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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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 16, 1997
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California Infrastructure and Economic Development Bank
Special Purpose Trust SDG&E-1
Rate Reduction Certificates, Series 1997-1
SDG&E Funding LLC
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(Exact Name of Issuer as Specified in its Charter)
Delaware 333-30761 33-0762746
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(State or Other (Commission File Number) (IRS Employer
Jurisdiction Identification
of Incorporation Number)
Identification or
Organization)
101 Ash Street, Room 111, San Diego, California 92101
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(Address of Principal Executive Offices) (Zip Code)
(Registrant's telephone number, including area code) (619) 696-2328
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(Former Name or Former Address, if Changed Since Last Report)
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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.
(a) Financial Statements of business acquired.
Not applicable.
(b) Pro Forma financial information.
Not applicable.
(c) Exhibits
Exhibit
Number
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1.1 Underwriting Agreement
4.1 Note Indenture
4.2 Series Supplement
4.3 Form of Note
4.4 Amended and Restated Declaration and Agreement of Trust
4.5 First Supplemental Trust Agreement
4.6 Form of 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
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SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: December 23, 1997 SDG&E Funding LLC
By /s/ Charles A. McMonagle
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Name: Charles A. McMonagle
Its: President and Chief Executive Officer
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Exhibit 1.1
EXECUTION COPY
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK SPECIAL PURPOSE TRUST SDG&E-1
RATE REDUCTION CERTIFICATES
SDG&E FUNDING LLC
SAN DIEGO GAS & ELECTRIC COMPANY
UNDERWRITING AGREEMENT
New York, New York
December 4, 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
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Development Bank Special Purpose Trust SDG&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 16, 1997, as 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
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2
trustee (the "Certificate Trustee"). The assets of the Trust will consist
solely of the SDG&E Funding LLC Notes, Series 1997-1 (the "Notes"), issued
by SDG&E Funding LLC, a Delaware limited liability company (the "Note
Issuer"), and the proceeds thereof. The Notes will be issued pursuant to
an indenture dated as of December 16, 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 16, 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 and the proceeds thereof. 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
San Diego Gas & Electric Company, a California corporation (the "Company"),
pursuant to a transition property purchase and sale agreement dated as of
December 16, 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 16, 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
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Note 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.
(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
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3
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 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
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4
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 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, however, that neither
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the Note Issuer nor the Company makes any 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
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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 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
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6
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 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
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in 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
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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 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
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8
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 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
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9
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).
(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.
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10
(b) Covenants of the Company. The Company covenants and agrees
-------------------------
with 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
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 as of the Execution
Time and the Closing Date 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 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
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11
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 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"), and the Trust
shall have received opinions of counsel for the Company, portions of
which may be delivered by O'Melveny & Myers LLP, outside counsel for
the Company, portions of which may be delivered by David R. Clark,
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;
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(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 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
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13
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, 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 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>
14
(c) The Representatives, the Infrastructure Bank and the STO
shall have received opinions of counsel for the Note Issuer, portions
of which may be delivered by O'Melveny & Myers LLP, outside counsel
for the Note Issuer, portions of which may be delivered by David R.
Clark, 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;
(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
<PAGE>
15
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 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
<PAGE>
16
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, 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
<PAGE>
17
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 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
<PAGE>
18
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);
(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 has been duly authorized
and delivered by the Trust and 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);
<PAGE>
19
(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 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
<PAGE>
20
(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 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
<PAGE>
21
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 (A) rely 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 and
the Servicer, assume such matters which are the subject of opinions
rendered by counsel to such parties hereunder or under the Basic
Documents, and (C) rely 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
<PAGE>
22
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 the Note Purchase Agreement
have been duly executed by the Certificate Trustee, and the Trust
Agreement has been duly authorized and delivered by the
Certificate Trustee and constitutes a legal, valid and binding
instrument enforceable against the Certificate 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 Certificate Trustee has duly executed and
authenticated 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,
<PAGE>
23
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, 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).
<PAGE>
24
(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 Chief Executive Officer 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 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, Deloitte & Touche 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
<PAGE>
25
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.
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, Deloitte & Touche 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 O'Melveny & Myers LLP, counsel
<PAGE>
26
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 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 O'Melveny & Myers LLP, outside counsel for the Company, and
portions of which may be delivered by David R. Clark, 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
<PAGE>
27
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 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, the STO, the
Company and the Note Issuer 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,
<PAGE>
28
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 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 that certain Mortgage and Deed of
Trust dated as of July 1, 1940, between San Diego Gas &
<PAGE>
29
Electric Company and First Trust of California, N.A. (successor to
Bank of California, National Association), as trustee.
(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 San Diego Gas & Electric Company, 101 Ash
Street, San Diego, CA, on the Closing Date.
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
<PAGE>
30
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 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
<PAGE>
31
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 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
<PAGE>
32
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 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
<PAGE>
33
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 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
<PAGE>
34
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 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
<PAGE>
35
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 San Diego Gas & Electric Company, 101 Ash
Street, San Diego, CA 92101, Attention: Chief Financial Officer; and if
sent to the Note Issuer, to it at SDG&E Funding LLC, 101 Ash Street, Room
111, San Diego, CA 92101, 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 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.
<PAGE>
36
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 original, which taken
together shall constitute one and the same instrument.
<PAGE>
37
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,
SAN DIEGO GAS & ELECTRIC
COMPANY,
by /s/ David Kuzma
__________________________
Name: David Kuzma
Title: Chief Financial Officer
SDG&E FUNDING LLC,
by /s/ Charles McMonagle
__________________________
Name: Charles McMonagle
Title: President and
Chief Executive Officer
CALIFORNIA INFRASTRUCTURE AND ECONOMIC
DEVELOPMENT BANK SPECIAL PURPOSE TRUST
SDG&E-1,
by California Infrastructure and Economic
Development Bank, as Originator,
by /s/ Christopher S. Holben
__________________________
Name: Christopher S. Holben
Title: Chair
CALIFORNIA INFRASTRUCTURE AND ECONOMIC
DEVELOPMENT BANK,
by /s/ Christopher S. Holben
__________________________
Name: Christopher S. Holben
Title: Chair
<PAGE>
38
TREASURER OF THE STATE OF CALIFORNIA,
by /s/ Steve Spears
________________________
Name: Steve Spears
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 /s/ Murray Stoltz
__________________________
Name: Murray Stoltz
Title:
by LEHMAN BROTHERS INC.
by /s/ Steve Peters
__________________________
Name: Steve Peters
Title:
For themselves and the other
several Underwriters, if any,
named in Schedule II to the
foregoing Agreement.
<PAGE>
39
SCHEDULE I
Underwriting Agreement dated December 4, 1997
Registration Statement No. 333-30761
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:
<TABLE>
<CAPTION>
Title: California Infrastructure and Economic
Development Bank Special Purpose Trust SDG&E-1
$658,000,000 Rate Reduction Certificates,
Series 1997-1
<S> <C>
Principal amount, Price to Public, Underwriting
Discounts and Commissions and Proceeds to Trust:
</TABLE>
<TABLE>
<CAPTION> Underwriting
Total Principal Discounts and Proceeds to
Amount of Class Price to Public Commissions Trust
--------------- ---------------- ------------- ------------
<S> <C> <C> <C> <C>
Per Class A-1 $ 65,800,000 99.99553% 0.24837% 99.74716%
Certificate
Per Class A-2 $ 82,639,254 99.98666% 0.35000% 99.63666%
Certificate
Per Class A-3 $ 66,230,948 99.98061% 0.40000% 99.58061%
Certificate
Per Class A-4 $ 65,671,451 99.96564% 0.45000% 99.51564%
Certificate
Per Class A-5 $ 96,537,839 99.99826% 0.50000% 99.49826%
Certificate
Per Class A-6 $ 197,584,137 99.98005% 0.55000% 99.43005%
Certificate
Per Class A-7 $ 83,536,371 99.93387% 0.65000% 99.28387%
Certificate --------------- --------------- ------------- ---------------
Total $658,000,000.00 $657,854,287.38 $3,125,498.53 $654,728,788.85
</TABLE>
<PAGE>
40
Plus the Underwriters will be reimbursed by the Note Issuer for:
----
$186,850 of expenses,
consisting of $154,000
of out-of-pocket expenses and
Original Issue Discount (if any): $145,712.62
Redemption provisions: Optional Redemption and Mandatory Redemption
as set forth in Article X of the Indenture
Other provisions:
Closing Date, Time and Location: December 16, 1997,
6:00 a.m., Pacific
Standard Time,
San Diego, 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
31, 1997
<PAGE>
41
SCHEDULE II
<TABLE>
<CAPTION>
Principal Amount of Certificates to be Purchased
-----------------------------------------------------
Underwriters Class A-1 Class A-2 Class A-3 Class A-4
- ------------ Certificates Certificates Certificates Certificates
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Morgan Stanley & Co. $36,190,000 $45,451,593 $36,427,024 $36,119,301
Incorporated
Lehman Brothers Inc. 16,450,000 20,659,813 16,557,737 16,417,862
Chase Securities Inc. 3,290,000 4,131,962 3,311,547 3,283,572
Prudential Securities 3,290,000 4,131,962 3,311,547 3,283,572
Incorporated
Salomon Brothers Inc 3,290,000 4,131,962 3,311,547 3,283,572
Artemis Capital Group, Inc. 1,645,000 2,065,981 1,655,773 1,641,786
Samuel A. Ramirez & Co. 1,645,000 2,065,981 1,655,773 1,641,786
Inc. ----------- ----------- ----------- -----------
Total...................... $65,800,000 $82,639,254 $66,230,948 $65,671,451
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Principal Amount of Certificates to be Purchased
-------------------------------------------------
Class A-5 Class A-6 Class A-7
Certificate sCertificates Certificates Total
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Morgan Stanley & Co. $53,095,817 $108,671,275 $45,945,007 $361,900,000
Incorporated
Lehman Brothers Inc. 24,134,459 49,396,034 20,884,092 164,500,000
Chase Securities Inc. 4,826,891 9,879,207 4,176,818 32,900,000
Prudential Securities 4,826,891 9,879,207 4,176,818 32,900,000
Incorporated
Salomon Brothers Inc 4,826,891 9,879,207 4,176,818 32,900,000
Artemis Capital Group, Inc. 2,413,445 4,939,603 2,088,409 16,450,000
Samuel A. Ramirez & Co. 2,413,445 4,939,603 2,088,409 16,450,000
Inc. ----------- ------------ ----------- ------------
Total...................... $96,537,839 $197,584,137 $83,536,371 $658,000,000
=========== ============ =========== ============
</TABLE>
<PAGE>
EXHIBIT 4.1
Execution Copy
================================================================================
SDG&E FUNDING LLC,
Note Issuer
and
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
Note Trustee
______________________________
INDENTURE
Dated as of December 16, 1997
______________________________
Issuable in Series
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I Definitions and Incorporation by Reference
------------------------------------------
SECTION 1.01. Definitions......................................... 3
SECTION 1.02. Incorporation by Reference of Trust
Indenture Act...................................... 18
SECTION 1.03. Rules of Construction............................... 18
ARTICLE II The Notes
---------
SECTION 2.01. Form................................................ 19
SECTION 2.02. Denominations; Notes Issuable in Series............. 20
SECTION 2.03. Execution, Authentication and Delivery.............. 21
SECTION 2.04. Temporary Notes..................................... 22
SECTION 2.05. Registration; Registration of Transfer and
Exchange.......................................... 23
SECTION 2.06. Mutilated, Destroyed, Lost or Stolen Notes.......... 25
SECTION 2.07. Persons Deemed Owner................................ 26
SECTION 2.08. Payment of Principal, Premium, if any, and
Interest; Interest on Overdue Principal;
Principal, Premium, if any, and Interest Rights
Preserved. 27
SECTION 2.09. Cancelation......................................... 28
SECTION 2.10. Amount Unlimited; Authentication and Delivery of
Notes............................................. 29
SECTION 2.11. Release of Collateral............................... 37
ARTICLE III Covenants
---------
SECTION 3.01. Payment of Principal, Premium, if any, and
Interest.......................................... 38
SECTION 3.02. Maintenance of Office or Agency..................... 38
SECTION 3.03. Money for Payments To Be Held in Trust.............. 38
SECTION 3.04. Existence........................................... 41
SECTION 3.05. Protection of Collateral............................ 41
SECTION 3.06. Opinions as to Collateral........................... 42
SECTION 3.07. Performance of Obligations; Servicing; SEC
Filings............................................ 43
SECTION 3.08. Negative Covenants.................................. 46
SECTION 3.09. Annual Statement as to Compliance................... 47
SECTION 3.10. Note Issuer May Consolidate, etc.................... 48
SECTION 3.11. Successor or Transferee............................. 51
SECTION 3.12. No Other Business................................... 51
SECTION 3.13. No Borrowing........................................ 51
SECTION 3.14. Servicer's Obligations.............................. 51
SECTION 3.15. Guarantees, Loans, Advances and Other Liabilities... 51
SECTION 3.16. Capital Expenditures................................ 52
SECTION 3.17. Non-Routine True-Up Adjustment...................... 52
SECTION 3.18. Restricted Payments................................. 52
<PAGE>
ii
SECTION 3.19. Notice of Events of Default......................... 53
SECTION 3.20. Further Instruments and Acts........................ 53
SECTION 3.21. Purchase of Subsequent Transition Property.......... 53
ARTICLE IV Satisfaction and Discharge; Defeasance
--------------------------------------
SECTION 4.01. Satisfaction and Discharge of Indenture;
Defeasance........................................ 55
SECTION 4.02. Conditions to Defeasance............................ 57
SECTION 4.03. Application of Trust Money.......................... 59
SECTION 4.04. Repayment of Moneys Held by Paying Agent............ 60
ARTICLE V Remedies
--------
SECTION 5.01. Events of Default................................... 60
SECTION 5.02. Acceleration of Maturity; Rescission and
Annulment......................................... 62
SECTION 5.03. Collection of Indebtedness and Suits for
Enforcement by Note Trustee....................... 63
SECTION 5.04. Remedies; Priorities................................ 67
SECTION 5.05. Optional Preservation of the Collateral............. 68
SECTION 5.06. Limitation of Suits................................. 69
SECTION 5.07. Unconditional Rights of Noteholders To Receive
Principal, Premium, if any, and Interest.......... 70
SECTION 5.08. Restoration of Rights and Remedies.................. 70
SECTION 5.09. Rights and Remedies Cumulative...................... 70
SECTION 5.10. Delay or Omission Not a Waiver...................... 71
SECTION 5.11. Control by Noteholders.............................. 71
SECTION 5.12. Waiver of Past Defaults............................. 72
SECTION 5.13. Undertaking for Costs............................... 73
SECTION 5.14. Waiver of Stay or Extension Laws.................... 73
SECTION 5.15. Action on Notes..................................... 74
SECTION 5.16. Performance and Enforcement of Certain
Obligations........................................ 74
ARTICLE VI The Note Trustee
----------------
SECTION 6.01. Duties of Note Trustee.............................. 75
SECTION 6.02. Rights of Note Trustee.............................. 77
SECTION 6.03. Individual Rights of Note Trustee................... 78
SECTION 6.04. Note Trustee's Disclaimer........................... 78
SECTION 6.05. Notice of Defaults.................................. 78
SECTION 6.06. Reports by Note Trustee to Holders.................. 79
SECTION 6.07. Compensation and Indemnity.......................... 80
SECTION 6.08. Replacement of Note Trustee......................... 80
SECTION 6.09. Successor Note Trustee by Merger.................... 82
SECTION 6.10. Appointment of Co-Trustee or Separate Trustee....... 83
SECTION 6.11. Eligibility; Disqualification....................... 84
SECTION 6.12. Preferential Collection of Claims Against
Note Issuer........................................ 85
<PAGE>
iii
ARTICLE VII Noteholders' Lists and Reports
------------------------------
SECTION 7.01. Note Issuer To Furnish Note Trustee Names and
Addresses of Noteholders....................... 85
SECTION 7.02. Preservation of Information; Communications to
Noteholders.................................... 86
SECTION 7.03. Reports by Note Issuer.......................... 86
SECTION 7.04. Reports by Note Trustee......................... 87
ARTICLE VIII Accounts, Disbursements and Releases
------------------------------------
SECTION 8.01. Collection of Money............................. 88
SECTION 8.02. Collection Account.............................. 88
SECTION 8.03. General Provisions Regarding the Collection
Account........................................ 93
SECTION 8.04. Release of Collateral........................... 94
SECTION 8.05. Opinion of Counsel.............................. 95
SECTION 8.06. Reports by Independent Accountants.............. 95
ARTICLE IX Supplemental Indentures
-----------------------
SECTION 9.01. Supplemental Indentures Without Consent of
Noteholders.................................... 96
SECTION 9.02. Supplemental Indentures with Consent of
Noteholders.................................... 98
SECTION 9.03. Execution of Supplemental Indentures............ 101
SECTION 9.04. Effect of Supplemental Indenture................ 101
SECTION 9.05. Conformity with Trust Indenture Act............. 102
SECTION 9.06. Reference in Notes to Supplemental Indentures... 102
ARTICLE X Redemption of Notes
-------------------
SECTION 10.01. Optional Redemption by Note Issuer............. 102
SECTION 10.02. Form of Optional Redemption Notice............. 103
SECTION 10.03. Notes Payable on Optional Redemption Date
or Payment Date............................ 103
ARTICLE XI Miscellaneous
-------------
SECTION 11.01. Compliance Certificates and Opinions, etc...... 105
SECTION 11.02. Form of Documents Delivered to Note Trustee.... 108
SECTION 11.03. Acts of Noteholders............................ 109
SECTION 11.04. Notices, etc................................... 110
<PAGE>
iv
SECTION 11.05. Notices to Noteholders; Waiver................. 111
SECTION 11.06. [Intentionally omitted]........................ 112
SECTION 11.07. Conflict with Trust Indenture Act.............. 112
SECTION 11.08. Effect of Headings and Table of Contents....... 113
SECTION 11.09. Successors and Assigns......................... 113
SECTION 11.10. Separability................................... 113
SECTION 11.11. Benefits of Indenture.......................... 113
SECTION 11.12. Legal Holidays................................. 113
SECTION 11.13. GOVERNING LAW.................................. 113
SECTION 11.14. Counterparts................................... 114
SECTION 11.15. Recording of Indenture......................... 114
SECTION 11.16. Trust Obligation............................... 114
SECTION 11.17. [Intentionally omitted]........................ 114
SECTION 11.18. No Recourse to Note Issuer..................... 114
SECTION 11.19. Inspection..................................... 115
EXHIBIT A-1 -- Form of Sale Agreement
EXHIBIT A-2 -- Form of Servicing Agreement
EXHIBIT B -- Form of Notes
EXHIBIT C -- Form of Series Supplement
<PAGE>
INDENTURE dated as of December 16, 1997, between SDG&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 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
<PAGE>
2
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
clauses (i) and (iv) above 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.
"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 16, 1997, as the same may be
amended and supplemented from time to time, between the Administrator and
the Note Issuer.
"Administrator" means San Diego Gas & Electric Company, or any
-------------
successor Administrator under the Administrative Services Agreement.
<PAGE>
3
"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 there after).
"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.
"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 Diego, 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 16, 1997.
------------
"Code" means the Internal Revenue Code of 1986, as amended from
----
time to time, and Treasury Regulations promulgated thereunder.
<PAGE>
4
"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 Bankers Trust Company of California, N.A., c/o
Bankers Trust Company, 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).
"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
<PAGE>
5
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;
(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 from which a rating is available in the highest investment
category granted thereby;
(d) investments in money market funds having a rating from
each of the Rating Agencies from which a rating is available 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.
<PAGE>
6
"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.
"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 confirm 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
<PAGE>
7
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 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 foregoing 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 circum stances 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.
<PAGE>
8
"Mandatory Redemption Price" has the meaning specified in Section
--------------------------
10.04.
"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, thereafter, 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 circum stances 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 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.
<PAGE>
9
"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 theretofore 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;
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
<PAGE>
10
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 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.
<PAGE>
11
"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 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.
<PAGE>
12
"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 16, 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 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 16, 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.
<PAGE>
13
"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 16, 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 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:
Section of
Term Servicing Agreement
---- -------------------
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
<PAGE>
14
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
Subsequent Transition Property.. Section 1.01
Transition Property............. Section 1.01
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>
15
(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 execut ing 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 authenti cation. 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
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
<PAGE>
16
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;
(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.
<PAGE>
17
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 authenti cation.
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.
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 authenti cate and deliver, temporary
Notes which are printed, litho graphed, 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
<PAGE>
18
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 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
<PAGE>
19
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.
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 notwith standing, 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 satis faction 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; pro
---
vided, 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,
<PAGE>
20
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 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,
-----------------------------------------------------------
<PAGE>
21
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 C hereto, at the applicable Note 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 such
installment. Notices in connection with redemptions of Notes shall be
mailed to Noteholders as provided in Section 10.02.
<PAGE>
22
(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. Cancelation. 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 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.
<PAGE>
23
(2) Authorizations. (a) 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 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
<PAGE>
24
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;
(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
<PAGE>
25
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 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;
<PAGE>
26
(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 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>
27
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);
(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
<PAGE>
28
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
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.
<PAGE>
29
(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)(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.
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.
<PAGE>
30
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 Sec tion 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:
(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
<PAGE>
31
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 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.
SECTION 3.05. Protection of Collateral. The Note Issuer will
-------------------------
from time to time execute and deliver all such
<PAGE>
32
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 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.
<PAGE>
33
(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.
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.
<PAGE>
34
(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 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
<PAGE>
35
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
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
<PAGE>
36
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;
(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
<PAGE>
37
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 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
<PAGE>
38
(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 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 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
<PAGE>
39
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), SDG&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 SDG&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 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
<PAGE>
40
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 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
<PAGE>
41
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.
(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;
<PAGE>
42
(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
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 and thereafter repaid to the Note Issuer or discharged
from such trust, as provided in
<PAGE>
43
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 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
<PAGE>
44
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 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
<PAGE>
45
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 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
<PAGE>
46
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 Section 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
<PAGE>
47
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 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>
48
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 Noteholders), 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.
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
<PAGE>
49
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 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
<PAGE>
50
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 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
<PAGE>
51
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 pro ceedings 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 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
<PAGE>
52
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 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
<PAGE>
53
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 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. Notwith standing 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
<PAGE>
54
or (iii) in the case of redemption, receive payment of the unpaid principal
and 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.
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
<PAGE>
55
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 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
<PAGE>
56
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 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
<PAGE>
57
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 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.
<PAGE>
58
(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 requirements of this Indenture.
(c) The Note Trustee may not be relieved from liabil ity 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
<PAGE>
59
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.
(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
<PAGE>
60
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 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;
(ii) the amount of the distribution to Noteholders allocable to
interest;
<PAGE>
61
(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
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
<PAGE>
62
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 insol vent;
(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 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
retir ing 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.
<PAGE>
63
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 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 Sec tion 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.
<PAGE>
64
(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 con ferred 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;
(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
<PAGE>
65
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 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 right to
execute, deliver and perform this Indenture and the Basic Dcouments to
which the Note Trustee is a party 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
<PAGE>
66
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 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 by the Note Issuer pursuant to clauses (i) and (ii) of this
Section 7.03(a) as may be
<PAGE>
67
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 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
<PAGE>
68
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.
(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:
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69
(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
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
<PAGE>
70
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 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.
<PAGE>
71
(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 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
short-term 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 short-term 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
<PAGE>
72
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
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.
<PAGE>
73
(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 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)(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 firm of
<PAGE>
74
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, 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
<PAGE>
75
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 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 supplemental hereto for the purpose of adding any
provisions to, or changing in any manner or eliminating any of
<PAGE>
76
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, 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
<PAGE>
77
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 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.
<PAGE>
78
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 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
<PAGE>
79
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 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>
80
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 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.
<PAGE>
81
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;
(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
<PAGE>
82
(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 de scribed 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.
(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
certifying 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 des cribed 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
<PAGE>
83
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 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
<PAGE>
84
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
consolidated and form one instrument.
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 evidenced 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 expressly 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, direction, 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
<PAGE>
85
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 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 hereunder if in writing and
mailed, first-class, postage prepaid, to the Note Issuer addressed to:
SDG&E Funding LLC, 101 Ash Street, Room 111, San Diego, CA 92101,
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 Agen cies 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
<PAGE>
86
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 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 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
<PAGE>
87
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 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.
<PAGE>
88
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 repre sentative 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 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
<PAGE>
89
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>
90
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.
SDG&E FUNDING LLC,
by /s/ Charles A. McMonagle
_________________________
Name: Charles A. McMonagle
Title: President and Chief
Executive Officer
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
not in its individual capacity but solely as
Note Trustee,
by /s/ Linda A. Rakolta
__________________________
Name: Linda A. Rakolta
Title: Vice President
<PAGE>
STATE OF CALIFORNIA, )
) ss.:
COUNTY OF SAN DIEGO, )
On the 15th day of December, 1997, before me, Donna R. Corona 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 SDG&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.
/s/ Donna R. Corona
____________________________
Notary Public
My commission expires: 4/21/01
<PAGE>
EXHIBIT A-1
[EXHIBIT A-1 FILED SEPARATELY AS
EXHIBIT 10.1 TO THIS FORM 8-K AND
INCORPORATED HEREIN BY REFERENCE]
<PAGE>
EXHIBIT A-2
[EXHIBIT A-2 FILED SEPARATELY AS
EXHIBIT 10.2 TO THIS FORM 8-K AND
INCORPORATED HEREIN BY REFERENCE]
<PAGE>
EXHIBIT B
[EXHIBIT B FILED SEPARATELY AS
EXHIBIT 4.3 TO THIS FORM 8-K AND
INCORPORATED HEREIN BY REFERENCE]
<PAGE>
EXHIBIT C
[EXHIBIT C FILED SEPARATELY AS
EXHIBIT 4.2 TO THIS FORM 8-K AND
INCORPORATED HEREIN BY REFERENCE]
<PAGE>
EXHIBIT 4.2
EXECUTION COPY
SERIES SUPPLEMENT dated as of December 16, 1997 (this
"Supplement"), by and between SDG&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 16, 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 $658,000,000 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-7.
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
<PAGE>
Scheduled Maturity Dates and Final Maturity Dates as set forth below:
Initial Note
Principal Interest Scheduled Final
Class Amount Rate Maturity Date Maturity Date
------ --------- --------- -------------- ------------------
A-1 $ 65,800,000 5.97 % December 26, December 26, 2000
1998
A-2 $ 82,639,254 6.04 % March 25, 2000 March 25, 2002
A-3 $ 66,230,948 6.07 % March 25, 2001 March 25, 2003
A-4 $ 65,671,451 6.15 % March 25, 2002 March 25, 2004
A-5 $ 96,537,839 6.19 % September 25, September 25, 2005
2003
A-6 $197,584,137 6.31 % September 25, September 25, 2008
2006
A-7 $ 83,536,371 6.37 % December 26, December 26, 2009
2007
- --------------------------------------------------------------------
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 16, 1997 (the
"Series Issuance Date") shall have as their date of authentication December
16, 1997.
(b) Payment Dates. The Payment Dates for the Series 1997-1
-------------
Notes are 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 Class A-
7 of the Series 1997-1 Notes.
(c) Expected Amortization Schedule for Principal. Unless an
--------------------------------------------
Event of Default shall have occurred and be continuing and the unpaid
principal amount of all Series of Notes and accrued interest thereon has
been declared to be due and payable, on each Payment Date, the Note Trustee
shall distribute to the Noteholders of record as of the related Record Date
amounts payable pursuant to Section 8.02(d)(vii) of the Indenture as
<PAGE>
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; and (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;
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
that reduces the Outstanding Amount of such Class of Notes to 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.
SECTION 4. Minimum Denominations. The Series 1997-1 Notes shall
---------------------
be issuable in the Minimum Denomination and integral multiples of $1 in
excess 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
<PAGE>
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-7 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.
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
<PAGE>
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>
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.
