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): March 25, 1999
PECO ENERGY TRANSITION TRUST
(Exact name of registrant as specified in its charter)
Delaware 333-58055 51-0382130
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
PECO Energy Transition Trust
c/o First Union Trust Company, National Association
920 King Street
Wilmington, Delaware 19801
(Address of principal executive offices) (Zip Code)
(302) 888-7532
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
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Item 5. Other Events
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Reference is made to Registrant's registration statement on Form S-3,
as amended (Registration No. 333-58055), filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended. Pursuant to such
registration statement, $4,000,000,000 aggregate principal amount of Transition
Bonds Series 1999-A were issued and sold by the Registrant. The transaction was
closed on March 25, 1999.
In connection with this transaction, the Registrant entered into the
material agreements attached hereto as Exhibits.
Item 7. Financial Statements and Exhibits
---------------------------------
A list of the Exhibits filed herewith is attached hereto.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
PECO ENERGY TRANSITION TRUST
By:/s/ Diana Moy Kelly
-----------------------
March 31, 1999 Name: Diana Moy Kelly
Title: Beneficiary Trustee
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EXHIBIT INDEX
Exhibit No. Exhibit
- ---------- -------
1.1 Underwriting Agreement dated March 18, 1999 among PECO Energy
Transition Trust, PECO Energy Company and Salomon Smith
Barney, as representative of the several underwriters named
therein.
4.1.2 Amended and Restated Trust Agreement for PECO Energy
Transition Trust dated as of February 19, 1999 among George
Shicora and Diana Moy Kelly, as Beneficiary Trustees, First
Union Trust Company, National Association, as Issuer Trustee,
Delaware Trustee and Independent Trustee, and PECO Energy
Company, as Grantor and Owner.
4.3.1 Indenture dated as of March 1, 1999 between PECO Energy
Transition Trust and The Bank of New York.
4.3.2 Series Supplement dated as of March 25, 1999 between PECO
Energy Transition Trust and The Bank of New York.
10.1 Intangible Transition Property Sale Agreement dated as of
March 25, 1999 between PECO Energy Transition Trust and PECO
Energy Company.
10.2 Master Servicing Agreement dated as of March 25, 1999 between
PECO Energy Transition Trust and PECO Energy Company.
99.1 Form of ISDA Master Agreement (PECO Energy Transition Trust
entered into two such agreements, each dated as of March 18,
1999, with Goldman Sachs Mitsui Marine Derivative Products,
L.P. and Citibank, N.A., New York, respectively, with respect
to the Class A-3 and Class A-5 Transition Bonds,
respectively).
99.2 Schedule to the Master Agreement dated as of March 18, 1999
between Goldman Sachs Mitsui Marine Derivative Products, L.P.
and PECO Energy Transition Trust.
99.3 Schedule to the Master Agreement dated as of March 18, 1999
between Citibank, N.A., New York and PECO Energy Transition
Trust.
99.4 Confirmation Letter Agreement dated March 18, 1999 from
Goldman Sachs Mitsui Marine Derivative Products, L.P. and
confirmed by PECO Energy Transition Trust.
99.5 Confirmation Letter Agreement dated March 18, 1999 from
Citibank, N.A., New York and confirmed by PECO Energy
Transition Trust.
PECO ENERGY TRANSITION TRUST
PECO ENERGY COMPANY
UNDERWRITING AGREEMENT
March 18, 1999
To Salomon Smith Barney Inc. as
representative of the Under-
writers named in Schedule II hereto
Ladies and Gentlemen:
PECO Energy Transition Trust, a statutory business trust created under the
laws of the State of Delaware (the "Issuer") and PECO Energy Company, a
Pennsylvania corporation (the "Company") as grantor and owner of all beneficial
interest in the Issuer, propose, subject to the terms and conditions stated
herein, that the Issuer issue and sell to the underwriters named in Schedule II
hereto (the "Underwriters"), for whom Salomon Smith Barney Inc. (the
"Representative") is acting as representative, the principal amount of its
securities identified in Schedule I hereto (the "Securities").
Each of the capitalized terms used and not otherwise defined herein shall
have the meaning given to it in the Sale Agreement, dated as of March 25, 1999
(the "Sale Agreement"), between the Company, as seller, and the Issuer or, if
not defined therein, in the Master Servicing Agreement, dated as of March 25,
1999 (the "Servicing Agreement") between the Company, as servicer, and the
Issuer or, if not defined therein, in the Indenture, dated as of March 25, 1999
(as amended and supplemented from time to time, including by the supplemental
indenture for the Securities, the "Indenture"), between the Issuer and The Bank
of New York (the "Bond Trustee") or, if not defined therein, in the amended and
restated Trust Agreement, dated as of February 19, 1999 (the "Trust Agreement"),
among the Company, First Union Trust Company, National Association, as issuer
trustee (the "Issuer Trustee"), and George R. Shicora and Diana Moy Kelly, as
beneficiary trustees (each a "Beneficiary Trustee").
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1. As of the date hereof, each of the Company and the Issuer represents and
warrants to each of the Underwriters that:
(a) The Issuer and the Securities meet the requirements for the use of
Form S-3 under the Securities Act of 1933, as amended (the "Act") and a
registration statement on Form S-3 (File No. 333-58055) in respect of the
Securities has been filed with the Securities and Exchange Commission (the
"Commission"); such registration statement and any post-effective amendment
thereto, each in the form heretofore delivered to you, and, excluding
exhibits thereto but including all documents incorporated by reference in
the prospectus included therein, have been declared effective by the
Commission in such form; no other document with respect to such
registration statement or document incorporated by reference therein has
heretofore been filed with the Commission; and no stop order suspending the
effectiveness of such registration statement has been issued and no
proceeding for that purpose has been initiated or to the knowledge of the
Company or the Issuer threatened by the Commission (any preliminary
prospectus included in such registration statement or filed with the
Commission pursuant to Rule 424(b) of the rules and regulations of the
Commission under the Act, being hereinafter called a "Preliminary
Prospectus"; the various parts of such registration statement, including
all exhibits thereto and the documents incorporated by reference in the
prospectus contained in the registration statement at the time such part of
the registration statement became effective, each as amended at the time
such part of the registration statement became effective, being hereinafter
called the "Registration Statement"; such final prospectus, in the form
first filed pursuant to Rule 424(b) under the Act, being hereinafter called
the "Prospectus"; any reference herein to any Preliminary Prospectus or the
Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 under the
Act, as of the date of such Preliminary Prospectus or Prospectus, as the
case may be; and any reference to any amendment or supplement to the
Registration Statement, any Preliminary Prospectus or the Prospectus shall
be deemed to refer to and include any documents filed after the effective
date of the Registration Statement or the date of such Preliminary
Prospectus or Prospectus, as the case may be, under the Securities and
Exchange Act of 1934, as amended (the "Exchange Act"), and incorporated by
reference in such Registration Statement, Preliminary Prospectus or
Prospectus, as the case may be);
(b) Each Preliminary Prospectus, at the time of circulation thereof by
the Underwriters, conformed in all
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material respects to the requirements of the Act and the rules and
regulations of the Commission thereunder, and as of the date thereof did
not contain an untrue statement of a material fact or omit to state a
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, provided, however, that this representation and
warranty shall not apply to any statement or omission made in reliance upon
and in conformity with information regarding any Underwriter or the
arrangements with respect to the underwriting of the offering of the
Securities contemplated hereby furnished in writing to the Issuer or the
Company by an Underwriter through you expressly for use therein;
(c) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects, to the requirements of
the Act, the Exchange Act, the Trust Indenture Act of 1939 (the "Trust
Indenture Act") and the respective rules and regulations of the Commission
thereunder; the Registration Statement does not and will not, as of the
applicable effective date as to the Registration Statement and any
amendment thereto, contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading; the Indenture complies in all
material respects with the requirements of the Trust Indenture Act and the
rules thereunder; and the Prospectus does not and will not, as of the
applicable filing date as to the Prospectus and any amendment or supplement
thereto, contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information regarding any Underwriter or the arrangements with respect to
the underwriting of the offering of the Securities contemplated hereby
furnished in writing to the Issuer or the Company by an Underwriter through
you expressly for use therein;
(d) The documents incorporated by reference in the Registration
Statement and the Prospectus, when they became effective or were filed (or,
if an amendment with respect to any such document was filed or became
effective, when such amendment was filed or became effective) with the
Commission, as the case may be, conformed in all material
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respects to the requirements of the Act, the Exchange Act, the Trust
Indenture Act and the rules and regulations thereunder, and any further
documents so filed and incorporated by reference will, when they become
effective or are filed with the Commission, as the case may be, conform in
all material respects to the requirements of the Act, the Exchange Act, the
Trust Indenture Act and the rules and regulations thereunder; none of such
documents, when it became effective or was filed (or, if an amendment with
respect to any such documents was filed or became effective, when such
amendment was filed or became effective) contained any untrue statement of
a material fact or omitted to state 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;
(e) PricewaterhouseCoopers LLP are independent certified public
accountants as required by the Act and the rules and regulations of the
Commission thereunder;
(f) The Issuer has been duly created and is validly existing in good
standing as a business trust under the Delaware Business Trust Act, has the
trust power and authority to conduct its business as presently conducted
and as described in the Prospectus, will not be required to be authorized
to do business in any other jurisdiction; and the Issuer has all requisite
business trust power and authority to issue the Securities and purchase the
Intangible Transition Property as described in the Prospectus;
(g) The Company is a validly existing and subsisting corporation under
the laws of the Commonwealth of Pennsylvania; each of the Company's
subsidiaries ("Subsidiaries") which constitutes a "gas utility company" or
an "electric utility company," as defined in the Public Utility Holding
Company Act of 1935, as amended (a "Utility Subsidiary"), is a validly
existing corporation under the laws of its jurisdiction of incorporation;
the Company and each Utility Subsidiary have all requisite power and
authority to own and occupy their respective properties and carry on their
respective businesses as presently conducted and as described in the
Prospectus and are duly qualified as foreign corporations to do business
and in good standing in every jurisdiction in which the nature of the
business conducted or property owned by them makes such qualification
necessary and in which the failure to so qualify would have a materially
adverse effect on the Company; and the Company has all requisite power and
authority to sell the Intangible Transition Property to the Issuer as
described in the Prospectus;
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(h) Each of the Basic Documents to which the Company or the Issuer is
a party has been duly authorized by the Company or the Issuer, as
applicable, and when executed and delivered by the Issuer or the Company,
as applicable, will constitute a legal, valid and binding obligation of the
Company or the Issuer, as applicable, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditor's rights and to general equity
principles;
(i) The Securities have been duly authorized by the Issuer and will
conform to the description thereof in the Prospectus; and when the
Securities are authenticated by the Bond Trustee and executed and delivered
to the Underwriters and are paid for by the Underwriters in accordance with
the terms of this Agreement, the Securities will constitute the legal,
valid and binding obligations of the Issuer, enforceable in accordance with
their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditor's rights and to general equity
principles;
(j) The issue and sale of the Securities by the Issuer, the sale of
the Intangible Transition Property by the Company to the Issuer, the
execution, delivery and compliance by the Company and the Issuer with all
of the provisions of each of this Agreement and the Basic Documents to
which the Company or the Issuer, as applicable, is a party, and the
consummation of the transactions herein and therein contemplated will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any trust agreement,
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Issuer or the Company is a party or by which the
Issuer or the Company is bound or to which any of the property or assets of
the Issuer or the Company is subject, which conflict, breach, violation or
default would be material to the issue and sale of the Securities or would
have a material adverse effect on the general affairs, management,
prospects, financial position or results of operations of the Issuer or the
Company or on the stockholders' equity of the Company, nor will such action
result in any violation of the provisions of the Articles of Incorporation
or Bylaws of the Company or the Issuer's Certificate of Trust or the Trust
Agreement or any statute, order, rule or regulation of any court or
governmental
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agency or body having jurisdiction over the Issuer or the Company or any of
their properties;
(k) Except (i) for the order of the Commission making the Registration
Statement effective, (ii) for permits and similar authorizations required
under the securities or "Blue Sky" laws of any jurisdiction, and to the
extent, if any, required pursuant to the undertakings set forth under Item
17 of Part II of the Registration Statement, and (iii) the Qualified Rate
Order, no consent, approval, authorization or other order of any
governmental authority is legally required for the execution, delivery and
performance of this Agreement by the Issuer and the Company and the
consummation of the transactions contemplated hereby; and
(l) This Agreement has been duly authorized, executed and delivered by
the Company and the Issuer.
2. Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Issuer agrees to sell to
each of the Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase from the Issuer, at the purchase price set forth in
Schedule I hereto the principal amount of the Securities set forth opposite the
name of such Underwriter in Schedule II hereto.
3. Upon the authorization by you of the release of the Securities, the
several Underwriters propose to offer the Securities for sale upon the terms and
conditions set forth in the Prospectus.
4. The Securities, on original issuance, will be issued in the form of one
or more global bonds registered in the name of The Depository Trust Company or
its nominee for the accounts of the Underwriters representing the Securities.
The time and date of delivery and payment for the Securities shall be 9:30 a.m.,
Philadelphia time on March 25, 1999, or at such other time and date as you and
the Issuer may agree upon in writing. The time and date for such delivery is
herein called the "Time of Delivery." The Securities shall be delivered by or on
behalf of the Issuer to The Depository Trust Company for the account of each
Underwriter, against payment by such Underwriter or on its behalf of the
purchase price therefor by wire transfer of immediately available funds to an
account specified by the Issuer. The Securities will be made available to the
Representative for checking and packaging at least twenty-four hours prior to
the Time of Delivery at the office of The Depository Trust Company, 55 Water
Street, New York, New York, 10004.
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5. The Issuer agrees with each of the Underwriters, and the Company agrees
with each of the Underwriters to cause the Issuer:
(a) To use its best efforts to cause the Registration Statement, if
not effective at the Execution Time, and any amendment thereto, to become
effective; to complete the Prospectus in a form approved by you, to file
the Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement and to provide evidence
satisfactory to you of such timely filing; and to furnish you, without
charge, three signed copies of the Registration Statement (or copies
thereof), including exhibits, and, during the period mentioned in paragraph
(d) below, as many copies of the Prospectus and any supplements and
amendments thereto as you may reasonably request and to furnish to the
Representative copies of all reports on Form SR required by Rule 463 under
the Act.
(b) Other than pursuant to filings under the Exchange Act incorporated
in the Registration Statement and the Prospectus by reference, before
amending or supplementing the Registration Statement or the Prospectus, to
furnish to you a copy of each such proposed amendment or supplement prior
to filing and not to file any such proposed amendment or supplement to
which you reasonably object.
(c) As soon as the Company or the Issuer is advised thereof, to
promptly advise you orally, and (if requested by you) to confirm such
advice in writing, (i) when the Registration Statement, if not effective at
the Execution Time, and any amendment thereto, has become effective, (ii)
when the Prospectus, and any Supplement thereto, has been filed with the
Commission pursuant to Rule 424(b), (iii) when any amendment to the
Registration Statement has been filed or become effective, (iv) of any
request by the Commission for any amendment of the Registration Statement
or supplement to the Prospectus or for any additional information, (v) when
any stop order has been issued under the Act with respect to the
Registration Statement or any proceedings therefor have been instituted or
are threatened; and to make every reasonable effort to secure the prompt
removal of any stop order, if issued, (vi) of the receipt by the Company or
the Issuer of any notification with respect to the suspension of the
qualification of the Securities for offering or sale in any jurisdiction,
or the initiation or threatening of any proceeding for that purpose and
(vii) of the happening of any event during the period mentioned in
subparagraph (d) below which in the judgment of the Company
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or the Issuer makes any statement made in the Registration Statement or the
Prospectus untrue and which requires the making of any changes in the
Registration Statement or the Prospectus in order to make the statements
therein not misleading.
(d) If, at any time when a prospectus is required to be delivered
under the Act, any event shall occur as a result of which it is necessary
to amend or supplement the Prospectus in order to make the statements
therein, in the light of the circumstances when the Prospectus is delivered
to a purchaser, not misleading, or if it is necessary to amend or
supplement the Prospectus to comply with law, forthwith to prepare and duly
file with the Commission an appropriate supplement or amendment thereto,
and furnish, at its own expense, to you such reasonable number of copies
thereof as you shall reasonably request.
(e) To cooperate with you and counsel for the Underwriters to qualify
the Securities for offer and sale under the securities or Blue Sky laws of
such jurisdictions as you shall reasonably request, to maintain such
qualifications in effect so long as required for the distribution of the
Securities and to arrange for the determination of the legality of the
Securities for purchase by institutional investors; provided that neither
the Company nor the Issuer shall 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 general service of process in any jurisdiction
where it is not now so subject, other than in suits arising out of the
offering or sale of the Securities, and to pay all expenses (including fees
and disbursements of counsel) in connection therewith.
(f) As soon as practicable, to make generally available to holders of
the Securities and to the Representative an earnings statement or
statements of the Issuer which will satisfy the provisions of Section 11(a)
of the Act and Rule 158 under the Act.
(g) During the period beginning from the date hereof and continuing to
and including the earlier of (i) the date, after the last Time of Delivery,
on which the distribution of the Securities ceases, as determined by the
Representative or (ii) the date which is 30 days after the last Time of
Delivery, not to offer, sell or contract to sell, or otherwise dispose of,
directly or indirectly, or announce the offering of, any "transition bonds"
(as defined in the Statute) issued by a trust or other special purpose
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vehicle without the prior written consent of the Representative.
(h) During a period from the date of this Agreement until the
retirement of the Securities, or until such time as the Underwriters shall
cease to maintain a secondary market in the Securities, whichever occurs
first, to deliver to the Representative the annual statements of compliance
and the annual independent auditor's servicing reports of the Company or
the Servicer furnished to the Issuer or the Bond Trustee pursuant to the
Sale and Servicing Agreement or the Indenture, as applicable, as soon as
such statements and reports are furnished to the Issuer or the Bond
Trustee.
(i) So long as any of the Securities are outstanding, to furnish to
the Representative (i) as soon as available, a copy of each report of the
Issuer filed with the Commission under the Exchange Act, or mailed to
holders of the Securities, (ii) a copy of any filings of the Company or the
Servicer with the Pennsylvania Public Utility Commission pursuant to the
Qualified Rate Order, including, but not limited to, any Adjustment
Requests and (iii) from time to time, any information concerning the
Company or the Issuer as the Representative may reasonably request.
(j) To the extent, if any, that any rating necessary to satisfy the
condition set forth in Section 6(i) of this Agreement is conditioned upon
the furnishing of documents or the taking of other actions by the Company
or the Issuer on or after the Time of Delivery, to furnish such documents
and take such other actions.
6. The Company covenants and agrees with the several Underwriters that the
Company will pay or cause to be paid the following: (i) the fees, disbursements
and expenses of the Issuer's and the Company's counsel and accountants in
connection with the registration of the Securities under the Act and other
expenses in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or producing
any Agreement among the Underwriters, this Agreement, the Blue Sky and Legal
Investment Memoranda, if any, and any other documents in connection with the
offering, purchase, sale and delivery of the Securities; (iii) all expenses in
connection with the qualification of the Securities for offering and sale under
state securities and insurance securities laws as provided in Section 5(e)
hereof, including the fees and disbursements of counsel for the Underwriters in
connection with such qualification and in
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connection with the Blue Sky and Legal Investment Memoranda; (iv) any fees
charged by securities rating services for rating the Securities; (v) the cost of
preparing certificates for the Securities; (vi) the cost and charges of any
transfer agent or registrar; (vii) the cost of qualifying the Securities with
The Depository Trust Company; (viii) all other costs and expenses incident to
the performance of its obligations hereunder which are not otherwise
specifically provided for in this Section; and (ix) all fees, costs and expenses
of the Underwriters, including the reasonable fees and disbursements of their
counsel and transfer taxes on resale of any of the Securities by them.
7. The several obligations of the Underwriters hereunder are subject to the
accuracy of the representations and warranties on the part of each of the
Company and the Issuer contained herein as of the Execution Time and the Time of
Delivery, in the latter case, on and as of the Time of Delivery with the same
effect as if made at the Time of Delivery, and in the Sale and Servicing
Agreement as of the Time of Delivery, to the accuracy of the statements of each
of the Company and the Issuer made in any certificates pursuant to the
provisions hereof, to the performance by each of the Company and the Issuer of
its obligations hereunder and to the following conditions:
(a) If the Registration Statement has not become effective prior to
the Execution Time, unless the Representative agrees 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) 9:30 AM 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 Prospectus, or any supplement thereto, is required pursuant
to Rule 424(b), the 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 Representative and the Issuer shall have received opinions of
counsel for the Company, portions of which may be delivered by (i) Ballard
Spahr Andrews & Ingersoll, LLP, outside counsel for the Company and (ii)
Richards, Layton & Finger, P.A., special Delaware counsel for the Company,
each dated the Time of Delivery, in
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form and substance reasonably satisfactory to the Representative, to the
effect that:
(i) the Company (a) has been duly incorporated and is validly
existing and subsisting as a corporation 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 Trust 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 a party and each other instrument or agreement necessary or
appropriate to the proper administration of this Agreement and the
transactions contemplated hereby;
(ii) the Trust Agreement, the Sale Agreement and the Servicing
Agreement have been duly authorized, executed and delivered by the
Company, and constitute legal, valid and binding agreements
enforceable against the Company in accordance with their terms
(subject to applicable bankruptcy, reorganization, fraudulent
transfer, 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
Prospectus, and there is no franchise, contract or other document of a
char acter required to be described in the Registration Statement or
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, filing with or order of
any court or governmental agency or body is required in connection
with the transactions
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contemplated herein, except such as have been obtained under the
Statute and the Qualified Rate Order and such as may be required under
the blue sky laws of any jurisdiction in connection with the purchase
and distribution of the Securities 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
Trust Agreement, the Sale Agreement or the Servicing Agreement, nor
the issue and sale of the Securities, nor the consummation of the
transactions contemplated by this Agreement, the Trust Agreement, the
Sale Agreement or the Servicing Agreement, nor the fulfillment of the
terms of this Agreement, the Trust 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, agreement or other instrument known to
such counsel after reasonable inquiry to which the Company or the
Issuer is a party or by which the Company or the Issuer is bound, (B)
result in the creation or imposition of any lien upon any properties
of the Company or the Issuer, pursuant to the terms of any such
indenture, agreement or other instrument (other than as contemplated
by the Basic Documents), or (C) violate any law, rule or regulation
or, to the knowledge of such counsel, any order, promulgated by the
United States, the State of Delaware or the Commonwealth of
Pennsylvania applicable to the Company or the Issuer, of any court or
of any federal or state regulatory body, administrative agency or
other governmental instrumentality having jurisdiction over the
Company or the Issuer or any of their respective properties; and
(vii) (A) the Qualified Rate Order has been duly authorized and
adopted by the Pennsylvania Public Utility Commission and is in full
force and effect, (B) the Securities constitute "transition bonds"
under Section 2812 of the Statute, and (C) upon the issuance of the
Securities, the Securities are entitled to the protections provided in
the first sentence of Section 2812(c)(2) of the Statute.
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In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the States
of Pennsylvania, New York and Delaware 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, the Issuer Trustee and public officials. References to the
Prospectus in this paragraph (b) include any supplements thereto at the
Time of Delivery.
(c) The Representative shall have received the opinions of counsel for
the Issuer, portions of which may be delivered by (i) Ballard Spahr Andrews
& Ingersoll, LLP, outside counsel for the Issuer and (ii) Richards, Layton
& Finger, P.A., special Delaware counsel for the Issuer, each dated as of
the Time of Delivery, in form and substance reasonably satisfactory to the
Representative, to the effect that:
(i) the Securities, the Indenture, the Sale Agreement, the
Servicing Agreement and the Trust Agreement conform to the
descriptions thereof contained in the Prospectus;
(ii) the Issuer has been duly formed and is validly existing as a
statutory 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 Securities;
(iii) the Indenture, the Sale Agreement and the Servicing
Agreement have been duly authorized, executed and delivered, and
constitute legal, valid and binding agreements enforceable against the
Issuer in accordance with their terms (subject to applicable
bankruptcy, reorganization, insolvency, fraudulent transfer,
moratorium or other similar laws or equitable principles affecting
creditors' rights generally from time to time in effect); and the
Securities have been duly authorized and, when executed and
authenticated in accordance with the provisions of the Indenture and
delivered to and paid for by the Underwriters pursuant to this
Agreement will constitute legal, valid and binding obligations of the
Issuer entitled to the benefits of the Indenture and any related
Series
<PAGE>
14
Supplement (subject to applicable bankruptcy, reorganization,
insolvency, fraudulent transfer, moratorium or other similar laws or
equitable principles affecting creditors' rights generally from time
to time in effect);
(iv) the Sale Agreement, the Servicing Agreement and the Trust
Agreement are not required to be qualified under the Trust Indenture
Act;
(v) the Indenture has been duly qualified under the Trust
Indenture Act;
(vi) 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 Issuer or
relating to the Securities, the Qualified Rate Order or the collection
of Intangible Transition Charges or the use and enjoyment of
Intangible Transition Property under the Statute, of a character
required to be disclosed in the Registration Statement which is not
adequately disclosed in the Prospectus, and there is no franchise,
contract or other document of a character required to be described in
the Registration Statement or Prospectus, or to be filed as an
exhibit, which is not described or filed as required; and the
statements included or incorporated in the Prospectus under the
headings "The Competition Act," "The QRO And The Intangible Transition
Charge," "The Indenture," "The Sale Agreement," "The Master Servicing
Agreement," "The Transition Bonds," "Certain Tax Matters" and "ERISA
Considerations" fairly summarize the matters described therein;
(vii) the Registration Statement has become effective under the
Act; any required filing of the Prospectus, any Preliminary
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 Registra tion Statement and the Prospectus (other than the
financial statements and the notes and schedules thereto and other
financial and statistical information contained therein and the Form
T-1 as to which such counsel need express no opinion) comply as to
form in all material respects with the applicable
<PAGE>
15
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 Prospectus as of its date
and at the Time of Delivery included or includes any untrue statement
of a material fact or omitted 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 (in each
case, other than the financial statements and the notes and schedules
thereto and other financial and statistical information contained
therein as to which such counsel need express no opinion);
(viii) this Agreement has been duly authorized, executed and
delivered by the Issuer;
(ix) no consent, approval, authorization, filing with or order of
any court or governmental agency or body is required for the issuance
of the Securities except such as have been obtained under the Statute
and the Qualified Rate Order and such as may be required under the
blue sky laws of any jurisdiction in connection with the purchase and
distribution of the Securities by the Underwriters and such other
approvals (specified in such opinion) as have been obtained;
(x) neither the execution and delivery of this Agreement, the
Sale Agreement, the Servicing Agreement or the Indenture, nor the
issue and sale of the Securities, nor the consummation of the
transactions contemplated by this Agreement, the Sale Agreement, the
Servicing Agreement or the Indenture, nor the fulfillment of the terms
of this Agreement, the Sale Agreement, the Servicing Agreement or the
Indenture, by the 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 Trust Agreement, 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 Issuer is a party or by which the Issuer, is bound, (B)
result in the creation or imposition of any lien
<PAGE>
16
upon any properties of the Issuer, pursuant to the terms of any such
indenture, agreement or other instrument (other than as contemplated
by the Basic Documents), or (C) violate any law or any order, rule or
regulation promulgated by the United States, the State of Delaware or
the Commonwealth of Pennsylvania applicable to the Issuer, of any
court or of any federal or state regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over
the Issuer or any of its properties;
(xi) (A) to the extent that the provisions of Section 2812 of the
Statute apply to the grant of a security interest by the Issuer in the
Collateral pursuant to the Indenture, then upon the giving of value by
the Bond Trustee to the Issuer with respect to the Collateral, (I) the
Indenture creates in favor of the Bond Trustee a security interest in
the rights of the Issuer in the Collateral, (II) such security
interest is valid and enforceable against the 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 2812
of the Statute), and has attached, (III) such security interest is
perfected, and (IV) such perfected security interest ranks prior to
any other security interest created under Section 2812 of the Statute.
(B) To the extent that the provisions of Section 2812 of the Statute
do not apply to the grant of a security interest by the Issuer in the
Collateral pursuant to the Indenture, then upon the giving of value by
the Bond Trustee to the Issuer with respect to the Collateral, (I) the
Indenture creates in favor of the Bond Trustee a security interest in
the rights of the Issuer in the Collateral, and such security interest
is enforceable against the Issuer with respect to such Collateral,
(II) insofar as perfection of such security interest can be
accomplished only by filing financing statements under the Uniform
Commercial Code in [list filing offices and jurisdictions], upon the
filing of such financing statements in such filing offices, the Bond
Trustee will have a perfected security interest in such Collateral,
and (III) when so perfected, the Bond Trustee's security interest in
such Collateral as to which perfection of such security interest can
be accomplished only by filing a financing statement will have
priority over any other security interest in such Collateral if such
other security interest, in order to achieve priority over the Bond
Trustee's security interest by the filing of one or more financing
<PAGE>
17
statements, was required by law to have been perfected by making such
filings in the filing offices prior to the effective date of [describe
search reports and effective date]; and
(xii) the Issuer is not and, after giving effect to the offering
and sale of the Securities and the application of the proceeds thereof
as described in the Prospectus, will not be 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.
(d) The Representative shall have received from Cravath, Swaine &
Moore, counsel for the Underwriters, such opinion or opinions, dated the
Time of Delivery, with respect to the issuance and sale of the Securities,
the Indenture, the Registration Statement, the Prospectus (together with
any supplement thereto) and other related matters as the Representative may
reasonably require, and each of the Company and the Issuer shall have
furnished to such counsel such documents as they request for the purpose of
enabling them to pass upon such matters.
(e) The Representative shall have received a certificate of the
Company, signed by any Vice President of the Company, dated the Time of
Delivery, in form and substance reasonably satisfactory to the
Representative, to the effect that the signer of such certificate has
reviewed the Registration Statement, the Prospectus, any supplement to the
Prospectus and this Agreement and that:
(i) the representations and warranties of the Company and the
Issuer in this Agreement, the Sale Agreement and the Servicing
Agreement are true and correct in all material respects on and as of
the Time of Delivery with the same effect as if made at the Time of
Delivery, and the Company and the Issuer have complied with all the
agreements and satisfied all the conditions on their respective parts
to be performed or satisfied at or prior to the Time of Delivery;
(ii) no stop order suspending the effective ness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or, to the Company's knowledge, threat
ened; and
(iii) since the dates as of which information is given in the
Prospectus (exclusive of any supplement thereto), there has been no
material adverse change in
<PAGE>
18
the condition (financial or other), earnings, business or properties
of the Company and its Subsidiaries taken as a whole (if such a change
would impair the investment quality of the Securities or make it
impractical or inadvisable to market the Securities) or the Issuer,
whether or not arising from transactions in the ordinary course of
business, except as set forth in or contemplated in the Prospectus
(exclusive of any supplement thereto).
(f) At the Time of Delivery, the Representative shall have received
from PricewaterhouseCoopers LLP (i) a letter or letters (which may refer to
letters previously delivered to one or more of the Representative), dated
as of the Time of Delivery, in form and substance satisfactory to the
Representative, confirming that they are independent accountants within the
meaning of the Act and the Exchange Act and the respective applicable
published rules and regulations thereunder and stating in effect that they
have performed certain specified procedures as a result of which they
determined that certain information of an accounting, financial or
statistical nature (which is limited to accounting, financial or
statistical information derived from the general accounting records of the
Company and its Subsidiaries) set forth in the Registration Statement and
the Prospectus, including information specified by the Underwriters and set
forth under the captions "Prospectus Summary," "PECO Energy's Restructuring
Plan," "The QRO And The Intangible Transition Charges," "The Seller and
Servicer," and "The Transition Bonds" in the 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 Time of Delivery, in form and substance satisfactory to the
Representative, satisfying the requirements of Section 2.10(7) of the
Indenture.
References to the Prospectus in this clause (f) include any supplement
thereto at the date of the letter.
In addition, except as provided in Schedule I hereto, at the Execution
Time, the Representative shall have received from PricewaterhouseCoopers
LLP a letter or letters, dated as of the Execution Time, in form and
substance satisfactory to the Representative, to the effect set forth
above.
(g) 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)
<PAGE>
19
and the Prospectus (exclusive of any supplement thereto), and at or prior
to the Time of Delivery, there shall not have been any change, or any
development involving a prospective change, in or affecting either (i) the
business or properties or financial condition of the Company or the Issuer,
or (ii) the Intangible Transition Property, the Securities, the Qualified
Rate Order or the Statute, the effect of which is, in the judgment of the
Representative, so material and adverse as to make it impractical or
inadvisable to proceed with the offering or delivery of the Securities as
contemplated by the Registration Statement (exclusive of any amendment
thereof) and the Prospectus (exclusive of any supplement thereto).
(h) The Representative, the Company and the Issuer shall have received
on the Closing Date an opinion letter or letters of Ballard Spahr Andrews &
Ingersoll, counsel to the Company and the Issuer, dated the Time of
Delivery, in form and substance reasonably satisfactory to the
Representative, (i) with respect to the characterization of the transfer of
the Intangible Transition Property by the Company to the Issuer as a "true
sale" for bankruptcy purposes, (ii) to the effect that a court would not
order the substantive consolidation of the assets and liabilities of the
Issuer with those of the Company in the event of a bankruptcy,
reorganization or other insolvency proceeding involving the Company and
(iii) to the effect that upon the delivery of the fully executed Sale
Agreement to the Issuer and the payment of the purchase price of the
Intangible Transition Property by the Issuer to the Seller pursuant to the
Sale Agreement, then (A) the transfer of the Intangible Transition Property
by the Seller to the Issuer pursuant to the Sale Agreement conveys the
Seller's right, title and interest in the Intangible Transition Property to
the Issuer and will be treated as an absolute transfer of all the Seller's
right, title and interest in the Intangible Transition Property, other than
for federal and state tax purposes, (B) such transfer of the Intangible
Transition Property is perfected, (C) such transfer has priority over any
other assignment of the Intangible Transition Property, and (D) the
Intangible Transition Property is free and clear of all liens created prior
to its transfer to the Issuer pursuant to the Sale Agreement.
(i) At or prior to the Time of Delivery, the Representative shall have
received evidence, in form and substance reasonably satisfactory to the
Representative, that the Company has obtained a release of the Intangible
Transition Property from the lien of that certain mortgage, dated May 1,
1923, as supplemented and amended to the date
<PAGE>
20
hereof, between the Company and First Union Trust Company, National
Association (as successor to Fidelity Trust Company), as trustee.
(j) The Securities shall have been rated in the highest long-term
rating category by each of the Rating Agencies or in such other rating
category as was specified in the Preliminary Prospectus.
(k) At or prior to the Time of Delivery, the Representative shall have
received evidence, in form and substance reasonably satisfactory to the
Representative, that appropriate filings have been or are being made in
accordance with the Statute and other applicable law reflecting the grant
of a security interest by the Issuer in the Collateral to the Bond Trustee.
(l) At or prior to the Time of Delivery, the Representative shall have
received evidence of the Pennsylvania Public Utility Commission's approval
of the Qualified Rate Order.
(m) Prior to the Time of Delivery, each of the Company and the Issuer
shall have furnished to the Representative such further information,
certificates, opinions and documents as the Representative may reasonably
request and as are customary for transactions of this type.
(n) The Representative shall have received an opinion of counsel to
the Bond Trustee, dated the Time of Delivery, in form and substance
reasonably satisfactory to the Representative, to the effect that:
(i) the Bond Trustee is a New York banking association in good
standing under the laws of the State of New York;
(ii) the Indenture has been duly authorized, executed and
delivered, and constitutes a legal, valid and binding instrument
enforceable against the Bond 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 Securities have been duly authenticated by the Bond
Trustee.
<PAGE>
21
(o) The Representative shall have received an opinion of counsel to
the Issuer Trustee, dated the Time of Delivery, in form and substance
reasonably satisfactory to the Representative, to the effect that:
(i) the Issuer Trustee has been duly incorporated and is validly
existing as a national banking association in good standing under the
federal laws of the United States of America, 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 Issuer, and constitutes a legal, valid and binding
instrument enforceable against the Issuer in accordance with its terms
(subject, as to enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium or other laws affecting
creditors' rights generally from time to time in effect).
(p) The Representative shall have received a letter from Ballard Spahr
Andrews & Ingersoll, LLP, counsel for the Issuer, dated as of the Time of
Delivery, in form and substance reasonably satisfactory to the
Representative, to the effect that the Representative may rely on the
opinion of Ballard Spahr Andrews & Ingersoll, LLP, of even date therewith,
addressed to PricewaterhouseCoopers LLP, to the effect that the likelihood
of any outcome of the Petition to the Supreme Court of the United States
for Writ of Certiorari filed by Indianapolis Power & Light Company having a
material adverse effect on the payment of principal and interest on the
Securities on the dates and in the amounts set forth in the Prospectus is
remote, as if such opinion were addressed to the Representative.
This Agreement and all obligations of the Underwriters hereunder may be
canceled at, or at any time prior to, the Time of Delivery by the Representative
if any of the conditions specified in this Section 7 shall not have been
fulfilled in all material respects when and as provided in this Agreement.
Notice of such cancelation shall be given to the Company in writing or by
telephone or telegraph confirmed in writing.
The documents required to be delivered by this Section 7 shall be delivered
at the office of Ballard Spahr Andrews & Ingersoll, LLP, counsel for the
Company, at 1735 Market Street, 51st Floor, Philadelphia, PA 19103-7599, at the
Time of Delivery.
8. Indemnification and Contribution. (a) The Company agrees to indemnify
and hold harmless each Underwriter, the directors, officers, employees and
agents of each Underwriter and each person who controls any Underwriter within
the meaning of either Section 15 of the Act or Section 20 of the Exchange Act
from and against any and all losses, claims, damages, liabilities and expenses,
based upon any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement (including the Prospectus contained
therein and including any amendment or supplement to any thereof) or any
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; provided, however,
that the Company will not be liable in any such case to the extent that any such
<PAGE>
22
losses, claims, damages, liabilities or expenses are caused by (i) 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 Company or the Issuer by or on behalf of any Underwriter
through the Representative specifically for inclusion therein, or (ii) the
failure of any Underwriter to send to any purchaser to whom it had sent a
Preliminary Prospectus an amended Prospectus as shall have been furnished by the
Company within the time periods required by the Act and in such quantities are
required by each Underwriter for such purpose (excluding documents incorporated
therein by reference), if required by the Act, to the extent that the amended
prospectus would have cured the defect in the Preliminary Prospectus giving rise
to such losses, claims, damages or liabilities, or (iii) any use of the
Prospectus by any Underwriter after the expiration of that period, if any,
during which the Underwriter is required by law to deliver a prospectus, unless
the Company shall have been advised in writing of such intended use. This
indemnity agreement will be in addition to any liability which the Company may
otherwise have.
(b) Each Underwriter severally and not jointly agrees to indemnify and hold
harmless the Company, each of its directors, each of its officers who signs the
Registration Statement, and each person who controls the Company within the
meaning of either the Act or the Exchange Act, the Issuer and each of its
controlling persons and trustees to the same extent as the foregoing indemnity
from the Company to each Underwriter, but only with reference to written
information relating to such Underwriter furnished to the Company by or on
behalf of such Underwriter through the Representative 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 Company acknowledges that the statements set forth in the
last paragraph of the cover page of the Prospectus Supplement and the Prospectus
and the information set forth under the heading "Underwriting" in the Prospectus
Supplement and "Plan of Distribution" in the 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.
(c) If any action, suit or proceeding shall be brought against any
Underwriter or any person controlling any Underwriter in respect of which
indemnity may be sought against the Company, such Underwriter or such
controlling person shall promptly notify the Company and the Company shall
assume the defense thereof, including the employment of counsel and payment of
all fees and expenses. Such Underwriter or any such controlling person shall
have the right to employ separate counsel in any such action,
<PAGE>
23
suit or proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Underwriter or such
controlling person unless (i) the Company has agreed in writing to any such fees
and expenses, (ii) the Company has failed, within 30 days after the Company has
been so notified, to assume the defense and employ counsel, or (iii) the named
parties to any such action, suit or proceeding (including any impleaded parties)
include both such Underwriter or such controlling person and the Company and
such Underwriter or such controlling person shall have been advised by its
counsel that representation of such indemnified party and the Company by the
same counsel would be inappropriate under applicable standards of professional
conduct (whether or not such representation by the same counsel has been
proposed) due to actual or potential differing interests or defenses among them
(in which case the Company shall not have the right to assume the defense of
such action, suit or proceeding on behalf of such Underwriter or such
controlling person). It is understood, however, that the Company shall, in
connection with any one such action, suit or proceeding or separate but
substantially similar or related actions, suits or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of only one separate firm of
attorneys (in addition to any local counsel) at any time for all such
Underwriters and controlling persons not having actual or potential differing
interests or defenses with you or among themselves, which firm shall be
designated in writing by the Representative, and that all such fees and expenses
shall be reimbursed as they become due. The Company shall not be liable for any
settlement of any such action, suit or proceeding effected without their written
consent, but if settled with such written consent, or if there be a final
judgment for the plaintiff in any such action, suit or proceeding, the Company
agrees to indemnify and hold harmless any Underwriter, to the extent provided in
the preceding paragraph, and any such controlling person from and against any
loss, claim, damage, liability or expense by reason of such settlement or
judgment.
(d) If the indemnification provided for in this Section 8 is for any reason
held to be unenforceable by an indemnified party although applicable in
accordance with its terms (including the terms of subsection (b) of this Section
8), an indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or expenses in such proportion as
is equitable and as shall reflect both the relative benefit received by the
Issuer and the Company on the one hand and the Underwriter or Underwriters, as
the case may be, on the other hand, from the offering of the Securities, and the
relative fault, if any, of
<PAGE>
24
the Issuer and the Company on the one hand and of the Underwriter or
Underwriters, as the case may be, on the other hand in connection with the
statements or omissions which resulted in such losses, liabilities, claims,
damages or expenses, as well as any other relevant equitable considerations. The
relative benefit received by the Issuer and the Company on the one hand and the
Underwriters or Underwriters, as the case may be, on the other hand, in
connection with the offering of the Securities shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Securities (before
deducting expenses) received by the Issuer and the Company bear to the total
commissions, concessions and discounts received by the Underwriter or
Underwriters, as the case may be. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Issuer and the Company on the one hand,
or the Underwriter or Underwriters, as the case may be, on the other hand, and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company and the
Underwriters agree that it would not be just and equitable if contribution
pursuant to this Section 8 were determined by a pro rata allocation (even if the
Underwriters were treated as one entity for such purpose) or by any other method
of allocation that does not take account of the equitable considerations
referred to above. The amount paid or payable by an indemnified party as a
result of the losses, liabilities, claims, damages and expenses referred to
above shall be deemed to include, subject to the limitations set forth above,
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 8, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price of the Securities underwritten by it and distributed to the public exceeds
the amount of any damages which such Underwriter has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. 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. The Underwriters'
obligations to contribute pursuant to this Section 8 are several in proportion
to the respective principal amounts of Securities set forth opposite their names
in Schedule I hereto and not joint.
(e) No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened action,
suit or proceeding in
<PAGE>
25
respect of which any indemnified party is or could have been a party and
indemnity could have been sought hereunder by such indemnified party, unless
such settlement includes an unconditional release of such indemnified party from
all liability on claims that are the subject matter of such action, suit or
proceeding.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses become due. A successor to
any Underwriter or any person controlling any Underwriter, or to the Issuer or
the Company, their directors or officers, or any person controlling the Issuer
or the Company, shall be entitled to the benefits of the indemnity, contribution
and reimbursement agreements contained in this Section 8.
9. If any one or more Underwriters shall fail to purchase and pay for any
of the Securities 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 Securities set forth opposite their
names in Schedule II hereto bears to the aggregate amount of Securities set
forth opposite the names of all the remaining Underwriters) the Securities which
the defaulting Underwriter or Underwriters agreed but failed to purchase;
provided, however, that in the event that the aggregate amount of Securities
which the defaulting Underwriter or Underwrites agreed but failed to purchase
shall exceed 10% of the aggregate amount of Securities 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 Securities, and if
such nondefaulting Underwriters do not purchase all the Securities, this
Agreement will terminate without liability to any nondefaulting Underwriter, the
Issuer or the Company. In the event of a default by any Underwriter as set forth
in this Section 9, the Time of Delivery shall be postponed for such period, not
exceeding seven days, as the Representative shall determine in order that the
required changes in the Registration Statement and the 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 Company, the Issuer and any nondefaulting Underwriter for damages occasioned
by its default hereunder.
<PAGE>
26
10. This Agreement shall be subject to termination in the absolute
discretion of the Representative, by notice given to the Company prior to
delivery of and payment for the Securities, if at any time 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 Company (if such a change or development would, in
the judgment of the Representative, impair the investment quality of the
Securities or make it impractical or inadvisable to market the Securities) or
the Issuer or (B) the Intangible Transition Property, the Securities, the
Qualified Rate Order or the Statute, the effect of which, in the judgment of the
Representative, materially impairs the investment quality of the Securities or
makes it impractical or inadvisable to market the Securities, (ii) trading in
the Company's Common Stock shall have been suspended by the Commission or the
New York Stock Exchange (if such a suspension would, in the judgment of the
Representative, impair the investment quality of the Securities or make it
impractical or inadvisable to market the Securities) 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 by Federal, New York State or Pennsylvania
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostili ties, 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 Representative, impracticable or inadvisable
to proceed with the offering or delivery of the Securities as contemplated by
the Final Prospectus (exclusive of any supplement thereto).
11. If the sale of the Securities provided for herein is not consummated
because any condition to the obligations of the Underwriters set forth in
Section 7 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 to perform any agreement herein or comply with any provision hereof
other than by reason of a default by any of the Underwriters, the Company will
reimburse the Underwriters severally 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
Securities.
12. The respective agreements, representations, warranties, indemnities and
other statements of the Company, the Issuer and the several Underwriters set
forth in this Agreement or made by or on behalf of them, respectively, pursuant
to this Agreement, shall remain in full force and effect, regardless of
<PAGE>
27
any investigation (or any statement as to the results thereof) made by or on
behalf of any Underwriter or any controlling person of any Underwriter or the
Company or any officer, director or controlling person of the Company, and shall
survive delivery of and payment for the Securities. The provisions of Sections 8
and 12 hereof shall survive the termination or cancelation of this Agreement.
13. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely on any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you on behalf of the Underwriters.
All communications hereunder will be in writing and effective only on
receipt, and, if sent to the Representative, will be mailed, delivered or
telegraphed and confirmed to them, at the address specified in Schedule I
hereto; and if sent to the Company or the Issuer, will be mailed, delivered or
telegraphed and confirmed to the address of the Company set forth in the
Registration Statement, Attention: Secretary.
14. This Agreement shall be binding on and inure solely to the benefit of
the Underwriters, the Issuer, the Company and, to the extent provided in Section
8 and Section 12 hereof, the officers and directors of the Company and each
person who controls the Issuer, the Company or any Underwriter, and their
respective heirs, executors, administrators, successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement. No purchaser of any of the Securities from any Underwriter shall be
deemed a successor or assign merely by reason of such purchase.
15. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business and the term "Execution Time" shall mean
the date and time that this Agreement is executed and delivered by the parties
hereto.
16. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
17. This Agreement may be executed by any one or more of the parties hereto
in any number of counterparts, each of which shall be deemed to be an original,
but all such respective counterparties shall together constitute one and the
same instrument.
<PAGE>
28
If the foregoing is in accordance with your understanding, please sign and
return to us 10 counterparts hereof, whereupon this letter and your acceptance
shall constitute a binding agreement between each of the Underwriters, on the
one hand, and the Company and the Issuer on the other. It is understood that
your acceptance of this letter on behalf of each of the Underwriters is pursuant
to the authority set forth in a form of Agreement among Underwriters, the form
of which shall be submitted to the Company for examination upon request, but
without warranty on your part as to the authority of the signers thereof.
Very truly yours,
PECO Energy Company
By: /s/ J. Barry Mitchell
------------------------------------
Name: J. Barry Mitchell
Title: Treasurer & Vice President -
Finance
PECO Energy Transition Trust
By: /s/ George Shicora
------------------------------------
Name: George Shicora
Title: Beneficiary Trustee
Accepted, March 18, 1999
Salomon Smith Barney Inc.
By: Salomon Smith Barney Inc.
By: /s/ Brooke Schooley
-------------------------
Name: Brooke Schooley
Title:
For itself and the other
several Underwriters, if any,
named in Schedule II to the
foregoing Agreement.
<PAGE>
SCHEDULE I
Underwriting Agreement dated March 18, 1999
Registration Statement No. 333-58055
Representative:
Salomon Smith Barney Inc.
7 World Trade Center
New York, NY 10048
Title, Purchase Price and Description of Securities:
Title: PECO Energy Transition Trust
$4,000,000,000 Transition Bond
Series 1999-A
Principal amount, Price to Public, Underwriting Discounts and Commissions
and Proceeds to Trust:
<TABLE>
<CAPTION>
Total Underwriting
Principal Discounts
Amount of Price to and Proceeds to
Class Public Commissions Trust
-------------- -------------- ------------ --------------
<S> <C> <C> <C> <C>
Per Class $ 244,470,272 $ 244,414,557 $ 855,646 $ 243,558,911
A-1 Bond
Per Class $ 275,371,325 $ 275,173,498 $ 1,101,485 $ 274,072,013
A-2 Bond
Per Class $ 667,000,000 $ 665,910,722 $ 3,001,500 $ 662,909,222
A-3 Bond
Per Class $ 458,518,647 $ 457,914,411 $ 2,063,334 $ 455,851,077
A-4 Bond
Per Class $ 464,600,000 $ 463,855,246 $ 2,323,000 $ 461,532,246
A-5 Bond
Per Class $ 993,386,331 $ 992,110,922 $ 4,966,932 $ 987,143,991
A-6 Bond
Per Class $ 896,653,425 $ 895,181,120 $ 4,483,267 $ 890,697,853
A-7 Bond
Total $4,000,000,000 $3,994,560,476 $18,795,164 $3,975,765,313
-------------- -------------- ----------- --------------
</TABLE>
<PAGE>
2
Original Issue Discount: None
Redemption provisions: Optional Redemption and Mandatory
Redemption as set forth in
Article X of the Indenture
Other provisions:
Closing Date, Time and Location: March 25, 1999,
9:30 a.m., Philadelphia time,
Philadelphia, PA
<PAGE>
3
SCHEDULE II
<TABLE>
<CAPTION>
Principal Amount of Transition Bonds to be Purchased
------------------------------------------------------------
Class A-1 Class A-2 Class A-3 Class A-4
------------ ------------ ------------ ------------
Underwriters Bonds Bonds Bonds Bonds
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Salomon Smith Barney $141,792,758 $159,715,369 $386,860,000 $265,940,815
Goldman, Sachs & Co. $ 42,782,298 $ 48,189,982 $116,725,000 $ 80,240,763
Lehman Brothers $ 42,782,298 $ 48,189,982 $116,725,000 $ 80,240,763
First Chicago $ 4,889,405 $ 5,507,427 $ 13,340,000 $ 9,170,373
Capital Markets, Inc.
First Union $ 4,889,405 $ 5,507,427 $ 13,340,000 $ 9,170,373
Capital Markets Corp.
Commerce Capital $ 2,444,703 $ 2,753,713 $ 6,670,000 $ 4,585,186
Markets, Inc.
Janney Montgomery Scott Inc. $ 2,444,703 $ 2,753,713 $ 6,670,000 $ 4,585,186
Pryor, McClendon, $ 2,444,703 $ 2,753,713 $ 6,670,000 $ 4,585,186
Counts & Co., Inc.
------------ ------------ ------------ ------------
Total $244,470,272 $275,371,325 $667,000,000 $458,518,647
============ ============ ============ ============
<CAPTION>
Principal Amount of Transition Bonds to be Purchased
--------------------------------------------------------------
Class A-5 Class A-6 Class A-7
------------ ------------ ------------
Underwriters Bonds Bonds Bonds Total
------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
Salomon Smith Barney $269,468,000 $576,164,072 $520,058,987 $2,320,000,001
Goldman, Sachs & Co. $ 81,305,000 $173,842,608 $156,914,349 $ 700,000,000
Lehman Brothers $ 81,305,000 $173,842,608 $156,914,349 $ 700,000,000
First Chicago $ 9,292,000 $ 19,867,727 $ 17,933,069 $ 80,000,001
Capital Markets, Inc.
First Union $ 9,292,000 $ 19,867,727 $ 17,933,069 $ 80,000,001
Capital Markets Corp.
Commerce Capital $ 4,646,000 $ 9,933,863 $ 8,966,534 $ 39,999,999
Markets, Inc.
Janney Montgomery Scott Inc. $ 4,646,000 $ 9,933,863 $ 8,966,534 $ 39,999,999
Pryor, McClendon, $ 4,646,000 $ 9,933,863 $ 8,966,534 $ 39,999,999
Counts & Co., Inc.
------------ ------------ ------------ --------------
Total $464,600,000 $993,386,331 $896,653,425 $4,000,000,000
============ ============ ============ ==============
</TABLE>
PECO ENERGY TRANSITION TRUST
AMENDED AND RESTATED
TRUST AGREEMENT
as of February 19, 1999
AMONG
GEORGE SHICORA and DIANA MOY KELLY, as BENEFICIARY TRUSTEES,
FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION, as ISSUER TRUSTEE,
DELAWARE TRUSTEE AND INDEPENDENT TRUSTEE
and
PECO ENERGY COMPANY,
as GRANTOR and OWNER
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Page
1.01. Capitalized Terms.......................................................1
ARTICLE II
ORGANIZATION
2.01. Name....................................................................5
2.02. Office..................................................................5
2.03. Purposes and Powers.....................................................5
2.04. Appointment of the Trustees; Initial Trust Property.....................6
2.05. Declaration of Trust....................................................6
2.06. Other Expenses, Liabilities of Trust....................................7
2.07. Situs of Trust..........................................................7
2.08. Additional Capital Contributions........................................7
2.09. Assignment of Right to Distributions or Payments; Transfers.............7
ARTICLE III
COMPLIANCE WITH THE CODE
3.01. Trust to be Treated as a Division For Tax Purposes..................... 8
ARTICLE IV
SEPARATE EXISTENCE OF TRUST
4.01. Maintenance of Separate Existence.......................................8
4.02. Merger and Other Transactions..........................................12
4.03. Transactions with Affiliates...........................................13
4.04. Insolvency.............................................................13
4.05. Rating Confirmation....................................................13
ARTICLE V
INVESTMENT AND APPLICATION OF TRUST FUNDS
5.01. Investment of Trust Funds..............................................13
5.02. Application of Funds...................................................14
ARTICLE VI
AUTHORITY AND DUTIES OF THE TRUSTEES
6.01. General Authority......................................................14
6.02. Specific Authority; Special Authority of Beneficiary Trustees..........14
6.03. Accounting and Reports to the Grantor, any Owner, the Internal Revenue
Service and Others....................................................15
6.04. Signature of Returns...................................................16
6.05. Right to Receive Instructions..........................................16
6.06. No Duties Except as Specified in this Agreement or in Instructions.....16
6.07. No Action Except Under Specified Documents or Instructions.............17
6.08. No Action Contrary to Agreement, Trust Related Agreements or
Applicable Law........................................................17
i
<PAGE>
ARTICLE VII
CONCERNING THE TRUSTEES
7.01. Acceptance of Trusts and Duties........................................17
7.02. Furnishing of Documents................................................18
7.03. Reliance; Advice of Counsel............................................18
7.04. Not Acting in Individual Capacity......................................18
ARTICLE VIII
COMPENSATION OF TRUSTEES
8.01. Issuer Trustee's Fees and Expenses.....................................19
8.02. Beneficiary Trustees' Fees and Expenses................................19
8.03. Fees of Separate Independent Trustee and Delaware Trustee..............19
ARTICLE IX
INDEMNIFICATION OF TRUSTEES
9.01. Scope of Indemnification...............................................19
ARTICLE X
TERMINATION OF TRUST
10.01. Dissolution of Trust..................................................20
10.02. No Termination by Grantor or Owner....................................20
10.03. Cancellation of Certificate of Trust..................................20
ARTICLE XI
SUCCESSOR TRUSTEES AND ADDITIONAL TRUSTEES
11.01. Resignation of Trustee; Appointment of Successor......................20
ARTICLE XII
MISCELLANEOUS
12.01. Supplements and Amendments............................................21
12.02. No Legal Title to Trust Property in Grantor and Owner.................22
12.03. Limitations on Rights of Others.......................................22
12.04. Notices...............................................................22
12.05. Severability..........................................................23
12.06. Separate Counterparts.................................................23
12.07. Successors and Assigns................................................23
12.08. Headings..............................................................23
12.09. Governing Law.........................................................24
Exhibit 1 Issuer Trustee Fee Schedule
Exhibit 2 Certificate of Trust
ii
<PAGE>
AMENDED AND RESTATED TRUST AGREEMENT dated as of February 19, 1999 among
PECO Energy Company, a Pennsylvania corporation, as Grantor and Owner, and First
Union Trust Company, National Association, a national banking corporation, as
Issuer Trustee, Delaware Trustee and Independent Trustee, George Shicora, an
individual, and Diana Moy Kelly, an individual, as Beneficiary Trustees.
A Certificate of Trust of the Trust was filed with the Secretary of State
of the State of Delaware on June 23, 1998.
The Grantor, the Beneficiary Trustees and the Issuer Trustee are parties to
that certain Trust Agreement dated as of June 23, 1998 (the "Prior Trust
Agreement") and now desire to amend and restate the Prior Trust
Agreement as set forth below.
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby,
agree to amend and restate the Prior Trust Agreement in its entirety as follows.
ARTICLE I
DEFINITIONS
1.01. Capitalized Terms. For all purposes of this Agreement, the following
terms shall have the meanings set forth below:
"Agreement" means this Amended and Restated Trust Agreement, as it may be
amended from time to time.
"Affiliate" shall mean, with reference to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person; provided, that, for purposes of this Agreement when used with respect to
the Grantor's or any Owner's direct or indirect subsidiaries, any limited
partners thereof shall also be deemed "Affiliates." For the purposes of this
definition, "control," when used with reference to any specified Person, shall
mean the power to direct the management and policies of such specified 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.
"Affiliated Entity" means the Grantor, any Owner, any of their respective
direct or indirect subsidiaries or any Affiliate of any of the foregoing other
than the Trust.
"Beneficiary Trustee" means any Trustee other than the Issuer Trustee, the
Independent Trustee or the Delaware Trustee.
<PAGE>
"Bond Trustee" means The Bank of New York, as Bond Trustee under the
Indenture, and its successors.
"Business Day" means any day other than a Saturday, Sunday, or a day on
which banking institutions in the City of Philadelphia, the City of New York,
the City of Charlotte or the State of Delaware are required by law or executive
order to remain closed.
"Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12
Del. C. Section 3801, et seq., and any successor statute, as amended from time
to time.
"Code" means the Internal Revenue Code of 1986, as amended.
"Competition Act" means the Pennsylvania Electricity Generation Customer
Choice and Competition Act, Chapter 28 of Title 66 of the Pennsylvania
Consolidated Statutes, 66 Pa.C.S. (section) 2801, et seq.
"Delaware Trustee" means a Trustee who is a natural person and who is a
resident of the State of Delaware, or, in all other cases, a trustee which has
its principal place of business in the State of Delaware.
"Eligible Investments" shall be the investments so designated from time to
time by any Beneficiary Trustee.
"Fiscal Year" means the calendar year from each January 1 to the following
December 31.
"GAAP" means generally accepted accounting principles in effect from time
to time.
"Grantor" means PECO Energy Company.
"Indenture" means the Indenture, to be executed at the closing of the
transactions contemplated in the Trust Related Agreements, between the Trust and
the Bond Trustee as the same may be amended, supplemented or otherwise modified
from time to time.
"Independent Trustee" means a Trustee that is not and has not been for at
least three years from the date of his or her or its appointment (i) a direct or
indirect legal or beneficial owner of the Trust or PECO Energy or any of their
respective Affiliates, (ii) a relative, supplier, employee, officer, director,
manager, contractor or material creditor of the Trust or PECO Energy or any of
their respective Affiliates or (iii) a Person who controls PECO Energy or its
Affiliates.
"Insolvency Event" means the Significant Events described in (a)(i) and
(a)(ii) of that definition.
2
<PAGE>
"Issuer Trustee" means First Union Trust Company, National Association or
any other Issuer Trustee designated by the Grantor or any Owner from time to
time.
"Liability" means any claim, damage, judgment, amount paid in settlement,
fine, penalty, punitive damages, or cost or expense of any nature (including,
without limitation, attorneys' fees and disbursements).
"Moody's" means Moody's Investor Service.
"Owner" means the Grantor and its successors and permitted assigns as a
beneficial owner (within the meaning of the Business Trust Act) of the Trust.
All references in this Agreement to "any Owner" means each of the Grantor's
successors and permitted assigns as a beneficial owner of the Trust,
and not the Grantor itself.
"PECO Energy" means PECO Energy Company, a Pennsylvania corporation, its
successors and permitted assigns.
"Periodic Filings" means any filings or submissions that the Trust is
required to make with any state or federal regulatory agency or under
the Code.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization, governmental authority or any other entity of
similar nature.
"Proceeding" means any threatened, pending or completed action, suit,
appeal or other proceeding of any nature, whether civil, criminal,
administrative or investigative, whether formal or informal, and whether brought
by or in the right of the Trust, the Grantor, any Owner or otherwise.
"Series" has the meaning assigned to that term in the Indenture.
"Significant Event" means (a) with respect to the Trust, that the Trust (i)
shall fail to or admit in writing its inability to pay its debts generally as
they become due, or shall commence a voluntary case or other Proceeding under
any applicable bankruptcy, insolvency, reorganization, debt arrangement,
dissolution or other similar law now or hereafter in effect, or shall consent to
the appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian, sequestrator (or other similar official) for the Trust or
for any substantial part of its property, or shall make any general assignment
for the benefit of creditors, or shall take any trust, corporate or partnership
action authorizing the taking of any of the foregoing actions or (ii) a case or
other Proceeding shall be commenced without the application or consent of the
Trust, in any court, seeking the liquidation, reorganization, debt arrangement,
dissolution, winding up, or compensation or readjustment of debts of the Trust,
the appointment of a trustee, receiver, custodian, liquidator, assignee,
sequestrator, or the like for the Trust or any substantial part of its assets,
or any similar action with respect to the Trust under any law
3
<PAGE>
(foreign or domestic) relating to bankruptcy, insolvency,
reorganization, winding up or composition or adjustment of debts and such case
or Proceeding shall continue undismissed or unstayed and in effect for a period
of 90 days; or any of the actions sought in such petition or Proceeding,
including the entering of an order for relief in respect of the Trust or the
appointment of any trustee, receiver, custodian, liquidator, assignee,
sequestrator or the like for the Trust or any substantial portion of the Trust's
property shall be granted or otherwise occur (each of (i) and (ii) an
"Insolvency Event");
(b) The Trust shall become subject to the registration requirements of
the Investment Company Act; or
(c) Any Event of Default as set forth in the Indenture shall have
occurred.
"Supplemental Indenture" means any Supplemental Indenture with respect to a
Series of Transition Bonds as defined in such Supplemental Indenture or that
amends the Indenture.
"Transition Bonds" means the transition bonds issued from time to time by
the Trust pursuant to the Indenture and any Supplemental Indenture.
"Transfer" means the sale, transfer or other assignment of all of the
Grantor's right, title and interest in all or a portion of its beneficial
interest in the Trust.
"Trust" means the Delaware statutory business trust continued under this
Agreement.
"Trustees" means the trustees of the Trust, which, as provided herein,
shall mean the Beneficiary Trustees, the Independent Trustee, the Delaware
Trustee and the Issuer Trustee collectively, not in their respective individual
capacities but solely as trustees under this Agreement, and any successor
trustees hereunder whether designated as Issuer Trustee, Independent Trustee,
Delaware Trustee or a Beneficiary Trustee.
"Trust Property" means all right, title and interest in and to any property
contributed to the Trust by the Grantor or any Owner or otherwise acquired by
the Trust, including, without limitation, all distributions or payments thereon
or proceeds thereof.
"Trust Related Agreements" means any instrument or agreement executed in
connection with or relating to the Trust or the Transition Bonds, including, but
not limited to, the Master Servicing Agreement between the Trust and PECO
Energy, as Servicer thereunder (the "Master Servicing Agreement"), the Sale
Agreement between the Trust and PECO Energy, as Seller thereunder (the "Sale
Agreement"), the Indenture and any supplemental indentures, any bill of sale and
a Custody Agreement for a short-term money management account between
4
<PAGE>
the Trust and The Bank of New York, as custodian, as each may be
supplemented or amended from time to time.
Each of the terms used herein and not defined herein shall have the
meanings given to such terms in the Trust Related Agreements, even after the
termination of such agreements.
ARTICLE II
ORGANIZATION
2.01. Name. The Trust continued hereby shall be known as "PECO Energy
Transition Trust," in which name the Trustees shall conduct the business of the
Trust, make and execute contracts, and sue and be sued.
2.02. Office. The initial office of the Trust shall be in care of the
Issuer Trustee, One Rodney Square, 920 King Street, 1st Floor, Wilmington,
Delaware 19801 (telephone number 302-888-7532) or at such other address as the
Trustees may designate by notice to the Grantor, any Owner and the Bond Trustee,
provided that any other office will comply with the provisions
of 4.01(c) and (e).
2.03. Purposes and Powers; Intent. (a) The Trust has been created for the
purpose of purchasing and owning Intangible Transition Property, issuing
Transition Bonds from time to time, pledging its interest in Intangible
Transition Property and other Collateral to the Bond Trustee under the Indenture
in order to secure the Transition Bonds and performing activities that are
necessary, suitable or convenient to accomplish these purposes, including, but
not limited to, entering into any hedge or swap arrangement with respect to the
Transition Bonds.
(b) The Grantor has determined that each of (i) the creation and ownership
of the Trust by the Grantor and (ii) the limited purposes of the Trust is in the
best interests of the Grantor and its creditors and represents a prudent and
advisable course of action that does not impair the rights and interests of the
Grantor's creditors. The Grantor has determined that the transactions
contemplated by this Agreement and the Trust Related Agreements are in the best
interests of the Grantor and its creditors and represent a prudent and advisable
course of action that does not impair the rights and interests of the Grantor's
creditors. Such determinations are memorialized in the corporate records of the
Grantor. The Grantor did not create the Trust with the intent to hinder, delay,
or defraud the Grantor's creditors, and any transfer to the Trust will not
render the Grantor insolvent or incapable of conducting its business in the
manner and to the extent presently conducted.
(c) The Trust shall not have the power to (i) incur any debt other than the
Transition Bonds and certain costs and expenses associated therewith
5
<PAGE>
(including day-to-day expenses incurred by the Trust) and debt in
connection with any credit enhancement required for any Series of Transition
Bonds or (ii) engage in any business or activity other than the business and
activities enumerated in Section 2.03 (other than in accordance with Section
6.02(a)).
(d) The Trust's existence is not dependent on its being a subsidiary of the
Grantor or being affiliated with any Affiliated Entity, and the Trust's business
operations could be maintained even if it were not a subsidiary of the Grantor
or affiliated with any other Affiliated Entity. The Grantor will not transfer
additional Intangible Transition Property to the Trust for the purpose of
mitigating losses on the Intangible Transition Property that has previously been
transferred to the Trust.
(e) The Trust has determined that the transactions contemplated by the
Trust Related Agreements are in the best interests of the Trust and its
creditors and represent a prudent and advisable course of action that does not
impair the rights and interests of the Trust's creditors.
2.04. Appointment of the Trustees; Initial Trust Property. (a) The Trust
shall have no fewer than one and no more than three trustees (if the Delaware
Trustee, Issuer Trustee and Independent Trustee are the same entity) or five
trustees (if the Delaware Trustee, Issuer Trustee and Independent Trustee are
different entities) appointed from time to time by the Grantor or, in the event
of a Transfer, by the Owner or Owners. The Grantor or, in the event of a
Transfer, the Owners may at any time increase the number of Trustees, subject to
the provisions of Sections 2.04(b), 3.01, 4.01 and 4.03. The Grantor has
appointed First Union Trust Company, National Association as Issuer Trustee,
Delaware Trustee and Independent Trustee, and George Shicora and Diana Moy Kelly
as Beneficiary Trustees of the Trust, which Trustees shall have all the rights,
powers and duties set forth herein.
(b) The Trust shall at all times have an Issuer Trustee which shall be a
Person meeting the qualifications of Section 11.01(c) of this Agreement. In
addition, the Trust shall at all times have at least one Trustee which qualifies
as a Delaware Trustee and at least one Trustee which qualifies as an Independent
Trustee. The Issuer Trustee, the Delaware Trustee and the Independent Trustee
may, and will initially, be the same entity.
(c) The Trustees acknowledge receipt in trust from the Grantor, as of June
23, 1998, of the sum of $5,000, constituting the initial Trust Property.
2.05. Declaration of Trust. The Trustees hereby declare that they will
hold the Trust Property in trust upon and subject to the conditions set forth
herein for the use and benefit of the Grantor or, in the event of a Transfer,
any Owner, subject to the obligations of the Trust under the Trust Related
Agreements. It is the intention of the parties hereto that the Trust constitutes
a business trust under the Business Trust Act and that this Agreement
constitutes the governing instrument of the Trust.
6
<PAGE>
On June 23, 1998, the Trustees filed a Certificate of Trust with the
Delaware Secretary of State in accordance with the provisions of the Business
Trust Act in substantially the form attached hereto as Exhibit 2.
2.06. Other Expenses, Liabilities of Trust. None of the Grantor, the
Trustees or any Owner shall be liable for any liabilities or obligations of the
Trust, including but not limited to, the indemnification obligations under
Article IX.
2.07. Situs of Trust. The Trust will be located and administered in the
State of Delaware. All bank accounts maintained by the Trustees on behalf of the
Trust shall be located in the State of Delaware. The Trust shall not have any
employees in any state other than in the State of Delaware; provided, however,
that nothing shall restrict or prohibit the Issuer Trustee from having employees
within or without the State of Delaware. Payments will be received by the Trust
only in the State of Delaware and payments will be made by the Trust only from
the State of Delaware.
2.08. Additional Capital Contributions. The assets of the Trust are
expected to generate a return sufficient to satisfy all obligations of the Trust
under this Agreement and the Trust Related Agreements and any other obligations
of the Trust. It is expected that no capital contributions to the Trust will be
necessary after the purchase of the initial Intangible Transitional Property,
except for capital contributions in connection with the issuance of additional
Series of Transition Bonds. In accordance with the private letter ruling
received by the Grantor from the Internal Revenue Service dated December 19,
1997 (the "Private Letter Ruling"), on or prior to the date of issuance of each
Series of Transition Bonds, the Grantor or, in the event of a Transfer, any
Owner, shall make an additional contribution to the Trust in an amount equal to
at least 0.50% of the initial principal amount of such Series or such greater
amount as agreed to by the Grantor in connection with the issuance by the Trust
of any Series of Transition Bonds. No capital contribution by the Grantor or any
Owner, as the case may be, to the Trust will be made for the purpose of
mitigating losses on Transition Property that has previously been transferred to
the Trust, and all capital contributions shall be made in accordance with all
applicable corporate business trust procedures and requirements, including
proper record keeping by the Grantor and the Trust. Each capital contribution
will be acknowledged by a written receipt signed by any of the Trustees. The
Trustees acknowledge and agree that, notwithstanding anything in this Agreement
to the contrary, such additional contribution will be managed by an investment
manager selected by the Grantor or, in the event of a Transfer, the Owner or
Owners who shall invest such amounts only in Eligible Investments (as defined in
the Indenture), and all income earned thereon shall be allocated or paid by the
Bond Trustee in accordance with the provisions of the Indenture.
2.09. Assignment of Right to Distributions or Payments; Transfers. The
Grantor and any Owner may assign all or any part of their respective rights to
receive distributions or payments hereunder, but such assignment shall effect no
change in the ownership of the Trust. No Transfer of a beneficial interest in
the Trust shall be made by the Grantor, except to an Affiliate or in connection
with the sale or disposition of all or substantially all of the
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Grantor's electric generating business, whether by operation of law or
otherwise, and only if prior notice of such assignment is provided to Moody's.
ARTICLE III
COMPLIANCE WITH THE CODE
3.01. Trust to be Treated as a Division For Tax Purposes. The Trust shall
comply with the applicable provisions of the Code and the applicable Treasury
regulations thereunder in the manner necessary to effect the intention of the
parties that the Trust be treated as a division of PECO Energy for federal
income tax purposes pursuant to Treasury regulation 301.7701-1 et seq. and
that the Trust be accorded such treatment until its termination pursuant to
Section 10.01 hereof and shall take, or refrain from taking, any action required
by the Code or Treasury regulations thereunder in order to maintain such status
of the Trust. In addition, the Trust may not claim any credit on, or make any
deduction from the principal and interest payable in respect of, the Transition
Bonds (other than amounts properly withheld under the Code), or assert any claim
against any present or former Transition Bondholder because of the payment of
taxes levied or assessed upon the Trust.
ARTICLE IV
SEPARATE EXISTENCE OF TRUST
4.01. Maintenance of Separate Existence. The Trust shall take all steps
necessary to continue the identity of the Trust as a separate legal entity and
to make it apparent to third Persons that the Trust is an entity with assets and
liabilities distinct from those of the Grantor, any Owner, the Trustees,
Affiliates of the Grantor or any Owner or any other Person, and that, except for
financial reporting purposes (to the extent required by generally accepted
accounting principles) and for state and federal income and franchise tax
purposes, it is not a division of any of the Affiliated Entities or any other
Person. In that regard, and without limiting the foregoing in any manner, the
Trust shall:
(a) be managed by the Trustees who shall independently manage the
daily operations and business affairs of the Trust in accordance with the
terms of this Agreement and, except as otherwise provided herein, neither
the Trustees nor the Trust shall be controlled in making such decisions by
the Grantor, any Owner, any Affiliated Entity or any other Person;
(b) maintain at least one Independent Trustee, one Issuer Trustee and
one Delaware Trustee (who may be the same Person);
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(c) if the office of the Trust is not in the care of the Issuer
Trustee, as provided by 2.02, maintain office space separate and clearly
delineated from the office space of any Affiliated Entity, owned by the
Trust or evidenced by a written lease or sublease (even if located in an
office owned or leased by, or shared with, an Affiliated Entity);
(d) maintain the assets of the Trust in such a manner that it is not
costly or difficult to segregate, identify or ascertain its individual
assets from those of any other Person, including any Affiliated Entity;
(e) if the office of the Trust is not in the care of the Issuer
Trustee, as provided by 2.02, maintain a separate telephone number which
will be answered only in its own name;
(f) conduct all intercompany transactions with Affiliated Entities on
an arm's-length basis and in accordance with Section 4.03;
(g) not guarantee, become obligated for or pay the debts of any
Affiliated Entity or hold the credit of the Trust out as being available to
satisfy the obligations of any Affiliated Entity or other Person (nor
indemnify any Person for losses resulting therefrom), nor have any of the
Trust's obligations guaranteed by any Affiliated Entity or hold the Trust
out as responsible for the debts of any Affiliated Entity or other Person
or for the decisions or actions with respect to the business and affairs of
any Affiliated Entity, nor seek or obtain credit or incur any obligation to
any third-party based upon the creditworthiness or assets of any Affiliated
Entity or any other Person (i.e. other than based on the assets of the
Trust) nor allow any Affiliated Entity to do such things based on the
credit of the Trust;
(h) except as expressly otherwise permitted hereunder or under any of
the Trust Related Agreements, not permit the commingling or pooling of the
Trust's funds or other assets with the funds or other assets of any
Affiliated Entity;
(i) maintain separate deposit and other bank accounts and funds to
which no Affiliated Entity has any access, which accounts shall be
maintained in the name and tax identification number of the Trust;
(j) maintain full books of accounts and records (financial or other)
and financial statements separate from those of the Affiliated Entities or
any other Person, prepared and maintained in accordance with GAAP
(including, but not limited to, all resolutions, records, agreements or
instruments underlying or regarding the transactions contemplated by the
Trust Related Agreements or otherwise) and will be audited annually by an
independent accounting firm which shall provide such audit to the Bond
Trustee;
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(k) compensate (either directly or through reimbursement of the
Trust's allocable share of any shared expenses) all employees, consultants
and agents and Affiliated Entities, to the extent applicable, for services
provided to the Trust by such employees, consultants and agents or
Affiliated Entities, in each case, from the Trust's own funds and maintain
a sufficient number of employees in light of its contemplated operations;
(l) pay from its own bank accounts for accounting and payroll
services, rent, lease and other expenses (or the Trust's allocable share of
any such amounts provided by one or more other Affiliated Entity) and not
have such operating expenses (or the Trust's allocable share thereof) paid
by any Affiliated Entities, provided, that the Grantor shall be permitted
to pay the initial organization expenses of the Trust and certain of the
expenses related to the transactions contemplated by the Trust Related
Agreements incurred on or prior to the closing date for such transactions;
(m) maintain adequate capitalization to conduct its business and
affairs considering the Trust's size and the nature of its business and
intended purposes and, after giving effect to the transactions contemplated
by the Related Trust Agreements, refrain from engaging in a business for
which its remaining property represents an unreasonably small capital;
(n) conduct all of the Trust's business (whether in writing or orally)
solely in the name of the Trust through its Trustees, employees and agents
and hold the Trust out as an entity separate from any Affiliated Entity;
(o) not make or declare any distributions of cash or property to the
Grantor or any Owner except in accordance with appropriate trust
formalities and only consistent with sound business judgment to the extent
that it is permitted pursuant to the Trust Related Agreements and not
violative of any applicable law and only if no Significant Event or
potential Significant Event then exists or would result therefrom;
(p) otherwise practice and adhere to all trust procedures and
formalities, such as the holding of regularly scheduled meetings of the
Trustees, to the extent required by such formalities and by this Agreement,
the State of Delaware and all other appropriate constituent documents;
(q) not appoint an Affiliated Entity or any employee of an Affiliated
Entity as an agent of the Trust, except as otherwise permitted in the Trust
Related Agreements (although such Persons can qualify as Beneficiary
Trustees);
(r) not acquire obligations or securities of or make loans or advances
to or pledge its assets for the benefit of the Grantor, any Owner or any
Affiliate of such parties;
(s) not permit the Grantor, any Owner or any Affiliated Entity to
acquire obligations of or make loans or advances to the Trust;
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(t) not permit the Grantor, any Owner or any Affiliated Entity to
guarantee, pay or become liable for the debts of the Trust or permit any
such entity to hold out its creditworthiness as being available to pay the
liabilities and expenses of the Trust nor, except for the indemnities in
this Agreement and the Trust Related Agreements, indemnify any Person for
losses resulting therefrom;
(u) maintain separate minutes of the actions of the Trustees,
including of the transactions contemplated by the Trust Related Agreements.
(v) cause (i) all written and oral communications, including, without
limitation, letters, invoices, purchase orders, and contracts, of the Trust
to be made solely in the name of the Trust, (ii) the Trust to have its own
tax identification number, stationery, checks and business forms, separate
from those of any Affiliated Entity, (iii) all Affiliated Entities not to
use the stationery or business forms of the Trust, and for the Trust not to
use the stationery or business forms of any Affiliated Entity, and (iv) all
Affiliated Entities not to conduct business in the name of the Trust, and
the Trust not to conduct business in the name of any Affiliated Entity;
(w) direct creditors of the Trust to send invoices and other
statements of account of the Trust directly to the Trust and not to any
Affiliated Entity and to cause the Affiliated Entities not to direct their
creditors to send invoices and other statements of accounts to the Trust;
(x) cause the Grantor or, in the event of a Transfer, any Owner to
maintain as official records all resolutions, agreements, and other
instruments underlying or regarding the transactions contemplated by the
Trust Related Agreements;
(y) disclose, and cause the Grantor to disclose, in its financial
statements the effects of all transactions between the Grantor and the
Trust in accordance with generally accepted accounting principles, and in a
manner which makes it clear that the assets of the Trust (including the
Transition Property) are not assets of any Affiliated Entity and are not
available to pay creditors of any Affiliated Entity;
(z) treat and cause the Grantor to treat the transfer of Intangible
Transition Property from the Grantor to the Trust as a sale under the
Competition Act;
(aa) if in accordance with GAAP, the assets and liabilities of the
Trust are included in the consolidated financial statements of the Grantor,
including if the Trust is treated as a division of PECO Energy, cause the
Grantor to prominently and clearly disclose, whether in a footnote or in
the notes to such financial statements, that (i) the Trust is a separate
legal entity, (ii) the assets of the Trust are not available to pay the
debts of the Grantor or any other Affiliated Entity and (iii) neither the
Grantor nor any other Affiliated Entity is liable or responsible for the
debts of the Trust;
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(bb) except as described herein with respect to tax reporting and
financial reporting, describe and cause each Affiliated Entity to describe
the Trust, and hold the Trust out as a separate legal entity and not as a
division or department of any Affiliated Entity, and promptly correct any
known misunderstandings regarding its identity separate from any Affiliated
Entity or any Person;
(cc) treat the Transition Bonds as debt obligations of the Trust;
(dd) maintain its valid existence in good standing under the laws of
the State of Delaware and maintain its qualification to do business under
the laws of such other jurisdictions as its operations require;
(ee) comply with all laws applicable to the transactions contemplated
by this Agreement and the Trust Related Agreements; and
(ff) cause PECO Energy to observe in all material respects all
corporate procedures and formalities required by its constituent documents
and the laws of its state of formation and all other appropriate
jurisdictions.
4.02. Merger and Other Transactions. As long as the Transition Bonds are
outstanding and subject to Section 4.05, the Trust may not consolidate with,
merge or convert into another entity or sell all or substantially all of its
assets to another entity and dissolve, unless: (i) the entity formed by or
surviving such consolidation, merger or conversion or to whom substantially all
of such assets are sold is organized under the laws of the United States, any
state thereof or the District of Columbia, (ii) such entity expressly assumes
all obligations and succeeds to all rights of the Trust under the Sale Agreement
and the Master Servicing Agreement pursuant to an assignment and assumption
agreement executed and delivered to the Bond Trustee, in form satisfactory to
the Bond Trustee, (iii) no Default or Event of Default will have occurred and be
continuing immediately after such consolidation, merger, conversion or sale of
assets, (iv) the Rating Agency Condition (as defined in the Indenture) will have
been satisfied with respect to such transaction by each Rating Agency (as
defined in the Indenture), except Moody's (to which notice will be sent), (v)
the Trust has received an opinion of counsel to the effect that such
consolidation, merger, conversion or sale of assets would have no material
adverse tax consequence to the Trust or any Transition Bondholder and such
consolidation, merger, conversion or sale of assets complies with the Indenture
and all conditions precedent therein provided relating to such transaction, (vi)
none of the Intangible Transition Property, the Qualified Rate Order or PECO
Energy's or the Trust's rights under the Competition Act or the Qualified Rate
Order are impaired and (vii) any action that is necessary to maintain the lien
and security interest created by the Indenture will have been taken. Further,
the Trust may not sell, transfer, exchange or otherwise dispose of any of its
assets, except as expressly permitted by the Indenture, any Supplemental
Indenture, the Master Servicing Agreement or the Sale Agreement.
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4.03. Transactions with Affiliates. The Trust will not enter into, or be a
party to, any transaction with any of its Affiliates, except (i) the
transactions contemplated by the Trust Related Agreements and (ii) any other
transactions (including, without limitation, the lease of office space or
computer equipment or software by the Trust from an Affiliate of the Trust and
the sharing of employees and employee resources and benefits) (A) in the
ordinary course of business or as otherwise permitted hereunder, (B) pursuant to
the reasonable requirements and purposes of the Trust's business, (C) upon fair
and reasonable terms (and, to the extent material, pursuant to written
agreements) that are on terms and conditions available at the time to the Trust
for comparable transactions with unaffiliated Persons and (D) not inconsistent
with the terms of Section 4.01. Unless such transactions are in the ordinary
course of business in which case any of the Trustees, acting singly or
collectively, may take all actions necessary to effectuate such transactions,
they will require the approval of a majority of the Trustees, which majority
must include the Independent Trustee.
4.04. Insolvency. As of the date hereof, neither the Grantor nor the Trust
intends to file a voluntary petition for relief under the Bankruptcy Code or any
similar law. None of the Grantor nor any Owner will cause the Trust to file a
voluntary petition for relief under the Bankruptcy Code or similar law. The
Trustees shall not file a bankruptcy or insolvency petition or otherwise
institute insolvency or bankruptcy proceedings without the prior written consent
of all of the Trustees, including the Independent Trustee. Further, as of the
date hereof, after giving effect to the transactions contemplated by the Trust
Related Agreements, the Issuer is solvent and expects to remain solvent,
believes it will be able to pay its debts as they become due and such belief is
reasonable, is able to pay its debts as they mature and does not intend to
incur, or believe that it will incur, indebtedness that it will not be able to
repay at maturity.
4.05. Rating Confirmation. Notwithstanding anything to the contrary
contained in this Agreement, as long as the Transition Bonds are outstanding,
the Trust may not engage in any dissolution, liquidation, consolidation, merger
or sale of all or substantially all of its assets without having first obtained
confirmation from Moody's Investor Service, Inc. and Standard & Poor's Rating
Services that such event will not result in either a downgrade or withdrawal of
the then current rating of the Transition Bonds.
ARTICLE V
INVESTMENT AND APPLICATION OF TRUST FUNDS
5.01. Investment of Trust Funds. The provisions of this Article V apply
only to funds or Trust Property that have been released from the lien of the
Indenture and are permitted to be held or applied by the Trust. Unless otherwise
directed in writing by the Beneficiary Trustees, funds or Trust Property
released by the Bond Trustee to the Trust or funds in the possession of the
Trust shall be invested and reinvested by the Trustees (or by an independent
investment manager appointed in writing by the Beneficiary Trustees) in Eligible
Investments.
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5.02. Application of Funds. Income with respect to and proceeds of any
funds or Trust Property held by the Trustees shall be transferred as determined
by the Beneficiary Trustees from time to time.
ARTICLE VI
AUTHORITY AND DUTIES OF THE TRUSTEES
6.01. General Authority. The Trustees are authorized to take all actions
required to be taken by them pursuant to the terms of this Agreement and the
Trust Related Agreements. The Trustees are further authorized, but shall not be
obligated, to take such further actions as are permitted but not required under
the terms of this Agreement and the Trust Related Agreements.
6.02. Specific Authority; Special Authority of Beneficiary Trustees. (a)
Notwithstanding any other provision in this Agreement to the contrary and
without the need for any additional consent of any Person, the Trustees, acting
singly or collectively, are hereby authorized and directed to take the following
action on behalf of the Trust: (i) execute, deliver and perform any agreements
related to the issuance and sale of Transition Bonds, including the Trust
Related Agreements, as necessary, (ii) execute and deliver all certificates and
other documents required by any such agreements and (iii) issue and deliver one
or more series of Transition Bonds in accordance with the provisions of such
agreements and the Qualified Rate Order issued on May 14, 1998 and qualify and
register the Transition Bonds for sale in various states. The Trustees, acting
singly or collectively, are authorized to take all actions necessary or
incidental to the day-to-day operations of the Trust. Except as otherwise
specifically provided, all non-day-to-day matters shall be determined by a
majority of the then current Trustees; provided that, such majority must include
the Independent Trustee (which may also be the Issuer Trustee) for all actions
specified in Sections 4.02 and 4.03 and any matter that would, if approved by
the Trustees, cause the Trust to deviate from the provisions of Sections
2.03(a), 2.03(c), 2.04(b), 4.01 and 12.01 of this Agreement (or any provisions
that by the terms hereof require the consent of the Independent Trustee),
subject to the provisions of Section 6.05. For purposes of determining a
majority under this Agreement, each Person that is serving as a Trustee shall be
counted as a single Trustee, even if such Person holds multiple Trustee
positions (i.e., the vote of one Person that acts as Delaware Trustee, Issuer
Trustee and Independent Trustee shall be counted only once).
(b) The Grantor and the Trustees hereby authorize and direct the
Beneficiary Trustees, acting singly or collectively, (i) to file with the
Securities and Exchange Commission (the "Commission") and execute, in each case
on behalf of the Trust, the Registration Statement on either Form S-3 or Form
S-1 (the "1933 Act Registration Statement"), including any pre-effective
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or post-effective amendments to such 1933 Act Registration Statement
(including the prospectus supplement, the prospectus and the exhibits contained
therein), relating to the registration under the Securities Act of 1933, as
amended, of the Transition Bonds, (ii) to file and execute on behalf of the
Trust such applications, reports, surety bonds, irrevocable consents,
appointments of attorney for service of process and other papers and documents
as shall be necessary or desirable to register the Transition Bonds under the
securities or "Blue Sky" laws of such jurisdictions as the Trust may deem
necessary or desirable and (iii) to do or cause to be done all such other acts
or things and to execute and deliver all such instruments and documents that any
such Beneficiary Trustee shall deem necessary or appropriate to carry out the
intent of the foregoing. In the event that any filing referred to above is
required by the rules and regulations of the Commission or state securities or
"Blue Sky" laws, to be executed on behalf of the Trust by the Issuer Trustee,
then the Issuer Trustee, not in its individual capacity, but solely in its
capacity as trustee of the Trust, is hereby authorized and directed to join in
any such filing and to execute on behalf of the Trust any and all of the
foregoing. In connection with all of the foregoing, the Trust hereby constitutes
and appoints each of the Beneficiary Trustees as its true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for the Trust or in the Trust's name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to the 1933 Act Registration Statement and any other registration statements and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Commission, granting unto said attorney-in-fact and agent
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as the Trust might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agent, or his respective
substitute or substitutes, shall do or cause to be done by virtue hereof.
(c) Meetings of the Trustees for the purpose of establishing a majority
under this Article VI or otherwise may be called at any time by any of the
Trustees upon two days written or oral notice, stating the time, place and
purpose of the meeting, to all Trustees prior to the time of the meeting. In
addition, any action required or permitted to be taken at a meeting of the
Trustees may be taken without a meeting upon the written consent of the Trustees
who would be necessary to authorize the action at a meeting at which all
Trustees were present and voting or upon the unanimous written consent of the
Trustees. The Issuer Trustee shall maintain the minutes of all meetings of the
Trustees. Any meeting may be held by means of conference telephone or similar
communications equipment by which all persons participating in the meeting can
hear one another. Attendance, whether by telephone or in person, at any meeting
of the Trustees shall constitute a waiver of notice of such meeting.
6.03. Accounting and Reports to the Grantor, any Owner, the Internal
Revenue Service and Others. The Grantor shall designate, from time to time, a
Trustee which shall, on behalf of the Trust, (i) maintain or cause to be
maintained the books of the Trust on a calendar year basis on the accrual method
of accounting, (ii) deliver to the Grantor and any Owner, within 90 days of the
end of each Fiscal Year, or more often, as may be required by the Code and the
regulations thereunder, a copy of the annual financial statement of the Trust
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for such Fiscal Year and a statement in such form and containing such
information as may be required by such regulations, and as is necessary and
appropriate to enable the Grantor and any Owner to prepare its federal and state
income tax returns, (iii) file such tax returns relating to the Trust, cause the
Trust to pay all taxes incurred by it pursuant to the terms of any tax sharing
agreement entered into by the Trust and the Grantor and take all actions
necessary for the Trust to qualify or continue to qualify as a division of PECO
Energy or its designated affiliate for federal income tax purposes, (iv) cause
such tax returns to be signed by the Trust in the manner required by law, and
(v) cause to be mailed to the Grantor and any Owner copies of all such reports
and tax returns of the Trust.
6.04. Signature of Returns. The Trustee designated in Section 6.03 shall
sign on behalf of the Trust the tax returns and other periodic filings of the
Trust, unless applicable law requires the Owner to sign such documents, in which
case, so long as the Grantor is the Owner and applicable law allows the Grantor
to sign any such document, the Grantor shall sign such document. At any time
that the Grantor is not the Owner, or is otherwise not allowed by law to sign
any such document, then the party required by law to sign such document shall
sign.
6.05. Right to Receive Instructions. In the event that the Trustees are
unable to decide between alternative courses of action for whatever reason, or
are unsure as to the application of any provision of this Agreement or any Trust
Related Agreement, or such provision is ambiguous as to its application, or is,
or appears to be, in conflict with any other applicable provision, or in the
event that this Agreement or any Trust Related Agreement permits any
determination by the Trustees or is silent or is incomplete as to the course of
action which the Trustees are required to take with respect to a particular set
of facts, any one or more of the Trustees may give notice of such circumstances
(in such form as shall be appropriate under the circumstances) to the Grantor
or, in the event of a Transfer, to the Owner and request instructions from
independent, appropriate legal or other counsel to the Trustees in accordance
with Section 7.03 of this Agreement.
6.06. No Duties Except as Specified in this Agreement or in Instructions.
The Trustees shall not have any duty or obligation to manage, make any payment
in respect of, register, record, sell, dispose of or otherwise deal with the
Trust Property, or to otherwise take or refrain from taking any action under, or
in connection with, any document contemplated hereby to which the Trustees are a
party, except as expressly provided by the terms of this Agreement or the Trust
Related Agreements and no implied duties or obligations shall be read into this
Agreement or the Trust Related Agreements against the Trustees. The Trustees
nevertheless agree that, in the event that claims are made against any of the
Trustees in their individual capacities that are not related to the ownership or
the administration of the Trust Property or the transactions contemplated by the
Trust Related Agreements, the Trustee against whom such claims were made shall,
at its own cost and expense, promptly take all action as may be necessary to
discharge any liens on any part of the Trust Property resulting from those
claims.
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6.07. No Action Except Under Specified Documents or Instructions. The
Trustees shall not manage, control, use, sell, dispose of or otherwise deal with
any part of the Trust Property except in accordance with the powers granted to
and the authority conferred upon the Trustees pursuant to this Agreement and the
Trust Related Agreements.
6.08 No Action Contrary to Agreement, Trust Related Agreements or
Applicable Law. The Trustees shall not be required to take or refrain from
taking any action under this Agreement or the Trust Related Agreements if the
Trustees shall reasonably determine or shall have been advised by counsel that
such action (i) is contrary to the terms of this Agreement or the Trust Related
Agreements or is otherwise contrary to applicable law or (ii) is likely to
result in liability on the part of the Trustees to risk or advance their own
funds.
ARTICLE VII
CONCERNING THE TRUSTEES
7.01. Acceptance of Trusts and Duties. The Trustees accept the trusts
hereby created and agree to perform their respective duties hereunder with
respect to the same but only upon the terms of this Agreement. The Trustees
shall not be personally liable under any circumstances except (i) for their own
willful misconduct or gross negligence, (ii) for liabilities arising from the
failure by any of the Trustees to perform obligations expressly undertaken by
them in Article VI, or (iii) for taxes, fees or other charges on, based on or
measured by any fees, commissions or compensation received by the Trustees in
connection with any of the transactions contemplated by this Agreement or the
Trust Related Agreements. In particular, but not by way of limitation:
(a) The Trustees shall not be personally liable for any error of
judgment made in good faith by any of the Trustees;
(b) The Trustees shall not be personally liable with respect to any
action taken or omitted to be taken by the Trustees in good faith in
accordance with the instructions delivered pursuant to Section 6.05;
(c) No provision of this Agreement shall require the Trustees to
expend or risk their personal funds or otherwise incur any financial
Liability in the performance of any of their rights or powers hereunder, if
the Trustees shall have reasonable grounds for believing that repayment of
such funds or adequate indemnity against such risk or Liability is not
reasonably assured or provided to them;
(d) Under no circumstance shall the Trustees be personally liable for
any indebtedness of the Trust under any Trust Related Agreement; and
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(e) The Trustees shall not be personally responsible for or in respect
of the validity or sufficiency of this Agreement or for the due execution
hereof by the Grantor, or for the form, character, genuineness,
sufficiency, value or validity of any Collateral, or for or in respect of
the validity or sufficiency of the Trust Related Agreements.
7.02. Furnishing of Documents. The Trustees shall furnish to the Grantor
and any Owner, promptly upon receipt thereof, duplicates or copies of all
material reports, notices, requests, demands, certificates, financial statements
and any other instruments furnished to the Trustees by any party pursuant to the
Trust Related Agreements (other than documents originated by or otherwise
furnished by the Grantor or any Owner).
7.03. Reliance; Advice of Counsel. (a) The Trustees 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 them to be genuine and believed by them to be
signed by the proper party or parties. The Trustees 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. As to any
fact or matter the manner of ascertainment of which is not specifically
prescribed herein, the Trustees may for all purposes hereof rely on a
certificate, signed by the president or any vice president or by the treasurer
or any assistant treasurer or the secretary or any assistant secretary of the
relevant party, as to such fact or matter, and such certificate shall constitute
full protection to the Trustees for any action taken or omitted to be taken by
them in good faith in reliance thereon.
(b) In the exercise or administration of the trusts hereunder and in the
performance of their respective duties and obligations under any of the Trust
Related Agreements, the Trustees (i) may act directly or, at the expense of the
Trust in the case of the Issuer Trustee, through agents or attorneys pursuant to
agreements entered into with any of them, and the Trustees shall not be liable
for the default or misconduct of such agents or attorneys if such agents or
attorneys shall have been selected by the Trustees with reasonable care and (ii)
may, at the expense of the Trust in the case of the Issuer Trustee, consult with
counsel, accountants and other skilled persons to be selected with reasonable
care and employed by them, and the Trustees 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.
7.04. Not Acting in Individual Capacity. Except as expressly provided in
this Article VII, in accepting the trusts hereby created the Trustees each act
solely as trustees hereunder and not in their respective individual capacities,
and all Persons having any claim against the Trustees by reason of the
transactions contemplated by this Agreement or the Trust Related Agreements
shall look only to the Trust Property for payment or satisfaction thereof.
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ARTICLE VIII
COMPENSATION OF TRUSTEES
8.01. Issuer Trustee's Fees and Expenses. The Issuer Trustee shall receive
compensation for its services hereunder as set forth on the fee schedule
attached hereto as Exhibit 1. The Issuer Trustee shall be entitled to be
reimbursed from the Trust Property for its reasonable expenses hereunder,
including, without limitation, its travel, telephone, facsimile, postage,
overnight courier and other related expenses, as well as the reasonable
compensation, expenses and disbursements of such agents, representatives,
experts and counsel as the Issuer Trustee may employ in connection with the
exercise and performance of its rights and duties under this Agreement and the
Trust Related Agreements.
8.02. Beneficiary Trustees' Fees and Expenses. The Beneficiary Trustees
shall not be compensated by the Trust for their services performed for or on
behalf of the Trust.
8.03. Fees of Separate Independent Trustee and Delaware Trustee. At such
time as the Issuer Trustee, the Independent Trustee and the Delaware Trustee are
not the same Person, the Trust shall pay such fees to each of the Independent
Trustee and Delaware Trustee as the majority of the Trustees shall approve.
ARTICLE IX
INDEMNIFICATION OF TRUSTEES
9.01. Scope of Indemnification. To the fullest extent permitted by law, the
Trust shall indemnify the Trustees and their agents, employees and directors
against any Liability incurred in connection with any Proceeding in which the
Trustees may be involved as a party or otherwise by reason of the fact that such
Trustee is or was serving in its capacity as a Trustee, unless such Liability is
based on or arises in connection with the Trustee's or such other indemnified
parties' own wilful misconduct or gross negligence, the failure to perform the
obligations expressly undertaken by them in Article VI, or taxes, fees or other
charges on, based on or measured by any fees, commissions or compensation
received by the Trustees in connection with any of the transactions contemplated
by this Agreement or the Trust Related Agreements. This indemnification clause
shall survive the termination of this Agreement.
19
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ARTICLE X
TERMINATION OF TRUST
10.01. Dissolution of Trust. (a) The Trust shall dissolve and, after
satisfaction of the creditors of the Trust as required by applicable law,
property held by the Trust will be distributed to the Grantor or, in the event
of a Transfer, to any Owner thirty years from the date of its creation or
sooner, at the option and expense, and upon written instruction of the Grantor,
but in no event before payment in full of all Series of Transition Bonds.
(b) The bankruptcy of either the Grantor or any Owner or both shall not
operate to terminate this Agreement, to dissolve, terminate or annul the Trust,
to entitle the Grantor's or any Owner's legal representatives to claim an
accounting or to take any action or Proceeding in any court for a partition or
winding up of the Trust Property, nor otherwise affect the rights, obligations
and liabilities of the parties hereto.
10.02. No Termination by Grantor or Owner. Except as provided in Section
10.01, neither the Grantor nor any Owner shall be entitled to dissolve or
terminate or revoke the Trust established hereunder.
10.03. Cancellation of Certificate of Trust. Upon completion of the winding
up of the affairs of the Trust after dissolution of the Trust in accordance with
Section 10.01 or otherwise, the Certificate of Trust shall be canceled by a
Beneficiary Trustee's executing and filing a Certificate of Cancellation with
the Secretary of State of Delaware.
ARTICLE XI
SUCCESSOR TRUSTEES AND ADDITIONAL TRUSTEES
11.01. Resignation of Trustee; Appointment of Successor. (a) The Trustees
may resign at any time without cause by giving at least 90 days' prior written
notice to the Grantor and any Owner, such resignation to be effective upon the
acceptance of appointment by a successor Trustee under Section 11.01(b). In
addition, the Grantor or, in the event of a Transfer, any Owner may at any time
remove any of the Trustees with or without cause by an instrument in writing
delivered to the Trustee, such removal to be effective upon the acceptance of
appointment by a successor Trustee under Section 11.01(b); except that, neither
the Grantor nor any Owner may remove the Independent Trustee (i) without cause,
(ii) after an Event of Default under the Indenture or (iii) if the removal of
one or more Trustees would cause the breach of Section 2.04(b). In case of the
resignation or removal of a Trustee, the Grantor or, in the event of a Transfer,
any Owner may appoint a successor Trustee by an instrument signed by the Grantor
or any Owner, as applicable, subject to Section 2.04(b). If the last remaining
Trustee of the Trust resigns or is removed or the Issuer Trustee,
20
<PAGE>
the Independent Trustee or the Delaware Trustee resigns or is removed
and a successor Trustee shall not have been appointed within 30 days after the
giving of written notice of such resignation or the delivery of the written
instrument with respect to such removal, such Trustee, the Grantor or any Owner
may apply to any court of competent jurisdiction to appoint a successor Trustee
in compliance with Section 2.04(b) to act until such time, if any, as a
successor Trustee shall have been appointed as provided above. Any successor
Trustee so appointed by such court shall immediately and without further act be
superseded by any successor Trustee appointed as above provided. In the event of
removal of a Trustee, the Trustee so removed shall be entitled to compensation
and reimbursement for expenses incurred through the date of such removal.
(b) Any successor Trustee, however appointed, shall execute and deliver to
the predecessor Trustee and the Trust an instrument accepting such appointment,
and thereupon such successor Trustee, without further acts, shall become vested
with all the estates, properties, rights, powers, duties and trusts of the
predecessor Trustee in the trusts hereunder with like effect as if originally
named as a Trustee herein; but nevertheless, upon the written request of such
successor Trustee, such predecessor Trustee shall execute and deliver an
instrument transferring to such successor Trustee, upon the trusts herein
expressed, all the estates, properties, rights, powers, duties and trusts of
such predecessor Trustee, and such predecessor Trustee shall duly assign,
transfer, deliver and pay over to such successor Trustee all moneys or other
property then held or subsequently received by such predecessor Trustee upon the
trusts herein expressed.
(c) Any successor Issuer Trustee, however appointed, shall be a bank or
trust company incorporated and doing business within the United States of
America and having a combined capital and surplus of at least $50,000,000. Any
corporation into which the Issuer 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 Issuer Trustee shall be a party, or any
corporation to which substantially all the corporate trust business of the
Issuer Trustee may be transferred, shall, subject to the terms of this
Agreement, be the Issuer Trustee of the Trust under this Agreement without
further act or consent of any Person.
ARTICLE XII
MISCELLANEOUS
12.01. Supplements and Amendments. This Agreement may be amended only by a
written instrument signed by the Grantor, any Owner and a majority of the
Trustees (which majority shall include the Independent Trustee) at the time of
such amendment. No such amendment may be made unless the Rating Agency Condition
is satisfied with respect to each of the Rating Agencies other than Moody's (to
which notice will be sent) in connection herewith.
21
<PAGE>
12.02. No Legal Title to Trust Property in Grantor and Owner. Neither the
Grantor nor any Owner shall have legal title to or ownership of any part of the
Trust Property. No transfer, by operation of law or otherwise, of any right,
title and interest of the Grantor or any Owner in and to their undivided
beneficial interest in the Trust Property hereunder shall operate to terminate
this Agreement or the trusts hereunder, to dissolve, terminate or annul the
Trust or to entitle any successor transferee to an accounting or to the transfer
to it of legal title to any part of the Trust Property.
12.03. Limitations on Rights of Others. Nothing in this Agreement, whether
express or implied, shall be construed to give to any Person other than the
Trust, the Grantor and any Owner any legal or equitable right, remedy or claim
in the Trust Property or except for the Grantor and any Owner, under or in
respect of this Agreement or any covenants, conditions or provisions contained
herein.
12.04. Notices. Unless otherwise expressly specified or permitted by the
terms hereof, all notices shall be in writing and delivered by hand or mailed by
certified mail, postage prepaid, if to the Trustees, addressed to:
First Union Trust Company, One Rodney Square
National Association 920 King Street, 1st Floor
Wilmington, DE 19801
George Shicora c/o First Union Trust Company,
National Association
One Rodney Square
920 King Street, 1st Floor
Wilmington, DE 19801
Diana Moy Kelly c/o First Union Trust Company,
National Association
One Rodney Square
920 King Street, 1st Floor
Wilmington, DE 19801
or to such other addresses as the Trustees may have set forth in a written
notice to the Grantor, any Owner and the Bond Trustee; and if to the Grantor,
addressed to: PECO Energy Company, 2301 Market Street, S21-1, Philadelphia, PA
19101 or to such other address as the Grantor may have set forth in a written
notice to the Trustees and the Bond Trustee; and if to Moody's, addressed to:
ABS Monitoring Department, 99 Church Street, New York, NY 10007. All notices to
any Owner shall be sent care of the Grantor to the Grantor's address set forth
above or to such other address as such Owner may have set forth in a written
notice to the Grantor, the Trustees and the Bond Trustee. Whenever any notice in
writing is required to be given by the Trustees hereunder, such notice shall be
deemed given and such requirement satisfied 72 hours after such notice is mailed
by certified mail, postage prepaid, addressed as provided above;
22
<PAGE>
any notice given by the Grantor or any Owner to the Trustees shall be
effective upon receipt. All notices required under this Agreement to be
delivered to Moody's shall be given by one or both of the Beneficiary Trustees.
12.05. Severability. Any provision of this Agreement which 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.
12.06. 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.
12.07. Successors and Assigns. All covenants and agreements contained
herein shall be binding upon, and inure to the benefit of, the Trustees and
their respective successors and assigns and the Grantor, any Owner and their
respective successors and permitted assigns, all as herein provided; provided,
that Moody's receives prior notice of any such succession or assignment. Any
request, notice, direction, consent, waiver or other instrument or action by the
Grantor and any Owner shall bind its successors and permitted assigns.
12.08. 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. Any reference to any Article or Section contained in
this Agreement shall refer to such Article or Section as set forth in this
Agreement, notwithstanding failure to use the term "hereof," "hereto" or
"herein" in connection with such reference.
23
<PAGE>
12.09. Governing Law. This Agreement shall in all respects be governed by,
and construed in accordance with, the laws of the State of Delaware (without
regard to conflict of laws principles), including all matters of construction,
validity and performance.
IN WITNESS WHEREOF, the parties hereto have duly executed or caused this
Agreement to be duly executed by their respective officers hereunto duly
authorized, as of the day and year first above written.
PECO ENERGY COMPANY,
as Grantor and Owner
By: /s/ J. Barry Mitchell
-------------------------
Name: J. Barry Mitchell
Title: Treasurer and
Vice President - Finance
FIRST UNION TRUST
COMPANY, NATIONAL
ASSOCIATION, not
in its individual
capacity but
solely as Issuer
Trustee, Delaware
Trustee and
Independent
Trustee
By: /s/ Edward Truitt
---------------------------
Name: Edward Truitt
Title: Vice President
GEORGE SHICORA, not in his individual
capacity but solely as a Beneficiary Trustee
/s/ George Shicora
-----------------------------
DIANA MOY KELLY, not in her individual
capacity but solely as a Beneficiary Trustee
/s/ Diana Moy Kelly
-----------------------------
24
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EXHIBIT 1
ISSUER TRUSTEE FEE SCHEDULE
For services performed pursuant to the Amended and Restated Trust Agreement
to which this Exhibit 1 is attached, the Issuer Trustee shall be entitled to the
following fees:
- $3,500.00 upon the execution by the Issuer Trustee of the Amended
and Restated Trust Agreement;
- $1,500.00 upon the Trust's issuance of each series of Transition
Bonds (calculated on a per series basis), other than the initial series of
Transition Bonds for which no fee shall be paid; and
- $8,500.00 at the end of each calendar year as an annual
administrative maintenance fee.
In addition to the foregoing fees and the out-of-pocket expenses described
in Section 8.01 of the Amended and Restated Trust Agreement, the Issuer Trustee
may receive a special administrative maintenance fee from time to time in such
amounts as the Grantor, any Owner and the Trustees shall mutually agree upon in
writing in the event the Issuer Trustee determines, in good faith, that the
Trust requires special administrative attention due to extraordinary
circumstances.
This Issuer Trustee Fee Schedule may be revised or amended only by a
written instrument signed by the Grantor, any Owner and the Trustees.
Exhibit 1
<PAGE>
EXHIBIT 2
CERTIFICATE OF TRUST
OF PECO ENERGY TRANSITION TRUST
THIS Certificate of Trust of PECO Energy Transition Trust (the "Trust"),
dated as of June 23, 1998, is being fully executed and filed by the undersigned,
as trustees, to form a business trust under the Delaware Business Trust Act (12
Del. C. (section) 3801, et seq.).
1. Name. The name of the business trust formed hereby is PECO Energy
Transition Trust.
2. Delaware Trustee. The name and business address of the trustee of the
Trust with its principal place of business in the State of Delaware are First
Union Trust Company, National Association, One Rodney Square, 920 King Street,
First Floor, Wilmington, Delaware 19801, Attention: Corporate Trust
Administration.
3. Effective Date. This Certificate of Trust shall be effective as of its
filing with the Secretary of State of the State of Delaware.
IN WITNESS WHEREOF, the undersigned, being the trustees of the Trust, have
executed this Certificate of Trust as of the date first-above written.
DIANA MOY KELLY, not in her FIRST UNION TRUST COMPANY,
individual capacity, but solely as NATIONAL ASSOCIATION, not in its
trustee of the Trust individual capacity, but solely as
trustee of the Trust
/s/ Diana Moy Kelly By: /s/ Edward L. Truitt, Jr.
- ----------------------------------- ----------------------------
Name: Edward L. Truitt, Jr.
Title: Assistant Vice President
GEORGE SHICORA, not in his
individual capacity, but solely as
trustee of the Trust
/s/ George Shicora
- -----------------------------------
Exhibit 2
================================================================================
PECO ENERGY TRANSITION TRUST,
Issuer
and
THE BANK OF NEW YORK,
Bond Trustee
------------------------------
INDENTURE
Dated as of March 1, 1999
------------------------------
Securing Transition Bonds
Issuable in Series
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.01. Definitions......................................................................2
SECTION 1.02. Incorporation by Reference of Trust Indenture Act...............................13
SECTION 1.03. Rules of Construction...........................................................14
ARTICLE II
The Transition Bonds
SECTION 2.01. Form............................................................................14
SECTION 2.02. Execution, Authentication and Delivery..........................................15
SECTION 2.03. Denominations; Transition Bonds Issuable in Series..............................15
SECTION 2.04. Temporary Transition Bonds......................................................16
SECTION 2.05. Registration; Registration of Transfer and Exchange.............................17
SECTION 2.06. Mutilated, Destroyed, Lost or Stolen Transition Bonds...........................18
SECTION 2.07. Persons Deemed Owner............................................................19
SECTION 2.08. Payment of Principal, Premium, if any, and Interest; Interest on Overdue
Principal and Premium, if any; Principal, Premium and Interest Rights
Preserved.....................................................................19
SECTION 2.09. Cancelation.....................................................................20
SECTION 2.10. Authentication and Delivery of Transition Bonds.................................20
SECTION 2.11. Book-Entry Transition Bonds.....................................................24
SECTION 2.12. Notices to Clearing Agency......................................................25
SECTION 2.13. Definitive Transition Bonds.....................................................25
ARTICLE III
Covenants
SECTION 3.01. Payment of Principal, Premium, if any, and Interest.............................26
SECTION 3.02. Maintenance of Office or Agency.................................................26
SECTION 3.03. Money for Payments To Be Held in Trust..........................................26
SECTION 3.04. Existence.......................................................................27
SECTION 3.05. Protection of Collateral........................................................28
SECTION 3.06. Opinions as to Collateral.......................................................28
SECTION 3.07. Performance of Obligations......................................................29
SECTION 3.08. Negative Covenants..............................................................29
SECTION 3.09. Annual Statement as to Compliance...............................................30
SECTION 3.10. Issuer May Consolidate, etc., Only on Certain Terms.............................30
SECTION 3.11. Successor or Transferee.........................................................31
SECTION 3.12. No Other Business...............................................................31
SECTION 3.13. No Borrowing....................................................................31
SECTION 3.14. Guarantees, Loans, Advances and Other Liabilities...............................31
<PAGE>
SECTION 3.15. Capital Expenditures............................................................
SECTION 3.16. Restricted Payments.............................................................32
SECTION 3.17. Notice of Events of Default.....................................................32
SECTION 3.18. Inspection......................................................................32
SECTION 3.19. Adjusted Overcollateralization Schedules........................................33
SECTION 3.20. Sale Agreement and Servicing Agreement Covenants................................33
SECTION 3.21. Taxes...........................................................................35
SECTION 3.22. Termination of Swap Agreements..................................................35
ARTICLE IV
Satisfaction and Discharge; Defeasance
SECTION 4.01. Satisfaction and Discharge of Indenture; Defeasance.............................35
SECTION 4.02. Conditions to Defeasance........................................................37
SECTION 4.03. Application of Trust Money......................................................38
SECTION 4.04. Repayment of Moneys Held by Paying Agent........................................38
ARTICLE V
Remedies
SECTION 5.01. Events of Default...............................................................39
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment..............................39
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement by Bond Trustee............40
SECTION 5.04. Remedies; Priorities............................................................42
SECTION 5.05. Optional Preservation of the Collateral.........................................43
SECTION 5.06. Limitation of Proceedings.......................................................43
SECTION 5.07. Unconditional Rights of Transition Bondholders To Receive Principal,
Premium, if any, and Interest................................................44
SECTION 5.08. Restoration of Rights and Remedies..............................................44
SECTION 5.09. Rights and Remedies Cumulative..................................................45
SECTION 5.10. Delay or Omission Not a Waiver..................................................45
SECTION 5.11. Control by Transition Bondholders...............................................45
SECTION 5.12. Waiver of Past Defaults.........................................................45
SECTION 5.13. Undertaking for Costs...........................................................46
SECTION 5.14. Waiver of Stay or Extension Laws................................................46
SECTION 5.15. Action on Transition Bonds......................................................46
ARTICLE VI
The Bond Trustee
SECTION 6.01. Duties and Liabilities of Bond Trustee..........................................47
SECTION 6.02. Rights of Bond Trustee..........................................................48
SECTION 6.03. Individual Rights of Bond Trustee...............................................48
SECTION 6.04. Bond Trustee's Disclaimer.......................................................48
SECTION 6.05. Notice of Defaults..............................................................49
SECTION 6.06. Reports by Bond Trustee to Holders..............................................49
SECTION 6.07. Compensation and Indemnity......................................................50
<PAGE>
SECTION 6.08. Replacement of Bond Trustee.....................................................50
SECTION 6.09. Successor Bond Trustee by Merger................................................51
SECTION 6.10. Appointment of Co-Trustee or Separate Trustee...................................51
SECTION 6.11. Eligibility; Disqualification...................................................52
SECTION 6.12. Preferential Collection of Claims Against Issuer................................53
ARTICLE VII
Transition Bondholders' Lists and Reports
SECTION 7.01. Issuer To Furnish Bond Trustee Names and Addresses of Transition Bondholders....53
SECTION 7.02. Preservation of Information; Communications to Transition Bondholders...........53
SECTION 7.03. Reports by Issuer...............................................................53
SECTION 7.04. Reports by Bond Trustee.........................................................54
SECTION 7.05. Provision of Servicer Reports...................................................54
ARTICLE VIII
Accounts, Disbursements and Releases
SECTION 8.01. Collection of Money.............................................................54
SECTION 8.02. Collection Account..............................................................55
SECTION 8.03. Release of Collateral...........................................................59
SECTION 8.04. Opinion of Counsel..............................................................60
SECTION 8.05. Reports by Independent Accountants..............................................60
ARTICLE IX
Supplemental Indentures
SECTION 9.01. Supplemental Indentures Without Consent of Transition Bondholders...............61
SECTION 9.02. Supplemental Indentures with Consent of Transition Bondholders..................62
SECTION 9.03. Execution of Supplemental Indentures............................................64
SECTION 9.04. Effect of Supplemental Indenture................................................64
SECTION 9.05. Conformity with Trust Indenture Act.............................................64
SECTION 9.06. Reference in Transition Bonds to Supplemental Indentures........................64
ARTICLE X
Redemption of Transition Bonds
SECTION 10.01. Optional Redemption by Issuer..................................................65
SECTION 10.02. Mandatory Redemption by Issuer.................................................65
SECTION 10.03. Form of Redemption Notice......................................................65
SECTION 10.04. Payment of Redemption Price....................................................66
<PAGE>
ARTICLE XI
Miscellaneous
SECTION 11.01. Compliance Certificates and Opinions, etc......................................66
SECTION 11.02. Form of Documents Delivered to Bond Trustee....................................67
SECTION 11.03. Acts of Transition Bondholders.................................................67
SECTION 11.04. Notices, etc., to Bond Trustee, Issuer, Counterparties and Rating Agencies.....68
SECTION 11.05. Notices to Transition Bondholders; Waiver......................................69
SECTION 11.06. Alternate Payment and Notice Provisions........................................69
SECTION 11.07. Conflict with Trust Indenture Act..............................................69
SECTION 11.08. Effect of Headings and Table of Contents.......................................70
SECTION 11.09. Successors and Assigns.........................................................70
SECTION 11.10. Separability...................................................................70
SECTION 11.11. Benefits of Indenture..........................................................70
SECTION 11.12. Legal Holidays.................................................................70
SECTION 11.13. GOVERNING LAW..................................................................70
SECTION 11.14. Counterparts...................................................................70
SECTION 11.15. Issuer Obligation..............................................................70
SECTION 11.16. No Petition....................................................................71
Schedule 1 Calculated Overcollateralization Level
</TABLE>
<PAGE>
INDENTURE dated as of March 1, 1999, between PECO ENERGY TRANSITION TRUST,
a Delaware statutory business trust (the "Issuer"), and THE BANK OF NEW YORK, a
New York banking corporation, as trustee (the "Bond Trustee").
