restructuring Legislation, Pacific Gas and
Electric Company ("Utility") filed an application with the California Public
Utilities Commission ("CPUC") on May 6, 1997 requesting approval to finance a
portion of its transition costs through the issuance of Bonds and simultaneously
filed part one of a completed Application Form with the Bank requesting the Bank
to issue, or cause to be issued through a special purpose trust (as defined in
the Restructuring Legislation), such Bonds; and
WHEREAS, pursuant to the Restructuring Legislation, the CPUC issued
Decision 97-09-055 dated September 3, 1997 ("Financing Order"), authorizing the
Utility, among other things, to recover up to $3.5 billion of its transition
costs through the imposition of fixed transition amounts (as defined in the
Restructuring Legislation) in amounts necessary to repay an equivalent amount of
Bonds, together with overcollateralization ("Overcollateralization") for such
Bonds, and authorizing one or more financing entities (as defined in the
Restructuring Legislation) to issue not to exceed $3.5 billion principal amount
of Bonds on terms and conditions approved by the Bank, and the Utility consented
to the terms and conditions of the Financing Order in a timely manner; and
WHEREAS, pursuant to the Procedures, the Secretary of the Bank has notified
the Chairperson of the Bank that a completed Application Form, including
exhibits thereto ("Application"), from the Utility has been received by the
Bank; and
WHEREAS, the Application has fully complied with the Procedures; and
<PAGE>
Resolution B97-18
page 2
WHEREAS, pursuant to the Restructuring Legislation, the Financing Order
also identified determinations and/or approvals required to be made by the Bank
in connection with the issuance of Bonds (collectively, "Necessary Approvals"),
which Necessary Approvals consist of the following: (1) approval of the final
transaction structure, including the terms of the "SPE Debt Securities" (as
defined in the Financing Order and hereinafter referred to as the "Notes") and
the terms of the Bonds (collectively, the "Structure"); (2) approval of certain
costs of issuance, delineated in the Financing Order, to be approved by the Bank
("Costs of Issuance"); (3) approval of the special purpose entity entitled "PG&E
Funding LLC" ("SPE") as a "financing entity"; (4) the amount of
Overcollateralization; and (5) the determination of the final expected maturity
and final legal maturity of the Bonds and Notes ("Final Maturity"); and (6) a
determination of whether all or a portion of the Bonds are issued as variable
rate Certificates (as defined below), notwithstanding the fact that the Notes
are fixed rate; and
WHEREAS, pursuant to the Restructuring Legislation, Bonds may be issued by
the Bank or by a special purpose trust authorized by the Bank or, subject to
certain conditions, by a financing entity, and pursuant to Resolution B97-09,
the Bank determined that the issuer of Bonds will be a special purpose trust
and, pursuant to Resolution No. B97-16, the Bank determined that the special
purpose trust will be a business trust organized as a not-for-profit business
trust under the laws of the State of Delaware and named California
Infrastructure and Economic Development Bank Special Purpose Trust PG&E-1
("Trust"); and
WHEREAS, the Utility submitted to the Bank, as an exhibit to its
Application, a copy of registration statement No. 333-30715 ("Registration
Statement") filed with the United States Securities and Exchange Commission by
the SPE as registrant, which together with the exhibits thereto describe in
detail the Structure; and
WHEREAS, the Restructuring Legislation authorizes the sale or assignment of
transition property and the pledge of such transition property, directly or
indirectly, as security for Bonds; and
WHEREAS, the Financing Order approves the SPE and the sale of the
transition property, and further approves the pledge of such transition property
for the payment of the Notes, which Notes will in turn constitute security for
the Bonds; and
WHEREAS, as described in the Registration Statement and the exhibits
thereto, the Bonds will be denominated "California Infrastructure and Economic
Development Bank Special Purpose Trust PG&E-1 Rate Reduction Certificates,
Series 1997A" ("Certificates") and will be issued by the Trust in one or more
series or classes in amounts to be determined at the time of pricing of the
Certificates; and
WHEREAS, the Certificates will represent an undivided beneficial interest
in the Notes of a related series or class issued by the SPE, with each series or
class of Certificates being entitled to receive payments received by the Trust
with respect to a corresponding series or class of Notes issued by the SPE,
together with any interest exchange (swap) agreement to exchange fixed rate
payments on the Notes for amounts reflecting variable rate payments on any
variable rate Certificates ("Swap Agreement"); and
WHEREAS, the Board wishes to approve the issuance of the Certificates and
provide for the Necessary Approvals, approving specified documents and
determining certain terms and conditions relating thereto as required by the
Restructuring Legislation and the Financing Order and in accordance with the
Procedures;
NOW THEREFORE, the board of directors of the Bank hereby does resolve as
follows:
Section 1. RECITALS. The recitals above are true and correct.