SDG&E FUNDING LLC, as Note Issuer,
by /s/ Charles A. McMonagle
___________________________
Name: Charles A. McMonagle
Title: President and Chief Executive
Officer
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
not in its individual capacity but solely as
Note Trustee,
by /s/ Linda A. Rakolta
____________________________
Name: Linda A. Rakolta
Title: Vice President
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
EXPECTED AMORTIZATION SCHEDULE
OUTSTANDING PRINCIPAL BALANCE
-------------------------------------------------------------------------------------------------------------
Payment Date Class A-1 Class A-2 Class A-3 Class A-4 Class A-5 Class A-6 Class A-7
- ------------ --------- --------- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Series Issuance
Date............ $65,800,000.00 $82,639,254.00 $66,230,948.00 $65,671,451.00 $96,537,839.00 $197,584,137.00 $83,536,371.00
Mar. 1998....... 62,632,171.52 82,639,254.00 66,230,948.00 65,671,451.00 96,537,839.00 197,584,137.00 83,536,371.00
June 1998....... 43,932,681.18 82,639,254.00 66,230,948.00 65,671,451.00 96,537,839.00 197,584,137.00 83,536,371.00
Sept. 1998...... 23,489,759.73 82,639,254.00 66,230,948.00 65,671,451.00 96,537,839.00 197,584,137.00 83,536,371.00
Dec. 1998....... 0.00 82,639,254.00 66,230,948.00 65,671,451.00 96,537,839.00 197,584,137.00 83,536,371.00
Mar. 1999....... 0.00 63,000,733.42 66,230,948.00 65,671,451.00 96,537,839.00 197,584,137.00 83,536,371.00
June 1999....... 0.00 49,025,773.57 66,230,948.00 65,671,451.00 96,537,839.00 197,584,137.00 83,536,371.00
Sept. 1999...... 0.00 34,076,269.98 66,230,948.00 65,671,451.00 96,537,839.00 197,584,137.00 83,536,371.00
Dec. 1999....... 0.00 16,839,254.00 66,230,948.00 65,671,451.00 96,537,839.00 197,584,137.00 83,536,371.00
Mar. 2000....... 0.00 0.00 66,230,948.00 65,671,451.00 96,537,839.00 197,584,137.00 83,536,371.00
June 2000....... 0.00 0.00 51,351,375.00 65,671,451.00 96,537,839.00 197,584,137.00 83,536,371.00
Sept. 2000...... 0.00 0.00 35,452,056.18 65,671,451.00 96,537,839.00 197,584,137.00 83,536,371.00
Dec. 2000....... 0.00 0.00 17,270,202.00 65,671,451.00 96,537,839.00 197,584,137.00 83,536,371.00
Mar. 2001....... 0.00 0.00 0.00 65,671,451.00 96,537,839.00 197,584,137.00 83,536,371.00
June 2001....... 0.00 0.00 0.00 50,877,702.51 96,537,839.00 197,584,137.00 83,536,371.00
Sept. 2001...... 0.00 0.00 0.00 35,102,832.31 96,537,839.00 197,584,137.00 83,536,371.00
Dec. 2001....... 0.00 0.00 0.00 17,141,653.00 96,537,839.00 197,584,137.00 83,536,371.00
Mar. 2002....... 0.00 0.00 0.00 0.00 96,537,839.00 197,584,137.00 83,536,371.00
June 2002....... 0.00 0.00 0.00 0.00 81,688,200.22 197,584,137.00 83,536,371.00
Sept. 2002...... 0.00 0.00 0.00 0.00 65,850,943.56 197,584,137.00 83,536,371.00
Dec. 2002....... 0.00 0.00 0.00 0.00 47,879,492.00 197,584,137.00 83,536,371.00
Mar. 2003....... 0.00 0.00 0.00 0.00 30,746,198.35 197,584,137.00 83,536,371.00
June 2003....... 0.00 0.00 0.00 0.00 15,862,492.33 197,584,137.00 83,536,371.00
Sept. 2003...... 0.00 0.00 0.00 0.00 0.00 197,584,137.00 83,536,371.00
Dec. 2003....... 0.00 0.00 0.00 0.00 0.00 179,663,629.00 83,536,371.00
Mar. 2004....... 0.00 0.00 0.00 0.00 0.00 162,559,535.91 83,536,371.00
June 2004....... 0.00 0.00 0.00 0.00 0.00 147,610,059.78 83,536,371.00
Sept. 2004...... 0.00 0.00 0.00 0.00 0.00 131,717,804.89 83,536,371.00
Dec. 2004....... 0.00 0.00 0.00 0.00 0.00 113,863,629.00 83,536,371.00
Mar. 2005....... 0.00 0.00 0.00 0.00 0.00 96,804,670.77 83,536,371.00
June 2005....... 0.00 0.00 0.00 0.00 0.00 81,792,085.99 83,536,371.00
Sept. 2005...... 0.00 0.00 0.00 0.00 0.00 65,865,306.62 83,536,371.00
Dec. 2005....... 0.00 0.00 0.00 0.00 0.00 48,063,629.00 83,536,371.00
Mar. 2006....... 0.00 0.00 0.00 0.00 0.00 31,031,326.78 83,536,371.00
June 2006....... 0.00 0.00 0.00 0.00 0.00 15,955,287.79 83,536,371.00
Sept. 2006...... 0.00 0.00 0.00 0.00 0.00 0.00 83,536,371.00
Dec. 2006....... 0.00 0.00 0.00 0.00 0.00 0.00 65,800,000.00
Mar. 2007....... 0.00 0.00 0.00 0.00 0.00 0.00 48,653,497.67
June 2007....... 0.00 0.00 0.00 0.00 0.00 0.00 33,202,584.82
Sept. 2007...... 0.00 0.00 0.00 0.00 0.00 0.00 16,886,533.28
Dec. 2007....... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
<CAPTION>
OUTSTANDING
PRINCIPAL
BALANCE
-------------
Payment Date Series 1997-1
- ------------ -------------
<S> <C>
Series Issuance
Date............ $658,000,000.00
Mar. 1998....... 654,832,171.52
June 1998....... 636,132.681.18
Sept. 1998...... 615,689,759.73
Dec. 1998....... 592,200,000.00
Mar. 1999....... 572,561,479.42
June 1999....... 558,586,519.57
Sept. 1999...... 543,637,015.98
Dec. 1999....... 526,400,000.00
Mar. 2000....... 509,560,746.00
June 2000....... 494,681,173.00
Sept. 2000...... 478,781,854.18
Dec. 2000....... 460,000,000.00
Mar. 2001....... 443,329,798.00
June 2001....... 428,536,049.51
Sept. 2001...... 412,761,179.31
Dec. 2001....... 394,800,000.00
Mar. 2002....... 377,658,347.00
June 2002....... 362,808,708.22
Sept. 2002...... 346,971,451.56
Dec. 2002....... 329,000,000.00
Mar. 2003....... 311,866,706.35
June 2003....... 296,983,000.33
Sept. 2003...... 281,120,508.00
Dec. 2003....... 263,200,000.00
Mar. 2004....... 246,095,906.91
June 2004....... 231,146,430.78
Sept. 2004...... 215,254,175.89
Dec. 2004....... 197,400,000.00
Mar. 2005....... 180,341,041.77
June 2005....... 165,328,456.99
Sept. 2005...... 149,401,677.62
Dec. 2005....... 131,600,000.00
Mar. 2006....... 114,567,697.78
June 2006....... 99,491,658.79
Sept. 2006...... 83,536,371.00
Dec. 2006....... 65,800,000.00
Mar. 2007....... 48,653,497.67
June 2007....... 33,202,584.82
Sept. 2007...... 16,886,533.28
Dec. 2007....... 0.00
</TABLE>
<PAGE>
SCHEDULE B
REQUIRED OVERCOLLATERALIZATION LEVEL SCHEDULE
Required Required
Payment Date Overcollateralization Payment Date Overcollateralization
Level Level
Mar. 1998 $ 82,250 Mar. 2003 $ 1,727,250
June 1998 $ 164,500 June 2003 $ 1,809,500
Sept.1998 $ 246,750 Sept.2003 $ 1,891,750
Dec. 1998 $ 329,000 Dec. 2003 $ 1,974,000
Mar. 1999 $ 411,250 Mar. 2004 $ 2,056,250
June 1999 $ 493,500 June 2004 $ 2,138,500
Sept.1999 $ 575,750 Sept.2004 $ 2,220,750
Dec. 1999 $ 658,000 Dec. 2004 $ 2,303,000
Mar. 2000 $ 740,250 Mar. 2005 $ 2,385,250
June 2000 $ 822,500 June 2005 $ 2,467,500
Sept.2000 $ 904,750 Sept.2005 $ 2,549,750
Dec. 2000 $ 987,000 Dec. 2005 $ 2,632,000
Mar. 2001 $1,069,250 Mar. 2006 $ 2,714,250
June 2001 $1,151,500 June 2006 $ 2,796,500
Sept.2001 $1,233,750 Sept.2006 $ 2,878,750
Dec. 2001 $1,316,000 Dec. 2006 $ 2,961,000
Mar. 2002 $1,398,250 Mar. 2007 $ 3,043,250
June 2002 $1,480,500 June 2007 $ 3,125,500
Sept.2002 $1,562,750 Sept.2007 $ 3,207,750
Dec. 2002 $1,645,000 Dec. 2007 $ 3,290,000
<PAGE>
EXHIBIT A
Form of Note
------------
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.
SDG&E FUNDING LLC
NOTES, SERIES 1997-1, Class A-__.
Interest Original Principal Final Maturity
Rate Amount Date
---- ------ ----
_____% $______________ _____________
SDG&E Funding LLC, 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 California
Infrastructure and Economic Development Bank Special Purpose Trust SDG&E-1, 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 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 March 25, 1998 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 Date or, if no
interest has yet been paid, from December 16, 1997. Interest will be computed
on the basis of a 360-day year of twelve 30-day months. Such
<PAGE>
2
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: December 16, 1997
SDG&E FUNDING LLC,
by
_____________________________
<PAGE>
4
NOTE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
Dated: December 16, 1997
This is one of the Class A-__ Notes of the Series 1997-1 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]
This Series 1997-1, 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 1997-1 Note, in which this
Class A-__ Note represents an interest, consists of 7 Classes, including this
Class A-__ Note (herein called the "Class A-__ Notes"), all issued and to be
issued under an Indenture dated as of December 16, 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 1997-1 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) 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 1997-1 Notes pursuant to Section 10.01 of the Indenture or (z) the Note
Issuer shall have called for the redemption of the Series 1997-1 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
<PAGE>
6
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
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
<PAGE>
7
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).
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
<PAGE>
8
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-__
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,
<PAGE>
9
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.
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>
10
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-1 Note in
- ------------------------------------------------------------------------------
every particular, without alteration, enlargement or any change whatsoever.
- ---------------------------------------------------------------------------
<PAGE>
EXHIBIT 4.3
FORM OF NOTE
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.
SDG&E FUNDING LLC
NOTES, SERIES 1997-1, Class A-__.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Interest Original Principal Final Maturity
Rate Amount Date
---- ------ ----
_____% $______________ _____________
</TABLE>
SDG&E Funding LLC, 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 California
Infrastructure and Economic Development Bank Special Purpose Trust SDG&E-1, 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 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 March 25, 1998 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 Date or, if no
interest has yet been paid, from December 16, 1997. Interest will be computed
on the basis of a 360-day year of twelve 30-day months. Such
<PAGE>
2
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: December 16, 1997
SDG&E FUNDING LLC,
by
_____________________________
<PAGE>
4
NOTE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
Dated: December 16, 1997
This is one of the Class A-__ Notes of the Series 1997-1 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]
This Series 1997-1, 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 1997-1 Note, in which this
Class A-__ Note represents an interest, consists of 7 Classes, including this
Class A-__ Note (herein called the "Class A-__ Notes"), all issued and to be
issued under an Indenture dated as of December 16, 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 1997-1 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) 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 1997-1 Notes pursuant to Section 10.01 of the Indenture or (z) the Note
Issuer shall have called for the redemption of the Series 1997-1 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
<PAGE>
6
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
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
<PAGE>
7
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).
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
<PAGE>
8
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-__
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,
<PAGE>
9
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.
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>
10
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-1 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 16, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
DEFINITIONS
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
ARTICLE II
ORGANIZATION; ACQUISITION OF NOTES;
ORIGINAL ISSUANCE OF CERTIFICATES
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
ARTICLE III
THE CERTIFICATES
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
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
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----
<S> <C>
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>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE IV
DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS
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
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
ARTICLE VI
THE CERTIFICATE TRUSTEE
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
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
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
Section 6.15.
Withholding Taxes; Information Reporting......................... 47
ARTICLE VII
THE DELAWARE TRUSTEE
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
ARTICLE VIII
SUPPLEMENTAL TRUST AGREEMENTS
Section 8.01.
Supplemental Trust Agreements Without Consent of
Certificateholders................................................ 51
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
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
Section 9.01.
Amendments and Supplements to Notes, Note Indenture and Other
Basic Documents................................................. 54
ARTICLE X
TERMINATION OF TRUST
Section 10.01.
Termination of the Trust........................................ 55
ARTICLE XI
MISCELLANEOUS PROVISIONS
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
</TABLE>
v
<PAGE>
<TABLE>
<CAPTION>
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----
<S> <C>
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>
vi
<PAGE>
AMENDED AND RESTATED DECLARATION AND AGREEMENT OF TRUST, dated as of December
16, 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 SDG&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:
1
<PAGE>
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;
(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.
2
<PAGE>
"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).
"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.
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"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 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 16, 1997,
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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
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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) 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.
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"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 16, 1997, among the Note Issuer, the Note Trustee, the
Originator, the Delaware Trustee and the Certificate Trustee.
"Initial Closing Date" means December 16, 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 16, 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 SDG&E Funding LLC, a Delaware limited liability
company, and its successors in interest.
"Note Purchase Agreement" means the Note Purchase Agreement dated as of
December 16, 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.
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"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;
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.
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Certificates so owned that have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satis faction 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 Sec tion 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.
"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
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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 16, 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 San Diego Gas & 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 San Diego Gas & 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 16, 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
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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
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.
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"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.
"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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Section of
Note
----
Term Indenture
- ---- ---------
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)
(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
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Issuer has given its prior written approval of such application or request.
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
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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.
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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 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
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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 Certificate holders 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, 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.
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ARTICLE II
ORGANIZATION; ACQUISITION OF NOTES;
ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.01. Name; Declaration and Statement of Intent; Office;
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Operations. (a) The Trust created hereby shall be known as the "California
- ----------
Infrastructure and Economic Development Bank Special Purpose Trust - SDG&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.
(c) Except as otherwise contemplated by the Basic Documents, the Trust will
not engage in any business transactions with the Originator.
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(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.
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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
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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 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;
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(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 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
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(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 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;
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(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
(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
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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
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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.
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, litho
graphed, 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
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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 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.
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(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
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
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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 Certificates canceled
as provided in this Section, except as expressly permitted by this Trust
Agreement.
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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
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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) 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
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(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
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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
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
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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 distrib uted 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.
(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;
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(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 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.
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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 Certifi cates 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 Certificate
holders 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 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.
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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.
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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 principal of and
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<PAGE>
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 answer able 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
37
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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 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
38
<PAGE>
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 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;
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<PAGE>
(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.
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 Certificate holders 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.
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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, 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
41
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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
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hereunder, the rights and protections afforded to the Certificate Trustee
pursuant to this Article VI shall also be afforded to such Paying Agent,
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.
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(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 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,
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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 resigna tion, 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
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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 Certificate holder; 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.
(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
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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 resignation or removal of the
retiring Certificate Trustee shall become effective and such successor
Certificate
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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
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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.
(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
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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 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
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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.
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.
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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.
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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.
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
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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 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
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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).
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
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Trustee. Any successor Delaware Trustee must satisfy the requirement of Section
3807(a) of the Business Trust Statute.
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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.
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
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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 Certifi cates of each such Series or Class under
this Trust Agreement; pro vided, 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
failure of the
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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.
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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 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.
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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
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
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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.
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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 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
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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.
Section 11.05. Notices. (a) 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
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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
if to the Note Issuer, to:
SDG&E Funding LLC
101 Ash Street, Room 111
San Diego, California 92101
Attention: President
Facscimile: (619) 696-2330
Telephone: (619) 696-2328
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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, and
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
(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
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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.
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. (a) 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
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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.
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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: /s/ Christopher S. Holben
Name: Christopher S. Holben
Title: Chair
BANKERS TRUST (DELAWARE),
as Delaware Trustee
By: /s/ M. Lisa Wilkins
Name: M. Lisa Wilkins
Title: Assistant Secretary
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 A
FORM OF FIXED RATE CERTIFICATE
REGISTERED REGISTERED
NO. . $.
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
SPECIAL PURPOSE TRUST SDG&E-1
SERIES 199[]-[]
CLASS .
RATE REDUCTION CERTIFICATE
SCHEDULED
FINAL
INTEREST DISTRIBUTION TERMINATION
RATE DATE DATE CUSIP
- ---------- ------------ ----------- -----
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 SDG&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 state government of the State of
California(the "Originator"), any other governmental agency or instrumentality
or San Diego Gas & Electric Company, a California corporation ("SDG&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
A-1
<PAGE>
insured by the State of California, the Originator, the Trust or any other
governmental agency or instrumentality or by SDG&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 SDG&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 16, 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 SDG&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 SDG&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 SDG&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 SDG&E's historic service territory, together with
certain related collateral, all as more fully described in the Note Indenture.
A-2
<PAGE>
To the extent not otherwise defined herein, the capitalized terms used
herein have the meanings assigned to them in the Trust Agreement.
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
A-3
<PAGE>
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 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
SDG&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
A-7
<PAGE>
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 $1,000 Original Principal Amount and
integral multiples of $1 in excess 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 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>
First Supplemental Agreement of Trust
(Supplemental to the Amended and Restated Declaration and
Agreement of Trust dated as of December 16, 1997)
Authorizing the Issuance of
$658,000,000 Aggregate Principal Amount of
Rate Reduction Certificates Series 1997-1, Classes A-1 through A-7
-------------------------------
This First Supplemental Agreement of Trust, dated as of December 16, 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;
WITNESSETH:
----------
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 SDG&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
16, 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 and 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 from SDG&E Funding LLC (the "Note
Issuer") of the SDG&E Funding LLC Notes, Series 1997-1 (the "Notes"), pursuant
to the Note Purchase Agreement, consisting of Classes A-1 through A-7, the Trust
shall issue, pursuant to this First Supplemental Trust Agreement, Rate Reduction
Certificates, Series 1997-1, consisting of Classes A-1 through A-7; 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 this First Supplemental Agreement of Trust dated as
of December 16, 1997.
"Interest Rate" shall have the meaning assigned in Section 12.02 hereof.
"Minimum Denomination" means $1,000, and integral multiples of $1.00 in
excess thereof, provided, that in the case of the Class A-7 Certificates, one
--------
registered, definitive certificate shall be issued representing a principal
amount of $5.00.
"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-7. 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 and the
Class A-7 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
SDG&E-1, Series 1997-1, Class [ ] Rate Reduction 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 $ 65,800,000 December 26, 1998 December 26, 2000 5.97%
A-2 82,639,254 March 25, 2000 March 25, 2002 6.04
A-3 66,230,948 March 25, 2001 March 25, 2003 6.07
A-4 65,671,451 March 25, 2002 March 25, 2004 6.15
A-5 96,537,839 September 25, 2003 September 25, 2005 6.19
A-6 197,584,137 September 25, 2006 September 25, 2008 6.31
A-7 83,536,371 December 26, 2007 December 26, 2009 6.37
</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: /s/ Christopher S. Holben
__________________________________
Name: Christopher S. Holben
Title: Chair
BANKERS TRUST (DELAWARE),
as Delaware Trustee
By: /s/ M. Lisa Wilkins
__________________________________
Name: M. Lisa Wilkins
Title: Assistant Secretary
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 RATE REDUCTION CERTIFICATE
REGISTERED REGISTERED
NO. . $.
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
SPECIAL PURPOSE TRUST SDG&E-1
SERIES 199[]-[]
CLASS .
RATE REDUCTION CERTIFICATE
SCHEDULED
FINAL
INTEREST DISTRIBUTION TERMINATION
RATE DATE DATE CUSIP
- ---------- ------------ ----------- -----
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 SDG&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 state government of the State of
California(the "Originator"), any other governmental agency or instrumentality
or San Diego Gas & Electric Company, a California corporation ("SDG&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
A-1
<PAGE>
insured by the State of California, the Originator, the Trust or any other
governmental agency or instrumentality or by SDG&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 SDG&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 16, 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 SDG&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 SDG&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 SDG&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 SDG&E's historic service territory, together with
certain related collateral, all as more fully described in the Note Indenture.
A-2
<PAGE>
To the extent not otherwise defined herein, the capitalized terms used
herein have the meanings assigned to them in the Trust Agreement.
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
A-3
<PAGE>
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 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
SDG&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
A-7
<PAGE>
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 $1,000 Original Principal Amount and
integral multiples of $1 in excess 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 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
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TRANSITION PROPERTY PURCHASE AND SALE AGREEMENT
between
SDG&E FUNDING LLC
Note Issuer
and
SAN DIEGO GAS & ELECTRIC COMPANY
Seller
Dated as of December 16, 1997
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TABLE OF CONTENTS
Page
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ARTICLE I
Definitions
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SECTION 1.01. Definitions ............................................ 1
SECTION 1.02. Other Definitional Provisions ........................... 7
ARTICLE II
Conveyance of Transition Property
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SECTION 2.01. Conveyance of Transition Property ....................... 8
ARTICLE III
Representations and Warranties of Seller
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SECTION 3.01. Organization and Good Standing .......................... 9
SECTION 3.02. Due Qualification ....................................... 10
SECTION 3.03. Power and Authority ..................................... 10
SECTION 3.04. Binding Obligation ...................................... 10
SECTION 3.05. No Violation ............................................ 11
SECTION 3.06. No Proceedings .......................................... 12
SECTION 3.07. Approvals ............................................... 13
SECTION 3.08. The Transition Property ................................. 13
SECTION 3.09. Outstanding Indenture ................................... 18
ARTICLE IV
Covenants of the Seller
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SECTION 4.01. Corporate Existence ..................................... 18
SECTION 4.02. No Liens ................................................ 19
SECTION 4.03. Delivery of Collections ................................. 19
SECTION 4.04. Notice of Liens ......................................... 19
SECTION 4.05. Compliance with Law ..................................... 19
SECTION 4.06. Covenants Related to Transition Property ................ 20
SECTION 4.07. Protection of Title ..................................... 21
SECTION 4.08. Nonpetition Covenants ................................... 22
SECTION 4.09. Taxes ................................................... 23
ARTICLE V
The Seller
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SECTION 5.01. Liability of Seller; Indemnities ........................ 24
SECTION 5.02. Merger or Consolidation of, or
Assumption of the Obligations of, Seller .............. 28
SECTION 5.03. Limitation on Liability of Seller and Others ............ 30
ARTICLE VI Miscellaneous Provisions
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SECTION 6.01. Amendment................................................ 30
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Contents, p.2
Page
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SECTION 6.02. Notices.................................................. 32
SECTION 6.03. Assignment............................................... 34
SECTION 6.04. Limitations on Rights of Others.......................... 34
SECTION 6.05. Severability............................................. 34
SECTION 6.06. Separate Counterparts.................................... 34
SECTION 6.07. Headings................................................. 35
SECTION 6.08. Governing Law............................................ 35
SECTION 6.09. Assignment to Note Trustee............................... 35
SECTION 6.10. Limitation of Liability.................................. 35
Schedules
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Schedule 3.06 Proceedings
<PAGE>
TRANSITION PROPERTY PURCHASE AND SALE AGREEMENT dated as of
December 16, 1997, between SDG&E FUNDING LLC, a Delaware limited
liability company (the "Note Issuer"), and San Diego Gas &
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
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SECTION 1.01. Definitions. Whenever used in this Agreement, the
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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.
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"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 97-09-057,
issued as of as of September 3, 1997, which became effective on October 6, 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. B97-17 adopted by
the Infrastructure Bank on November 10, 1997.
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"Indenture" means the Indenture dated as of December 16, 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 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
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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 1060-E, dated December 9, 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 by the chairman of
the board, chief executive officer, the president, the vice chairman of the
board, any vice president, the controller, 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.
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"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.
"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 San Diego Gas & 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.
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"Servicing Agreement" means that certain Transition Property Servicing
Agreement dated as of the date hereof between San Diego Gas & 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.
"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 16, 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.
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SECTION 1.02. Other Definitional Provisions.
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(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 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
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SECTION 2.01. Conveyance of Transition Property. In consideration of
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the Note Issuer's delivery to or upon the order of the Seller of
$651,004,287.85, the Seller does hereby irrevocably sell, transfer, assign, set
over and otherwise convey
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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 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.
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ARTICLE III
Representations and Warranties of Seller
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The Seller makes the following representations and warranties, as of
the Closing Date, on which the Note Issuer 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
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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
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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).
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SECTION 3.03. Power and Authority. The Seller has the requisite
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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
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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
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the lien of the Mortgage and Deed of Trust dated as of July 1, 1940, between San
Diego Gas & Electric Company and First Trust of California, N.A. (successor to
Bank of California, National Association), as trustee (the "Seller Mortgage"),
on the Transition Property, the consummation of the transactions contemplated by
this Agreement and the fulfillment of the terms
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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,
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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 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
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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
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or other action of, or filing with, any court, Federal or state regulatory body,
administrative agency or other governmental instrumentality is required in
connection with the execution and delivery by the Seller of this Agreement, the
performance by the Seller of the transactions contemplated hereby or the
fulfillment by the Seller of the terms hereof, except those that have been
obtained or made and those that the Seller, in its capacity as Servicer under
the Servicing Agreement, is required to make in the future pursuant to Article
IV of the Servicing Agreement.
SECTION 3.08. The Transition Property.
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(a) Information. At the Closing Date, all information provided by the
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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
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transfer and assignment herein contemplated constitute a sale of the Transition
Property from the Seller to the Note
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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 exist or have been asserted with respect thereto and San Diego Gas
& 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
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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
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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 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
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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
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15
thereunder, in a manner adversely affecting the Noteholders or the
Certificateholders, other than a temporary impairment described in the following
sentence, 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 mean a breach by the State of
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16
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
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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
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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 (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
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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
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Date, the Lien of the Seller Mortgage on the Transition Property shall have been
released.
ARTICLE IV
Covenants of the Seller
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SECTION 4.01. Corporate Existence. So long as any of the Notes are
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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 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
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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
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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
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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
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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.
SECTION 4.05. Compliance with Law. The Seller hereby agrees to
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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.
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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 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
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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
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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 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
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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. 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
<PAGE>
22
subsidiaries to, pay all material taxes, assessments and governmental charges
imposed upon it or any of its properties or assets or with respect to any of its
franchises, business, income or property before any penalty accrues thereon if
the failure to pay any such taxes, assessments and governmental charges would,
after any applicable grace periods, notices or other similar requirements,
result in a lien on the 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 "Repurchase Price") equal to the then outstanding principal
amount of the Notes and
<PAGE>
23
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, 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
<PAGE>
24
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 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
<PAGE>
25
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
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
<PAGE>
26
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
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).
<PAGE>
27
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 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
<PAGE>
28
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 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
<PAGE>
29
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 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 outstanding
Notes.
<PAGE>
30
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 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 San Diego
Gas & Electric Company, 101 Ash Street, San Diego,
<PAGE>
31
California 92101, Attention of Manager, Financial Services, (b) in the case of
the Note Issuer, to SDG&E Funding LLC, 101 Ash Street, Room 111, San Diego,
California 92101, 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, 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.
<PAGE>
32
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 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.
<PAGE>
33
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 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,
<PAGE>
34
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 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>
35
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.
SDG&E FUNDING LLC, Note
Issuer,
by /s/ Charles McMonagle
------------------------------------
Title: President and Chief
Executive Officer
SAN DIEGO GAS & ELECTRIC COMPANY, Seller,
by /s/ Donald E. Felsinger
--------------------------------------
Title: President and Chief
Executive Officer
Acknowledged and Accepted:
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A., not in
its individual capacity but
solely as Note Trustee,
by /s/ Linda A. Rakolta
____________________
Linda A. Rakolta
Vice President
<PAGE>
SCHEDULE 3.06
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
- --------------------------------------------------------------------------------
TRANSITION PROPERTY SERVICING AGREEMENT
between
SDG&E FUNDING LLC
Note Issuer
and
SAN DIEGO GAS & ELECTRIC COMPANY
Servicer
Dated as of December 16, 1997
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I Definitions
-----------
SECTION 1.01 Definitions .............................................. 2
SECTION 1.02 Other Definitional Provisions ............................ 16
ARTICLE II Appointment and Authorization
-----------------------------
SECTION 2.01 Appointment of Servicer; Acceptance of
Appointment ............................................ 17
SECTION 2.02 Authorization ............................................ 17
SECTION 2.03 Dominion and Control Over the
Transition Property .................................... 18
ARTICLE III Billing Services
----------------
SECTION 3.01 Duties of Servicer ....................................... 18
SECTION 3.02 Servicing and Maintenance Standards ...................... 22
SECTION 3.03 Certificate of Compliance ................................ 22
SECTION 3.04 Annual Report by Independent Public Accountants .......... 23
ARTICLE IV Services Related to True-Up Adjustments
---------------------------------------
SECTION 4.01 Periodic True-Up Adjustments ............................. 25
SECTION 4.02 Limitation of Liability .................................. 34
ARTICLE V The Transition Property
-----------------------
SECTION 5.01 Custody of Transition Property Records ................... 35
SECTION 5.02 Duties of Servicer as Custodian .......................... 36
SECTION 5.03 Instructions; Authority to Act ........................... 39
SECTION 5.04 Custodian's Indemnification .............................. 39
SECTION 5.05 Effective Period and Termination ......................... 40
SECTION 5.06 General Indemnification of Note Trustee,
Certificate Trustee and the Delaware Trustee ........... 41
ARTICLE VI The Servicer
------------
SECTION 6.01 Representations and Warranties of Servicer ............... 41
SECTION 6.02 Indemnities of Servicer; Release of Claims ............... 47
SECTION 6.03 Merger or Consolidation of, or Assumption
of the Obligations of, Servicer ......................... 49
<PAGE>
Contents, p. ii
SECTION 6.04 Limitation on Liability of Servicer and Others............. 50
SECTION 6.05 San Diego Gas & Electric Company Not to
Resign as Servicer ..................................... 51
SECTION 6.06 Servicing Compensation .................................... 52
SECTION 6.07 Compliance with Applicable Law ............................ 54
SECTION 6.08 Access to Certain Records and Information
Regarding Transition Property ........................... 54
SECTION 6.09 Appointments .............................................. 55
SECTION 6.10 No Servicer Advances ...................................... 56
SECTION 6.11 Remittances ............................................... 56
ARTICLE VII Default
-------
SECTION 7.01 Servicer Default .......................................... 58
SECTION 7.02 Appointment of Successor .................................. 61
SECTION 7.03 Waiver of Past Defaults ................................... 62
SECTION 7.04 Notice of Servicer Default ................................ 63
ARTICLE VIII Miscellaneous Provisions
------------------------
SECTION 8.01 Amendment ................................................. 63
SECTION 8.02 Protection of Title to Trust .............................. 66
SECTION 8.03 Notices ................................................... 67
SECTION 8.04 Assignment ................................................ 68
SECTION 8.05 Limitations on Rights of Others ........................... 68
SECTION 8.06 Severability .............................................. 68
SECTION 8.07 Separate Counterparts ..................................... 69
SECTION 8.08 Headings .................................................. 69
SECTION 8.09 Governing Law ............................................. 69
SECTION 8.10 Assignment to Note Trustee ................................ 69
SECTION 8.11 Nonpetition Covenants ..................................... 70
SECTION 8.12 Limitation of Liability ................................... 70
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
<PAGE>
Contents, p. iii
Page
----
Annexes
-------
Annex I Servicing Procedures
Schedule 6 to
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
16, 1997, between SDG&E FUNDING LLC, a Delaware limited liability
company (the "Note Issuer"), and SAN DIEGO GAS & 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-Up Adjustments from the CPUC. The Servicer desires to perform all of these
activities on behalf of the Note Issuer.