The Issuer has duly authorized the execution and delivery of this Indenture
to provide for one or more Series of Transition Bonds, issuable as provided in
this Indenture. Each such Series of Transition Bonds will be issued only under a
separate Series Supplement to this Indenture duly executed and delivered by the
Issuer and the Bond Trustee. The Issuer is entering into this Indenture, and the
Bond Trustee is accepting the trusts created hereby, each for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged and
each intending to be legally bound hereby.
GRANTING CLAUSE
The Issuer hereby Grants to the Bond Trustee as trustee for the benefit of
the Holders of the Transition Bonds from time to time issued and outstanding,
all of the Issuer's right, title and interest in and to (a) the Intangible
Transition Property transferred by the Seller to the Issuer from time to time
pursuant to the Sale Agreement and all proceeds thereof, (b) the Sale Agreement
except for Section 5.01 thereof solely to the extent such Section provides for
indemnification of the Issuer, (c) all Bills of Sale delivered by the Seller
pursuant to the Sale Agreement, (d) the Servicing Agreement except for Section
5.02(b) thereof solely to the extent such Section provides for indemnification
of the Issuer, (e) the Collection Account and all amounts on deposit therein
from time to time, (f) any Swap Agreements to which the Issuer is a party, (g)
all other property of whatever kind owned from time to time by the Issuer
including all accounts, accounts receivable and chattel paper, (h) all present
and future claims, demands, causes and choses in action in respect of any or all
of the foregoing and (i) 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, general intangibles,
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 (collectively, the "Collateral").
To have and to hold in trust to secure the payment of principal of and
premium, if any, and interest on, and any other amounts (including all fees,
expenses, counsel fees and other amounts due and owing to the Bond Trustee)
owing in respect of, the Transition Bonds equally and ratably without prejudice,
preference, priority or distinction, except as expressly provided in this
Indenture and to secure performance by the Issuer of all of the Issuer's
obligations under this Indenture with respect to the Transition Bonds, all as
provided in this Indenture.
<PAGE>
2
The Bond Trustee, as trustee on behalf of the Holders of the Transition
Bonds, 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. Definitions. (a) Except as otherwise specified herein or as
the context may otherwise require, each of the following terms has the
respective meaning set forth below for all purposes of this Indenture.
"Act" has the meaning specified in Section 11.03(a).
"Adjustment Date" means, with respect to any Series of Transition Bonds,
the date or dates specified as such in the Series Supplement therefor.
"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 Initial Denominations" means, with respect to any Series of
Transition Bonds, $1,000 and integral multiples thereof, or such other
denominations as may be specified in the Series Supplement therefor.
"Authorized Officer" means, with respect to the Issuer, any trustee of the
Issuer and, with respect to the Issuer Trustee or other corporate trustee of the
Issuer, any officer who is authorized to act for such trustee in matters
relating to the Issuer and who is identified on the list of Authorized Officers
delivered by such trustee to the Bond Trustee as of the date hereof (as such
list may be modified or supplemented from time to time thereafter).
"Basic Documents" means the Certificate of Trust, the Trust Agreement, the
Sale Agreement, the Servicing Agreement and any Bills of Sale.
"Bond Rate" means, with respect to any Series or Class, the rate at which
interest accrues on the principal balance of Transition Bonds of such Series or
Class, as specified in the Series Supplement therefor.
"Bond Trustee" means The Bank of New York, a New York banking corporation
or any successor bond trustee under this Indenture, not in its individual
capacity but solely as bond trustee under this Indenture.
<PAGE>
3
"Book-Entry Transition Bonds" means beneficial interests in the Transition
Bonds, ownership and transfers of which shall be made through book entries by a
Clearing Agency as described in Section 2.11.
"Business Day" has the meaning specified in the Servicing Agreement.
"Calculated Overcollateralization Level" means, with respect to any Payment
Date, the amount set forth as such in Schedule 1 hereto, as such Schedule has
been adjusted in accordance with Section 3.19.
"Calculation Date" means, with respect to any Series of Transition Bonds,
such date or dates specified as such in the Series Supplement therefor.
"Capital Subaccount" has the meaning specified in Section 8.02(a).
"Certificate of Trust" means the certificate of trust of the Issuer
substantially in the form of Exhibit 2 to the Trust Agreement.
"Class" means, with respect to any Series, any one of the classes of
Transition Bonds of that Series.
"Class Subaccount" has the meaning specified in Section 8.02(a).
"Class Termination Date" means, with respect to any Class, the termination
date therefor, as specified in the Series Supplement therefor.
"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.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and Treasury Regulations promulgated thereunder.
"Collateral" has the meaning specified in the granting clause of this
Indenture.
"Collection Account" has the meaning specified in Section 8.02(a).
"Collection Period" has the meaning specified in the Servicing Agreement.
"Corporate Trust Office" means the principal office of the Bond Trustee at
which at any particular time its corporate trust business shall be administered,
which office at date of the execution of this Indenture is located at 101
Barclay Street, Floor 12 East, New York, NY 10019, Attention: Asset Backed
Finance Unit or at such other address as the Bond Trustee may designate from
<PAGE>
4
time to time by notice to the Transition Bondholders and the Issuer, or the
principal corporate trust office of any successor Bond Trustee (the address of
which the successor Bond Trustee will notify the Transition Bondholders and the
Issuer).
"Covenant Defeasance Option" has the meaning specified in Section 4.01(b).
"Counterparty" means the counterparty with respect to any Swap Agreement.
"Default" means any occurrence that is, or with notice or the lapse of time
or both would become, an Event of Default.
"Defeasance Subaccount" has the meaning specified in Section 8.02(a).
"Definitive Transition Bonds" has the meaning specified in Section 2.11.
"DTC Agreement" means the agreement between the Issuer, the Bond Trustee
and The Depository Trust Company, as the initial Clearing Agency, dated as of
the Closing Date, relating to the Transition Bonds, substantially in the form of
Exhibit C hereto, as the same may be amended and supplemented from time to time.
"Duff" has the meaning specified in the Servicing 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 State (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 Guarantor Institution" means a firm or other entity identified in
Rule 17Ad-15 under the Exchange Act as "an eligible guarantor institution,"
including (as such terms are defined therein) (i) a bank; (ii) a broker, dealer,
municipal securities broker or dealer or government securities broker or dealer;
(iii) a credit union; (iv) a national securities exchange, registered securities
association or clearing agency; or (v) a savings association that is a
participant in a securities transfer association.
"Eligible Institution" means (a) the corporate trust department of the Bond
Trustee or (b) a depository institution organized under the laws of the United
States of America or any State (or any domestic branch of a foreign bank), which
(i) has (A) a long-term unsecured debt rating of "AAA" by Standard & Poor's and
"Aa3" by Moody's and (B) a short-term 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" mean book-entry securities, negotiable instruments
or securities represented by instruments in bearer or registered form which
evidence:
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5
(a) direct obligations of, or 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 any Eligible Institution; provided, however, that at the
time of the investment or contractual commitment to invest therein such
Eligible Institution shall have the credit ratings set forth in clause (i)
of the Definition of Eligible Institution.
(c) commercial paper (other than commercial paper of the Seller or the
Servicer or any of their affiliates) having, at the time of the investment
or contractual commitment to invest therein, a rating from each of the
Rating Agencies in the highest rating category granted thereby;
(d) investments in money market funds having a rating from each of the
Rating Agencies in the highest rating category granted thereby (including
funds for which the Bond 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 an Eligible Institution; and
(f) any other investment permitted by each of the Rating Agencies;
provided, however, that (i) any book-entry security, instrument or security
having a maturity of one month or less that would be an Eligible Investment but
for its failure (or the failure of the obligor thereon) to have the rating
specified above shall be an Eligible Investment if such book-entry security,
instrument or security (or the obligor thereon) has 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 (ii) any book-entry
security, instrument or security having a maturity of greater than one month
that would be an Eligible Investment but for its failure (or the failure of the
obligor thereon) to have the rating specified above shall be an Eligible
Investment if such book-entry security, instrument or security (or the obligor
thereon) has 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).
"Event of Default" has the meaning specified in Section 5.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Executive Officer" means, with respect to any corporation, the Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer, President,
Executive Vice President, any Vice President, the Secretary or the Treasurer of
such corporation; and with respect to any partnership, any general partner
thereof.
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"Expected Amortization Schedule" means, with respect to any Series of
Transition Bonds, the expected amortization schedule for principal thereof, as
specified in the Series Supplement therefor.
"Expected Final Payment Date" means, with respect to any Series or Class of
Transition Bonds, the expected final payment date therefor, as specified in the
Series Supplement therefor.
"FDIC" means the Federal Deposit Insurance Corporation or any successor.
"Financing Issuance" means an issuance of a new Series of Transition Bonds
hereunder to provide funds to finance the purchase by the Issuer of Intangible
Transition Property.
"Fitch IBCA" has the meaning specified in the Servicing Agreement.
"General Subaccount" has the meaning specified 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 principal,
interest and other payments in respect of the Collateral and all other moneys
payable thereunder, to give and receive notices and other communications, to
make waivers or other agreements, to exercise all rights and options, to bring
Proceedings in the name of the Granting party or otherwise and generally to do
and receive anything that the Granting party is or may be entitled to do or
receive thereunder or with respect thereto.
"Holder" or "Transition Bondholder" means the Person in whose name a
Transition Bond is registered on the Transition Bond Register.
"Indemnity Amounts" means any amounts paid by the Seller or the Servicer to
the Bond Trustee, for itself or on behalf of the Transition Bondholders,
pursuant to Section 5.01(b), 5.0l(c)(ii) and 5.01(e) of the Sale Agreement or
Section 5.02(b) of the Servicing Agreement or by the Issuer to the Bond Trustee
pursuant to Section 5.07 of this Indenture; provided, however, that Indemnity
Amounts shall exclude Liquidated Damages paid pursuant to Section 5.01(c)(ii) of
the Sale Agreement.
"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 Transition Bonds established hereunder.
"Independent" means, when used with respect to any specified Person, that
the Person (a) is in fact independent of the Issuer, any other obligor upon the
Transition Bonds, the Seller and any Affiliate of any of the foregoing Persons,
(b) does not have any direct financial interest or any material indirect
financial interest in the Issuer, any such other obligor, the Seller or any
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7
Affiliate of any of the foregoing Persons and (c) is not connected with the
Issuer, any such other obligor, the Seller 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 Bond Trustee under the circumstances described in, and otherwise complying
with, the applicable requirements of Section 11.01, made by an Independent
appraiser or other expert appointed by an Issuer Order and approved by the Bond
Trustee in the exercise of reasonable care, 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.
"Intangible Transition Charges Adjustment Process" means the process by
which Intangible Transition Charges are adjusted pursuant to the Servicing
Agreement and the Statute.
"Interest" means, with respect to any Monthly Allocation Date for any
Series of Transition Bonds, the sum of, without duplication, (i) an amount that
if deposited to the Series Subaccount therefor would cause the amount on deposit
in such Series Subaccount, without regard to investment income, in respect of
interest to equal the Monthly Allocated Interest Balance for such Series and
such Monthly Allocation Date, (ii) if the maturities of the Transition Bonds
have been accelerated in accordance with Section 5.02, the accrued and unpaid
interest on such Series through the date of acceleration, (iii) with respect to
a Series to be redeemed prior to the next Monthly Allocation Date, the amount of
interest that will be payable as interest on such Series on the Redemption Date
therefor and (iv) any interest due on such Series on a Payment Date therefor or
other date for the payment of interest thereon and not paid and, to the extent
permitted by law, interest thereon.
"Interest Deposit Amounts" means any amounts remitted by the Seller to the
Bond Trustee in respect of interest payments (which shall mean in the case of
any Series or Class for which a Swap Agreement is in effect and any payments due
thereunder from the applicable Counterparty are being received by the Issuer,
the regular fixed payment to a Counterparty determined without regard to
netting, but not payments in respect of breakage or termination of a Swap
Agreement) pursuant to (i) a binding agreement with the Issuer entered into by
the Seller pursuant to Section 5.01(d)(i)(B)(i) of the Sale Agreement or (ii) an
escrow arrangement pursuant to Section 5.01(d)(i)(B)(ii) of the Sale Agreement .
"Interest Deposit Subaccount" has the meaning specified in Section 8.02(a).
"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
Transition Bonds.
"Issuer Order" and "Issuer Request" means a written order or request signed
in the name of the Issuer by any one of its Authorized Officers and delivered to
the Bond Trustee.
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"Issuer Trustee" means First Union Trust Company, National Association, not
in its individual capacity but solely as Issuer Trustee under the Trust
Agreement, or any successor Issuer Trustee under the Trust Agreement.
"Legal Defeasance Option" has the meaning specified in Section 4.01(b).
"Lien" has the meaning specified in the Servicing Agreement.
"Liquidated Damages" means the Liquidated Damages Amount paid by the Seller
to the Bond Trustee, on behalf of the Transition Bondholders, pursuant to
Section 5.01(c)(ii) or 5.01(d)(i) of the Sale Agreement.
"Liquidated Damages Redemption Date" means the date, not more than 5 days
after receipt of Liquidated Damages by the Issuer, specified by the Issuer for
the redemption of the Transition Bonds as a result of receiving Liquidated
Damages.
"Loss Amounts" means any amounts remitted by the Seller to the Bond Trustee
pursuant to Section 5.01(c)(iii) of the Sale Agreement.
"Loss Subaccount" has the meaning specified in Section 8.02(a).
"Monthly Allocated Interest Balance" means, for any Monthly Allocation Date
for a Series, the balance set forth as such for such Monthly Allocation Date in
Schedule B to the Series Supplement for such Series.
"Monthly Allocated Overcollateralization Balance" means, for any Monthly
Allocation Date, the balance set forth as such in Schedule 1 hereto , as such
Schedule has been adjusted in accordance with Section 3.19.
"Monthly Allocated Principal Balance" means, for any Monthly Allocation
Date for a Series, the balance set forth as such for such Monthly Allocation
Date in Schedule B to the Series Supplement for such Series.
"Monthly Allocation Date" has the meaning specified in the Servicing
Agreement.
"Monthly Servicing Fee" means, with respect to any Series of Transition
Bonds, the fee payable to the Servicer on each Monthly Allocation Date for
services rendered, determined pursuant to Section 5.07 of the Servicing
Agreement.
"Moody's" has the meaning specified in the Servicing Agreement.
"Officer's Certificate" means a certificate signed by any Authorized
Officer of the Issuer, under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.01, and delivered to
the Bond Trustee. Unless otherwise specified, any reference in this Indenture to
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9
an Officer's Certificate shall be to an Officer's Certificate of any Authorized
Officer of the Issuer.
"Operating Expenses" means all fees, costs, expenses and indemnity payments
owed by the Issuer, including all amounts owed by the Issuer to the Bond
Trustee, the Monthly Servicing Fee, and legal and accounting fees, costs and
expenses of the Issuer and the Issuer Trustee.
"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 Issuer and who shall be reasonably satisfactory to the Bond
Trustee, and which opinion or opinions shall be addressed to the Bond Trustee,
as Bond Trustee, and shall comply with any applicable requirements of Section
11.01, and shall be in a form reasonably satisfactory to the Bond Trustee.
"Outstanding" means, as of the date of determination, all Transition Bonds
theretofore authenticated and delivered under this Indenture except:
(i) Transition Bonds theretofore canceled by the Transition Bond
Registrar or delivered to the Transition Bond Registrar for cancelation;
(ii) Transition Bonds or portions thereof the payment for which money
in the necessary amount has been theretofore deposited with the Bond
Trustee or any Paying Agent in trust for the Holders of such Transition
Bonds; (provided, however, that if such Transition Bonds are to be
redeemed, notice of such redemption has been duly given pursuant to this
Indenture or provision therefor, satisfactory to the Bond Trustee, made);
and
(iii) Transition Bonds in exchange for or in lieu of other Transition
Bonds which have been authenticated and delivered pursuant to this
Indenture unless proof satisfactory to the Bond Trustee is presented that
any such Transition Bonds are held by a bona fide purchaser;
provided that in determining whether the Holders of the requisite Outstanding
Amount of the Transition Bonds or any Series or Class thereof have given any
request, demand, authorization, direction, notice, consent or waiver hereunder
or under any Basic Document, Transition Bonds owned by the Issuer, any other
obligor upon the Transition Bonds, the 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 Bond Trustee shall be protected in relying upon
any such request, demand, authorization, direction, notice, consent or waiver,
only Transition Bonds that the Bond Trustee knows to be so owned shall be so
disregarded. Transition Bonds so owned that have been pledged in good faith may
be regarded as Outstanding if the pledgee establishes to the satisfaction of the
Bond Trustee the pledgee's right so to act with respect to such Transition Bonds
and that the pledgee is not the Issuer, any other obligor upon the Transition
Bonds, the Seller or any Affiliate of any of the foregoing Persons.
"Outstanding Amount" means the aggregate principal amount of all Transition
Bonds or, if the context requires, all Transition Bonds of a Series or Class
Outstanding at the date of determination.
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"Overcollateralization" means, with respect to any Monthly Allocation Date,
an amount that, if deposited to the Overcollateralization Subaccount, would
cause the balance in such subaccount to equal the Monthly Allocated
Overcollateralization Balance for such Monthly Allocation Date, without regard
to investment earnings.
"Overcollateralization Amount" means, with respect to any Series of
Transition Bonds, the amount specified as such in the Series Supplement
therefor.
"Overcollateralization Subaccount" has the meaning specified in Section
8.02(a).
"Paying Agent" means the Bond Trustee or any other Person that meets the
eligibility standards for the Bond Trustee specified in Section 6.11 and is
authorized by the Issuer to make the payments of principal of or premium, if
any, or interest on the Transition Bonds on behalf of the Issuer.
"Payment Date" means, with respect to any Series or Class, each date or
dates specified as Payment Dates for such Series or Class in the Series
Supplement therefor.
"Person" means any individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust (including any beneficiary
thereof), business trust, unincorporated organization or government or any
agency or political subdivision thereof.
"Predecessor Transition Bond" means, with respect to any particular
Transition Bond, every previous Transition Bond evidencing all or a portion of
the same debt as that evidenced by such particular Transition Bond; and, for the
purpose of this definition, any Transition Bond authenticated and delivered
under Section 2.06 in lieu of a mutilated, lost, destroyed or stolen Transition
Bond shall be deemed to evidence the same debt as the mutilated, lost, destroyed
or stolen Transition Bond.
"Principal" means, with respect to any Monthly Allocation Date for any
Series of Transition Bonds, the sum of, without duplication, (i) an amount that,
if deposited to the Series Subaccount therefor, would cause the amount on
deposit in such Series Subaccount, without regard to investment income, in
respect of principal to equal the Monthly Allocated Principal Balance for such
Series and such Monthly Allocation Date, (ii) if the maturities of the
Transition Bonds have been accelerated in accordance with Section 5.02, the
aggregate outstanding principal amount of such Series of Transition Bonds, (iii)
with respect to a Series to be redeemed prior to the next Monthly Allocation
Date, the amount of principal that will be payable as principal on the
Redemption Date therefor and (iv) any principal due on a Series on a Payment
Date therefor or other date for the payment of principal thereof and not paid.
"Proceeding" means any suit in equity, action at law or other judicial or
administrative proceeding.
"Projected Transition Bond Balance" means, as of any date, the sum of the
amounts provided for in the Expected Amortization Schedules for each outstanding
Series of Transition Bonds and such date.
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"Pro Rata" has the meaning specified in Section 8.02(d).
"Rating Agency" means any rating agency rating the Transition Bonds of any
Class or Series at the time of issuance thereof at the request of the Issuer .
If no such organization or successor is any longer in existence, "Rating Agency"
shall be a nationally recognized statistical rating organization or other
comparable Person designated by the Issuer, notice of which designation shall be
given to the Bond Trustee, the Issuer Trustee and the Servicer.
"Rating Agency Condition" means, with respect to any action, the
notification in writing by each Rating Agency to the Seller, the Servicer, the
Bond Trustee and the Issuer that such action will not result in a reduction or
withdrawal of the then current rating by such Rating Agency of any outstanding
Series or Class of Transition Bonds.
"Record Date" means, with respect to any Payment Date for a Series, the
date set forth as such in the Series Supplement therefor.
"Redemption Date" means, with respect to any Series or Class, the date for
the redemption of the Transition Bonds of such Series or Class pursuant to
Sections 10.01 or 10.02 or the Series Supplement for such Series or Class,
including the Liquidated Damages Redemption Date.
"Redemption Price" has the meaning specified in Section 10.01.
"Refunding Issuance" means issuance of a new Series of Transition Bonds
hereunder to pay the cost of refunding, through redemption or payment on the
Expected Final Payment Date for a Series or Class of Transition Bonds, all or
part of the Transition Bonds of such Series or Class to the extent permitted by
the terms thereof.
"Registered Holder" means, as of any date, the Person in whose name a
Transition Bond is registered on the Transition Bond Register on such date.
"Required Capital Amount" means the sum of, for each Outstanding Series of
Transition Bonds, 0.50% of the initial principal amount thereof.
"Reserve Subaccount" has the meaning specified in Section 8.02(a).
"Responsible Officer" means, with respect to the Bond Trustee, any officer
within the Corporate Trust Office of the Bond Trustee, including any Vice
President, Assistant Vice President, Secretary, Assistant Secretary, or any
other officer of the Bond Trustee customarily performing functions similar to
those performed by any of the above designated officers and also, with respect
to a particular matter, any other officer to whom such matter is referred
because of such officer's knowledge of and familiarity with the particular
subject.
"Retiring Bond Trustee" has the meaning specified in Section 6.08.
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"Sale Agreement" means the Intangible Transition Property Sale Agreement
dated as of March 25, 1999, between the Issuer and the Seller, as amended and
supplemented from time to time.
"Schedule Revision Date" means (i) the date on which a new Series of
Transition Bonds is issued or any outstanding Series of Transition Bonds is
redeemed or defeased, (ii) any Adjustment Date on which the Intangible
Transition Charges are changed or revised and (iii) any Payment Date on which
payments are not made in accordance with the Expected Amortization Schedule.
"Series" means any series of Transition Bonds issued and authenticated
pursuant to this Indenture.
"Series Issuance Date" means, with respect to any Series, the date on which
the Transition Bonds of such Series are to be originally issued in accordance
with Section 2.10 and the Series Supplement for such Series.
"Series Subaccount" has the meaning specified in Section 8.02(a).
"Series Supplement" means an indenture supplemental to this Indenture that
authorizes a particular Series of Transition Bonds.
"Series Termination Date" means, with respect to any Series, the
termination date therefor, as specified in the Series Supplement for such
Series.
"Servicing Agreement" means the Master Servicing Agreement dated as of
March 25, 1999, between the Issuer, the Servicer and such other Persons as may
become parties thereto, as amended and supplemented from time to time.
"Standard & Poor's" has the meaning specified in the Servicing Agreement.
"State" means any one of the 50 states of the United States of America or
the District of Columbia.
"Successor Servicer" has the meaning specified in Section 3.20(h).
"Swap Agreement" means any ISDA Master Agreement, interest rate swap
agreement or agreement with respect to any hedge or similar transaction entered
into by the Issuer.
"Transition Bond" means any of the transition bonds (as defined in the
Statute) issued and authenticated pursuant to this Indenture.
"Transition Bond Balance" means, as of any date, the aggregate outstanding
principal amount of all Series of Transition Bonds on such date.
"Transition Bond Owner" means, with respect to a Book-Entry Transition
Bond, the Person who is the beneficial owner of such Book-Entry Transition Bond,
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13
as reflected on the books of the Clearing Agency, or on the books of a Person
maintaining an account with such Clearing Agency (directly as a Clearing Agency
Participant or as an indirect participant, in each case in accordance with the
rules of such Clearing Agency).
"Transition Bond Register" and "Transition Bond Registrar" have the
respective meanings specified in Section 2.05.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939 as in
force on the date hereof, unless otherwise specifically provided.
"UCC" has the meaning specified in the Servicing Agreement.
"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 issuer's option.
(b) Except as otherwise specified herein or as the context may otherwise
require, each of the following terms has the meaning set forth in the Sale
Agreement 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:
Term Section of Sale Agreement
Bill of Sale.................................. Section 1.01(a)
Initial Intangible Transition Property........ Section 1.01(a)
Intangible Transition Charges................. Section 1.01(a)
Intangible Transition Property................ Section 1.01(a)
ITC Collections............................... Section 1.01(a)
Liquidated Damages Amount .................... Section 1.01(a)
PUC .......................................... Section 1.01(a)
Qualified Rate Order ......................... Section 1.01(a)
Seller ....................................... Section 1.01(a)
Servicer ..................................... Section 1.01(a)
Servicer Default ............................. Section 1.01(a)
Statute ...................................... Section 1.01(a)
Subsequent Intangible Transition Property..... Section 1.01(a)
Transferred Intangible Transition Property.... Section 1.01(a)
Trust Agreement............................... Section 1.01(a)
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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. Each of the following TIA
terms used in this Indenture has the following meaning:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Transition Bonds.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Bond Trustee.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule have
the meaning 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
(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 Transition Bonds
SECTION 2.01. Form. The Transition Bonds and the Bond Trustee's certificate
of authentication shall be in substantially the forms set forth in Exhibit A
hereto, 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 Authorized Officers of the Issuer
Trustee executing such Transition Bonds, as evidenced by their execution of such
Transition Bonds. Any portion of the text of any Transition Bond may be set
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15
forth on the reverse thereof, with an appropriate reference thereto on the face
of the Transition Bond. Each Transition Bond shall be dated the date of its
authentication.
The Transition Bonds 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 Authorized Officers of the Issuer
Trustee executing such Transition Bonds, as evidenced by their execution of such
Transition Bonds.
Each Transition Bond shall bear upon its face the designation so selected
for the Series or Class to which it belongs. The terms of all Transition Bonds
of the same Series shall be the same, unless such Series is comprised of one or
more Classes, in which case the terms of all Transition Bonds of the same Class
shall be the same.
All Definitive Transition Bonds shall bear the legend set forth in Exhibit
A hereto.
SECTION 2.02. Execution, Authentication and Delivery. The Transition Bonds
shall be executed on behalf of the Issuer by an Authorized Officer of the Issuer
Trustee. The signature of any such Authorized Officer on the Transition Bonds
may be manual or facsimile.
Transition Bonds bearing the manual or facsimile signature of individuals
who were at any time Authorized Officers of the Issuer Trustee shall bind the
Issuer, notwithstanding that such individuals or any of them have ceased to hold
such offices prior to the authentication and delivery of such Transition Bonds
or did not hold such offices at the date of such Transition Bonds.
At any time and from time to time after the execution and delivery of this
Indenture, the Issuer may deliver Transition Bonds executed on behalf of the
Issuer to the Bond Trustee pursuant to an Issuer Order for authentication; and
the Bond Trustee shall authenticate and deliver such Transition Bond as in this
Indenture provided and not otherwise.
No Transition Bond shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose, unless there appears on such Transition
Bond a certificate of authentication substantially in the form provided for
herein executed by the Bond Trustee by the manual signature of one of its
authorized signatories, and such certificate upon any Transition Bond shall be
conclusive evidence, and the only evidence, that such Transition Bond has been
duly authenticated and delivered hereunder.
SECTION 2.03. Denominations; Transition Bonds Issuable in Series. The
Transition Bonds of each Series shall be issuable as registered Transition Bonds
in the Authorized Initial Denominations specified in the Series Supplement
therefor.
The Transition Bonds may, at the election of and as authorized by an
Authorized Officer of the Issuer, and set forth in a Series Supplement, be
issued in one or more Series (each comprised of one or more Classes), and shall
be designated generally as the "Transition Bonds" of the Issuer, with such
further particular designations added or incorporated in such title for the
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Transition Bonds of any particular Series or Class as an Authorized Officer of
the Issuer may determine and be set forth in the Series Supplement therefor.
Each Series of Transition Bonds shall be created by a Series Supplement
authorized by an Authorized Officer of the 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:
(i) designation of the Series and, if applicable, the Classes thereof;
(ii) the aggregate principal amount of the Transition Bonds of the
Series and, if applicable, each Class thereof;
(iii) the Bond Rate of the Series and, if applicable, each Class
thereof or the formula, if any, used to calculate the applicable Bond Rate
or Bond Rates for the Series;
(iv) the Payment Dates for the Series;
(v) the Monthly Allocated Interest Balances for the Series;
(vi) the Monthly Allocated Principal Balances for the Series;
(vii) the Expected Final Payment Date of the Series, and, if
applicable, each Class thereof;
(viii) the Series Termination Date for the Series and, if applicable,
the Class Termination Dates for each Class thereof;
(ix) the Series Issuance Date for the Series;
(x) the place or places for payments with respect to the Series;
(xi) the Authorized Initial Denominations for the Series;
(xii) the provisions, if any, for redemption of the Series by the
Issuer;
(xiii) the Expected Amortization Schedule for the Series;
(xiv) the Overcollateralization Amount with respect to the Series, the
Calculated Overcollateralization Level and the Monthly Allocated
Overcollateralization Balance for each Monthly Allocation Date;
(xv) the Calculation Dates and Adjustment Dates for the Series;
(xvi) the credit enhancement applicable to the Series; and
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(xvii) any other terms of the Series or Class that are not
inconsistent with the provisions of this Indenture.
SECTION 2.04. Temporary Transition Bonds. Pending the preparation of
definitive Transition Bonds, or by agreement of the purchasers of all Transition
Bonds or, in the case of Transition Bonds held in a book-entry only system by a
Clearing Agency, the Issuer Trustee on behalf of the Issuer may execute, and
upon receipt of an Issuer Order the Bond Trustee shall authenticate and deliver,
temporary Transition Bonds which are printed, lithographed, typewritten,
mimeographed or otherwise produced, of the tenor of the definitive Transition
Bonds in lieu of which they are issued and with such variations not inconsistent
with the terms of this Indenture as the Authorized Officers of the Issuer
Trustee executing such Transition Bonds may determine, as evidenced by their
execution of such Transition Bonds.
If temporary Transition Bonds are issued, the Issuer will cause definitive
Transition Bonds to be prepared without unreasonable delay except where
temporary Transition Bonds are held by a Clearing Agency . After the preparation
of definitive Transition Bonds, the temporary Transition Bonds shall be
exchangeable for definitive Transition Bonds upon surrender of the temporary
Transition Bonds at the office or agency of the 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 Transition Bonds, the Issuer Trustee on
behalf of the Issuer shall execute and the Bond Trustee shall authenticate and
deliver in exchange therefor a like initial principal amount of definitive
Transition Bonds in Authorized Initial Denominations. Until so exchanged, the
temporary Transition Bonds shall in all respects be entitled to the same
benefits under this Indenture as definitive Transition Bonds.
SECTION 2.05. Registration; Registration of Transfer and Exchange. The
Issuer shall cause to be kept a register (the "Transition Bond Register") in
which, subject to such reasonable regulations as it may prescribe, the Issuer
shall provide for the registration of Transition Bonds and the registration of
transfers of Transition Bonds. The Bond Trustee shall be "Transition Bond
Registrar" for the purpose of registering Transition Bonds and transfers of
Transition Bonds as herein provided. Upon any resignation of any Transition Bond
Registrar, the Issuer shall promptly appoint a successor or, if it elects not to
make such an appointment, assume the duties of Transition Bond Registrar.
If a Person other than the Bond Trustee is appointed by the Issuer as
Transition Bond Registrar, the Issuer will give the Bond Trustee prompt written
notice of the appointment of such Transition Bond Registrar and of the location,
and any change in the location, of the Transition Bond Register, and the Bond
Trustee shall have the right to inspect the Transition Bond Register at all
reasonable times and to obtain copies thereof, and the Bond Trustee shall have
the right to rely upon a certificate executed on behalf of the Transition Bond
Registrar by an Authorized Officer thereof as to the names and addresses of the
Holders of the Transition Bonds and the principal amounts and number of such
Transition Bonds.
Upon surrender for registration of transfer of any Transition Bond at the
office or agency of the Issuer to be maintained as provided in Section 3.02, the
Issuer Trustee on behalf of the Issuer shall execute, and the Bond Trustee shall
authenticate and the Transition Bondholder shall obtain from the Bond Trustee,
in the name of the designated transferee or transferees, one or more new
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18
Transition Bonds in any Authorized Initial Denominations, of a like Series (and,
if applicable, Class) and aggregate initial principal amount.
At the option of the Holder, Transition Bonds may be exchanged for other
Transition Bonds of a like Series (and, if applicable, Class) and aggregate
initial principal amount in Authorized Initial Denominations, upon surrender of
the Transition Bonds to be exchanged at such office or agency. Whenever any
Transition Bonds are so surrendered for exchange, the Issuer Trustee on behalf
of the Issuer shall execute, and the Bond Trustee shall authenticate and the
Transition Bondholder shall obtain from the Bond Trustee, the Transition Bonds
which the Transition Bondholder making the exchange is entitled to receive.
All Transition Bonds issued upon any registration of transfer or exchange
of Transition Bonds shall be the valid obligations of the Issuer, evidencing the
same debt, and entitled to the same benefits under this Indenture, as the
Transition Bonds surrendered upon such registration of transfer or exchange.
Every Transition Bond presented or surrendered for registration of transfer
or exchange shall be duly endorsed by, or be accompanied by a written instrument
of transfer in the form set forth in Exhibit A hereto or such other form as is
satisfactory to the Bond Trustee duly executed by, the Holder thereof or such
Holder's attorney duly authorized in writing, with such signature guaranteed by
an Eligible Guarantor Institution in the form set forth in such Transition Bond.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Transition Bonds, but, other than in respect of
exchanges pursuant to Section 2.04 or 9.06 not involving any transfer, the
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 Transition Bonds.
The preceding provisions of this Section notwithstanding, the Issuer shall
not be required to make, and the Transition Bond Registrar need not register,
transfers or exchanges of Transition Bonds selected for redemption or transfers
or exchanges of any Transition Bond for a period of 15 days preceding the date
on which final payment of principal is to be made with respect to such
Transition Bond.
SECTION 2.06. Mutilated, Destroyed, Lost or Stolen Transition Bonds. If (i)
any mutilated Transition Bond is surrendered to the Bond Trustee, or the Bond
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Transition Bond, and (ii) there is delivered to the Bond Trustee such
security or indemnity as may be required by it to hold the Issuer and the Bond
Trustee harmless, then, in the absence of notice to the Issuer, the Transition
Bond Registrar or the Bond Trustee that such Transition Bond has been acquired
by a bona fide purchaser, the Issuer Trustee on behalf of the Issuer shall
execute, and upon the Issuer Trustee's request the Bond Trustee shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Transition Bond, a replacement Transition Bond of like
Series (and, if applicable, Class), tenor and initial principal amount in
Authorized Initial Denominations, bearing a number not contemporaneously
outstanding; provided, however, that if any such destroyed, lost or stolen
Transition Bond, but not a mutilated Transition Bond, shall have
<PAGE>
19
become or within seven days shall be due and payable, or shall have been called
for redemption, instead of issuing a replacement Transition Bond, the Issuer may
pay such destroyed, lost or stolen Transition Bond when so due or payable or
upon the Redemption Date without surrender thereof. If, after the delivery of
such replacement Transition Bond or payment of a destroyed, lost or stolen
Transition Bond pursuant to the proviso to the preceding sentence, a bona fide
purchaser of the original Transition Bond in lieu of which such replacement
Transition Bond was issued presents for payment such original Transition Bond,
the Issuer and the Bond Trustee shall be entitled to recover such replacement
Transition Bond (or such payment) from the Person to whom it was delivered or
any Person taking such replacement Transition Bond from such Person to whom such
replacement Transition Bond was delivered or any assignee of such Person, except
a bona fide 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 Issuer or the Bond Trustee in connection therewith.
Upon the issuance of any replacement Transition Bond under this Section,
the Issuer may require the payment by the Holder of such Transition Bond 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 Bond Trustee) connected therewith.
Every replacement Transition Bond issued pursuant to this Section in
replacement of any mutilated, destroyed, lost or stolen Transition Bond shall
constitute an original additional contractual obligation of the Issuer, whether
or not the mutilated, destroyed, lost or stolen Transition Bond 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 Transition Bonds
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 Transition Bonds.
SECTION 2.07. Persons Deemed Owner. Prior to due presentment for
registration of transfer of any Transition Bond, the Issuer, the Bond Trustee
and any agent of the Issuer or the Bond Trustee may treat the Person in whose
name any Transition Bond is registered (as of the day of determination) as the
owner of such Transition Bond for the purpose of receiving payments of principal
of and premium, if any, and interest on such Transition Bond and for all other
purposes whatsoever, whether or not such Transition Bond be overdue, and neither
the Issuer, the Bond Trustee nor any agent of the Issuer or the Bond Trustee
shall be affected by notice to the contrary.
SECTION 2.08. Payment of Principal, Premium, if any, and Interest; Interest
on Overdue Principal and Premium, if any; Principal, Premium and Interest Rights
Preserved. (a) The Transition Bonds shall accrue interest as provided in the
form of Transition Bond attached to the Series Supplement for such Transition
Bonds, at the applicable Bond Rate specified therein, and such interest shall be
payable on each Payment Date as specified therein. Any instalment of interest,
principal or premium, if any, payable on any Transition Bond which is punctually
paid or duly provided for by the Issuer on the applicable Payment Date shall be
paid to the Person in whose name such Transition Bond (or one or more
Predecessor Transition Bonds) 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 Transition Bond Register on such Record Date or in such other
<PAGE>
20
manner as may be provided in the related Series Supplement, except that with
respect to Transition Bonds registered on a 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 and except for the final instalment of
principal and premium, if any, payable with respect to such Transition Bond on a
Payment Date which shall be payable as provided in clause (b) 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 Transition Bond of each Series (and, if
applicable, Class) shall be payable in instalments on each Payment Date
specified in the Expected Amortization Schedule included in the form of
Transition Bond attached to the Series Supplement for such Transition
Bonds, but only to the extent that moneys are available for such payment
pursuant to Section 8.02. Failure to pay in accordance with such Expected
Amortization Schedule because moneys are not so available pursuant to
Section 8.02 to make such payments shall not constitute a Default or Event
of Default under this Indenture. Notwithstanding the foregoing, the entire
unpaid principal amount of the Transition Bonds of any Series or Class
shall be due and payable, if not previously paid (i) on the Series
Termination Date (or, if applicable, Class Termination Date) therefor, (ii)
on the date on which the Transition Bonds of all Series have been declared
immediately due and payable in accordance with Section 5.02 or (iii) on the
Redemption Date, if any, therefor. The Bond Trustee shall notify the Person
in whose name a Transition Bond is registered at the close of business on
the Record Date second preceding the Payment Date on which the Issuer
expects that the final instalment of principal of and premium, if any, and
interest on such Transition Bond 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 instalment of principal and premium, if any, will be
payable to the Person in whose name a Transition Bond is registered at the
close of business on the Record Date immediately preceding such final
Payment Date and only upon presentation and surrender of such Transition
Bond and shall specify the place where such Transition Bond may be
presented and surrendered for payment of such instalment. Notices in
connection with redemptions of Transition Bonds shall be mailed to
Transition Bondholders as provided in Section 10.03.
(c) If the Issuer defaults in a payment of interest on the Transition
Bonds of any Series, the Issuer shall pay defaulted interest (plus interest
on such defaulted interest at the applicable Bond Rate to the extent
lawful) in any lawful manner. The Issuer may pay such defaulted interest to
the Persons who are Transition Bondholders on a subsequent special record
date, which date shall be at least five Business Days prior to the payment
date. The Issuer shall fix or cause to be fixed any such special record
date and payment date, and, at least 15 days before any such special record
date, the Issuer shall mail to each affected Transition Bondholder a notice
that states the special record date, the payment date and the amount of
defaulted interest to be paid.
SECTION 2.09. Cancelation. All Transition Bonds surrendered for payment,
registration of transfer, exchange or redemption shall, if surrendered to any
Person other than the Bond Trustee, be delivered to the Bond Trustee and shall
be promptly canceled by the Bond Trustee. The Issuer may at any time deliver to
the Bond Trustee for cancelation any Transition Bonds previously authenticated
and delivered hereunder which the Issuer may have acquired in any manner
whatsoever, and all Transition Bonds so delivered shall be promptly canceled by
the Bond Trustee. No Transition Bonds shall be authenticated in lieu of or in
exchange for any Transition Bonds canceled as provided in this Section, except
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21
as expressly permitted by this Indenture. All canceled Transition Bonds may be
held or disposed of by the Bond Trustee in accordance with its standard
retention or disposal policy as in effect at the time unless the Issuer shall
direct by an Issuer Order that they be destroyed or returned to it; provided
that such Issuer Order is timely and the Transition Bonds have not been
previously disposed of by the Bond Trustee.
SECTION 2.10. Authentication and Delivery of Transition Bonds. The Issuer
may issue Transition Bonds of a new Series from time to time as a Financing
Issuance or a Refunding Issuance.
Transition Bonds of a new Series may from time to time be executed by the
Issuer Trustee on behalf of the Issuer and delivered to the Bond Trustee for
authentication and thereupon the same shall be authenticated and delivered by
the Bond Trustee upon Issuer Request and upon delivery by the Issuer, at the
Issuer's expense, to the Bond Trustee of the following:
(1) Trust Action. An Issuer Order authorizing and directing the
execution, authentication and delivery of the Transition Bonds by the Bond
Trustee and specifying the principal amount of Transition Bonds to be
authenticated.
(2) Authorizations. Either (i) a certificate of authentication or
other official document evidencing the due authorization, approval or
consent of any governmental body or bodies at the time having jurisdiction,
together with an Opinion of Counsel that the Bond Trustee is entitled to
rely on that the authorization, approval, or consent of no other
governmental body is required for the valid issuance, authentication and
delivery of such Transition Bonds, or (ii) an Opinion of Counsel that no
such authorization, approval, or consent of any governmental body is
required, except for, in the case of (i) and (ii), such registrations as
are required under the Blue Sky and securities laws of any State.
(3) Authorizing Certificate. A certified resolution of the Issuer
authorizing the execution and delivery of the Series Supplement for the
Transition Bonds applied for and the execution, authentication and delivery
of such Transition Bonds.
(4) A Series Supplement for the Series of Transition Bonds applied
for, which shall set forth the provisions and form of the Transition Bonds
of such Series (and, if applicable, each Class thereof).
(5) Certificates of the Issuer. (a) An Officer's Certificate from the
Issuer, dated as of the Series Issuance Date, stating: (i) that no Default
has occurred and is continuing under this Indenture and that the issuance
of the Transition Bonds applied for will not result in any Default; (ii)
that the Issuer has appointed the firm of independent certified public
accountants as contemplated in Section 8.05; (iii) that attached thereto
are duly executed, true and complete copies of the Sale Agreement and the
Servicing Agreement; (iv) that all filings with the PUC pursuant to the
Statute and all UCC financing statements with respect to the Collateral
which are required to be filed by the terms of the Sale Agreement, the
Servicing Agreement or this Indenture have been filed as required; and (v)
that all conditions precedent provided in the Indenture relating to the
<PAGE>
22
authentication and delivery of the Transition Bonds have been complied
with.
(b) An Officer's Certificate from the Seller, dated as of the Series
Issuance Date, to the effect that, in the case of the Intangible Transition
Property to be transferred to the Issuer on such date immediately prior to
the conveyance thereof to the Issuer pursuant to the Sale Agreement:
(i) the Seller is the sole owner of such Intangible Transition
Property; such Intangible Transition Property has been validly
transferred and sold to the Issuer free and clear of all Liens (other
than Liens created by the Issuer pursuant to this Indenture); the
Seller has the corporate power and authority to own, sell and assign
such Intangible Transition Property to the Issuer; and the Seller has
duly authorized such sale and assignment to the Issuer by all
necessary corporate action; and
(ii) the attached copy of the Qualified Rate Order creating such
Intangible Transition Property is true and correct and is in full
force and effect.
(6) Opinion of Counsel. An Opinion of Counsel, portions of which may be
delivered by counsel for the Issuer and portions of which may be delivered by
counsel for the Seller and the Servicer, dated as of the Series Issuance Date,
to the collective effect that:
(a) the Issuer has the power and authority to execute and deliver the
Series Supplement and this Indenture and to issue the Transition Bonds
applied for, each of the Series Supplement and this Indenture, and the
Transition Bonds applied for have been duly authorized and executed, and
the Issuer is duly organized and in good standing under the laws of the
jurisdiction of its organization;
(b) the Transition Bonds applied for, when authenticated in accordance
with the provisions of the Indenture and delivered, will constitute valid
and binding obligations of the Issuer entitled to the benefits of the
Indenture and the related Series Supplement;
(c) the Indenture (including the related Series Supplement), the Sale
Agreement and the Servicing Agreement are valid and binding agreements of
the 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);
(d) the Sale Agreement is a valid and binding agreement of the Seller,
enforceable against the Seller in accordance with its terms except as such
enforceability may be subject to bankruptcy, insolvency, reorganization and
other similar laws affecting the rights of creditors generally and general
principles of equity (regardless of whether such enforcement is considered
in a proceeding in equity or at law);
<PAGE>
23
(e) the Servicing Agreement is a valid and binding agreement of the
Servicer, enforceable against the Servicer in accordance with its terms
except as such enforceability may be subject to bankruptcy, insolvency,
reorganization and other similar laws affecting the rights of creditors
generally and general principles of equity (regardless of whether such
enforcement is considered in a proceeding in equity or at law);
(f) upon the delivery of a fully executed Bill of Sale delivered to
the Issuer pursuant to Section 2.03(i) of the Sale Agreement in connection
with the issuance of Transition Bonds applied for and the payment of the
purchase price of the related Intangible Transition Property by the Issuer
to the Seller pursuant to such Bill of Sale and the Sale Agreement, then
(I) the transfer of the Intangible Transition Property purported to be
conveyed thereby by the Seller to the Issuer pursuant to such Bill of Sale
and the Sale Agreement conveys all of the Seller's right, title and
interest in such Intangible Transition Property to the Issuer and will be
treated under state law as an absolute transfer of all of the Seller's
right, title, and interest in such Intangible Transition Property, other
than for federal and state income tax purposes, (II) such transfer of such
Intangible Transition Property is perfected, (III) such transfer has a
priority over any other assignment or transfer of such Intangible
Transition Property, and (IV) such Intangible Transition Property is free
and clear of all liens created prior to its transfer to the Issuer pursuant
to such Bill of Sale and the Sale Agreement;
(g)(I) to the extent that the provisions of Section 2812 of the
Statute apply to the grant of a security interest by the Issuer in the
Collateral pursuant to this Indenture, then upon the giving of value by the
Bond Trustee to the Issuer with respect to the Collateral, (A) this
Indenture creates in favor of the Bond Trustee a security interest in the
rights of the Issuer in the Collateral, (B) such security interest is valid
and enforceable against the 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 2812 of the Statute), and has
attached, (C) such security interest is perfected, and (D) such perfected
security interest is of first priority; and (II) to the extent that the
provisions of Section 2812 of the Statute do not apply to the grant of a
security interest by the Issuer in the Collateral pursuant to this
Indenture, then upon the giving of value by the Bond Trustee to the Issuer
with respect to the Collateral, (A) this Indenture creates in favor of the
Bond Trustee a security interest in the rights of the Issuer in the
Collateral, (B) such security interest is enforceable against the Issuer
and third parties with respect to such Collateral, (C) such security
interest is perfected, and (D) such perfected security interest is of first
priority;
(h) the Indenture has been duly qualified under the Trust Indenture
Act and either the Series Supplement for the Transition Bonds applied for
has been duly qualified under the Trust Indenture Act or no such
qualification of such Series Supplement is necessary;
<PAGE>
24
(i) all instruments furnished to the Bond Trustee conform to the
requirements of this Indenture and constitute all the documents required to
be delivered hereunder for the Bond Trustee to authenticate and deliver the
Transition Bonds applied for, and all conditions precedent provided for in
this Indenture relating to the authentication and delivery of the
Transition Bonds have been complied with;
(j) either (A) the registration statement covering the Transition
Bonds is effective under the Securities Act of 1933 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 of 1933 nor have proceedings therefor been instituted or
threatened by the Commission or (B) the Transition Bonds are exempt from
the registration requirements under the Securities Act of 1933;
(k) the Indenture (including the related Series Supplement) has been
duly authorized, executed and delivered by the Issuer; and
(l) the Sale Agreement and the Servicing Agreement have been duly
authorized, executed and delivered by the Issuer, the Seller and the
Servicer as applicable.
(7) Accountant's Certificate or Opinion. A certificate or opinion,
addressed to the Issuer and the Bond Trustee complying with the requirements of
Section 11.01 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 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 Intangible Transition Charges with respect to the Transferred Intangible
Transition Property or, if applicable, the most recent revised Intangible
Transition Charges with respect to the Transferred Intangible Transition
Property, and taking into account amounts on deposit in the Reserve Subaccount,
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
Intangible Transition Charges are sufficient to (a) pay Operating Expenses when
incurred, (b) pay interest on each Series of Transition Bonds at their
respective Bond Rates when due, or, with respect to Classes or Series for which
a Swap Agreement is in effect and any payments due thereunder from the
applicable Counterparty are being received by the Issuer, regular fixed payments
due to the related Counterparties (not including any breakage or termination
payments), (c) pay principal of the Transition Bonds of all Series in accordance
with their respective Expected Amortization Schedules and (d) fund the
Calculated Overcollateralization Level as of each Payment Date.
(8) Rating Agency Condition. The Bond Trustee shall receive written notice
from each Rating Agency that the Rating Agency Condition will be satisfied with
respect to the issuance of such new Series.
<PAGE>
25
(9) Bill of Sale. If the issuance of an additional Series of Transition
Bonds is a Financing Issuance, the Bill of Sale delivered to the Issuer under
the Sale Agreement with respect to the Intangible Transition Property being
purchased with the proceeds of such Financing Issuance.
(10) Moneys for Refunding. If the issuance of a Series of Transition Bonds
is a Refunding Issuance, the amount of money necessary to pay the outstanding
principal balance of, and premium and interest on, the Transition Bonds being
refunded to either the Redemption Date for Transition Bonds being refunded upon
redemption, such money to be deposited into a separate account with the Bond
Trustee.
SECTION 2.11. Book-Entry Transition Bonds. Unless otherwise specified in
the related Series Supplement, each Series of Transition Bonds, upon original
issuance, will be issued in the form of a typewritten Transition Bond or
Transition Bonds representing the Book- Entry Transition Bonds, to be delivered
to The Depository Trust Company, the initial Clearing Agency, by, or on behalf
of, the Issuer. Such Transition Bond shall initially be registered on the
Transition Bond Register in the name of Cede & Co., the nominee of the initial
Clearing Agency, and no Transition Bond Owner will receive a definitive
Transition Bond representing such Transition Bond Owner's interest in such
Transition Bond, except as provided in Section 2.13. Unless and until
definitive, fully registered Transition Bonds (the "Definitive Transition
Bonds") have been issued to Transition Bond Owners pursuant to Section 2.13:
(i) the provisions of this Section shall be in full force and effect;
(ii) the Transition Bond Registrar and the Bond Trustee shall be
entitled to deal with the Clearing Agency for all purposes of this
Indenture (including the payment of principal of and premium, if any, and
interest on the Transition Bonds and the giving of instructions or
directions hereunder) as the sole holder of the Transition Bonds, and shall
have no obligation to the Transition Bond Owners;
(iii) to the extent that the provisions of this Section conflict with
any other provisions of this Indenture, the provisions of this Section
shall control;
(iv) the rights of Transition Bond Owners shall be exercised only
through the Clearing Agency and shall be limited to those established by
law and agreements between such Transition Bond Owners and the Clearing
Agency or the Clearing Agency Participants. Pursuant to the DTC Agreement,
unless and until Definitive Transition Bonds are issued pursuant to Section
2.13, the initial Clearing Agency will make book-entry transfers among the
Clearing Agency Participants and receive and transmit payments of principal
of and premium, if any, and interest on the Transition Bonds to such
Clearing Agency Participants; and
(v) whenever this Indenture requires or permits actions to be taken
based upon instructions or directions of Holders of Transition Bonds
evidencing a specified percentage of the Outstanding Amount of the
Transition Bonds or a Series or Class thereof, the Clearing Agency shall be
deemed to represent such percentage only to the extent that it has received
instructions to such effect from Transition Bond Owners or Clearing Agency
<PAGE>
26
Participants owning or representing, respectively, such required percentage
of the beneficial interest in the Transition Bonds or such Series or Class
and has delivered such instructions to the Bond Trustee.
SECTION 2.12. Notices to Clearing Agency. Whenever a notice or other
communication to the Transition Bondholders is required under this Indenture,
unless and until Definitive Transition Bonds shall have been issued to
Transition Bond Owners pursuant to Section 2.13, the Bond Trustee shall give all
such notices and communications specified herein to be given to Transition
Bondholders to the Clearing Agency, and shall have no obligation to the
Transition Bond Owners.
SECTION 2.13. Definitive Transition Bonds. If (i) the Issuer advises the
Bond Trustee in writing that the Clearing Agency is no longer willing or able to
properly discharge its responsibilities as depository with respect to any Series
or Class of Transition Bonds and the Issuer is unable to locate a qualified
successor, (ii) the Issuer, at its option, advises the Bond Trustee in writing
that it elects to terminate the book-entry system through the Clearing Agency
with respect to any Series or Class of Transition Bonds or (iii) after the
occurrence of an Event of Default, Transition Bond Owners representing
beneficial interests aggregating at least a majority of the Outstanding Amount
of the Transition Bonds of all Series advise the Bond Trustee through the
Clearing Agency in writing that the continuation of a book-entry system through
the Clearing Agency is no longer in the best interests of the Transition Bond
Owners, then the Clearing Agency shall notify all affected Transition Bond
Owners and the Bond Trustee of the occurrence of any such event and of the
availability of Definitive Transition Bonds to affected Transition Bond Owners
requesting the same. Upon surrender to the Bond Trustee of the typewritten
Transition Bond or Transition Bonds representing the Book-Entry Transition Bonds
by the Clearing Agency, accompanied by registration instructions, the Issuer
Trustee on behalf of the Issuer shall execute and the Bond Trustee shall
authenticate the Definitive Transition Bonds in accordance with the instructions
of the Clearing Agency. None of the Issuer, the Transition Bond Registrar or the
Bond Trustee shall be liable for any delay in delivery of such instructions and
may conclusively rely on, and shall be protected in relying on, such
instructions. Upon the issuance of Definitive Transition Bonds, the Bond Trustee
shall recognize the Holders of the Definitive Transition Bonds as Transition
Bondholders.
ARTICLE III
Covenants
SECTION 3.01. Payment of Principal, Premium, if any, and Interest. The
Issuer will duly and punctually pay the principal of and premium, if any, and
interest on the Transition Bonds in accordance with the terms of the Transition
Bonds and this Indenture; provided that except on the Series Termination Date,
the Class Termination Date, or the Redemption Date for a Series or Class of
Transition Bonds or upon the acceleration of the Transition Bonds following the
occurrence of an Event of Default, the Issuer shall only be obligated to pay the
principal of such Transition Bonds on each Payment Date therefor to the extent
moneys are available for such payment pursuant to Section 8.02. Amounts properly
withheld under the Code by any person from a payment to any Transition
Bondholder of interest or principal or premium, if any, shall be considered as
having been paid by the Issuer to such Transition Bondholder for all purposes of
this Indenture.
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SECTION 3.02. Maintenance of Office or Agency. The Issuer will maintain in
the Borough of Manhattan, the City of New York, an office or agency where
Transition Bonds may be surrendered for registration of transfer or exchange,
and where notices and demands to or upon the Issuer in respect of the Transition
Bonds and this Indenture may be served. The Issuer hereby initially appoints the
Bond Trustee to serve as its agent for the foregoing purposes. The Issuer will
give prompt written notice to the Bond Trustee of the location, and of any
change in the location, of any such office or agency. If at any time the Issuer
shall fail to maintain any such office or agency or shall fail to furnish the
Bond Trustee with the address thereof, such surrenders, notices and demands may
be made or served at the Corporate Trust Office, and the Issuer hereby appoints
the Bond Trustee as its agent to receive all such surrenders, notices and
demands.
SECTION 3.03. Money for Payments To Be Held in Trust. As provided in
Section 8.02(a), all payments of principal of, or premium and interest on, the
Transition Bonds that are to be made from amounts withdrawn from the Collection
Account pursuant to Section 8.02(d), (e) or (f) or Section 4.03 shall be made on
behalf of the Issuer by the Bond Trustee or by another Paying Agent, and no
amounts so withdrawn from the Collection Account for payments of Transition
Bonds shall be paid over to the Issuer except as provided in this Section and in
Section 8.02.