----------
Section 2. TRUST CONSTITUTES SPECIAL PURPOSE TRUST; TRUST POWERS; TRUST
----------
AND SPE AS FINANCING ENTITIES. The Bank hereby finds and determines that the
Trust constitutes a "special purpose trust" that is authorized to purchase the
Notes and issue the Certificates under the Restructuring
<PAGE>
Resolution B97-18
page 3
Legislation, which Certificates constitute "rate reduction bonds" under the
Restructuring Legislation and the Financing Order.
The Trust shall have the powers set forth in the Trust Agreement (as
defined in Section 11), including the power to purchase the Notes pursuant to
the Note Purchase Agreement (as defined in the Trust Agreement), issue the
Certificates and execute and deliver the Underwriting Agreement and Swap
Agreement.
The Trust is authorized to issue Bonds and the SPE is authorized to
purchase transition property, and each is hereby found and determined to be a
"financing entity" (as defined in the Restructuring Legislation).
Section 3. AGREEMENT WITH SPE, TRUST AND CERTIFICATEHOLDERS. Pursuant to
----------
Public Utilities Code Section 841(c), the Bank, on behalf of the State of
California, does hereby pledge and agree with the SPE, the Trust and the holders
of the Certificates that the State of California shall neither limit nor alter
the fixed transition amounts, the transition property, the Financing Order, and
all rights thereunder until the Notes and Certificates, together with the
interest thereon, are fully met and discharged, provided, however, that nothing
contained herein shall preclude the limitation or alteration of such rights if
and when adequate provision shall be made by law for the protection of the SPE,
the Trust and the holders of the Certificates.
Section 4. NOTES AND CERTIFICATES NOT OBLIGATION OF STATE. The issuance
----------
of Certificates shall not directly, indirectly, or contingently obligate the
State or any political subdivision thereof to levy or pledge any form of
taxation therefor or to make any appropriation for their payment. Each
Certificate shall bear on its face a statement to the following effect: "Neither
the full faith and credit nor the taxing power of the State of California is
pledged to the payment of the principal of, or interest on, this bond."
Section 5. STRUCTURE. The Structure in substantially the form described
----------
in the Registration Statement is hereby approved.
Section 6. COSTS OF ISSUANCE. The Costs of Issuance identified in Exhibit
----------
A to this resolution are hereby approved to be paid or reimbursed from proceeds
of the Certificates and the Notes in amounts not exceeding the amounts
identified therein. Other Costs of Issuance to be paid or reimbursed from
proceeds of the Certificates and the Notes required in the Financing Order to be
approved by the Bank and/or the State Treasurer's Office ("STO") shall be
approved by the STO.
Section 7. OVERCOLLATERALIZATION AMOUNT. Overcollateralization in an
----------
amount equal to 0.5% of the initial principal amount of the Certificates is
hereby approved.