<PAGE>
2
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 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
<PAGE>
3
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 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 San Diego
Gas & 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.
<PAGE>
4
"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 Monthly Collections Curves.
"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 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 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.
<PAGE>
5
"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 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 97-09-057,
issued as of September 3, 1997, which became effective on October 6, 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.
<PAGE>
6
"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 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 16, 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.
<PAGE>
7
"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 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
<PAGE>
8
effective five Business Days after filing pursuant to the terms of the Financing
Order. The first 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 Curves" 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 SDG&E Funding LLC, a Delaware limited liability
company.
<PAGE>
9
"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 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;
<PAGE>
10
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.
"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.
<PAGE>
11
"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.
"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
<PAGE>
12
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 San Diego Gas & 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 San Diego Gas & Electric Company 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 San Diego Gas & Electric Company, as the servicer of
the Transition Property, and each successor to San Diego Gas & 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
<PAGE>
13
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 of 1996 and Chapter
275, California Statutes of 1997, as 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.
<PAGE>
14
"Transition Property" means the Initial Transition Property and, from
and after the applicable Subsequent Sale Date therefor, any Subsequent
Transition Property.
"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 16, 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.
<PAGE>
15
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 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 hereby accepts such appointment, to perform the
Servicer's obligations pursuant to this Agreement on behalf of and for the
benefit of
<PAGE>
16
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.
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
<PAGE>
17
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 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, investigating
delinquencies, 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
<PAGE>
18
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.
--------------------
(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
<PAGE>
19
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 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.
<PAGE>
20
(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 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.
<PAGE>
21
SECTION 3.03. Certificate of Compliance. The 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 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
<PAGE>
22
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 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
<PAGE>
23
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 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
<PAGE>
24
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 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
<PAGE>
25
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
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
<PAGE>
26
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 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 last
Scheduled Maturity Date for any Class of a Series, determine the
revised FTA Charges that would be
<PAGE>
27
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 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,
<PAGE>
28
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.
--------------------------------
(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").
<PAGE>
29
(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 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
<PAGE>
30
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 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
<PAGE>
31
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
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
<PAGE>
32
than any delay resulting from the Servicer's failure to file the
applications 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.
(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
<PAGE>
33
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 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
<PAGE>
34
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 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 101 Ash Street, San Diego,
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.
<PAGE>
35
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).
(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
<PAGE>
36
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
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
<PAGE>
37
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 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 Note Trustee or such Holders may terminate
the rights and obligations of the Servicer under Section 7.01.
<PAGE>
38
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, the Certificateholders or any other Person. 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 Delaware Trustee under the Trust
Agreement.
ARTICLE VI
The Servicer
------------
SECTION 6.01. Representations and Warranties of Servicer. The
-------------------------------------------
Servicer makes the following representations and warranties, as of the Closing
Date, as of each Subsequent Sale Date relating to the sale of Subsequent
Transition Property
<PAGE>
39
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.
(b) Due Qualification. The Servicer is duly qualified to do business
------------------
as a foreign corporation in good standing, and has obtained all necessary
licenses and approvals in, all jurisdictions in which the ownership or
lease of property or the conduct of its business (including the servicing
of the Transition Property as required by this Agreement) 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,
<PAGE>
40
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 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 Mortgage and Deed of Trust dated as of July 1, 1940, between San Diego
Gas & Electric Company and First Trust of California, N.A. (successor to
Bank of California, National Association), 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
<PAGE>
41
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 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
<PAGE>
42
Agreement or any of the other Basic Documents, (iii) seeking any
determination or ruling that might materially and adversely affect the
performance by the Servicer of its obligations under, or the validity or
enforceability 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 respects.
<PAGE>
43
(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 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
<PAGE>
44
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 San Diego Gas & 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
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
<PAGE>
45
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 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
<PAGE>
46
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 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 STO, 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
-------- -------
<PAGE>
47
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 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. San Diego Gas & Electric Company Not to Resign as
-------------------------------------------------
Servicer. Subject to the provisions of Section 6.03, San Diego Gas & 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
<PAGE>
48
Infrastructure Bank. Notice of any such determination permitting the
resignation of San Diego Gas & Electric Company shall be communicated to the
Note Issuer, the Note Trustee, the 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 San Diego Gas & 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 entitled to retain as additional
compensation (i) any interest earnings on
<PAGE>
49
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 or
reimbursement therefor.
<PAGE>
50
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, the Infrastructure Bank and the STO 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 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.
<PAGE>
51
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 (including, without limitation, the Rating Agency Condition)
shall preclude the execution by the Servicer of an ESP Service Agreement with
any ESP pursuant to applicable CPUC Regulations. 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 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.
<PAGE>
52
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 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
<PAGE>
53
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 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
<PAGE>
54
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:
(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
<PAGE>
55
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
(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
<PAGE>
56
with respect to the Transition Property: (1) the 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 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
<PAGE>
57
(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 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
<PAGE>
58
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 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
<PAGE>
59
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 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
<PAGE>
60
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 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.
<PAGE>
61
(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 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 Section 8.02(b) shall affect the obligation of the Servicer to
observe any applicable law (including any CPUC
<PAGE>
62
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 San Diego
Gas & Electric Company, at 101 Ash Street, San Diego, CA 92101, Attention of
Manager, Financial Services, (b) in the case of the Note Issuer, to SDG&E
Funding LLC, 101 Ash Street, Room 111, San Diego, CA 92101, Attention of
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 of Executive Director, (e)
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, (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
<PAGE>
63
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 provided in Section 6.03 and as provided in the
provisions of this Agreement concerning the resignation of the Servicer, this
Agreement may not be assigned by the Servicer.
SECTION 8.05. Limitations on Rights of Others. The provisions of
--------------------------------
this Agreement are solely for the benefit 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.
<PAGE>
64
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 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
<PAGE>
65
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 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
<PAGE>
66
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 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>
67
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.
SDG&E FUNDING LLC,
by /s/ Charles McMonagle
-------------------------------
Title: President and Chief
Executive Officer
SAN DIEGO GAS & ELECTRIC COMPANY,
by /s/ Donald E. Felsinger
-------------------------------
Title: President and Chief
Executive Officer
Acknowledged and Accepted:
BANKERS TRUST COMPANY
OF CALIFORNIA, N.A., not in
its individual capacity
but solely as Note Trustee,
by /s/ Linda A. Rakolta
________________________
Linda A. Rakolta
Vice President
<PAGE>
EXHIBIT A
[TO COME]
<PAGE>
EXHIBIT B
CERTIFICATE OF COMPLIANCE
The undersigned hereby certifies that he/she is the duly elected and
acting __________ of San Diego Gas & Electric Company, as servicer (the
"Servicer") under the Transition Property Servicing Agreement dated as of
December 16, 1997 (the "Servicing Agreement") between the Servicer and SDG&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 objections 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 _________________.
SAN DIEGO GAS & 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 C
[TO COME]
<PAGE>
EXHIBIT D
TO TRANSITION PROPERTY
SERVICING AGREEMENT
Form of Anniversary True-Up Mechanism Advice Letter
---------------------------------------------------
_____________________, 1997
ADVICE __________-E
(U 338-E)
PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
ENERGY DIVISION
SUBJECT: Anniversary Fixed Transition Amounts Charge (FTAC) True-Up
Mechanism Advice Filing
Pursuant to California Public Utilities Commission (Commission) Decision No. 97-
09-057 (D.97-09-057), Ordering Paragraph No. 14, San Diego Gas & Electric
Company (SDG&E or Company), as servicer of the Rate Reduction Bonds (RRBs) and
on behalf of SDG&E Funding LLC is required to file a True-Up Mechanism Advice
Lette at least 15 days before each anniversary of the issuance of the financing
order.
PURPOSE
- -------
This filing establishes revised FTACs currently in effect are adequate to
service the Rate Reduction Bonds, that no event of default has occurred and is
continuing on the Rate Reduction Bonds, and that no adjustments to the FTACs are
required at this time.
BACKGROUND
- ----------
In D.97-09-057, in accordance with Public Utilities (PU) Code Section 841 (e),
the Commission ordered SDG&E to file True-Up Mechanism Advice Letters at least
15 days before each anniversary of the issuance of the financing order, stating
whether an adjustment to the FTACs is necessary.
Table I shows the RRB principal balance and the balances in the Collection
Account subaccounts as of June 25, _____. The assumptions underlying the
current FTACs were filed in Advice 1060-E, as authorized by D.97-09-057.
<PAGE>
<TABLE>
<CAPTION>
=========================================================================
TABLE I
RRB PRINCIPAL BALANCE AND COLLECTION ACCOUNT SUBACCOUNT BALANCES
- -------------------------------------------------------------------------
<S> <C>
Scheduled RRB Principal Balance
- -------------------------------------------------------------------------
RRB Principal Balance
- -------------------------------------------------------------------------
Reserve Subaccount Balance
- -------------------------------------------------------------------------
Required Overcollateralization Level
- -------------------------------------------------------------------------
Overcollateralization Subaccount Balance
- -------------------------------------------------------------------------
Required Capital Level
- -------------------------------------------------------------------------
Capital Subaccount Balance
=========================================================================
</TABLE>
EFFECTIVE DATE
- --------------
In accordance with Decision No. 97-09-057 and PU Code Section 841(e), the
Commission shall determine on the anniversary of issuance of this financing
order, whether adjustments to the FTACs are required, with the resulting
adjustments to the FTACs, if necessary, to be implemented within 90 days of this
anniversary date.
NOTICE
- ------
In accordance with PU Code Section 491, notice to the public is hereby given by
filing and keeping the Advice Filing open for public inspection at the Company's
corporate headquarters.
Since this Filing is made pursuant to Decision No. 97-09-057, further notice in
accordance with General Order No. 96-A, Section III, Paragraph G, is not
necessary. However, copies of this Filing are being furnished to the Interested
Parties on the attached service list and to parties to A.97-05-022. Address
change requests should be directed to Cheryl Morales at (619) 696-4011.
Enclosures
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 E
[ TO COME ]
<PAGE>
SCHEDULE 4.01(a)
<TABLE>
<CAPTION>
EXPECTED AMORTIZATION SCHEDULE
OUTSTANDING PRINCIPAL BALANCE
-------------------------------------------------------------------------------------------------------------
Payment Date Class A-1 Class A-2 Class A-3 Class A-4 Class A-5 Class A-6 Class A-7
- ------------ --------- --------- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Series Issuance
Date............ $65,800,000.00 $82,639,254.00 $66,230,948.00 $65,671,451.00 $96,537,839.00 $197,584,137.00 $83,536,371.00
Mar. 1998....... 62,632,171.52 82,639,254.00 66,230,948.00 65,671,451.00 96,537,839.00 197,584,137.00 83,536,371.00
June 1998....... 43,932,681.18 82,639,254.00 66,230,948.00 65,671,451.00 96,537,839.00 197,584,137.00 83,536,371.00
Sept. 1998...... 23,489,759.73 82,639,254.00 66,230,948.00 65,671,451.00 96,537,839.00 197,584,137.00 83,536,371.00
Dec. 1998....... 0.00 82,639,254.00 66,230,948.00 65,671,451.00 96,537,839.00 197,584,137.00 83,536,371.00
Mar. 1999....... 0.00 63,000,733.42 66,230,948.00 65,671,451.00 96,537,839.00 197,584,137.00 83,536,371.00
June 1999....... 0.00 49,025,773.57 66,230,948.00 65,671,451.00 96,537,839.00 197,584,137.00 83,536,371.00
Sept. 1999...... 0.00 34,076,269.98 66,230,948.00 65,671,451.00 96,537,839.00 197,584,137.00 83,536,371.00
Dec. 1999....... 0.00 16,839,254.00 66,230,948.00 65,671,451.00 96,537,839.00 197,584,137.00 83,536,371.00
Mar. 2000....... 0.00 0.00 66,230,948.00 65,671,451.00 96,537,839.00 197,584,137.00 83,536,371.00
June 2000....... 0.00 0.00 51,351,375.00 65,671,451.00 96,537,839.00 197,584,137.00 83,536,371.00
Sept. 2000...... 0.00 0.00 35,452,056.18 65,671,451.00 96,537,839.00 197,584,137.00 83,536,371.00
Dec. 2000....... 0.00 0.00 17,270,202.00 65,671,451.00 96,537,839.00 197,584,137.00 83,536,371.00
Mar. 2001....... 0.00 0.00 0.00 65,671,451.00 96,537,839.00 197,584,137.00 83,536,371.00
June 2001....... 0.00 0.00 0.00 50,877,702.51 96,537,839.00 197,584,137.00 83,536,371.00
Sept. 2001...... 0.00 0.00 0.00 35,102,832.31 96,537,839.00 197,584,137.00 83,536,371.00
Dec. 2001....... 0.00 0.00 0.00 17,141,653.00 96,537,839.00 197,584,137.00 83,536,371.00
Mar. 2002....... 0.00 0.00 0.00 0.00 96,537,839.00 197,584,137.00 83,536,371.00
June 2002....... 0.00 0.00 0.00 0.00 81,688,200.22 197,584,137.00 83,536,371.00
Sept. 2002...... 0.00 0.00 0.00 0.00 65,850,943.56 197,584,137.00 83,536,371.00
Dec. 2002....... 0.00 0.00 0.00 0.00 47,879,492.00 197,584,137.00 83,536,371.00
Mar. 2003....... 0.00 0.00 0.00 0.00 30,746,198.35 197,584,137.00 83,536,371.00
June 2003....... 0.00 0.00 0.00 0.00 15,862,492.33 197,584,137.00 83,536,371.00
Sept. 2003...... 0.00 0.00 0.00 0.00 0.00 197,584,137.00 83,536,371.00
Dec. 2003....... 0.00 0.00 0.00 0.00 0.00 179,663,629.00 83,536,371.00
Mar. 2004....... 0.00 0.00 0.00 0.00 0.00 162,559,535.91 83,536,371.00
June 2004....... 0.00 0.00 0.00 0.00 0.00 147,610,059.78 83,536,371.00
Sept. 2004...... 0.00 0.00 0.00 0.00 0.00 131,717,804.89 83,536,371.00
Dec. 2004....... 0.00 0.00 0.00 0.00 0.00 113,863,629.00 83,536,371.00
Mar. 2005....... 0.00 0.00 0.00 0.00 0.00 96,804,670.77 83,536,371.00
June 2005....... 0.00 0.00 0.00 0.00 0.00 81,792,085.99 83,536,371.00
Sept. 2005...... 0.00 0.00 0.00 0.00 0.00 65,865,306.62 83,536,371.00
Dec. 2005....... 0.00 0.00 0.00 0.00 0.00 48,063,629.00 83,536,371.00
Mar. 2006....... 0.00 0.00 0.00 0.00 0.00 31,031,326.78 83,536,371.00
June 2006....... 0.00 0.00 0.00 0.00 0.00 15,955,287.79 83,536,371.00
Sept. 2006...... 0.00 0.00 0.00 0.00 0.00 0.00 83,536,371.00
Dec. 2006....... 0.00 0.00 0.00 0.00 0.00 0.00 65,800,000.00
Mar. 2007....... 0.00 0.00 0.00 0.00 0.00 0.00 48,653,497.67
June 2007....... 0.00 0.00 0.00 0.00 0.00 0.00 33,202,584.82
Sept. 2007...... 0.00 0.00 0.00 0.00 0.00 0.00 16,886,533.28
Dec. 2007....... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
<CAPTION>
OUTSTANDING
PRINCIPAL
BALANCE
-------------
Payment Date Series 1997-1
- ------------ -------------
<S> <C>
Series Issuance
Date............ $658,000,000.00
Mar. 1998....... 654,832,171.52
June 1998....... 636,132.681.18
Sept. 1998...... 615,689,759.73
Dec. 1998....... 592,200,000.00
Mar. 1999....... 572,561,479.42
June 1999....... 558,586,519.57
Sept. 1999...... 543,637,015.98
Dec. 1999....... 526,400,000.00
Mar. 2000....... 509,560,746.00
June 2000....... 494,681,173.00
Sept. 2000...... 478,781,854.18
Dec. 2000....... 460,000,000.00
Mar. 2001....... 443,329,798.00
June 2001....... 428,536,049.51
Sept. 2001...... 412,761,179.31
Dec. 2001....... 394,800,000.00
Mar. 2002....... 377,658,347.00
June 2002....... 362,808,708.22
Sept. 2002...... 346,971,451.56
Dec. 2002....... 329,000,000.00
Mar. 2003....... 311,866,706.35
June 2003....... 296,983,000.33
Sept. 2003...... 281,120,508.00
Dec. 2003....... 263,200,000.00
Mar. 2004....... 246,095,906.91
June 2004....... 231,146,430.78
Sept. 2004...... 215,254,175.89
Dec. 2004....... 197,400,000.00
Mar. 2005....... 180,341,041.77
June 2005....... 165,328,456.99
Sept. 2005...... 149,401,677.62
Dec. 2005....... 131,600,000.00
Mar. 2006....... 114,567,697.78
June 2006....... 99,491,658.79
Sept. 2006...... 83,536,371.00
Dec. 2006....... 65,800,000.00
Mar. 2007....... 48,653,497.67
June 2007....... 33,202,584.82
Sept. 2007...... 16,886,533.28
Dec. 2007....... 0.00
</TABLE>
<PAGE>
SCHEDULE 6.01(f)
Proceedings
-----------
1. Petition for writ of review filed with the California Supreme Court by The
Utility Reform Network on November 24, 1997.
<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.
"Applicable MDMA" means with respect to each Customer, the meter data
---------------
management agent providing meter reading services for that Customer's account.
"Billed FTA Charges" 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 such 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
Charges, all in accordance with applicable CPUC Regulations.
"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.
"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,
I-1
<PAGE>
including the FTA Charges, from billing factors provided by the utility and the
Servicer.
"Level Pay Plan" means a level payment plan offered by the Seller, which,
--------------
if elected by a Customer, provides for level monthly Bill charges to such
Customer by estimating the amount that the Customer would pay during a year
(based on the Customer's actual usage during the prior year), then charging the
Customer 1/11th of that amount for each of eleven months, with quarterly
adjustments if necessary. In the twelfth month, the payments made by such
Customer during the preceding eleven months are reconciled with the amount owed
by such Customer for actual usage during the level pay period, and the Customer
is given a credit or billed for the difference, as appropriate, based on such
reconciliation.
"Net Write-Off Percent" means the number (expressed as a percent) equal to:
---------------------
(i) the amount by which Write-Offs attributable to a particular Billing Period
exceed Write-Off recoveries attributable to such Billing Period, divided by (ii)
the total billed revenue attributable to 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.
"Variables" means the following variables underlying the Daily Collections
---------
Curves:
(i) the 30-day outstanding billed revenue;
(ii) the 60-day outstanding billed revenue;
(iii) the 90-day outstanding billed revenue (which may be solved for
in accordance with applicable Servicer Policies and Practices);
(iv) the 120-day outstanding billed revenue (which may be solved for
in accordance with applicable Servicer Policies and Practices);
(v) the 150-day outstanding billed revenue (which may be solved for
in accordance with applicable Servicer Policies and Practices);
and
(vi) the estimated Net Write-Off percentage for each class of
Customers.
"Write-Offs" means write-offs of Billed FTA Charges that remain unpaid
----------
by Customers or ESPs as of 180 days after the issuance of the Closing Bills
containing such charges.
I-2
<PAGE>
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 to 33 days.
(b) Meter Reading. At least once each calendar month, the Servicer shall
-------------
obtain usage measurements from the Applicable MDMA 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.
(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) at least once each
calendar month 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
I-3
<PAGE>
the Applicable ESP, for 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 these
practices, 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 the Servicer's billing system cannot do so, beginning January 1,
1998, 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 to the Applicable ESPs by such means as are
prescribed by applicable CPUC Regulations, or if not prescribed by applicable
CPUC Regulations, 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.
I-4
<PAGE>
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 Charges 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 to outstanding
Customer and ESP balances in accordance with applicable CPUC
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 verbal and written final call
notices in accordance with applicable CPUC Regulations and
Servicer Policies and Practices.
(D) The Servicer shall adhere to and carry out disconnection
policies in accordance with PU Code (S) 779.2 and applicable
CPUC Regulations and Servicer Policies and Practices.
(E) The Servicer may employ the assistance of collections 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.
I-5
<PAGE>
(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
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 Charges, in accordance with its Servicer Policies and
Practices, that remain outstanding for 180 days.
(iii) The Servicer shall accept payment from Customers in respect of
Billed FTA Charges 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 Charges 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 accounts as
promptly as practicable, and, in any event, substantially all payments shall be
posted no later than two Servicer Business Days after receipt.
(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 or ESP shall be allocated as follows:
(A) first to amounts owed to the Note Issuer and the Seller (including any late
fees and interest charges), 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 and the Seller.
(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.
(v) For Customers on a Level Pay Plan, the Servicer shall treat FTA
Payments received from such Customers as if such Customers had been billed for
their respective FTA Charges in the absence of the Level Pay Plan. Partial
payment of a Level Pay Plan payment shall be allocated according to clause (iii)
above, and overpayment of a Level Pay Plan payment shall be allocated according
to clause (iv) above.
I-6
<PAGE>
(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 Charges, 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 (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 Monthly Collections Curve in Schedule 6 and
----------
shall revise such curve to reflect the updated Variables.
(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 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
COMPUTATION OF AGGREGATE REMITTANCE AMOUNT
The following models shall be used to determine the Monthly Collections Curve
for each Collection Period. If at some point in the future improvements to the
Servicer's computerized systems result in more precise data becoming available,
the following procedure may be modified to improve the accuracy of determining
the Monthly Collections Curve.
I. Assumptions
- ---------------
A. Customer billing occurs in 21 cycles 12 times each year.
B. The pattern of collections has not varied materially over the last five
years.
C. The current month collection amounts are based upon actual historical
customer payments.
D. The first prior month through the fifth prior monthly amounts are based on
five years of accounts receivable aging data.
E. Initially, each month has an estimated collection percentage as shown
below.
F. Combined service (gas and electric service) customers have no significantly
different pattern of payments or write-offs than electric only service
customers.
Collection Curve
- ----------------
The initial monthly collection curve for residential and small commercial
customers is shown below in Figure 1.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CUMULATIVE INCREMENTAL
- --------------------------------------------------------------------------------
PAYMENT COLLECTED PERCENTAGE COLLECTED PERCENTAGE
- --------------------------------------------------------------------------------
MONTH RESIDENTIAL COMMERCIAL RESIDENTIAL COMMERCIAL
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Current month 40.8% 40.8% 40.8% 40.8%
- --------------------------------------------------------------------------------
First prior month 89.1% 93.2% 48.3% 52.4%
- --------------------------------------------------------------------------------
Second prior month 97.8% 99.5% 8.7% 6.3%
- --------------------------------------------------------------------------------
Third prior month 99.3% 99.7% 1.5% 0.2%
- --------------------------------------------------------------------------------
Fourth prior month 99.4% 99.8% 0.1% 0.1%
- --------------------------------------------------------------------------------
Fifth prior month 99.5% 99.8% 0.1% 0.0%
- --------------------------------------------------------------------------------
</TABLE>
Figure 1
I-6-1
<PAGE>
Methodology
- -----------
For the payments received within the current month of billing, existing data
will be used. For the initial calculation actual data representing over 4
million customer payments by billing cycle between January and June, 1996, was
employed. That data had been captured as part of the Servicer's continuing
evaluation and implementation of alternate payment processes (direct debit and
electronic data interchange (EDI)) which are currently offered to customers.
For the payments received within the first prior through the fifth prior months
of billing, the process involves reviewing accounts receivable aging schedules,
exclusive of write-offs, as generated by the Servicer's information system.
Initially the data shown in Figure 2 for calendar years 1992 through 1996 was
used.
<TABLE>
<CAPTION>
- --------------------------------------------------------------
RESIDENTIAL CUSTOMERS
- --------------------------------------------------------------
COLLECTED 1992 1993 1994 1995 1996 1997
- --------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
30 days 79.6% 80.9% 82.7% 82.9% 84.5% 82.1%
- --------------------------------------------------------------
60 days 95.5% 96.0% 97.7% 97.6% 97.9% 96.9%
- --------------------------------------------------------------
90 days 99.4% 99.5% 99.8% 99.8% 99.8% 99.7%
- --------------------------------------------------------------
120+ days 99.9% 99.9% 99.9% 99.9% 99.9% 99.9%
- --------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------
COMMERCIAL & INDUSTRIAL CUSTOMERS
- --------------------------------------------------------------
COLLECTED 1992 1993 1994 1995 1996 1997
- --------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
30 days 83.1% 86.5% 89.4% 89.9% 87.4% 87.3%
- --------------------------------------------------------------
60 days 99.6% 99.6% 99.6% 99.4% 99.3% 99.5%
- --------------------------------------------------------------
90 days 99.9% 99.9% 99.9% 99.9% 99.8% 99.9%
- --------------------------------------------------------------
120+ days 99.9% 99.9% 99.9% 99.9% 99.9% 99.9%
- --------------------------------------------------------------
</TABLE>
Figure 2
The data in Figure 2 is calculated beginning when a customer's bill is past due.
Accounts become past due 19 days after mailed for residential customers, and 15
days after mailed for small commercial customers. Further, the Figure 2 data
does not include amounts ultimately written-off.
---
Assuming that accounts become past due about 15 days after billed, averages of
the Figure 2 data can be used to approximate collected amounts. For example,
the Figure 1 amount for the first prior month is calculated as the Figure 2
amount after 30 days plus the amount after
I-6-2
<PAGE>
60 days, divided by two (simple average). This simple average was further
adjusted downward to reflect that the data in Figure 2 does not include amounts
---
ultimately written-off. This approach was used to calculate the percentages in
the monthly collections curve for the first prior, the second prior, and the
third prior months.
Next the ultimate write-off amounts are determined. The total billed revenue
amounts in Figure 3 and the write-off amounts in dollars in Figure 4 were
adjusted. The first adjustment was to approximate the small commercial customer
data. First the total revenue data in Figure 3 was developed for small
commercial customers by using the values for the Servicer's rate schedule A
customers, which is the majority of the small commercial customers.
For the write-off dollars in Figure 4, the total amounts were reduced by the
major write-offs that applied to industrial and large commercial customers
during the indicated historical period to produce write-offs for small
commercial customers. For residential customers, the impact of refund programs
was excluded from the amount of write-offs. Under Public Utility Commission
refund plan guidelines, the Servicer takes the amount of refund that a write-off
customer would be allowed and applies this amount to the customer's write-off
amount.
The write-off percentages in the bottom portion of Figure 4 are calculated as
the write-off dollars in the top half of Figure 4 divided by the total billed
revenues in Figure 3.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
ADJUSTED ELECTRIC AND GAS REVENUES BILLED
(IN MILLIONS)
- --------------------------------------------------------------------------------------------
1992 1993 1994 1995 1996 TOTAL
<S> <C> <C> <C> <C> <C> <C>
Residential $ 783,143 $ 807,052 $ 859,342 $ 839,145 $ 858,252 $4,146,934
- --------------------------------------------------------------------------------------------
Small Comm $ 247,141 $ 255,747 $ 280,670 $ 274,961 $ 284,451 $1,342,970
- --------------------------------------------------------------------------------------------
Total $1,030,284 $1,062,799 $1,140,012 $1,114,106 $1,142,703 $5,489,904
- --------------------------------------------------------------------------------------------
</TABLE>
Figure 3
I-6-3
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
ADJUSTED NET ELECTRIC AND GAS REVENUES BILLS
(IN THOUSANDS)
- --------------------------------------------------------------------------
1992 1993 1994 1995 1996 TOTAL
<S> <C> <C> <C> <C> <C> <C>
Residential $4,338 $5,183 $4,330 $4,204 $2,965 $21,020
- --------------------------------------------------------------------------
Small Comm $ 603 $ 541 $ 503 $ 557 $ 311 $ 2,515
- --------------------------------------------------------------------------
Total $4,941 $5,724 $4,833 $4,761 $3,276 $23,535
- --------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
ADJUSTED NET WRITE OFFS AS A PERCENTAGE OF BILLED REVENUES
- --------------------------------------------------------------------------
1992 1993 1994 1995 1996 TOTAL
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------
Residential 0.6% 0.6% 0.5% 0.5% 0.4% 0.5%
- --------------------------------------------------------------------------
Small Comm 0.2% 0.2% 0.2% 0.2% 0.1% 0.2%
- --------------------------------------------------------------------------
Total 0.5% 0.5% 0.4% 0.4% 0.3% 0.4%
- --------------------------------------------------------------------------
</TABLE>
Figure 4
The fifth prior month percentages in Figure 1 are the amounts ultimately written
off by the Servicer as shown in the bottom portion of Figure 4. The fourth
prior month percentages in Figure 1 are a simple average of the third prior
month and fifth prior month percentages.