The Issuer will cause each Paying Agent other than the Bond Trustee to
execute and deliver to the Bond Trustee an instrument in which such Paying Agent
shall agree with the Bond Trustee (and if the Bond 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 principal of, or
premium or interest on, the Transition Bonds 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 Bond Trustee notice of any Default by the Issuer (or any
other obligor upon the Transition Bonds) of which the Paying Agent has
actual knowledge in the making of any payment required to be made with
respect to the Transition Bonds;
(iii) at any time during the continuance of any such Default, upon the
written request of the Bond Trustee, forthwith pay to the Bond Trustee all
sums so held in trust by such Paying Agent;
(iv) immediately resign as a Paying Agent and forthwith pay to the
Bond Trustee all sums held by the Paying Agent in trust for the payment of
Transition Bonds if at any time the Paying Agent 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 Transition Bonds of any
applicable withholding taxes imposed thereon and with respect to any
applicable reporting requirements in connection therewith.
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The 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 Bond Trustee all sums held in trust by such
Paying Agent, such sums to be held by the Bond Trustee upon the same trusts as
those upon which the sums were held by such Paying Agent; and upon such payment
by any Paying Agent to the Bond 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 Bond Trustee or any Paying Agent in trust for the payment of any amount
of principal of, premium on, if any, or interest on any Transition Bond 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 Issuer; and the Holder of
such Transition Bond shall thereafter, as an unsecured general creditor, look
only to the Issuer for payment thereof (but only to the extent of the amounts so
paid to the Issuer), and all liability of the Bond Trustee or such Paying Agent
with respect to such trust money shall thereupon cease; provided, however, that
the Bond Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the 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 Issuer. The Bond
Trustee may also adopt and employ, at the expense of the Issuer, any other
reasonable means of notification of such repayment (including mailing notice of
such repayment to Holders whose Transition Bonds 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 Bond Trustee or
of any Paying Agent, at the last address of record for each such Holder).
SECTION 3.04. Existence. Subject to Section 3.10, the Issuer will keep in
full effect its existence, rights and franchises as a statutory business trust
under the laws of the State of Delaware (unless it becomes, or any successor
Issuer hereunder is or becomes, organized under the laws of any other State or
of the United States of America, in which case the 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 Transition Bonds,
the Collateral and each other instrument or agreement included therein.
SECTION 3.05. Protection of Collateral. The Issuer will from time to time
execute and deliver all such supplements and amendments hereto and all such
filings (including filings with the PUC pursuant to the Statute), financing
statements, continuation statements, instruments of further assurance and other
instruments, and will take such other action necessary or advisable to:
(i) maintain and 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;
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(iii) enforce any of the Collateral;
(iv) preserve and defend title to the Collateral and the rights of the
Bond Trustee and the Transition Bondholders in the Collateral against the
claims of all Persons and parties; or
(v) pay any and all taxes levied or assessed up on all or any part of
the Collateral.
The Issuer hereby designates the Bond Trustee its agent and attorney-in-fact to
execute any filing with the PUC, financing statement, continuation statement or
other instrument required by the Bond Trustee pursuant to this Section.
SECTION 3.06. Opinions as to Collateral. (a) On or before July 1st in each
calendar year, beginning at least 3 months after the issuance of the first
Series of the Transition Bonds while any Series is outstanding, the Issuer shall
furnish to the Bond 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 PUC pursuant to the Statute,
financing statements and continuation statements as is necessary to maintain the
lien and security interest, and the first priority thereof, 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, and the first priority thereof. 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 PUC, 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 July 1 in the
following calendar year.
(b) Prior to the effectiveness of any amendment to the Sale Agreement
or the Servicing Agreement, the Issuer shall furnish to the Bond Trustee an
Opinion of Counsel either (A) stating that, in the opinion of such counsel,
all filings, including filings with the PUC pursuant to the Statute, have
been executed and filed that are necessary fully to preserve and protect
the interest of the Issuer and the Bond Trustee in the Transferred
Intangible 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. (a) The 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 or the
Servicing Agreement or such other instrument or agreement.
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(b) The 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 Bond Trustee in an Officer's
Certificate of the Issuer shall be deemed to be action taken by the Issuer.
Initially, the Issuer has contracted with the Servicer to assist the Issuer
in performing its duties under this Indenture.
(c) The Issuer will punctually perform and observe all of its
obligations and agreements contained in the Sale Agreement, the Servicing
Agreement and in all other instruments and agreements included in the
Collateral.
(d) Without derogating from the absolute nature of the assignment
granted to the Bond Trustee under this Indenture or the rights of the Bond
Trustee hereunder, but subject to Section 3.20, the Issuer agrees that it
will not, without the prior written consent of the Bond Trustee or the
Holders of at least a majority in Outstanding Amount of the Transition
Bonds 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. If any such amendment, modification, supplement or waiver
shall be so consented to by the Bond Trustee or such Holders, the 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 Issuer agrees that no such
amendment, modification, supplement or waiver shall adversely affect the
rights of the Holders of the Transition Bonds outstanding at the time of
any such amendment, modification, supplement or waiver.
SECTION 3.08. Negative Covenants. The Issuer shall not:
(i) except as expressly permitted by this Indenture or the Sale
Agreement or the Servicing Agreement, sell, transfer, exchange or otherwise
dispose of any of the Collateral, unless directed to do so by the Bond
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 Transition Bonds
(other than amounts properly withheld from such payments under the Code) or
assert any claim against any present or former Transition Bondholder by
reason of the payment of taxes levied or assessed upon the Issuer or any
part of the Collateral;
(iii)(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 Transition Bonds
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 and security interest created by
this Indenture) 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) permit the lien of this Indenture not to constitute
a continuing valid first priority security interest in the Collateral.
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SECTION 3.09. Annual Statement as to Compliance. The Issuer will deliver to
the Bond Trustee, within 120 days after the end of each fiscal year of the
Issuer (commencing with the fiscal year 1999), an Officer's Certificate stating,
as to the Authorized Officer signing such Officer's Certificate, that
(i) a review of the activities of the Issuer during such year (or
relevant portion thereof) 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 Issuer has complied with all conditions and covenants under
this Indenture throughout such calendar year (or relevant portion thereof),
or, if there has been a default in complying with any such condition or
covenant, describing each such default and the nature and status thereof.
SECTION 3.10. Issuer May Consolidate, etc., Only on Certain Terms. The
Issuer shall not consolidate or merge with or into any other Person or sell
substantially all of its assets to any other Person, unless:
(i) the Person (if other than the Issuer) formed by or surviving such
consolidation or merger or to whom substantially all of such assets are
sold 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 Bond Trustee, in form
satisfactory to the Bond Trustee, the due and punctual payment of the
principal of and premium, if any, and interest on all Transition Bonds and
the performance or observance of every agreement and covenant of this
Indenture on the part of the Issuer to be performed or observed, all as
provided herein and in the applicable Series Supplement or Series
Supplements;
(ii) the Person (if other than the Issuer) formed by or surviving such
consolidation or merger or to whom substantially all of such assets are
sold shall expressly assume all obligations and succeed to all rights of
the Issuer under the Sale Agreement and the Servicing Agreement pursuant to
an assignment and assumption agreement executed and delivered to the Bond
Trustee, in form satisfactory to the Bond Trustee;
(iii) immediately after giving effect to such consolidation or merger
or sale, no Default or Event of Default shall have occurred and be
continuing;
(iv) the Rating Agency Condition shall have been satisfied with
respect to such consolidation or merger or sale by each Rating Agency
except Moody's (and the Issuer shall have furnished Moody's with prior
written notice of such consolidation, merger or sale);
(v) the Issuer shall have received an Opinion of Counsel (and shall
have delivered copies thereof to the Bond Trustee) to the effect that such
consolidation or merger or sale (a) will not have any material adverse tax
consequence to the Issuer or any Transition Bondholder, (b) complies with
this Indenture and all of the conditions precedent herein relating to such
transaction and (c) will result in the Bond Trustee maintaining a
continuing valid first priority security interest in the Collateral;
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(vi) none of the Intangible Transition Property, the Qualified Rate
Order, the Seller's, the Servicer's or the Issuer's rights under the
Statute or the Qualified Rate Order are impaired thereby; and
(vii) any action as is necessary to maintain the lien and security
interest created by this Indenture shall have been taken.
SECTION 3.11. Successor or Transferee. (a) Upon any consolidation or merger
of the Issuer in accordance with Section 3.10, the Person formed by or surviving
such consolidation or merger (if other than the Issuer) shall succeed to, and be
substituted for, and may exercise every right and power of, the Issuer under
this Indenture with the same effect as if such Person had been named as the
Issuer herein.
(b) Upon any sale by the Issuer of substantially all of its assets in a
sale which complies with Section 3.10, PECO Energy Transition Trust will be
released from every covenant and agreement of this Indenture to be observed or
performed on the part of the Issuer with respect to the Transition Bonds and
from every covenant and agreement of the Sale Agreement and the Servicing
Agreement to be observed or performed on the part of the Issuer.
SECTION 3.12. No Other Business. The Issuer shall not engage in any
business other than purchasing and owning Intangible Transition Property,
issuing Transition Bonds from time to time, pledging its interest in the
Collateral to the Bond Trustee under this Indenture in order to secure the
Transition Bonds and performing activities that are necessary, suitable or
convenient to accomplish these purposes or are incidental thereto.
SECTION 3.13. No Borrowing. The Issuer shall not issue, incur, assume,
guarantee or otherwise become liable, directly or indirectly, for any
indebtedness except for the Transition Bonds.
SECTION 3.14. Guarantees, Loans, Advances and Other Liabilities. Except as
contemplated by the Sale Agreement, the Servicing Agreement, this Indenture or
the Trust Agreement, the 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 3.15. Capital Expenditures. The Issuer shall not make any
expenditure (by long-term or operating lease or otherwise) for capital assets
(either realty or personalty) other than Intangible Transition Property
purchased from the Seller pursuant to, and in accordance with, the Sale
Agreement.
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SECTION 3.16. Restricted Payments. The 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 Issuer or otherwise with
respect to any ownership or equity interest in, or ownership security of, the
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 Issuer may make, or cause
to be made, any such distributions to any owner of a beneficial interest in the
Issuer or otherwise with respect to any ownership or equity interest or security
in or of the Issuer using funds distributed to the Issuer pursuant to Section
8.02(d) or (e) to the extent that such distributions would not cause the book
value of the remaining equity in the Issuer to decline below 0.5% of the
original principal amount of all Series of Transition Bonds which remain
outstanding. Notwithstanding the foregoing, from such time as all Transition
Bonds have been fully paid and discharged the Issuer shall not make any such
distribution to any owner of a beneficial interest in the Issuer or otherwise
while amounts are owed by the Issuer to any Counterparty. The 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 3.17. Notice of Events of Default. The Issuer agrees to deliver to
the Bond Trustee and the Rating Agencies written notice in the form of an
Officer's Certificate of any Default or Event of Default hereunder, its status
and what action the Issuer is taking or proposes to take with respect thereto
within five days after the occurrence thereof.
SECTION 3.18. Inspection. The Issuer agrees that, on reasonable prior
notice, it will permit any representative of the Bond Trustee, during the
Issuer's normal business hours, to examine all the books of account, records,
reports, and other papers of the Issuer, to make copies and extracts therefrom,
to cause such books to be audited annually by Independent certified public
accountants, and to discuss the Issuer's affairs, finances and accounts with the
Issuer's officers, employees, and Independent certified public accountants, all
at such reasonable times and as often as may be reasonably requested. The Bond
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 Bond Trustee may reasonably determine that such disclosure
is consistent with its obligations hereunder.
SECTION 3.19. Adjusted Overcollateralization Schedules. Not later than each
Schedule Revision Date, the Issuer shall deliver to the Bond Trustee a
replacement Schedule 1 hereto, adjusted to reflect the event giving rise to such
Schedule Revision Date and setting forth the Calculated Overcollateralization
Level for each Payment Date and the Monthly Allocated Overcollateralization
Balance for each Monthly Allocation Date.
SECTION 3.20. Sale Agreement and Servicing Agreement Covenants. (a) The
Issuer agrees to take all such lawful actions to enforce its rights under the
Sale Agreement and the Servicing Agreement and to compel or secure the
performance and observance by the Seller and the Servicer, of each of their
obligations to the Issuer under or in connection with the Sale Agreement and the
Servicing Agreement, respectively, in accordance with the terms thereof. So long
as no Event of Default occurs and is continuing, but subject to Section 3.20(f),
the Issuer may exercise any and all rights, remedies, powers and privileges
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lawfully available to the Issuer under or in connection with the Sale Agreement
and the Servicing Agreement.
(b) If an Event of Default occurs and is continuing, the Bond Trustee may,
and, at the direction (which direction shall be in writing or by telephone
(confirmed in writing promptly thereafter)) of the Holders of a majority of the
Outstanding Amount of the Transition Bonds of all Series shall, exercise all
right, remedies, powers, privileges and claims of the 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 Issuer thereunder and to give any consent, request,
notice, direction, approval, extension or waiver under the Sale Agreement and
the Servicing Agreement, and any right of the Issuer to take such action shall
be suspended.
(c) With the consent of the Bond Trustee, the Sale Agreement and the
Servicing Agreement may be amended, at any time and from time to time, without
the consent of the Transition Bondholders or any Counterparty, provided that
such amendment shall not, as evidenced by an Officer's Certificate, adversely
affect the interest of any Transition Bondholder or Counterparty (except, in the
case of a Counterparty with the consent of such Counterparty, which consent may
not be unreasonably withheld) or change the Intangible Transition Charges
Adjustment Process. The Bond Trustee shall not withhold its consent to such
amendment so long as the Rating Agency Condition is satisfied in connection
therewith by each Rating Agency other than Moody's (and the Issuer shall have
furnished Moody's with written notice of such amendment prior to the
effectiveness thereof) and the foregoing Officer's Certificate is provided.
(d) No amendment, modification, supplement, termination, waiver or
surrender of, the terms of the Sale Agreement or the Servicing Agreement, or
waiver of timely performance or observance by the Servicer or the Seller under
the Sale Agreement or the Servicing Agreement, respectively, in each case in
such a way as would adversely affect the interests of Transition Bondholders or
any Counterparty is permitted (except, in the case of a Counterparty, with the
consent of such Counterparty, which consent may not be unreasonably withheld)
nor shall the Bond Trustee consent thereto. If the Issuer, the Seller or the
Servicer shall otherwise propose to amend, modify, waive, supplement, terminate
or surrender, or agree to any amendment, modification, supplement, termination,
waiver or surrender of, the terms of the Sale Agreement or the Servicing
Agreement or waive timely performance or observance by the Seller or the
Servicer under the Sale Agreement or Servicing Agreement, respectively, the
Issuer shall notify the Bond Trustee and any applicable Counterparty and the
Bond Trustee shall notify the Transition Bondholders thereof. The Bond Trustee
shall consent to such proposed amendment, modification, supplement or waiver
only with the consent of the Holders of at least a majority of the Outstanding
Amount of the Transition Bonds of each Series or Class. If any such amendment,
modification, supplement or waiver shall be so consented to by the Bond Trustee
or such Holders, the 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.
(e) If the Issuer and the Seller or Servicer propose to amend, modify,
waive, supplement, terminate or surrender, or agree to any amendment,
modification, supplement, termination, waiver or surrender of, the Intangible
Transition Charges Adjustment Process, the Issuer shall notify the Bond Trustee
and each Counterparty and the Bond Trustee shall notify
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Transition Bondholders of such proposal and the Bond Trustee shall consent
thereto only with the consent of the Holder of each Outstanding Transition Bond
of each Series or Class affected thereby.
(f) Promptly following a default by either the Seller or Servicer under the
Sale Agreement or the Servicing Agreement, respectively, and at the Issuer's
expense, the Issuer agrees to take all such lawful actions as the Bond Trustee
may request to compel or secure the performance and observance by the Seller or
the Servicer, as applicable, of each of their obligations to the Issuer under or
in connection with the Sale Agreement or the Servicing Agreement in accordance
with the terms thereof, and to exercise any and all rights, remedies, powers and
privileges lawfully available to the Issuer under or in connection with the Sale
Agreement or the Servicing Agreement to the extent and in the manner directed by
the Bond 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.
(g) If the Issuer shall have knowledge of the occurrence of a Servicer
Default under the Servicing Agreement, the Issuer shall promptly give written
notice thereof to the Bond Trustee and the Rating Agencies, and shall specify in
such notice the action, if any, the Issuer is taking with respect to 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 Intangible Transition Property or the Intangible Transition
Charges, the Issuer shall take all reasonable steps available to it to remedy
such failure. The Issuer shall not take any action to terminate the Servicer's
rights and powers under the Servicing Agreement following a Servicer Default
without the prior written consent of the Bond Trustee or of the Holders of
Transition Bonds evidencing not less than 25% of the Outstanding Amount of the
Transition Bonds of all Series and the consent, not to be unreasonably withheld,
of any Counterparties affected thereby.
(h) 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 6.01 of the Servicing Agreement, the Bond Trustee shall,
together with such other Persons, if any, as are specified in Section 6.01 of
the Servicing Agreement, appoint a successor Servicer (the "Successor
Servicer"), and such Successor Servicer shall accept its appointment by a
written assumption in a form acceptable to the Issuer and the Bond Trustee. A
person shall qualify as a Successor Servicer only if such Person satisfies the
requirements of Section 6.04 of the Servicing Agreement. If within 30 days after
the delivery of the notice referred to above, a Successor Servicer shall not
have been appointed and accepted its appointment as such, the Bond Trustee may
petition the PUC or a court of competent jurisdiction to appoint a Successor
Servicer. In connection with any such appointment, the Issuer may make such
arrangements for the compensation of such Successor Servicer as it and such
Successor Servicer shall agree, subject to the limitations set forth below and
in the Servicing Agreement, and in accordance with Section 6.04 of the Servicing
Agreement, the Issuer shall enter into an agreement with such Successor Servicer
for the servicing of the Intangible Transition Property (such agreement to be in
form and substance satisfactory to the Bond Trustee).
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(i) Upon termination of the Servicer's rights and powers pursuant to the
Servicing Agreement, the Bond Trustee shall promptly notify the Issuer, the
Transition Bondholders and the Rating Agencies. As soon as a Successor Servicer
is appointed, the Issuer shall notify the Bond Trustee, the Transition
Bondholders and the Rating Agencies of such appointment, specifying in such
notice the name and address of such Successor Servicer.
SECTION 3.21. Taxes. So long as any of the Transition Bonds are
outstanding, the Issuer shall pay all material taxes, including gross receipts
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
Collateral.
SECTION 3.22. Termination of Swap Agreements. (a) The Issuer shall duly
and punctually perform all of its obligations pursuant to any Swap Agreements.
(b) The Issuer shall not terminate or amend any Swap Agreement while any of
the floating rate Transition Bonds of a Class related thereto remain outstanding
except pursuant to the terms of such Swap Agreement and then only with the
consent of Holders of 66 2/3% of the Outstanding Amount of the Transition Bonds
of the related Class. Any termination or breakage fees owed by the Issuer
pursuant to any Swap Agreement shall be subordinated to amounts owed to Holders
of Transition Bonds except as otherwise provided herein.
ARTICLE IV
Satisfaction and Discharge; Defeasance
SECTION 4.01. Satisfaction and Discharge of Indenture; Defeasance. (a) The
Transition Bonds of any Series, all moneys payable with respect thereto and this
Indenture as it applies to such Series shall cease to be of further effect and
the lien hereunder shall be released with respect to such Series, interest shall
cease to accrue on the Transition Bonds of such Series and the Bond Trustee, on
demand of and at the expense of the Issuer, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture with respect to the
Transition Bonds of such Series, when
(A) either
(1) all Transition Bonds of such Series theretofore authenticated and
delivered (other than (i) Transition Bonds that have been destroyed, lost
or stolen and that have been replaced or paid as provided in Section 2.06
and (ii) Transition Bonds for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the Issuer and
thereafter repaid to the Issuer or discharged from such trust, as provided
in Section 3.03) have been delivered to the Bond Trustee for cancelation;
or
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37
(2) the Expected Final Payment Date or Redemption Date has occurred
with respect to all Transition Bonds of such Series not theretofore
delivered to the Bond Trustee for cancelation, and the Issuer has
irrevocably deposited or caused to be irrevocably deposited with the Bond
Trustee cash, in trust for such purpose, in an amount sufficient to pay and
discharge the entire indebtedness on such Transition Bonds not theretofore
delivered to the Bond Trustee on the Expected Final Payment Date or
Redemption Date, as applicable, therefor;
(B) the Issuer has paid or caused to be paid all other sums payable
hereunder by the Issuer with respect to such Series; and
(C) the Issuer has delivered to the Bond Trustee an Officer's
Certificate, an Opinion of Counsel and (if required by the TIA or the Bond
Trustee) an Independent Certificate from a firm of certified public
accountants, each meeting the applicable requirements of Section 11.01 and
each stating that all conditions precedent herein provided for relating to
the satisfaction and discharge of this Indenture with respect to Transition
Bonds of such Series have been complied with.
(b) Subject to Sections 4.01(c) and 4.02, the Issuer at any time may
terminate (i) all its obligations under this Indenture with respect to the
Transition Bonds 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, 3.18, 3.19 and 3.20 and the operation of Section
5.01(iv) ("Covenant Defeasance Option") with respect to any Series of Transition
Bonds. The Issuer may exercise the Legal Defeasance Option with respect to any
Series of Transition Bonds notwithstanding its prior exercise of the Covenant
Defeasance Option with respect to such Series.
If the Issuer exercises the Legal Defeasance Option with respect to any
Series, the maturity of the Transition Bonds of such Series may not be (a)
accelerated because of an Event of Default or (b) except as provided in Section
4.02, redeemed. If the Issuer exercises the Covenant Defeasance Option with
respect to any Series, the maturity of the Transition Bonds 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 Transition Bonds, the Bond Trustee, on demand of and at the expense of
the 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) rights of substitution of mutilated,
destroyed, lost or stolen Transition Bonds, (iii) rights of Transition
Bondholders to receive payments of principal, premium, if any, and interest, but
only from the amounts deposited with the Bond Trustee for such payments, (iv)
Sections 4.03 and 4.04, (v) the rights, obligations and immunities of the Bond
Trustee hereunder (including the rights of the Bond Trustee under Section 6.07
and the obligations of the Bond Trustee under Section 4.03) and (vi) the rights
of Transition Bondholders under this Indenture with respect to the property
deposited with the Bond Trustee payable to all or any of them, shall survive
until the Transition Bonds of the Series as to which this Indenture or certain
<PAGE>
38 obligations hereunder have be satisfied and discharged pursuant to Section
4.01(a) or 4.01(b) and 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 Issuer may exercise the Legal
Defeasance Option or the Covenant Defeasance Option with respect to any Series
of Transition Bonds only if:
(a) the Issuer irrevocably deposits or causes to be deposited in trust with
the Bond Trustee cash or U.S. Government Obligations for the payment of
principal of and premium, if any, and interest on such Transition Bonds to the
Expected Payment Date or Redemption Date therefor, as applicable, such deposit
to be made in the Defeasance Subaccount for such Series of Transition Bonds;
(b) the Issuer delivers to the Bond 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 Transition Bonds 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 Redemption Price therefor on the
Redemption Date therefor and (iii) interest when due;
(c) in the case of the Legal Defeasance Option, 95 days pass after the
deposit is made and during the 95-day period no Default specified in Section
5.01(v) or (vi) occurs which is continuing at the end of the period;
(d) no Default has occurred and is continuing on the day of such deposit
and after giving effect thereto;
(e) in the case of the Legal Defeasance Option, the Issuer delivers to the
Bond Trustee an Opinion of Counsel stating that (i) the 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 Transition
Bonds of such Series will not recognize income, gain or loss for Federal income
tax purposes as a result of the exercise of such Legal Defeasance Option 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 the Covenant Defeasance Option, the Issuer delivers to
the Bond Trustee an Opinion of Counsel to the effect that the Holders of the
Transition Bonds of such Series will not recognize income, gain or loss for
Federal income tax purposes as a result of the exercise of such Covenant
Defeasance Option and will be subject to Federal income tax on the
<PAGE>
39
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 Issuer delivers to the Bond Trustee an Officer's Certificate and an
Opinion of Counsel, each stating that all conditions precedent to the
satisfaction and discharge of the Transition Bonds of such Series to the extent
contemplated by this Article IV have been complied with.
Notwithstanding any other provision of this Section 4.02 to the contrary,
no delivery of cash or U.S. Government Obligations to the Bond Trustee under
this Section shall terminate any obligations of the Issuer under this Indenture
with respect of any Transition Bonds which are to be redeemed prior to the
Expected Final Payment Date therefor until such Transition Bonds shall have been
irrevocably called or designated for redemption on a date thereafter on which
such Transition Bonds may be redeemed in accordance with the provisions of this
Indenture and proper notice of such redemption shall have been given in
accordance with the provisions of this Indenture or the Issuer shall have given
the Bond Trustee, in form satisfactory to the Bond Trustee, irrevocable
instructions to give, in the manner and at the times prescribed herein, notice
of redemption of such Series.
SECTION 4.03. Application of Trust Money. All moneys or U.S. Government
Obligations deposited with the Bond Trustee pursuant to Section 4.01 or 4.02
hereof with respect to any Series of Transition Bonds shall be held in trust in
the Defeasance Subaccount for such Series and applied by it, in accordance with
the provisions of the Transition Bonds and this Indenture, to the payment,
either directly or through any Paying Agent, as the Bond Trustee may determine,
to the Holders of the particular Transition Bonds for the payment or redemption
of which such moneys have been deposited with the Bond Trustee, of all sums due
and to become due thereon for principal, premium, if any, and interest. Such
moneys will be segregated and held apart solely for paying such Transition Bonds
and such Transition Bonds shall not entitled to any amounts on deposit in the
Collection Account other than amounts on deposit in the Defeasance Subaccount
for such Transition Bonds.
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 Transition Bonds of any
Series, all moneys then held by any Paying Agent other than the Bond Trustee
under the provisions of this Indenture with respect to such Transition Bonds
shall, upon demand of the Issuer, be paid to the Bond 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" wherever used herein,
means any one of the following events (whatever the reason for such Event of
<PAGE>
40
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 Transition Bond when
the same becomes due and payable, and such default shall continue for a
period of five days;
(ii) default in the payment of the then unpaid principal of any
Transition Bond of any Series on the Series Termination Date for such
Series or, if applicable, any Class on the Class Termination Date for such
Class;
(iii) default in the payment of the Redemption Price for any
Transition Bond on the Redemption Date therefor;
(iv) default in the observance or performance of any covenant or
agreement of the Issuer made in this Indenture (other than a covenant or
agreement, a default in the observance or performance of which is
specifically dealt with in clause (i), (ii) or (iii) above), and such
default shall continue or not be cured, for a period of 30 days after there
shall have been given, by registered or certified mail, to the Issuer by
the Bond Trustee or to the Issuer and the Bond Trustee by the Holders of at
least 25% of the Outstanding Amount of the Transition Bonds of any 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;
(v) the filing of a decree or order for relief by a court having
jurisdiction in the premises in respect of the 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 Issuer or for any substantial part
of the Collateral, or ordering the winding-up or liquidation of the
Issuer's affairs, and such decree or order shall remain unstayed and in
effect for a period of 90 consecutive days; or
(vi) the commencement by the 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 Issuer to the entry of an
order for relief in an involuntary case under any such law, or the consent
by the Issuer to the appointment or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official
of the Issuer or for any substantial part of the Collateral, or the making
by the Issuer of any general assignment for the benefit of creditors, or
the failure by the Issuer generally to pay its debts as such debts become
due, or the taking of action by the Issuer in furtherance of any of the
foregoing.
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment. If an
Event of Default occurs and is continuing, then and in every such case either
the Bond Trustee or the Holders of Transition Bonds representing not less than a
majority of the Outstanding Amount of the Transition Bonds of all Series may,
but need not, declare all the Transition Bonds to be immediately due and
payable, by a notice in writing to the Issuer (and to the Bond Trustee if given
by Transition Bondholders), and upon any such declaration the unpaid principal
amount
<PAGE>
41
of the Transition Bonds 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 Bond Trustee as hereinafter in this Article V provided, the
Holders of Transition Bonds representing a majority of the Outstanding Amount of
the Transition Bonds of all Series, by written notice to the Issuer and the Bond
Trustee, may rescind and annul such declaration and its consequences if:
(i) the Issuer has paid or deposited with the Bond Trustee, for
deposit in the General Subaccount of the Collection Account, a sum
sufficient to pay
(A) all payments of principal of and premium, if any, and interest on
all Transition Bonds of all Series and all other amounts that would
then be due hereunder or upon such Transition Bonds if the Event of
Default giving rise to such acceleration had not occurred; and
(B) all sums paid or advanced by the Bond Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Bond Trustee and its agents and counsel; and
(ii) all Events of Default, other than the nonpayment of the principal
of the Transition Bonds 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 Bond
Trustee. (a) The Issuer covenants that if (i) Default is made in the payment of
any interest on any Transition Bond when such interest 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 Transition Bond on the Series
Termination Date or Class Termination Date, as applicable, therefor or (iii)
Default is made in the payment of the Redemption Price or for any Transition
Bond on the Redemption Date therefor, the Issuer will, upon demand of the Bond
Trustee, pay to it, for the benefit of the Holders of the Transition Bonds of
such Series, such amount as shall be sufficient to cover the costs and expenses
of collection, including the reasonable compensation, expenses, disbursements
and advances of the Bond Trustee and its agents and counsel and the whole amount
then due and payable on such Transition Bonds 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 instalments of interest, at the respective Bond Rate of such Series
or the applicable Class of such Series.
(b) In case the Issuer shall fail forthwith to pay the amounts specified in
clause (a) above upon such demand, the Bond Trustee, in its own name and as
<PAGE>
42
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 Issuer or other obligor upon
such Transition Bonds and collect in the manner provided by law out of the
property of the Issuer or other obligor upon such Transition Bonds, wherever
situated, the moneys adjudged or decreed to be payable.
(c) If an Event of Default occurs and is continuing, the Bond 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 Transition Bondholders, by
such appropriate Proceedings as the Bond 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 Bond Trustee by this Indenture or by law including
foreclosing or otherwise enforcing the lien on the Intangible Transition
Property securing the Transition Bonds or applying to the PUC for sequestration
of revenues arising with respect to such Intangible Transition Property.
(d) In case there shall be pending, relative to the Issuer or any other
obligor upon the Transition Bonds 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 Issuer or its property or such other obligor or Person,
or in case of any other comparable judicial Proceedings relative to the Issuer
or other obligor upon the Transition Bonds, or to the creditors or property of
the Issuer or such other obligor, the Bond Trustee, irrespective of whether the
principal of any Transition Bonds shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the Bond
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
Transition Bonds and to file such other papers or documents as may be
necessary or advisable in order to have the claims of the Bond Trustee
(including any claim for reasonable compensation to the Bond Trustee and
each predecessor Bond Trustee, and their respective agents, attorneys and
counsel, and for reimbursement of all expenses and liabilities incurred,
and all advances made, by the Bond Trustee and each predecessor Bond
Trustee, except as a result of negligence or bad faith) and of the
Transition Bondholders allowed in such Proceedings;
(ii) unless prohibited by applicable law and regulations, to vote on
behalf of the Holders of Transition Bonds in any election of a trustee, a
standby trustee or Person performing similar functions in any such
Proceedings;
(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 Transition Bondholders and of the Bond Trustee
on their behalf; and
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43
(iv) to file such proofs of claim and other papers or documents as may
be necessary or advisable in order to have the claims of the Bond Trustee
or the Holders of Transition Bonds allowed in any judicial proceedings
relative to the Issuer, its creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Transition Bondholders
to make payments to the Bond Trustee, and, in the event that the Bond Trustee
shall consent to the making of payments directly to such Transition Bondholders,
to pay to the Bond Trustee such amounts as shall be sufficient to cover
reasonable compensation to the Bond Trustee, each predecessor Bond Trustee and
their respective agents, attorneys and counsel, and all other expenses and
liabilities incurred, and all advances made, by the Bond Trustee and each
predecessor Bond Trustee except as a result of negligence or bad faith.
(e) Nothing herein contained shall be deemed to authorize the Bond Trustee
to authorize or consent to or vote for or accept or adopt on behalf of any
Transition Bondholder any plan of reorganization, arrangement, adjustment or
composition affecting the Transition Bonds or the rights of any Holder thereof
or to authorize the Bond Trustee to vote in respect of the claim of any
Transition Bondholder in any such proceeding except, as aforesaid, to vote for
the election of a trustee in bankruptcy or similar Person.
(f) All rights of action and of asserting claims under this Indenture, or
under any of the Transition Bonds, may be enforced by the Bond Trustee without
the possession of any of the Transition Bonds or the production thereof in any
trial or other Proceedings relative thereto, and any such action or proceedings
instituted by the Bond 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 Bond Trustee, each predecessor
Bond Trustee and their respective agents and attorneys, shall be for the ratable
benefit of the Holders of the Transition Bonds.
(g) In any Proceedings brought by the Bond Trustee (and also any
Proceedings involving the interpretation of any provision of this Indenture to
which the Bond Trustee shall be a party), the Bond Trustee shall be held to
represent all the Holders of the Transition Bonds, and it shall not be necessary
to make any Transition Bondholder a party to any such Proceedings.
SECTION 5.04. Remedies; Priorities. If an Event of Default occurs and is
continuing, the Bond 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 Transition
Bonds or under this Indenture with respect thereto, whether by declaration
or otherwise, enforce any judgment obtained, and collect from the Issuer
and any other obligor upon such Transition Bonds moneys adjudged due;
(ii) institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture with respect to the Collateral;
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44
(iii) exercise any remedies of a secured party under the UCC or the
Statute or any other applicable law and take any other appropriate action
to protect and enforce the rights and remedies of the Bond Trustee and the
Holders of the Transition Bonds of such Series;
(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; and
(v) exercise all rights, remedies, powers, privileges and claims of
the Issuer against the Seller or the Servicer under or in connection with
the Sale Agreement or the Servicing Agreement as provided in Section
3.20(b);
provided, however, that the Bond Trustee may not sell or otherwise liquidate any
portion of the Collateral following an Event of Default, other than an Event of
Default described in Section 5.01(i), (ii) or (iii), with respect to any Series
unless (A) the Holders of 100% of the Outstanding Amount of the Transition Bonds
of all Series consent thereto, (B) the proceeds of such sale or liquidation
distributable to the Transition Bondholders of all Series are sufficient to
discharge in full all amounts then due and unpaid upon such Transition Bonds for
principal, premium, if any, and interest or (C) the Bond Trustee determines that
the Collateral will not continue to provide sufficient funds for all payments on
the Transition Bonds of all Series as they would have become due if the
Transition Bonds had not been declared due and payable, and the Bond Trustee
obtains the consent of Holders of 66-2/3% of the Outstanding Amount of the
Transition Bonds of each Series. In determining such sufficiency or
insufficiency with respect to clause (B) and (C), the Bond Trustee may, but need
not, obtain and 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 5.05. Optional Preservation of the Collateral. If the Transition
Bonds 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 Bond Trustee may, but need not, elect, as provided
in Section 5.11(iii), to maintain possession of the Collateral and not sell or
liquidate the same. It is the desire of the parties hereto and the Transition
Bondholders that there be at all times sufficient funds for the payment of
principal of and premium, if any, and interest on the Transition Bonds, and the
Bond Trustee shall take such desire into account when determining whether or not
to maintain possession of the Collateral or sell or liquidate the same. In
determining whether to maintain possession of the Collateral or sell or
liquidate the same, the Bond Trustee may, but need not, obtain and 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 Proceedings. No Holder of any Transition Bond
of any Series shall have any right to institute any Proceeding, judicial or
otherwise, or to avail itself of the remedies provided in Section 2812(d)(3)(v)
of the Statute, with respect to this Indenture, or for the appointment of a
receiver or trustee, or for any other remedy hereunder, unless:
(i) such Holder has previously given written notice to the Bond
Trustee of a continuing Event of Default;
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45
(ii) the Holders of not less than 25% of the Outstanding Amount of the
Transition Bonds of each Series have made written request to the Bond
Trustee to institute such Proceeding in respect of such Event of Default in
its own name as Bond Trustee hereunder;
(iii) such Holder or Holders have offered to the Bond Trustee security
or indemnity reasonably satisfactory to the Bond Trustee against the costs,
expenses and liabilities to be incurred in complying with such request;
(iv) the Bond 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 Bond Trustee during such 60-day period by the Holders of a majority
of the Outstanding Amount of the Transition Bonds of all Series;
it being understood and intended that no one or more Holders of Transition Bonds
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 Transition Bonds 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 Bond Trustee shall receive conflicting or inconsistent
requests and indemnity from two or more groups of Holders of Transition Bonds,
each representing less than a majority of the Outstanding Amount of the
Transition Bonds of all Series, the Bond 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 Transition Bondholders To Receive
Principal, Premium, if any, and Interest. Notwithstanding any other provisions
in this Indenture, the Holder of any Transition Bond shall have the right, which
is absolute and unconditional, (a) to receive payment of (i) the interest, if
any, on such Transition Bond on or after the due dates thereof expressed in such
Transition Bond or in this Indenture, (ii) the unpaid principal, if any, of such
Transition Bonds on or after the Series Termination Date or Class Termination
Date therefor or (iii) in the case of redemption, receive payment of the unpaid
principal, if any, of and premium, if any, and interest, if any, on such
Transition Bond on or after the Redemption Date 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 Bond Trustee or
any Transition Bondholder 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 Bond Trustee or
to such Transition Bondholder, then and in every such case the Issuer, the Bond
Trustee and the Transition Bondholders 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 Bond Trustee
and the Transition Bondholders shall continue as though no such Proceeding had
been instituted.
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46
SECTION 5.09. Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to the Bond Trustee or to the Transition Bondholders
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
Bond Trustee or any Transition Bondholder 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 Bond Trustee or to the Transition Bondholders may be exercised from time
to time, and as often as may be deemed expedient, by the Bond Trustee or by the
Transition Bondholders, as the case may be.
SECTION 5.11. Control by Transition Bondholders. The Holders of a majority
of the Outstanding Amount of the Transition Bonds 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 Bond Trustee with respect to the
Transition Bonds of such Series or Class or Classes or exercising any trust or
power conferred on the Bond 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 Bond Trustee to sell or liquidate the Collateral shall be by the
Holders of Transition Bonds representing not less than 100% of the
Outstanding Amount of the Transition Bonds of all Series;
(iii) if the conditions set forth in Section 5.05 have been satisfied
and the Bond Trustee elects to retain the Collateral pursuant to such
Section and not sell or liquidate the same, then any direction to the Bond
Trustee by Holders of Transition Bonds representing less than 100% of the
Outstanding Amount of the Transition Bonds of all Series to sell or
liquidate the Collateral shall be of no force and effect; and
(iv) the Bond Trustee may take any other action deemed proper by the
Bond Trustee that is not inconsistent with such direction;
provided, however, that, subject to Section 6.01, the Bond Trustee need not take
any action that it determines might involve it in liability or might materially
adversely affect the rights of any Transition Bondholders not consenting to such
action.
SECTION 5.12. Waiver of Past Defaults. Prior to the declaration of the
acceleration of the maturity of the Transition Bonds of all Series as provided
in Section 5.02, the Holders of not less than a majority of the Outstanding
Amount of the Transition Bonds of all Series may waive any past Default or Event
of Default and its consequences except a Default (i) in payment of principal of
or premium, if any, or interest on any of the Transition Bonds or (ii) in
respect of a covenant or provision hereof which cannot be modified or amended
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without the consent of the Holder of each Transition Bond of all Series or
Classes affected. In the case of any such waiver, the Issuer, the Bond Trustee
and the Holders of the Transition Bonds shall be restored to their former
positions and rights hereunder, respectively; but no such waiver shall extend to
any subsequent or other Default or impair any right consequent thereto.
Upon any such waiver, such Default shall cease to exist and be deemed to
have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereto.
SECTION 5.13. Undertaking for Costs. All parties to this Indenture agree,
and each Holder of any Transition Bond 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 Bond Trustee for any action taken, suffered or omitted by it as
Bond 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 Bond Trustee, (b) any
suit instituted by any Transition Bondholder, or group of Transition
Bondholders, in each case holding in the aggregate more than 10% of the
Outstanding Amount of the Transition Bonds of a Series or (c) any suit
instituted by any Transition Bondholder for the enforcement of the payment of
(i) interest on any Transition Bond on or after the due dates expressed in such
Transition Bond and in this Indenture, (ii) the unpaid principal, if any, of any
Transition Bond on or after the Series Termination Date or Class Termination
Date, if applicable, therefor or (iii) in the case of redemption, the unpaid
principal of and premium, if any, and interest on any Transition Bond on or
after the Redemption Date therefor.
SECTION 5.14. Waiver of Stay or Extension Laws. The 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 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 Bond 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 Transition Bonds. The Bond Trustee's right to seek
and recover judgment on the Transition Bonds 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 Bond Trustee or the Transition Bondholders shall be
impaired by the recovery of any judgment by the Bond Trustee against the 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 Issuer.
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ARTICLE VI
The Bond Trustee
SECTION 6.01. Duties and Liabilities of Bond Trustee. (a) If an Event of
Default has occurred and is continuing, the Bond Trustee shall exercise the
rights and powers vested in it by this Indenture and use the same degree of care
and skill in their exercise as a prudent Person would exercise or use under the
circumstances in the conduct of such Person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Bond 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 Bond
Trustee; and
(ii) in the absence of bad faith on its part, the Bond 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 Bond Trustee and conforming to the requirements of this Indenture.
(c) The Bond Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section;
(ii) the Bond Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer unless it is proved that the
Bond Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Bond 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 Bond
Trustee is subject to paragraphs (a), (b) and (c) of this Section 6.01.
(e) The Bond Trustee shall not be liable for interest on any money received
by it except as the Bond Trustee may agree in writing with the Issuer.
(f) Money held in trust by the Bond Trustee need not be segregated from
other funds except to the extent required by law or the terms of this Indenture
or the Sale Agreement or the Servicing Agreement.
(g) No provision of this Indenture shall require the Bond Trustee to expend
or risk its own funds or otherwise incur financial liability in the performance
of any of its duties hereunder or in the exercise of any of its rights or
powers, if it shall have reasonable grounds to believe that repayments of such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it.
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49
(h) Every provision of this Indenture relating to the conduct or affecting
the liability of or affording protection to the Bond Trustee shall be subject to
the provisions of this Section and to the provisions of the TIA.
(i) Under no circumstances shall the Bond Trustee be liable for any
indebtedness evidenced by or arising under the Transition Bonds or any Basic
Document.
SECTION 6.02. Rights of Bond Trustee. (a) The Bond Trustee may rely on any
document believed by it to be genuine and to have been signed or presented by
the proper Person. The Bond Trustee need not investigate any fact or matter
stated in the document.
(b) Before the Bond Trustee acts or refrains from acting, it may require an
Officer's Certificate or an Opinion of Counsel. The Bond Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on an
Officer's Certificate or an Opinion of Counsel.
(c) The Bond 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 Bond 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 Bond 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 Bond Trustee's conduct does not constitute
wilful misconduct, negligence or bad faith.
(e) The Bond Trustee may consult with counsel, and the advice or opinion of
counsel with respect to legal matters relating to this Indenture and the
Transition Bonds 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 Bond Trustee. The Bond Trustee in its
individual or any other capacity may become the owner or pledgee of Transition
Bonds and may otherwise deal with the Issuer or its affiliates with the same
rights it would have if it were not Bond Trustee. Any Paying Agent, Transition
Bond Registrar, co-registrar or co-paying agent may do the same with like
rights. However, the Bond Trustee must comply with Sections 6.11 and 6.12.
SECTION 6.04. Bond Trustee's Disclaimer. The Bond Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Transition Bonds. The Bond Trustee shall not be
accountable for the Issuer's use of the proceeds from the Transition Bonds, and
the Bond Trustee shall not be responsible for any statement of the Issuer in the
Indenture or in any document issued in connection with the sale of the
Transition Bonds or in the Transition Bonds other than the Bond Trustee's
certificate of authentication. The Bond Trustee shall not be responsible for the
form, character, genuineness, sufficiency, value or validity of any of the
Collateral, or for or in respect of the validity or sufficiency of the
Transition Bonds (other than the certificate of authentication for the
Transition Bonds) or the Basic Documents and the Bond Trustee shall in no event
assume or incur any liability, duty or obligation to any Holder of a Transition
Bond, other than is expressly provided for in this Indenture. The Bond Trustee
shall not be liable for the default or misconduct of the Issuer, the Seller, the
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50
Servicer or the Issuer Trustee under any Basic Document or otherwise and the
Bond Trustee shall have no obligation or liability to perform the obligations of
the Issuer.
SECTION 6.05. Notice of Defaults. If a Default occurs and is continuing
with respect to any Series and if it is known to a Responsible Officer of the
Bond Trustee, the Bond Trustee shall mail to each Holder of Transition Bonds 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 or premium, if any, or interest on
any Transition Bond, the Bond 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 Transition Bondholders.
SECTION 6.06. Reports by Bond Trustee to Holders. (a) The Bond Trustee
shall deliver to each Holder of Transition Bonds such information as may be
required to enable such Holder to prepare its Federal and state income tax
returns.
(b) With respect to each Series of Transition Bonds, on or prior to each
Payment Date therefor, the Bond Trustee will deliver a statement prepared by the
Bond Trustee to each Holder of Transition Bonds which will include (to the
extent applicable) the following information (and any other information so
specified in the Series Supplement for such Series) as to the Transition Bonds
of such Series with respect to such Payment Date or the period since the
previous Payment Date, as applicable:
(i) the amount paid to Holders of such Transition Bonds in respect of
principal, such amount to be expressed as a dollar amount per thousand;
(ii) the amount paid to Holders of such Transition Bonds in respect of
interest, such amount to be expressed as a dollar amount per thousand;
(iii) the Transition Bond Balance and the Projected Transition Bond
Balance, in each case for such Series and as of the most recent Payment
Date;
(iv) the amount on deposit in the Overcollateralization Subaccount and
the Calculated Overcollateralization Level, in each case for all Series and
as of the most recent Payment Date;
(v) the amount on deposit in the Capital Subaccount as of the most
recent Payment Date; and
(vi) the amount, if any, on deposit in the Reserve Subaccount as of
the most recent Payment Date.
(c) The Bond Trustee's responsibility for disbursing the information
described in subsection (b) above to Holders of Transition Bonds is limited to
the availability, timeliness and accuracy of the information provided by the
Servicer pursuant to Section 3.04 and Annex 1 of the Servicing Agreement.
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51
SECTION 6.07. Compensation and Indemnity. The Issuer shall pay to the Bond
Trustee from time to time reasonable compensation for its services. The Bond
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Issuer shall reimburse the Bond Trustee for all
reasonable out-of-pocket expenses, disbursements and advances 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 Bond Trustee's agents, counsel, accountants
and experts. The Issuer shall indemnify and hold harmless the Bond Trustee from
and against any and all costs, damages, expenses, losses, liabilities or other
amounts whatsoever (including counsel fees) incurred by the Bond Trustee in
connection with the administration of this trust, the enforcement of this trust
and all of the Bond Trustee's rights, powers and duties under this Indenture and
the performance by the Bond Trustee of the duties and obligations of the Bond
Trustee under or pursuant to this Indenture. The Bond Trustee shall notify the
Issuer promptly of any claim for which it may seek indemnity. Failure by the
Bond Trustee to so notify the Issuer shall not relieve the Issuer of its
obligations hereunder. The Issuer shall defend the claim and the Bond Trustee
may have separate counsel and the Issuer shall pay the fees and expenses of such
counsel. The Issuer need not reimburse any expense or indemnify against any
loss, liability or expense incurred by the Bond Trustee (i) through the Bond
Trustee's own wilful misconduct, negligence or bad faith or (ii) to the extent
the Bond Trustee was reimbursed for or indemnified against any such loss,
liability or expense by the Seller pursuant to the Sale Agreement or by the
Servicer pursuant to the Servicing Agreement.
When the Bond Trustee incurs expenses after the occurrence of a Default
specified in Section 5.01(v) or (vi) with respect to the Issuer, the expenses
are intended to constitute expenses of administration under Title 11 of the
United States Code or any other applicable Federal or state bankruptcy,
insolvency or similar law.
SECTION 6.08. Replacement of Bond Trustee. The Bond Trustee may resign at
any time by so notifying the Issuer. The Holders of a majority in Outstanding
Amount of the Transition Bonds of all Series may remove the Bond Trustee by so
notifying the Issuer and the Bond Trustee and may appoint a successor Bond
Trustee. The Issuer shall remove the Bond Trustee if:
(i) the Bond Trustee fails to comply with Section 6.11;
(ii) the Bond Trustee is adjudged a bankrupt or insolvent;
(iii) a receiver or other public officer takes charge of the Bond
Trustee or its property; or
(iv) the Bond Trustee otherwise becomes incapable of acting.
If the Bond Trustee resigns or is removed or if a vacancy exists in the
office of Bond Trustee for any reason (the Bond Trustee in such event being
referred to herein as the "Retiring Bond Trustee"), the Issuer shall promptly
appoint a successor Bond Trustee.
A successor Bond Trustee shall deliver a written acceptance of its
appointment to the Retiring Bond Trustee and to the Issuer. Thereupon the
resignation or removal of the Retiring Bond Trustee shall become effective, and
the successor Bond Trustee shall have all the rights, powers and duties of the
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Bond Trustee under this Indenture. The successor Bond Trustee shall mail a
notice of its succession to Transition Bondholders. The Retiring Bond Trustee
shall promptly transfer all property held by it as Bond Trustee to the successor
Bond Trustee.
If a successor Bond Trustee does not take office within 60 days after the
Retiring Bond Trustee resigns or is removed, the Retiring Bond Trustee, the
Issuer or the Holders of a majority in Outstanding Amount of the Transition
Bonds of all Series may petition any court of competent jurisdiction for the
appointment of a successor Bond Trustee.
If the Bond Trustee fails to comply with Section 6.11, any Transition
Bondholder may petition any court of competent jurisdiction for the removal of
the Bond Trustee and the appointment of a successor Bond Trustee.
The Issuer shall promptly furnish written notification of the appointment
of any successor Bond Trustee pursuant to this Section 6.08 to each of the
Rating Agencies.
Notwithstanding the replacement of the Bond Trustee pursuant to this
Section 6.08, the Issuer's obligations under Section 6.07 shall continue for the
benefit of the Retiring Bond Trustee.
SECTION 6.09. Successor Bond Trustee by Merger. If the Bond 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 or banking
association shall, without any further act, be the successor Bond Trustee. The
Issuer shall promptly furnish written notification of any such successor Bond
Trustee to each of the Rating Agencies.
In case at the time such successor or successors by merger, conversion
consolidation or transfer shall succeed to the trusts created by this Indenture
any of the Transition Bonds shall have been authenticated but not delivered, any
such successor to the Bond Trustee may adopt the certificate of authentication
of any Retiring Bond Trustee, and deliver such Transition Bonds so
authenticated; and in case at that time any of the Transition Bonds shall not
have been authenticated, any successor to the Bond Trustee may authenticate such
Transition Bonds either in the name of any Retiring Bond Trustee hereunder or in
the name of the successor to the Bond Trustee; and in all such cases such
certificates shall have the full force which it is anywhere in the Transition
Bonds or in this Indenture provided that the certificate of the Bond 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 Collateral may at the time be located, the Bond 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 Collateral, and to vest in such Person or Persons, in
such capacity and for the benefit of the Transition Bondholders, such title to
the Collateral, or any part hereof, and, subject to the other provisions of this
Section, such powers, duties, obligations, rights and trusts as the Bond 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
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Section 6.11 and no notice to Transition Bondholders of the appointment of any
co-trustee or separate trustee shall be required under Section 6.08 hereof.
(b) Every separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or imposed
upon the Bond Trustee shall be conferred or imposed upon and exercised or
performed by the Bond 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 Bond 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 Bond 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 Bond Trustee;
(ii) no trustee hereunder shall be personally liable by reason of any
act or omission of any other trustee hereunder; and
(iii) the Bond 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 Bond 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 Bond 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 Bond
Trustee. Every such instrument shall be filed with the Bond Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the Bond
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
Agreement 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
Bond Trustee, to the extent permitted by law, without the appointment of a new
or successor trustee.
SECTION 6.11. Eligibility; Disqualification. The Bond Trustee shall at all
times satisfy the requirements of TIA ss. 310(a). The Bond 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 "Baa3" or better by Moody's and "BBB-" by Fitch IBCA (if currently
rated by Fitch IBCA). The Bond Trustee shall comply with TIA ss. 310(b),
including the optional provision permitted by the second sentence of TIA ss.
310(b)(9); provided, however, that there shall be excluded from the operation of
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TIA ss. 310(b)(1) any indenture or indentures under which other securities of
the Issuer are outstanding if the requirements for such exclusion set forth in
TIA ss. 310(b)(1) are met.
SECTION 6.12. Preferential Collection of Claims Against Issuer. The Bond
Trustee shall comply with TIA ss. 311(a), excluding any creditor relationship
listed in TIA ss. 311(b). A Bond Trustee who has resigned or been removed shall
be subject to TIA ss. 311(a) to the extent indicated.
ARTICLE VII
Transition Bondholders' Lists and Reports
SECTION 7.01. Issuer To Furnish Bond Trustee Names and Addresses of
Transition Bondholders. The Issuer will furnish or cause to be furnished to the
Bond 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 Bond Trustee may
reasonably require, of the names and addresses of the Holders of Transition
Bonds of such Series as of such Record Date, (b) at such other times as the Bond
Trustee may request in writing, within 30 days after receipt by the 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 Bond Trustee is the Transition Bond Registrar, no such list shall be
required to be furnished.
SECTION 7.02. Preservation of Information; Communications to Transition
Bondholders. (a) The Bond Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of the Holders of Transition
Bonds contained in the most recent list furnished to the Bond Trustee as
provided in Section 7.01 and the names and addresses of Holders of Transition
Bonds received by the Bond Trustee in its capacity as Transition Bond Registrar.
The Bond Trustee may destroy any list furnished to it as provided in such
Section 7.01 upon receipt of a new list so furnished.
(b) Transition Bondholders may communicate pursuant to TIA ss. 312(b) with
other Transition Bondholders with respect to their rights under this Indenture
or under the Transition Bonds.
(c) The Issuer, the Bond Trustee and the Transition Bond Registrar shall
have the protection of TIA ss. 312(c).
SECTION 7.03. Reports by Issuer. (a) The Issuer shall:
(i) file with the Bond Trustee, within 15 days after the Issuer is
required to file the same with the Commission, 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 Commission may from time to time by
rules and regulations prescribe) which the Issuer may be required to file
with the Commission pursuant to Section 13 or 15(d) of the Exchange Act;
(ii) file with the Bond Trustee and the Commission in accordance with
rules and regulations prescribed from time to time by the Commission such
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additional information, documents and reports with respect to compliance by
the 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 Bond Trustee (and the Bond Trustee shall transmit
by mail to all Transition Bondholders described in TIA ss. 313(c)) such
summaries of any information, documents and reports required to be filed by
the Issuer pursuant to clauses (i) and (ii) of this Section 7.03(a) as may
be required by rules and regulations prescribed from time to time by the
Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the Issuer
shall end on December 31 of each year.
SECTION 7.04. Reports by Bond Trustee. If required by TIA ss. 313(a),
within 60 days after January 1st of each year, commencing with the year after
the issuance of the Transition Bonds of any Series, the Bond Trustee shall mail
to each Holder of Transition Bonds of such Series as required by TIA ss. 313(c)
a brief report dated as of such date that complies with TIA ss. 313(a). The Bond
Trustee also shall comply with TIA ss. 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 Transition Bondholders
shall be filed by the Bond Trustee with the Commission and each stock exchange,
if any, on which the Transition Bonds are listed. The Issuer shall notify the
Bond Trustee if and when the Transition Bonds are listed on any stock exchange.
SECTION 7.05. Provision of Servicer Reports. Upon the written request of
any Transition Bondholder to the Bond Trustee addressed to the Corporate Trust
Office, the Bond Trustee shall provide such Transition Bondholder with a copy of
the Officer's Certificate referred to in Section 3.05 of the Servicing Agreement
and the Annual Accountant's Report referred to in Section 3.06 of the Servicing
Agreement.
ARTICLE VIII
Accounts, Disbursements and Releases
SECTION 8.01. Collection of Money. Except as otherwise expressly provided
herein, the Bond 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 Bond Trustee pursuant to this Indenture. The Bond 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 Bond Trustee may take such action as may be appropriate to
enforce such payment or performance, including the institution and prosecution
of appropriate Proceedings.
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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) On or prior to the Series Issuance
Date for the first Series issued hereunder, the Issuer shall open, at the Bond
Trustee's Corporate Trust Office, or at another Eligible Institution, one or
more segregated trust accounts in the Bond Trustee's name (collectively, the
"Collection Account"). The Collection Account will initially be divided into
subaccounts, which need not be separate bank accounts: a general subaccount (the
"General Subaccount"), an Overcollateralization subaccount (the
"Overcollateralization Subaccount"), a capital subaccount (the "Capital
Subaccount"), a reserve subaccount (the "Reserve Subaccount"), a series
subaccount for each Series of Transition Bonds issued on such date (each a
"Series Subaccount"), and a class subaccount for each Class of Transition Bonds
issued on such date that the supplemental indenture authorizing such Class
specifies a class subaccount shall be established therefor (each a "Class
Subaccount"). On or prior to the Series Issuance Date for each Series issued
after the Series Issuance Date for the first Series issued hereunder, the Issuer
shall establish a Series Subaccount therefor and any necessary Class Subaccounts
as subaccounts of the Collection Account. Prior to depositing funds or U.S.
Government Obligations in the Collection Account pursuant to Sections 4.01 or
4.02, the Issuer shall establish defeasance subaccounts (each a "Defeasance
Subaccount") for each Series for which funds shall be deposited, as subaccounts
of the Collection Account. Prior to any Loss Amounts or Interest Deposit Amounts
being deposited in the Collection Account, the Issuer shall establish a loss
subaccount (the "Loss Subaccount") or an interest deposit subaccount (the
"Interest Deposit Subaccount"), as applicable, as a subaccount of the Collection
Account. All amounts in the Collection Account not allocated to any other
subaccount 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 Sections
4.01, 4.02, 4.03 and 8.02(c), (d), (e) and (f). The Collection Account shall at
all times be maintained in an Eligible Deposit Account and only the Bond 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 Bond Trustee in the Collection Account as
part of the Collateral as herein provided.