Section 8. FINAL MATURITY; AUTHORITY OF STO AS AGENT OF SALE. The
----------
Certificates and Notes shall have an expected final maturity of not more than 10
years from their date of issuance, shall have a final legal maturity of not more
than 13 years from their date of issuance and principal shall be scheduled to be
repaid in substantially equal annual amounts. Subject to the preceding
sentence, the Notes and the Certificates shall mature on such dates and in such
principal amounts and shall bear interest at such rates per annum (or in the
case of variable rate Certificates, the interest rates shall be determined in
such manner) as determined at the time of sale by the State Treasurer as agent
for sale for the Bank and the Trust pursuant to Sections 63073 and 63074 of the
Government Code, and as set forth in the Underwriting Agreement approved
pursuant to Section 14. The STO is hereby authorized and requested to sell the
Bonds, at any time within one year of receipt of a certified copy of this
resolution.
Section 9. VARIABLE RATE CERTIFICATES. Variable rate Certificates are
----------
hereby approved and authorized to be issued pursuant to the terms of the Trust
Supplement (defined and approved pursuant to Section 11) and secured by the Swap
Agreement (defined and approved pursuant to Section 12), if the STO determines
at the time of sale that such variable rate Certificates will result in lower
net interest costs on the Notes.
<PAGE>
Resolution B97-18
page 4
Section 10. NECESSARY APPROVALS. The Bank having approved in Sections
-----------
2,5,6,7,8, and 9 the various components of the Necessary Approvals, hereby finds
that all the Necessary Approvals have been provided for, and having provided for
the Necessary Approvals, and there having been full compliance with the
Procedures, hereby approves the issuance of Bonds under the terms and conditions
described in this resolution.
Section 11. TRUST AGREEMENT; TRUST SUPPLEMENT. For the purpose of
-----------
establishing the Trust and delineating the powers of the Trust, the form of the
Amended and Restated Declaration and Agreement of Trust, dated as of November 1,
1997 (the "Trust Agreement"), by and among the Bank, as originator, Bankers
Trust (Delaware), a Delaware banking corporation, as Delaware trustee ("Delaware
Trustee"), and Bankers Trust Company, as Certificate trustee ("Certificate
Trustee" and, together with the Delaware Trustee, the "Trustees"), and the form
of First Supplemental Agreement of Trust, dated as of November 1, 1997 ("First
Supplement"), including the form of same, both presented at this meeting and on
file with the Secretary of this Board, are hereby approved. The Chairperson is
hereby authorized and directed, for and in the name and on behalf of the Bank,
to execute and deliver the Trust Agreement and the First Supplement in
substantially the form presented at this meeting, with such changes therein as
such officer, with the advice of Bank counsel and Brown and Wood LLP ("Bond
Counsel") may require or approve, such approval to be conclusively evidenced by
the execution and delivery thereof.
Section 12. SWAP AGREEMENT. For the purpose of permitting the issuance of
-----------
variable rate Certificates with fixed rate Notes, the form of the Swap Agreement
appended as Exhibit B to the Trust Supplement is hereby approved. If the STO
approves the issuance of variable rate Certificates pursuant to Sections 9 and
14, the Chairperson of the Board is authorized to direct the Trust to execute
and deliver the Swap Agreement in substantially the form appended to the Trust
Supplement, with such changes therein as such officer, with the advice of Bank
Counsel and Bond Counsel, may require or approve, such approval to be
conclusively evidenced by the execution and delivery thereof.
Section 13. FEE AND INDEMNITY AGREEMENT. For the purpose of compensating
-----------
and providing certain indemnities to the Trustees under the Trust Agreement, the
form of the Fee and Indemnity Agreement, dated as of November 1, 1997, by and
among the Certificate Trustee, the Delaware Trustee, the SPE, the Bank and
Bankers Trust Company, as Note trustee, presented at this meeting and on file
with the Secretary of this Board, is hereby approved, and the Chairperson is
hereby authorized and directed, for and in the name and on behalf of the Bank,
to execute and deliver such Fee and Indemnity Agreement in substantially said
form, with such changes therein as such officer, with the advice of Bank counsel
and Bond Counsel, may require or approve, such approval to be conclusively
evidenced by the execution and delivery thereof.