I-6-4
<PAGE>
II. Estimation Template
- ------------------------
Where:
M\\n\\ = a Collection Period
A = percentage collected of the total Billed FTA Charges
billed during the current Billing Period
B = percentage collected of the total Billed FTA Charges
billed during the Billing Period prior to the current
Billing Period
C = percentage collected of the total Billed FTA Charges
billed during the Billing Period two periods prior to
the current Billing Period
D = percentage collected of the total Billed FTA Charges
billed during the Billing Period three periods prior to
the current Billing Period
E = percentage collected of the total Billed FTA Charges
billed during the Billing Period four periods prior to
the current Billing Period
F = percentage collected of the total Billed FTA Charges
billed during the Billing Period five periods prior to
the current Billing Period
Then:
FTA Payments estimated to have been received during a Collection
Period (prior to any adjustments for a Remittance Shortfall or Excess
Remittance) equal Z, as shown in the Estimation Template below.
I-6-5
<PAGE>
ESTIMATION TEMPLATE
FTA PAYMENTS ESTIMATED TO HAVE BEEN RECEIVED
BY THE SERVICER DURING THE COLLECTION PERIOD OF M\\n\\
(1) RESIDENTIAL CUSTOMERS
---------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
COLLECTION COLLECTION BILLED FTA ESTIMATED
PERIOD (M\\n\\) PERCENT CHARGES COLLECTIONS
(R) (S) (T) (S X T)
- ----------------------------------------------------------------------
<S> <C> <C> <C>
M\\n-5\\ F\\n-5\\ X\\n-5\\ (F\\n-5\\)(X\\n-5\\)
+
M\\n-4\\ E\\n-4\\ X\\n-4\\ (E\\n-4\\)(X\\n-4\\)
+
M\\n-3\\ D\\n-3\\ X\\n-3\\ (D\\n-3\\)(X\\n-3\\)
+
M\\n-2\\ C\\n-2\\ X\\n-2\\ (C\\n-2\\)(X\\n-2\\)
+
M\\n-1\\ B\\n-1\\ X\\n-1\\ (B\\n-1\\)(X\\n-1\\)
+
M\\n\\ A\\n\\ X\\n\\ (A\\n\\)(X\\n\\)
--------------------------
TOTAL: Z\\(residential)\\
=========================
</TABLE>
(2) SMALL COMMERCIAL CUSTOMERS
--------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
COLLECTION COLLECTION BILLED FTA ESTIMATED
PERIOD (M\\n\\) PERCENT CHARGES COLLECTIONS
(R) (S) (T) (S X T)
- ------------------------------------------------------------------------
<S> <C> <C> <C>
M\\n-5\\ F\\n-5\\ X\\n-5\\ (F\\n-5\\)(X\\n-5\\)
+
M\\n-4\\ E\\n-4\\ X\\n-4\\ (E\\n-4\\)(X\\n-4\\)
+
M\\n-3\\ D\\n-3\\ X\\n-3\\ (D\\n-3\\)(X\\n-3\\)
+
M\\n-2\\ C\\n-2\\ X\\n-2\\ (C\\n-2\\)(X\\n-2\\)
+
M\\n-1\\ B\\n-1\\ X\\n-1\\ (B\\n-1\\)(X\\n-1\\)
+
M\\n\\ A\\n\\ X\\n\\ (A\\n\\)(X\\n\\)
---------------------------
TOTAL: Z\\(small commercial)\\
===========================
</TABLE>
(3) ESTIMATED FTA PAYMENTS
----------------------
Z\\(residential)\\ + Z\\(small commercial)\\ = Z
I-6-6
<PAGE>
(4) NOTES
-----
1. THE BILLED FTA CHARGES (T) 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 CHARGES 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 (S) IS THE COLLECTION PERCENT IN EFFECT AT THE TIME
THE FTA CHARGES WERE BILLED BASED ON THE MONTHLY COLLECTIONS CURVE THEN IN
EFFECT.
I-6-7
<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 SDG&E
Funding LLC Notes, Series 1997-1.
<PAGE>
Exhibit 10.3
NOTE PURCHASE AGREEMENT
This Note Purchase Agreement (this "Agreement"), dated as of December
16, 1997, is made by and between SDG&E Funding LLC, a Delaware limited liability
company (the "Note Issuer"), and the California Infrastructure and Economic
Development Bank Special Purpose Trust SDG&E-1, a not-for-profit business trust
organized under the laws of the State of Delaware (the "Trust"), pursuant to
that certain Amended and Restated Declaration and Agreement of Trust (the "Trust
Agreement"), dated as of December 16, 1997 among Bankers Trust (Delaware), as
Delaware Trustee, Bankers Trust Company of California, N.A., a national banking
association, as certificate trustee (in such capacity, 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 16, 1997, between 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 $658,000,000 in principal amount of SDG&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 Trust 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.
<PAGE>
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 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 December
4, 1997 (the "Underwriting Agreement"), among San Diego Gas & Electric
Company, the Note Issuer, the Trust, the California Infrastructure 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.
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 an
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, on behalf of the Trust, shall have
received on the Closing Date an Officer's Certificate dated the Closing
Date confirming the matters set forth in Sections 2(a) and 2(b).
d. The Certificate Trustee, on behalf of the Trust, shall have
received 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.
<PAGE>
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 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
<PAGE>
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 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 Mortgage Deed of Trust dated July 1, 1940, executed by San Diego
Gas & Electric Company, as supplemented and amended to date hereof, in
favor of First Trust of California, N.A. as successor trustee, as Trustee
(which lien shall be released on the Closing Date contemporaneously with
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.
<PAGE>
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, as the representative of the
Trust, or counsel for the Certificate Trustee shall be deemed to be a
representation and warranty by the Note Issuer to the Trust as to the
matters covered thereby.
4. Covenants
The Note Issuer covenants and agrees that, until payment in full of
the Notes, unless the Certificate Trustee, on behalf of the Trust, shall
otherwise give prior written consent, the Note Issuer shall perform all
covenants in this Section 4.
a. To advise the Certificate Trustee, as the representative of
the Trust, promptly and, if requested by the Certificate Trustee, on behalf
of the Trust, 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 or
Certificate for offering or sale in any jurisdiction in which the
Certificates have been offered 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.
<PAGE>
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, on behalf
of the Trust, or the Infrastructure Bank, to provide, or cause to be
provided, to the Certificate Trustee, as the representative of the Trust,
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 Trust 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 Trust, the
Certificate Trustee, the Delaware Trustee and the Infrastructure Bank and
their respective officers, directors and each person, if any, who controls
the Trust, 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 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.
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 Date.
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.
<PAGE>
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:
SDG&E Funding LLC
101 Ash Street, Room 111
San Diego, CA 92101
Attention: President
Facsimile: (619) 696-2330
Telephone: (619) 696-2328
If to the Trust or 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)
<PAGE>
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
e. 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 each such entity, 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 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. Further Assurances
The Note Issuer agrees to execute and deliver such instruments
and take such actions as the Certificate Trustee, on behalf of the Trust,
may, from time to time, reasonably request in order to effectuate the
purpose and to carry out the terms of this Agreement.
<PAGE>
i. 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.
j. Counterparts
This Agreement may be signed in various counterparts which
together shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the Note Issuer and the Trust have caused this
Note Purchase Agreement to be duly executed by their respective officer or
trustee, thereunto duly authorized, all as of the day and year first above
written.
SDG&E FUNDING LLC, a Delaware limited liability
company
By: /s/ James P. Trent
_________________________
Name: James P. Trent
Title: Chief Financial Officer, Chief Accounting
Officer and Treasurer
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK SPECIAL PURPOSE TRUST SDG&E-1, a not-for-
profit business trust organized under the laws of
the State of Delaware
By: BANKERS TRUST COMPANY OF CALIFORNIA, N.A., a
national banking association, not in its
individual capacity, but solely as
Certificate Trustee
By: /s/ Linda A. Rakolta
_________________________
Name: Linda A. Rakolta
Title: Vice President
<PAGE>
SCHEDULE 1(a)
NOTES
<TABLE>
<CAPTION>
CLASS OF NOTE PRINCIPAL AMOUNT PURCHASE PRICE (%)
<S> <C> <C>
A-1 $ 65,800,000 99.74716%
A-2 $ 82,639,254 99.63666%
A-3 $ 66,230,948 99.58061%
A-4 $ 65,671,451 99.51564%
A-5 $ 96,537,839 99.49826%
A-6 $197,584,137 99.43005%
A-7 $ 83,536,371 99.28387%
Total: $658,000,000 $654,728,788.85
</TABLE>
1(a)-1
<PAGE>
EXHIBIT 10.4
EXECUTION COPY
FEE AND INDEMNITY AGREEMENT
This Fee and Indemnity Agreement (the "Fee and Indemnity Agreement"), dated
as of December 16, 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"), SDG&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
<PAGE>
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.
(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
<PAGE>
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 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:
<PAGE>
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
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:
SDG&E Fund LLC
101 Ash Street, Room 111
San Diego, California 92101
Attention: President
Facsimile: (619) 696-2330
Telephone: (619) 696-2328
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
<PAGE>
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.
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]
<PAGE>
IN WITNESS WHEREOF, the Originator, the Delaware Trustee, the
Certificate Trustee and the Note Issuer 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: /s/ Christopher S. Holben
Name: Christopher S. Holben
Title: Chair
BANKERS TRUST (DELAWARE),
as Delaware Trustee
By: /s/ M. Lisa Wilkins
Name: M. Lisa Wilkins
Title: Assistant Secretary
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A., as
Certificate Trustee
By: /s/ Linda A. Rakolta
Name: Linda A. Rakolta
Title: Vice President
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
<PAGE>
SDG&E FUNDING LLC, as Note
Issuer
By: /s/ Charles A. McMonagle
Name: Charles A. McMonagle
Title: President and Chief
Executive Officer
<PAGE>
Schedule A
----------
SCHEDULE OF FEES
for
$658,000,000
California Infrastructure and Economic
Development Bank Special
Purpose Trust SDG&E-1
Rate Reduction Certificates, Series 1997-1
Note Trustee and Certificate Trustee/1/
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 $10.00/wire
distribution)
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.
- ----------------------
- ------------
/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
[LETTERHEAD OF SAN DIEGO GAS & ELECTRIC]
SDGE San Diego Gas & Electric
P.O. BOX 1831 SAN DIEGO, CA 92112-4150 619/696-2000
December 9, 1997 PUC 110
FILE NO. x-PUF 000
(A.97-05-022)
ADVICE 1060-E
(U 902-E)
Public Utilities Commission of the State of California
San Diego Gas & Electric Company (SDG&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.) 97-09-057,
Ordering Paragraph 4, SDG&E hereby transmits for filing, subsequent to 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, and A-7.
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, SDG&E also
submits, on behalf of itself and on behalf of SDG&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. 97-09-057, the Commission authorized SDG&E to file Issuance Advice Letters
when pricing terms for RRBs have been established. Issuance Advice Letter
filings are those in which SDG&E uses the bond sizing methodology and FTA charge
formulas found reasonable by the Commission in D. 97-09-057 to establish initial
FTA charges for a series of RRBs. Using
- ----------
(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 1060-E
December 9, 1997
Page 2
the methodology approved by the Commission in D. 97-09-057, 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 Interim Transition Cost Balancing Account
will be reduced by an amount equal to the FTA charges so that total rates remain
frozen.
Issuance Information
Rate Reduction Bond Name: Rate Reduction Certificates,
Series 1997-1
Rate Reduction Bond Issuer: California Infrastructure and
Economic Development Bank
Special Purpose Trust SDG&E-1
Transition Property Owner (SPE): SDG&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 16, 1997
Bond Rating:
Moody's Aaa
S&P AAA
Fitch AAA
Face value of Amount Issued: $658,000,000.00
Issuance Costs(2): $6,850,000.00
Issuance Costs Approved by
Infrastructure Bank or STO: $5,075,000.00
Issuance Costs as a Percent of
Amount Issued: 1.041%
- ----------
(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 1060-E
December 9, 1997
Page 3
Cumulative Aggregate Cumulative
Issuance Costs for all Series: $6,850,000.00
Transition Costs Financed: $651,150,000.00
Coupon Rate(s), Expected Final
Maturities, and Legal Final Maturities:
Coupon Expected Final Legal Final
Rates Maturities Maturities
-------------------------------------------------------
Series 1997-1(3) 6.26% Not applicable Not applicable
Class A-1 5.97% December 26, 1998 December 26, 2000
Class A-2 6.04% March 25, 2000 March 25, 2002
Class A-3 6.07% March 25, 2001 March 25, 2003
Class A-4 6.15% March 25, 2002 March 25, 2004
Class A-5 6.19% September 25, 2003 September 25, 2005
Class A-6 6.31% September 25, 2006 September 25, 2008
Class A-7 6.37% December 26, 2007 December 26, 2009
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.
- ----------
(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 1060-E
December 9, 1997
Page 4
Overcollateralization Amount
for the Series: $3,290,000.00, which is 0.50% of
the initial amount issued, to be
collected ratably (equal quarterly
amounts) over the term of the
series
Equity Contribution to SPE: $3,290,000.00, 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. 97-09-057 p. 3). The following minor structural
details were determined after D. 97-09-054 and D. 97-09-057 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 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
<PAGE>
Public Utilities Commission
Advice 1060-E
December 9, 1997
Page 5
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 the applicability of the statutory provisions underlying the SDG&E
Financing Order.
Quarterly Variance Trigger Mechanism
The pro forma Issuance Advice Letter attached to D. 97-09-057 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. 97-09-057 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 a AAA rating (the highest possible rating) on the RRBs. Based on this
input from rating agencies, SDG&E will not implement the quarterly true-up
mechanism.(4)
Confirmation of Ratepayer Benefits
D. 97-09-057 requires SDG&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 $126 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 or 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 1060-E
December 9, 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 137,041,290 38,441,290
- ------------------------------------------------------------------------------------------------
January 1998 428,215,484 112,145,032
- ------------------------------------------------------------------------------------------------
February 1998 509,180,000 145,024,000
- ------------------------------------------------------------------------------------------------
March 1998 478,865,000 145,246,000
- ------------------------------------------------------------------------------------------------
April 1998 447,019,000 145,996,000
- ------------------------------------------------------------------------------------------------
May 1998 431,560,000 149,636,000
- ------------------------------------------------------------------------------------------------
June 1998 445,007,000 157,168,000
- ------------------------------------------------------------------------------------------------
July 1998 520,694,000 173,680,000
- ------------------------------------------------------------------------------------------------
August 1998 527,888,000 173,413,000
- ------------------------------------------------------------------------------------------------
September 1998 586,396,000 185,138,000
- ------------------------------------------------------------------------------------------------
October 1998 480,773,000 163,229,000
- ------------------------------------------------------------------------------------------------
November 1998 473,258,000 154,950,000
- ------------------------------------------------------------------------------------------------
December 1998 538,638,000 151,391,000
- ------------------------------------------------------------------------------------------------
Residential and eligible small commercial bill
charge February 1997(5) 11.25 (cents)/kWh 11.87 (cents)/kWh
- ------------------------------------------------------------------------------------------------
Percent of residential customers' and eligible
small commercial customers' billed amounts
expected to be uncollected 0.5% 0.2%
- ------------------------------------------------------------------------------------------------
Percent of billed amounts collected in current
month 40.8% 40.8%
- ------------------------------------------------------------------------------------------------
Percent of billed amounts collected in second
month after billing 48.3% 52.4%
- ------------------------------------------------------------------------------------------------
Percent of billed amounts collected in third
month after billing 8.7% 6.3%
- ------------------------------------------------------------------------------------------------
Percent of billed amounts collected in fourth
month after billing 1.5% .2%
- ------------------------------------------------------------------------------------------------
Percent of billed amounts collected in fifth
month after billing 0.1% 0.1%
- ------------------------------------------------------------------------------------------------
Percent of billed amounts collected in sixth
month after billing 0.1% 0.0%
- ------------------------------------------------------------------------------------------------
</TABLE>
- ----------
(5) SDG&E's June 10, 1996, rates were adjusted on February 1, 1997, in
accordance with an authorized adjustment mechanism which is based on fuel
prices.
<PAGE>
Public Utilities Commission
Advice 1060-E
December 9, 1997
Page 7
- --------------------------------------------------------------------------------
For Series
- --------------------------------------------------------------------------------
Quarterly Overcollateralization amount $82,250.00
- --------------------------------------------------------------------------------
Quarterly Servicing Fee as percent of outstanding
balance 0.0625%
- --------------------------------------------------------------------------------
Quarterly ongoing transaction expenses $31,250.00
- --------------------------------------------------------------------------------
Expected outstanding RRB principal balance as of
12/31/98 $592,200,000.00
- --------------------------------------------------------------------------------
Table II shows the initial FTA charges calculated for residential and eligible
small commercial customers. The FTA calculations are shown in Attachment IV.
- --------------------------------------------------------------------------------
TABLE II
- --------------------------------------------------------------------------------
Residential Customer FTA Charge 1.591 (cents)/kWh
- --------------------------------------------------------------------------------
Eligible Small Commercial Customer FTA
Charge 1.679 (cents)/kWh
- --------------------------------------------------------------------------------
SDG&E's new Rate Schedule FTA which shows FTA charges to be effective December
16, 1997, is included in Attachment I. SDG&E will reflect the applicable FTA
rate component in its electric rate schedules when it files Advice Letter
1042-E-C (Cost Separation) in compliance with a resolution to be issued by the
Commission on December 16, 1997.
Transition Property
Transition property is the property described in Public Utilities Code ss. 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.
<PAGE>
Public Utilities Commission
Advice 1060-E
December 9, 1997
Page 8
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).
Copies of UCC-1 Financing Statements
Attached as Attachment VI, SDG&E submits, in compliance with PU Code ss.844 (c),
a copy of the UCC-1 Financing Statement filed in connection with the sale of
certain Transition Property from San Diego Gas & Electric Company to SDG&E
Funding LLC, 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 San Diego Gas & Electric Company, as Debtor,
SDG&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, SDG&E submits, in compliance with PU Code ss.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
ss.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
San Diego Gas & Electric Company, as debtor, SDG&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, SDG&E submits on behalf of SDG&E Funding LLC, in
compliance with PU Code ss.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 ss. 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 SDG&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.
<PAGE>
Public Utilities Commission
Advice 1060-E
December 9, 1997
Page 9
In accordance with D. 97-09-057, these FTA charges shall be effective on
December 16, 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 Charge
Issuance Advice Letter, or an FTA Charge True-Up Mechanism Advice Letter.
In accordance with Section III, Paragraph G of General Order 96-A, SDG&E is
mailing copies of this advice filing to the utilities and interested parties
shown on the attached list, and interested parties in A. 97-05-022. Address
change requests should be directed to Jennifer Valeri at (619) 696-4011.
/s/ C.R. Swanson
for Lee Schavrien
Regulatory Affairs Director
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>
[LETTERHEAD OF SAN DIEGO GAS & ELECTRIC]
Public Utilities Commission -10- December 9, 1997
G.O. 96-A, Sec. III(G)
ADVICE LETTER FILING MAILING LIST
CC: (w/enclosures)
- --------------------------------------------------------------------------------
Public Utilities Commission Duckett & Associates
Director - ORA Equitax
Thomas Lew - ORA Generator Power Systems
M.Pocta - ORA G.E. Goodrich Co
J. Grieg - ORA Graham & James
M.D. McNamara - ORA Great Western Bank
W. Franklin Green, Jerry
W. Scott - ORA Grossmont District Hospital
California Energy Commission Grueneich Resource Advocates
David Mundstock Hamilton, Richard
ACWA HMH Resourses
Agland Energy Services Hawthorne Power Systems
Aglet Consumer Alliance Henwood Energy Services
Andrews & Kurth Hunter Industries
Anza Electric Cooperative Husky Oil
Ater, Wynne, Hewitt, Dodson Jackson, Tufts, Cole & Black
& Skerritt (3) Jones, Day, Reavis & Pogue
AT&T Global Information Kaiser Permanente
Barakat & Chamberlin NutraSweet Kelco Co.
Bartle Wells Associates Koteen, George
Belson, Steve Kyocera America Inc
BETA LSW Engineers
Bonneville Pacific Corp Meridan Oil
Boyd Rosene & Associates Met Life
California Building Industry Midcon Marketing Corp.
California Edison Utilities Co Mission Viejo Company
California Manufacturers Assoc Mock Energy Services
California Submeters Monsanto
CalMat Company Morrison & Foerster
Children's Hospital Naval Facilities Engineering
City of El Cajon Onsite Energy
City of Poway O'Rourke & Company
City of San Diego Pacific Energy
Computer Sciences Pacific Gas & Electric
Crossboarder Services Poway Unified School District
Dept of The Navy Power Heat Savers
Dept of Veteran Affairs Recon Research Corp
Medical Center Rohr Inc
Danios, Edward Scripps Clinic
Sea World
Sithe Energies
Dan Skurkis Associates
Solar Turbines
Southern California Edison (2)
Southern California Gas Co
Stichler Design Group
Super System
TRW
TURN, Michael Florio
UCAN, Michael Shames
University Energy
Utility Bill Consultants
Utility Cost Management
Utility Specialists
Utili-Tech
Bartle Wells Associates
The Zettl Company
Interested Parties A.97-O5-022
<PAGE>
ATTACHMENT
I
<PAGE>
ATTACHMENT I
ADVICE 1060-E
Cal. P.U.C. Canceling Cal.
Sheet No. Title of Sheet P.U.C. Sheet No.
- ----------- ----------------------------- ----------------
10583-E Schedule FTA 10103-E
10584-E Table of Contents (Continued) 10117-E
10585-E Table of Contents 10202-E
<PAGE>
[LOGO] Revised Cal. P.U.C. Sheet No. 10583-E
San Diego Gas & Electric Company
San Diego, California Canceling Original Cal. P.U.C. Sheet No. 10103-E
- --------------------------------------------------------------------------------
Sheet 1 of 2
SCHEDULE FTA
FIXED TRANSITION AMOUNT
APPLICABILITY
This schedule is applicable to all residential and small commercial customers.
This schedule is also in effect for all customers that have previously received
service on this schedule or Schedule RRB. The rates on this schedule are to be
added to the rates from the otherwise applicable schedule(s).
TERRITORY
Within the entire territory served by the utility at any time since December 20,
1995.
RATES
$/kWh
Energy rate, per kWh
FTA for Residential Rate Schedules ....................... 1.591
FTA for Small Commercial Rate Schedules .................. 1.679
The rates hereunder shall be applied in conjunction with the provisions of
Schedule RRB (See Schedule RRB-Rates) and shall continue in effect, as modified
pursuant to Special Condition 6 below, until termination of this rate schedule
as set forth in Special Condition 9 below.
Franchise Fee Differential:
A Franchise Fee Differential of 1.9% will be applied to the monthly billings
calculated under this schedule for all customers within the corporate limits of
the City of San Diego. Such Franchise Fee Differential shall be so indicated and
added as a separate item to bills rendered to such customers.
SPECIAL CONDITIONS
1. Definitions. The Definitions of principal terms used in this schedule,
including "small commercial" described in Public Utilities Code Section
331(h), are found either herein or in Rule 1, Definitions.
2. Name of Charge. The FTA charge may be presented on each bill as the "Trust
Transfer Amount".
3. Composition of Rates. The rates shall be comprised of the following
components: (a) scheduled debt service on the Rate Reduction Bonds; (b)
servicing fees; (c) Bond Trustee fees; (d) overcollateralization; (e)
allowances for uncollectibles; and, (f) other ongoing expenses.
4. Rights to Revenues. The rights to the Schedule FTA revenues constitute a
"transition property" as defined in the P.U. Code and have been
established pursuant to a Financing Order (Decision 97-09-057) issued by
the Commission. Concurrent with the effective date of this Rate Schedule,
SDG&E has sold such transition property to SDG&E Funding LLC, a Delaware
Limited Liability Company. The sale of transition property includes (a)
all rights, titles, and interest in all revenues, collections, claims,
payments, money, or proceeds of/or arising from or constituting fixed
transition amounts that are subject of the financing order, (b) the rights
to be paid all such amounts, and (c) the right to seek and obtain
adjustment to the rates on this schedule as provided in the financing
order. SDG&E has no rights to the transition property, FTA or any amounts
payable thereunder other than its rights as servicer under the Servicing
Agreement.
(Continued)
- --------------------------------------------------------------------------------
Issued by Date Filed December 9, 1997
Advice Ltr. No. 1060-E William L. Reed Effective
Decision No. 97-09-057 Vice President Resolution No.
Regulatory Affairs
<PAGE>
[LOGO] Revised Cal. P.U.C. Sheet No. 10584-E
San Diego Gas & Electric Company
San Diego, California Canceling Revised Cal. P.U.C. Sheet No. 10117-E
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
SCHEDULE OF RATES
Schedule
Number Service Cal. P.U.C. Sheet No.
- --------- ------- ---------------------
COMMERCIAL/INDUSTRIAL RATES
A-V3 General Service - Variable Time-of-Use 3 ........... 9596, 10097, 9424-E
9425-E
A-V6-C General Service - Variable Time-of-Use 6-C ......... 9597, 10098, 9048-E
9049, 8615-E
NJ New Job Incentive Rate ............................. 9598, 9051, 10099-E
9600, 9128-E
I-2 General Service - Interruptible .................... 9601, 10100, 8623-E
8624, 8625-E
I-3 General Service - Interruptible .................... 9603, 9604, 10101-E
9430, 8630, 9548-E
8632-E
LIGHTING RATES
LS-1 Lighting - Street and Highway ...................... 9506, 9507, 8635-E
Utility-Owned Installations ........................... 8636, 8637-E
LS-2 Lighting - Street and Highway ...................... 9608, 9609, 8640-E
Customer-Owned Installations .......................... 8641-E
LS-3 Lighting - Street and Highway
Customer-Owned Installations .......................... 9610, 4533-E
OL-1 Outdoor Area Lighting Service ............................ 9611, 9435-E
DWL Residential Walkway Lighting ............................. 9612, 4537-E
MISCELLANEOUS
PA Power - Agricultural ..................................... 10102, 8648-E
FTA Fixed Transmission Amount ............................... 10583, 10104-E
RRB Rate Reduction Bonds .......................................... 10105-E
PG-QF Parallel Generation - Cogeneration
or Power Production .............................. 6314, 6315, 6080-E
S Standby Service .................................... 9614, 8650, 8651-E
S-I Standby Service - Interruptible .................... 6084, 6085, 6317-E
SE Service Establishment Charge ............................. 5598,8729-E
RCM Rate Cap Mechanism ....................................... 9615, 9440-E
E-PUC Surcharge to Fund Public Utilities Commission
Reimbursement Fee ........................................... 5214-E
(Continued)
- --------------------------------------------------------------------------------
Issued by Date Filed December 9, 1997
Advice Ltr. No. 1060-E William L. Reed Effective
Decision No. 97-09-057 Vice President Resolution No.
Regulatory Affairs
<PAGE>
[LOGO] Revised Cal. P.U.C. Sheet No. 10585-E
San Diego Gas & Electric Company
San Diego, California Canceling Revised Cal. P.U.C. Sheet No. 10202-E
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
The following sheets contain all the effective rates and rules affecting rates,
service and information relating thereto, in effect on the date indicated
herein.
Cal. P.U.C. Sheet No.
---------------------
TITLE PAGE ............................................................. 4812-E
TABLE OF CONTENTS .......................... 10585, 10116, 10584, 10118, 9745-E
9126, 9668, 9132, 9683, 8827-E
PRELIMINARY STATEMENT:
I. General Information ................................. 8274, 8275, 8276-E
II. Balancing Accounts ............................ 10466, 8278, 8279, 8280-E
8281, 8282, 8283, 8284, 8285, 8286-E
8287, 8288, 8456, 8975, 9685, 8977-E
8978, 8813, 8979, 8980, 8981, 8982-E
8983, 8815, 8534, 8535, 8536, 8537-E
8984, 8816, 8540, 8541, 8542, 8543-E
8895, 8896, 9638, 10069, 10070-E
10467, 10468-E
III. Memorandum Accounts ............... 10071, 8324, 8325, 8326, 8327, 8328-E
8442, 8443, 8444, 8845, 8846, 8847-E
8848, 8727, 9372, 9373, 9179, 9722-E
9723, 9724, 9725, 9726, 9727, 9728-E
9729, 9730, 9731, 9732, 9733, 9641-E
9642, 9643, 10072, 10073-E
IV. Performance Based Ratemaking
(PBR) Base Rate Mechanism .......................... 9749, 8341, 8342-E
8343, 8344, 9750, 8346, 8347, 8348-E
8349, 8350, 8351, 8352, 8353, 8354-E
8355, 8356, 8357, 8358, 8359, 9751-E
8361, 8362, 8363, 8364, 8365, 8366-E
V. SONGS 1 Ratemaking Procedure ......................... 8367, 8368, 8369-E
8370, 8371, 8372, 8373, 8374, 8375-E
8376, 8377, 8378-E
VI. SONGS 2&3 Ratemaking Procedure ....................... 8954, 8955, 8956-E
8957, 8958, 8959, 8960, 8961, 8962-E
8963, 8964, 8965, 8966-E
VII. Miscellaneous ........................................ 9391, 8380, 8381-E
8382, 8383, 8384, 8385, 8843, 8387-E
8388, 8389, 8390, 8391, 8392, 8393-E
8394, 8395, 8945, 9392, 9393-E
INDEX OF RATE AREA MAPS ............................................... 9134-E
Map 1 - Territory Served ............................................ 5120-E
Map 1-A - Territory Served .......................................... 4916-E
Map 1-B - Territory Served .......................................... 7295-E
Map 1-C - Territory Served .......................................... 9135-E
Map 1-D - Territory Served .......................................... 9136-E
Map 2 - Territory Served ............................................ 8048-E
(Continued)
- --------------------------------------------------------------------------------
Issued by Date Filed December 9, 1997
Advice Ltr. No. 1060-E William L. Reed Effective
Decision No. 97-09-057 Vice President Resolution No.