(b) So long as no Default or Event of Default has occurred and is
continuing, all or a portion of the funds in the Collection Account shall
be invested in Eligible Investments and reinvested by the Bond Trustee upon
Issuer Order; provided, however, that (i) such Eligible Investments shall
not mature later than the Business Day prior to (x) with respect to funds
in the General Subaccount, the Overcollateralization Subaccount, the
Capital Subaccount, the Reserve Subaccount, the Loss Subaccount and the
Interest Deposit Subaccount, the next Monthly Allocation Date or (y) with
respect to funds in the Series Subaccount for any Series of Transition
Bonds or the Class Subaccount for any Class of Transition Bonds, the next
Payment Date for such Series or Class, (ii) such Eligible Investments shall
not be sold, liquidated or otherwise disposed of at a loss prior to the
maturity thereof, and (iii) no funds in the Defeasance Subaccount for any
Series of Transition Bonds shall be invested in Eligible Investments or
otherwise, except that U.S. Government Obligations deposited by the Issuer
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with the Bond Trustee pursuant to Sections 4.01 or 4.02 shall remain as
such. All income or other gain from investments of moneys deposited in the
Collection Account shall be deposited by the Bond Trustee in the Collection
Account, and any loss resulting from such investments shall be charged to
the Collection Account. The Issuer will not direct the Bond Trustee to make
any investment of any funds or to sell any investment held in the
Collection Account unless the security interest granted and perfected in
such account will continue to be perfected in such investment or the
proceeds of such sale, in either case without any further action by any
Person, and, in connection with any direction to the Bond Trustee to make
any such investment or sale, if requested by the Bond Trustee, the Issuer
shall deliver to the Bond Trustee an Opinion of Counsel, acceptable to the
Bond Trustee, to such effect. Subject to Section 6.01(c), the Bond Trustee
shall not in any way be held liable for the selection of Eligible
Investments or for investment losses incurred thereon except for losses
attributable to the Bond Trustee's failure to make payments on such
Eligible Investments issued by the Bond Trustee, in its commercial capacity
as principal obligor and not as Bond Trustee, in accordance with their
terms. The Bond 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 Issuer to provide timely written
investment direction. The Bond 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, however, if (i) the Issuer shall
have failed to give investment directions for any funds on deposit in the
Collection Account to the Bond Trustee by 11:00 a.m. Eastern Time (or such
other time as may be agreed by the Issuer and Bond Trustee) on any Business
Day; or (ii) a Default or Event of Default shall have occurred and be
continuing but the Transition Bonds shall not have been declared due and
payable pursuant to Section 5.02; then the Bond Trustee shall, to the
fullest extent practicable, invest and reinvest funds in the Collection
Account in one or more Eligible Investments.
(c) ITC Collections remitted by the Servicer to the Bond Trustee,
Liquidated Damages remitted by the Seller to the Bond Trustee and Indemnity
Amounts remitted to the Bond Trustee by the Seller or the Servicer or
otherwise received by the Bond Trustee or the Issuer shall be deposited in
the General Subaccount. Loss Amounts remitted by the Seller to the Bond
Trustee shall be deposited in the Loss Subaccount and Interest Deposit
Amounts remitted by the Seller to the Bond Trustee shall be deposited in
the Interest Deposit Subaccount. Amounts remitted by a Counterparty shall
be deposited in the Class Subaccount for the Class to which such amounts
relate.
(d) On each Monthly Allocation Date, the Bond Trustee shall by 12:00
noon (New York City time) apply all amounts on deposit in the General
Subaccount of the Collection Account and any investment earnings thereon in
the following priority:
(i) all amounts owed to the Bond Trustee (including legal fees and
expenses, Indemnity Amounts and Loss Amounts) shall be paid to the Bond
Trustee;
(ii) all amounts owed to the Issuer Trustee (including legal fees and
expenses, Indemnity Amounts and Loss Amounts) shall be paid to the Issuer
Trustee;
(iii) the Monthly Servicing Fee and all unpaid Monthly Servicing Fees
from prior Monthly Allocation Dates shall be paid to the Servicer;
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(iv) so long as no Event of Default has occurred and is continuing or
would be caused by such payment, all Operating Expenses other than (i),
(ii) and (iii) above shall be paid to the Persons entitled thereto,
provided that the amount paid on any Monthly Allocation Date pursuant to
this clause (iv) may not exceed $12,500 in the aggregate for all Series;
(v) an amount equal to Interest (which shall mean, in the case of any
Series or Class for which a Swap Agreement is in effect and any payments
due thereunder from the applicable Counterparty are being received by the
Issuer, the regular fixed payment to a Counterparty determined without
regard to netting, but not payment in respect of breakage or termination of
the related Swap Agreement) with respect to each Series of Transition Bonds
for such Monthly Allocation Date shall be transferred on a Pro Rata basis
to the Series Subaccount for such Series;
(vi) an amount equal to any Principal of any Series or Class of
Transition Bonds payable as a result of acceleration pursuant to Section
5.02, any Principal of any Series or Class of Transition Bonds payable on a
Series Termination Date or Class Termination Date, as applicable, that will
occur prior to the next Monthly Allocation Date and any Principal of and
premium on a Series or Class of Transition Bonds payable on a Redemption
Date that will occur prior to the next Monthly Allocation Date shall be
transferred on a Pro Rata basis to the Series Subaccount for such Series,
taking into account amounts on deposit therein in respect of Principal as
of such Monthly Allocation Date;
(vii) an amount equal to Principal with respect to each Series of
Transition Bonds for such Monthly Allocation Date not provided for pursuant
to clause (vi) above shall be transferred on a Pro Rata basis to the Series
Subaccount for such Series;
(viii) all unpaid Operating Expenses, Indemnity Amounts and Loss
Amounts shall be paid to the Persons entitled thereto;
(ix) Overcollateralization with respect to all Series of Transition
Bonds for such Monthly Allocation Date shall be transferred to the
Overcollateralization Subaccount;
(x) any termination or breakage amounts owed to any Counterparty
pursuant to a Swap Agreement shall be paid to such Counterparty;
(xi) provided no Event of Default has occurred and is continuing, an
amount up to the amount of net investment earnings on amounts in the
Collection Account since the previous Monthly Allocation Date will be
released to the Issuer, free from the lien of this Indenture;
(xii) the balance, if any, will be allocated to the Reserve
Subaccount; and
(xiii) following repayment of all outstanding Series of Transition
Bonds, the balance, if any, will be released to the Issuer, free from the
lien of this Indenture.
"Pro Rata" means with respect to any Series of Transition Bonds a ratio,
(i) in the case of clause (v) above, the numerator of which is the Monthly
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Allocated Interest Balance with respect to such Series, for such Monthly
Allocation Date and the denominator of which is the sum of Monthly Allocated
Interest Balances with respect to all Series, for such Monthly Allocation Date,
(ii) in the case of clause (vi) above, the numerator of which is the amount
allocable under such clause with respect to such Series and the denominator of
which is the amount allocable to all Series under such clause and (iii) in the
case of clause (vii) above, the numerator of which is the Monthly Allocated
Principal Balance with respect to such Series, for such Monthly Allocation Date
and the denominator of which is the sum of Monthly Allocated Principal Balances
with respect to all Series, for such Monthly Allocation Date.
If, on any Monthly Allocation Date funds on deposit in the General
Subaccount are insufficient to make the payments or transfers contemplated by
clauses (i) through (ix) above, the Bond Trustee will draw from amounts on
deposit in the following subaccounts up to the amount of such shortfall, in
order to make such payments and transfers:
(i) from the Interest Deposit Subaccount, with respect to the payments
or transfers contemplated by clause (v) above only;
(ii) then from the Loss Subaccount, with respect to the payments or
transfers contemplated by clauses (i) through (viii) above only; and
(iii) thereafter, from the Reserve Subaccount, then from the
Overcollateralization Subaccount and finally from the Capital Subaccount.
(e) On each Payment Date for any Series, the amounts on deposit in the
applicable Series Subaccount for that Series remaining after the
allocations, if any, described in the next paragraph (other than net income
or other gain thereon, which, so long as no Event of Default has occurred
and is continuing, shall be released to the Issuer free of the lien of
Indenture) will be applied as follows (in the priority indicated): (i)
interest due and payable on the Transition Bonds of such Series, together
with any overdue interest and, to the extent permitted by law, interest
thereon, will be paid to the Holders of Transition Bonds of such Series
provided that with respect to a Class of such Series for which a Swap
Agreement is in effect and any payments due thereunder from the applicable
Counterparty are being received by the Issuer, only amounts on deposit in
the Class Subaccount therefor shall be so applied, (ii) the balance, if
any, up to the principal amount of the Transition Bonds of such Series that
is scheduled to be paid by such Payment Date in accordance with the
Expected Amortization Schedule therefor or, with respect to any Series of
Transition Bonds payable as a result of acceleration pursuant to Section
5.02 or to be redeemed pursuant to Article X, the outstanding principal
amount of such Series and premium, if any, will be paid to the Holders of
Transition Bonds of such Series in respect of principal of and premium, if
any, on the Transition Bonds of such Series, and (iii) the balance, if any,
will be transferred to the General Subaccount for allocation on the next
Monthly Allocation Date.
On the Business Day preceding each Payment Date, the amounts on deposit in
any Series Subaccount with respect to Classes of such Series for which a Swap
Agreement is in effect and any payments due thereunder from the applicable
Counterparty are being received by the Issuer (other than net income or other
gain, which, so long as no Event of Default has occurred and is continuing,
shall be released to the Issuer free of the lien of the Indenture) will be
allocated to the applicable Class Subaccount up to the gross amount, if any,
owed to the applicable Counterparty pursuant to the related Swap Agreement in
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respect of regular fixed payments but not breakage or termination of such Swap
Agreement. On such day net amounts in respect of regular fixed payments, but not
breakage or termination of such Swap Agreement, owed to such Counterparty will
be paid from, or net amounts paid by such Counterparty will be deposited into,
such Class Subaccount. On the related Payment Date, remaining amounts in each
Class Subaccount will be paid as interest to the Holders of Transition Bonds of
the applicable Class.
All payments to the Transition Bondholders of a Series pursuant to clauses
(i) and (ii) of the second preceding paragraph shall be made pro rata based on
the respective principal amounts of Transition Bonds 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. All payments to Transition
Bondholders of a Class pursuant to clause (i) or (ii) of the second preceding
paragraph shall be made pro rata based on the respective principal amounts of
Transition Bonds of such Class held by such Holders. If on any Payment Date a
Counterparty has failed to fully pay amounts due to the Issuer under the
applicable Swap Agreement, then after all Series Subaccounts have accessed the
Reserve Subaccount pursuant to Section 8.01(d) the Bond Trustee shall transfer
amounts on deposit in the Reserve Subaccount up to the amount of such shortfall
attributable to the failure of the Swap Counterparty to the applicable Class
Subaccount, provided that the Bond Trustee shall have received from the Servicer
a certificate to the effect that based on the Servicer's best assumptions and
projections at the time, such amounts will not be needed to cover any other
shortfalls on any Monthly Allocation Date prior to the next Adjustment Date.
(f) On the Liquidated Damages Redemption Date, the Bond Trustee shall
by 12:00 noon (New York City time) apply all amounts on deposit in the
Collection Account and any investment earnings thereon since the
immediately preceding Monthly Allocation Date to pay the following amounts
in the following priority:
(i) all amounts owed by the Issuer to the Bond Trustee and the Issuer
Trustee (including legal fees and expenses) shall be paid to the Bond
Trustee and the Issuer Trustee, respectively;
(ii) the Monthly Servicing Fee or the portion thereof accrued from and
including the immediately preceding Monthly Allocation Date to but
excluding the Liquidated Damages Redemption Date and all unpaid Monthly
Servicing Fees from prior Monthly Allocation Dates shall be paid to the
Servicer;
(iii) all other Operating Expenses shall be paid to the Persons
entitled thereto, provided that as long as PECO Energy Company is Servicer
all amounts owed to the Servicer will be paid as per clause (v) below and
if PECO Energy Company is not the Servicer then any payments to the
Servicer pursuant to this clause (iii) shall not exceed $150,000;
(iv) the Redemption Price and accrued interest for each Series of
Transition Bonds shall be paid to Transition Bondholders of such Series and
any amounts due to any Counterparty pursuant to a Swap Agreement shall be
paid to such Counterparty;
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(v) any other Operating Expenses owed to the Servicer not yet paid
shall be paid to the Servicer; and
(vi) the balance, if any, will be released to the Issuer, free from
the lien of this Indenture.
SECTION 8.03. Release of Collateral. (a) All money and other property
withdrawn from the Collection Account by the Bond Trustee for payment to the
Issuer as provided in this Indenture in accordance with Section 8.02 hereof
shall be deemed released from the Indenture when so withdrawn and applied in
accordance with the provisions of Article VIII, without further notice to, or
release or consent by, the Bond Trustee.
(b) So long as the Issuer is not in default hereunder, the Issuer,
through the Servicer, may collect, liquidate, sell or otherwise dispose of
the Transferred Intangible Transition Property, at any time and from time
to time, without any notice to, or release or consent by, the Bond Trustee,
but only as and to the extent permitted by the Basic Documents; provided,
however, that any and all proceeds of such dispositions shall become
Collateral and be deposited to the General Subaccount immediately upon
receipt thereof by the Issuer or any other Person, including the Servicer.
(c) Other than as provided for in clauses (a) and (b) above, the Bond
Trustee shall release property from the lien of this Indenture only upon
receipt of an Issuer Request accompanied by an Officer's Certificate, an
Opinion of Counsel and Independent Certificates in accordance with TIA
ss.ss. 314(c) and 314(d)(1) meeting the applicable requirements of Section
11.01 or an Opinion of Counsel in lieu of such Independent Certificates to
the effect that the TIA does not require any such Independent Certificate.
(d) Subject to the payment of its fees and expenses pursuant to
Section 6.07, the Bond 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 Bond 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 Bond Trustee as provided in this Article VIII shall be bound to
ascertain the Bond Trustee's authority, inquire into the satisfaction of
any conditions precedent or see to the application of any moneys.
(e) Subject to Section 8.03(c), the Bond Trustee shall, at such time
as there are no Transition Bonds Outstanding and all sums due the Bond
Trustee pursuant to Section 6.07 have been paid, release any remaining
portion of the Collateral that secured the Transition Bonds from the lien
of this Indenture and release to the Issuer or any other Person entitled
thereto any funds then on deposit in the Collection Account.
SECTION 8.04. Opinion of Counsel. The Bond Trustee shall receive at least
five Business Days notice when requested by the Issuer to take any action
pursuant to Section 8.03, accompanied by copies of any instruments involved, and
the Bond Trustee shall also require, as a condition to such action, an Opinion
of Counsel, in form and substance satisfactory to the Bond 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
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the security for the Transition Bonds or the rights of the Transition
Bondholders 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 Bond Trustee in
connection with any such action.
SECTION 8.05. Reports by Independent Accountants. The 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. Upon any resignation by such firm the Issuer shall promptly appoint
a successor thereto that shall also be a firm of Independent certified public
accountants of recognized national reputation. If the 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 Bond Trustee shall
promptly notify the Issuer of such failure in writing. If the Issuer shall not
have appointed a successor within 10 days thereafter the Bond Trustee shall
promptly appoint a successor firm of Independent certified public accountants of
recognized national reputation. The fees of such firm of Independent certified
public accountants and its successor shall be payable by the Issuer.
ARTICLE IX
Supplemental Indentures
SECTION 9.01. Supplemental Indentures Without Consent of Transition
Bondholders. (a) Without the consent of the Holders of any Transition Bonds or
any Counterparty but with prior notice to the Rating Agencies, the Issuer and
the Bond 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 Bond Trustee, for any of the
following purposes:
(i) to correct or amplify the description of the Collateral, or to
better assure, convey and confirm unto the Bond Trustee the Collateral, 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 Issuer, and the assumption by
any such successor of the covenants of the Issuer herein and in the
Transition Bonds contained;
(iii) to add to the covenants of the Issuer, for the benefit of the
Holders of the Transition Bonds, or to surrender any right or power herein
conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any property to
or with the Bond Trustee;
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(v) to cure any ambiguity, to correct or supplement any provision
herein or in any supplemental indenture which may be inconsistent with any
other provision herein or in any supplemental indenture or to make any
other provisions with respect to matters or questions arising under this
Indenture or in any supplemental indenture; provided, however, that (i)
such action shall not, as evidenced by an Opinion of Counsel, adversely
affect in any material respect the interests of any Transition Bondholder
and (ii) the Rating Agency Condition shall have been satisfied with respect
thereto by all Rating Agencies other than Moody's (and prior written notice
of such action shall be provided to Moody's);
(vi) to evidence and provide for the acceptance of the appointment
hereunder by a successor bond trustee with respect to the Transition Bonds
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 bond 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;
(viii) to set forth the terms of any Series that has not theretofore
been authorized by a Series Supplement; or
(ix) to provide for any hedge or swap transactions with respect to any
floating rate Series or Class of Transition Bonds or any Series or Class
specific credit enhancement; provided, however, that (i) such action shall
not, as evidenced by an opinion of counsel, adversely affect in any
material respect the interests of any Transition Bondholder and (ii) the
Rating Agency Condition shall have been satisfied with respect thereto by
all Rating Agencies other than Moody's (and prior written notice of such
action shall be provided to Moody's).
The Bond 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 Issuer and the Bond Trustee, when authorized by an Issuer
Order, may, also without the consent of any of the Holders of the
Transition Bonds or any Counterparty, 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
Transition Bonds under this Indenture; provided, however, that (i) such
action shall not, as evidenced by an Opinion of Counsel, adversely affect
the interests of any Transition Bondholder or any Counterparty and (ii) the
Rating Agency Condition shall have been satisfied with respect thereto.
SECTION 9.02. Supplemental Indentures with Consent of Transition
Bondholders. The Issuer and the Bond 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
Transition Bonds of each Series or Class to be affected, by Act of such Holders
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delivered to the Issuer and the Bond 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 the provisions of, this Indenture
or of modifying in any manner the rights of the Holders of the Transition Bonds
under this Indenture; provided, however, that no such supplemental indenture
shall, without the consent of the Holder of each Outstanding Transition Bond of
each Series or Class affected thereby and each Counterparty, if any, affected
thereby:
(i) change the date of payment of any instalment of principal of or
premium, if any, or interest on any Transition Bond, or reduce the
principal amount thereof, the interest rate thereon or the redemption price
or the 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 Transition Bonds, or change any place of payment where, or the coin or
currency in which, any Transition Bond or the interest thereon is payable;
(ii) 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 Transition Bonds on or after the respective due dates thereof (or,
in the case of redemption, on or after the Redemption Date);
(iii) reduce the percentage of the Outstanding Amount of the
Transition Bonds 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 or 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 Transition
Bonds required to direct the Bond Trustee to direct the 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 Transition
Bond affected thereby;
(vi) modify any of the provisions of this Indenture in such manner as
to affect the amount of any payment of interest, principal or premium, if
any, payable on any Transition Bond on any Payment Date or to affect the
rights of the Holders of Transition Bonds to the benefit of any provisions
for the mandatory redemption of the Transition Bonds contained herein or
change the Redemption Dates, Expected Amortization Schedules or Series
Termination Dates or Class Termination Dates of any Transition Bonds;
(vii) decrease the Overcollateralization Amount or Required Capital
Amount with respect to any Series or the Calculated Overcollateralization
Level with respect to any Payment Date;
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(viii) modify or alter the provisions of this Indenture regarding the
voting of Transition Bonds held by the Issuer, the Seller, an Affiliate of
either of them or any obligor on the Transition Bonds;
(ix) decrease the percentage of the aggregate principal amount of
Transition Bonds required to amend the sections of this Indenture which
specify the applicable percentage of the aggregate principal amount of the
Transition Bonds necessary to amend this Indenture or certain other related
agreements; or
(x) 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 Transition Bond of the security provided by the
lien of this Indenture.
It shall not be necessary for any Act of Transition Bondholders 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 Issuer and the Bond Trustee of any
supplemental indenture pursuant to this Section, the Bond Trustee shall mail to
the Holders of the Transition Bonds and any applicable Counterparty, in each
case 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 Bond 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 Bond 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 Bond Trustee may, but shall not be obligated
to, enter into any such supplemental indenture that affects the Bond Trustee's
own rights, duties, liabilities or immunities under this Indenture or otherwise.
SECTION 9.04. Effect of Supplemental Indenture. Upon the execution of any
supplemental indenture pursuant to the provisions hereof, this Indenture shall
be and be deemed to be modified and amended in accordance therewith with respect
to each Series or Class of Transition Bonds affected thereby, and the respective
rights, limitations of rights, obligations, duties, liabilities and immunities
under this Indenture of the Bond Trustee, the Issuer and the Holders of the
Transition Bonds 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.
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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 TIA as then in effect so long as this
Indenture shall then be qualified under the TIA.
SECTION 9.06. Reference in Transition Bonds to Supplemental Indentures.
Transition Bonds authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article IX may, and if required by the
Bond Trustee shall, bear a notation in form approved by the Bond Trustee as to
any matter provided for in such supplemental indenture. If the Issuer or the
Bond Trustee shall so determine, new Transition Bonds so modified as to conform,
in the opinion of the Bond Trustee and the Issuer, to any such supplemental
indenture may be prepared and executed by the Issuer and authenticated and
delivered by the Bond Trustee in exchange for Outstanding Transition Bonds.
ARTICLE X
Redemption of Transition Bonds
SECTION 10.01. Optional Redemption by Issuer. The Issuer may, at its
option, redeem the Transition Bonds of a Series, in whole or from time to time
in part, as permitted by the related Series Supplement on any Redemption Date at
a price specified in such Series Supplement (such price being called the
"Redemption Price") plus interest accrued on the Transition Bonds to be redeemed
to such Redemption Date. If the Issuer shall elect to redeem the Transition
Bonds of a Series pursuant to this Section 10.01, it shall furnish notice of
such election to the Bond Trustee not later than 25 days prior to the Redemption
Date for such redemption and shall deposit with the Bond Trustee the Redemption
Price of the Transition Bonds to be redeemed plus interest accrued thereon to
such Redemption Date on or prior to such Redemption Date whereupon all such
Transition Bonds shall be due and payable on such Redemption Date upon the
furnishing of a notice complying with Section 10.03 hereof to each Holder of the
Transition Bonds of such Series pursuant to this Section 10.01.
SECTION 10.02. Mandatory Redemption by Issuer. (a) The Issuer shall redeem
(i) the Transition Bonds of a Series on the Redemption Date or Dates, if any, in
the amounts required, if any, and at the Redemption Price specified in the
Series Supplement for such Series plus accrued interest thereon to such
Redemption Date and (ii) the Transition Bonds of all Series, if the Issuer
receives Liquidated Damages, on the Liquidated Damages Redemption Date at a
Redemption Price that shall be equal to the then outstanding principal amount of
the Transition Bonds as of the Liquidated Damages Redemption Date plus accrued
interest to such Redemption Date. If the Issuer is required to redeem the
Transition Bonds of a Series pursuant to this Section 10.02, it shall furnish
notice of such requirement to the Bond Trustee not later than 25 days prior to
the Redemption Date for such redemption and shall deposit with the Bond Trustee
the Redemption Price of the Transition Bonds to be redeemed whereupon all such
Transition Bonds shall be due and payable on the Redemption Date upon the
furnishing of a notice complying with Section 10.03 hereof to each Holder of the
Transition Bonds of such Series pursuant to this Section 10.02.
SECTION 10.03. Form of Redemption Notice. Unless otherwise specified in the
Series Supplement relating to a Series of Transition Bonds, notice of redemption
under Section 10.01 or 10.02 hereof shall be given by the Bond Trustee by
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first-class mail, postage prepaid, mailed not less than five days nor more than
45 days prior to the applicable Redemption Date to each Holder of Transition
Bonds to be redeemed, as of the close of business on the Record Date preceding
the applicable Redemption Date at such Holder's address appearing in the
Transition Bond Register.
All notices of redemption shall state:
(1) the Redemption Date;
(2) the amount of such Transition Bonds to be redeemed;
(3) the Redemption Price; and
(4) the place where such Transition Bonds are to be surrendered for
payment of the Redemption Price and accrued interest (which shall be the
office or agency of the Issuer to be maintained as provided in Section 3.02
hereof).
Notice of redemption of the Transition Bonds to be redeemed shall be given
by the Bond Trustee in the name and at the expense of the Issuer. Failure to
give notice of redemption, or any defect therein, to any Holder of any
Transition Bond selected for redemption shall not impair or affect the validity
of the redemption of any other Transition Bond. Any notice of optional
redemption may be conditioned upon the deposit of sufficient moneys to pay the
Redemption Price and accrued interest with the Bond Trustee before the date
fixed for redemption and such notice shall be of no effect unless such moneys
are so deposited.
SECTION 10.04. Payment of Redemption Price. If (a) unconditional notice of
redemption has been duly mailed or duly waived by the Holders of all Transition
Bonds called for redemption or (b) conditional notice of redemption has been so
mailed or waived and the redemption moneys have been duly deposited with the
Bond Trustee, then in either case the Transition Bonds called for redemption
shall be payable on the applicable Redemption Date at the applicable Redemption
Price. No further interest will accrue on the principal amount of any Transition
Bonds called for redemption after the Redemption Date for such redemption if
payment of the Redemption Price thereof has been duly provided for, and the
Holder of such Transition Bonds will have no rights with respect thereto, except
to receive payment of the Redemption Price thereof and unpaid interest accrued
to the Redemption Date. Payment of the Redemption Price together with accrued
interest shall be made by the Bond Trustee to or upon the order of the Holders
of the Transition Bonds called for redemption upon surrender of such Transition
Bonds, and the Transition Bonds so redeemed shall cease to be of further effect
and the Lien hereunder shall be released with respect to such Transition Bonds.
<PAGE>
68
ARTICLE XI
Miscellaneous
SECTION 11.01. Compliance Certificates and Opinions, etc. Upon any
application or request by the Issuer to the Bond Trustee to take any action
under any provision of this Indenture, the Issuer shall furnish to the Bond
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:
(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;
(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 11.02. Form of Documents Delivered to Bond 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 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 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 or the Issuer, stating that the information with respect to such factual
matters is in the possession of the Servicer, the Seller or the Issuer, unless
such Authorized Officer or 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.
<PAGE>
69
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.
Whenever in this Indenture, in connection with any application or
certificate or report to the Bond Trustee, it is provided that the Issuer shall
deliver any document as a condition of the granting of such application, or as
evidence of the 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 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 Bond 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.
SECTION 11.03. Acts of Transition Bondholders. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Transition Bondholders may be embodied in
and evidenced by one or more instruments of substantially similar tenor signed
by such Transition Bondholders 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 Bond Trustee,
and, where it is hereby expressly required, to the Issuer. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Transition Bondholders 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 Bond Trustee
and the 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 Bond Trustee
deems sufficient.
(c) The ownership of Transition Bonds shall be proved by the
Transition Bond Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Transition Bonds shall bind the
Holder of every Transition Bond 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 Bond Trustee or the Issuer in reliance
thereon, whether or not notation of such action is made upon such
Transition Bond.
SECTION 11.04. Notices, etc., to Bond Trustee, Issuer, Counterparties and
Rating Agencies. Any request, demand, authorization, direction, notice, consent,
waiver or Act of Transition Bondholders or other documents provided or permitted
by this Indenture to be made upon, given or furnished to or filed with:
(a) the Bond Trustee by any Transition Bondholder or by the Issuer
shall be sufficient for every purpose hereunder if made, given, furnished
<PAGE>
70
or filed in writing, delivered personally, via facsimile transmission, by
reputable overnight courier or by first-class mail, postage prepaid, to the
Bond Trustee at its Corporate Trust Office, or
(b) the Issuer by the Bond Trustee or by any Transition Bondholder
shall be sufficient for every purpose hereunder if in writing, delivered
personally, via facsimile transmission, by reputable overnight courier or
by first-class mail, postage prepaid, to the Issuer addressed to: c/o First
Union Trust Company, National Association, One Rodney Square, 920 King
Street, Wilmington, DE 19801, Attention: Corporate Trustee Administration
Department, or at any other address previously furnished in writing to the
Bond Trustee by the Issuer. The Issuer shall promptly transmit any notice
received by it from the Transition Bondholders to the Bond Trustee.
Notices required to be given to any Counterparty or the Rating Agencies by
the Issuer, the Bond Trustee or the Issuer Trustee shall be in writing,
delivered personally, via facsimile transmission, by reputable overnight courier
or by first-class mail, postage prepaid, to (i) in the case of a Counterparty,
to the address provided in the applicable Swap Agreement, (ii) in the case of
Duff, at the following address: Duff & Phelps Credit Rating Company, 55 E.
Monroe Street, 35th Floor, Chicago, Illinois 60603, (iii) in the case of Fitch
IBCA, at the following address: Fitch IBCA, Inc., 1 State Street Plaza, New
York, New York IBCA 10004, Attention: ABS Surveillance, (iv) in the case of
Moody's, at the following address: Moody's Investors Service, Inc., Attention:
ABS Monitoring Department, 99 Church Street, New York, New York 10007 and (v) in
the case of Standard & Poor's, at the following address: Standard & Poor's
Corporation, 26 Broadway (15th Floor), New York, New York 10004, Attention:
Asset Backed Surveillance Department.
SECTION 11.05. Notices to Transition Bondholders; Waiver. Where this
Indenture provides for notice to Transition Bondholders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and delivered by first-class mail, postage prepaid, to each
Transition Bondholder affected by such event, at their address as it appears on
the Transition Bond Register, not later than the latest date, and not earlier
than the earliest date, prescribed for the giving of such notice. In any case
where notice to Transition Bondholders is given by mail, neither the failure to
mail such notice nor any defect in any notice so mailed to any particular
Transition Bondholder shall affect the sufficiency of such notice with respect
to other Transition Bondholders, 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 Transition Bondholders shall be filed with the Bond 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 it shall be impractical to deliver notice in accordance with the
first paragraph of this Section 11.05 to the Holders of Transition Bonds 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 Bond
Trustee shall be deemed to be a sufficient giving of such notice.
<PAGE>
71
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. Alternate Payment and Notice Provisions. Notwithstanding any
provision of this Indenture or any of the Transition Bonds to the contrary, the
Issuer may enter into any agreement with any Holder of a Transition Bond
providing for a method of payment, or notice by the Bond Trustee or any Paying
Agent to such Holder, that is different from the methods provided for in this
Indenture for such payments or notices. The Issuer will furnish to the Bond
Trustee a copy of each such agreement and the Bond Trustee will cause payments
to be made and notices to be given in accordance with such agreements.
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 TIA, such required
provision shall control.
The provisions of TIA ss.ss. 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 Transition Bonds by the Issuer shall bind its successors and
permitted assigns, whether so expressed or not.
All agreements of the Bond Trustee in this Indenture shall bind its
successors.
SECTION 11.10. Separability. In case any provision in this Indenture or in
the Transition Bonds 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
Transition Bonds, express or implied, shall give to any Person, other than the
parties hereto and their successors hereunder, and the Transition Bondholders,
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 Transition Bonds 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.
<PAGE>
72
SECTION 11.13. GOVERNING LAW. THIS INDENTURE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA,
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. Issuer Obligation. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer or the Bond Trustee on
the Transition Bonds or under this Indenture or any certificate or other writing
delivered in connection herewith or therewith, against (i) any owner of a
beneficial interest in the Issuer or (ii) any partner, owner, beneficiary,
agent, officer, director, employee or agent of the Bond Trustee, any holder of a
beneficial interest in the Issuer or the Bond Trustee or of any successor or
assign of the Bond Trustee, except as any such Person may have expressly agreed
(it being understood that none of the Bond Trustee's obligations are in its
individual capacity).
SECTION 11.16. No Petition. The Bond Trustee, by entering into this
Indenture, and each Transition Bondholder, by accepting a Transition Bond,
hereby covenant and agree that they will not at any time institute against the
Issuer, or join in any institution against the Issuer of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any United States Federal or state bankruptcy or similar law
in connection with any obligations relating to the Transition Bonds, this
Indenture or any of the Basic Documents.
<PAGE>
73
IN WITNESS WHEREOF, the Issuer and the Bond 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.
PECO ENERGY TRANSITION TRUST,
by First Union Trust Company, National
Association, not in its individual
capacity but solely as Issuer Trustee,
Delaware Trustee and Independent Trustee
by /s/ Edward L. Truitt, Jr.
----------------------------------------
Name: Edward L. Truitt, Jr.
Title: Vice President
THE BANK OF NEW YORK,
by /s/ Cheryl L. Laser
----------------------------------------
Name: Cheryl L. Laser
Title: Assistant Vice President
<PAGE>
SCHEDULE 1
Calculated Overcollateralization Level
Payment Date Required Overcollateralization Level
------------ ------------------------------------
September 1, 1999 4,210,526
March 1, 2000 8,421,053
September 1, 2000 12,631,579
March 1, 2001 16,842,105
September 1, 2001 21,052,632
March 1, 2002 25,263,158
September 1, 2002 29,473,684
March 1, 2003 33,684,211
September 1, 2003 37,894,737
March 1, 2004 42,105,263
September 1, 2004 46,315,789
March 1, 2005 50,526,316
September 1, 2005 54,736,842
March 1, 2006 58,947,368
September 1, 2006 63,157,895
March 1, 2007 67,368,421
September 1, 2007 71,578,947
March 1, 2008 75,789,474
September 1, 2008 80,000,000
<PAGE>
Monthly
Monthly Allocated
Allocation Date Overcollateralization Balance
-------------------------- ------------------------------------
April 1, 1999 0.00
May 1, 1999 236,715.80
June 1, 1999 944,952.06
July 1, 1999 1,885,868.18
August 1, 1999 2,978,348.10
September 1, 1999 4,210,526.32
October 1, 1999 5,166,912.03
November 1, 1999 5,928,603.39
December 1, 1999 6,556,455.60
January 1, 2000 7,133,295.37
February 1, 2000 7,753,819.46
March 1, 2000 8,421,052.63
April 1, 2000 9,127,508.85
May 1, 2000 9,814,294.02
June 1, 2000 10,466,865.26
July 1, 2000 11,120,398.85
August 1, 2000 11,834,292.07
September 1, 2000 12,631,578.95
October 1, 2000 13,375,258.64
November 1, 2000 14,109,402.75
December 1, 2000 14,768,502.95
January 1, 2001 15,388,824.02
February 1, 2001 16,076,033.96
March 1, 2001 16,842,105.26
April 1, 2001 17,548,526.84
May 1, 2001 18,235,913.21
June 1, 2001 18,888,614.77
July 1, 2001 19,541,185.78
August 1, 2001 20,254,225.57
September 1, 2001 21,052,631.58
October 1, 2001 21,809,339.98
November 1, 2001 22,564,553.96
December 1, 2001 23,242,799.88
<PAGE>
Monthly
Monthly Allocated
Allocation Date Overcollateralization Balance
-------------------------- ------------------------------------
January 1, 2002 23,881,011.04
February 1, 2002 24,557,450.01
March 1, 2002 25,263,157.89
April 1, 2002 25,972,911.53
May 1, 2002 26,660,428.53
June 1, 2002 27,312,447.88
July 1, 2002 27,963,663.43
August 1, 2002 28,675,430.69
September 1, 2002 29,473,684.21
October 1, 2002 30,155,508.86
November 1, 2002 30,909,346.95
December 1, 2002 31,606,330.20
January 1, 2003 32,266,967.51
February 1, 2003 32,963,585.70
March 1, 2003 33,684,210.53
April 1, 2003 34,394,275.20
May 1, 2003 35,081,816.29
June 1, 2003 35,733,767.35
July 1, 2003 36,384,801.42
August 1, 2003 37,096,428.27
September 1, 2003 37,894,736.84
October 1, 2003 38,696,640.73
November 1, 2003 39,458,633.84
December 1, 2003 40,129,592.95
January 1, 2004 40,757,444.67
February 1, 2004 41,419,236.83
March 1, 2004 42,105,263.16
April 1, 2004 42,815,279.19
May 1, 2004 43,502,810.71
June 1, 2004 44,154,771.28
July 1, 2004 44,805,845.66
August 1, 2004 45,517,503.81
September 1, 2004 46,315,789.47
October 1, 2004 47,124,228.08
<PAGE>
Monthly
Monthly Allocated
Allocation Date Overcollateralization Balance
-------------------------- ------------------------------------
November 1, 2004 47,886,347.36
December 1, 2004 48,555,621.75
January 1, 2005 49,181,446.35
February 1, 2005 49,841,427.03
March 1, 2005 50,526,315.79
April 1, 2005 51,236,290.13
May 1, 2005 51,923,825.60
June 1, 2005 52,575,793.44
July 1, 2005 53,226,866.00
August 1, 2005 53,938,531.49
September 1, 2005 54,736,842.11
October 1, 2005 55,520,778.56
November 1, 2005 56,274,801.98
December 1, 2005 56,943,030.98
January 1, 2006 57,569,661.53
February 1, 2006 58,238,909.05
March 1, 2006 58,947,368.42
April 1, 2006 59,657,181.37
May 1, 2006 60,345,000.80
June 1, 2006 60,997,043.22
July 1, 2006 61,647,639.63
August 1, 2006 62,358,945.52
September 1, 2006 63,157,894.74
October 1, 2006 63,959,599.62
November 1, 2006 64,722,390.54
December 1, 2006 65,395,667.45
January 1, 2007 66,026,407.74
February 1, 2007 66,687,684.16
March 1, 2007 67,368,421.05
April 1, 2007 68,080,588.14
May 1, 2007 68,768,850.35
June 1, 2007 69,420,456.72
July 1, 2007 70,069,417.84
August 1, 2007 70,779,312.49
<PAGE>
Monthly
Monthly Allocated
Allocation Date Overcollateralization Balance
-------------------------- ------------------------------------
September 1, 2007 71,578,947.37
October 1, 2007 72,477,223.32
November 1, 2007 73,245,706.99
December 1, 2007 73,894,515.67
January 1, 2008 74,494,676.77
February 1, 2008 75,128,180.71
March 1, 2008 75,789,473.68
April 1, 2008 76,501,530.98
May 1, 2008 77,189,952.50
June 1, 2008 77,841,602.11
July 1, 2008 78,490,297.29
August 1, 2008 79,199,998.08
September 1, 2008 80,000,000.00
================================================================================
PECO ENERGY TRANSITION TRUST,
Issuer
and
THE BANK OF NEW YORK,
Bond Trustee
------------------------------
SERIES SUPPLEMENT
Dated as of March 25, 1999
------------------------------
================================================================================
<PAGE>
1
SERIES SUPPLEMENT dated as of March 25, 1999 (this
"Supplement"), by and between PECO ENERGY TRANSITION TRUST, a
Delaware statutory business trust (the "Issuer"), and THE BANK OF
NEW YORK, a New York banking corporation (the "Bond Trustee"), as
Bond Trustee under the Indenture dated as of March 1, 1999,
between the Issuer and the Bond Trustee (the "Indenture").
PRELIMINARY STATEMENT
Section 9.01 of the Indenture provides, among other things, that the Issuer
and the Bond 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 Issuer of a Series of Transition Bonds and specifying the
terms thereof. The Issuer has duly authorized the execution and delivery of this
Supplement and the creation of a Series of Transition Bonds with an initial
aggregate principal amount of $4,000,000,000 to be known as the Issuer's
Transition Bonds, Series 1999-A (the "Series 1999-A Transition Bonds"). All acts
and all things necessary to make the Series 1999-A Transition Bonds, when duly
executed by the Issuer and authenticated by the Bond Trustee as provided in the
Indenture and this Supplement and issued by the Issuer, the valid, binding and
legal obligations of the Issuer and to make this Supplement a valid and
enforceable supplement to the Indenture have been done, performed and fulfilled
and the execution and delivery hereof have been in all respects duly and
lawfully authorized. The Issuer and the Bond Trustee are executing and
delivering this Supplement in order to provide for the Series 1999-A Transition
Bonds.
In order to secure the payment of principal of and interest on the Series
1999-A Transition Bonds issued and to be issued under the Indenture and/or any
Series Supplement, the Issuer hereby Grants to the Bond Trustee as trustee for
the benefit of the Holders of the Transition Bonds from time to time issued and
outstanding, all of the Issuer's right, title and interest in and to (a) the
Intangible Transition Property transferred by the Seller to the Issuer from time
to time pursuant to the Sale Agreement and all proceeds thereof, (b) the Sale
Agreement except for Section 5.01 thereof solely to the extent such Section
provides for indemnification of the Issuer, (c) all Bills of Sale delivered by
the Seller pursuant to the Sale Agreement, (d) the Servicing Agreement except
for Section 5.02(b)
<PAGE>
2
thereof solely to the extent such Section provides for indemnification of the
Issuer, (e) the Collection Account and all amounts on deposit therein from time
to time, (f) all Swap Agreements with respect to the Series 1999-A Transition
Bonds, (g) all other property of whatever kind owned from time to time by the
Issuer including all accounts, accounts receivable and chattel paper, (h) all
present and future claims, demands, causes and choses in action in respect of
any or all of the foregoing and (i) 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, general
intangibles, 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 (collectively, the "Collateral").
To have and to hold in trust to secure the payment of principal of and
premium, if any, and interest on, and any other amounts (including all fees,
expenses, counsel fees and other amounts due and owing to the Bond Trustee)
owing in respect of, the Transition Bonds equally and ratably without prejudice,
preference, priority or distinction, except as expressly provided in the
Indenture or any Series Supplement and to secure performance by the Issuer of
all of the Issuer's obligations under the Indenture and all Series Supplements
with respect to the Transition Bonds, all as provided in the Indenture.
The Bond Trustee, as trustee on behalf of the Holders of the Transition
Bonds, acknowledges such Grant, accepts the trusts hereunder in accordance with
the provisions hereof and agrees to perform its duties required in the Indenture
and this Supplement.
SECTION 1. Definitions. (a) Article One of the Indenture provides that the
meanings of certain defined terms used in the Indenture shall, when applied to
the Transition Bonds of a particular Series, be as defined in Article One but
with such additional provisions as are specified in the related Series
Supplement. With respect to the Series 1999-A Transition Bonds, the following
definitions shall apply:
"Adjustment Date" shall mean initially each August 12th, until February 14,
2008 and on such date and thereafter, the 14th day of each month.
<PAGE>
3
"Authorized Initial Denominations" shall mean $1,000 and integral multiples
thereof.
"Bond Rate" has the meaning set forth in Section 3 of this Supplement.
"Calculation Date" means initially each May 14th, until January 14, 2008
and on such date and thereafter the 14th day of each month.
"Calculation Period" means the period from and including the preceding
payment date under the applicable Swap Agreement (or, in the case of the first
period, from and including March 25, 1999) to and excluding the next payment
date under such Swap Agreement.
"Class Termination Date" means, with respect to any Class of the Series
1999-A Transition Bonds, the termination date therefor, as specified in Section
3 of this Supplement.
"Expected Amortization Schedule" means Schedule A to this Supplement.
"Expected Final Payment Date" means, with respect to any Class of the
Series 1999-A Transition Bonds, the expected final payment date therefor, as
specified in Section 3 of this Supplement.
"Interest Accrual Period" means, with respect to any Payment Date, the
period from and including the preceding Payment Date (or, in the case of the
first Payment Date, from and including the Series Issuance Date) to and
excluding such Payment Date.
"Interest Determination Date" means, with respect to any payment date under
the applicable Swap Agreement, the day two London Banking Days prior to such
payment date or, in the case of the first payment date, the Series Issuance
Date.
"LIBOR" means LIBOR determined as specified in Section 3(b) of this
Supplement.
"London Banking Day" means any day on which dealings in deposits in U.S.
dollars are transacted in the London interbank market.
"Monthly Allocated Interest Balance" has the meaning set forth in Section
4(e) of this Supplement.
<PAGE>
4
"Monthly Allocated Principal Balance" has the meaning set forth in Section
4(e) of this Supplement.
"Overcollateralization Amount" has the meaning set forth in Section 4(e) of
this Supplement.
"Payment Date" has the meaning set forth in Section 4(a) of this
Supplement.
"Record Date" shall mean, with respect to any Payment Date, the close of
business on the day prior to such Payment Date.
"Series Issuance Date" has the meaning set forth in Section 2(b) of this
Supplement.
"Series Termination Date" has the meaning set forth in Section 3 of this
Supplement.
"Servicing Fee Rate" shall mean 0.25% per annum so long as ITC Charges are
included in electric bills otherwise sent to Customers or, if ITC Charges are
not included in such bills, 1.50% per annum.
(b) 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.
SECTION 2. Designation; Series Issuance Dates. (a) Designation. The Series
1999-A Transition Bonds shall be designated generally as the Issuer's Transition
Bonds, Series 1999-A and further denominated as Classes A-1 through A-7.
(b) Series Issuance Date. The Series 1999-A Transition Bonds that are
authenticated and delivered by the Bond Trustee to or upon the order of the
Issuer on March 25, 1999 (the "Series Issuance Date") shall have as their date
of authentication March 25, 1999. Each other Series 1999-A Transition Bond shall
be dated the date of its authentication.
SECTION 3. Initial Principal Amount; Bond Rate; Expected Final Payment
Date; Series Termination Date; Class Termination Dates; Determination of LIBOR;
Calculation of Interest Due. (a) The Transition Bonds of each Class of the
Series 1999-A Transition Bonds shall have the initial principal amounts, bear
interest at the rates per annum and
<PAGE>
5
shall have Expected Final Payment Dates and Class Termination Dates as set forth
below:
<TABLE>
<CAPTION>
Initial
Principal Bond Expected Final Class
Class Amount Rate Payment Date Termination Date
- ----- ------ ---- ------------ ----------------
<S> <C> <C> <C> <C>
A-1 244,470,272 5.48% March 1, 2001 March 1, 2003
A-2 275,371,325 5.63% March 1, 2003 March 1, 2005
A-3 667,000,000 LIBOR + 0.125% March 1, 2004 March 1, 2006
A-4 458,518,647 5.80% March 1, 2005 March 1, 2007
A-5 464,600,000 LIBOR + 0.200% September 1, 2007 March 1, 2009
A-6 993,386,331 6.05% March 1, 2007 March 1, 2009
A-7 896,653,425 6.13% September 1, 2008 March 1, 2009
</TABLE>
The Bond Rate for Classes A-1, A-2, A-4, A-6 and A-7 shall be computed on
the basis of a 360-day year of twelve 30-day months. The Bond Rate for Classes
A-3 and A-5 shall be computed on the basis of the actual number of days from the
preceding Payment Date, to but excluding the next Payment Date, divided by 360,
for so long as the related Swap Agreement is in effect and any payments due
thereunder from the applicable Counterparty are being received by the Issuer and
otherwise on the basis of a 360-day year of twelve 30-day months at a Bond Rate
for Classes A-3 and A-5 of 6.577% and 6.9425%, respectively. In the event that a
Swap Agreement terminates, the Bond Rate for the affected Class shall
permanently convert to the applicable foregoing rate.
(b) Determination of LIBOR. So long as the Swap Agreement related to
Classes A-3 or A-5, as applicable, is in effect and any payments due thereunder
from the applicable Counterparty are being received by the Issuer, the
applicable Counterparty will determine LIBOR for the Calculation Period
corresponding to each Interest Accrual Period and provide such calculation to
the Servicer for use in calculating the Bond Rate for Classes A-3 and A-5 as
applicable in accordance with the following provisions:
(i) On the Interest Determination Date immediately preceding the first
day of each Calculation Period, each Counterparty will determine LIBOR
based on the offered rate for deposits in U.S. dollars for the six-month
period commencing on the first day of such Calculation Period that appears
on the page
<PAGE>
6
USD-LIBOR-BBA, of the Dow Jones Telerate Service as of 11:00 a.m., London
time, on such Interest Determination Date (such display page being the
"Telerate Page"). Notwithstanding the foregoing, if no offered rate
appears, LIBOR for such Calculation Period will be determined as described
in clause (ii) below.
(ii) With respect to an Interest Determination Date on which no
offered rate appears on the Telerate Page, each Counterparty will request
the principal London office of each of four major banks in the London
interbank market, selected by such Counterparty, to provide such
Counterparty with its offered quotation for six-month deposits in U.S.
dollars for the applicable Calculation Period, commencing on the second
London Banking Day immediately following such Interest Determination Date,
to prime banks in the London interbank market at approximately 11:00 a.m.,
London time, on such Interest Determination Date and in a principal amount
that is representative for a single transaction in U.S. dollars in such
market at such time. If at least two such quotations are provided, LIBOR
for the relevant Calculation Period will be the arithmetic mean of such
quotations. If fewer than two quotations are provided, LIBOR for such
Calculation Period will be the arithmetic mean of the rates quoted at
approximately 11:00 a.m. in the City of New York, on such Interest
Determination Date by three major banks in the City of New York selected by
such Counterparty for loans in U.S. dollars to leading European banks, for
the Calculation Period commencing on the second London Banking Day
immediately following such Interest Determination Date and in a principal
amount that is representative for a single transaction in U.S. dollars in
such market at such time.
(c) Calculation of Interest Due. So long as the Swap Agreement related to
Classes A-3 or A-5, as applicable, is in effect and any payments due thereunder
from the applicable Counterparty are being received by the Issuer, on or prior
to each Payment Date, the Servicer, using LIBOR as determined by the applicable
Counterparty, will calculate the amount of interest payable on Classes A-3 and
A-5, as applicable, for the relevant Interest Accrual Period. Interest payments
on such Classes will be made in an amount equal to the product of (i) the actual
number of days in the related Interest Accrual Period divided by 360, (ii) the
applicable Bond Rate and (iii) the principal balance of the relevant Class as of
the close of business on the preceding Payment Date (or, in the case of the
first Payment Date, as
<PAGE>
7
of the Series Issuance Date). There will be no minimum or maximum Bond Rate.
SECTION 4. Payment Dates; Expected Amortization Schedule for Principal;
Interest; Overcollateralization Amount; Monthly Allocated Balances. (a) Payment
Dates. The Payment Dates for each Class of the Series 1999-A Transition Bonds
are March 1 and September 1 of each year or, if any such date is not a Business
Day, the next succeeding Business Day, commencing on September 1, 1999 and
continuing until the earlier of repayment of such Class in full and the
applicable Class Termination Date.
(b) 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 Transition Bonds has been declared to be due and payable together
with accrued and unpaid interest thereon, on each Payment Date, the Bond Trustee
shall distribute to the Series 1999-A Transition Bondholders of record as of the
related Record Date amounts payable in respect of the Series 1999-A Transition
Bonds pursuant to Section 8.02(e) of the Indenture as principal, in accordance
with the Expected Amortization Schedule. To the extent that more than one Class
of the Series 1999-A Transition Bonds is to receive payments of principal in
accordance with the Expected Amortization Schedule on any Payment Date, such
amounts will be allocated pro rata between such Classes based on the principal
scheduled to be paid to such Classes in accordance with the Expected
Amortization Schedule on such Payment Date; provided, however, that if one or
more Classes did not receive principal on the prior Payment Date and as a result
their Class Principal Balance was not reduced to the balance indicated in the
Expected Amortization Schedule on such Payment Date, then such Classes will be
(i) allocated funds from the Series 1999-A Subaccount to make up such shortfalls
prior to any Classes receiving funds in respect of principal scheduled to be
paid on the current Payment Date and (ii) allocated funds from the Series 1999-A
Subaccount in respect of prior shortfalls on a pro rata basis based on the
amount of such shortfalls; provided, however, that other than in the event of a
redemption in no event shall a principal payment pursuant to this Section 4(b)
on any Class on a Payment Date be greater than the amount that reduces the
Outstanding Amount of such Class of Series 1999-A Transition Bonds to the amount
specified in the Expected Amortization Schedule which is attached as Schedule A
hereto for such Class and Payment Date.
<PAGE>
8
(c) Interest. Interest will be payable on each Class of the Series 1999-A
Transition Bonds on each Payment Date in an amount equal to one-half of the
product of (i) the applicable Bond Rate and (ii) the Outstanding Amount of the
related Class of Transition Bonds 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 1999-A Transition Bonds on such preceding
Payment Date; and provided, further, 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.
(d) Overcollateralization Amount. The Overcollateralization Amount for the
Series 1999-A Transition Bonds shall be $80,000,000.
(e) Monthly Allocated Balances. The Monthly Allocated Interest Balance and
Monthly Allocated Principal Balance for any Monthly Allocation Date and the
Series 1999-A Transition Bonds shall be as set forth in Schedule B hereto.
Not later than each Schedule Revision Date, the Issuer shall deliver to the
Bond Trustee replacement Schedules A and B hereto, adjusted to reflect the event
giving rise to such Schedule Revision Date and setting forth the Expected
Amortization Schedule for each Payment Date and the Monthly Allocated Interest
Balance and Monthly Allocated Principal Balance for each Monthly Allocation
Date; provided, however, that no such replacement schedules shall be required if
the event giving rise to such Schedule Revision Date is a redemption of the
Series 1999-A Transition Bonds in whole.
SECTION 5. Authorized Initial Denominations. The Series 1999-A Transition
Bonds shall be issuable in the Authorized Initial Denominations.
SECTION 6. Redemption. (a) Mandatory Redemption. The Series 1999-A
Transition Bonds shall not be subject to mandatory redemption except as provided
in Section 10.02 of the Indenture in the event that the Issuer receives
Liquidated Damages.
(b) Optional Redemption. The Issuer may, at its sole option, redeem the
Series 1999-A Class A-3 and A-5 Transition Bonds in whole or from time to time
in part on any Payment Date on or after March 1, 2001, at a Redemption Price
equal to the principal amount thereof plus interest at
<PAGE>
9
the applicable Bond Rate accrued to the Redemption Date pursuant to Section
10.01 of the Indenture. The Series 1999-A Transition Bonds of all other Classes
shall not be subject to optional redemption by the Issuer except that the Series
1999-A Transition Bonds may be redeemed in whole at a Redemption Price equal to
the principal amount thereof plus interest at the applicable Bond Rate accrued
to the Redemption Date on any Payment Date on which the Outstanding Amount
thereof (after giving effect to payments that would otherwise be made on such
Payment Date) has been reduced to less than 5% of the initial principal balance
thereof.
SECTION 7. Credit Enhancement. No credit enhancement (other than the
Overcollateralization Amount) is provided for the Series 1999-A Transition
Bonds.
SECTION 8. Swap Agreements. The Issuer has entered into Swap Agreements
with Goldman Sachs Mitsui Marine Derivative Products, L.P. and Citibank, N.A.,
New York for the benefit of Classes A-3 and A-5 respectively. In the event that
the Issuer is permitted to terminate either such Swap Agreement pursuant to the
terms thereof, the Class A-3 or Class A-5 Transition Bondholders, as applicable,
may vote to do so in accordance with the provisions of Section 3.22(b) of the
Indenture.
SECTION 9. Delivery and Payment for the Series 1999-A Transition Bonds;
Form of the Series 1999-A Transition Bonds. The Bond Trustee shall deliver the
Series 1999-A Transition Bonds to the Issuer when authenticated in accordance
with Section 2.02 of the Indenture. The Series 1999-A Transition Bonds of each
Class shall be in the form of Exhibits A-1 through A-7 hereto.
SECTION 10. Confirmation of Indenture. 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 11. 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 12. Governing Law. This Supplement shall be construed in accordance
with the laws of the Commonwealth of Pennsylvania, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
<PAGE>
10
parties hereunder shall be determined in accordance with such laws.
SECTION 13. Issuer Obligation. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer or the Bond Trustee on
the Transition Bonds or under this Supplement or any certificate or other
writing delivered in connection herewith or therewith, against (i) any owner of
a beneficial interest in the Issuer or (ii) any partner, owner, beneficiary,
agent, officer, director or employee of the Bond Trustee, any holder of a
beneficial interest in the Issuer or the Bond Trustee or of any successor or
assign of the Bond Trustee, except as any such Person may have expressly agreed
(it being understood that none of the Bond Trustee's obligations are in its
individual capacity).
<PAGE>
11
IN WITNESS WHEREOF, the Issuer and the Bond 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.
PECO ENERGY TRANSITION TRUST,
by First Union Trust Company,
National Association, not in
its individual capacity but
solely as Issuer Trustee,
Delaware Trustee and
Independent Trustee
by /s/ Edward L. Truitt, Jr.
---------------------------
Name: Edward L. Truitt, Jr.