Section 14. UNDERWRITING AGREEMENT. For the purpose of providing for the
-----------
sale of the Certificates, the form of the Underwriting Agreement dated as of
November 1, 1997, by and among the Utility, the Trust, the SPE, Morgan Stanley
Dean Witter and Lehman Brothers as representatives of the underwriters, the Bank
on behalf of the Trust and the STO, as agent of sale for the Trust, presented at
this meeting and on file with the Secretary of this Board is hereby approved.
Upon approval by the STO of the scheduled maturity, the final legal maturity,
the interest rate and the purchase price for each class of Certificates, and the
award of the Certificates by the STO in accordance with Section 5702 of the
Government Code, the Chairperson is hereby authorized and directed, for and in
the name and on behalf of the Trust, to execute and deliver such Underwriting
Agreement in substantially said form, with such changes therein as such officer,
with the advice of Bank counsel and Bond Counsel, may require or approve, and
not inconsistent with the terms approved by the STO, such approval to be
conclusively evidenced by the execution and delivery thereof. The Secretary of
the Bank shall provide a certified copy of this resolution to the STO as
required by Section 63074 of the Government Code.
Section 15. ATTESTATION. The Secretary of the Bank is hereby authorized
-----------
and directed to attest the signature of the Chairperson of the Bank in
connection with the execution and delivery of any document or certificate
authorized to be executed pursuant to the terms of this resolution.
<PAGE>
Resolution B97-18
page 5
Section 16. PROCEDURE FOR EXECUTION AND DELIVERY OF DOCUMENTS. The
-----------
officers of the Bank are hereby authorized and directed, jointly and severally,
to do any and all things necessary or desirable to execute and deliver any and
all documents that they may deem necessary or desirable in order to consummate
the transactions authorized hereby and to consummate the sale, execution and
delivery of the Certificates by the Trust, the registration of the Notes with
the Securities and Exchange Commission pursuant to the Securities Act of 1933,
as amended, and the qualification of the Trust Agreement under the Trust
Indenture Act of 1939, as amended and otherwise to carry out, give effect to and
comply with the terms and intent of this resolution, and all such actions
heretofore taken by such officers, in respect to such matters, are hereby
ratified, confirmed and approved.
Section 17. SERVICING COMPENSATION. Any Servicer shall receive annual
----------
compensation not to exceed 0.25% of the outstanding principal balance of the
Notes if the fixed transition amount (as defined in the Restructuring
Legislation) is included as a line item on bills otherwise sent to customers,
and shall receive annual compensation not to exceed 1.5% of the outstanding
principal balance of the Notes if the fixed transition amount is billed
separately to customers.
Section 18. RATINGS. The Certificates shall be rated the highest rating
----------
category by any rating agency rating the Certificates.
AYES: Holben, Spears, Waddell
NOES: none
ABSENT: none
ABSTAIN: none
/s/ Christopher S. Holben
-----------------------------------------
CHRISTOPHER S. HOLBEN,
Chairperson
ATTEST:
/s/ Glenn Stober
- -----------------------------------
GLENN STOBER,
Secretary of the Board of Directors
<PAGE>
Resolution B97-18
page 6
Exhibit A
Resolution B97-17
Cost of Issuance
<TABLE>
<CAPTION>
Payee Description Amount
- ----- ----------- ------
<S> <C> <C>
California Infrastructure
and Economic Development Bank Bank fees/1/ $111,000
Brown & Wood LLP Bond Counsel fees $410,000
Public Resources Advisory Group Financial Advisor fees $ 74,000
Bankers Trust Company and Note, Certificate and
Bankers Trust (Delaware) Delaware Trustee fees $ 10,200
Richards, Layton & Finger Note, Certificate and
Delaware Trustee counsel fees $ 17,000
TOTAL /2/$622,200
</TABLE>
- --------------------------
/1/ All fees categories include both fees and disbursements.
/2/ $50,000 of this fee will be credited to Utility as reimbursement for
previously paid Bank Application fee.