Regulatory Affairs
<PAGE>
ATTACHMENT
II
<PAGE>
San Diego Gas & Electric Advice 1060-E
Page 1 of 7
Series 1997-1, Class A-1
Quarterly Date Principal Payment Outstanding Principal
-------------- ----------------- ---------------------
12/25/97 $0 $65,800,000
3/25/98 $3,167,828 $62,632,172
6/25/98 $18,699,490 $43,932,681
9/25/98 $20,442,921 $23,489,760
12/25/98 $23,489,760 $0
3/25/99 $0 $0
6/25/99 $0 $0
9/25/99 $0 $0
12/25/99 $0 $0
3/25/00 $0 $0
6/25/00 $0 $0
9/25/00 $0 $0
12/25/00 $0 $0
3/25/01 $0 $0
6/25/01 $0 $0
9/25/01 $0 $0
12/25/01 $0 $0
3/25/02 $0 $0
6/25/02 $0 $0
9/25/02 $0 $0
12/25/02 $0 $0
3/25/03 $0 $0
6/25/03 $0 $0
9/25/03 $0 $0
12/25/03 $0 $0
3/25/04 $0 $0
6/25/04 $0 $0
9/25/04 $0 $0
12/25/04 $0 $0
3/25/05 $0 $0
6/25/05 $0 $0
9/25/05 $0 $0
12/25/05 $0 $0
3/25/06 $0 $0
6/25/06 $0 $0
9/25/06 $0 $0
12/25/06 $0 $0
3/25/07 $0 $0
6/25/07 $0 $0
9/25/07 $0 $0
12/25/07 $0 $0
<PAGE>
San Diego Gas & Electric Advice 1060-E
Page 2 of 7
Series 1997-1, Class A-2
Quarterly Date Principal Payment Outstanding Principal
-------------- ----------------- ---------------------
12/25/97 $0 $82,639,254
3/25/98 $0 $82,639,254
6/25/98 $0 $82,639,254
9/25/98 $0 $82,639,254
12/25/98 $0 $82,639,254
3/25/99 $19,638,521 $63,000,733
6/25/99 $13,974,960 $49,025,774
9/25/99 $14,949,504 $34,076,270
12/25/99 $17,237,016 $16,839,254
3/25/00 $6,839,254 $0
6/25/00 $0 $0
9/25/00 $0 $0
12/25/00 $0 $0
3/25/01 $0 $0
6/25/01 $0 $0
9/25/01 $0 $0
12/25/01 $0 $0
3/25/02 $0 $0
6/25/02 $0 $0
9/25/02 $0 $0
12/25/02 $0 $0
3/25/03 $0 $0
6/25/03 $0 $0
9/25/03 $0 $0
12/25/03 $0 $0
3/25/04 $0 $0
6/25/04 $0 $0
9/25/04 $0 $0
12/25/04 $0 $0
3/25/05 $0 $0
6/25/05 $0 $0
9/25/05 $0 $0
12/25/05 $0 $0
3/25/06 $0 $0
6/25/06 $0 $0
9/25/06 $0 $0
12/25/06 $0 $0
3/25/07 $0 $0
6/25/07 $0 $0
9/25/07 $0 $0
12/25/07 $0 $0
<PAGE>
San Diego Gas & Electric Advice 1060-E
Page 3 of 7
Series 1997-1, Class A-3
Quarterly Date Principal Payment Outstanding Principal
-------------- ----------------- ---------------------
12/25/97 $0 $66,230,948
3/25/98 $0 $66,230,948
6/25/98 $0 $66,230,948
9/25/98 $0 $66,230,948
12/25/98 $0 $66,230,948
3/25/99 $0 $66,230,948
6/25/99 $0 $66,230,948
9/25/99 $0 $66,230,948
12/25/99 $0 $66,230,948
3/25/00 $0 $66,230,948
6/25/00 $14,879,573 $51,351,375
9/25/00 $15,899,319 $35,452,056
12/25/00 $18,181,854 $17,270,202
3/25/01 $17,270,202 $0
6/25/01 $0 $0
9/25/01 $0 $0
12/25/01 $0 $0
3/25/02 $0 $0
6/25/02 $0 $0
9/25/02 $0 $0
12/25/02 $0 $0
3/25/03 $0 $0
6/25/03 $0 $0
9/25/03 $0 $0
12/25/03 $0 $0
3/25/04 $0 $0
6/25/04 $0 $0
9/25/04 $0 $0
12/25/04 $0 $0
3/25/05 $0 $0
6/25/05 $0 $0
9/25/05 $0 $0
12/25/05 $0 $0
3/25/06 $0 $0
6/25/06 $0 $0
9/25/06 $0 $0
12/25/06 $0 $0
3/25/07 $0 $0
6/25/07 $0 $0
9/25/07 $0 $0
12/25/07 $0 $0
<PAGE>
San Diego Gas & Electric Advice 1060-E
Page 4 of 7
Series 1997-1, Class A-4
Quarterly Date Principal Payment Outstanding Principal
-------------- ----------------- ---------------------
12/25/97 $0 $65,671,451
3/25/98 $0 $65,671,451
6/25/98 $0 $65,671,451
9/25/98 $0 $65,671,451
12/25/98 $0 $65,671,451
3/25/99 $0 $65,671,451
6/25/99 $0 $65,671,451
9/25/99 $0 $65,671,451
12/25/99 $0 $65,671,451
3/25/00 $0 $65,671,451
6/25/00 $0 $65,671,451
9/25/00 $0 $65,671,451
12/25/00 $0 $65,671,451
3/25/01 $0 $65,671,451
6/25/01 $14,793,748 $50,877,703
9/25/01 $15,774,870 $35,102,832
12/25/01 $17,961,179 $17,141,653
3/25/02 $17,141,653 $0
6/25/02 $0 $0
9/25/02 $0 $0
12/25/02 $0 $0
3/25/03 $0 $0
6/25/03 $0 $0
9/25/03 $0 $0
12/25/03 $0 $0
3/25/04 $0 $0
6/25/04 $0 $0
9/25/04 $0 $0
12/25/04 $0 $0
3/25/05 $0 $0
6/25/05 $0 $0
9/25/05 $0 $0
12/25/05 $0 $0
3/25/06 $0 $0
6/25/06 $0 $0
9/25/06 $0 $0
12/25/06 $0 $0
3/25/07 $0 $0
6/25/07 $0 $0
9/25/07 $0 $0
12/25/07 $0 $0
<PAGE>
San Diego Gas & Electric Advice 1060-E
Page 5 of 7
Series 1997-1, Class A-5
Quarterly Date Principal Payment Outstanding Principal
-------------- ----------------- ---------------------
12/25/97 $0 $96,537,839
3/25/98 $0 $96,537,839
6/25/98 $0 $96,537,839
9/25/98 $0 $96,537,839
12/25/98 $0 $96,537,839
3/25/99 $0 $96,537,839
6/25/99 $0 $96,537,839
9/25/99 $0 $96,537,839
12/25/99 $0 $96,537,839
3/25/00 $0 $96,537,839
6/25/00 $0 $96,537,839
9/25/00 $0 $96,537,839
12/25/00 $0 $96,537,839
3/25/01 $0 $96,537,839
6/25/01 $0 $96,537,839
9/25/01 $0 $96,537,839
12/25/01 $0 $96,537,839
3/25/02 $0 $96,537,839
6/25/02 $14,849,639 $81,688,200
9/25/02 $15,837,257 $65,850,944
12/25/02 $17,971,452 $47,879,492
3/25/03 $17,133,294 $30,746,198
6/25/03 $14,883,706 $15,862,492
9/25/03 $15,862,492 $0
12/25/03 $0 $0
3/25/04 $0 $0
6/25/04 $0 $0
9/25/04 $0 $0
12/25/04 $0 $0
3/25/05 $0 $0
6/25/05 $0 $0
9/25/05 $0 $0
12/25/05 $0 $0
3/25/06 $0 $0
6/25/06 $0 $0
9/25/06 $0 $0
12/25/06 $0 $0
3/25/07 $0 $0
6/25/07 $0 $0
9/25/07 $0 $0
12/25/07 $0 $0
<PAGE>
San Diego Gas & Electric Advice 1060-E
Page 6 of 7
Series 1997-1, Class A-6
Quarterly Date Principal Payment Outstanding Principal
-------------- ----------------- ---------------------
12/25/97 $0 $197,584,137
3/25/98 $0 $197,584,137
6/25/98 $0 $197,584,137
9/25/98 $0 $197,584,137
12/25/98 $0 $197,584,137
3/25/99 $0 $197,584,137
6/25/99 $0 $197,584,137
9/25/99 $0 $197,584,137
12/25/99 $0 $197,584,137
3/25/00 $0 $197,584,137
6/25/00 $0 $197,584,137
9/25/00 $0 $197,584,137
12/25/00 $0 $197,584,137
3/25/01 $0 $197,584,137
6/25/01 $0 $197,584,137
9/25/01 $0 $197,584,137
12/25/01 $0 $197,584,137
3/25/02 $0 $197,584,137
6/25/02 $0 $197,584,137
9/25/02 $0 $197,584,137
12/25/02 $0 $197,584,137
3/25/03 $0 $197,584,137
6/25/03 $0 $197,584,137
9/25/03 $0 $197,584,137
12/25/03 $17,920,508 $179,663,629
3/25/04 $17,104,093 $162,559,536
6/25/04 $14,949,476 $147,610,060
9/25/04 $15,892,255 $131,717,805
12/25/04 $17,854,176 $113,863,629
3/25/05 $17,058,958 $96,804,671
6/25/05 $15,012,585 $81,792,086
9/25/05 $15,926,779 $65,865,307
12/25/05 $17,801,678 $48,063,629
3/25/06 $17,032,302 $31,031,327
6/25/06 $15,076,039 $15,955,288
9/25/06 $15,955,288 $0
12/25/06 $0 $0
3/25/07 $0 $0
6/25/07 $0 $0
9/25/07 $0 $0
12/25/07 $0 $0
<PAGE>
San Diego Gas & Electric Advice 1060-E
Page 7 of 7
Series 1997-1, Class A-7
Quarterly Date Principal Payment Outstanding Principal
-------------- ----------------- ---------------------
12/25/97 $0 $83,536,371
3/25/98 $0 $83,536,371
6/25/98 $0 $83,536,371
9/25/98 $0 $83,536,371
12/25/98 $0 $83,536,371
3/25/99 $0 $83,536,371
6/25/99 $0 $83,536,371
9/25/99 $0 $83,536,371
12/25/99 $0 $83,536,371
3/25/00 $0 $83,536,371
6/25/00 $0 $83,536,371
9/25/00 $0 $83,536,371
12/25/00 $0 $83,536,371
3/25/01 $0 $83,536,371
6/25/01 $0 $83,536,371
9/25/01 $0 $83,536,371
12/25/01 $0 $83,536,371
3/25/02 $0 $83,536,371
6/25/02 $0 $83,536,371
9/25/02 $0 $83,536,371
12/25/02 $0 $83,536,371
3/25/03 $0 $83,536,371
6/25/03 $0 $83,536,371
9/25/03 $0 $83,536,371
12/25/03 $0 $83,536,371
3/25/04 $0 $83,536,371
6/25/04 $0 $83,536,371
9/25/04 $0 $83,536,371
12/25/04 $0 $83,536,371
3/25/05 $0 $83,536,371
6/25/05 $0 $83,536,371
9/25/05 $0 $83,536,371
12/25/05 $0 $83,536,371
3/25/06 $0 $83,536,371
6/25/06 $0 $83,536,371
9/25/06 $0 $83,536,371
12/25/06 $17,736,371 $65,800,000
3/25/07 $17,146,502 $48,653,498
6/25/07 $15,450,913 $33,202,585
9/25/07 $16,316,052 $16,886,533
12/25/07 $16,886,533 $0
<PAGE>
ATTACHMENT
III
<PAGE>
San Diego Gas & Electric Company Advice 1060-E
Page 1 of 8
RATE REDUCTION BONDS -- SIZING CALCULATIONS
INPUT PAGE
($ in millions)
1 Target revenue reduction, 1-1-1998 - 3-31-2002:
<TABLE>
<CAPTION>
2 1998 1999 2000 2001 2002
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
3 Annual revenue reduction with 10% rate reduction $ 92 $ 94 $ 95 $ 97 $ 25
4 Total revenue reduction $ 402
</TABLE>
5
<TABLE>
<CAPTION>
6 3/31/98 6/30/98 9/30/98 12/31/98 3/31/99 6/30/99
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
7 Quarterly revenue reduction with 10% rate reduction $ 23 $ 23 $ 23 $ 23 $ 23 $ 23
8 Total revenue reduction $ 402
<CAPTION>
6 9/30/99 12/31/99 3/31/00 6/30/00 9/30/00 12/31/00
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
7 Quarterly revenue reduction with 10% rate reduction $ 23 $ 23 $ 24 $ 24 $ 24 $ 24
8 Total revenue reduction
<CAPTION>
6 3/31/01 6/30/01 9/30/01 12/31/01 3/31/02
--------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
7 Quarterly revenue reduction with 10% rate reduction $ 24 $ 24 $ 24 $ 24 $ 25
8 Total revenue reduction
</TABLE>
9
10 Transition cost amortization without debt financing:
11
<TABLE>
<S> <C> <C> <C>
12 Amortization period 4 years 1 quarter(s)
13 Number of amortization periods 17 quarters
14
15 Annual authorized pretax transition cost return 9.52%
16
17 Franchise fees & uncollectibles 2.2537%
18
19 Transition cost amortization with debt financing:
20
21 Amortization period 10 years 0 quarters
22 Number of amortization periods 40 quarters
23
24 Annual Quarterly
------ ---------
25 Interest (pre-tax carrying cost) 6.26% 1.57% (percentage of outstanding
26 principal balance)
27 Refundable costs/fees 0.25% 0.06% (percentage of outstanding
28 principal balance)
29 Non-refundable costs/fees $ 0.125 $ 0.03 (fixed dollar amount)
30
31 Annual authorized pre-tax rate of return 13.61%
32
33 Rate reduction bond type 2 (Constant-principal)
34 (Enter 1 for mortgage-style, 2 for constant-principal)
35
36 Overcollateralization Percentage 0.50% (percentage of original principal)
37
38 Overcollateralization Amount $ 3.3
39
40 Bond issuance expenses $ 6.85
41
42 Transition cost amounts financed:
43 Net assets Financed Taxes
---------- --------------
44 Generic Asset $ 386 $ 265
45 ---------- --------------
46 Total Net Assets plus Financed Taxes $ 651
</TABLE>
<PAGE>
San Diego Gas & Electric Company Advice 1060-E
Page 2 of 8
RATE REDUCTION BONDS -- SIZING CALCULATIONS
17-QUARTER AMORTIZATION CASE
($ in millions)
Assumptions 17-quarter amortization
9.52% pre-tax carrying cost
<TABLE>
<CAPTION>
1 12/31/97 3/31/98 6/30/98 9/30/98 12/31/98 3/31/99
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
2 Rate-Base Balances
3
4 EOY Transition Cost-Rate Base Balance 386 -- -- -- 295 --
5 Annual Transition Cost-Rate Base Depreciation -- -- -- 91 --
6 Average Transition Cost-Rate Base Balance -- -- -- 340 --
7 Annual Pre-tax Return on Average Balance -- -- -- 32 --
8
9
10 Financed Taxes
11
12 EOY Financed Taxes Balance 265 -- -- -- 203 --
13 Annual Financed Taxes Amortization -- -- -- 62 --
14
15
16 Quarterly Revenue Requirement, 17-quarter Amortization
17
18 Transition Cost-Rate Base Depreciation (ln 5 - 4) 23 23 23 23 23
19 Pre-tax Return on Transition Cost-Rate Base (ln 7 - 4) 8 8 8 8 6
20 Financed Tax (ln 13- 4) 16 16 16 16 16
-------------------------------------------------------------------------
21 Subtotal (ln 18 - ln 19 - ln 20) 46 46 46 46 44
22 Franchise Fee 0.065 1 1 1 1 1
-------------------------------------------------------------------------
23 Total Revenue Requirement 1/1/1998 - 3/31/2002 47 47 47 47 45
=========================================================================
0.0025
<CAPTION>
1 6/30/99 9/30/99 12/31/99 3/31/00 6/30/00
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
2 Rate-Base Balances
3
4 EOY Transition Cost-Rate Base Balance -- -- 204 -- --
5 Annual Transition Cost-Rate Base Depreciation -- -- 91 -- --
6 Average Transition Cost-Rate Base Balance -- -- 250 -- --
7 Annual Pre-tax Return on Average Balance -- -- 24 -- --
8
9
10 Financed Taxes
11
12 EOY Financed Taxes Balance -- -- 140 -- --
13 Annual Financed Taxes Amortization -- -- 62 -- --
14
15
16 Quarterly Revenue Requirement, 17-quarter Amortization
17
18 Transition Cost-Rate Base Depreciation (ln 5 - 4) 23 23 23 23 23
19 Pre-tax Return on Transition Cost-Rate Base (ln 7 - 4) 6 6 6 4 4
20 Financed Tax (ln 13 - 4) 16 16 16 16 16
-----------------------------------------------------------------
21 Subtotal (ln 18 - ln 19 - ln 20) 44 44 44 42 42
22 Franchise Fee 0.065 1 1 1 1 1
-----------------------------------------------------------------
23 Total Revenue Requirement 1/1/1998 - 3/31/2002 45 45 45 43 43
=================================================================
0.0025
<CAPTION>
1 9/30/00 12/31/00 3/31/01 6/30/01 9/30/01
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
2 Rate-Base Balances
3
4 EOY Transition Cost-Rate Base Balance -- 113 -- -- --
5 Annual Transition Cost-Rate Base Depreciation -- 91 -- -- --
6 Average Transition Cost-Rate Base Balance -- 159 -- -- --
7 Annual Pre-tax Return on Average Balance -- 15 -- -- --
8
9
10 Financed Taxes
11
12 EOY Financed Taxes Balance -- 78 -- -- --
13 Annual Financed Taxes Amortization -- 62 -- -- --
14
15
16 Quarterly Revenue Requirement, 17-quarter Amortization
17
18 Transition Cost-Rate Base Depreciation (ln 5 - 4) 23 23 23 23 23
19 Pre-tax Return on Transition Cost-Rate Base (ln 7 - 4) 4 4 2 2 2
20 Financed Tax (ln 13 - 4) 16 16 16 16 16
------------------------------------------------------------------
21 Subtotal (ln 18 - ln 19 - ln 20) 42 42 40 40 40
22 Franchise Fee 0.065 1 1 1 1 1
------------------------------------------------------------------
23 Total Revenue Requirement 1/1/1998 3/31/2002 43 43 41 41 41
==================================================================
0.0025
<CAPTION>
1 12/31/01 3/31/02
-----------------------
<S> <C> <C> <C>
2 Rate-Base Balances
3
4 EOY Transition Cost-Rate Base Balance 23 0
5 Annual Transition Cost-Rate Base Depreciation 91 21
6 Average Transition Cost-Rate Base Balance 68 11
7 Annual Pre-tax Return on Average Balance 6 1
8
9
10 Financed Taxes
11
12 EOY Financed Taxes Balance 16 0
13 Annual Financed Taxes Amortization 62 16
14
15
16 Quarterly Revenue Requirement, 17-quarter Amortization
17
18 Transition Cost-Rate Base Depreciation (ln 5 - 4) 23 23
19 Pre-tax Return on Transition Cost-Rate Base (ln 7 - 4) 2 1
20 Financed Tax (ln 13 - 4) 16 16
-----------------------
21 Subtotal (ln 18 - ln 19 - ln 20) 40 39
22 Franchise Fee 0.065 1 1
-----------------------
23 Total Revenue Requirement 1/1/1998 3/31/2002 41 40
=======================
0.0025
</TABLE>
<PAGE>
San Diego Gas & Electric Company Advice 1060-E
Page 3 of 8
RATE REDUCTION BONDS -- SIZING CALCULATIONS
BOND-ISSUANCE CASE
($ in millions)
Assumptions 10-year amortization
6.26% pre-tax carrying cost
<TABLE>
<CAPTION>
1 12/31/97 3/31/98 6/30/98 9/30/98 12/31/98 3/31/99
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
2 Debt Service
3
4 Principal Payment sum of payments = 5 658 MM 16.5 16.5 16.5 16.5 16.5
5 Interest Payment 10.3 10.0 9.8 9.5 9.3
6 Refundable Ongoing Costs/Fees 0.4 0.4 0.4 0.4 0.4
7 Non-refundable Ongoing Costs/Fees 0.0 0.0 0.0 0.0 0.0
8 Overcollateralization 0.1 0.1 0.1 0.1 0.1
-------------------------------------------------------------------
9 Quarterly Total Debt Service & Fees 27.2 26.9 26.7 26.4 26.1
===================================================================
10
11 Refundable Ongoing Costs/Fees Credit
12
13 Quarterly Total Refundable Ongoing Costs/Fees Credit (0) (0) (0) (0) (0)
14 Overcollateralization Refund -- -- -- -- --
15
16 Financed Taxes Carrying Cost Credit
17
18 EOQ Balance of Financed Taxes 265 259 252 245 219 232
19 Financed Taxes Amortization (reduce per ln 1) 7 7 7 7 7
20 Average Balance of Financed Taxes -- -- -- 242 --
21 Carrying Cost on Balance of Financed Taxes -- -- -- 9.52% --
22 Annual Financed Taxes Carrying Cost Credit -- -- -- (24) --
23 Quarterly Finance 0.065 (6) (6) (6) (6) (5)
24
25 Quarterly Revenue 0.0025
26
27 Principal Payment (ln 4) 16 16 16 16 16
28 Interest Payment (ln 5) 10 10 10 10 9
29 Total Ongoing Costs Fees (ln 6 - ln 7) 0 0 0 0 0
30 Refundable Ongoing Costs/Fees Credit (ln 13) (0) (0) (0) (0) (0)
31 Total Overcollateralization (ln 8 - ln 14) 0 0 0 0 0
32 Financed Taxes Carrying Cost Credit (ln 23) (6) (6) (6) (6) (5)
-------------------------------------------------------------------
33 Subtotal (ln 27 + ln 28 + ln 29 + ln 30 - ln 31 - ln 32) 21 21 20 20 20
34 Franchise Fees & Uncollectibles 0 0 0 0 0
-------------------------------------------------------------------
35 Total Revenue Requirement 12/31/98 - 12-31-02 21 21 21 21 21
===================================================================
<CAPTION>
1 6/30/99 9/30/99 12/31/99 3/31/00 6/30/00
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
2 Debt Service
3
4 Principal Payment sum of payments = 5 16.5 16.5 16.5 16.5 16.5
5 Interest Payment 9.0 8.8 8.5 8.2 8.0
6 Refundable Ongoing Costs/Fees 0.4 0.3 0.3 0.3 0.3
7 Non-refundable Ongoing Costs/Fees 0.0 0.0 0.0 0.0 0.0
8 Overcollateralization 0.1 0.1 0.1 0.1 0.1
-------------------------------------------------------------------
9 Quarterly Total Debt Service & Fees 25.9 25.6 25.3 25.0 24.8
===================================================================
10
11 Refundable Ongoing Costs/Fees Credit
12
13 Quarterly Total Refundable Ongoing Costs/Fees Credit (0) (0) (0) (0) (0)
14 Overcollateralization Refund -- -- -- -- --
15
16 Financed Taxes Carrying Cost Credit
17
18 EOQ Balance of Financed Taxes 226 219 212 206 199
19 Financed Taxes Amortization (reduce per ln 1) 7 7 7 7 7
20 Average Balance of Financed Taxes -- -- 226 -- --
21 Carrying Cost on Balance of Financed Taxes -- -- 9.52% -- --
22 Annual Financed Taxes Carrying Cost Credit -- -- (21) -- --
23 Quarterly Finance 0.065 (5) (5) (5) (5) (5)
24
25 Quarterly Revenue 0.0025
26
27 Principal Payment (ln 4) 16 16 16 16 16
28 Interest Payment (ln 5) 9 9 8 8 8
29 Total Ongoing Costs Fees (ln 6 - ln 7) 0 0 0 0 0
30 Refundable Ongoing Costs/Fees Credit (ln 13) (0) (0) (0) (0) (0)
31 Total Overcollateralization (ln 8 - ln 14) 0 0 0 0 0
32 Financed Taxes Carrying Cost Credit (ln 23) (5) (5) (5) (5) (5)
-------------------------------------------------------------------
33 Subtotal (ln 27 + ln 28 + ln 29 + ln 30 - ln 31 - ln 32) 20 20 20 20 20
34 Franchise Fees & Uncollectibles 0 0 0 0 0
-------------------------------------------------------------------
35 Total Revenue Requirement 12/31/98 - 12-31-02 21 20 20 21 20
===================================================================
<CAPTION>
1 9/30/00 12/31/00 3/31/01 6/30/01 9/30/01 12/31/01
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
2 Debt Service
3
4 Principal Payment sum of payments = 5 16.5 16.5 16.5 16.5 16.5 16.5
5 Interest Payment 7.7 7.5 7.2 7.0 6.7 6.4
6 Refundable Ongoing Costs/Fees 0.3 0.3 0.3 0.3 0.3 0.3
7 Non-refundable Ongoing Costs/Fees 0.0 0.0 0.0 0.0 0.0 0.0
8 Overcollateralization 0.1 0.1 0.1 0.1 0.1 0.1
-----------------------------------------------------------------------
9 Quarterly Total Debt Service & Fees 24.5 24.2 24.0 23.7 23.4 23.2
=======================================================================
10
11 Refundable Ongoing Costs/Fees Credit
12
13 Quarterly Total Refundable Ongoing Costs/Fees Credit (0) (0) (0) (0) (0) (0)
14 Overcollateralization Refund -- -- -- -- -- --
15
16 Financed Taxes Carrying Cost Credit
17
18 EOQ Balance of Financed Taxes 192 186 179 172 166 159
19 Financed Taxes Amortization (reduce per ln 1) 7 7 7 7 7 7
20 Average Balance of Financed Taxes -- 199 -- -- -- 172
21 Carrying Cost on Balance of Financed Taxes -- 9.52% -- -- -- 9.52%
22 Annual Financed Taxes Carrying Cost Credit -- (19) -- -- -- (16)
23 Quarterly Finance 0.065 (5) (5) (4) (4) (4) (4)
24
25 Quarterly Revenue 0.0025
26
27 Principal Payment (ln 4) 16 16 16 16 16 16
28 Interest Payment (ln 5) 8 7 7 7 7 6
29 Total Ongoing Costs Fees (ln 6 - ln 7) 0 0 0 0 0 0
30 Refundable Ongoing Costs/Fees Credit (ln 13) (0) (0) (0) (0) (0) (0)
31 Total Overcollateralization (ln 8 - ln 14) 0 0 0 0 0 0
32 Financed Taxes Carrying Cost Credit (ln 23) (5) (5) (4) (4) (4) (4)
-----------------------------------------------------------------------
33 Subtotal (ln 27 + ln 28 + ln 29 + ln 30 - ln 31 - ln 32) 20 19 20 19 19 19
34 Franchise Fees & Uncollectibles 0 0 0 0 0 0
-----------------------------------------------------------------------
35 Total Revenue Requirement 12-31-98 - 12-31-02 20 20 20 20 20 19
=======================================================================
</TABLE>
<PAGE>
San Diego Gas & Electric Company Advice 1060-E
Page 4 of 8
RATE REDUCTION BONDS -- SIZING CALCULATIONS
BOND-ISSUANCE CASE
($ in millions)
Assumptions 10-year amortization
6.26% pre-tax carrying cost
<TABLE>
<CAPTION>
1 3/31/02 6/30/02 9/30/02 12/31/02 3/31/03
---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
2 Debt Service
3
4 Principal Payment sum of payments = 5 658 16.5 16.5 16.5 16.5 16.5
5 Interest Payment 6.2 5.9 5.7 5.4 5.1
6 Refundable Ongoing Costs/Fees 0.2 0.2 0.2 0.2 0.2
7 Non-refundable Ongoing Costs/Fees 0.0 0.0 0.0 0.0 0.0
8 Overcollateralization 0.1 0.1 0.1 0.1 0.1
---------------------------------------------------------
9 Quarterly Total Debt Service & Fees 22.9 22.6 22.4 22.1 21.8
=========================================================
10
11 Refundable Ongoing Costs/Fees Credit
12
13 Quarterly Total Refundable Ongoing Costs/Fees Credit (0) (0) (0) (0) (0)
14 Overcollateralization Refund -- -- -- -- --
15
16 Financed Taxes Carrying Cost Credit
17
18 EOQ Balance of Financed Taxes 151 146 139 133 126
19 Financed Taxes Amortization (reduce per ln 1) 7 7 7 7 7
20 Average Balance of Financed Taxes 156 -- -- 143 --
21 Carrying Cost on Balance of Financed Taxes 9.52% -- -- 13.61% --
22 Annual Financed Taxes Carrying Cost Credit (4) -- -- (15) --
23 Quarterly Finance 0.065 (4) (5) (5) (5) (4)
24
25 Quarterly Revenue 0.0025
26
27 Principal Payment (ln 4) 16 16 16 16 16
28 Interest Payment (ln 5) 6 6 6 5 5