Title: Vice President
THE BANK OF NEW YORK, not in
its individual capacity but
solely as Bond Trustee on
behalf of the Transition
Bondholders,
by /s/ Cheryl L. Laser
----------------------------
Name: Cheryl L. Laser
Title: Assistant Vice President
<PAGE>
SCHEDULE A
Expected Amortization Schedule
Outstanding Principal Balance
<TABLE>
<CAPTION>
- ---------------------- ----------- ----------- ----------- ----------- ----------- -----------
Payment Date Class A-1 Class A-2 Class A-3 Class A-4 Class A-5 Class A-6
- ---------------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Series Issuance Date.. 244,470,272 275,371,325 667,000,000 458,518,647 464,600,000 993,386,331
September 1, 1999..... 201,970,272 275,371,325 667,000,000 458,518,647 464,600,000 993,386,331
March 1, 2000......... 138,085,186 275,371,325 667,000,000 458,518,647 464,600,000 993,386,331
September 1, 2000..... 81,970,272 275,371,325 667,000,000 458,518,647 464,600,000 993,386,331
March 1, 2001......... 0 275,371,325 667,000,000 458,518,647 464,600,000 993,386,331
September 1, 2001..... 0 228,041,597 608,800,000 458,518,647 464,600,000 993,386,331
March 1, 2002......... 0 149,875,299 549,400,000 458,518,647 464,600,000 993,386,331
September 1, 2002..... 0 78,069,747 481,400,000 458,518,647 464,600,000 993,386,331
March 1, 2003......... 0 0 330,200,000 458,518,647 464,600,000 993,386,331
September 1, 2003..... 0 0 161,200,000 387,037,737 464,600,000 993,386,331
March 1, 2004......... 0 0 0 286,885,259 464,600,000 993,386,331
September 1, 2004..... 0 0 0 187,125,557 307,900,000 993,386,331
March 1, 2005......... 0 0 0 0 221,400,000 993,386,331
September 1, 2005..... 0 0 0 0 153,000,000 793,067,814
March 1, 2006......... 0 0 0 0 86,100,000 560,156,375
September 1, 2006..... 0 0 0 0 18,500,000 318,221,391
March 1, 2007......... 0 0 0 0 3,500,000 0
September 1, 2007..... 0 0 0 0 0 0
March 1, 2008......... 0 0 0 0 0 0
September 1, 2008..... 0 0 0 0 0 0
<CAPTION>
- ---------------------- ----------- -------------
Payment Date Class A-7 Series 1999-A
- ---------------------- ----------- -------------
<S> <C> <C>
Series Issuance Date.. 896,653,425 4,000,000,000
September 1, 1999..... 896,653,425 3,957,500,000
March 1, 2000......... 896,653,425 3,893,614,914
September 1, 2000..... 896,653,425 3,837,500,000
March 1, 2001......... 896,653,425 3,755,529,728
September 1, 2001..... 896,653,425 3,650,000,000
March 1, 2002......... 896,653,425 3,512,433,702
September 1, 2002..... 896,653,425 3,372,628,150
March 1, 2003......... 896,653,425 3,143,358,403
September 1, 2003..... 896,653,425 2,902,877,493
March 1, 2004......... 896,653,425 2,641,525,015
September 1, 2004..... 896,653,425 2,385,065,313
March 1, 2005......... 896,653,425 2,111,439,756
September 1, 2005..... 896,653,425 1,842,721,239
March 1, 2006......... 896,653,425 1,542,909,800
September 1, 2006..... 896,653,425 1,233,374,816
March 1, 2007......... 896,653,425 900,153,425
September 1, 2007..... 575,000,000 575,000,000
March 1, 2008......... 280,541,519 280,541,519
September 1, 2008..... 0 0
</TABLE>
<PAGE>
SCHEDULE B
Monthly Allocated Balances
<TABLE>
<CAPTION>
Monthly Allocated Monthly Allocated
Monthly Allocation Date Interest Balance Principal Balance
- ----------------------- ----------------- -----------------
<S> <C> <C>
April 1, 1999......................... 0 0
May 1, 1999........................... 6,009,682 2,389,350
June 1, 1999.......................... 23,990,211 9,538,110
July 1, 1999.......................... 47,877,958 19,035,482
August 1, 1999........................ 75,613,569 30,062,701
September 1, 1999..................... 106,895,807 42,500,000
October 1, 1999....................... 27,751,438 14,510,961
November 1, 1999...................... 49,853,432 26,067,882
December 1, 1999...................... 68,071,815 35,594,100
January 1, 2000....................... 84,809,971 44,346,321
February 1, 2000...................... 102,815,715 53,761,352
March 1, 2000......................... 122,176,816 63,885,086
April 1, 2000......................... 20,205,539 9,415,148
May 1, 2000........................... 39,848,461 18,568,135
June 1, 2000.......................... 58,512,822 27,265,142
July 1, 2000.......................... 77,204,707 35,974,975
August 1, 2000........................ 97,622,954 45,489,239
September 1, 2000..................... 120,426,364 56,114,914
October 1, 2000....................... 20,998,609 14,477,911
November 1, 2000...................... 41,727,971 28,770,185
December 1, 2000...................... 60,338,386 41,601,507
January 1, 2001....................... 77,853,830 53,677,881
February 1, 2001...................... 97,257,955 67,056,442
March 1, 2001......................... 118,888,816 81,970,272
April 1, 2001......................... 19,569,765 17,705,263
May 1, 2001........................... 38,612,205 34,933,441
June 1, 2001.......................... 56,693,782 51,292,303
July 1, 2001.......................... 74,771,743 67,647,893
August 1, 2001........................ 94,524,850 85,519,030
September 1, 2001..................... 116,642,830 105,529,728
October 1, 2001....................... 20,379,437 24,723,174
November 1, 2001...................... 40,718,626 49,397,522
December 1, 2001...................... 58,984,935 71,557,170
January 1, 2002....................... 76,173,040 92,408,802
February 1, 2002...................... 94,390,685 114,509,413
March 1, 2002......................... 113,396,591 137,566,298
April 1, 2002......................... 18,414,682 23,566,531
May 1, 2002........................... 36,252,431 46,394,721
June 1, 2002.......................... 53,169,187 68,044,253
July 1, 2002.......................... 70,065,088 89,667,096
August 1, 2002........................ 88,532,014 113,300,487
September 1, 2002..................... 109,242,841 139,805,552
October 1, 2002....................... 17,000,627 37,126,419
November 1, 2002...................... 35,796,839 78,174,083
December 1, 2002...................... 53,175,431 116,125,912
January 1, 2003....................... 69,647,773 152,098,647
February 1, 2003...................... 87,017,263 190,030,598
March 1, 2003......................... 104,985,335 229,269,747
April 1, 2003......................... 16,495,634 40,554,787
May 1, 2003........................... 32,468,019 79,823,158
June 1, 2003.......................... 47,613,606 117,058,831
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Monthly Allocated Monthly Allocated
Monthly Allocation Date Interest Balance Principal Balance
- ----------------------- ----------------- -----------------
<S> <C> <C>
July 1, 2003.......................... 62,737,890 154,242,132
August 1, 2003........................ 79,269,816 194,886,142
September 1, 2003..................... 97,815,459 240,480,910
October 1, 2003....................... 17,175,919 49,775,147
November 1, 2003...................... 33,496,993 97,072,984
December 1, 2003...................... 47,868,216 138,720,231
January 1, 2004....................... 61,316,125 177,691,749
February 1, 2004...................... 75,491,001 218,769,991
March 1, 2004......................... 90,184,948 261,352,478
April 1, 2004......................... 13,824,099 43,246,494
May 1, 2004........................... 27,210,422 85,123,474
June 1, 2004.......................... 39,904,175 124,833,857
July 1, 2004.......................... 52,580,673 164,490,264
August 1, 2004........................ 66,436,744 207,836,778
September 1, 2004..................... 81,979,464 256,459,702
October 1, 2004....................... 14,140,528 52,537,248
November 1, 2004...................... 27,470,877 102,064,384
December 1, 2004...................... 39,177,262 145,557,897
January 1, 2005....................... 50,123,659 186,227,778
February 1, 2005...................... 61,667,486 229,117,328
March 1, 2005......................... 73,646,984 273,625,557
April 1, 2005......................... 10,996,939 45,311,022
May 1, 2005........................... 21,646,318 89,189,981
June 1, 2005.......................... 31,744,783 130,798,991
July 1, 2005.......................... 41,829,380 172,350,864
August 1, 2005........................ 52,852,514 217,769,816
September 1, 2005..................... 65,217,711 268,718,517
October 1, 2005....................... 10,572,276 55,820,365
November 1, 2005...................... 20,741,140 109,510,766
December 1, 2005...................... 29,752,969 157,092,157
January 1, 2006....................... 38,203,795 201,711,521
February 1, 2006...................... 47,229,360 249,365,436
March 1, 2006......................... 56,783,741 299,811,439
April 1, 2006......................... 7,993,400 52,181,586
May 1, 2006........................... 15,739,126 102,746,328
June 1, 2006.......................... 23,081,956 150,680,939
July 1, 2006.......................... 30,408,503 198,509,246
August 1, 2006........................ 38,418,715 250,800,585
September 1, 2006..................... 47,415,904 309,534,984
October 1, 2006....................... 7,187,939 63,446,989
November 1, 2006...................... 14,026,982 123,814,324
December 1, 2006...................... 20,063,459 177,097,512
January 1, 2007....................... 25,718,561 227,014,350
February 1, 2007...................... 31,647,444 279,347,819
March 1, 2007......................... 37,750,806 333,221,391
April 1, 2007......................... 4,668,918 54,996,347
May 1, 2007........................... 9,181,118 108,146,666
June 1, 2007.......................... 13,453,005 158,466,276
July 1, 2007.......................... 17,707,549 208,581,610
August 1, 2007........................ 22,361,570 263,402,471
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Monthly Allocated Monthly Allocated
Monthly Allocation Date Interest Balance Principal Balance
- ----------------------- ----------------- -----------------
<S> <C> <C>
September 1, 2007..................... 27,603,921 325,153,425
October 1, 2007....................... 3,759,860 62,819,931
November 1, 2007...................... 6,976,457 116,562,983
December 1, 2007...................... 9,692,137 161,936,697
January 1, 2008....................... 12,204,195 203,908,297
February 1, 2008...................... 14,855,815 248,211,691
March 1, 2008......................... 17,623,750 294,458,481
April 1, 2008......................... 1,454,140 47,443,388
May 1, 2008........................... 2,860,012 93,311,958
June 1, 2008.......................... 4,190,789 136,730,466
July 1, 2008.......................... 5,515,533 179,952,125
August 1, 2008........................ 6,964,860 227,238,503
September 1, 2008..................... 8,598,598 280,541,519
</TABLE>
<PAGE>
1
Exhibit A to Series Supplement
REGISTERED $[ ]
No. ______
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP NO.
THE PRINCIPAL OF THIS CLASS [ ] TRANSITION BOND WILL BE PAID
IN INSTALMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL
AMOUNT OF THIS CLASS [ ] TRANSITION BOND AT ANY TIME MAY BE LESS THAN THE AMOUNT
SHOWN ON THE FACE HEREOF.
PECO ENERGY TRANSITION TRUST
TRANSITION BONDS, SERIES [ ], Class [ ].
Bond Original Principal Expected Final
Rate Amount Payment Date
[ ]% $[ ] [ ], [ ]
PECO Energy Transition Trust, a statutory business trust organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to the Registered Holder
hereof, or registered assigns, the Original Principal Amount shown above in
[monthly][quarterly][semi-annual] instalments on the Payment Dates and in the
amounts specified on the reverse hereof or, if less, the amounts determined
pursuant to Section 8.02(e) of the Indenture, in each year, commencing on the
date determined as provided on the reverse hereof and ending on or before the
Class [ ] Termination Date, to pay the entire unpaid principal hereof on the
Class [ ] Termination Date and to pay interest, at [the Bond Rate shown above][a
floating rate calculated as follows [insert formula]], on each [ ] and [ ] or if
any such day is not a Business Day, the next succeeding Business Day, commencing
on [ ], 1999 and continuing until the earlier of the payment of the principal
hereof and the Class [ ] Termination Date (each a "Payment Date"), on the
principal amount of this Class [ ] Transition Bond outstanding from time to
time. Interest on this Class [ ] Transition Bond will accrue for each Payment
Date from the
<PAGE>
2
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 [ ], 1999. Interest will
be computed on the basis of [a 360-day year of twelve 30-day months] [the actual
number of days from the preceeding Payment Date, to but excluding the next
Payment Date, divided by 360]. Such principal of and interest on this Class [ ]
Transition Bond shall be paid in the manner specified on the reverse hereof.
The principal of and interest on this Class [ ] Transition Bond 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 Issuer with respect to this Class [ ] Transition Bond shall be
applied first to interest due and payable on this Class [ ] Transition Bond as
provided above and then to the unpaid principal of and premium, if any, on this
Class [ ] Transition Bond, all in the manner set forth in Section 8.02(e) of the
Indenture.
Reference is made to the further provisions of this Class [ ] Transition
Bond set forth on the reverse hereof, which shall have the same effect as though
fully set forth on the face of this Class [ ] Transition Bond.
Unless the certificate of authentication hereon has been executed by the
Bond Trustee whose name appears below by manual signature, this Class [ ]
Transition Bond 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 Issuer has caused this instrument to be signed,
manually or in facsimile, by an Authorized Officer of the Issuer Trustee.
Date:
PECO ENERGY TRANSITION TRUST,
by First Union Trust Company,
National Association, not in
its individual capacity but
solely as Issuer Trustee,
by
---------------------------
Name:
Title:
<PAGE>
4
BOND TRUSTEE'S CERTIFICATE OF AUTHENTICATION
Dated: _______________, 199[ ]
This is one of the Class [ ] Transition Bonds of the Series [ ] Transition
Bonds, designated above and referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK, not in its
individual capacity but solely as
Bond Trustee on behalf of the
Transition Bondholders,
by
--------------------------
Authorized Signatory
<PAGE>
5
[REVERSE OF TRANSITION BOND]
This Series [ ], Class [ ] Transition Bond is one of a duly authorized
issue of Transition Bonds of the Issuer, designated as its Transition Bonds
(herein called the "Transition Bonds"), issued and to be issued in one or more
Series, which Series are issuable in one or more Classes, and this Series [ ]
Transition Bond, in which this Class [ ] Transition Bond represents an interest,
consists of [ ] Classes, including the Class [ ] Transition Bonds (herein called
the "Class [ ] Transition Bonds"), all issued and to be issued under an
indenture dated as of March 1, 1999, and a series supplement thereto dated as of
[ ], [1999] (such series supplement, as supplemented or amended, the
"Supplement" and, collectively with such indenture, as supplemented or amended,
the "Indenture"), each between the Issuer and The Bank of New York, as Bond
Trustee (the "Bond Trustee", which term includes any successor bond trustee
under the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the Collateral property pledged, the
nature and extent of the security, the respective rights, obligations and
immunities thereunder of the Issuer, the Bond Trustee and the Holders of the
Transition Bonds and the terms and conditions under which additional Transition
Bonds may be issued. All terms used in this Class [ ] Transition Bond that are
defined in the Indenture, as supplemented or amended, shall have the meanings
assigned to them in the Indenture.
The Class [ ] Transition Bonds, the other Classes of Series [ ] Transition
Bonds and any other Series of Transition Bonds issued by the 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 [ ] Transition Bond 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 Supplement as
Schedule A, unless payable earlier either because (i) an Event of Default shall
have occurred and be continuing and the Bond Trustee or the Holders of
Transition
<PAGE>
6
Bonds representing not less than a majority of the Outstanding Amount of the
Transition Bonds of all Series have declared the Transition Bonds to be
immediately due and payable in accordance with Section 5.02 of the Indenture,
(ii) [the Issuer, at its option, shall have called for the redemption of the
Series [ ] Transition Bonds in whole or from time to time in part pursuant to
Section 10.01 of the Indenture [or][,] (iii)] the Issuer shall have called for
the redemption of the Series [ ] Transition Bonds pursuant to Section 10.02 of
the Indenture if the Seller is required to pay Liquidated Damages pursuant to
Section 5.01(d) of the Sale Agreement [or [(iii)][(iv)] the Issuer shall have
called for the redemption of the Series [ ] Transition Bond in whole or from
time to time in part] pursuant to Section [6(a) or] 6(b) of the Supplement].
However, actual principal payments may be made in lesser than expected amounts
and at later than expected times as determined pursuant to Section 8.02(e) of
the Indenture. The entire unpaid principal amount of this Class [ ] Transition
Bond shall be due and payable on the earlier of the Class [ ]Termination Date
hereof and the Redemption Date, if any, herefor. Notwithstanding the foregoing,
the entire unpaid principal amount of the Transition Bonds 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 Bond Trustee or the Holders of the
Transition Bonds representing not less than a majority of the Outstanding Amount
of the Transition Bonds have declared the Transition Bonds to be immediately due
and payable in the manner provided in Section 5.02 of the Indenture. All
principal payments on the Class [ ] Transition Bonds shall be made pro rata to
the Class [ ] Transition Bondholders entitled thereto based on the respective
principal amounts of the Class [ ] Transition Bonds held by them.
Payments of interest on this Class [ ] Transition Bond due and payable on
each Payment Date, together with the instalment of principal or premium, if any,
due on this Class [ ] Transition Bond on such Payment Date shall be made by
check mailed first-class, postage prepaid, to the Person whose name appears as
the Registered Holder of this Class [ ] Transition Bond (or one or more
Predecessor Transition Bonds) in the Transition Bond Register as of the close of
business on the Record Date or in such other manner as may be provided in the
Supplement, except that with respect to Class [ ] Transition Bonds registered on
the Record Date in the name of a Clearing Agency, payments will be made by wire
transfer in immediately available funds to
<PAGE>
7
the account designated by such Clearing Agency and except for the final
instalment of principal and premium, if any, payable with respect to this Class
[ ] Transition Bond 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 in the Transition Bond Register as of the applicable
Record Date without requiring that this Class [ ] Transition Bond be submitted
for notation of payment. Any reduction in the principal amount of this Class [ ]
Transition Bond (or any one or more Predecessor Transition Bonds) effected by
any payments made on any Payment Date shall be binding upon all future Holders
of this Class [ ] Transition Bond and of any Class [ ] Transition Bond 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 [ ] Transition Bond on a Payment Date, then the
Bond Trustee, in the name of and on behalf of the Issuer, will notify the Person
who was the Registered Holder hereof as of the second preceding Record Date to
such Payment Date by notice mailed no later than five days prior to such final
Payment Date and shall specify that such final instalment will be payable to the
Registered Holder hereof as of the Record Date immediately preceding such final
Payment Date and only upon presentation and surrender of this Class [ ]
Transition Bond and shall specify the place where this Class [ ] Transition Bond
may be presented and surrendered for payment of such instalment.
The Issuer shall pay interest on overdue instalments of interest on this
Class [ ] Transition Bond at the Class [ ] Bond Rate to the extent lawful.
As provided in the Indenture, [the Class [ ] Transition Bonds may be
redeemed, in whole or from time to time in part, at the option of the Issuer on
any Redemption Date at the Redemption Price. In addition, as provided in the
Indenture,] if the Seller is required to pay Liquidated Damages pursuant to
Section 5.01(d) of the Sale Agreement, the Issuer will be required to redeem all
outstanding Series of Transition Bonds, including the Class [ ] Transition
Bonds, on the Liquidated Damages Redemption Date. [The Issuer will also be
required to redeem the Class [ ] Transition Bonds in certain circumstances as
provided in Sections 6(a) and 6(b) of the Supplement.]
<PAGE>
8
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Class [ ] Transition Bond may be registered in the
Transition Bond Register upon surrender of this Class [ ] Transition Bond for
registration of transfer at the office or agency designated by the Issuer
pursuant to the Indenture, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Bond Trustee duly executed by
the Holder hereof or his attorney duly authorized in writing, with such
signature guaranteed by an Eligible Guarantor Institution, and thereupon one or
more new Class [ ] Transition Bonds of any Authorized Initial Denominations and
in the same aggregate initial 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 [ ] Transition Bond, 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 registration of
transfer or exchange.
Each Class [ ] Transition Bondholder, by acceptance of a Class [ ]
Transition Bond, covenants and agrees that no recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer or the Bond Trustee on
the Class [ ] Transition Bonds or under the Indenture or any certificate or
other writing delivered in connection herewith or therewith, against (i) any
owner of a beneficial interest in the Issuer or (ii) any partner, owner,
beneficiary, agent, officer, director or employee of the Bond Trustee, any
holder of a beneficial interest in the Issuer or the Bond Trustee or of any
successor or assign of the Bond Trustee, except as any such Person may have
expressly agreed (it being understood that all of the Bond Trustee's obligations
are in its individual capacity).
Prior to the due presentment for registration of transfer of this Class [ ]
Transition Bond, the Issuer, the Bond Trustee and any agent of the Issuer or the
Bond Trustee may treat the Person in whose name this Class [ ] Transition Bond
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 [ ] Transition Bond and for all other purposes whatsoever, whether
or not this Class [ ] Transition Bond be overdue, and neither the Issuer, the
Bond
<PAGE>
9
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
Issuer and the rights of the Holders of the Transition Bonds under the Indenture
at any time by the Issuer with the consent of the Holders of Transition Bonds
representing a majority of the Outstanding Amount of all Transition Bonds at the
time Outstanding of each Series or Class to be affected. The Indenture also
contains provisions permitting the Holders of Transition Bonds representing
specified percentages of the Outstanding Amount of the Transition Bonds of all
Series, on behalf of the Holders of all the Transition Bonds, to waive
compliance by the 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 [ ] Transition Bond (or any one of more
Predecessor Transition Bonds) shall be conclusive and binding upon such Holder
and upon all future Holders of this Class [ ] Transition Bond and of any Class [
] Transition Bond 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 [ ] Transition Bond. The Indenture also permits the Bond
Trustee to amend or waive certain terms and conditions set forth in the
Indenture without the consent of Holders of the Transition Bonds issued
thereunder.
The term "Issuer" as used in this Class [ ] Transition Bond includes any
successor to the Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances, to
merge or consolidate, subject to the rights of the Bond Trustee and the Holders
of Transition Bonds under the Indenture.
The Class [ ] Transition Bonds are issuable only in registered form in
Authorized Initial Denominations as provided in the Indenture and the
Supplement, subject to certain limitations therein set forth.
This Class [ ] Transition Bond, the Indenture and the Supplement shall be
construed in accordance with the laws of the Commonwealth of Pennsylvania,
without reference to its conflict of law provisions, and the obligations,
<PAGE>
10
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 [ ]
Transition Bond or of the Indenture shall alter or impair the obligation of the
Issuer, which is absolute and unconditional, to pay the principal of and
interest on this Class [ ] Transition Bond at the times, place, and rate, and in
the coin or currency herein prescribed.
<PAGE>
11
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number
of assignee
_______________________
FOR VALUE RECEIVED, the undersigned hereby sells,
assigns and transfers unto ___________________________________________________
______________________________________________________________________________
(name and address of assignee)
the within Class [ ] Transition Bond and all rights
thereunder, and hereby irrevocably constitutes and appoints
_____________________________________________________________________________,
attorney, to transfer said Class [ ] Transition Bond 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 [ ]
Transition Bond in every particular, without alteration, enlargement or any
change whatsoever.
================================================================================
INTANGIBLE TRANSITION PROPERTY
SALE AGREEMENT
between
PECO ENERGY TRANSITION TRUST
Issuer
and
PECO ENERGY COMPANY
Seller
Dated as of March 25, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions
SECTION 1.01. Definitions.....................................................2
SECTION 1.02. Other Definitional Provisions...................................8
ARTICLE II
Conveyance of Intangible Transition Property
SECTION 2.01. Conveyance of Initial Intangible
Transition Property.........................................9
SECTION 2.02. Conveyance of Subsequent Intangible
Transition Property......................... ..............11
SECTION 2.03. Conditions to Conveyance of Intangible
Transition Property........................................11
ARTICLE III
Representations and Warranties of Seller
SECTION 3.01. Organization and Good Standing.................................14
SECTION 3.02. Due Qualification..............................................14
SECTION 3.03. Power and Authority............................................14
SECTION 3.04. Binding Obligation.............................................15
SECTION 3.05. No Violation...................................................15
SECTION 3.06. No Proceedings.................................................16
SECTION 3.07. Approvals......................................................16
SECTION 3.08. The Intangible Transition Property.............................17
ARTICLE IV
Covenants of the Seller
SECTION 4.01. Corporate Existence............................................22
SECTION 4.02. No Liens or Conveyances........................................23
SECTION 4.03. Delivery of Collections........................................23
SECTION 4.04. Notice of Liens................................................24
SECTION 4.05. Compliance with Law............................................24
SECTION 4.06. Covenants Related to Intangible Transition
Property...................................................24
SECTION 4.07. Notice of Indemnification Events...............................26
SECTION 4.08. Protection of Title............................................26
<PAGE>
Contents, p. ii
SECTION 4.09. Taxes..........................................................27
ARTICLE V
The Seller
SECTION 5.01. Liability of Seller; Indemnities and
Liquidated Damages.........................................28
SECTION 5.02. Merger or Consolidation of, or Assumption
of the Obligations of, Seller..............................35
SECTION 5.03. Limitation on Liability of Seller
and Others.................................................37
SECTION 5.04. Opinions of Counsel............................................37
ARTICLE VI
Miscellaneous Provisions
SECTION 6.01. Amendment......................................................38
SECTION 6.02. Notices........................................................39
SECTION 6.03. Assignment.....................................................40
SECTION 6.04. Limitations on Rights of Others................................40
SECTION 6.05. Severability...................................................40
SECTION 6.06. Separate Counterparts..........................................41
SECTION 6.07. Headings.......................................................41
SECTION 6.08. Governing Law..................................................41
SECTION 6.09. Assignment to Bond Trustee.....................................41
SECTION 6.10. Nonpetition Covenant...........................................42
SECTION 6.11. Limitation of Liability of Issuer Trustee......................43
SECTION 6.12. Perfection.....................................................43
<PAGE>
INTANGIBLE TRANSITION PROPERTY SALE AGREEMENT dated as of March
25, 1999, between PECO ENERGY TRANSITION TRUST, a Delaware business
trust (the "Issuer"), and PECO ENERGY COMPANY, a Pennsylvania
corporation, and its successors in interest to the extent permitted
hereunder, as Seller (the "Seller").
WHEREAS the Issuer desires to purchase from time to time Intangible
Transition Property created pursuant to the Statute and the Qualified Rate
Order;
WHEREAS the Seller is willing to sell Intangible Transition Property to the
Issuer;
WHEREAS the Issuer, in order to finance the purchase of the Transferred
Intangible Transition Property, will from time to time issue Transition Bonds
under the Indenture;
WHEREAS the Issuer, to secure its obligations under all Transition Bonds
and the Indenture, will pledge its right, title and interest in the Transferred
Intangible Transition Property to the Bond Trustee for the benefit of the
Transition Bondholders; and
WHEREAS the Issuer has determined that the transactions contemplated by the
Basic Documents are in the
<PAGE>
2
best interest of the Issuer and its creditors and represent a prudent and
advisable course of action that does not impair the rights and interests of the
Issuer's creditors.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained and intending to be legally bound hereby, the parties hereto
agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definitions. (a) Whenever used in this Agreement, each of the
following words and phrases shall have the following meaning:
"Addition Notice" means, with respect to the transfer of Subsequent
Intangible Transition Property to the Issuer pursuant to Section 2.02, notice,
which shall be given by the Seller to the Issuer and the Rating Agencies not
later than 10 days prior to the related Subsequent Transfer Date, specifying the
Subsequent Transfer Date for such Subsequent Intangible Transition Property.
"Agreement" means this Intangible Transition Property Sale Agreement, as
the same may be amended and supplemented from time to time.
"Bill of Sale" means a bill of sale substantially in the form of Exhibit A
hereto.
"Business Day" has the meaning specified in the Master Servicing Agreement.
<PAGE>
3
"Competitive Transition Charges" has the meaning specified in the Master
Servicing Agreement.
"Corporate Trust Office" means,(i) with respect to the Bond Trustee, 101
Barclay Street, Floor 12 East, New York, New York 10286, Attention: Asset Backed
Finance Unit, or the principal corporate trust office of any successor Bond
Trustee (the address of which the successor Bond Trustee will notify the
Transition Bondholders and the Issuer), and (ii) with respect to the Issuer
Trustee, c/o First Union Trust Company, National Association, One Rodney Square,
920 King Street, Wilmington, Delaware 19801.
"Customers" has the meaning specified in the Master Servicing Agreement.
"De Minimis Loss Amount" has the meaning specified in Section 5.01(d)(iii).
"Duff" has the meaning specified in the Master Servicing Agreement.
"Fitch IBCA" has the meaning specified in the Master Servicing Agreement.
"Indemnification Event" has the meaning specified in Section 5.01(c)(i).
"Indenture" means the Indenture dated as of March 1, 1999, between the
Issuer and The Bank of New York, as the same may be amended and supplemented
from time to time.
<PAGE>
4
"Initial Intangible Transition Property" means the Intangible Transition
Property, as identified in the related Bill of Sale, sold to the Issuer on the
Initial Transfer Date pursuant to this Agreement in connection with the issuance
of the Series 1999-A Transition Bonds.
"Initial Loss Calculation Date" has the meaning specified in Section
5.01(c)(ii).
"Initial Transfer Date" means March 25, 1999.
"Intangible Transition Charges" has the meaning specified in the Master
Servicing Agreement.
"Intangible Transition Property" has the meaning specified in the Master
Servicing Agreement.
"ITC Collections" has the meaning specified in the Master Servicing
Agreement.
"Lien" has the meaning specified in the Master Servicing Agreement.
"Liquidated Damages Amount" means an amount equal to the sum of (i) all
amounts due to the Bond Trustee or the Issuer Trustee in respect of expenses or
indemnity payments, (ii) the then outstanding principal amount of the Transition
Bonds as of the Liquidated Damages Redemption Date and unpaid interest accrued
thereon to such date, (iii) amounts due to the Issuer in respect of any other
fees or Operating Expenses of the Issuer or indemnity payments and (iv) amounts
due to any Counterparty in respect of the termination of a Swap Agreement.
<PAGE>
5
"Liquidated Damages Payment Date" means the date that is (i)
90 days after the date of a breach of a representation or warranty specified in
Section 3.08(b),(c),(d)(i), (d)(ii), (d)(iv) or (f) if the Seller (A) has the
long term debt ratings specified by, and enters into the binding agreement
described in, Section 5.01(d)(i)(B)(i) or (B) does not have such long term debt
ratings but makes the deposit required by Section 5.01(d)(i)(B)(ii) or (ii) in
all other cases, two Business Days after the date of such breach.
"Losses" has the meaning specified in the Master Servicing Agreement.
"Master Servicing Agreement" means the Master Servicing Agreement dated as
of March 25, 1999, among the Issuer, the Servicer and any Other Issuers, as the
same may be amended and supplemented from time to time.
"Monthly Allocation Date" has the meaning specified in the Master Servicing
Agreement.
"Moody's" has the meaning specified in the Master Servicing Agreement.
"Mortgage" has the meaning specified in the Master Servicing Agreement.
"Officers' Certificate" means a certificate signed by (a) the chairman of
the board, the president, the vice chairman of the board, the executive vice
president or any vice president and (b) a treasurer, assistant treasurer,
<PAGE>
6
secretary or assistant secretary, in each case of the Seller or the Servicer, as
appropriate.
"Opinion of Counsel" means one or more written opinions of counsel who may
be an employee of or counsel to the Seller or the Servicer, which counsel shall
be reasonably acceptable to the Bond Trustee, the Issuer or the Rating Agencies,
as applicable, and which shall be in form reasonably satisfactory to the Bond
Trustee, if applicable.
"Other Issuer" means any Person other than the Issuer that issues Other
Transition Bonds secured by Intangible Transition Property sold by the Seller to
such Person in accordance with Section 4.02 of this Agreement.
"Other Transition Bonds" means "transition bonds" (as defined in the
Statute) issued by any Other Issuer.
"PECO Energy" has the meaning specified in the Master Servicing Agreement.
"PUC" has the meaning specified in the Master Servicing Agreement.
"PUC Regulations" has the meaning specified in the Master Servicing
Agreement.
"Qualified Rate Order" has the meaning specified in the Master Servicing
Agreement.
"Qualified Transition Expenses" has the meaning specified in the Master
Servicing Agreement.
<PAGE>
7
"Rate Class" has the meaning specified in the Master Servicing Agreement.
"Retained Intangible Transition Property" means Intangible Transition
Property other than (i) the Transferred Intangible Transition Property and (ii)
any Intangible Transition Property sold to Other Issuers.
"Serviced Intangible Transition Property" has the meaning specified in the
Master Servicing Agreement.
"Servicer" means PECO Energy, as the servicer of the Intangible Transition
Property, and each successor to PECO Energy (in the same capacity) pursuant to
Section 5.03 or 6.04 of the Master Servicing Agreement.
"Servicer Default" means an event specified in Section 6.01 of the Master
Servicing Agreement.
"Standard & Poor's" has the meaning specified in the Master Servicing
Agreement.
"Statute" has the meaning specified in the Master Servicing Agreement.
"Subsequent Intangible Transition Property" means Intangible Transition
Property, as identified in the related Bill of Sale, sold to the Issuer on any
Subsequent Transfer Date in connection with the issuance of a Series of
Transition Bonds.
"Subsequent Transfer Date" means any date on which Subsequent Intangible
Transition Property is to be transferred to the Issuer pursuant to Section 2.02.
<PAGE>
8
"Third Party" has the meaning specified in the Master Servicing Agreement.
"Transferred Intangible Transition Property" means, collectively, the
Initial Intangible Transition Property and any Subsequent Intangible Transition
Property.
"Trust Agreement" means the Amended and Restated Trust Agreement dated as
of February 19, 1999, among the Seller, the Issuer Trustee and the other
trustees named therein, as the same may be amended and supplemented from time to
time.
"UCC" has the meaning specified in the Master Servicing Agreement.
(b) Except as otherwise specified herein or as the context may otherwise
require, each of the following terms has the meaning set forth in the Indenture
for all purposes of this Agreement, and the definitions of such terms are
equally applicable both to the singular and plural forms of such terms:
Term Section of the Indenture
- ---- ------------------------
Adjustment Date............................................. 1.01(a)
Affiliate................................................... 1.01(a)
Basic Documents............................................. 1.01(a)
Bond Trustee................................................ 1.01(a)
Capital Subaccount.......................................... 1.01(a)
Collateral.................................................. 1.01(a)
Collection Account.......................................... 1.01(a)
Counterparty................................................ 1.01(a)
General Subaccount.......................................... 1.01(a)
Holders or Transition Bondholders........................... 1.01(a)
Issuer Trustee.............................................. 1.01(a)
Liquidated Damages.......................................... 1.01(a)
Liquidated Damages Redemption Date.......................... 1.01(a)
Loss Subaccount............................................. 1.01(a)
<PAGE>
9
Monthly Servicing Fee....................................... 1.01(a)
Operating Expenses.......................................... 1.01(a)
Overcollateralization Amount................................ 1.01(a)
Person...................................................... 1.01(a)
Rating Agency............................................... 1.01(a)
Rating Agency Condition..................................... 1.01(a)
Reserve Subaccount.......................................... 1.01(a)
Series...................................................... 1.01(a)
Swap Agreement.............................................. 1.01(a)
Transition Bonds............................................ 1.01(a)
SECTION 1.02. Other Definitional Provisions. (a) The words "hereof",
"herein", "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement; Section, 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".
(b) 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 genders of such terms.
ARTICLE II
Conveyance of Intangible Transition Property
SECTION 2.01. Conveyance of Initial Intangible Transition Property. (a) In
consideration of the Issuer's delivery to or upon the order of the Seller of
$3,994,560,476, subject to the conditions specified in Section 2.03, the Seller
<PAGE>
10
does hereby irrevocably sell, transfer, assign, set over and otherwise convey to
the Issuer, without recourse (subject to the obligations herein), all right,
title and interest of the Seller in and to the Initial Intangible Transition
Property (such sale, transfer, assignment, set over and conveyance of the
Initial Intangible 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 Intangible Transition Charges
related to the Initial Intangible Transition Property, as the same may be
adjusted from time to time). Such sale, transfer, assignment, set over and
conveyance is hereby expressly stated to be a sale and, pursuant to Section
2812(e) of the Statute, 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 Initial Intangible Transition Property. The preceding
sentence is the statement referred to in Section 2812(e) of the Statute. The
Seller agrees and confirms that after giving effect to the sale contemplated
hereby it has no rights in the Initial Intangible Transition Property to which a
security interest of creditors of the Seller could attach because it has sold
all rights in the Initial Intangible Transition Property to the Issuer pursuant
to Section 2812(e) of the Statute.
<PAGE>
11
(b) Subject to the conditions specified in Section 2.03, the Issuer does
hereby purchase the Initial Intangible Transition Property from the Seller for
the consideration set forth in paragraph (a) above.
(c) The Seller and the Issuer each acknowledge and agree that the purchase
price for the Initial Intangible Transition Property sold pursuant to this
Agreement is equal to its fair market value at the time of sale.
SECTION 2.02. Conveyance of Subsequent Intangible Transition Property. The
Seller may from time to time offer to sell additional Intangible Transition
Property to the Issuer, subject to the conditions specified in Section 2.03. If
any such offer is accepted by the Issuer, such Subsequent Intangible Transition
Property shall be sold to the Issuer effective on the Subsequent Transfer Date
specified in the related Addition Notice, subject to the satisfaction or waiver
of the conditions specified in Section 2.03.
SECTION 2.03. Conditions to Conveyance of Intangible Transition Property.
The Seller shall be permitted to sell Intangible Transition Property to the
Issuer only upon the satisfaction or waiver of each of the following conditions:
(i) on or prior to the Initial Transfer Date or Subsequent Transfer
Date, as applicable, the Seller shall have delivered to the Issuer a duly
executed Bill of Sale identifying the Intangible Transition Property to be
conveyed on that date;
<PAGE>
12
(ii) as of the Initial Transfer Date or the Subsequent Transfer Date,
as applicable, the Seller was not insolvent and will not have been made
insolvent by such sale and the Seller is not aware of any pending
insolvency with respect to itself;
(iii) as of the Initial Transfer Date or the Subsequent Transfer Date,
as applicable, no breach by the Seller of its representations, warranties
or covenants in this Agreement shall exist; and no Servicer Default shall
have occurred and be continuing;
(iv) as of the Initial Transfer Date or the Subsequent Transfer Date,
as applicable, (A) the Issuer shall have sufficient funds available to pay
the purchase price for the Transferred Intangible Transition Property to be
conveyed on such date and (B) all conditions to the issuance of one or more
Series of Transition Bonds intended to provide such funds set forth in the
Indenture shall have been satisfied or waived;
(v) on or prior to the Initial Transfer Date or Subsequent Transfer
Date, as applicable, the Seller shall have taken all action required to
transfer to the Issuer ownership of the Transferred Intangible Transition
Property to be conveyed on such date, free and clear of all Liens other
than Liens created by the Issuer pursuant to the Indenture; and the Issuer
or the Servicer, on behalf of the Issuer, shall have taken any action
required for the Issuer to grant the Bond Trustee a first priority
perfected security interest in the Collateral and maintain such security
interest as of such date;
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13
(vi) in the case of a sale of Subsequent Intangible Transition
Property only, on or prior to such Subsequent Transfer Date, the Seller
shall have provided the Issuer and the Rating Agencies with a timely
Addition Notice;
(vii) the Seller shall have delivered to the Rating Agencies and the
Issuer (A) an Opinion of Counsel with respect to the transfer of the
Transferred Intangible Transition Property then being conveyed to the
Issuer substantially in the form of Exhibit B hereto and (B) the Opinion of
Counsel required by Section 5.04(a); and
(viii) the Seller shall have delivered to the Bond Trustee and the
Issuer an Officers' Certificate confirming the satisfaction of each
condition precedent specified in this Section 2.03.
ARTICLE III
Representations and Warranties of Seller
As of the Initial Transfer Date and as of any Subsequent Transfer Date, as
applicable, the Seller makes the following representations and warranties on
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14
which the Issuer has relied and will rely in acquiring Transferred Intangible
Transition Property. The representations and warranties shall survive the sale
of Transferred Intangible Transition Property to the Issuer and the pledge
thereof to the Bond Trustee pursuant to the Indenture.
SECTION 3.01. Organization and Good Standing. The Seller is a corporation
duly organized and in good standing under the laws of the Commonwealth of
Pennsylvania, with corporate power and authority to own its properties and
conduct its business as currently owned or conducted.
SECTION 3.02. Due Qualification. The Seller is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions in which the ownership or
lease of property or the conduct of its business shall require such
qualifications, licenses or approvals (except where the failure to so qualify
would not be reasonably likely to have a material adverse effect on the Seller's
business, operations, assets, revenues, properties or prospects).
SECTION 3.03. Power and Authority. The Seller has the corporate power and
authority to execute and deliver this Agreement and to carry out its terms; the
Seller has full corporate power and authority to own the Intangible Transition
Property and sell and assign the Initial Intangible Transition Property, in the
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15
case of the Initial Transfer Date, and the Subsequent Intangible Transition
Property, in the case of each Subsequent Transfer Date, as applicable, and the
Seller has duly authorized such sale and assignment to the Issuer by all
necessary corporate action; and the execution, delivery and performance of this
Agreement has been duly authorized by the Seller by all necessary corporate
action.
SECTION 3.04. Binding Obligation. This Agreement constitutes a legal, valid
and binding obligation of the Seller enforceable against the Seller in
accordance with its terms subject to bankruptcy, receivership, insolvency,
fraudulent transfer, reorganization, moratorium or other laws affecting
creditors' rights generally from time to time in effect and to general
principles of equity (regardless of whether considered in a proceeding in equity
or at law).
SECTION 3.05. No Violation. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof do not
conflict with, result in any breach of any of the terms and provisions of, nor
constitute (with or without notice or lapse of time) a default under, the
articles of incorporation or by-laws of the Seller, or any indenture, agreement
or other instrument to which the Seller is a party or by which it shall be
bound; nor result in the creation or imposition of any Lien upon any of its
properties (other than the lien of the Mortgage on the Seller's interest in the
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16
Monthly Servicing Fee and any other rights under this Agreement in accordance
with the terms of this Agreement) 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. There are no proceedings or investigations
pending or, to the Seller's best knowledge, threatened, before any court,
Federal or state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Seller or its properties (i)
asserting the invalidity of the Basic Documents or the Transition Bonds, (ii)
seeking to prevent the issuance of the Transition Bonds or the consummation of
any of the transactions contemplated by the Basic Documents or the Transition
Bonds or (iii) except as disclosed by the Seller to the Issuer, seeking any
determination or ruling that could reasonably be expected to materially and
adversely affect the performance by the Seller of its obligations under, or the
validity or enforceability of, the Basic Documents or the Transition Bonds.
SECTION 3.07. Approvals. Except for UCC continuation filings, 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
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17
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.
SECTION 3.08. The Intangible Transition Property. (a) Information. All
information provided by the Seller to the Issuer with respect to the Transferred
Intangible Transition Property is correct in all material respects.
(b) Effect of Transfer. The transfers and assignments herein contemplated
constitute sales of the Initial Intangible Transition Property or the Subsequent
Intangible Transition Property, as the case may be, from the Seller to the
Issuer and the beneficial interest in and title to the Transferred Intangible
Transition Property would 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.
(c) Transfer Filings. The Seller is the sole owner of the Intangible
Transition Property being sold to the Issuer on the Initial Transfer Date or
Subsequent Transfer Date, as applicable; the Transferred Intangible Transition
Property has been validly transferred and sold to the Issuer free and clear of
all Liens other than Liens created by the Issuer pursuant to the Indenture. All
filings, including filings with the PUC under the Statute, necessary in any
jurisdiction to give the Issuer a valid ownership interest in
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18
the Transferred Intangible Transition Property, free and clear of all Liens of
the Seller or anyone claiming through the Seller, and to give the Bond Trustee a
first priority perfected security interest in the Transferred Intangible
Transition Property have been made, other than any such filings (except for
filings with the PUC under the Statute and UCC filings with the Secretary of
State of the State of Delaware) the absence of which would not have an adverse
impact on (i) the ability of the Servicer to collect Intangible Transition
Charges with respect to the Serviced Intangible Transition Property or (ii) the
rights of the Issuer or the Bond Trustee with respect to the Transferred
Intangible Transition Property.
(d) Irrevocable; Process Valid; No Litigation; Etc. (i) The Qualified Rate
Order has been issued by the PUC in accordance with the Statute, such order and
the process by which it was issued comply with all applicable laws, rules and
regulations, and such order is in full force and effect. (ii) As of the date of
issuance of any Series of Transition Bonds, such Transition Bonds are entitled
to the protections provided by the Statute and, accordingly, the provisions of
the Qualified Rate Order relating to Intangible Transition Property and
Intangible Transition Charges are not revocable by the PUC. (iii) (a) Under the
Statute, neither the Commonwealth of Pennsylvania nor the PUC may limit, alter
or in any way impair or reduce the value of Intangible Transition Property or
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19
Intangible Transition Charges approved by the Qualified Rate Order or any rights
thereunder, except such a limitation or alteration may be made by the
Commonwealth of Pennsylvania or the PUC if adequate compensation is made by law
for the full protection of the Intangible Transition Charges and of Transition
Bondholders; and (b) under the Contract Clauses of the Constitutions of the
Commonwealth of Pennsylvania and the United States, the Commonwealth of
Pennsylvania and the PUC cannot take any action that substantially impairs the
rights of the Transition Bondholders unless such action is a reasonable exercise
of the Commonwealth of Pennsylvania's sovereign powers and appropriate to
further a legitimate public purpose, and, under the Takings Clauses of the
Pennsylvania and United States Constitutions, in the event such action
constitutes a permanent appropriation of the property interest of Transition
Bondholders in the Intangible Transition Property and deprives the Transition
Bondholders of their reasonable expectations arising from their investments in
Transition Bonds, unless just compensation, as determined by a court of
competent jurisdiction, is provided to Transition Bondholders. (iv) There is no
order by any court providing for the revocation, alteration, limitation or other
impairment of the Statute, Qualified Rate Order, Intangible Transition Property
or the Intangible Transition Charges or any rights arising under any of them or
which seeks to enjoin the performance of any obligations under the Qualified
Rate Order. (v) No
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20
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 Intangible Transition Property, except those that have been obtained or
made. (vi) Except as disclosed by the Seller to the Issuer there are no
proceedings or investigations pending, or to the Seller's best knowledge,
threatened before any court, Federal or state regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over the Seller
or its properties challenging the Qualified Rate Order or the Statute. (vii) No
failure on the Initial Transfer Date or any Subsequent Transfer Date or any time
thereafter to satisfy any condition imposed by the Statute with respect to the
recovery of stranded costs will adversely affect the creation or sale hereunder
of Intangible Transition Property or the right to collect Intangible Transition
Charges.
(e) Assumptions. The assumptions used in calculating Intangible Transition
Charges are reasonable and made in good faith.
(f) Creation of Intangible Transition Property. (i) The Intangible
Transition Property other than the Retained Intangible Transition Property
constitutes a current property right, (ii) the Intangible Transition Property
includes, without limitation, (A) the irrevocable right of the Issuer and any
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21
Other Issuers to receive through Intangible Transition Charges an amount
sufficient to recover all of the Seller's Qualified Transition Expenses
described in the Qualified Rate Order in an amount equal to the aggregate
principal amount of Transition Bonds and Other Transition Bonds plus an amount
sufficient to provide for any credit enhancement (including the
Overcollateralization Amount relating to each Series of Transition Bonds), to
fund any reserves, and to pay interest, premium, if any, servicing fees and
other expenses relating to the Transition Bonds and Other Transition Bonds, and
(B) all right, title and interest of the Seller or its assignee applicable to
the Transition Bonds and Other Transition Bonds in the Qualified Rate Order and
in all revenues, collections, claims, payments, money or proceeds of or arising
from the Intangible Transition Charges applicable to the Transition Bonds and
Other Transition Bonds set forth in the Qualified Rate Order to the extent that
in accordance with the Statute, the Qualified Rate Order and the rates and
charges authorized under the Qualified Rate Order are declared to be irrevocable
and (iii) paragraphs four through nineteen of the Qualified Rate Order,
including the right to collect Intangible Transition Charges, have been declared
to be irrevocable by the PUC.
(g) Solvency. After giving effect to the sale of any Transferred Intangible
Transition Property hereunder, the Seller (i) is solvent and expects to remain
solvent, (ii) is adequately capitalized to conduct its business and affairs
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22
considering its size and the nature of its business and intended purposes, (iii)
is not engaged in nor does it expect to engage in a business for which its
remaining property represents an unreasonably small capital, (iv) believes that
it will be able to pay its debts as they come due and that such belief is
reasonable and (v) is able to pay its debts as they mature and does not intend
to incur, or believe that it will incur, indebtedness that it will not be able
to repay at its maturity.
(h) Swap Payments. Semiannual fixed amounts payable by the Issuer to a
Counterparty in respect of fixed interest under a Swap Agreement are includable
in Intangible Transition Charges.
ARTICLE IV
Covenants of the Seller
SECTION 4.01. Corporate Existence. Subject to Section 5.02, so long as any
of the Transition Bonds are outstanding, the Seller will keep in full force and
effect its corporate existence and remain in good standing, in each case under
the laws of the jurisdiction of its incorporation, 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 Agreement and the Trust Agreement and each other
instrument or agreement to which the Seller is a party necessary to the proper
administration of this Agreement and the transactions contemplated hereby.
<PAGE>
23
SECTION 4.02. No Liens or Conveyances. Except for the conveyances
hereunder, 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 Intangible Transition Property, whether now existing or hereafter created,
or any interest therein, other than, with respect to Retained Intangible
Transition Property, the Lien of the Mortgage; provided, that the Seller may
sell Retained Intangible Transition Property to Other Issuers if (i) the Rating
Agency Condition is satisfied with respect to all outstanding Transition Bonds
and (ii) each such Other Issuer is, or prior to such sale becomes, a party to
the Master Servicing Agreement as an "Issuer" (as defined in the Master
Servicing Agreement). The Seller shall not at any time assert any Lien against
or with respect to any Serviced Intangible Transition Property, and shall defend
the right, title and interest of the Issuer, the Bond Trustee, as assignee of
the Issuer, and any Other Issuers in, to and under the Intangible Transition
Property, whether now existing or hereafter created, against all claims of third
parties claiming through or under the Seller.
SECTION 4.03. Delivery of Collections. If the Seller receives collections
in respect of the Intangible Transition Charges, other than Intangible
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24
Transition Charges relating to Retained Intangible Transition Property, 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 Issuer Trustee
and the Bond Trustee promptly after becoming aware of any Lien on any Intangible
Transition Property other than the conveyances hereunder or under the Indenture,
conveyances to Other Issuers (and related pledges) or, in the case of Retained
Intangible Transition Property, the Lien of the Mortgage.
SECTION 4.05. Compliance with Law. The Seller hereby agrees to comply with
its organizational or governing documents and all laws, treaties, rules,
regulations and determinations of any governmental instrumentality applicable to
the Seller, except to the extent that failure to so comply would not adversely
affect the Issuer's, the Bond Trustee's or any Other Issuer's interests in the
Intangible 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 a party.
SECTION 4.06. Covenants Related to Intangible Transition Property. (a) So
long as any of the Transition Bonds are outstanding, the Seller shall treat the
Transition Bonds as debt of the Seller for Federal income tax purposes.
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25
(b) So long as any of the Transition Bonds are outstanding, the Seller
shall (i) clearly disclose in its financial statements that it is not the owner
of the Serviced Intangible Transition Property and that the assets of the Issuer
are not available to pay creditors of the Seller or any of its Affiliates and
(ii) clearly disclose the effects of all transactions between the Seller and the
Issuer in accordance with generally accepted accounting principles.
(c) The Seller agrees that upon the sale by the Seller of the Transferred
Intangible Transition Property to the Issuer pursuant to this Agreement, (i) to
the fullest extent permitted by law, including applicable PUC Regulations, the
Issuer shall have all of the rights originally held by the Seller with respect
to the Transferred Intangible Transition Property (other than the rights of an
electric distribution company set forth in Section 2807 of the Statute),
including the right to collect any amounts payable by any Customer or Third
Party in respect of such Transferred Intangible Transition Property,
notwithstanding any objection or direction to the contrary by the Seller and
(ii) any payment by any Customer or Third Party to the Issuer shall discharge
such Customer's or such Third Party's obligations in respect of such Transferred
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26
Intangible Transition Property to the extent of such payment, notwithstanding
any objection or direction to the contrary by the Seller.
(d) So long as any of the Transition Bonds are outstanding, (i) the Seller
shall not make any statement or reference in respect of the Transferred
Intangible Transition Property that is inconsistent with the ownership thereof
by the Issuer and (ii) the Seller shall not take any action in respect of the
Serviced Intangible Transition Property except solely in its capacity as the
Servicer thereof pursuant to the Master Servicing Agreement or as otherwise
contemplated by the Basic Documents.
SECTION 4.07. Notice of Indemnification Events. The Seller shall deliver to
the Issuer and the Bond Trustee promptly after having obtained knowledge
thereof, written notice in an Officers' Certificate of any Indemnification Event
or any event which, with the giving of notice or the passage of time, would
become an Indemnification Event.
SECTION 4.08. Protection of Title. The Seller shall execute and file such
filings, including filings with the PUC pursuant to the Statute, 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
Issuer in the Transferred Intangible Transition Property, including all filings
required under the Statute relating to the transfer of the ownership or security
interest in the Transferred Intangible Transition Property by the Seller to the
Issuer. The Seller shall deliver (or cause to be delivered) to the Issuer
file-stamped copies of, or filing receipts for, any document filed as provided
above, as soon as available following such filing. The Seller agrees to take
such legal or administrative actions, including defending against or
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27
instituting and pursuing legal actions and appearing or testifying at hearings
or similar proceedings, as may be reasonably necessary (i) to protect the Issuer
and the Transition Bondholders from claims, state actions or other actions or
proceedings of third parties which, if successfully pursued, would result in a
breach of any representation or warranty set forth in Article III or (ii) to
block or overturn any attempts to cause a repeal of, modification of or
supplement to the Statute or the Qualified Rate Order or the rights of holders
of Intangible Transition Property by legislative enactment or constitutional
amendment that would be adverse to the holders of Intangible Transition
Property.
SECTION 4.09. Taxes. So long as any of the Transition Bonds are
outstanding, the Seller shall, and shall cause each of its subsidiaries (other
than the Issuer) to, pay all material taxes, including gross receipts 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 Intangible
Transition Property; provided that no such tax need be paid if the Seller or one
of its subsidiaries is contesting the same in
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28
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 and Liquidated Damages. (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) The Seller shall indemnify the Issuer and the Bond Trustee, for itself
and on behalf of the Transition Bondholders, and each of their respective
trustees, officers, directors and agents for, and defend and hold harmless each
such Person from and against, any and all taxes (other than any taxes imposed on
Transition Bondholders solely as a result of their ownership of Transition
Bonds) that may at any time be imposed on or asserted against any such Person as
a result of the acquisition or holding of the Transferred Intangible Transition
Property by the Issuer or the issuance and sale by the Issuer of the Transition
Bonds, including any sales, gross receipts, general corporation, tangible
personal property, privilege or license taxes.
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(c)(i) The Seller shall indemnify the Issuer and the Bond Trustee, on
behalf of the Transition Bondholders, each of their respective trustees,
officers, directors, and agents, and any Counterparty, and defend and hold
harmless each such Person from and against, any and all Losses that may be
imposed on, incurred by or asserted against any such Person as a result of (x)
the Seller's wilful misconduct, bad faith or gross negligence in the performance
of its duties or observance of its covenants under this Agreement, (y) the
Seller's reckless disregard of its obligations and duties under this Agreement
or (z) the Seller's breach of any of its representations or warranties contained
in this Agreement other than those contained in Sections 3.08(b), 3.08(c),
3.08(d)(i), (ii) and (iv) and 3.08(f) (any event described in any of the
foregoing clauses (x), (y) or (z), an "Indemnification Event"); provided,
however, that the amount of such Losses (other than those payable pursuant to
Section 5.01(e)) for which the Seller shall be obligated to provide
indemnification shall not exceed the Liquidated Damages Amount. Amounts on
deposit in the Reserve Subaccount and the Capital Subaccount shall not be
available to satisfy any Losses for which indemnification is provided in this
Agreement.
(ii) If an Indemnification Event shall occur, upon receipt of written
notice thereof by the Seller from the Issuer or the Bond Trustee, the Seller
shall notify the
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30
Servicer of the occurrence of such event so that the Servicer may, pursuant to
Section 8 of Annex 1 to the Master Servicing Agreement, calculate (x) on the day
which is 90 days after receipt of such notice by the Seller (the "Initial Loss
Calculation Date") the amount of Losses expected to be incurred as a result of
such Indemnification Event from and including the time of its occurrence through
and including the next Monthly Allocation Date after the Initial Loss
Calculation Date and (y) to the extent that Losses may be incurred as a result
of such Indemnification Event in an amount exceeding the amount of Losses
calculated pursuant to clause (x) above and unless the Seller has paid
Liquidated Damages with respect to such Indemnification Event pursuant to
Section 5.01(d)(i)(B), not later than each Monthly Allocation Date succeeding
the Initial Loss Calculation Date, the amount of Losses expected to be incurred
as a result of such Indemnification Event from but excluding such Monthly
Allocation Date through and including the next Monthly Allocation Date. All such
calculations shall be subject to the approval of the Bond Trustee. If such
Indemnification Event shall continue unremedied beyond the Initial Loss
Calculation Date, the Seller shall pay to the Bond Trustee, as assignee of the
Issuer, for deposit into the General Subaccount of the Collection Account, (x)
on the Monthly Allocation Date immediately following the Initial Loss
Calculation Date, the amount of Losses
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calculated pursuant to clause (x) and clause (y) of the preceding sentence with
respect to such Monthly Allocation Date and (y) on each subsequent Monthly
Allocation Date, the amount of Losses calculated as of such date pursuant to
clause (y) of the preceding sentence. Upon payment pursuant to this Section
5.01(c)(ii), the Seller shall have no further obligations with respect to such
Losses to the extent of such payments.
(d)(i) In the event of a breach by the Seller of any representation and
warranty specified in (A) Section 3.08(b), 3.08(c), 3.08(d)(i), (ii) or (iv) or
3.08(f) of this Agreement that has a material adverse effect on the Transition
Bondholders or (B) Sections 3.01, 3.03, 3.04, 3.05 and 3.08(d)(iii), (v) or (vi)
of this Agreement for which the full amount of Losses attributable thereto are
reasonably expected to be incurred beyond a 90-day period immediately following
the occurrence of such Indemnification Event, the Seller shall pay to the Bond
Trustee, as assignee of the Issuer, for deposit into the General Subaccount of
the Collection Account the Liquidated Damages Amount. Such amount shall be paid
(x) in the case of clause (A) above, on the Liquidated Damages Payment Date or
(y) in the case of clause (B) above, on the First Monthly Allocation Date
following the expiration of the 90-day period set forth in such clause (B).
(ii) The Seller shall not be obligated to pay the Liquidated Damages Amount
pursuant to Section 5.01(d)(i) (A) if (A) within 90 days after the date of the
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32
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 Transition
Bondholders 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 Issuer to pay
any amounts necessary so that all interest payments due on the Transition Bonds
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 Bond 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 Transition Bonds during such 90-day period. In the event that within such
90-day period (i) such breach is cured or (ii) the Seller takes the remedial
action specified by Section 5.01(d)(ii)(A), any amounts paid by the Seller to
the Bond Trustee, as assignee of the Issuer pursuant to Section 5.01(d)(ii)(B),
which have not been distributed pursuant to the Indenture shall be returned to
the Seller at the end of such 90-day period.
(iii) With respect to any Losses described in Section 5.01(c)(ii) or
Section 5.01(d)(i)(B) above, the full amount of which is reasonably expected not
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33
to exceed 1/12th of 1% of the annual outstanding balance of Transition Bonds per
Monthly Allocation Date (the "De Minimis Loss Amount"), the Seller, on the
Monthly Allocation Date immediately following the Initial Loss Calculation Date,
shall pay to the Bond Trustee, as assignee of the Issuer, for deposit in the
Loss Subaccount of the Collection Account, the aggregate expected amount of such
Losses for all Monthly Allocation Dates on which such Losses are expected to be
incurred, following which the Seller's obligation to pay indemnification or
Liquidated Damages, as applicable, as a result of such Losses shall be waived so
long as the actual Losses incurred on any Monthly Allocation Date do not exceed
the De Minimis Loss Amount. If the aggregate amount of such Losses incurred as
of any Monthly Allocation Date exceeds the amounts paid by the Seller to the
Bond Trustee, as assignee of the Issuer, with respect thereto, the Seller shall
pay to the Bond Trustee, as assignee of the Issuer, on the next Monthly
Allocation Date, the amount of such excess for such Monthly Allocation Date and
the expected amount of excess for all subsequent Monthly Allocation Dates.
(iv) Upon the payment by the Seller of the Liquidated Damages Amount
pursuant to Section 5.01(d)(i), neither the Issuer nor any other Person shall
have any other claims, rights or remedies against the Seller for a breach of the
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34
representations and warranties specified in Section 3.08(b), (c), (d)(i),
(d)(ii), (d)(iv) or (f).