29 Total Ongoing Costs Fees (ln 6 - ln 7) 0 0 0 0 0
30 Refundable Ongoing Costs/Fees Credit (ln 13) (0) (0) (0) (0) (0)
31 Total Overcollateralization (ln 8 - ln 14) 0 0 0 0 0
32 Financed Taxes Carrying Cost Credit (ln 23) (4) (5) (5) (5) (4)
---------------------------------------------------------
33 Subtotal (ln 27 + ln 28 + ln 29 + ln 30 - ln 31 - ln 32) 19 18 17 17 18
34 Franchise Fees & Uncollectibles 0 0 0 0 0
---------------------------------------------------------
35 Total Revenue Requirement 12/31/98 - 12-31-07 19 18 18 18 18
=========================================================
<CAPTION>
1 6/30/03 9/30/03 12/31/03 3/31/04 6/30/04 9/30/04
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
2 Debt Service
3
4 Principal Payment sum of payments = 5 16.5 16.5 16.5 16.5 16.5 16.5
5 Interest Payment 4.9 4.6 4.4 4.1 3.9 3.6
6 Refundable Ongoing Costs/Fees 0.2 0.2 0.2 0.2 0.2 0.1
7 Non-refundable Ongoing Costs/Fees 0.0 0.0 0.0 0.0 0.0 0.0
8 Overcollateralization 0.1 0.1 0.1 0.1 0.1 0.1
----------------------------------------------------------------
9 Quarterly Total Debt Service & Fees 21.6 21.3 21.0 20.8 20.5 20.2
================================================================
10
11 Refundable Ongoing Costs/Fees Credit
12
13 Quarterly Total Refundable Ongoing Costs/Fees Credit (0) (0) (0) (0) (0) (0)
14 Overcollateralization Refund -- -- -- -- -- --
15
16 Financed Taxes Carrying Cost Credit
17
18 EOQ Balance of Financed Taxes 119 113 106 100 93 86
19 Financed Taxes Amortization (reduce per ln 1) 7 7 7 7 7 7
20 Average Balance of Financed Taxes -- -- 119 -- -- --
21 Carrying Cost on Balance of Financed Taxes -- -- 13.61% -- -- --
22 Annual Financed Taxes Carrying Cost Credit -- -- (16) -- -- --
23 Quarterly Finance 0.065 (4) (4) (4) (3) (3) (3)
24
25 Quarterly Revenue 0.0025
26
27 Principal Payment (ln 4) 16 16 16 16 16 16
28 Interest Payment (ln 5) 5 5 4 4 4 4
29 Total Ongoing Costs Fees (ln 6 - ln 7) 0 0 0 0 0 0
30 Refundable Ongoing Costs/Fees Credit (ln 13) (0) (0) (0) (0) (0) (0)
31 Total Overcollateralization (ln 8 - ln 14) 0 0 0 0 0 0
32 Financed Taxes Carrying Cost Credit (ln 23) (4) (4) (4) (3) (3) (3)
----------------------------------------------------------------
33 Subtotal (ln 27 + ln 28 + ln 29 + ln 30 - ln 31 - ln 32) 17 17 17 18 17 17
34 Franchise Fees & Uncollectibles 0 0 0 0 0 0
----------------------------------------------------------------
35 Total Revenue Requirement 12/31/98 - 12-31-07 18 18 17 18 18 17
================================================================
<CAPTION>
1 12/31/04 3/31/05 6/30/05 9/30/05 12/31/05 3/31/06
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
2 Debt Service
3
4 Principal Payment sum of payments = 5 16.5 16.5 16.5 16.5 16.5 16.5
5 Interest Payment 3.3 3.1 2.8 2.6 2.3 2.1
6 Refundable Ongoing Costs/Fees 0.1 0.1 0.1 0.1 0.1 0.1
7 Non-refundable Ongoing Costs/Fees 0.0 0.0 0.0 0.0 0.0 0.0
8 Overcollateralization 0.1 0.1 0.1 0.1 0.1 0.1
-----------------------------------------------------------------
9 Quarterly Total Debt Service & Fees 20.0 19.7 19.4 19.2 18.9 18.6
=================================================================
10
11 Refundable Ongoing Costs/Fees Credit
12
13 Quarterly Total Refundable Ongoing Costs/Fees Credit (0) (0) (0) (0) (0) (0)
14 Overcollateralization Refund -- -- -- -- -- --
15
16 Financed Taxes Carrying Cost Credit
17
18 EOQ Balance of Financed Taxes 80 73 66 60 53 46
19 Financed Taxes Amortization (reduce per ln 1) 7 7 7 7 7 7
20 Average Balance of Financed Taxes 93 -- -- -- 66 --
21 Carrying Cost on Balance of Financed Taxes 13.61% -- -- -- 13.61% --
22 Annual Financed Taxes Carrying Cost Credit (13) -- -- -- (9) --
23 Quarterly Finance 0.065 (3) (2) (2) (2) (2) (1)
24
25 Quarterly Revenue 0.0025
26
27 Principal Payment (ln 4) 16 16 16 16 16 16
28 Interest Payment (ln 5) 3 3 3 3 2 2
29 Total Ongoing Costs Fees (ln 6 - ln 7) 0 0 0 0 0 0
30 Refundable Ongoing Costs/Fees Credit (ln 13) (0) (0) (0) (0) (0) (0)
31 Total Overcollateralization (ln 8 - ln 14) 0 0 0 0 0 0
32 Financed Taxes Carrying Cost Credit (ln 23) (3) (2) (2) (2) (2) (1)
-----------------------------------------------------------------
33 Subtotal (ln 27 + ln 28 + ln 29 + ln 30 - ln 31 - ln 32) 17 17 17 17 17 17
34 Franchise Fees & Uncollectibles 0 0 0 0 0 0
-----------------------------------------------------------------
35 Total Revenue Requirement 12/31/98 - 12-31-07 17 18 18 17 17 18
=================================================================
</TABLE>
<PAGE>
San Diego Gas & Electric Company Advice 1060-E
Page 5 of 8
RATE REDUCTION BONDS -- SIZING CALCULATIONS
BOND-ISSUANCE CASE
($ in millions)
Assumptions 10-year amortization
6.26% pre-tax carrying cost
<TABLE>
<CAPTION>
1 6/30/06 9/30/06 12/31/06 3/31/07 6/30/07 9/30/07 12/31/07
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2 Debt Service
3
4 Principal Payment sum of payments = $ 658 16.5 16.5 16.5 16.5 16.5 16.5 16.5
5 Interest Payment 1.8 1.5 1.3 1.0 0.8 0.5 0.3
6 Refundable Ongoing Costs/Fees 0.1 0.1 0.1 0.0 0.0 0.0 0.0
7 Non-refundable Ongoing Costs/Fees 0.0 0.0 0.0 0.0 0.0 0.0 0.0
8 Overcollateralization 0.1 0.1 0.1 0.1 0.1 0.1 0.1
------------------------------------------------------------------------
9 Quarterly Total Debt Service & Fees 18.4 18.1 17.8 17.6 17.3 17.0 16.7
========================================================================
10
11 Refundable Ongoing Costs/Fees Credit
12
13 Quarterly Total Refundable Ongoing Costs/Fees Credit (0) (0) (0) (0) (0) (0) (0)
14 Overcollateralization Refund -- -- -- -- -- -- (3)
15
16 Financed Taxes Carrying Cost Credit
17
18 EOQ Balance of Financed Taxes 40 33 27 20 13 7 0
19 Financed Taxes Amortization (reduce per ln 1) 7 7 7 7 7 7 7
20 Average Balance of Financed Taxes -- -- 40 -- -- -- 13
21 Carrying Cost on Balance of Financed Taxes -- -- 13.61% -- -- -- 13.61%
22 Annual Financed Taxes Carrying Cost Credit -- -- (5) -- -- -- (2)
23 Quarterly Finance 0.065 (1) (1) (1) (0) (0) (0) (0)
24
25 Quarterly Revenue 0.0025
26
27 Principal Payment (ln 4) 16 16 16 16 16 16 16
28 Interest Payment (ln 5) 2 2 1 1 1 1 0
29 Total Ongoing Costs Fees (ln 6 - ln 7) 0 0 0 0 0 0 0
30 Refundable Ongoing Costs/Fees Credit (ln 13) (0) (0) (0) (0) (0) (0) (0)
31 Total Overcollateralization (ln 8 - ln 14) 0 0 0 0 0 0 (3)
32 Financed Taxes Carrying Cost Credit (ln 23) (1) (1) (1) (0) (0) (0) (0)
------------------------------------------------------------------------
33 Subtotal (ln 27 + ln 28 + ln 29 + ln 30 - ln 31 - ln 32) 17 17 16 17 17 17 13
34 Franchise Fees & Uncollectibles 0 0 0 0 0 0 0
------------------------------------------------------------------------
35 Total Revenue Requirement 12/31/98 - 12-31-07 17 17 17 18 17 17 13
========================================================================
</TABLE>
<PAGE>
San Diego Gas & Electric Company Advice 1060-E
Page 6 of 8
RATE REDUCTION BONDS -- SIZING CALCULATIONS
REVENUE REQUIREMENT DIFFERENCES
($ millions)
<TABLE>
<CAPTION>
1 12/31/97 3/31/98 6/30/98 9/30/98 12/31/98 3/31/99
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
2 Revenue Requirement Difference
3
4 Revenue Requirement, 17-quarter Transition Cost Amortization 47 47 47 47 45
5 Revenue Requirement RRBs (21) (21) (21) (21) (21)
--------------------------------------------------------------
6 Subtotal Calculated Difference 26 26 27 27 24
7 Timing Adjustment (3) (3) (4) (4) (1)
--------------------------------------------------------------
8 Difference 23 23 23 23 23
==============================================================
<CAPTION>
1 6/30/99 9/30/99 12/31/99 3/31/00 6/30/00 9/30/00
------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
2 Revenue Requirement Difference
3
4 Revenue Requirement, 17-quarter Transition Cost Amortization 45 45 45 43 43 43
5 Revenue Requirement RRBs (21) (20) (20) (21) (20) (20)
------------------------------------------------------------
6 Subtotal Calculated Difference 25 25 25 23 23 23
7 Timing Adjustment (1) (1) (2) 1 1 1
------------------------------------------------------------
8 Difference 23 23 23 24 24 24
============================================================
<CAPTION>
1 12/31/00 3/31/01 6/30/01 9/30/01 12/31/01
-------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
2 Revenue Requirement Difference
3
4 Revenue Requirement, 17-quarter Transition Cost Amortization 43 41 41 41 41
5 Revenue Requirement RRBs (20) (20) (20) (20) (19)
-------------------------------------------------
6 Subtotal Calculated Difference 23 21 21 21 22
7 Timing Adjustment 1 4 3 3 3
-------------------------------------------------
8 Difference 24 24 24 24 24
=================================================
9
10 Sizing Calculation
11
12 Total Calculated Difference 1/1/1998 - 3-31-2002 (ln 6) $ 402 (Model iterates on amount financed on page 1,
13 line 42 until this figure equals total target revenue
14 Proceeds on Bonds Issued $ 651 reduction on page 1, line 8)
15 Bond Issuance Expense $ 7
-----
16 Face Value of Bonds Issued $ 658
17
18 Customer Benefits Calculation
19
20 NPV of Quarterly 0.065 $ 126
21 Annual Discount Rate 10.0%
22 Quarterly Discount 0.0025 2.5%
</TABLE>
<PAGE>
San Diego Gas & Electric Company Advice 1060-E
Page 7 of 8
RATE REDUCTION BONDS -- SIZING CALCULATIONS
REVENUE REQUIREMENT DIFFERENCES
($ millions)
<TABLE>
<CAPTION>
1 3/31/02 6/30/02 9/30/02 12/31/02 3/31/03
--------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
2 Revenue Requirement Difference
3
4 Revenue Requirement, 17-quarter Transition Cost Amortization 40 -- -- -- --
5 Revenue Requirement RRBs (19) (18) (18) (18) (18)
--------------------------------------------------------
6 Subtotal Calculated Difference 21 (18) (18) (18) (18)
7 Timing Adjustment 4 -- -- -- --
--------------------------------------------------------
8 Difference 25 (18) (18) (18) (18)
========================================================
<CAPTION>
1 6/30/03 9/30/03 12/31/03 3/31/04 6/30/04 9/30/04
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
2 Revenue Requirement Difference
3
4 Revenue Requirement, 17-quarter Transition Cost Amortization -- -- -- -- -- --
5 Revenue Requirement RRBs (18) (18) (17) (18) (18) (17)
--------------------------------------------------------
6 Subtotal Calculated Difference (18) (18) (17) (18) (18) (17)
7 Timing Adjustment -- -- -- -- -- --
--------------------------------------------------------
8 Difference (18) (18) (17) (18) (18) (17)
========================================================
<CAPTION>
1 12/31/04 3/31/05 6/30/05 9/30/05 12/31/05 3/31/06
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
2 Revenue Requirement Difference
3
4 Revenue Requirement, 17-quarter Transition Cost Amortization -- -- -- -- -- --
5 Revenue Requirement RRBs (17) (18) (18) (17) (17) (18)
---------------------------------------------------------------
6 Subtotal Calculated Difference (17) (18) (18) (17) (17) (18)
7 Timing Adjustment -- -- -- -- -- --
---------------------------------------------------------------
8 Difference (17) (18) (18) (17) (17) (18)
===============================================================
</TABLE>
9
10 Sizing Calculation
11
12 Total Calculated Difference 1/1/1998 - 3-31-2002 (ln 6)
13
14 Proceeds on Bonds Issued
15 Bond Issuance Expense
16 Face Value of Bonds Issued
17
18 Customer Benefits Calculation
19
20 NPV of Quarterly 0.065
21 Annual Discount Rate 10.0%
22 Quarterly Discount 0.0025 2.5%
<PAGE>
San Diego Gas & Electric Company Advice 1060-E
Page 8 of 8
RATE REDUCTION BONDS -- SIZING CALCULATIONS
REVENUE REQUIREMENT DIFFERENCES
($ millions)
<TABLE>
<CAPTION>
1 6/30/06 9/30/06 12/31/06 3/31/07 6/30/07
------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
2 Revenue Requirement Difference
3
4 Revenue Requirement, 17-quarter Transition Cost Amortization -- -- -- -- --
5 Revenue Requirement RRBs (17) (17) (17) (18) (17)
------------------------------------------------------
6 Subtotal Calculated Difference (17) (17) (17) (18) (17)
7 Timing Adjustment -- -- -- -- --
------------------------------------------------------
8 Difference (17) (17) (17) (18) (17)
======================================================
<CAPTION>
1 9/30/07 12/31/07
-------------------
<S> <C> <C> <C>
2 Revenue Requirement Difference
3
4 Revenue Requirement, 17-quarter Transition Cost Amortization -- --
5 Revenue Requirement RRBs (17) (13)
-------------------
6 Subtotal Calculated Difference (17) (13)
7 Timing Adjustment -- --
-------------------
8 Difference (17) (13)
===================
</TABLE>
9
10 Sizing Calculation
11
12 Total Calculated Difference 1/1/1998 - 3-31-2002 (ln 6)
13
14 Proceeds on Bonds Issued
15 Bond Issuance Expense
16 Face Value of Bonds Issued
17
18 Customer Benefits Calculation
19
20 NPV of Quarterly 0.065
21 Annual Discount Rate 10.0%
22 Quarterly Discount 0.0025 2.5%
<PAGE>
ATTACHMENT
IV
<PAGE>
San Diego Gas & Electric Advice 1060-E
Page 1 of 6
[ILLEGIBLE]
Electric Utility Transition Property Securitization Analysis
- --------------------------------------------------------------------------------
Summary Bond Information
<TABLE>
<CAPTION>
Beginning Ending Expected
Approx. Benchmark Spread to Benchmark Total Quarterly Payment Payment Final
Class Avg. Life Size Duration Description Treasury Yield Yield Coupons Window Window Maturity
- ----- --------- ---- -------- ----------- -------- ----- ----- ------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 0.7691 65,800,000.00 0.73 EDSF 4 5.979% 6.019% 5.970% 3 12 12/25/98
2 1.7679 82,639,254.00 1.64 5 5/8% of 11-99 41 5.683% 6.093% 6.040% 15 27 3/25/00
3 2.9178 66,230,948.00 2.61 5 3/4% of 11-00 41 5.713% 6.123% 6.070% 30 39 3/25/01
4 3.9176 65,671,451.00 3.40 5 7/8% of 11-01 43 5.777% 6.207% 6.150% 42 51 3/25/02
5 5.1518 96,537,839.00 4.31 5 3/4% of 11-02 49 5.748% 6.238% 6.190% 54 69 9/25/03
6 7.3851 197,584,137.00 5.76 7 7/8% of 11-04 54 5.823% 6.363% 6.310% 72 105 9/25/06
7 9.5174 83,536,371.00 6.98 6 1/2% of 10-06 56 5.870% 6.430% 6.370% 108 120 12/25/07
8 --
--------------
658,000,000.00
<CAPTION>
Summary Tariff Information Assumptions
- -------------------------------
- --------------------------------
<S> <C> <C> <C> <C>
Overcollateralization building evenly at the per quarter amount of: 82,250.00
Residential Commercial Overcollateralization Target (in Future Dollars) by End Target Month: 3,290,000.00
FTA Charge FTA Charge Initial Deposit in Equity Account (less 100,000): 3,190,000.00
Forecast Forecast Residential Bill Charge: 0.1125
Years (cents/kWh) (cents/kWh) Commercial Bill Charge: 0.1187
- -------------------------------- Servicing Fee (per quarter): 0.063%
1 1.59091 1.67859 Trustee and Admin Fees (per quarter): 31,250.00
2 1.21980 1.28702
3 1.19451 1.26035 Base Case Collections Account Curves
4 1.11761 1.17920
5 1.04932 1.10715 Residential Commercial
6 0.97764 1.03152 30 days 40.80% 40.80%
7 0.90904 0.95914 60 days 48.30% 52.40%
8 0.84337 0.88985 90 days 8.70% 6.30%
9 0.77949 0.82244 120 days 1.50% 0.20%
10 0.73192 0.77225 150 days 0.10% 0.10%
180 days 0.10% 0.00%
Duration Weighted Coupon 6.26%
</TABLE>
<PAGE>
San Diego Gas & Electric Advice 1060-E
Amortization Schedules Page 2 of 6
<TABLE>
<CAPTION>
-------------------------------------- -------------------------------------- --------------------------------------
Class A-1 Class A-2 Class A-3
-------------------------------------- -------------------------------------- --------------------------------------
Quarterly Ending Ending Ending
Payment Principal Interest Principal Period Interest Principal Period Interest Principal
Dates Balance Payment Payment Balance Payment Payment Balance Payment Payment
-------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/25/97 $65,800,000 $0 $0 $82,639,254 $0 $0 $66,230,948 $0 $0
3/25/98 $62,632,172 $1,080,272 $3,167,828 $82,639,254 $1,372,638 $0 $66,230,948 $1,105,560 $0
6/25/98 $43,932,681 $934,785 $18,699,490 $82,639,254 $1,247,853 $0 $66,230,948 $1,005,055 $0
9/25/98 $23,489,760 $655,695 $20,442,921 $82,639,254 $1,247,853 $0 $66,230,948 $1,005,055 $0
12/25/98 $0 $350,585 $23,489,760 $82,639,254 $1,247,853 $0 $66,230,948 $1,005,055 $0
3/25/99 $0 $0 $0 $63,000,733 $1,247,853 $19,638,521 $66,230,948 $1,005,055 $0
6/25/99 $0 $0 $0 $49,025,774 $951,311 $13,974,960 $66,230,948 $1,005,055 $0
9/25/99 $0 $0 $0 $34,076,270 $740,289 $14,949,504 $66,230,948 $1,005,055 $0
12/25/99 $0 $0 $0 $16,839,254 $514,552 $17,237,016 $66,230,948 $1,005,055 $0
3/25/00 $0 $0 $0 $0 $254,273 $16,839,254 $66,230,948 $1,005,055 $0
6/25/00 $0 $0 $0 $0 $0 $0 $51,351,375 $1,005,055 $14,879,573
9/25/00 $0 $0 $0 $0 $0 $0 $35,452,056 $779,257 $15,899,319
12/25/00 $0 $0 $0 $0 $0 $0 $17,270,202 $537,985 $18,181,854
3/25/01 $0 $0 $0 $0 $0 $0 $0 $262,075 $17,270,202
6/25/01 $0 $0 $0 $0 $0 $0 $0 $0 $0
9/25/01 $0 $0 $0 $0 $0 $0 $0 $0 $0
12/25/01 $0 $0 $0 $0 $0 $0 $0 $0 $0
3/25/02 $0 $0 $0 $0 $0 $0 $0 $0 $0
6/25/02 $0 $0 $0 $0 $0 $0 $0 $0 $0
9/25/02 $0 $0 $0 $0 $0 $0 $0 $0 $0
12/25/02 $0 $0 $0 $0 $0 $0 $0 $0 $0
3/25/03 $0 $0 $0 $0 $0 $0 $0 $0 $0
6/25/03 $0 $0 $0 $0 $0 $0 $0 $0 $0
9/25/03 $0 $0 $0 $0 $0 $0 $0 $0 $0
12/25/03 $0 $0 $0 $0 $0 $0 $0 $0 $0
3/25/04 $0 $0 $0 $0 $0 $0 $0 $0 $0
6/25/04 $0 $0 $0 $0 $0 $0 $0 $0 $0
9/25/04 $0 $0 $0 $0 $0 $0 $0 $0 $0
12/25/04 $0 $0 $0 $0 $0 $0 $0 $0 $0
3/25/05 $0 $0 $0 $0 $0 $0 $0 $0 $0
6/25/05 $0 $0 $0 $0 $0 $0 $0 $0 $0
9/25/05 $0 $0 $0 $0 $0 $0 $0 $0 $0
12/25/05 $0 $0 $0 $0 $0 $0 $0 $0 $0
3/25/06 $0 $0 $0 $0 $0 $0 $0 $0 $0
6/25/06 $0 $0 $0 $0 $0 $0 $0 $0 $0
9/25/06 $0 $0 $0 $0 $0 $0 $0 $0 $0
12/25/06 $0 $0 $0 $0 $0 $0 $0 $0 $0
3/25/07 $0 $0 $0 $0 $0 $0 $0 $0 $0
6/25/07 $0 $0 $0 $0 $0 $0 $0 $0 $0
9/25/07 $0 $0 $0 $0 $0 $0 $0 $0 $0
12/25/07 $0 $0 $0 $0 $0 $0 $0 $0 $0
</TABLE>
<PAGE>
San Diego Gas & Electric Advice 1060-E
Amortization Schedules Page 3 of 6
<TABLE>
<CAPTION>
-------------------------------------- -------------------------------------- --------------------------------------
Class A-4 Class A-5 Class A-6
-------------------------------------- -------------------------------------- --------------------------------------
Quarterly Ending Ending Ending
Payment Period Interest Principal Period Interest Principal Period Interest Principal
Dates Balance Payment Payment Balance Payment Payment Balance Payment Payment
-------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/25/97 $65,671,451 $0 $0 $96,537,839 $0 $0 $197,584,137 $0 $0
3/25/98 $65,671,451 $1,110,668 $0 $96,537,839 $1,643,315 $0 $197,584,137 $3,428,579 $0
6/25/98 $65,671,451 $1,009,699 $0 $96,537,839 $1,493,923 $0 $197,584,137 $3,116,890 $0
9/25/98 $65,671,451 $1,009,699 $0 $96,537,839 $1,493,923 $0 $197,584,137 $3,116,890 $0
12/25/98 $65,671,451 $1,009,699 $0 $96,537,839 $1,493,923 $0 $197,584,137 $3,116,890 $0
3/25/99 $65,671,451 $1,009,699 $0 $96,537,839 $1,493,923 $0 $197,584,137 $3,116,890 $0
6/25/99 $65,671,451 $1,009,699 $0 $96,537,839 $1,493,923 $0 $197,584,137 $3,116,890 $0
9/25/99 $65,671,451 $1,009,699 $0 $96,537,839 $1,493,923 $0 $197,584,137 $3,116,890 $0
12/25/99 $65,671,451 $1,009,699 $0 $96,537,839 $1,493,923 $0 $197,584,137 $3,116,890 $0
3/25/00 $65,671,451 $1,009,699 $0 $96,537,839 $1,493,923 $0 $197,584,137 $3,116,890 $0
6/25/00 $65,671,451 $1,009,699 $0 $96,537,839 $1,493,923 $0 $197,584,137 $3,116,890 $0
9/25/00 $65,671,451 $1,009,699 $0 $96,537,839 $1,493,923 $0 $197,584,137 $3,116,890 $0
12/25/00 $65,671,451 $1,009,699 $0 $96,537,839 $1,493,923 $0 $197,584,137 $3,116,890 $0
3/25/01 $65,671,451 $1,009,699 $0 $96,537,839 $1,493,923 $0 $197,584,137 $3,116,890 $0
6/25/01 $50,877,703 $1,009,699 $14,793,748 $96,537,839 $1,493,923 $0 $197,584,137 $3,116,890 $0
9/25/01 $35,102,832 $782,245 $15,774,870 $96,537,839 $1,493,923 $0 $197,584,137 $3,116,890 $0
12/25/01 $17,141,653 $539,706 $17,961,179 $96,537,839 $1,493,923 $0 $197,584,137 $3,116,890 $0
3/25/02 $0 $263,553 $17,141,653 $96,537,839 $1,493,923 $0 $197,584,137 $3,116,890 $0
6/25/02 $0 $0 $0 $81,688,200 $1,493,923 $14,849,639 $197,584,137 $3,116,890 $0
9/25/02 $0 $0 $0 $65,850,944 $1,264,125 $15,837,257 $197,584,137 $3,116,890 $0
12/25/03 $0 $0 $0 $47,879,492 $1,019,043 $17,971,452 $197,584,137 $3,116,890 $0
3/25/03 $0 $0 $0 $30,746,198 $740,935 $17,133,294 $197,584,137 $3,116,890 $0
6/25/03 $0 $0 $0 $15,862,492 $475,797 $14,883,706 $197,584,137 $3,116,890 $0
9/25/03 $0 $0 $0 $0 $245,472 $15,862,492 $197,584,137 $3,116,890 $0
12/25/03 $0 $0 $0 $0 $0 $0 $179,663,629 $3,116,890 $17,920,508
3/25/04 $0 $0 $0 $0 $0 $0 $162,559,536 $2,834,194 $17,104,093
6/25/04 $0 $0 $0 $0 $0 $0 $147,610,060 $2,564,377 $14,949,476
9/25/04 $0 $0 $0 $0 $0 $0 $131,717,805 $2,328,549 $15,892,255
12/25/04 $0 $0 $0 $0 $0 $0 $113,863,629 $2,077,848 $17,854,176
3/25/05 $0 $0 $0 $0 $0 $0 $96,804,671 $1,796,199 $17,058,958
6/25/05 $0 $0 $0 $0 $0 $0 $81,792,086 $1,527,094 $15,012,585
9/25/05 $0 $0 $0 $0 $0 $0 $65,865,307 $1,290,270 $15,926,779
12/25/05 $0 $0 $0 $0 $0 $0 $48,063,629 $1,039,025 $17,801,678
3/25/06 $0 $0 $0 $0 $0 $0 $31,031,327 $758,204 $17,032,302
6/25/06 $0 $0 $0 $0 $0 $0 $15,955,288 $489,519 $15,076,039
9/25/06 $0 $0 $0 $0 $0 $0 $0 $251,695 $15,955,288
12/25/06 $0 $0 $0 $0 $0 $0 $0 $0 $0
3/25/07 $0 $0 $0 $0 $0 $0 $0 $0 $0
6/25/07 $0 $0 $0 $0 $0 $0 $0 $0 $0
9/25/07 $0 $0 $0 $0 $0 $0 $0 $0 $0
12/25/07 $0 $0 $0 $0 $0 $0 $0 $0 $0
</TABLE>
<PAGE>
San Diego Gas & Electric Advice 1060-E
Amortization Schedules Page 4 of 6
<TABLE>
<CAPTION>
-------------------------------------- --------------------------------------
Class A-7 Series 1997-1 Total
-------------------------------------- --------------------------------------
Quarterly Ending Ending
Payment Period Interest Principal Period Interest Principal
Dates Balance Payment Payment Balance Payment Payment
-------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C>
12/25/97 $83,536,371 $0 $0 $658,000,000 $0 $0
3/25/98 $83,536,371 $1,463,348 $0 $654,832,172 $11,204,381 $3,167,828
6/25/98 $83,536,371 $1,330,317 $0 $636,132,681 $10,138,521 $18,699,490
9/25/98 $83,536,371 $1,330,317 $0 $615,689,760 $9,859,431 $20,442,921
12/25/98 $83,536,371 $1,330,317 $0 $592,200,000 $9,554,320 $23,489,760
3/25/99 $83,536,371 $1,330,317 $0 $572,561,479 $9,203,735 $19,638,521
6/25/99 $83,536,371 $1,330,317 $0 $558,586,520 $8,907,194 $13,974,960
9/25/99 $83,536,371 $1,330,317 $0 $543,637,016 $8,696,172 $14,949,504
12/25/99 $83,536,371 $1,330,317 $0 $526,400,000 $8,470,434 $17,237,016
3/25/00 $83,536,371 $1,330,317 $0 $509,560,746 $8,210,155 $16,839,254
6/25/00 $83,536,371 $1,330,317 $0 $494,681,173 $7,955,883 $14,879,573
9/25/00 $83,536,371 $1,330,317 $0 $478,781,854 $7,730,085 $15,899,319
12/25/00 $83,536,371 $1,330,317 $0 $460,600,000 $7,488,813 $18,181,854
3/25/01 $83,536,371 $1,330,317 $0 $443,329,798 $7,212,903 $17,270,202
6/25/01 $83,536,371 $1,330,317 $0 $428,536,050 $6,950,828 $14,793,748
9/25/01 $83,536,371 $1,330,317 $0 $412,761,179 $6,723,374 $15,774,870
12/25/01 $83,536,371 $1,330,317 $0 $394,800,000 $6,480,836 $17,961,179
3/25/02 $83,536,371 $1,330,317 $0 $377,658,347 $6,204,682 $17,141,653
6/25/02 $83,536,371 $1,330,317 $0 $362,808,708 $5,941,130 $14,849,639
9/25/02 $83,536,371 $1,330,317 $0 $346,971,452 $5,711,331 $15,837,257
12/25/02 $83,536,371 $1,330,317 $0 $329,000,000 $5,466,250 $17,971,452
3/25/03 $83,536,371 $1,330,317 $0 $311,866,706 $5,188,142 $17,133,294
6/25/03 $83,536,371 $1,330,317 $0 $296,983,000 $4,923,004 $14,883,706
9/25/03 $83,536,371 $1,330,317 $0 $281,120,508 $4,692,679 $15,862,492
12/25/03 $83,536,371 $1,330,317 $0 $263,200,000 $4,447,206 $17,920,508
3/25/04 $83,536,371 $1,330,317 $0 $246,095,907 $4,164,510 $17,104,093
6/25/04 $83,536,371 $1,330,317 $0 $231,146,431 $3,894,693 $14,949,476
9/25/04 $83,536,371 $1,330,317 $0 $215,254,176 $3,658,865 $15,892,255
12/25/04 $83,536,371 $1,330,317 $0 $197,400,000 $3,408,165 $17,854,176
3/25/05 $83,536,371 $1,330,317 $0 $180,341,042 $3,126,515 $17,058,958
6/25/05 $83,536,371 $1,330,317 $0 $165,328,457 $2,857,410 $15,012,585
9/25/05 $83,536,371 $1,330,317 $0 $149,401,678 $2,620,587 $15,926,779
12/25/05 $83,536,371 $1,330,317 $0 $131,600,000 $2,369,342 $17,801,678
3/25/06 $83,536,371 $1,330,317 $0 $114,567,698 $2,088,520 $17,032,302
6/25/06 $83,536,371 $1,330,317 $0 $99,491,659 $1,819,836 $15,076,039
9/25/06 $83,536,371 $1,330,317 $0 $83,536,371 $1,582,011 $15,955,288
12/25/06 $65,800,000 $1,330,317 $17,736,371 $65,800,000 $1,330,317 $17,736,371
3/25/07 $48,653,498 $1,047,865 $17,146,503 $48,653,498 $1,047,865 $17,146,502
6/25/07 $33,202,585 $774,807 $15,450,913 $33,202,585 $774,807 $15,450,913
9/25/07 $16,886,533 $528,751 $16,316,052 $16,886,533 $528,751 $16,316,052
12/25/07 $0 $268,918 $16,886,533 $0 $268,918 $16,886,533
</TABLE>
<PAGE>
San Diego Gas & Electric Advice 1060-E
Page 5 of 6
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
BOND CASH FLOWS
- -----------------------------------------------------------------------------------------------------------------------------
RESIDENTIAL SMALL COMMERCIAL
Monthly Bond Tariff Monthly Bond Tariff Total Collection Overcollateralization
Consumption Cents Consumption Cents Monthly Account Ending Account
Dates Periods Projected per Kwatt Projected per Kwatt Revenues Balance Balance
Kwatt Kwatt
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
12/25/97 0 -- -- -- $0 $0
1/25/98 1 137,041,290 1 591 38,441,290 1 679 $1,152,794 $1,152,794 $0
2/25/98 2 428,215,484 1 591 112,145,032 1 679 $4,938,714 $6,091,509 $0
3/25/98 3 509,180,000 1 591 145,024,000 1 679 $8,805,450 $14,896,959 $82,250
4/25/98 4 478,865,000 1 591 145,246,000 1 679 $10,036,483 $10,036,483 $82,250
5/25/98 5 447,019,000 1 591 145,996,000 1 679 $9,825,536 $19,862,019 $82,250
6/25/98 6 431,560,000 1 591 149,636,000 1 679 $9,498,762 $29,360,781 $164,500
7/25/98 7 445,007,000 1 591 157,168,000 1 679 $9,506,818 $9,506,818 $164,500
8/25/98 8 520,694,000 1 591 173,680,000 1 679 $10,256,447 $19,763,265 $164,500
9/25/98 9 527,888,000 1 591 173,413,000 1 679 $11,050,171 $30,813,435 $246,750
10/25/98 10 586,396,000 1 591 185,138,000 1 679 $11,688,162 $11,688,162 $246,750
11/25/98 11 480,773,000 1 591 163,229,000 1 679 $11,433,623 $23,121,785 $246,750
12/25/98 12 473,258,000 1 591 154,950,000 1 679 $10,420,601 $33,542,386 $329,000
1/25/99 13 538,638,000 1 591 151,391,000 1 679 $10,536,345 $10,536,345 $329,000
2/25/99 14 569,607,000 1 220 149,427,000 1 287 $10,049,954 $20,586,300 $329,000
3/25/99 15 514,706,000 1 220 146,803,000 1 287 $8,739,581 $29,325,881 $411,250
4/25/99 16 491,629,000 1 220 149,287,000 1 287 $8,130,185 $8,130,185 $411,250
5/25/99 17 458,668,000 1 220 150,066,000 1 287 $7,765,944 $15,896,128 $411,250
6/25/99 18 438,930,000 1 220 152,426,000 1 287 $7,457,376 $23,353,505 $493,500
7/25/99 19 460,092,000 1 220 162,713,000 1 287 $7,475,509 $7,475,509 $493,500
8/25/99 20 526,247,000 1 220 175,099,000 1 287 $8,037,879 $15,513,387 $493,500
9/25/99 21 536,886,000 1 220 175,901,000 1 287 $8,594,905 $24,108,292 $575,750
10/25/99 22 591,640,000 1 220 186,262,000 1 287 $9,073,672 $9,073,672 $575,750
11/25/99 23 491,815,000 1 220 167,005,000 1 287 $8,892,724 $17,966,396 $575,750
12/25/99 24 489,014,000 1 220 160,120,000 1 287 $8,194,328 $26,160,724 $658,000
1/25/00 25 552,740,000 1 220 155,343,000 1 287 $8,313,140 $8,313,140 $658,000
2/25/00 26 580,488,000 1 195 152,358,000 1 260 $8,675,941 $16,989,081 $658,000
3/25/00 27 524,531,000 1 195 149,670,000 1 260 $8,502,829 $25,491,910 $740,250
4/25/00 28 500,991,000 1 195 152,190,000 1 260 $8,082,359 $8,082,359 $740,250
5/25/00 29 467,035,000 1 195 153,170,000 1 260 $7,745,851 $15,828,210 $740,250
6/25/00 30 446,958,000 1 195 155,566,000 1 260 $7,439,220 $23,267,430 $822,500
7/25/00 31 468,525,000 1 195 166,052,000 1 260 $7,459,065 $7,459,065 $822,500
8/25/00 32 535,746,000 1 195 178,645,000 1 260 $8,019,174 $15,478,239 $822,500
9/25/00 33 546,621,000 1 195 179,450,000 1 260 $8,573,840 $24,052,080 $904,750
10/25/00 34 602,426,000 1 195 190,005,000 1 260 $9,051,519 $9,051,519 $904,750
11/25/00 35 499,939,000 1 195 170,298,000 1 260 $8,866,826 $17,918,345 $904,750
12/25/00 36 497,125,000 1 195 163,265,000 1 260 $8,165,061 $26,083,406 $987,000
1/25/01 37 561,968,000 1 195 158,382,000 1 260 $8,282,342 $8,282,342 $987,000
2/25/01 38 589,702,000 1 118 155,063,000 1 179 $8,479,495 $16,671,837 $987,000
3/25/01 39 532,949,000 1 118 152,319,000 1 179 $8,122,645 $24,884,482 $1,069,250
4/25/01 40 509,105,000 1 118 154,874,000 1 179 $7,691,854 $7,691,854 $1,069,250
5/25/01 41 474,429,000 1 118 155,995,000 1 179 $7,367,497 $15,059,351 $1,069,250
6/25/01 42 454,086,000 1 118 158,428,000 1 179 $7,075,805 $22,135,156 $1,151,500
7/25/01 43 476,048,000 1 118 169,097,000 1 179 $7,094,890 $7,094,890 $1,151,500
8/25/01 44 544,476,000 1 118 181,883,000 1 179 $7,628,273 $14,723,163 $1,151,500
9/25/01 45 555,569,000 1 118 182,692,000 1 179 $8,156,416 $22,879,579 $1,233,750
10/25/01 46 612,344,000 1 118 193,426,000 1 179 $8,611,203 $8,611,203 $1,233,750
11/25/01 47 508,056,000 1 118 173,367,000 1 179 $8,435,263 $17,046,467 $1,233,750
12/25/01 48 505,192,000 1 118 166,196,000 1 179 $7,767,024 $24,813,491 $1,316,000
1/25/02 49 571,105,000 1 118 161,216,000 1 179 $7,878,214 $7,878,214 $1,316,000
2/25/02 50 599,569,000 1 049 157,663,000 1 107 $8,077,360 $15,955,574 $1,316,000
3/25/02 51 541,856,000 1 049 154,863,000 1 107 $7,751,014 $23,706,588 $1,398,250
4/25/02 52 517,589,000 1 049 157,451,000 1 107 $7,341,975 $7,341,975 $1,398,250
5/25/02 53 482,970,000 1 049 158,799,000 1 107 $7,036,201 $14,378,176 $1,398,250
6/25/02 54 462,279,000 1 049 161,267,000 1 107 $6,762,126 $21,140,302 $1,480,500
7/25/02 55 484,651,000 1 049 172,119,000 1 107 $6,781,224 $6,781,224 $1,480,500
8/25/02 56 555,671,000 1 049 185,250,000 1 107 $7,297,517 $14,078,740 $1,480,500
9/25/02 57 567,016,000 1 049 186,070,000 1 107 $7,810,103 $21,888,843 $1,562,750
10/25/02 58 624,996,000 1 049 196,999,000 1 107 $8,247,155 $8,247,155 $1,562,750
11/25/02 59 518,578,000 1 049 176,750,000 1 107 $8,079,883 $16,327,038 $1,562,750
12/25/02 60 [ILLEGIBLE] 1 049 169,417,000 1 107 $7,441,021 $23,768,059 $1,645,000
<CAPTION>
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
Equity Aggregate
Ending Account Servicing End of Period
Dates Balance and Trustee Fees Interest Principal Balance
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
12/25/97 $0 $0 $658,000,000
1/25/98 $3,190,000 $0 $0 $0 $658,000,000
2/25/98 $3,190,000 $0 $0 $0 $658,000,000
3/25/98 $3,190,000 $442,500 $11,204,381 $3,167,828 $654,832,172
4/25/98 $3,190,000 $0 $0 $0 $654,832,172
5/25/98 $3,190,000 $0 $0 $0 $654,832,172
6/25/98 $3,190,000 $440,520 $10,138,521 $18,699,490 $636,132,681
7/25/98 $3,190,000 $0 $0 $0 $636,132,681
8/25/98 $3,190,000 $0 $0 $0 $636,132,681
9/25/98 $3,190,000 $428,833 $9,859,431 $20,442,921 $615,689,760
10/25/98 $3,190,000 $0 $0 $0 $615,689,760
11/25/98 $3,190,000 $0 $0 $0 $615,689,760
12/25/98 $3,190,000 $416,056 $9,554,320 $23,489,760 $592,200,000
1/25/99 $3,190,000 $0 $0 $0 $592,200,000
2/25/99 $3,190,000 $0 $0 $0 $592,200,000
3/25/99 $3,190,000 $401,375 $9,203,735 $19,638,521 $572,561,479
4/25/99 $3,190,000 $0 $0 $0 $572,561,479
5/25/99 $3,190,000 $0 $0 $0 $572,561,479
6/25/99 $3,190,000 $389,101 $8,907,194 $13,974,960 $558,586,520
7/25/99 $3,190,000 $0 $0 $0 $558,586,520
8/25/99 $3,190,000 $0 $0 $0 $558,586,520
9/25/99 $3,190,000 $380,367 $8,696,172 $14,949,504 $543,637,016
10/25/99 $3,190,000 $0 $0 $0 $543,637,016
11/25/99 $3,190,000 $0 $0 $0 $543,637,016
12/25/99 $3,190,000 $371,023 $8,470,434 $17,237,016 $526,400,000
1/25/00 $3,190,000 $0 $0 $0 $526,400,000
2/25/00 $3,190,000 $0 $0 $0 $526,400,000
3/25/00 $3,190,000 $360,250 $8,210,155 $16,839,254 $509,560,746
4/25/00 $3,190,000 $0 $0 $0 $509,560,746
5/25/00 $3,190,000 $0 $0 $0 $509,560,746
6/25/00 $3,190,000 $349,725 $7,955,883 $14,879,573 $494,681,173
7/25/00 $3,190,000 $0 $0 $0 $494,681,173
8/25/00 $3,190,000 $0 $0 $0 $494,681,173
9/25/00 $3,190,000 $340,426 $7,730,085 $15,899,319 $478,781,854
10/25/00 $3,190,000 $0 $0 $0 $478,781,854
11/25/00 $3,190,000 $0 $0 $0 $478,781,854
12/25/00 $3,190,000 $330,489 $7,488,813 $18,181,854 $460,600,000
1/25/01 $3,190,000 $0 $0 $0 $460,600,000
2/25/01 $3,190,000 $0 $0 $0 $460,600,000
3/25/01 $3,190,000 $319,125 $7,212,903 $17,270,202 $443,329,798
4/25/01 $3,190,000 $0 $0 $0 $443,329,798
5/25/01 $3,190,000 $0 $0 $0 $443,329,798
6/25/01 $3,190,000 $308,331 $6,950,828 $14,793,748 $428,536,050
7/25/01 $3,190,000 $0 $0 $0 $428,536,050
8/25/01 $3,190,000 $0 $0 $0 $428,536,050
9/25/01 $3,190,000 $299,085 $6,723,374 $15,774,870 $412,761,179
10/25/01 $3,190,000 $0 $0 $0 $412,761,179
11/25/01 $3,190,000 $0 $0 $0 $412,761,179
12/25/01 $3,190,000 $289,226 $6,480,836 $17,961,179 $394,800,000
1/25/02 $3,190,000 $0 $0 $0 $394,800,000
2/25/02 $3,190,000 $0 $0 $0 $394,800,000
3/25/02 $3,190,000 $278,000 $6,204,682 $17,141,653 $377,658,347
4/25/02 $3,190,000 $0 $0 $0 $377,658,347
5/25/02 $3,190,000 $0 $0 $0 $377,658,347
6/25/02 $3,190,000 $267,286 $5,941,130 $14,849,639 $362,808,708
7/25/02 $3,190,000 $0 $0 $0 $362,808,708
8/25/02 $3,190,000 $0 $0 $0 $362,808,708
9/25/02 $3,190,000 $258,005 $5,711,331 $15,837,257 $346,971,452
10/25/02 $3,190,000 $0 $0 $0 $346,971,452
11/25/02 $3,190,000 $0 $0 $0 $346,971,452
12/25/02 $3,190,000 $248,107 $5,466,250 $17,971,452 $329,000,000
</TABLE>
<PAGE>
San Diego Gas & Electric Advice 1060-E
Page 6 of 6
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
BOND CASH FLOWS
- -----------------------------------------------------------------------------------------------------------------------------
RESIDENTIAL SMALL COMMERCIAL
Monthly Monthly
Consumption Bond Tariff Consumption Bond Tariff Total Collection Overcollateralization
Projected Cents Projected Cents Monthly Account Ending Account
Dates Periods Kwatt Per Kwatt Kwatt Per Kwatt Revenues Balance Balance
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1/25/03 61 582,958,000 1 049 164,368,000 1 107 $7,547,997 $7,547,997 $1,645,000
2/25/03 62 612,120,000 0 978 160,815,000 1 032 $7,715,711 $15,263,708 $1,645,000
3/25/03 63 553,216,000 0 978 157,967,000 1 032 $7,376,853 $22,640,560 $1,727,250
4/25/03 64 528,441,000 0 978 160,615,000 1 032 $6,983,198 $6,983,198 $1,727,250
5/25/03 65 493,464,000 0 978 162,320,000 1 032 $6,694,538 $13,677,736 $1,727,250
6/25/03 66 472,346,000 0 978 164,855,000 1 032 $6,437,390 $20,115,127 $1,809,500
7/25/03 67 495,225,000 0 978 175,961,000 1 032 $6,456,415 $6,456,415 $1,809,500
8/25/03 68 568,653,000 0 978 189,541,000 1 032 $6,952,321 $13,408,736 $1,809,500
9/25/03 69 580,294,000 0 978 190,397,000 1 032 $7,445,553 $20,854,288 $1,891,750
10/25/03 70 639,677,000 0 978 201,598,000 1 032 $7,863,496 $7,863,496 $1,891,750
11/25/03 71 530,116,000 0 978 181,003,000 1 032 $7,702,393 $15,565,889 $1,891,750
12/25/03 72 527,139,000 0 978 173,537,000 1 032 $7,091,023 $22,656,912 $1,974,000
1/25/04 73 595,974,000 0 978 168,357,000 1 032 $7,192,586 $7,192,586 $1,974,000
2/25/04 74 625,048,000 0 909 164,656,000 0 959 $7,343,374 $14,535,960 $1,974,000
3/25/04 75 564,924,000 0 909 161,758,000 0 959 $7,010,643 $21,546,604 $2,056,250
4/25/04 76 539,634,000 0 909 164,487,000 0 959 $6,635,296 $6,635,296 $2,056,250
5/25/04 77 503,418,000 0 909 166,514,000 0 959 $6,360,390 $12,995,685 $2,056,250
6/25/04 78 481,905,000 0 909 169,134,000 0 959 $6,115,794 $19,111,479 $2,138,500
7/25/04 79 505,276,000 0 909 180,549,000 0 959 $6,134,324 $6,134,324 $2,138,500
8/25/04 80 579,702,000 0 909 194,537,000 0 959 $6,604,003 $12,738,327 $2,138,500
9/25/04 81 591,615,000 0 909 195,440,000 0 959 $7,070,760 $19,809,087 $2,220,750
10/25/04 82 652,217,000 0 909 206,963,000 0 959 $7,467,681 $7,467,681 $2,220,750
11/25/04 83 539,866,000 0 909 185,839,000 0 959 $7,312,827 $14,780,507 $2,220,750
12/25/04 84 536,861,000 0 909 178,196,000 0 959 $6,729,867 $21,510,375 $2,303,000
1/25/05 85 607,016,000 0 909 172,898,000 0 959 $6,825,384 $6,825,384 $2,303,000
2/25/05 86 636,530,000 0 843 168,907,000 0 890 $6,960,391 $13,785,774 $2,303,000
3/25/05 87 575,366,000 0 843 165,954,000 0 890 $6,636,574 $20,422,349 $2,385,250
4/25/05 88 549,653,000 0 843 168,775,000 0 890 $6,280,954 $6,280,954 $2,385,250
5/25/05 89 512,772,000 0 843 171,104,000 0 890 $6,022,386 $12,303,340 $2,385,250
6/25/05 90 490,905,000 0 843 173,815,000 0 890 $5,792,869 $18,096,208 $2,467,500
7/25/05 91 514,755,000 0 843 185,567,000 0 890 $5,811,518 $5,811,518 $2,467,500
8/25/05 92 590,319,000 0 843 199,944,000 0 890 $6,255,821 $12,067,339 $2,467,500
9/25/05 93 602,494,000 0 843 200,890,000 0 890 $6,696,857 $18,764,197 $2,549,750
10/25/05 94 664,269,000 0 843 212,755,000 0 890 $7,072,763 $7,072,763 $2,549,750
11/25/05 95 550,229,000 0 843 191,010,000 0 890 $6,927,773 $14,000,537 $2,549,750
12/25/05 96 547,174,000 0 843 183,168,000 0 890 $6,377,359 $20,377,896 $2,632,000
1/25/06 97 618,710,000 0 843 177,735,000 0 890 $6,467,685 $6,467,685 $2,632,000
2/25/06 98 648,879,000 0 779 173,323,000 0 822 $6,584,024 $13,051,709 $2,632,000
3/25/06 99 586,561,000 0 779 170,303,000 0 822 $6,264,863 $19,316,573 $2,714,250
4/25/06 100 560,364,000 0 779 173,208,000 0 822 $5,927,793 $5,927,793 $2,714,250
5/25/06 101 522,661,000 0 779 175,779,000 0 822 $5,684,393 $11,612,186 $2,714,250
6/25/06 102 500,401,000 0 779 178,572,000 0 822 $5,468,794 $17,080,980 $2,796,500
7/25/06 103 524,740,000 0 779 190,654,000 0 822 $5,487,048 $5,487,048 $2,796,500
8/25/06 104 601,479,000 0 779 205,376,000 0 822 $5,905,525 $11,392,573 $2,796,500
9/25/06 105 613,903,000 0 779 206,354,000 0 822 $6,320,412 $17,712,986 $2,878,750
10/25/06 106 676,879,000 0 779 218,548,000 0 822 $6,674,872 $6,674,872 $2,878,750
11/25/06 107 560,735,000 0 779 196,185,000 0 822 $6,538,371 $13,213,243 $2,878,750
12/25/06 108 557,602,000 0 779 188,135,000 0 822 $6,019,150 $19,232,394 $2,961,000
1/25/07 109 630,500,000 0 779 182,559,000 0 822 $6,103,706 $6,103,706 $2,961,000
2/25/07 110 661,203,000 0 732 177,783,000 0 772 $6,251,459 $12,355,165 $2,961,000
3/25/07 111 597,690,000 0 732 174,687,000 0 772 $5,993,827 $18,348,992 $3,043,250
4/25/07 112 570,971,000 0 732 177,669,000 0 772 $5,679,174 $5,679,174 $3,043,250
5/25/07 113 532,468,000 0 732 180,521,000 0 772 $5,447,957 $11,127,131 $3,043,250
6/25/07 114 509,794,000 0 732 183,391,000 0 772 $5,242,497 $16,369,628 $3,125,500
7/25/07 115 534,587,000 0 732 195,801,000 0 772 $5,260,513 $5,260,513 $3,125,500
8/25/07 116 612,580,000 0 732 210,888,000 0 772 $5,660,956 $10,921,468 $3,125,500
9/25/07 117 625,226,000 0 732 211,895,000 0 772 $6,057,586 $16,979,054 $3,207,750
10/25/07 118 689,366,000 0 732 224,418,000 0 772 $6,396,851 $6,396,851 $3,207,750
11/25/07 119 571,118,000 0 732 201,436,000 0 772 $6,266,196 $12,663,047 $3,207,750
12/25/07 120 283,944,500 0 732 96,587,000 0 772 $4,616,459 $17,279,505 $3,290,000
<CAPTION>
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
Equity Aggregate
Ending Account Servicing End of Period
Dates Balance and Trustee Fees Interest Principal Balance
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1/25/03 $3,190,000 $0 $0 $0 $329,000,000
2/25/03 $3,190,000 $0 $0 $0 $329,000,000
3/25/03 $3,190,000 $236,875 $5,188,142 $17,133,294 $311,866,706
4/25/03 $3,190,000 $0 $0 $0 $311,866,706
5/25/03 $3,190,000 $0 $0 $0 $311,866,706
6/25/03 $3,190,000 $226,167 $4,923,004 $14,883,706 $296,983,000
7/25/03 $3,190,000 $0 $0 $0 $296,983,000
8/25/03 $3,190,000 $0 $0 $0 $296,983,000
9/25/03 $3,190,000 $216,864 $4,692,679 $15,862,492 $281,120,508
10/25/03 $3,190,000 $0 $0 $0 $281,120,508
11/25/03 $3,190,000 $0 $0 $0 $281,120,508
12/25/03 $3,190,000 $206,950 $4,447,206 $17,920,508 $263,200,000
1/25/04 $3,190,000 $0 $0 $0 $263,200,000
2/25/04 $3,190,000 $0 $0 $0 $263,200,000
3/25/04 $3,190,000 $195,750 $4,164,510 $17,104,093 $246,095,907
4/25/04 $3,190,000 $0 $0 $0 $246,095,907
5/25/04 $3,190,000 $0 $0 $0 $246,095,907
6/25/04 $3,190,000 $185,060 $3,894,693 $14,949,476 $231,146,431
7/25/04 $3,190,000 $0 $0 $0 $231,146,431
8/25/04 $3,190,000 $0 $0 $0 $231,146,431
9/25/04 $3,190,000 $175,717 $3,658,865 $15,892,255 $215,254,176
10/25/04 $3,190,000 $0 $0 $0 $215,254,176
11/25/04 $3,190,000 $0 $0 $0 $215,254,176
12/25/04 $3,190,000 $165,784 $3,408,165 $17,854,176 $197,400,000
1/25/05 $3,190,000 $0 $0 $0 $197,400,000
2/25/05 $3,190,000 $0 $0 $0 $197,400,000
3/25/05 $3,190,000 $154,625 $3,126,515 $17,058,958 $180,341,042
4/25/05 $3,190,000 $0 $0 $0 $180,341,042
5/25/05 $3,190,000 $0 $0 $0 $180,341,042
6/25/05 $3,190,000 $143,963 $2,857,410 $15,012,585 $165,328,457
7/25/05 $3,190,000 $0 $0 $0 $165,328,457
8/25/05 $3,190,000 $0 $0 $0 $165,328,457
9/25/05 $3,190,000 $134,580 $2,620,587 $15,926,779 $149,401,678
10/25/05 $3,190,000 $0 $0 $0 $149,401,678
11/25/05 $3,190,000 $0 $0 $0 $149,401,678
12/25/05 $3,190,000 $124,626 $2,369,342 $17,801,678 $131,600,000
1/25/06 $3,190,000 $0 $0 $0 $131,600,000
2/25/06 $3,190,000 $0 $0 $0 $131,600,000
3/25/06 $3,190,000 $113,500 $2,088,520 $17,032,302 $114,567,698
4/25/06 $3,190,000 $0 $0 $0 $114,567,698
5/25/06 $3,190,000 $0 $0 $0 $114,567,698
6/25/06 $3,190,000 $102,855 $1,819,836 $15,076,039 $99,491,659
7/25/06 $3,190,000 $0 $0 $0 $99,491,659
8/25/06 $3,190,000 $0 $0 $0 $99,491,659
9/25/06 $3,190,000 $93,432 $1,582,011 $15,955,288 $83,536,371
10/25/06 $3,190,000 $0 $0 $0 $83,536,371
11/25/06 $3,190,000 $0 $0 $0 $83,536,371
12/25/06 $3,190,000 $83,460 $1,330,317 $17,736,371 $65,800,000
1/25/07 $3,190,000 $0 $0 $0 $65,800,000
2/25/07 $3,190,000 $0 $0 $0 $65,800,000
3/25/07 $3,190,000 $72,375 $1,047,865 $17,146,502 $48,653,498
4/25/07 $3,190,000 $0 $0 $0 $48,653,498
5/25/07 $3,190,000 $0 $0 $0 $48,653,498
6/25/07 $3,190,000 $61,658 $774,807 $15,450,913 $33,202,585
7/25/07 $3,190,000 $0 $0 $0 $33,202,585
8/25/07 $3,190,000 $0 $0 $0 $33,202,585
9/25/07 $3,190,000 $52,002 $528,751 $16,316,052 $16,886,533
10/25/07 $3,190,000 $0 $0 $0 $16,886,533
11/25/07 $3,190,000 $0 $0 $0 $16,886,533
12/25/07 $3,190,000 $41,804 $268,918 $16,886,533 $0
</TABLE>
<PAGE>
ATTACHMENT
V
<PAGE>
San Diego Gas & Electric Advice 1060-E
Page 1 of 3
Amounts Receivable and Expected Principal Amount Amortization
The total amount payable to the owner of the transition property, or its
assignee(s), pursuant to this advice letter is a $658,000,000 principal amount,
plus interest on such principal amount, plus a $3,290,000 overcollateralization
amount, plus other ongoing costs, to be obtained from FTA charges calculated in
accordance with D.97-09-057.
The FTA charges shall be adjusted from time to time, at least annually,
via the FTA Charge True-up Mechanism in accordance with D.97-09-057.
The following amounts are scheduled to be paid by the Bond Trustee from
FTA charges it has received. These payment amounts include principal plus
interest, overcollateralization, and other ongoing costs.