(e) The Seller shall indemnify the Bond Trustee and the Issuer Trustee and
their respective officers, directors and agents for, and defend and hold
harmless each such Person from and against, any and all Losses that may be
imposed upon, incurred by or asserted against any such Person as a result of the
acceptance or performance of the trusts and duties contained herein and in the
Indenture, except to the extent that any such Loss shall be due to the wilful
misfeasance, bad faith or gross negligence of the Bond Trustee or the Issuer
Trustee, as applicable. Such amounts shall be deposited into the Collection
Account and distributed in accordance with the Indenture.
(f) The Seller's indemnification obligations under Section 5.01(b),(c), (d)
and (e) for events occurring prior to the removal or resignation of the Bond
Trustee or the termination of this Agreement shall survive the resignation or
removal of the Bond Trustee or the termination of this Agreement and shall
include reasonable fees and expenses of investigation and litigation (including
the Bond Trustee's reasonable attorney's fees and expenses).
(g) The Seller shall indemnify each Counterparty for, and defend and hold
harmless each Counterparty from and against, any and all Losses that may be
imposed upon, incurred by or asserted against such Counterparty as a result of
<PAGE>
35
breach of the Seller's representations or warranties contained in Section
3.08(h) of this Agreement. Such amounts shall be deposited into the Collection
Account and distributed in accordance with the Indenture.
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
and which succeeds to the major part of the electric distribution business of
the Seller, (b) which results from the division of the Seller into two or more
Persons and which succeeds to the major part of the electric distribution
business of the Seller, (c) which may result from any merger or consolidation to
which the Seller shall be a party and which succeeds to the major part of the
electric distribution business of the Seller, (d) which may succeed to the
properties and assets of the Seller substantially as a whole and which succeeds
to the major part of the electric distribution business of the Seller or (e)
which may otherwise succeed to the major part of the electric distribution
business of the Seller, which Person in any of the foregoing cases executes an
agreement of assumption to perform every obligation of the Seller under this
Agreement, shall be the successor to the Seller hereunder without the execution
or filing of any document or any further act by any of the parties to this
Agreement; provided, however, that (i) immediately after giving effect to such
<PAGE>
36
transaction, no representation or warranty made pursuant to Article III shall
have been breached and no Servicer Default, and no event that, after notice or
lapse of time, or both, would become a Servicer Default, shall have occurred and
be continuing, (ii) the Seller shall have delivered to the Issuer and the Bond
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
Rating Agencies shall have received prior written notice of such transaction and
(iv) the Seller shall have delivered to the Issuer and the Bond Trustee an
Opinion of Counsel either (A) stating that, in the opinion of such counsel, all
filings, including filings with the PUC pursuant to the Statute, have been
executed and filed that are necessary fully to preserve and protect the interest
of the Issuer in the Transferred Intangible 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 above
described agreement of assumption and compliance with clauses (i), (ii), (iii)
and (iv) above shall be conditions precedent to the consummation of any
transaction referred to in clauses (a), (b), (c), (d) or (e) above.
<PAGE>
37
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 5.04, the Seller shall not be under any obligation
to appear in, prosecute or defend any legal action that is not incidental to its
obligations under this Agreement, and that in its opinion may involve it in any
expense or liability.
SECTION 5.04. Opinions of Counsel. The Seller shall deliver to the Issuer
and the Bond Trustee: (a) promptly after the execution and delivery of this
Agreement and of each amendment hereto or to the Master Servicing Agreement and
on each Subsequent Transfer Date, an Opinion of Counsel either (i) to the effect
that, in the opinion of such counsel, all filings, including filings with the
PUC pursuant to the Statute, that are necessary to fully preserve and protect
the interests of the Issuer in the Intangible Transition Property have been
executed and filed, and reciting the details of such filings or referring to
prior Opinions of Counsel in which such details are given, or (ii) to the effect
that, in the opinion of such counsel, no such action shall be necessary to
preserve and protect such interest; and (b) within 90 days after the beginning
of each calendar year beginning with the first calendar year beginning more than
<PAGE>
38
three months after the Initial Transfer Date, an Opinion of Counsel, dated as of
a date during such 90-day period, either (i) to the effect that, in the opinion
of such counsel, all filings with the PUC pursuant to the Statute, have been
executed and filed that are necessary to preserve fully and protect fully the
interest of the Issuer in the Intangible Transition Property, and reciting the
details of such filings or referring to prior Opinions of Counsel in which such
details are given, or (ii) to the effect that, in the opinion of such counsel,
no such action shall be necessary to preserve and protect such interest. Each
Opinion of Counsel referred to in clause (a) or (b) above shall specify any
action necessary (as of the date of such opinion) to be taken in the following
year to preserve and protect such interest.
ARTICLE VI
Miscellaneous Provisions
SECTION 6.01. Amendment. This Agreement may be amended by the Seller and
the Issuer, with the consent of the Bond Trustee and, with respect to any
amendment which would materially adversely affect the rights of any Counterparty
under any Swap Agreement, the consent of each such Counterparty (which consent
shall not be unreasonably withheld). The Issuer shall furnish to each of the
Rating Agencies (i) prior to the execution of any such amendment or consent,
<PAGE>
39
written notification of the substance thereof and (ii) promptly after the
execution of any such amendment or consent, a copy thereof.
Prior to the execution of any amendment to this Agreement, the Issuer and
the Bond 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 and the Opinion of Counsel referred to in Section 5.04(a). The
Issuer and the Bond Trustee may, but shall not be obligated to, enter into any
such amendment which affects their own rights, duties or immunities under this
Agreement or otherwise.
SECTION 6.02. Notices. All demands, notices and communications upon or to
the Seller, the Issuer or the Issuer Trustee, the Bond Trustee or the Rating
Agencies under this Agreement shall be in writing, delivered personally, via
facsimile, reputable overnight courier or by certified mail, return-receipt
requested, and shall be deemed to have been duly given upon receipt (a) in the
case of the Seller, to PECO Energy Company, 2301 Market Street, Philadelphia, PA
19101, Attention of Vice President, Finance and Treasurer, (b) in the case of
the Issuer, the Issuer Trustee or any other trustee of the Issuer, at the
Corporate Trust Office, (c) in the case of the Bond Trustee, at the Corporate
Trust Office, (d) in the case of Moody's, to Moody's Investors Service, Inc.,
ABS Monitoring Department, 99 Church Street, New York, New York 10007, (e) in
<PAGE>
40
the case of Standard & Poor's, to Standard & Poor's Corporation, 26 Broadway
(15th Floor), New York, New York 10004, Attention of Asset Backed Surveillance
Department, (f) in the case of Fitch IBCA, to Fitch IBCA, Inc., One State Street
Plaza, New York, New York 10004, Attention of ABS Surveillance, and (h) in the
case of Duff, to Duff & Phelps Credit Rating Company, 55 E. Monroe Street (35th
Floor), Chicago, Illinois 60603; or, as to each of the foregoing, at such other
address as shall be designated by written notice to the other parties.
SECTION 6.03. Assignment. 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 Issuer, the Issuer
Trustee and the Bond Trustee, on behalf of itself and the Transition
Bondholders, and nothing in this Agreement, whether express or implied, shall be
construed to give to any other Person any legal or equitable right, remedy or
claim in the Collateral 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
<PAGE>
41
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 6.06. Separate Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 6.07. Headings. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
SECTION 6.08. Governing Law. This Agreement shall be construed in
accordance with the laws of the Commonwealth of Pennsylvania, 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 Bond Trustee. The Seller hereby acknowledges
and consents to any mortgage, pledge, assignment and grant of a security
interest by the Issuer to the Bond Trustee pursuant to the Indenture for the
benefit of the Transition Bondholders of all right, title and interest of the
Issuer in, to and under the Transferred Intangible Transition Property and the
proceeds thereof and the assignment of any or all of the Issuer's rights
hereunder to the Bond Trustee. In no event shall The Bank of New York have any
<PAGE>
42
liability for the representations, warranties, covenants, agreements or other
obligations of the Issuer, hereunder or in any of the certificates, notices or
agreements delivered pursuant hereto, as to all of which recourse shall be had
solely to the assets of the Issuer.
SECTION 6.10. Nonpetition Covenant. Notwithstanding any prior termination
of this Agreement or the Indenture, but subject to the PUC's rights to order the
sequestration and payment of revenues arising with respect to the Intangible
Transition Property notwithstanding any bankruptcy, reorganization or other
insolvency proceedings with respect to the debtor, pledgor or transferor of the
Intangible Transition Property pursuant to Section 2812(d)(3)(v) of the Statute,
the Seller shall not, prior to the date which is one year and one day after the
termination of the Indenture, petition or otherwise invoke or cause the Issuer
to invoke the process of any court or government authority for the purpose of
commencing or sustaining a case against the Issuer under any Federal or state
bankruptcy, insolvency or similar law or appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the
Issuer or any substantial part of the property of the Issuer, or ordering the
winding up or liquidation of the affairs of the Issuer.
<PAGE>
43
SECTION 6.11. Limitation of Liability of Issuer Trustee. Notwithstanding
anything contained herein to the contrary, this Agreement has been countersigned
by First Union Trust Company, National Association not in its individual
capacity but solely in its capacity as Issuer Trustee of the Issuer and in no
event shall First Union Trust Company, National Association in its individual
capacity have any liability for warranties, covenants, agreements or other
obligations of the Issuer hereunder or in any of the certificates, notices or
agreements delivered pursuant hereto, as to all of which recourse shall be had
solely to the assets of the Issuer. For all purposes of this Agreement, in the
performance of its duties or obligations hereunder or in the performance of any
duties or obligations of the Issuer hereunder, the Issuer Trustee shall be
subject to, and entitled to the benefits of, the terms and provisions of
Articles VI, VII, VIII and IX of the Trust Agreement.
SECTION 6.12. Perfection. In accordance with Section 2812(e) of the
Statute, upon the execution and delivery of this Agreement and the related Bill
of Sale, the transfer of the Initial Intangible Transition Property will be
perfected as against all third persons, including any judicial lien creditors,
and upon the execution and delivery of a Bill of Sale and, if applicable, a
supplement to this Agreement, a transfer of Subsequent Intangible Transition
Property will be perfected against all third persons, including any judicial
lien creditors.
<PAGE>
44
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.
PECO ENERGY TRANSITION TRUST,
by First Union Trust
Company, National
Association, not in its
individual capacity but
solely as Issuer Trustee
on behalf of the Trust,
by /s/ Edward L. Truitt, Jr.
-------------------------
Name: Edward L. Truitt, Jr.
Title: Vice President
PECO ENERGY COMPANY, Seller,
by /s/ J. Barry Mitchell
---------------------
Name: J. Barry Mitchell
Title: Treasurer and Vice President--
Finance
Acknowledged and Accepted:
THE BANK OF NEW YORK, not in its individual capacity but solely as Bond Trustee
on behalf of the Transition Bondholders,
by /s/ Cheryl L. Laser
-------------------
Name: Cheryl L. Laser
Title: Assistant Vice President
<PAGE>
Exhibit A
Form of Bill of Sale
BILL OF SALE
1. This Bill of Sale is being delivered pursuant to the Intangible
Transition Property Sale Agreement, dated as of March 25, 1999 (the "Sale
Agreement"), between PECO Energy Company (the "Seller") and PECO Energy
Transition Trust (the "Issuer") and is subject to all of the terms, conditions
and limitations contained in the Sale Agreement. All capitalized terms used but
not defined herein have the respective meanings ascribed thereto in the Sale
Agreement.
2. In consideration of the Issuer's delivery to or upon the order of the
Seller of $[ ], the Seller does hereby irrevocably sell, transfer, assign, set
over and otherwise convey to the Issuer, without recourse, all right, title and
interest of the Seller in and to the Intangible Transition Property related to
the Series Transition Bonds and identified on Schedule 1 hereto (the "[Initial]
[Subsequent] Intangible Transition Property") (such sale, transfer, assignment,
set over and conveyance of the [Initial] [Subsequent] Intangible 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 Intangible Transition Charges related to such
[Initial] [Subsequent] Intangible Transition Property, as the same may be
adjusted from time to time). Such sale, transfer, assignment, set over and
conveyance is hereby expressly stated to be a sale and, pursuant to Section
2812(e) of the Statute, 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 [Initial] [Subsequent] Intangible Transition Property.
The preceding sentence is the statement referred to in Section 2812(e) of the
Statute. The Seller agrees and confirms that after giving effect to the sale
contemplated hereby it has no rights in the [Initial] [Subsequent] Intangible
Transition Property to which a security interest of creditors of the Seller
could attach because it has sold all rights in the [Initial] [Subsequent]
Intangible Transition Property to the Issuer pursuant to Section 2812(e) of the
Statute.
3. The Issuer does hereby purchase the [Initial] [Subsequent] Intangible
Transition Property from the Seller for the consideration set forth in paragraph
2 above.
4. The Seller and the Issuer each acknowledge and agree that the purchase
price for the [Initial] [Subsequent] Intangible Transition Property sold
pursuant to this Bill of
<PAGE>
2
Sale and the Sale Agreement is equal to its fair market value at the time of
sale.
5. The Seller confirms that each of the representations and warranties on
the part of the Seller contained in the Sale Agreement are true and correct in
all respects on the date hereof as if made on the date hereof.
6. This Bill of Sale 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.
7. This Bill of Sale shall be construed in accordance with the laws of the
Commonwealth of Pennsylvania, 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.
IN WITNESS WHEREOF, the Seller and the Issuer have duly executed this Bill
of Sale as of this [ ] day of [ ], [ ].
PECO Energy Company,
by _____________________________
Name:
Title:
PECO Energy Transition Trust,
by _____________________________
Name:
Title:
================================================================================
MASTER SERVICING
AGREEMENT
between
PECO ENERGY TRANSITION TRUST,
the other Issuers from
time to time party hereto
and
PECO ENERGY COMPANY
Servicer
Dated as of March 25, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
Definitions
SECTION 1.01. Definitions....................................................2
SECTION 1.02. Other Definitional Provisions.................................12
ARTICLE II
Appointment and Authorization of Servicer
SECTION 2.01. Appointment of Servicer; Acceptance of
Appointment..................................................13
SECTION 2.02. Authorization.................................................13
SECTION 2.03. Dominion and Control over Serviced
Intangible Transition Property...............................14
ARTICLE III
Billing Services
SECTION 3.01. Duties of Servicer............................................15
SECTION 3.02. Collection and Allocation of Intangible
Transition Charges...........................................17
SECTION 3.03. Servicing and Maintenance Standards...........................19
SECTION 3.04. Servicer's Certificates.......................................20
SECTION 3.05. Annual Statement as to Compliance;
Notice of Default............................................20
SECTION 3.06. Annual Independent Certified Public
Accountants' Report..........................................21
SECTION 3.07. Intangible Transition Property
Documentation................................................22
SECTION 3.08. Computer Records; Audits of
Documentation................................................23
SECTION 3.09. Defending Intangible Transition
Property Against Claims......................................25
SECTION 3.10. Opinions of Counsel...........................................25
ARTICLE IV
Services Related to Intangible
Transition Charges Adjustments
SECTION 4.01. Intangible Transition Charges
Adjustments..................................................27
<PAGE>
Contents, p. ii
ARTICLE V
The Servicer
SECTION 5.01. Representations and Warranties
of Servicer..................................................27
SECTION 5.02. Indemnities of Servicer; Release
of Claims....................................................31
SECTION 5.03. Merger or Consolidation of, or
Assumption of the Obligations
of, Servicer.................................................34
SECTION 5.04. Assignment of Servicer's Obligations..........................36
SECTION 5.05. Limitation on Liability of Servicer
and Others...................................................36
SECTION 5.06. PECO Energy Not To Resign as Servicer.........................37
SECTION 5.07. Monthly Servicing Fee.........................................38
SECTION 5.08. Servicer Expenses.............................................39
SECTION 5.09. Appointments..................................................39
SECTION 5.10. Remittances...................................................40
SECTION 5.11. Servicer Advances.............................................41
SECTION 5.12. Protection of Title...........................................41
ARTICLE VI
Servicer Default
SECTION 6.01. Servicer Default..............................................42
SECTION 6.02. Notice of Servicer Default....................................45
SECTION 6.03. Waiver of Past Defaults.......................................46
SECTION 6.04. Appointment of Successor......................................46
SECTION 6.05. Cooperation with Successor....................................48
ARTICLE VII
Miscellaneous Provisions
SECTION 7.01. Amendment.....................................................48
SECTION 7.02. Notices.......................................................49
SECTION 7.03. Assignment....................................................50
SECTION 7.04. Limitations on Rights of Others...............................50
SECTION 7.05. Severability..................................................50
SECTION 7.06. Separate Counterparts.........................................51
SECTION 7.07. Headings......................................................51
SECTION 7.08. Governing Law.................................................51
SECTION 7.09. Assignment to Bond Trustee....................................51
SECTION 7.10. Nonpetition Covenants.........................................52
SECTION 7.11. Addition of Issuers...........................................53
SECTION 7.12. Termination by Issuers........................................53
SECTION 7.13. Limitation of Liability of Trustee............................53
<PAGE>
Contents, p. iii
EXHIBIT A Servicing Procedures
EXHIBIT B Supplement for Addition of Issuer
ANNEX 1 ITC Adjustment Process and Reports - PECO
Energy Transition Trust
<PAGE>
1
MASTER SERVICING AGREEMENT dated as of March 25, 1999, between PECO ENERGY
TRANSITION TRUST, a Delaware business trust (the "First Issuer"), the other
Issuers from time to time party hereto (together with the First Issuer, the
"Issuers"), and PECO ENERGY COMPANY, a Pennsylvania corporation, as the servicer
of the Intangible Transition Property (together with each successor to PECO
ENERGY COMPANY (in the same capacity) pursuant to Section 5.03 or 6.02, the
"Servicer").
WHEREAS the Servicer is willing to service the Intangible Transition
Property purchased from the Seller by each Issuer; and
WHEREAS each Issuer, in connection with ownership of Serviced Intangible
Transition Property, desires to engage the Servicer to carry out the functions
described herein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained and intending to be legally bound hereby, the parties hereto
agree as follows:
<PAGE>
2
ARTICLE I
Definitions
SECTION 1.01. Definitions. Whenever used in this Agreement, each of the
following words and phrases shall have the following meaning:
"Agreement" means this Master Servicing Agreement, as the same may be
amended and supplemented from time to time.
"Annual Accountant's Report" has the meaning specified in Section 3.06(a)
"Bond Trustees" means, collectively, The Bank of New York, a New York
banking corporation, as bond trustee under the Indenture to which the First
Issuer is a party, and each other Person serving as a bond trustee or in a
similar capacity under any of the other Indentures, or any successors to any of
the foregoing.
"Business Day" means any day other than a Saturday, Sunday or a day on
which banking institutions in the City of New York, the City of Philadelphia or
the State of Delaware are required by law or executive order to remain closed.
"Class" means, with respect to any Series, any one of the classes of
Transition Bonds of that Series.
"Collateral" means, with respect to an Issuer, all property of such Issuer
pledged by it to secure Transition
<PAGE>
3
Bonds issued by such Issuer as provided in the Indenture to which it is a
party.
"Collection Period" means the period from and including the first day of a
calendar month to and including the last day of the same calendar month.
"Competitive Transition Charges" means the competitive transition charges
that PECO Energy may impose on Customers as set forth in Appendix A to the Joint
Petition for Approval of Full Settlement of PECO Energy Company's Restructuring
Plan and Related Appeals and approved in the Final Order issued on May 14, 1998
by the PUC with respect to PECO Energy's restructuring plan.
"Counterparty" means any counterparty to a Swap Agreement entered into by
any Issuer.
"Customers" means each person that (i) was a customer of PECO Energy
located within PECO Energy's retail electric service territory on January 1,
1997 or that became a customer of electric services within such territory after
January 1, 1997, (ii) is still located within such territory, and (iii) is in a
Rate Class that has been assigned stranded cost responsibility.
"Duff" means Duff & Phelps Credit Rating Company or its successor.
"Fitch IBCA" means Fitch IBCA, Inc. or its successor.
<PAGE>
4
"Formation Documents" means, collectively, the Amended and Restated Trust
Agreement of the First Issuer dated as of February 19, 1999, among the Seller
and the trustees named therein, and any other trust agreement, certificate of
incorporation, limited liability company agreement, partnership agreement, or
other document pursuant to which any other Issuer is formed or governed, in each
case, as the same may be amended and supplemented from time to time.
"Holder" or "Transition Bondholder" means the Person in whose name a
Transition Bond of any Series or Class is registered as provided in the
Indenture therefor.
"Indentures" means, collectively, the indenture dated as of March 1, 1999,
between the First Issuer and The Bank of New York, and each indenture entered
into by any other Issuer in connection with the issuance of Transition Bonds, in
each case as the same may be amended and supplemented from time to time,
including by any Series Supplement.
"Insolvency Event" means, with respect to a specified Person, (a) the
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property in an
involuntary case under any applicable Federal or state bankruptcy, insolvency or
other similar law now or
<PAGE>
5
hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for such Person or for any
substantial part of its property, or ordering the winding-up or liquidation of
such Person's affairs, and such decree or order shall remain unstayed and in
effect for a period of 90 consecutive days or (b) the commencement by such
Person of a voluntary case under any applicable Federal or state bankruptcy,
insolvency or other similar law now or hereafter in effect, or the consent by
such Person to the entry of an order for relief in an involuntary case under any
such law, or the consent by such Person to the appointment of or taking
possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator
or similar official for such Person or for any substantial part of its
property, or the making by such Person of any general assignment for the benefit
of creditors, or the failure by such Person generally to pay its debts as such
debts become due, or the taking of action by such Person in furtherance of any
of the foregoing.
"Intangible Transition Charges" means the amounts authorized by the PUC to
be imposed on all Customer bills with respect to the Intangible Transition
Property and collected, through a non-bypassable mechanism, by the Seller or its
successor or by any other entity which provides
<PAGE>
6
electric service to Customers, to recover Qualified Transition Expenses
pursuant to the Qualified Rate Order.
"Intangible Transition Charges Adjustment" means each adjustment to
Intangible Transition Charges related to the Serviced Intangible Transition
Property made in accordance with Section 4.01 and the Issuer Annexes or in
connection with the redemption by any Issuer of Transition Bonds.
"Intangible Transition Property" means the irrevocable right of the Seller
or its successor or assignee to collect Intangible Transition Charges from
Customers to recover the Qualified Transition Expenses described in the
Qualified Rate Order, including all right, title and interest of the Seller or
its successor or assignee in such order and in all revenues, collections,
claims, payments, money or proceeds of or arising from Intangible Transition
Charges pursuant to such order, and all proceeds of any of the foregoing.
"Intangible Transition Property Documentation" has the meaning assigned to
that term in Section 3.07
"Issuer Annex" means, with respect to the First Issuer, Annex 1 hereto, and
with respect to any other Issuer, an Annex hereto describing the statements and
certificates to be provided by the Servicer and the procedures regarding
Intangible Transition Charges
<PAGE>
7
Adjustments to be followed by the Servicer with respect to such Issuer.
"Issuers" means, collectively, the First Issuer and each other Person from
time to time named as an Issuer in this Agreement, in each case each until a
successor replaces it and, thereafter, such successor.
"ITC Collections" means amounts collected in respect of Intangible
Transition Charges or the Intangible Transition Property.
"Lien" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind.
"Losses" means collectively, any and all liabilities, obligations, losses,
damages, payments, costs or expenses of any kind whatsoever.
"Monthly Allocation Date" means the first day of each calendar month or,
if any such day is not a Business Day, the immediately succeeding Business Day.
"Monthly Servicing Fee" means, with respect to any Series of Transition
Bonds, the fee payable to the Servicer on each Monthly Allocation Date for
services rendered, determined pursuant to Section 5.07.
"Moody's" means Moody's Investors Service Inc., or its successor.
"Mortgage" means the First and Refunding Mortgage, dated May 1, 1923
between the Counties Gas and Electric
<PAGE>
8
Company (to which PECO Energy is successor) and Fidelity Trust Company (to
which First Union National Bank is successor), as trustee, as supplemented and
amended by 96 supplemental indentures.
"Officers' Certificate" means a certificate signed by (a) the chairman of
the board, the president, the vice chairman of the board, the executive vice
president or any vice president and (b) a treasurer, assistant treasurer,
secretary or assistant secretary, in each case of the Servicer.
"Operating Expenses" means, with respect to any Issuer, all fees, costs,
expenses and indemnity payments owed by such Issuer, including all amounts owed
by such Issuer to a Bond Trustee or any other trustee of such Issuer, the
Monthly Servicing Fee payable in respect of Transition Bonds issued by such
Issuer, legal fees and expenses of the Servicer allocated to such Issuer
pursuant to Section 3.09 and legal and accounting fees, costs and expenses of
such Issuer and any trustee of such Issuer.
"Opinion of Counsel" means one or more written opinions of counsel who may
be an employee of or counsel to the Seller or the Servicer, which counsel shall
be reasonably acceptable to the Bond Trustees, the Issuers or the Rating
Agencies, as applicable, and shall be in form reasonably satisfactory to the
Bond Trustee, if applicable.
<PAGE>
9
"PECO Energy" means PECO Energy Company, a Pennsylvania corporation.
"Percentage" means, with respect to any Issuer and any Collection Period,
the percentage equivalent of a fraction, the numerator of which is the aggregate
Intangible Transition Charges (as adjusted from time to time) scheduled to be
collected in such Collection Period applicable to all Series of Transition Bonds
issued by such Issuer and the denominator of which is the aggregate Intangible
Transition Charges (as adjusted from time to time) scheduled to be collected in
such Collection Period applicable to all Series of Transition Bonds issued by
all the Issuers.
"Person" means any individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust (including any beneficiary
thereof), business trust, unincorporated organization or government or any
agency or political subdivision thereof.
"PUC" means the Pennsylvania Public Utility Commission or any successor.
"PUC Regulations" means any regulations promulgated or adopted by the PUC.
"Qualified Rate Order" means the order of the PUC issued on May 14, 1998,
adopted in accordance with the Statute, which, among other things, creates the
Intangible Transition Property and authorizes the imposition and
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10
collection of the Intangible Transition Charges by PECO Energy or its
assignee.
"Qualified Transition Expenses" has the meaning assigned to that term in
the Qualified Rate Order.
"Rate Class" means each of the rate classes into which Customers are
divided as of the date hereof, as such rate classes may be reconfigured from
time to time.
"Rating Agency" means any rating agency rating the Transition Bonds of any
Class or Series at the time of issuance thereof at the request of the Issuer of
such Class or Series. 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 an Issuer, notice of which
designation shall be given to the Bond Trustee under the Indenture to which such
Issuer is a party, any trustee of such Issuer and the Servicer.
"Rating Agency Condition" means, with respect to any action, the
notification in writing by each Rating Agency to the Seller, the Servicer, the
Bond Trustees and the applicable Issuer that such action will not result in a
reduction or withdrawal of the then current rating by such Rating Agency of any
outstanding Series or Class of Transition Bonds issued by such Issuer.
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11
"Released Parties" has the meaning specified in Section 5.02(e).
"Remittance Date" means each date on which ITC Collections allocated to any
Issuer are to be remitted by the Servicer to the Bond Trustee for such Issuer
pursuant to Section 5.10.
"Sale Agreements" means, collectively, the Intangible Transition Property
Sale Agreement dated March 25, 1999, between the Seller and the First Issuer,
and any other agreements between the Seller and any other Issuer relating to the
sale of Intangible Transition Property to such Issuer.
"Seller" means PECO Energy and its successors in interest to the extent
permitted hereunder.
"Series" means any series of Transition Bonds issued by any of the Issuers.
"Series Supplement" means an indenture supplemental to an Indenture that
authorizes a particular Series of Transition Bonds.
"Serviced Intangible Transition Property" means, collectively, all
Intangible Transition Property sold, conveyed, assigned or otherwise transferred
to any Issuer by the Seller or, with respect to an Issuer, all Intangible
Transition Property sold, conveyed, assigned or otherwise transferred to such
Issuer by the Seller.
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12
"Servicer Default" means an event specified in Section 6.01.
"Servicing Fee Rate" means, with respect to any Series of Transition Bonds,
the per annum rate specified in the Series Supplement pursuant to which such
Transition Bonds are issued.
"Standard & Poor's means Standard & Poor's Rating Group, or its successor.
"Statute" means the Pennsylvania Electricity Generation Customer Choice and
Competition Act, Chapter 28 of Title 66 of the Pennsylvania Consolidated
Statutes, 66 Pa. C.S., ss.2801, et seq.
"Swap Agreement" means any interest rate swap agreement or agreement with
respect to any hedge or similar transaction entered into by any Issuer
"Termination Notice" has the meaning specified in Section 6.01(d).
"Third Party" means any third party, including any electric generation
supplier, providing billing or metering services, licensed by the PUC pursuant
to relevant provisions of the Statute and any PUC order.
"Transfer Date" means each date on which the Seller sells, conveys, or
otherwise transfers any Intangible Transition Property to any
Issuer.
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13
"Transition Bonds" means "transition bonds" (as defined in the Statute)
issued by any Issuer.
"UCC" means, unless the context otherwise requires, the Uniform Commercial
Code, as in effect in the relevant jurisdiction, as amended from time to time.
SECTION 1.02. Other Definitional Provisions. (a) The words "hereof",
"herein", "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement; Section, Annex, Schedule and Exhibit references contained in
this Agreement are references to Sections, Annexes, Schedules and Exhibits in or
to this Agreement unless otherwise specified; and the term "including" shall
mean "including without limitation".
(b) 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 genders of such terms.
ARTICLE II
Appointment and Authorization of Servicer
SECTION 2.01. Appointment of Servicer; Acceptance of Appointment. Subject
to Section 5.04 and Article VI, each 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
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14
the benefit of each Issuer in accordance with the terms of this Agreement.
This appointment and the Servicer's acceptance thereof may not be revoked except
in accordance with the express terms of this Agreement.
SECTION 2.02. Authorization. With respect to all or any portion of the
Serviced Intangible Transition Property, the Servicer shall be, and hereby is,
authorized and empowered by each Issuer to (a) execute and deliver, on behalf of
itself or such Issuer, as the case may be, any and all instruments, documents or
notices, and (b) on behalf of itself or such Issuer, as the case may be, make
any filing and participate in proceedings of any kind with any governmental
authorities, including with the PUC. Each Issuer shall furnish the Servicer with
such documents as have been prepared by the Servicer for execution by such
Issuer, and with such other documents as may be in such 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, each
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 Serviced Intangible Transition
Property. Notwithstanding any other
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15
provision herein, the Servicer and each Issuer agree that such Issuer
shall have dominion and control over its respective Serviced Intangible
Transition Property, and the Servicer, in accordance with the terms hereof, is
acting solely as the servicing agent of such Issuer with respect to the Serviced
Intangible Transition Property owned by such Issuer. 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 any Issuer in its respective Serviced Intangible 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 each Issuer
(to the extent provided herein), shall have the following duties:
(a) Duties of Servicer Generally. The Servicer will manage,
service, administer and make collections in respect of the Serviced
Intangible Transition Property. The Servicer's duties will include
(i) calculating and billing the Intangible Transition Charges and
collecting (from Customers and Third Parties, as applicable) and
posting all ITC
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16
Collections; (ii) responding to inquiries by Customers, Third
Parties, the PUC, or any Federal, local or other state governmental
authorities with respect to the Serviced Intangible Transition
Property and Intangible Transition Charges; (iii) accounting for ITC
Collections, investigating delinquencies, processing and depositing
collections and making periodic remittances, furnishing periodic
reports to the Issuers, the Bond Trustees and the Rating Agencies;
(iv) selling, as the agent for each Issuer, as its interest may
appear, defaulted or written off accounts in accordance with the
Servicer's usual and customary practices; and (v) taking action in
connection with Intangible Transition Charge Adjustments as set
forth herein. Anything to the contrary notwithstanding, the duties
of the Servicer set forth in this Agreement shall be qualified in
their entirety by any PUC 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,
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17
collections, payment processing and remittance set forth in
Exhibit A hereto.
(b) Notification of Laws and Regulations. The Servicer shall
immediately notify the Issuers, the Bond Trustees and the Rating
Agencies in writing of any laws or PUC Regulations hereafter
promulgated that have a material adverse effect on the Servicer's
ability to perform its duties under this Agreement.
(c) Other Information. Upon the reasonable request of any
Issuer, any Bond Trustee or any Rating Agency, the Servicer shall
provide to such Issuer, such Bond Trustee or such Rating Agency, as
the case may be, any public financial information in respect of the
Servicer, or any material information regarding the Intangible
Transition Property to the extent it is reasonably available to the
Servicer, as may be reasonably necessary and permitted by law for
such Issuer, such Bond Trustee or such Rating Agency to monitor the
performance by the Servicer hereunder. In addition, so long as any
of the Transition Bonds of any Series are outstanding, the Servicer
shall provide each Issuer and each Bond Trustee, within a reasonable
time after written request therefor, any information available to
the Servicer or reasonably obtainable by
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18
it that is necessary to calculate the Intangible Transition
Charges applicable to each Rate Class.
SECTION 3.02. Collection and Allocation of Intangible Transition Charges.
(a) The Servicer shall use all reasonable efforts consistent with its customary
servicing procedures to collect all amounts owed in respect of Intangible
Transition Charges as and when the same shall become due and shall follow such
collection procedures as it follows with respect to collection activities that
the Servicer conducts for itself or others. The Servicer shall not change the
amount of or reschedule the due date of any scheduled payment of Intangible
Transition Charges, except as contemplated in this Agreement or as required by
law or court or PUC order; provided, however, that the Servicer may take any of
the foregoing actions to the extent that such action would be in accordance with
customary billing and collection practices of the Servicer with respect to
billing and collection activities that it conducts for itself.
(b) Any amounts received by the Servicer from a Customer that
represent a partial payment toward an outstanding balance will be applied
first to state tax charges, then Intangible Transition Charges, then to
Competitive Transition Charges, then to transmission and distribution
charges and finally to electric generation charges. Notwithstanding the
foregoing, when PECO Energy is
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providing billing for its transmission and distribution charges
which is separate from billing for generation, any amounts received from
Customers remitting partial payments will be applied in the following
priority: (i) to the outstanding balance before direct access to electric
generation from electric generation suppliers or the installment amount
for a payment agreement on such balance; (ii) to the balance due for state
tax charges; (iii) to the balance due or the instalment amount for a
payment agreement for Intangible Transition Charges; (iv) to the balance
due or the instalment amount for a payment agreement for Competitive
Transition Charges; (v) to the balance due or the instalment amount for a
payment agreement for fixed and variable utility distribution service
charges; (vi) to the current state tax charges; (vii) to the current
Intangible Transition Charges; and (viii) to the current Competitive
Transition Charges; (ix) to the current fixed and variable utility
distribution service charges; (x) to the balance due for prior charges for
energy and capacity (if PECO Energy is the provider of last resort); (xi)
to the current charges for energy and capacity charges (if PECO Energy is
the provider of last resort); and (xii) to the non-basic service charges.
(c) Any ITC Collections received by the Servicer during any
Collection Period shall be allocated between the
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Issuers based on their respective Percentages with respect to the
Collection Period during which such ITC Collections were expected to be
collected.
SECTION 3.03. Servicing and Maintenance Standards. The Servicer shall, on
behalf of each Issuer, (a) manage, service, administer and make collections in
respect of the Serviced Intangible Transition Property with reasonable care and
in material compliance with applicable law, including all applicable PUC
Regulations and guidelines, using the same degree of care and diligence that the
Servicer exercises with respect to billing and collection activities that the
Servicer conducts for itself and others; (b) follow standards, policies and
procedures in performing its duties as Servicer that are customary in the
Servicer's industry; (c) use all reasonable efforts, consistent with its
customary servicing procedures, to enforce and maintain rights in respect of the
Intangible Transition Property; and (d) calculate Intangible Transition Charges
in compliance with the Statute, the Qualified Rate Order and any applicable
tariffs, except where the failure to comply with any of the foregoing would not
adversely affect any Issuer's or any Bond Trustee's interest in the Serviced
Intangible 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
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21
or any portion of the Serviced Intangible Transition Property, which, in
the Servicer's judgment, may include the taking of legal action pursuant to
Section 3.09 hereof or otherwise.
SECTION 3.04. Servicer's Certificates. (a) The Servicer will provide to
each Issuer, the Bond Trustee under the Indenture to which such Issuer is a
party, and each of the Rating Agencies the statements and certificates specified
in the Issuer Annex for such Issuer.
SECTION 3.05. Annual Statement as to Compliance; Notice of Default. (a) The
Servicer shall deliver to each Issuer, each Bond Trustee and each Rating Agency,
on or before March 31 of each year beginning March 31, 1999, an Officers'
Certificate, stating that (i) a review of the activities of the Servicer during
the preceding calendar year (or relevant portion thereof) and of its performance
under this Agreement has been made under such officers' supervision and (ii) to
the best of such officers' knowledge, based on such review, the Servicer has
fulfilled all its obligations under this Agreement throughout such period or, if
there has been a default in the fulfillment of any such obligation, describing
each such default.
(b) The Servicer shall deliver to each Issuer, each Bond Trustee and each
Rating Agency, promptly after having obtained knowledge thereof, but in no event
later
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22
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 6.01.
SECTION 3.06. Annual Independent Certified Public Accountants' Report. (a)
The Servicer shall cause a firm of independent certified public accountants
(which may also provide other services to the Servicer or the Seller) to
prepare, and the Servicer shall deliver to each Issuer, each Bond Trustee and
each Rating Agency, on or before March 31 of each year, beginning March 31, 2000
to and including the March 31 succeeding the retirement of all Transition Bonds,
a report addressed to the Servicer (the "Annual Accountant's Report"), which may
be included as part of the Servicer's customary auditing activities, to the
effect that such firm has performed certain procedures in connection with the
Servicer's compliance with its obligations under this Agreement during the
preceding calendar year ended December 31 (or, in the case of the first Annual
Accountant's Report, the period of time from the first Transfer Date until
December 31, 1999), identifying the results of such procedures and including any
exceptions noted. In the event such accounting firm requires any Bond Trustee or
any Issuer to agree or consent to the procedures performed by such firm, such
Issuer shall direct the
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23
applicable Bond Trustee in writing to so agree; it being understood and
agreed that such Bond Trustee will deliver such letter of agreement or consent
in conclusive reliance upon the direction of such Issuer, and neither such Bond
Trustee nor such Issuer will make any independent inquiry or investigation as
to, and shall have no obligation or liability in respect of, the sufficiency,
validity or correctness of such procedures.
(b) The Annual Accountant's Report shall also indicate that the accounting
firm providing such report is independent of the Servicer within the meaning of
the Code of Professional Ethics of the American Institute of Certified Public
Accountants.
SECTION 3.07. Intangible Transition Property Documentation. To assure
uniform quality in servicing the Serviced Intangible Transition Property and to
reduce administrative costs, the Servicer shall keep on file, in accordance with
its customary procedures, all documents relating to the Intangible Transition
Property, including copies of the Qualified Rate Order and all documents filed
with the PUC in connection with any Intangible Transition Charges Adjustment
(collectively, the "Intangible Transition Property Documentation").
SECTION 3.08. Computer Records; Audits of Documentation. (a) Safekeeping.
The Servicer shall
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maintain accurate and complete accounts, records and computer systems
pertaining to the Intangible Transition Property and the Intangible Transition
Property Documentation in accordance with its standard accounting procedures and
in sufficient detail to permit reconciliation between payments or recoveries on
(or with respect to) Intangible Transition Charges and the ITC Collections from
time to time remitted to each Bond Trustee pursuant to Section 5.10 and to
enable each Issuer to comply with this Agreement and the Indenture to which it
is a party. The Servicer shall conduct, or cause to be conducted, periodic
audits of the Intangible Transition Property Documentation held by it under this
Agreement and of the related accounts, records and computer systems, in such a
manner as shall enable each Issuer and each Bond Trustee, as pledgee of the
applicable Issuer, to verify the accuracy of the Servicer's record keeping. The
Servicer shall promptly report to each Issuer and each Bond Trustee any failure
on the Servicer's part to hold the Intangible Transition Property Documentation
and maintain its accounts, records and computer systems as herein provided and
promptly take appropriate action to remedy any such failure. Nothing herein
shall be deemed to require an initial review or any periodic review by any
Issuer or any Bond Trustee of the Intangible Transition Property Documentation.
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25
(b) Maintenance of and Access to Records. The Servicer shall maintain the
Intangible Transition Property Documentation at 2301 Market Street,
Philadelphia, Pennsylvania or at such other office as shall be specified to each
Issuer and each Bond Trustee by written notice not later than 30 days prior to
any change in location. The Servicer shall permit each Issuer and each Bond
Trustee or their respective duly authorized representatives, attorneys, agents
or auditors at any time during normal business hours to inspect, audit and make
copies of and abstracts from the Servicer's records regarding the Intangible
Transition Property and Intangible Transition Charges and the Intangible
Transition Property Documentation. The failure of the Servicer to provide access
to such information as a result of an obligation or applicable law (including
PUC Regulations) prohibiting disclosure of information regarding customers shall
not constitute a breach of this Section 3.08(b).
SECTION 3.09. Defending Intangible Transition Property Against Claims. The
Servicer shall institute any action or proceeding necessary to compel
performance by the PUC or the Commonwealth of Pennsylvania of any of their
obligations or duties under the Statute or the Qualified Rate Order with respect
to the Intangible Transition Property. The costs of any such action reasonably
allocated
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26
by the Servicer to the Serviced Intangible Transition Property, based on
the ratio the Serviced Intangible Transition Property bears to the total
Intangible Transition Property, shall be payable from ITC Collections as an
Operating Expense in accordance with the Indentures and shall be allocated among
the Issuers based on the ratio the outstanding principal amount of Transition
Bonds issued by each such Issuer bears to the aggregate outstanding principal
amount of Transition Bonds issued by all the Issuers at the time such costs are
incurred. The Servicer's obligations pursuant to this Section 3.09 shall survive
and continue notwithstanding the fact that the payment of Operating Expenses
pursuant to the Indentures may be delayed (it being understood that the Servicer
may be required to advance its own funds to satisfy its obligations hereunder).
SECTION 3.10. Opinions of Counsel. The Servicer shall deliver to each
Issuer and each Bond Trustee:
(a) promptly after the execution and delivery of this Agreement and
of each amendment hereto, promptly after the execution of each Sale
Agreement and of each amendment thereto and on each Transfer Date, an
Opinion of Counsel either (i) to the effect that, in the opinion of such
counsel, all filings, including filings with the PUC pursuant to the
Statute, that are necessary to fully preserve and protect the interests
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27
of each Bond Trustee in the Serviced Intangible Transition Property
have been executed and filed, and reciting the details of such filings or
referring to prior Opinions of Counsel in which such details are given, or
(ii) to the effect that, in the opinion of such counsel, no such action
shall be necessary to preserve and protect such interest; and
(b) within 90 days after the beginning of each calendar year
beginning with the first calendar year beginning more than three months
after the first Transfer Date, an Opinion of Counsel, dated as of a date
during such 90-day period, either (i) to the effect that, in the opinion
of such counsel, all filings with the PUC pursuant to the Statute, have
been executed and filed that are necessary to preserve fully and protect
fully the interest of each Bond Trustee in the Serviced Intangible
Transition Property, and reciting the details of such filings or referring
to prior Opinions of Counsel in which such details are given, or (ii) to
the effect that, in the opinion of such counsel, no such action shall be
necessary to preserve and protect such interest.
Each Opinion of Counsel referred to in clause (a) or (b) above shall
specify any action necessary (as of the
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28
date of such opinion) to be taken in the following year to preserve and
protect such interest.
ARTICLE IV
Services Related to Intangible
Transition Charges Adjustments
SECTION 4.01. Intangible Transition Charges Adjustments. The Servicer shall
perform the calculations and take the actions relating to revising the
Intangible Transition Charges, in each case set forth in each Issuer Annex to
this Agreement.
ARTICLE V
The Servicer
SECTION 5.01. Representations and Warranties of Servicer. The Servicer
makes the following representations and warranties as of each Transfer Date, on
which the Issuers have relied and will rely in acquiring Serviced Intangible
Transition Property. The representations and warranties shall survive the sale
of any of the Serviced Intangible Transition Property to any Issuer and the
pledge thereof to any Bond Trustee pursuant to any Indenture.
(a) Organization and Good Standing. The Servicer is a corporation
duly organized and in good standing under the laws of the state of its
incorporation, with the corporate power and authority to own its
properties and to conduct its business as such properties are
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currently owned and such business is presently conducted, and has
the power, authority and legal right to service the Serviced Intangible
Transition Property.
(b) Due Qualification. The Servicer is duly qualified to do business
as a foreign corporation in good standing, and has obtained all necessary
licenses and approvals in, all jurisdictions in which the ownership or
lease of property or the conduct of its business (including the servicing
of the Serviced Intangible Transition Property as required by this
Agreement) requires such qualifications, licenses or approvals (except
where the failure to so qualify would not be reasonably likely to have a
material adverse effect on the Servicer's business, operations, assets,
revenues, properties or prospects or adversely affect the servicing of the
Serviced Intangible Transition Property).
(c) Power and Authority. The Servicer has the corporate 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
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Servicer enforceable against the Servicer in accordance with its
terms subject to bankruptcy, receivership, insolvency, fraudulent
transfer, reorganization, moratorium or other laws affecting creditors'
rights generally from time to time in effect and to general principles of
equity (regardless of whether considered in a proceeding in equity or at
law).
(e) No Violation. The consummation of the transactions contemplated
by this Agreement and the fulfillment of the terms hereof shall not
conflict with, result in any breach of any of the terms and provisions of,
nor constitute (with or without notice or lapse of time) a default under,
the articles of incorporation or by-laws 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 (other than the lien of the Mortgage on the Servicer's interest
in this Agreement) 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
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31
instrumentality having jurisdiction over the Servicer or its
properties.
(f) Approvals. Except for filings with the PUC for revised
Intangible Transition Charges pursuant to Section 4.01 and the Issuer
Annexes and UCC continuation filings, 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.
(g) No Proceedings. 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: (i) except as disclosed by the Servicer to the Issuers,
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 against the Servicer of this Agreement or (ii)
relating to the
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Servicer and which might adversely affect the Federal or state
income tax attributes of the Transition Bonds.
(h) Reports and Certificates. Each report and certificate delivered in
connection with any filing made to the PUC by the Servicer on behalf of any
Issuer with respect to Intangible Transition Charges or Intangible
Transition Charges Adjustments will constitute a representation and
warranty by the Servicer that each such report or certificate, as the case
may be, is true and correct in all material respects; provided, however,
that to the extent any such report or certificate is based in part upon or
contains assumptions, forecasts or other predictions of future events, the
representation and warranty of the Servicer with respect thereto will be
limited to the representation and warranty that such assumptions, forecasts
or other predictions of future events are reasonable based upon historical
performance.
SECTION 5.02. 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 each Issuer and each Bond Trustee, for
itself and on behalf of the Transition Bondholders for which it acts as Bond
Trustee,
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33
and each of their respective trustees, officers, directors and agents for,
and defend and hold harmless each such Person from and against, any and all
Losses that may be imposed upon, incurred by or asserted against any such Person
as a result of (i) the Servicer's wilful misfeasance, 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) If any action, claim, demand or proceeding (including any governmental
investigation) shall be brought or asserted against a party (the "indemnified
party") entitled to any indemnification provided for under this Section 5.02,
such indemnified party shall promptly notify the Servicer in writing; provided,
however, that failure to give such notification shall not affect the
indemnification provided hereunder except to the extent the Servicer shall have
been actually prejudiced as a result of such failure.
(d) The Servicer shall indemnify the Bond Trustees and their respective
officers, directors and agents for, and defend and hold harmless each such
Person from and against, any and all Losses that may be imposed upon, incurred
by or asserted against any such Person as a result of the acceptance or
performance of the trusts and duties
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34
contained herein and in the Indenture, except to the extent that any such
Loss shall be due to the wilful misfeasance, bad faith or gross negligence of
the applicable Bond Trustee. Such amounts with respect to the Bond Trustee of
the First Issuer shall be deposited and distributed in accordance with the
Indenture to which such Bond Trustee is a party.
(e) The Servicer's indemnification obligations under Section 5.02(b) and
(d) for events occurring prior to the removal or resignation of any Bond Trustee
or the termination of this Agreement with respect to any Issuer shall survive
the resignation or removal of such Bond Trustee or the termination of this
Agreement with respect to such Issuer and shall include reasonable costs, fees
and expenses of investigation and litigation (including any Issuer's and any
Bond Trustee's reasonable attorneys' fees and expenses).
(f) Except to the extent expressly provided for in this Agreement, the Sale
Agreements or the Formation Documents (including the Servicer's claims with
respect to the Monthly Servicing Fees and the Seller's claim for payment of the
purchase price of Intangible Transition Property), the Servicer hereby releases
and discharges each Issuer (including its respective trustees, officers,
directors and agents, if any), and each Bond Trustee
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35
(including its respective officers, directors and agents) (collectively,
the "Released Parties") from any and all actions, claims and demands whatsoever,
which the Servicer, in its capacity as Servicer or Seller, shall or may have
against any such Person relating to the Serviced Intangible Transition Property
or the Servicer's activities with respect thereto other than any actions, claims
and demands arising out of the wilful misconduct, bad faith or gross negligence
of the Released Parties.
SECTION 5.03. Merger or Consolidation of, or Assumption of the Obligations
of, Servicer. Any Person (a) into which the Servicer may be merged or
consolidated and which succeeds to the major part of the electric distribution
business of the Servicer, (b) which results from the division of the Servicer
into two or more Persons and which succeeds to the major part of the electric
distribution business of the Servicer, (c) which may result from any merger or
consolidation to which the Servicer shall be a party and which succeeds to the
major part of the electric distribution business of the Servicer, (d) which may
succeed to the properties and assets of the Servicer substantially as a whole
and which succeeds to the major part of the electric distribution business of
the Servicer or (e) which may otherwise succeed to the major part of the
electric distribution business of the Servicer, which Person
<PAGE>
36
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 representation and warranty made pursuant to
Section 5.01 shall have been breached and no Servicer Default, and no event
which, after notice or lapse of time, or both, would become a Servicer Default,
shall have occurred and be continuing, (ii) the Servicer shall have delivered to
each Issuer and each Bond 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 5.03 and that all conditions
precedent provided for in this Agreement relating to such transaction have been
complied with, (iii) the Rating Agencies shall have received prior written
notice of such transaction, (iv) the Servicer shall have delivered to each
Issuer, each Bond Trustee and each Rating Agency an Opinion of Counsel either
(A) stating that, in the opinion of such counsel, all filings, including filings
with the PUC pursuant to the Statute, have been executed and filed that are
necessary to preserve fully and protect fully the interests of each Issuer in
the Serviced Intangible Transition Property and
<PAGE>
37
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
above referenced agreement of assumption and compliance with clauses (i), (ii),
(iii) and (iv) above shall be conditions precedent to the consummation of the
transactions referred to in clause (a), (b), (c), (d) or (e) above.
SECTION 5.04. Assignment of Servicer's Obligations. Pursuant to paragraph
13 of the Qualified Rate Order in which the PUC authorizes PECO Energy to
contract with an alternative party to perform PECO Energy's obligations
contemplated in the Qualified Rate Order, the Servicer may assign its
obligations hereunder to any electric distribution company (as such term is
defined in the Statute) which succeeds to the major part of PECO Energy's
electric distribution business. Prior to any such assignment, the Servicer shall
provide written notice thereof to each of the Rating Agencies.
SECTION 5.05. Limitation on Liability of Servicer and Others. The Servicer
shall not be liable to any Issuer, 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;
<PAGE>
38
provided, however, that this provision shall not protect the Servicer
against any liability that would otherwise be imposed by reason of wilful
misfeasance, bad faith or gross negligence in the performance of its 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
Bond Trustees 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 is not
incidental to its duties to service the Serviced Intangible Transition Property
in accordance with this Agreement or related to its obligation to pay
indemnification, and that in its reasonable opinion may cause it to incur any
expense or liability.
SECTION 5.06. PECO Energy Not To Resign as Servicer. Subject to the
provisions of Sections 5.03 and 5.04, PECO Energy shall not resign from the
obligations and duties hereby imposed on it as Servicer under this Agreement
except upon a determination that the performance of its duties under this
Agreement shall no longer be permissible under applicable law. Notice of any
such determination
<PAGE>
39
permitting the resignation of PECO Energy shall be communicated to each
Issuer, each Bond Trustee and each Rating Agency 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 each Issuer and
each Bond Trustee concurrently with or promptly after such notice. No such
resignation shall become effective until a successor Servicer shall have assumed
the servicing obligations and duties hereunder of PECO Energy in accordance with
Section 6.04.
SECTION 5.07. Monthly Servicing Fee. Each Issuer, severally and not
jointly, agrees to pay the Servicer, solely to the extent amounts are available
therefor in accordance with the Indenture to which such Issuer is a party, the
Monthly Servicing Fees with respect to all Series of Transition Bonds issued by
such Issuer. The Monthly Servicing Fee with respect to a Series for a Monthly
Allocation Date shall equal the product of (a) 1/12, (b) the Servicing Fee Rate
for such Series and (c) the outstanding principal amount of the Transition Bonds
of such Series as of such Monthly Allocation Date. The Servicer will be entitled
to retain as additional compensation net investment income on ITC Collections
related to Serviced
<PAGE>
40
Intangible Transition Property received by the Servicer prior to each
Remittance Date and the late fees, if any, paid by Customers to the Servicer.
The foregoing fees constitute a fair and reasonable price for the obligations to
be performed by the Servicer.
SECTION 5.08. Servicer Expenses. Except as otherwise expressly provided
herein, the Servicer shall be required to pay all expenses incurred by it in
connection with its activities hereunder, including fees and disbursements of
independent accountants and counsel, taxes imposed on the Servicer and expenses
incurred in connection with reports to Transition Bondholders.
SECTION 5.09. Appointments. The Servicer may at any time appoint a
subservicer 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 with respect to all Rating Agencies other than
Moody's (and the Servicer shall have furnished Moody's with written notice of
such appointment prior to its effectiveness); provided further that the Servicer
shall remain obligated and be liable to each Issuer for the servicing and
administering of the Serviced Intangible Transition Property in accordance with
the provisions hereof without diminution of such obligation and liability by
virtue of the appointment of such subservicer and to the
<PAGE>
41
same extent and under the same terms and conditions as if the Servicer
alone were servicing and administering the Serviced Intangible Transition
Property. The fees and expenses of the subservicer shall be as agreed between
the Servicer and its subservicer from time to time, and no Issuer (or trustee
thereof, if any), Bond Trustee or Transition Bondholder shall have any
responsibility therefor.
SECTION 5.10. Remittances. (a) Subject to Section 5.07, the Servicer shall
remit all ITC Collections (from whatever source) allocated to each Issuer
pursuant to Section 3.02 and all proceeds of other Collateral of such Issuer, if
any, received by the Servicer to the Bond Trustee under the Indenture to which
such Issuer is a party, for deposit pursuant to such Indenture, not later than
the second Business Day after receipt thereof
(b) Notwithstanding the foregoing clause (a), (i) as long as PECO Energy or
any successor to PECO Energy's electric distribution business remains the
Servicer, (ii) no Servicer Default has occurred and is continuing and (iii) (A)
PECO Energy or such successor maintains a short-term rating of "A-1" or better
by Standard & Poor's, "P-1" or better by Moody's and, if rated by Fitch IBCA,
"F-2" by Fitch IBCA (and for five Business Days following a reduction in any
such rating) or (B) the Rating Agency Condition shall
<PAGE>
42
have been satisfied (and any conditions or limitations imposed by the Rating
Agencies in connection therewith are complied with), the Servicer need not make
the daily remittances required by such clause (a), but in lieu thereof, shall
remit all ITC Collections (from whatever source) allocated to each Issuer
pursuant to Section 3.02 and all proceeds of other Collateral of such Issuer, if
any, received by the Servicer during each Collection Period and any such amounts
received in prior Collection Periods but not so remitted to the Bond Trustee
under the Indenture to which such Issuer is a party, for deposit pursuant to
such Indenture, not later than the final day of such Collection Period or, if
any such day is not a Business Day, the next succeeding Business Day.
SECTION 5.11. Servicer Advances. The Servicer shall make advances of
interest or principal on the Transition Bonds of any Series in the manner and to
the extent, if any, specified in any Annex to this Agreement entered into in
connection with the issuance of such Transition Bonds.
SECTION 5.12. Protection of Title. The Servicer shall execute and file
such filings, including filings with the PUC pursuant to the Statute, 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,
<PAGE>
43
maintain, and protect the interests of each Issuer in its respective
Serviced Intangible Transition Property, including all filings required under
the Statute relating to the transfer of the ownership or security interest in
the Serviced Intangible Transition Property by the Seller to such Issuer or any
security interest granted by such Issuer in its Serviced Intangible Transition
Property. The Servicer shall deliver (or cause to be delivered) to the
applicable Issuers file-stamped copies of, or filing receipts for, any document
filed as provided above, as soon as available following such filing.
ARTICLE VI
Servicer Default
SECTION 6.01. Servicer Default. If any one of the following events (a
"Servicer Default") shall occur and be continuing:
(a) any failure by the Servicer to remit to any Bond Trustee on
behalf of an 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 such Issuer or Bond Trustee; or
(b) any failure by the Servicer or, so long as the Seller and the
Servicer are the same Person, the Seller, as applicable, duly to observe
or perform in
<PAGE>
44
any material respect any other covenant or agreement of the Servicer or
the Seller, as the case may be, set forth in this Agreement or any
other Basic Document to which it is a party, which failure shall (i)
materially and adversely affect the Intangible Transition Property and
(ii) continue unremedied for a period of 30 days after written notice
of such failure shall have been given to the Servicer or the Seller, as
the case may be, by any Issuer or any Bond Trustee or after discovery
of such failure by an officer of the Servicer or the Seller, as the
case may be; 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 any of the Issuers or the Transition
Bondholders and which material adverse effect continues unremedied for a
period of 60 days after the date on which written notice thereof shall
have been given to the Servicer by any Issuer or any Bond Trustee; or
(d) an Insolvency Event occurs with respect to the Servicer;
then, and in each and every case, so long as the Servicer Default shall not
have been remedied, Bond Trustees, as assignees of the applicable Issuers, with
respect to Holders of a majority of the outstanding principal amount of the
<PAGE>
45
Transition Bonds, by notice then given in writing to the Servicer (a
"Termination Notice") may terminate all the rights and obligations (other than
the indemnification obligations set forth in Section 5.02 hereof and the
obligation under Section 6.02 to continue performing its functions as Servicer
until a successor Servicer is appointed) of the Servicer under this Agreement
with respect to all the Issuers. In addition, upon a Servicer Default described
in Section 6.01(a), each of the following shall be entitled to apply to the PUC
for sequestration and payment of revenues arising with respect to the Serviced
Intangible Transition Property: (i) each Issuer or its assignees or (ii)
pledgees or transferees, including transferees under the Statute, of the
Serviced Intangible Transition Property. On or after the receipt by the Servicer
of a Termination Notice, all authority and power of the Servicer under this
Agreement with respect to the Issuers, whether with respect to the Serviced
Intangible Transition Property, the related Intangible Transition Charges or
otherwise, shall, upon appointment of a successor Servicer pursuant to Section
6.02, without further action, pass to and be vested in such successor Servicer
and, without limitation, each Bond 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
<PAGE>
46
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 Intangible Transition Property
Documentation and related documents, or otherwise. The predecessor Servicer
shall cooperate with the successor Servicer, the Bond Trustees and the Issuers
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 Serviced Intangible Transition Property or
the related Intangible Transition Charges. As soon as practicable after receipt
by the Servicer of such Termination Notice, the Servicer shall deliver the
Intangible Transition Property Documentation to the successor Servicer. All
reasonable costs and expenses (including attorneys fees and expenses) incurred
in connection with transferring the Intangible Transition Property Documentation
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.