<TABLE>
<CAPTION>
Date Monthly Receipt Amount Quarterly Payment Amount Outstanding Principal
- ---- ---------------------- ------------------------ ---------------------
<S> <C> <C> <C>
12/25/97 $0 $0 $658,000,000
1/25/98 $1,152,794 $0 $658,000,000
2/25/98 $4,938,714 $0 $658,000,000
3/25/98 $8,805,450 $14,896,959 $654,832,172
4/25/98 $10,036,483 $0 $654,832,172
5/25/98 $9,825,536 $0 $654,832,172
6/25/98 $9,498,762 $29,360,781 $636,132,681
7/25/98 $9,506,818 $0 $636,132,681
8/25/98 $10,256,447 $0 $636,132,681
9/25/98 $11,050,171 $30,813,435 $615,689,760
10/25/98 $11,688,162 $0 $615,689,760
11/25/98 $11,433,623 $0 $615,689,760
12/25/98 $10,420,601 $33,542,386 $592,200,000
1/25/99 $10,536,345 $0 $592,200,000
2/25/99 $10,049,954 $0 $592,200,000
3/25/99 $8,739,581 $29,325,881 $572,561,479
4/25/99 $8,130,185 $0 $572,561,479
5/25/99 $7,765,944 $0 $572,561,479
6/25/99 $7,457,376 $23,353,505 $558,586,520
7/25/99 $7,475,509 $0 $558,586,520
8/25/99 $8,037,879 $0 $558,586,520
9/25/99 $8,594,905 $24,108,292 $543,637,016
10/25/99 $9,073,672 $0 $543,637,016
11/25/99 $8,892,724 $0 $543,637,016
12/25/99 $8,194,328 $26,160,724 $526,400,000
1/25/00 $8,313,140 $0 $526,400,000
2/25/00 $8,675,941 $0 $526,400,000
3/25/00 $8,502,829 $25,491,909 $509,560,746
4/25/00 $8,082,359 $0 $509,560,746
5/25/00 $7,745,851 $0 $509,560,746
6/25/00 $7,439,220 $23,267,431 $494,681,173
7/25/00 $7,459,065 $0 $494,681,173
8/25/00 $8,019,174 $0 $494,681,173
</TABLE>
<PAGE>
San Diego Gas & Electric Advice 1060-E
Page 2 of 3
Amounts Receivable and Expected Principal Amount Amortization
<TABLE>
<S> <C> <C> <C>
9/25/00 $8,573,840 $24,052,080 $478,781,854
10/25/00 $9,051,519 $0 $478,781,854
11/25/00 $8,866,826 $0 $478,781,854
12/25/00 $8,165,061 $26,083,406 $460,600,000
1/25/01 $8,282,343 $0 $460,600,000
2/25/01 $8,479,495 $0 $460,600,000
3/25/01 $8,122,645 $24,884,480 $443,329,798
4/25/01 $7,691,854 $0 $443,329,798
5/25/01 $7,367,497 $0 $443,329,798
6/25/01 $7,075,805 $22,135,158 $428,536,050
7/25/01 $7,094,890 $0 $428,536,050
8/25/01 $7,628,273 $0 $428,536,050
9/25/01 $8,156,416 $22,879,579 $412,761,179
10/25/01 $8,611,203 $0 $412,761,179
11/25/01 $8,435,263 $0 $412,761,179
12/25/01 $7,767,024 $24,813,491 $394,800,000
1/25/02 $7,878,214 $0 $394,800,000
2/25/02 $8,077,360 $0 $394,800,000
3/25/02 $7,751,014 $23,706,585 $377,658,347
4/25/02 $7,341,975 $0 $377,658,347
5/25/02 $7,036,201 $0 $377,658,347
6/25/02 $6,762,126 $21,140,305 $362,808,708
7/25/02 $6,781,224 $0 $362,808,708
8/25/02 $7,297,517 $0 $362,808,708
9/25/02 $7,810,103 $21,888,843 $346,971,452
10/25/02 $8,247,155 $0 $346,971,452
11/25/02 $8,079,883 $0 $346,971,452
12/25/02 $7,441,021 $23,768,059 $329,000,000
1/25/03 $7,547,997 $0 $329,000,000
2/25/03 $7,715,711 $0 $329,000,000
3/25/03 $7,376,853 $22,640,560 $311,866,706
4/25/03 $6,983,198 $0 $311,866,706
5/25/03 $6,694,538 $0 $311,866,706
6/25/03 $6,437,390 $20,115,127 $296,983,000
7/25/03 $6,456,415 $0 $296,983,000
8/25/03 $6,952,321 $0 $296,983,000
9/25/03 $7,445,553 $20,854,285 $281,120,508
10/25/03 $7,863,496 $0 $281,120,508
11/25/03 $7,702,393 $0 $281,120,508
12/25/03 $7,091,023 $22,656,915 $263,200,000
1/25/04 $7,192,586 $0 $263,200,000
2/25/04 $7,343,374 $0 $263,200,000
3/25/04 $7,010,643 $21,546,604 $246,095,907
4/25/04 $6,635,296 $0 $246,095,907
5/25/04 $6,360,390 $0 $246,095,907
6/25/04 $6,115,794 $19,111,479 $231,146,431
7/25/04 $6,134,324 $0 $231,146,431
8/25/04 $6,604,003 $0 $231,146,431
</TABLE>
<PAGE>
San Diego Gas & Electric Advice 1060-E
Page 3 of 3
Amounts Receivable and Expected Principal Amount Amortization
<TABLE>
<S> <C> <C> <C>
9/25/04 $7,070,760 $19,809,087 $215,254,176
10/25/04 $7,467,681 $0 $215,254,176
11/25/04 $7,312,827 $0 $215,254,176
12/25/04 $6,729,867 $21,510,375 $197,400,000
1/25/05 $6,825,384 $0 $197,400,000
2/25/05 $6,960,391 $0 $197,400,000
3/25/05 $6,636,574 $20,422,349 $180,341,042
4/25/05 $6,280,954 $0 $180,341,042
5/25/05 $6,022,386 $0 $180,341,042
6/25/05 $5,792,869 $18,096,208 $165,328,457
7/25/05 $5,811,518 $0 $165,328,457
8/25/05 $6,255,821 $0 $165,328,457
9/25/05 $6,696,857 $18,764,197 $149,401,678
10/25/05 $7,072,763 $0 $149,401,678
11/25/05 $6,927,773 $0 $149,401,678
12/25/05 $6,377,359 $20,377,896 $131,600,000
1/25/06 $6,467,685 $0 $131,600,000
2/25/06 $6,584,024 $0 $131,600,000
3/25/06 $6,264,863 $19,316,573 $114,567,698
4/25/06 $5,927,793 $0 $114,567,698
5/25/06 $5,684,393 $0 $114,567,698
6/25/06 $5,468,794 $17,080,980 $99,491,659
7/25/06 $5,487,048 $0 $99,491,659
8/25/06 $5,905,525 $0 $99,491,659
9/25/06 $6,320,412 $17,712,981 $83,536,371
10/25/06 $6,674,872 $0 $83,536,371
11/25/06 $6,538,371 $0 $83,536,371
12/25/06 $6,019,150 $19,232,398 $65,800,000
1/25/07 $6,103,706 $0 $65,800,000
2/25/07 $6,251,459 $0 $65,800,000
3/25/07 $5,993,827 $18,348,992 $48,653,498
4/25/07 $5,679,174 $0 $48,653,498
5/25/07 $5,447,957 $0 $48,653,498
6/25/07 $5,242,497 $16,369,628 $33,202,585
7/25/07 $5,260,513 $0 $33,202,585
8/25/07 $5,660,956 $0 $33,202,585
9/25/07 $6,057,586 $16,979,054 $16,886,533
10/25/07 $6,396,851 $0 $16,886,533
11/25/07 $6,266,196 $0 $16,886,533
12/25/07 $4,616,459 $17,279,505 $0
</TABLE>
<PAGE>
ATTACHMENT
VI
<PAGE>
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
1. DEBTOR (LAST NAME FIRST - IF AN INDIVIDUAL) 1A. SOCIAL SECURITY OR FEDERAL TAX NO
San Diego Gas and Electric Company
- ------------------------------------------------------------------------------------------------------------------
1B. MAILING ADDRESS 1C. CITY, STATE 1D. ZIP CODE
P.O. Box 1831 San Diego, CA 92101
- ------------------------------------------------------------------------------------------------------------------
2. ADDITIONAL DEBTOR (IF ANY) (LAST NAME FIRST - IF AN INDIVIDUAL) 2A. SOCIAL SECURITY OR FEDERAL TAX NO
- ------------------------------------------------------------------------------------------------------------------
2B. MAILING ADDRESS 2C. CITY, STATE 2D. ZIP CODE
- ------------------------------------------------------------------------------------------------------------------
3. DEBTOR'S TRADE NAMES OR STYLES (IF ANY) 3A. FEDERAL TAX NUMBER
==================================================================================================================
4. SECURED PARTY 4A. SOCIAL SECURITY NO., FEDERAL TAX
NO., OR BANK TRANSIT AND ABA NO.
NAME SDG&E Funding LLC
MAILING ADDRESS 101 Ash Street
CITY San Diego STATE CA ZIP CODE 92101
- ------------------------------------------------------------------------------------------------------------------
5. ASSIGNEE OF SECURED PARTY (IF ANY) 5A. SOCIAL SECURITY NO., FEDERAL TAX
NO., OR BANK TRANSIT AND ABA NO.
NAME Bankers Trust Company of California, N.A.,
as Note Trustee
MAILING ADDRESS 300 South Grand Avenue, 42nd Floor
CITY Los Angeles STATE CA ZIP CODE 90071
- ------------------------------------------------------------------------------------------------------------------
6. This FINANCING STATEMENT covers the following types or items of property (include description of real property
on which located and owner of record when required by instruction 4).
See Exhibit A attached hereto.
- ------------------------------------------------------------------------------------------------------------------
7. CHECK [X] 7A. PRODUCTS OF COLLATERAL 7B. DEBTOR(S) SIGNATURE NOT REQUIRED IN ACCORDANCE WITH
IF APPLICABLE [ ] ARE ALSO COVERED INSTRUCTION 5(a) ITEM:
[ ](1) [ ](2) [ ](3) [ ](4)
- ------------------------------------------------------------------------------------------------------------------
8. CHECK [X] [x] DEBTOR IS A "TRANSMITTING UTILITY" IN ACCORDANCE WITH UCC SECTIONS 9105(-)(-)
IF APPLICABLE
- ------------------------------------------------------------------------------------------------------------------
9. DATE: 12/9/97 C 10. THIS SPACE FOR USE OF
San Diego Gas & Electric O FILING OFFICER (DATE,
/s/David R. Kuzma Name: David R. Kuzma D TIME, FILE NUMBER
SIGNATURE OF DEBTOR(S) Title: SVP, CEO & Treasurer E AND FILING OFFICER)
- -------------------------------------------------------------------------
1
San Diego Gas & Electric
TYPE OR PRINT NAME(S) OF DEBTOR(S) 2
- -------------------------------------------------------------------------
SDG&E Funding LLC 3
/s/Gary A. Perlmutter Name: Gary A. Perlmutter
SIGNATURE OF SECURED PARTY(IES) Title: VP, Counsel & Sec. 4
- -------------------------------------------------------------------------
5
SDG&E Funding LLC
TYPE OR PRINT NAME(S) OF SECURED PARTY(IES) 6
=========================================================================
11. Return copy to: 7
NAME 8
ADDRESS 9
CITY 0
STATE
ZIP CODE
=========================================================================
FORM UCC.1-
Approved by the Secretary of State
==================================================================================================================
</TABLE>
FILING OFFICER COPY ADVICE 1060-E
PAGE 1 OF 3
<PAGE>
Exhibit A
Debtor: San Diego Gas and Electric Company
Secured Party: SDG&E Funding LLC
Assignee: Bankers Trust Company of California, N.A., as Note Trustee
All right, title and interest of San Diego Gas and Electric Company in and
to the Transition Property, including, to the fullest extent permitted by the
Statute, all revenues, collections, claims, rights, payments, money or proceeds
of or arising from the FTA Charges, pursuant to the Financing Order and the
Issuance Advice Letter.
As used herein, the following terms have the respective meanings set forth
below:
"Customers" means existing and future Residential Customers and Small
---------
Commercial Customers.
"Financing Order" means the order of the California Public Utilities
---------------
Commission, Decision 97-09-057, issued as of September 3, 1997, which became
effective on October 6, 1997.
"FTA Charges" means charges permitted to be levied upon the Customers
-----------
pursuant to the Financing Order.
"Issuance Advice Letter" means Advice 1060-E, dated December 9, 1997,
----------------------
filed with the California Public Utilities Commission by San Diego Gas and
Electric Company pursuant to the Financing Order, a copy of which (except for
Attachments VI, VII and VIII is attached hereto as Exhibit B.
"Residential Customers" means the existing and future residential
---------------------
consumers of electricity, as identified in the Financing Order, located in the
service territory in which San Diego Gas and Electric Company provided
electricity services as of December 20, 1995.
"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 San Diego Gas & Electric Company
provided electricity services as of December 20, 1995.
"Statute" means Chapter 854 of California Statutes of 1996 and Chapter 275
-------
of California Statutes of 1997, as further amended from time to time.
1
ADVICE 1060-E
PAGE 2 OF 3
<PAGE>
"Transition Property" means the "Transition Property" contemplated by the
-------------------
Financing Order and specifically described in the Issuance Advice Letter.
All capitalized terms used herein and not otherwise defined herein shall
have the same meanings as that certain Transition Property Purchase and Sale
Agreement, dated as of December 16, 1997, by and between SDG&E Funding LLC and
San Diego Gas and Electric Company, a copy of which is available for inspection
at the office of Bankers Trust Company of California, N.A., as Note Trustee, at
300 South Grand Avenue, 42nd Floor, Los Angeles, California 90071.
THE PARTIES INTEND THE TRANSFER OF THE TRANSITION PROPERTY FROM SAN DIEGO
GAS AND ELECTRIC COMPANY TO SDG&E FUNDING LLC TO BE AN ABSOLUTE SALE PURSUANT TO
SECTION 844(a) OF THE CALIFORNIA PUBLIC UTILITIES CODE, AND NOT A SECURED
BORROWING. THIS FINANCING STATEMENT IS FILED PURSUANT TO SECTION 844(c) OF THE
CALIFORNIA PUBLIC UTILITIES CODE IN CONNECTION WITH SUCH TRANSFER AND IS NOT
EVIDENCE OF ANY INTENT THAT SUCH TRANSFER BE DEEMED TO BE OR TREATED AS A
SECURED BORROWING.
2
ADVICE 1060-E
PAGE 3 OF 3
<PAGE>
ATTACHMENT
VII
<PAGE>
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
1. DEBTOR (LAST NAME FIRST - IF AN INDIVIDUAL) 1A. SOCIAL SECURITY OR FEDERAL TAX NO.
San Diego Gas and Electric Company
- ------------------------------------------------------------------------------------------------------------------
1B. MAILING ADDRESS 1C. CITY, STATE 1D. ZIP CODE
P.O. Box 1831 San Diego, CA 92101
- ------------------------------------------------------------------------------------------------------------------
2. ADDITIONAL DEBTOR (IF ANY) (LAST NAME FIRST - IF AN INDIVIDUAL) 2A. SOCIAL SECURITY OR FEDERAL TAX NO.
- ------------------------------------------------------------------------------------------------------------------
2B. MAILING ADDRESS 2C. CITY, STATE 2D. ZIP CODE
- ------------------------------------------------------------------------------------------------------------------
3. DEBTOR'S TRADE NAMES OR STYLES (IF ANY) 3A. FEDERAL TAX NUMBER
==================================================================================================================
4. SECURED PARTY 4A. SOCIAL SECURITY NO., FEDERAL TAX
NO., OR BANK TRANSIT AND ABA NO.
NAME SDG&E Funding LLC
MAILING ADDRESS 101 Ash Street
CITY San Diego STATE CA ZIP CODE 92101
- ------------------------------------------------------------------------------------------------------------------
5. ASSIGNEE OF SECURED PARTY (IF ANY) 5A. SOCIAL SECURITY NO., FEDERAL TAX
NO., OR BANK TRANSIT AND ABA NO.
NAME Bankers Trust Company of California, N.A.,
as Note Trustee
MAILING ADDRESS 300 South Grand Avenue, 42nd Floor
CITY Los Angeles STATE CA ZIP CODE 90071
- ------------------------------------------------------------------------------------------------------------------
6. This FINANCING STATEMENT covers the following types or items of property (include description of real property
on which located and owner of record when required by instruction 4).
See Exhibit A attached hereto.
- ------------------------------------------------------------------------------------------------------------------
7. CHECK [X] 7A. PRODUCTS OF COLLATERAL 7B. DEBTOR(S) SIGNATURE NOT REQUIRED IN ACCORDANCE WITH
IF APPLICABLE [ ] ARE ALSO COVERED INSTRUCTION 5(a) ITEM:
[ ](1) [ ](2) [ ](3) [ ](4)
- ------------------------------------------------------------------------------------------------------------------
8. CHECK [X] [x] DEBTOR IS A "TRANSMITTING UTILITY" IN ACCORDANCE WITH UCC SECTIONS 9105(-)(-)
IF APPLICABLE
- ------------------------------------------------------------------------------------------------------------------
9. DATE: 12/9/97 C 10. THIS SPACE FOR USE OF
San Diego Gas & Electric O FILING OFFICER (DATE,
/s/David R. Kuzma Name: David R. Kuzma D TIME, FILE NUMBER
SIGNATURE OF DEBTOR(S) Title: SVP, CFO & Treasurer E AND FILING OFFICER)
- -------------------------------------------------------------------------
1
San Diego Gas & Electric Company
TYPE OR PRINT NAME(S) OF DEBTOR(S) 2
- -------------------------------------------------------------------------
SDG&E Funding LLC 3
/s/Gary A. Perlmutter Name: Gary A. Perlmutter
SIGNATURE OF SECURED PARTY(IES) Title: VP, Counsel & Sec. 4
- -------------------------------------------------------------------------
5
SDG&E Funding LLC
TYPE OR PRINT NAME(S) OF SECURED PARTY(IES) 6
=========================================================================
11. Return copy to: 7
NAME 8
ADDRESS 9
CITY 0
STATE
ZIP CODE
=========================================================================
FORM UCC.1-
Approved by the Secretary of State
==================================================================================================================
</TABLE>
FILING OFFICER COPY ADVICE 1060-E
PAGE 1 OF 3
<PAGE>
Exhibit A
Debtor: San Diego Gas and Electric Company
Secured Party: SDG&E Funding LLC
Assignee: Bankers Trust Company of California, N.A., as Note Trustee
All right, title and interest of San Diego Gas and Electric Company in and
to the Transition Property, including, to the fullest extent permitted by the
Statute, all revenue, collections, claims, rights, payments, money or proceeds
of or arising from the FTA Charges pursuant to the Financing Order and the
Issuance Advice Letter.
As used herein, the following terms have the respective meanings set forth
below:
"Customers" means existing and future Residential Customers and Small
---------
Commercial Customers.
"Financing Order" means the order of the California Public Utilities
---------------
Commission, Decision 97-09-057, issued as of September 3, 1997, which became
effective on October 6, 1997.
"FTA Charges" means the charges permitted to be levied upon the Customers
-----------
pursuant to the Financing Order.
"Issuance Advice Letter" means Advice 1060-E, dated December 9, 1997,
----------------------
filed with the California Public Utilities Commission by San Diego Gas and
Electric Company pursuant to the Financing Order, a copy of which (except for
Attachments VI, VII and VIII) is attached hereto as Exhibit B.
"Residential Customers" means the existing and future residential
---------------------
consumers of electricity, as identified in the Financing Order, located in the
service territory in which San Diego Gas and Electric Company provided
electricity services as of December 20, 1995.
"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 San Diego Gas & Electric Company
provided electricity services as of December 20, 1995.
"Statute" means Chapter 854 of California Statutes of 1996 and Chapter 275
-------
of California Statutes of 1997, as further amended from time to time.
<PAGE>
"Transition Property" means the "Transition Property" contemplated by the
-------------------
Financing Order and specifically described in the Issuance Advice Letter.
THE PARTIES INTEND THE TRANSFER OF THE TRANSITION PROPERTY FROM SAN DIEGO
GAS AND ELECTRIC COMPANY TO SDG&E FUNDING LLC TO BE AN ABSOLUTE SALE PURSUANT TO
SECTION 844(a) OF THE CALIFORNIA PUBLIC UTILITIES CODE (THE "PU CODE"), AND NOT
A SECURED BORROWING. SAN DIEGO GAS AND ELECTRIC COMPANY BELIEVES THAT IT HAS NO
RIGHTS IN THE TRANSITION PROPERTY TO WHICH A SECURITY INTEREST MAY ATTACHE
BECAUSE IT HAS SOLD ALL RIGHTS IN THE TRANSITION PROPERTY TO SDG&E FUNDING LLC
PURSUANT TO SECTION 844(a) OF THE PU CODE. THIS FILING SHOULD NOT BE CONSTRUED
AS A CONCLUSION THAT A SALE HAS NOT OCCURRED. WITH RESPECT TO THE FOREGOING,
THIS FILING IS MADE ONLY IN THE EVENT OF CONTRARY ASSERTIONS BY THIRD PARTIES,
AND IS FILED PURSUANT TO SECTION 843(b) OF THE PU CODE AND DIVISION 9 OF THE
CALIFORNIA COMMERCIAL CODE.
All capitalized terms used herein and not otherwise defined herein shall
have the same meanings as that certain Transition Property Purchase and Sale
Agreement, dated as of December 16, 1997, by and between SDG&E Funding LLC and
San Diego Gas and Electric Company, a copy of which is available for inspection
at the office Bankers Trust Company of California, N.A., as Note Trustee, at 300
South Grand Avenue, 42nd Floor, Los Angeles, California 90071.
2
<PAGE>
ATTACHMENT
VIII
<PAGE>
FINANCING STATEMENT - FOLLOW INSTRUCTIONS CAREFULLY
This Financing Statement is presented for filing pursuant to the Uniform
Commercial Code and will remain effective, with certain exceptions, for 5 years
from date of filing.
<TABLE>
<S> <C>
A. NAME & TEL # OF CONTACT AT FILER (optional) B. FILING OFFICE ACCT. # (optional)
C. RETURN COPY TO: (Name and Mailing Address)
D. OPTIONAL DESIGNATION (if applicable): |_| LESSOR/LESSEE |_| CONSIGNOR/CONSIGNEE |_| NON-UCC FILING
1. DEBTOR'S EXACT FULL LEGAL NAME - Insert only one debtor name (1a or 1b)
------------------------------------------------------------------------------------------------------------------------------
1a. ENTITY'S NAME
SDG&E Funding LLC
------------------------------------------------------------------------------------------------------------------------------
OR
------------------------------------------------------------------------------------------------------------------------------
1b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX
------------------------------------------------------------------------------------------------------------------------------
1c. MAILING ADDRESS CITY STATE COUNTRY POSTAL CODE
101 Ash Street, Room 111 San Diego CA 92101
- ---------------------------------------------------------------------------------------------------------------------------------
1d. S.S. or TAX I.D.# OPTIONAL 1e. TYPE OF ENTITY 1f. ENTITY'S STATE 1g. ENTITY'S
ADD'NL INFO RE OR COUNTRY OF ORGANIZATIONAL
ENTITY DEBTOR ORGANIZATION I.D.#, if any
33-0762746 |_| NONE
=================================================================================================================================
2. ADDITIONAL DEBTOR'S EXACT FULL LEGAL NAME - Insert only one debtor name (2a or 2b)
------------------------------------------------------------------------------------------------------------------------------
2a. ENTITY'S NAME
------------------------------------------------------------------------------------------------------------------------------
OR
------------------------------------------------------------------------------------------------------------------------------
2b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX
- ---------------------------------------------------------------------------------------------------------------------------------
2c. MAILING ADDRESS CITY STATE COUNTRY POSTAL CODE
- ---------------------------------------------------------------------------------------------------------------------------------
2d. S.S. or TAX I.D.# OPTIONAL 2e. TYPE OF ENTITY 2f. ENTITY'S STATE 2g. ENTITY'S
ADD'NL INFO RE OR COUNTRY OF ORGANIZATIONAL
ENTITY DEBTOR ORGANIZATION I.D.#, if any
|_| NONE
=================================================================================================================================
3. SECURED PARTY'S (ORIGINAL S/P or ITS TOTAL ASSIGNEE) EXACT FULL LEGAL NAME - insert only one secured party name (3a or 3b)
------------------------------------------------------------------------------------------------------------------------------
3a. ENTITY'S NAME
Banker's Trust Company of California, N.A., as Trustee
------------------------------------------------------------------------------------------------------------------------------
OR
------------------------------------------------------------------------------------------------------------------------------
3b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX
- ---------------------------------------------------------------------------------------------------------------------------------
3c MAILING ADDRESS CITY STATE COUNTRY POSTAL CODE
300 South Grand Avenue, 42nd Floor Los Angeles CA 90071
=================================================================================================================================
4. This FOLLOWING STATEMENT covers the following types or items of property:
See Exhibit A attached hereto.
=================================================================================================================================
5. CHECK |_| This FINANCING STATEMENT is signed by the Secured 7. If filed in Florida (check one)
BOX Party instead of the Debtor to perfect a security
(if applicable) interest (a) in collateral already subject to a |_| Documentary |_| Documentary stamp
security interest in another jurisdiction when it stamp tax paid tax not applicable
was brought into this state, or when the debtor's
location was changed to this state or (b) in
accordance with other statutory provisions
(additional date may be required).
=================================================================================================================================
6. REQUIRED SIGNATURE(S) Name: Gary A. Perlmutter 8. |_| This FINANCING STATEMENT is to be filed (for record)
Title: VP, Counsel & Sec. (or recorded) in the REAL ESTATE RECORDS
/s/ Gary A. Perlmutter Attach Addendum (if applicable)
- ---------------------------------------------------------------------------------------------------------------------------------
SDG&E Funding LLC
9. Check to REQUEST SEARCH CERTIFICATE(S) on Debtor(s)
Name: Gary A. Perlmutter (ADDITIONAL FEE)
Title: VP. Counsel & Sec. (optional) ( ) All Debtors ( ) Debtor 1 ( ) Debtor 2
</TABLE>
(1) FILING OFFICER COPY - NATIONAL FINANCING STATEMENT (FORM UCC1) (TRANS)
(REV. 12/18/95)
ADVICE 1060-E
PAGE 1 OF 3
<PAGE>
Exhibit A
Debtor: SDG&E Funding LLC
Secured Party: Bankers Trust Company of California, N.A., as Trustee
All right, title and interest of SDG&E Funding LLC in and to (a) the
Transition Property transferred by San Diego Gas and Electric Company to SDG&E
Funding LLC pursuant to the Sale Agreement and all proceeds thereof; (b) any
Subsequent Transition Property transferred by San Diego Gas and Electric Company
to SDG&E Funding LLC 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 SDG&E Funding LLC; and (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 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
SDG&E Funding LLC by San Diego Gas and Electric Company which is not held in the
Capital Subaccount, including cash that has been released to SDG&E Funding LLC
pursuant to Section 8.02(d) of the Indenture following retirement of a Series of
Notes, (ii) net investment earnings which have been released to SDG&E Funding
LLC pursuant to Section 8.02(d) of the Indenture and (iii) the
Overcollateralization Amount with respect to a Series of Notes that has been
released to SDG&E Funding LLC pursuant to Section 8.02(d) of the Indenture
following retirement of such Series of Notes).
As used herein, the following terms have the respective meanings set forth
below:
"Capital Subaccount" means the capital subaccount of the Collection
------------------
Account.
"Collection Account" means one or more segregated trust accounts in the
------------------
name of Bankers Trust Company of California, N.A., as Note Trustee, for the
deposit of amounts relating to the Transition Property.
"Financing Order" means the order of the California Public Utilities
---------------
Commission, Decision 97-09-057, issued as of September 3, 1997, which became
effective on October 6, 1997.
ADVICE 1060-E
PAGE 2 OF 3
1
<PAGE>
"Indenture" means the Indenture dated December 16, 1997 between SDG&E
---------
Funding LLC and Bankers Trust Company of California, N.A., as Note Trustee, as
amended from time to time.
"Issuance Advice Letter" means Advice 1060-E, dated December 9, 1997,
----------------------
filed with the California Public Utilities Commission by San Diego Gas and
Electric Company pursuant to the Financing Order, a copy of which (except for
Attachments VI, VII and VIII) is attached hereto as Exhibit B.
"Overcollateralization Amount" means, with respect to any Series of Notes,
----------------------------
the amount specified in the related issuance advice letter.
"Sale Agreement" means the Transition Property Purchase and Sale Agreement
--------------
dated as of December 16, 1997 by and between SDG&E Funding LLC and San Diego Gas
and Electric Company, as amended and supplemented from time to time.
"Servicing Agreement" means the Transition Property Servicing Agreement
-------------------
dated as of December 16, 1997 between SDG&E Funding LLC and San Diego Gas and
Electric Company, as amended and supplemented from time to time.
"Subsequent Transition Property" means any transition property (as defined
------------------------------
in Section 840 of the California Public Utilities Code, as amended from time to
time (the "PU Code")) created under the PU Code and the Financing Order and
specifically described in the related issuance advice letter and sold to SDG&E
Funding LLC by San Diego Gas and Electric Company pursuant to an agreement
substantially similar to the Sale Agreement (a "Subsequent Sale Agreement").
"Transition Property" means the "Transition Property" contemplated by the
-------------------
Financing Order and specifically described in the Issuance Advice Letter.
All capitalized terms not defined herein shall have the same meanings as
set forth in either the Indenture or the Servicing Agreement, copies of which
are available for inspection at the office of Bankers Trust Company of
California, N.A., as Note Trustee, at 300 South Grand Avenue, 42nd Floor, Los
Angeles, California 90071.
THIS FINANCING STATEMENT IS FILED PURSUANT TO SECTION 843(b) OF THE PU
CODE AND DIVISION 9 OF THE CALIFORNIA COMMERCIAL CODE.
ADVICE 1060-E
PAGE 3 OF 3
2