Termination of
<PAGE>
47
PECO Energy as Servicer shall not terminate PECO Energy's rights or
obligations as Seller under any of the Sale Agreements.
SECTION 6.02. Notice of Servicer Default. The Servicer shall deliver to
each Issuer, each Bond Trustee and each Rating Agency 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 or
circumstance (such as a breach of any representation or warranty made by the
Servicer in this Agreement) which, with the giving of notice or the passage of
time, would become a Servicer Default under Section 6.01.
SECTION 6.03. Waiver of Past Defaults. All the Bond Trustees acting
together may 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 remittances to any Bond Trustee of ITC Collections from Serviced
Intangible Transition Property in accordance with Section 5.10 of this
Agreement. Upon any such waiver of a past default, such default shall cease to
exist, and any Servicer Default arising therefrom shall be deemed to have been
remedied for every purpose of this Agreement. No such waiver shall extend to any
subsequent or other default or impair any right consequent thereto.
<PAGE>
48
SECTION 6.04. Appointment of Successor. (a) Upon the Servicer's receipt of
a Termination Notice, pursuant to Section 6.01 or the Servicer's resignation in
accordance with the terms of this Agreement, the predecessor Servicer shall
continue to perform its functions as Servicer under this Agreement and shall be
entitled to receive the requisite portion of the Monthly Servicing Fees, 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, Bond Trustees, as assignees of the applicable Issuers, with respect
to Holders of a majority of the outstanding principal amount of the Transition
Bonds, shall appoint a successor Servicer, and the successor Servicer shall
accept its appointment by a written assumption in form acceptable to the Issuers
and the Bond Trustees. If, within 30 days after the delivery of the Termination
Notice, a new Servicer shall not have been appointed and accepted such
appointment, any Bond Trustee may petition the PUC 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
PUC Regulations to perform the duties of the Servicer pursuant to the Statute,
the Qualified Rate Order and this Agreement, (ii) the Rating Agency Condition
shall have been satisfied
<PAGE>
49
with respect to all Rating Agencies other than Moody's (and Moody's shall
have been furnished with written notice of such appointment prior to its
effectiveness) and (iii) such Person enters into a servicing agreement with the
Issuers 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 Monthly
Servicing Fees and all the rights granted to the predecessor Servicer by the
terms and provisions of this Agreement.
(c) The successor Servicer may not resign unless it is prohibited from
serving as such by law.
SECTION 6.05. Cooperation with Successor. The Servicer covenants and agrees
with each Issuer that it will, on an ongoing basis, cooperate with the successor
Servicer and provide whatever information is, and take whatever actions are,
reasonably necessary to assist the successor Servicer in performing its
obligations hereunder.
ARTICLE VII
Miscellaneous Provisions
SECTION 7.01. Amendment. This Agreement may be amended by the Seller, the
Servicer and the Issuers, with
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50
the consent of all the Bond Trustees and, with respect to any amendment
which would materially adversely affect the rights of any Counterparty under any
Swap Agreement, the consent of each such Counterparty (which consent shall not
be unreasonably withheld). The Issuers shall furnish to each of the Rating
Agencies (i) prior to the execution of any such amendment or consent, written
notification of the substance thereof and (ii) promptly after the execution of
any such amendment or consent, a copy thereof.
Prior to the execution of any amendment to this Agreement, the Issuers and
the Bond Trustees 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 and the Opinion of Counsel referred to in Section 3.10. The
Issuers and the Bond Trustees may, but shall not be obligated to, enter into any
such amendment which affects their own rights, duties or immunities under this
Agreement or otherwise.
SECTION 7.02. Notices. All demands, notices and communications upon or to
the Servicer, the Issuers, the Bond Trustees or the Rating Agencies under this
Agreement shall be in writing, delivered personally, via facsimile, reputable
overnight courier or by first class mail, postage prepaid, and shall be deemed
to have been duly given upon receipt (a) in the case of the Servicer, to PECO
Energy
<PAGE>
51
Company, 2301 Market Street, Philadelphia, PA 19101, Attention of Vice
President, Finance and Treasurer, (b) in the case of any Issuer or any Bond
Trustee, at the address provided for notices or communications to such Person in
the Indenture to which such Person is a party, (c) in the case of Moody's, to
Moody's Investors Service, Inc., ABS Monitoring Department, 99 Church Street,
New York, New York 10007, (d) in the case of Standard & Poor's, to Standard &
Poor's Corporation, 26 Broadway (15th Floor), New York, New York 10004,
Attention of Asset Backed Surveillance Department, (e) in the case of Fitch
IBCA, to Fitch IBCA, Inc., One State Street Plaza, New York, New York 10004,
Attention of ABS Surveillance, and (f) in the case of Duff, to Duff & Phelps
Credit Rating Company, 55 E. Monroe Street (35th Floor), Chicago, Illinois
60603; or, as to each of the foregoing, at such other address as shall be
designated by written notice to the other parties.
SECTION 7.03. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 5.03 and 5.04 and as provided
in the provisions of this Agreement concerning the resignation of the Servicer,
this Agreement may not be assigned by the Servicer.
SECTION 7.04. Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit
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52
of the Servicer, the Issuers (including their respective trustees, if any)
and the Bond Trustees, on behalf of themselves and the Transition Bondholders,
and nothing in this Agreement, whether express or implied, shall be construed to
give to any other Person any legal or equitable right, remedy or claim in any
Collateral or under or in respect of this Agreement or any covenants, conditions
or provisions contained herein.
SECTION 7.05. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 7.06. Separate Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 7.07. Headings. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
<PAGE>
53
SECTION 7.08. Governing Law. This Agreement shall be construed in
accordance with the laws of the Commonwealth of Pennsylvania, without reference
to its conflict of law provisions, and the obligations, rights and remedies of
the parties hereunder shall be determined in accordance with such laws.
SECTION 7.09. Assignment to Bond Trustee. The Servicer hereby acknowledges
and consents to any mortgage, pledge, assignment and grant of a security
interest by any Issuer to any Bond Trustee pursuant to any Indenture for the
benefit of any Transition Bondholders of all right, title and interest of such
Issuer in, to and under the Serviced Intangible Transition Property owned by
such Issuer and the proceeds thereof and the assignment of any or all of such
Issuer's rights hereunder to such Bond Trustee. In no event shall any Bond
Trustee have any liability for the representations, warranties, covenants,
agreements or other obligations of any Issuer, hereunder or in any of the
certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the applicable Issuer.
SECTION 7.10. Nonpetition Covenants. Notwithstanding any prior termination
of this Agreement or the Indenture, but subject to the PUC's rights to order the
sequestration and payment of revenues arising with respect
<PAGE>
54
to the Serviced Intangible Transition Property notwithstanding any
bankruptcy, reorganization or other insolvency proceedings with respect to the
debtor, pledgor or transferor of the Serviced Intangible Transition Property
pursuant to Section 2812(d)(3)(v) of the Statute, the Servicer shall not, prior
to the date which is one year and one day after the termination of the
applicable Indenture, petition or otherwise invoke or cause any Issuer to invoke
the process of any court or government authority for the purpose of commencing
or sustaining a case against any 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 any Issuer or any
substantial part of the property of any Issuer, or ordering the winding up or
liquidation of the affairs of any Issuer.
SECTION 7.11. Addition of Issuers. Upon execution and delivery by the
Servicer and a Person which owns Intangible Transition Property sold to such
Person by the Seller of an instrument in the form of Exhibit B hereto, such
Person shall become an Issuer hereunder with the same force and effect as if
originally named as an Issuer herein. The execution and delivery of any such
instrument shall not require the consent of any Issuer hereunder. The rights and
obligations of each Issuer hereunder shall remain in full
<PAGE>
55
force and effect notwithstanding the addition of any new Issuer as a party to
this Agreement.
SECTION 7.12. Termination by Issuers. This Agreement shall terminate with
respect to any Issuer when all Transition Bonds issued by such Issuer have been
retired, redeemed or defeased in full.
SECTION 7.13. Limitation of Liability of Trustee. Notwithstanding anything
contained herein to the contrary, this Agreement has been countersigned by First
Union Trust Company, National Association, not in its individual capacity but
solely in its capacity as trustee of the First Issuer and in no event shall
First Union Trust Company, National Association, in its individual capacity have
any liability for warranties, covenants, agreements or other obligations of the
First Issuer hereunder or in any of the certificates, notices or agreements
delivered pursuant hereto, as to all of which recourse shall be had solely to
the assets of the First Issuer. For all purposes of this Agreement, in the
performance of its duties or obligations hereunder or in the performance of any
duties or obligations of the First Issuer hereunder, First Union Trust Company,
National Association, shall be subject to, and entitled to
<PAGE>
56
the benefits of, the applicable terms and provisions of the Formation
Documents relating to the First Issuer.
<PAGE>
57
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
PECO ENERGY TRANSITION TRUST,
By: First Union Trust Company, National
Association, not in its individual
capacity but solely as Issuer Trustee
on behalf of PECO Energy
Transition Trust,
By: /s/ Edward L. Truitt, Jr.
---------------------------------------
Title: Edward L. Truitt, Jr.
Vice President
PECO ENERGY COMPANY, Servicer,
By: /s/ J. Barry Mitchell
----------------------------------------
Title: J. Barry Mitchell
Acknowledged and Accepted:
THE BANK OF NEW YORK, not in its
individual capacity but solely as
Bond Trustee on behalf of the
Holders of Transition Bonds
issued by the First Issuer,
By: /s/ Cheryl L. Laser
-----------------------------
Title: Cheryl L. Laser
Assistant Vice President
<PAGE>
EXHIBIT A
to
MASTER 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 Master Servicing Agreement dated as of March 25, 1999,
between the First Issuer, the other Issuers from time to time party thereto and
PECO Energy Company, as Servicer (the "Servicing Agreement").
(b) Whenever used in this Exhibit A, the following words and phrases shall
have the following meanings:
"Adjustment Request" has, with respect to the First Issuer, the meaning
given to such term in the Issuer Annex relating to the First Issuer, or with
respect to any other Issuer, the meaning given to such term in the Issuer Annex
relating thereto.
"Applicable MDMA" means with respect to each Customer, the meter data
management agent or Third Party providing meter reading services for that
Customer's account.
"Applicable Third Party" means, with respect to each Customer, the Third
Party, if any, providing billing or metering services to that Customer.
"Billed Intangible Transition Charges" means the amounts billed to
Customers pursuant to the Intangible Transition Charges, whether billed directly
to such Customers by the Servicer or indirectly through a Third Party pursuant
to Consolidated Third Party Billing.
"Bills" means each of the regular monthly bills, the summary bills, the
opening bills and the Closing bills issued to Customers or Third Parties by PECO
Energy Company.
"Closing Bill" means the final bill issued to a Customer at the time
service is terminated.
"Consolidated Third Party Billing" means the billing option available to
Customers served by an Third Party pursuant to which such Third Party will be
responsible
<PAGE>
2
for billing and collecting all charges to Customers electing such billing
option, including the Intangible Transition Charges, and will become obligated
to the Servicer for such Billed Intangible Transition Charges, all in accordance
with applicable PUC Regulations and orders.
"Full Consolidated Third Party Billing" means the billing option available
to Customers served by a Third Party, if such option is approved by the utility
with respect to such Third Party, pursuant to which such Third Party performs
the same tasks it would perform under Consolidated Third Party Billing,
including billing Customers the itemized charges supplied by the Servicer to
such Third Party.
"Intangible Transition Charge Effective Date" means the date on which the
initial Intangible Transition Charges go into effect pursuant to the QRO.
"Intangible Transition Charge Termination Date" means the date on which the
Intangible Transition Charges will cease to be billed pursuant to the terms of
the QRO.
"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 Exhibit A, with policies and practices of the Servicer
applicable to such duties that the Servicer follows with respect to comparable
assets that it services for itself.
<PAGE>
3
"Variables" means the following variables for each Rate Class used in
calculating Adjustment Requests:
(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);
(vi) the estimated Net Write-Off percentage; and
(vii) the projected billed revenue to which Intangible Transaction
Charges apply.
"Write-Offs" means write-offs of Billed Intangible Transition Charges that
remain unpaid by Customers or Third Parties as of 180 days after the issuance of
the Closing Bills containing such charges.
SECTION 2. Data Acquisition.
(a) Installation and Maintenance of Meters. Except to the extent that a
Third Party is responsible for such services pursuant to a Third Party Service
Agreement, the Servicer shall use its best efforts to 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 or as provided in the applicable tariff.
(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 PUC Regulations.
(c) Cost of Metering. No Issuer shall 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 any Issuer be entitled to any
<PAGE>
4
credit against the Monthly Servicing Fee for any cost savings realized by the
Servicer or any Third Party 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 PUC Regulations) at least once each
calendar month and shall determine therefrom each Customer's individual
Intangible Transition Charge to be included on such Customer's Bill pursuant to
PUC Regulations.
SECTION 4. Billing.
The Servicer shall implement the Intangible Transition Charges as of the
Intangible Transition Charge Effective Date and shall thereafter bill each
Customer or the Applicable Third Party for the respective Customer's outstanding
current and past due Intangible Transition Charges accruing through the
Intangible Transition Charge 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 Third Party Billing,
to an Applicable Third Party, for such Customer's respective Intangible
Transition Charge as a general practice once every 27 to 33 days or such
other time period as allowed by the PUC, 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 Third Party, as the case may be. In the event
that the Servicer makes any material modification to these practices, it
shall notify each Issuer, each Bond Trustee 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 (i) the Servicer may
not make any modification that will materially adversely affect the
Transition Bondholders and (ii) the Rating Agencies shall receive prior
notice of any modification that would change the frequency with which Bills
are issued or would change any tariff charged.
<PAGE>
5
(b) Format.
(i) Each Bill to a Customer shall contain the charge
corresponding to the respective Competitive Transition Charge owed by
such Customer for the Billing Period. Unless the Servicer's billing
system cannot do so, for billing cycles beginning [January 1], 1999,
the amount of the Competitive Transition Charge to be remitted to the
Issuers in respect of a Customer's Intangible Transition Charge shall
appear as a footnote to the Competitive Transaction Charge line-item
on each Bill.
(ii) In the case of each Customer that has elected Consolidated
Third Party Billing, the Servicer shall deliver to the Applicable
Third Party itemized charges for such Customer including the amount of
such Customer's Competitive Transition Charge to be remitted by the
Servicer to the Issuers in respect of such Customer's Intangible
Transition Charge.
(iii) The Servicer shall conform to such requirements in respect
of the format, structure and text of Bills delivered to Customers and
Third Parties as applicable PUC Regulations shall from time to time
prescribe. To the extent that Bill format, structure and text are not
prescribed by the Statute, other applicable law or PUC 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
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 Third Party Billing, the
Servicer shall deliver all Bills to the Applicable Third Parties by such means
as are prescribed by applicable PUC Regulations, or if not prescribed by
applicable PUC Regulations, by such means as are mutually agreed upon by the
Servicer and the Applicable Third Party and are consistent with PUC Regulations.
The Servicer or a Third Party, 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.
<PAGE>
6
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
Intangible Transition Charges from Customers and Third Parties 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 Third Parties in accordance with applicable PUC
Regulations and Servicer Policies and Practices.
(B) The Servicer shall apply late payment charges to outstanding
Customer and Third Party balances in accordance with applicable PUC
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 Servicing Agreement, and no Issuer shall have
any right to share in the same.
(C) The Servicer shall deliver verbal and written final call
notices in accordance with applicable PUC Regulations and Servicer
Policies and Practices.
(D) The Servicer shall adhere and carry out disconnection
policies in accordance with the Statute, other applicable law and PUC
Regulations and Servicer Policies and Practices.
(E) The Servicer may employ the assistance of collections agents
in accordance with applicable PUC Regulations and Servicer Policies
and Practices.
(F) The Servicer shall apply Customer and Third Party deposits to
the payment of delinquent accounts in accordance with applicable PUC
Regulations and Servicer Policies and Practices and according to the
priorities set forth in Section 6(b)(ii), (iii) and (iv) of this
Exhibit A.
<PAGE>
7
(G) The Servicer shall promptly take all necessary action in
accordance with applicable PUC Regulation to terminate billing of
Competitive Transition Charges by Third Parties whose payments are 45
or more days delinquent and to collect the Billed Intangible
Transition Charges directly from the applicable Customers.
(ii) The Servicer shall not waive any late payment charge or any other
fee or charge relating to delinquent payments, if any, or waive, vary or
modify any terms of payment of any amounts payable by a Customer, in each
case unless such waiver or action: (A) would be in accordance with the
Servicer's customary practices or those of any successor Servicer with
respect to comparable assets that it services for itself and for others;
(B) would not materially adversely affect the rights of the Transition
Bondholders; and (C) would comply with applicable law; provided, however,
that notwithstanding anything in the Servicing Agreement or this Exhibit A
to the contrary, the Servicer is authorized to write off any Billed
Intangible Transition 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 Intangible Transition 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 Third Parties in respect of Billed Intangible
Transition Charges in such forms and methods and at such times and places
as the Servicer and each Third Party shall mutually agree in accordance
with applicable PUC 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 Third Party's account in proportion to the
charges contained on the outstanding Bill to such Customer or Third Party.
(iii) Any amounts collected by the Servicer that represent partial
payments of the total Bill to a Customer or Third Party shall be allocated
in accordance with the
<PAGE>
8
priorities set forth in Section 3.02(b) of the Servicing Agreement.
(iv) The Servicer shall hold all over-payments for the benefit of the
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 ITC
Collections received from such Customers as if such Customers had been
billed for their respective Intangible Transition 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.
(c) Accounts; Records.
(i) The Servicer shall maintain accounts and records as to the
Serviced Intangible 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 Serviced
Intangible Transition Property and the amounts from time to time remitted
to the Collection Account in respect of the Serviced Intangible Transition
Property.
(ii) The Servicer shall maintain accounts and records as to Third
Parties performing Consolidated Third Party Billing or Full Consolidated
Third Party Billing for Customers accurately and in accordance with its
standard accounting procedures and in sufficient detail to permit
reconciliation between payments or recoveries with respect to the Serviced
Intangible Transition Property and amounts owed by such Customers in
respect of Intangible Transition Charges.
(d) Investment of ITC Collections Received.
Prior to remittance on the applicable Remittance Date, the Servicer may
invest ITC Collections 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 the total ITC Collections received by the Servicer from or
on behalf of Customers during prior
<PAGE>
9
Collection Periods in respect of all previously Billed Intangible
Transition Charges. With respect to accounts for which the City of
Philadelphia Board of Education is billed and accounts of Customers
that are municipalities billed in Rate Class TL, ITC Collection will
be estimated based upon the amounts billed using the assumption that
all billed amounts are paid when due. These estimates shall be
reconciled to actual ITC Collections received from these accounts
twice yearly on May 15 and November 15 of each year, with any
under-remittance or over-remittance corrected on the immediately
following Remittance Date.
(ii) In accordance with Section 4.01 of the Servicing Agreement and
each Issuer Annex, the Servicer shall update the Variables and shall
prepare Adjustment Requests to reflect the updated Variables when required
to do so pursuant to each Issuer Annex.
(f) Remittances.
(i) The Servicer shall make remittances to the Issuers in accordance
with Section 5.10 of the Servicing Agreement.
(ii) In the event of any change of account or change of institution
affecting the remittances, the affected Issuers 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 applicable Remittance Date.
<PAGE>
1
EXHIBIT B
Supplement for Addition of Issuer
SUPPLEMENT NO. __ dated as of [ ], to the Master Servicing Agreement dated
as of [ ], 1999, between [ ], a [state of formation] [type of entity] (the "New
Issuer") and PECO ENERGY COMPANY, a Pennsylvania corporation as Servicer (the
"Servicer").
A. Reference is made to the Master Servicing Agreement dated as of [ ],
1999 (as amended, supplemented or otherwise modified from time to time, the
"Servicing Agreement"), between PECO ENERGY TRANSITION TRUST, a Delaware
business trust (the "First Issuer"), the other Issuers from time to time party
thereto (together with the First Issuer, the "Issuers") and the Servicer.
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Servicing Agreement.
C. The Issuers have entered into the Servicing Agreement in order to
provide for servicing of the Serviced Intangible Transition Property. Section
7.11 of Servicing Agreement provides that additional Persons may become Issuers
under the Servicing Agreement by execution and delivery of an instrument in the
form of this Supplement. The New Issuer is executing this Supplement in
accordance
<PAGE>
2
with the requirements of the Servicing Agreement to become an Issuer under
the Servicing Agreement in order to provide for the servicing of the Serviced
Intangible Transition Property owned by the New Issuer.
Accordingly, the Servicer and the New Issuer agree as follows
SECTION 1. In accordance with Section 7.11 of the Servicing Agreement, the
New Issuer by its signature below becomes an Issuer under the Servicing
Agreement with the same force and effect as if originally named therein as an
Issuer and the New Issuer hereby agrees to all the terms and provisions of the
Servicing Agreement applicable to it as an Issuer thereunder. Each reference to
an "Issuer" in the Servicing Agreement shall be deemed to include the New
Issuer. The Servicing Agreement is hereby incorporated herein by reference.
SECTION 2. The New Issuer represents and warrants to the Servicer that this
Supplement has been duly authorized, executed and delivered by it and
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms.
SECTION 3. This Supplement 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
<PAGE>
3
agreement. This Supplement shall become effective when the Servicer shall
have received counterparts of this Supplement that, when taken together, bear
the signatures of the New Issuer and the Servicer.
SECTION 4. Except as expressly supplemented hereby, the Servicing Agreement
shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE COMMONWEALTH OF PENNSYLVANIA 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. Any provision of this Supplement that is prohibited or
unenforceable in any jurisdiction shall 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.
<PAGE>
4
SECTION 7. All communications and notices here under shall be in writing
and given as provided in Section 7.02 of the Servicing Agreement.
IN WITNESS WHEREOF, the New Issuer and the Servicer have duly executed this
Supplement to the Servicing Agreement as of the day and year first above
written.
[Name Of New Issuer],
by
--------------------------------
Title:
PECO ENERGY COMPANY, Servicer,
by
--------------------------------
Title:
<PAGE>
1
ANNEX 1
to
MASTER SERVICING AGREEMENT
The Servicer agrees to comply with the following with respect to PECO
Energy Transition Trust (the "First Issuer"):
SECTION 1. Definitions. (a) Capitalized terms used herein and not otherwise
defined shall have the meanings set forth in the Master Servicing Agreement
dated as of March 25, 1999 (the "Servicing Agreement"), between the First
Issuer, the other Issuers from time to time party thereto and PECO ENERGY
COMPANY, as Servicer.
(b) Whenever used in this Annex 1, the following words and phrases shall
have the following meanings:
"Adjustment Date" has the meaning specified in the Indenture.
"Adjustment Request" means an application filed by the Servicer with the
PUC for revised Intangible Transition Charges pursuant to Section 6(b) of this
Annex.
"Available Reserve Amount" means, as of any date, the amount on deposit in
the Reserve Subaccount less the product of (a) the Prepayment Amount and (b) the
difference, expressed as a percentage, between 100% and the Expected
Amortization Percentage for the immediately following Regulatory Year.
<PAGE>
2
"Bond Trustee" has the meaning specified in the Indenture.
"Calculation Date" means, with respect to any Series of Transition Bonds,
such date or dates specified as such in the Series Supplement therefor.
"Calculated Overcollateralization Level" has the meaning set forth in the
Indenture.
"Class" has the meaning specified in the Indenture.
"Expected Amortization Percentage" means, with respect to any Regulatory
Year, the percentage equivalent of a fraction, the numerator of which is the
aggregate amount of Transition Bonds of all Series to be amortized during such
Regulatory Year as set forth in Expected Amortization Schedules therefor and the
denominator of which is the Projected Transition Bond Balance on the first day
of such Regulatory Year.
"Expected Amortization Schedule" has the meaning set forth in the
Indenture.
"Expected Final Payment Date" has the meaning set forth in the Indenture.
"Holder" or "Transition Bondholder" has the meaning set forth in the
Indenture.
"Indenture" means the Indenture dated as of March 1, 1999, between the
First Issuer and The Bank of
<PAGE>
3
New York, as amended and supplemented from time to time, including any
Series Supplement.
"Overcollateralization Subaccount" has the meaning set forth in the
Indenture.
"Payment Date" has the meaning specified in the Indenture.
"Prepayment Amount" means, as of any date, the sum of all amounts currently
on deposit in the Reserve Subaccount arising from prepayment by customers
allocable to Intangible Transition Charges.
"Projected Transition Bond Balance" has the meaning specified in the
Indenture.
"Regulatory Period" means with respect to any Series (i) the period from
the Series Issuance Date therefor through and including the first Adjustment
Date (the "Initial Regulatory Period") and (ii) following the Initial Regulatory
Period until December 31, 2010, each period from and including each Adjustment
Date through but excluding the following Adjustment Date.
"Reserve Subaccount" has the meaning set forth in the Indenture.
"Sale Agreement" has the meaning set forth in the Indenture.
"Schedule Revision Date" has the meaning set forth in the Indenture.
<PAGE>
4
"Series" has the meaning specified in the Indenture.
"Series Issuance Date" has the meaning specified in the Indenture.
"Series Supplement" has the meaning specified in the Indenture.
"Transferred ITP" has the meaning specified in the Sale Agreement.
"Transition Bonds" has the meaning specified in the Indenture.
"Transition Bond Balance" has the meaning specified in the Indenture.
SECTION 2. Calculation Date Statements. For each Calculation Date, the
Servicer will provide to the First Issuer and the Bond Trustee a statement
indicating (i) the Transition Bond Balance and the Projected Transition Bond
Balance for each Series as of the immediately preceding Payment Date, (ii) the
amount on deposit in the Overcollateralization Subaccount and the Calculated
Overcollateralization Level as of the immediately preceding Payment Date, (iii)
the Projected Transition Bond Balance for each Payment Date prior to the next
Adjustment Date and the Servicer's projection of the Transition Bond Balance as
of each Payment Date prior to the next Adjustment Date, (iv) the Calculated
Overcollateralization Level for each
<PAGE>
5
Payment Date prior to the next Adjustment Date and the Servicer's
projection of the amount on deposit in the Overcollateralization Subaccount for
each Payment Date prior to the next Adjustment Date and (v) the projected ITC
Collections from the Payment Date immediately preceding the next Adjustment Date
through such Adjustment Date.
SECTION 3. Remittance Date Statements. On or before each Remittance Date,
the Servicer will prepare and furnish to the First Issuer and the Bond Trustee a
statement setting forth the aggregate amount remitted or to be remitted by the
Servicer to the Bond Trustee for deposit on such Remittance Date pursuant to
ss.5.10 of the Servicing Agreement and the Indenture.
Section 4. Monthly Allocation Date Statements. At least three Business Days
before each Monthly Allocation Date, the Servicer will prepare and furnish to
the First Issuer, the Bond Trustee, each Counterparty and the Rating Agencies a
statement setting forth the transfers and payments to be made on such Monthly
Allocation Date pursuant to Section 8.02(d) of the Indenture and the amounts
thereof.
Section 5. Payment Date Statements. At least three Business Days before
each Payment Date for each Series of Transition Bonds, the Servicer will
calculate the interest due on any floating rate Transition Bonds of such Series
and will prepare and furnish to the First Issuer and
<PAGE>
6
the Bond Trustee a statement setting forth the amounts to be paid to Holders of
Transition Bonds of such Series pursuant to Section 8.02(e) of the Indenture.
SECTION 6. Intangible Transition Charges Adjustments. (a) Prior to each
Calculation Date, the Servicer shall calculate (i) the Transition Bond Balance
as of the Payment Date immediately preceding such Calculation Date (a written
copy of which shall be delivered by the Servicer to the Bond Trustee within five
days following such Calculation Date) and (ii) the revised Intangible Transition
Charges with respect to the Transferred Intangible Transition Property for the
then-current Regulatory Period and any subsequent Regulatory Periods until a
Payment Date occurs, such that the Servicer projects that ITC Collections
therefrom allocable to the First Issuer will be sufficient so that (x) the
outstanding principal balance of each outstanding Series will equal the amount
provided for in the Expected Amortization Schedule therefor and the amount on
deposit in the Overcollateralization Subaccount will equal the Calculated
Overcollateralization Level, by the next Adjustment Date or the immediately
succeeding Payment Date after such Adjustment Date as specified in the Series
Supplement therefor or, if earlier with respect to any Series or Class of
Transition Bonds, by the Expected Final
<PAGE>
7
Payment Date therefor, taking into account the Available Reserve Amount.
(b) On each Calculation Date, the Servicer shall (i) file an Adjustment
Request with the PUC for such revised Intangible Transition Charges with respect
to the Transferred Intangible Transition Property to remain in effect until the
earlier of (A) the effective date of the next Intangible Transition Charges
Adjustment with respect to the Transition Bonds, (B) the Expected Final Payment
Date for any Series or Class of Transition Bonds and (C) December 31, 2010, (ii)
take all reasonable actions and make all reasonable efforts in order to
effectuate such revision to such Intangible Transition Charges and (iii)
promptly send to the Bond Trustee copies of all material notices and documents
relating to such revision.
SECTION 7. Servicer Advances. The Servicer shall not make any advances of
interest or principal on the Transition Bonds of any Series.
SECTION 8. Loss Calculations. Upon notice from the Seller, the Servicer
shall perform the calculations specified in Sections 5.01(c)(ii)(x) and
5.01(c)(ii)(y) of the Sale Agreement in the manner specified in such Sections
and notify the Issuer and the Bond Trustee thereof.
SECTION 9. Schedule Revision Date Schedules. Prior to each Schedule
Revision Date, the Servicer shall
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8
deliver to the First Issuer a replacement Schedule 1 to the Indenture and
replacement Schedules A and B to each Series Supplement to which such Schedule
Revision Date applies, adjusted to reflect the event giving rise to such
Schedule Revision Date and setting forth the Expected Amortization Schedule for
each Payment Date and the Monthly Allocated Interest Balance and Monthly
Allocated Principal Balance for each Monthly Allocation Date applicable thereto;
provided, however, that no such replacement Schedules A and B shall be required
with respect to a Series if the event giving rise to such Schedule Revision Date
is a redemption of the Transition Bonds of such Series in whole.
(Local Currency-Single Jurisdiction)
ISDA(R)
International Swap Dealers Association, Inc.
MASTER AGREEMENT
dated as of March 18, 1999
__________________________________and PECO Energy Transition
Trust have entered and/or anticipate entering into one or more transactions
(each a "Transaction") that are or will be governed by this Master Agreement,
which includes the schedule (the "Schedule"), and the documents and other
confirming evidence (each a "Confirmation") exchanged between the parties
confirming those Transactions.
Accordingly, the parties agree as follows:--
1. Interpretation
(a) Definitions. The terms defined in Section 12 and in the Schedule will have
the meanings therein specified for the purpose of this Master Agreement.
(b) Inconsistency. In the event of any inconsistency between the provisions of
the Schedule and the other provisions of this Master Agreement, the Schedule
will prevail. In the event of any inconsistency between the provisions of any
Confirmation and this Master Agreement (including the Schedule), such
Confirmation will prevail for the purpose of the relevant Transaction.
(c) Single Agreement. All Transactions are entered into in reliance on the fact
that this Master Agreement and all Confirmations form a single agreement between
the parties (collectively referred to as this "Agreement"), and the parties
would not otherwise enter into any Transactions.
2. Obligations
(a) General Conditions.
(i) Each party will make each payment or delivery specified in
each Confirmation to be made by it, subject to the other
provisions of this Agreement.
(ii) Payments under this Agreement will be made on this due date
for value on that date in the place of the account specified
in the relevant Confirmation or otherwise pursuant to this
Agreement, in freely transferable funds and in the manner
customary for payments in the required currency. Where
settlement is by delivery (that is, other than by payment),
such delivery will be made for receipt on the due date in the
manner customary for the relevant obligation unless otherwise
specified in the relevant Confirmation or elsewhere in this
Agreement.
(iii) Each obligation of each party under Section 2(a)(i) is subject
to (1) the condition precedent that no Event of Default or
Potential Event of Default with respect to the other party
has occurred and is continuing, (2) the condition precedent
that no Early Termination Date in respect of the relevant
Transaction has occurred or been effectively designated and
(3) each other applicable condition precedent specified in
this Agreement.
<PAGE>
(b) Change of Account. Either party may change its account for receiving a
payment or delivery by giving notice to the other party at least five Local
Business Days prior to the scheduled date for the payment or delivery to which
such change applies unless such other party gives timely notice of a reasonable
objection to such change.
(c) Netting. If on any date amounts would otherwise be payable:--
(i) in the same currency; and
(ii) in respect of the same Transaction,
by each party to the other, then, on such date, each party's obligation to make
payment of any such amount will be automatically satisfied and discharged and,
if the aggregate amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been payable by the other
party, replaced by an obligation upon the party by whom the larger aggregate
amount would have been payable to pay to the other party the excess of the
larger aggregate amount over the smaller aggregate amount.
The parties may elect in respect of two or more Transactions that a net amount
will be determined in respect of all amounts payable on the same date in the
same currency in respect of such Transactions, regardless of whether such
amounts are payable in respect of the same Transaction. The election may be made
in the Schedule or a Confirmation by specifying that subparagraph (ii) above
will not apply to the Transactions identified as being subject to the election,
together with the starting date (in which case subparagraph (ii) above will not,
or will cease to, apply to such Transactions from such date). This election may
be made separately for different groups of Transactions and will apply
separately to each pairing of branches or offices through which the parties make
and receive payments or deliveries.
(iii) Default Interest; Other Amounts. Prior to the occurrence or effective
designation of an Early Termination Date in respect of the relevant Transaction,
a party that defaults in the performance of any payment obligation will, to the
extent permitted by law and subject to Section 6(c), be required to pay interest
(before as well as after judgment) on the overdue amount to the other party on
demand in the same currency as such overdue amount, for the period from (and
including) the original due date for payment to (but excluding) the date of
actual payment, at the Default Rate. Such interest will be calculated on the
basis of daily compounding and the actual number of days elapsed. If, prior to
the occurrence or effective designation of an Early Termination Date in respect
of the relevant Transaction, a party defaults in the performance of any
obligation required to be settled by delivery, it will compensate the other
party on demand if and to the extent provided for in the relevant Confirmation
or elsewhere in this Agreement.
3. Representations
Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Transaction is entered
into) that:--
(a) Basic Representations.
(i) Status. It is duly organized and validly existing under the
laws of the jurisdiction of its organization or
incorporation and, if relevant under such laws, in good
standing;
(ii) Powers. It has the power to execute this Agreement and any
other documentation relating to this Agreement to which it is
a party, to deliver this Agreement and any other documentation
relating to this Agreement that it is required by this
Agreement to deliver and to perform its obligations under this
Agreement and any obligations it has under any Credit Support
Document to which it is a party and has taken all necessary
action to authorize such execution, delivery and performance;
(iii) No Violation or Conflict. Such execution, delivery and
performance do not violate or conflict with any law applicable
to it, any provision of its constitutional documents, any
order or judgment of any court or other agency of government
applicable to it or any of its assets or any contractual
restriction binding on or affecting it or any of its assets;
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(iv) Consents. All governmental and other consents that are
required to have been obtained by it with respect to this
Agreement or any Credit Support Document to which it is a
party have been obtained and are in full force and effect and
all conditions of any such consents have been complied with;
and
(v) Obligations Binding. Its obligations under this Agreement and
any Credit Support Document to which it is a party constitute
its legal, valid and binding obligations, enforceable in
accordance with their respective terms (subject to applicable
bankruptcy, reorganization, insolvency, moratorium or similar
laws affecting creditors' rights generally and subject, as to
enforceability, to equitable principles of general application
(regardless of whether enforcement is sought in a proceeding
in equity or at law)).
(b) Absence of Certain Events. No Event of Default or Potential Event of Default
or, to its knowledge, Termination Event with respect to it has occurred and is
continuing and no such event or circumstance would occur as a result of its
entering into or performing its obligations under this Agreement or any Credit
Support Document to which it is a party.
(c) Absence of Litigation. There is not pending or, to its knowledge, threatened
against it or any of its Affiliates any action, suit or proceeding at law or in
equity or before any court, tribunal, governmental body, agency or official or
any arbitrator that is likely to affect the legality, validity or enforceability
against it of this Agreement or any Credit Support Document to which it is a
party or its ability to perform its obligations under this Agreement or such
Credit Support Document.
(d) Accuracy of Specified Information. All applicable information that is
furnished in writing by or on behalf of it to the other party and is identified
for the purpose of this Section 3(d) in the Schedule is, as of the date of the
information, true, accurate and complete in ever, material respect.
4. Agreements
Each party agrees with the other that, so long as either party has or may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party:--
(a) Furnish Specified Information. It will deliver to the other party any forms,
documents or certificates specified in the Schedule or any Confirmation by the
date specified in the Schedule or such Confirmation or, if none is specified, as
soon as reasonably practicable.
(b) Maintain Authorizations. It will use all reasonable efforts to maintain in
full force and effect all consents of any governmental or other authority that
are required to be obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party, and will use all reasonable efforts to
obtain any that may become necessary in the future.
(c) Comply with Laws. It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to comply
would materially, impair its ability to perform its obligations under this
Agreement or any Credit Support Document to which it is a party.
5. Events of Default and Termination Events
(a) Events of Default. The occurrence at any time with respect to a party or, if
applicable, any Credit Support Provider of such party or any Specified Entity of
such party of any of the following events constitutes an event of default (an
"Event of Default") with respect to such party:--
(i) Failure to Pay or Deliver. Failure by the party to make, when
due, any payment under this Agreement or delivery under
Section 2(a)(i) or 2(d) required to be made by it if such
failure is not remedied on or before the third Local Business
Day after notice of such failure is given to the party;
(ii) Breach of Agreement. Failure by the party to comply with or
perform any agreement or obligation (other than an obligation
to make any payment under this Agreement or delivery under
Section 2(a)(i) or 2(d) or to give notice of a Termination
Event) to be complied with or performed
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by the party in accordance with this Agreement if such
failure is not remedied on or before the thirtieth day after
notice of such failure is given to the party;
(iii) Credit Support Default.
(1) Failure by the party or any Credit Support Provider of
such party to comply with or perform any agreement or
obligation to be complied with or performed by it in
accordance with any Credit Support Document if such failure is
continuing after any applicable grace period has elapsed;
(2) the expiration or termination of such Credit Support
Document or the failing or ceasing of such Credit Support
Document to be in full force and effect for the purpose of
this Agreement (in either case other than in accordance with
its terms) prior to the satisfaction of all obligations of
such party under each Transaction to which such Credit Support
Document relates without the written consent of the other
party; or
(3) the party or such Credit Support Provider disaffirms,
disclaims, repudiates or rejects, in whole or in part, or
challenges the validity of, such Credit Support Document;
(iv) Misrepresentation. A representation made or repeated or deemed
to have been made or repeated by the party or any Credit
Support Provider of such party in this Agreement or any Credit
Support Document proves to have been incorrect or misleading
in any material respect when made or repeated or deemed to
have been made or repeated;
(v) Default under Specified Transaction. The party, any Credit
Support Provider of such party or any applicable Specified
Entity of such party (1) defaults under a Specified
Transaction and, after giving effect to any applicable
notice requirement or grace period, there occurs a
liquidation of, an acceleration of obligations under, or an
early termination of, that Specified Transaction, (2)
defaults, after giving effect to any applicable notice
requirement or grace period, in making any payment or
delivery due on the last payment, delivery or exchange date
of, or any payment on early termination of, a Specified
Transaction (or such default continues for at least three
Local Business Days if there is no applicable notice
requirement or grace period) or (3) disaffirms, disclaims,
repudiates or rejects, in whole or in part, a Specified
Transaction (or such action is taken by any person or entity
appointed or empowered to operate it or act on its behalf);
(vi) Cross Default. If "Cross Default" is specified in the
Schedule as applying to the party, the occurrence or
existence of (1) a default, event of default or other
similar condition or event (however described) in respect of
such party, any Credit Support Provider of such party or any
applicable Specified Entity of such party under one or more
agreements or instruments relating to Specified Indebtedness
of any of them (individually or collectively) in an
aggregate amount of not less than the applicable Threshold
Amount (as specified in the Schedule) which has resulted in
such Specified Indebtedness becoming, or becoming capable at
such time of being declared, due and payable under such
agreements or instruments, before it would otherwise have
been due andpayable or (2) a default by such party, such
Credit Support Provider or such Specified Entity
(individually or collectively) in making one or more
payments on the due date thereof in an aggregate amount of
not less than the applicable Threshold Amount under such
agreements or instruments (after giving effect to any
applicable notice requirement or grace period);
(vii) Bankruptcy. The party, any Credit Support Provider of such
party or any applicable Specified Entity of such party:--
(1) is dissolved (other than pursuant to a consolidation,
amalgamation or merger); (2) becomes insolvent or is unable to
pay its debts or fails or admits in writing its inability
generally to pay its debts as they become due; (3) makes a
general assignment, arrangement or composition with or for the
benefit of its creditors; (4) institutes or has instituted
against it a proceeding seeking a judgment of insolvency or
bankruptcy or any other relief under any bankruptcy or
insolvency law or other similar law affecting creditors'
rights, or a petition is presented for its
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winding-up or liquidation, and, in the case of any such
proceeding or petition instituted or presented against it,
such proceeding or petition (A) results in a judgment of
insolvency or bankruptcy or the entry of an order for relief
or the making of an order for its winding-up or liquidation
or (B) is not dismissed, discharged, started or restrained
in each case within 30 days of the institution or
presentation thereof; (5) has a resolution passed for its
winding-up, official management or liquidation (other than
pursuant to a consolidation, amalgamation or merger); (6)
seeks or becomes subject to the appointment of an
administrator, provisional liquidator, conservator, receiver,
trustee, custodian or other similar official for it or for all
or substantially all its assets; (7) has a secured party take
possession of all or substantially all its assets or has a
distress, execution, attachment, sequestration or other legal
process levied, enforced or sued on or against all or
substantially all its assets and such secured party maintains
possession, or any such process is not dismissed, discharged,
stayed or restrained, in each case within 30 days thereafter;
(8) causes or is subject to any event with respect to it
which, under the applicable laws of any jurisdiction, has an
analogous effect to any of the events specified in clauses (1)
to (7) (inclusive); or (9) takes any action in furtherance of,
or indicating its consent to, approval of, or acquiescence in,
any of the foregoing acts; or
(viii) Merger Without Assumption. The party or any Credit Support
Provider of such party consolidates or amalgamates with, or
merges with or into, or transfers all or substantially all its
assets to, another entity and, at the time of such
consolidation, amalgamation, merger or transfer:--
(1) the resulting, surviving or transferee entity fails to
assume all the obligations of such party or such Credit
Support Provider under this Agreement or any Credit Support
Document to which it or its predecessor was a party by
operation of law or pursuant to an agreement reasonably
satisfactory to the other party to this Agreement; or
(2) the benefits of any Credit Support Document fail to extend
(without the consent of the other party) to the performance by
such resulting, surviving or transferee entity of its
obligations under this Agreement.
(b) Termination Events. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified Entity
of such party of any event specified below constitutes an Illegality if the
event is specified in (i) below, and, if specified to be applicable, a Credit
Event Upon Merger if the event is specified pursuant to (ii) below or an
Additional Termination Event if the event is specified pursuant to (iii)
below:--
(i) Illegality. Due to the adoption of, or any change in, any
applicable law after the date on which a Transaction is
entered into, or due to the promulgation of, or any change in,
the interpretation by any court, tribunal or regulatory
authority with competent jurisdiction of any applicable law
after such date, it becomes unlawful (other than as a result
of a breach by the party of Section 4(b)) for such party
(which will be the Affected Party):--
(1) to perform any absolute or contingent obligation to make a
payment or delivery or to receive a payment or delivery in
respect of such Transaction or to comply with any other
material provision of this Agreement relating to such
Transaction; or
(2) to perform, or for any Credit Support Provider of such
party to perform, any contingent or other obligation which the
party (or such Credit Support Provider) has under any Credit
Support Document relating to such Transaction;
(ii) Credit Event Upon Merger. If "Credit Event Upon Merger" is
specified in the Schedule as applying to the party, such
party ("X"), any Credit Support Provider of X or any
applicable Specified Entity of X consolidates or amalgamates
with, or merges with or into, or transfers all or
substantially all its assets to, another entity and such
action does not constitute an event described in Section
5(a)(viii) but the creditworthiness of the resulting,
surviving or transferee entity is materially weaker dm that
of X, such Credit Support Provider or such Specified Entity,
as the case may be, immediately prior to such action (and,
in such event, X or its successor or transferee, as
appropriate, will be the Affected Party); or
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(iii) Additional Termination Event. If any "Additioinal Termination
Event" is specified in the Schedule or any Confirmation as
applying, the occurrence of such event (and, in such event.
the Affected Party or Affected Parties shall be as specified
for such Additional Termination Event in the Schedule or such
Confirmation).
(c) Event of Default and Illegality. If an event or circumstance which would
otherwise constitute or give rise to an Event of Default also constitutes an
Illegality, it will be treated as an Illegality and will not constitute an Event
of Default.
6. Early Termination
(a) Right to Terminate Following Event of Default. If at any time an Event of
Default with respect to a party (the "Defaulting Party") has occurred and is
then continuing, the other party (the "Non-defaulting Party") may, by not more
than 20 days notice to the Defaulting Party specifying the relevant Event of
Default, designate a day not earlier than the day such notice is effective as an
Early Termination Date in respect of all outstanding Transactions. If, however,
"Automatic Early Termination" is specified in the Schedule as applying to a
party, then an Early Termination Date in respect of all outstanding Transactions
will occur immediately upon the occurrence with respect to such party of an
Event of Default specified in Section 5(a)(vii)(1), (3), (5), (6) or, to the
extent analogous thereto, (8), and as of the time immediately preceding the,
institution of the relevant proceeding or the presentation of the relevant
petition upon the occurrence with respect to such party of an Event of Default
specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8).
(b) Right to Terminate Following Termination Event.
(i) Notice. If a Termination Event occurs, an Affected Party will,
promptly upon becoming aware of it, notify the other party,
specifying the nature of that Termination Event and each
Affected Transaction and will also give such other information
about that Termination Event as the other party may reasonably
require.
(ii) Two Affected Parties. If an Illegality under Section
5(b)(i)(1) occurs and there are two Affected Parties, each
party will use all reasonable efforts to reach agreement
within 30 days after notice thereof is given under Section
6(b)(i) on action to avoid that Termination Event.
(iii) Right to Terminate. If:--
(1) an agreement under Section 6(b)(ii) has not been effected
with respect to all Affected Transactions within 30 days after
an Affected Party gives notice under Section 6(b)(i); or
(2) an Illegality other than that referred to in Section
6(b)(ii), a Credit Event Upon Merger or an Additional
Termination Event occurs,
either party in the case of an Illegality, any Affected Party in the
case of an Additional Termination Event if there is more than one
Affected Party, or tbe party which is not the Affected Party in the
case of a Credit Event Upon Merger or an Additional Termination Event
if there is only one Affected Party may, by not more than 20 days
notice to the other party and provided that the relevant Termination
Event is then continuing, designate a day not earlier than the day such
notice is effective as an Early Termination Date in respect of all
Affected Transactions.
(c) Effect of Designation.
(i) If notice designating an Early Termination Date is given under
Section 6(a) or (b), the Early Termination Date will occur on
the date so designated, whether or not the relevant Event of
Default or Termination Event is then continuing.
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(ii) Upon the occurrence or effective designation of an Early
Termination Date, no further payments or deliveries under
Section 2(a)(i) or 2(d) in respect of the Terminated
Transactions will be required to be made, but without
prejudice to the other provisions of this Agreement. The
amount, if any, payable in respect of an Early Termination
Date shall be determined pursuant to Section 6(e).
(d) Calculations.
(i) Statement. On or as soon as reasonably practicable following
the occurrence of an Early Termination Date, each party will
make the calculations on its part, if any, contemplated by
Section 6(e) and will provide to the other party a statement
(1) showing, in reasonable detail, such calculations
(including all relevant quotations and specifying any amount
payable under Section 6(e)) and (2) giving details of the
relevant account to which any amount payable to it is to be
paid. In the absence of written confirmation from the source
of a quotation obtained in determining a Market Quotation,
the records of the party obtaining such quotation will be
conclusive evidence of the existence and accuracy of such
quotation.
(ii) Payment Date. An amount calculated as being due in respect
of any Early Termination Date under Section 6(e) will be
payable on the day that notice of the amount payable is
effective (in the case of an Early Termination Date which is
designated or occurs as a result of an Event of Default) and
on the day which is two Local Business Days after the day on
which notice of the amount pavable is effective (in the case
of an Early Termination Date which is designated as a result
of a Termination Event). Such amount will be paid together
with (to the extent permitted under applicable law) interest
thereon (before as well as after judgment), from (and
including) the relevant Early Termination Date to (but
excluding) the date such amount is paid, at the Applicable
Rate. Such interest will be calculated on the basis of daily
compounding and the actual number of days elapsed.
(e) Payments on Early Termination. If an Early Termination Date occurs, the
following provisions shall apply based on the parties' election in the Schedule
of a payment measure, either "Market Quotation" or "Loss", and a payment method,
either the "First Method" or the "Second Method". If the parties fail to
designate a payment measure or payment method in the Schedule, it will be deemed
that "Market Quotation" or the "Second Method", as the case may be, shall apply.
The amount, if any, payable in respect of an Early Termination Date and
determined pursuant to this Section will The subject to any Set-off.
(i) Events of Default. If the Early Termination Date results from
an Event of Default:--
(1) First Method and Market Quotation. If the First Method and
Market Quotation apply, the Defaulting Party will pay to the
Non-defaulting Party the excess, if a positive number, of (A)
the sum of the Settlement Amount (determined by the
Non-defaulting Party) in respect of the Terminated
Transactions and the Unpaid Amounts owing to the
Non-defaulting Party over (B) the Unpaid Amounts owing to the
Defaulting Party.
(2) First Method and Loss. If the First Method and Loss apply,
the Defaulting Party will pay to the Non-defaulting Party, if
a positive number, the Non-defaulting Party's Loss in respect
of this Agreement.
(3) Second Method and Market Quotation. If the Second Method
and Market Quotation apply, an amount will be payable equal to
(A) the sum of the Settlement Amount (determined by the
Non-defaulting Party) in respect of the Terminated
Transactions and the Unpaid Amounts owing to the
Non-defaulting Party less (B) the Unpaid Amounts owing to the
Defaulting Party. If that amount is a positive number, the
Defaulting Party will pay it to the Non-defaulting Party; if
it is a negative number, the Non-defaulting Party will pay the
absolute value of that amount to the Defaulting Party.
(4) Second Method and Loss. If the Second Method and Loss
apply, an amount will be payable equal to the Non-defaulting
Party's Loss in respect of this Agreement. If that amount is a
positive number, the Defaulting Party will pay it to the
Non-defaulting Party; if it is a negative
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number, the Non-defaulting Party will pay the absolute value
of that amount to the Defaulting Party.
(ii) Termination Events. If the Early Termination Date results from
a Termination Event:--
(1) One Affected Party. If there is one Affected Party, the
amount payable will be determined in accordance with Section
6(e)(i)(3), if Market Quotation applies, or Section
6(e)(i)(4), if Loss applies, except that, in either case,
references to the Defaulting Party and to the Non-defaulting
Party will be deemed to be references to the Affected Party
and the party which is not the Affected Party, respectively,
and, if Loss applies and fewer than all the Transactions are
being terminated, Loss shall be calculated in respect of all
Terminated Transactions.
(2) Two Affected Parties. If there are two Affected Parties:--
A. if Market Quotation applies, each party
shall determine a Settlement Amount in
respect of the Terminated Transactions, and
an amount will be payable equal to (1) the
sum of (a) one-half of the difference
between the Settlement Amount of the party
with the higher Settlement Amount ("X") and
the Settlement Amount of the party with the
lower Settlement Amount ("Y") and (b) the
Unpaid Amounts owing to X less (II) the
Unpaid Amounts owing to Y; and
B. if Loss applies, each party will determine
its Loss in respect of this Agreement (or,
if fewer than all the Transactions are being
terminated, in respect of all Terminated
Transactions) and an amount will be payable
equal to one-half of the difference between
the Loss of the party with the higher Loss
("X") and the Loss of the party with the
lower Loss ("Y").
If the amount payable is a positive number, Y will pay it to
X; if it is a negative number, X will pay the absolute value
of that amount to Y.
(iii) Adjustment for Bankruptcy. In circumstances where an Early
Termination Date occurs because "Automatic Early Termination"
applies in respect of a party, the amount determined under
this Section 6(e) will be subject to such adjustments as are
appropriate and permitted by law to reflect any payments or
deliveries made by one party to the other under this Agreement
(and retained by such other party) during the period from the
relevant Early Termination Date to the date for payment
determined under Section 6(d)(ii).
(iv) Pre-Estimate. The parties agree that if Market Quotation
applies an amount recoverable under this Section 6(e) is a
reasonable pre-estimate of loss and not a penalty. Such amount
is payable for the loss of bargain and the loss of protection
against future risks and except as otherwise provided in this
Agreement neither party will be entitled to recover any
additional damages as a consequence of such losses.
7. Transfer
Neither this Agreement nor any interest or obligation in or under this Agreement
may be transferred (whether by way of security or otherwise) by either party
without the prior written consent of the other party, except that:--
(a) a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or transfer of all
or substantially all its assets to, another entity (but without prejudice to any
other right or remedy under this Agreement); and
(b) a party may make such a transfer of all or any part of its interest in any
amount payable to it from a Defaulting Party under Section 6(e).
Any purported transfer that is not in compliance with this Section will be void.
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8. Miscellaneous
(a) Entire Agreement. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and supersedes
all oral communication and prior writings with respect thereto.
(b) Amendments. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing evidenced by
a facsimile transmission) and executed by each of the parties or confirmed by an
exchange of telexes or electronic messages on an electronic messaging system.
(c) Survival of Obligations. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will survive the
termination of any Transaction.
(d) Remedies Cumulative. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are cumulative and
not exclusive of any rights, powers, remedies and privileges provided by law.
(e) Counterparts and Confirmations.
(i) This Agreement (and each amendment, modification and waiver in
respect of it) may be executed and delivered in counterparts
(including by facsimile transmission), each of which will be
deemed an original.
(ii) The parties intend that they are legally bound by the terms
of each Transaction from the moment they agree to those
terms (whether orally or otherwise). A Confirmation shall be
entered into as soon as practicable and may be executed and
delivered in counterparts (including by facsimile
transmission) or be created by an exchange of telexes or by
an exchange of electronic messages on an electronic
messaging system, which in each case will be sufficient for
all purposes to evidence a binding supplement to this
Agreement. The parties will specify therein or through
another effective means that any such counterpart, telex or
electronic message constitutes a Confirmation.
(f) No Waiver of Rights. A failure or delay in exercising any right, power or
privilege in respect of this Agreement will not be presumed to operate as a
waiver, and a single or partial exercise of any right, power or privilege will
not be presumed to preclude any subsequent or further exercise, of that right,
power or privilege or the exercise of any other right, power or privilege.
(g) Headings. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken into
consideration in interpreting this Agreement.
9. Expenses
A Defaulting Party will, on demand, indemnify and hold harmless the other party
for and against all reasonable out-of-pocket expenses, including legal fees,
incurred by such other party by reason of the enforcement and protection of its
rights under this Agreement or any Credit Support Document to which the,
Defaulting Party is a party or by reason of the early termination of any
Transaction, including, but not limited to, costs of collection.
10. Notices
(a) Effectiveness. Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except that a notice or
other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address or number or in
accordance with the electronic messaging system details provided (see the
Schedule) and will be deemed effective as indicated:--
(i) if in writing and delivered in person or by courier,, on the
date it is delivered;
(ii) if sent by telex, on the date the recipient's answerback is
received;
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(iii) if sent by facsimile transmission, on the date that
transmission is received by a responsible employee of the
recipient in legible form (it being agreed that the burden of
proving receipt will be on the sender and will not be met by a
transmission report generated by the sender's facsimile
machine);
(iv) if sent by certified or registered mail (airmail, if overseas)
or the equivalent (return receipt requested), on the date that
mail is delivered or its delivery is attempted; or
(v) if sent by electronic messaging system, on the date that
electronic message is received,
unless the date of that delivery (or attempted delivery) or that receipt, as
applicable, is not a Local Business Day or that communication is delivered (or
attempted) or received, as applicable, after the close of business on a Local
Business Day, in which case that communication shall be deemed given and
effective on the first following day that is a Local Business Day.
(b) Change of Addresses. Either party may by notice to the other change the
address, telex or facsimile number or electronic messaging system details at
which notices or other communications are to be given to it.
11. Governing Law and Jurisdiction
(a) Governing Law. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.
(b) Jurisdiction. With respect to any suit, action or proceedings relating to
this Agreement ("Proceedings"), each party irrevocably:--
(i) submits to the jurisdiction of the English courts, if this
Agreement is expressed to be governed by English law, or to
the non-exclusive jurisdiction of the courts of the State of
New York and the United States District Court located in the
Borough of Manhattan in New York City, if this Agreement is
expressed to be governed by the laws of the State of New York;
and
(ii) waives any objection which it may have at any time to the
laying of venue of any Proceedings brought in any such
court, waives any claim that such Proceedings have been
brought in an inconvenient forum and further waives the
right to object, with respect to such Proceedings, that such
court does not have any jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 1(3) of the Civil
Jurisdiction and Judgments Act 1982 or any modification, extension or
reenactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.
(c) Waiver of Immunities. Each party irrevocably waives, to the fullest extent
permitted by applicable law, with respect to itself and its revenues and assets
(irrespective of their use or intended use), all immunity on the grounds of
sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any
court, (iii) relief by way of injunction, order for specific performance or for
recovery of property, (iv) attachment of its assets (whether before or after
judgment) and (v) execution or enforcement of any judgment to which it or its
revenues or assets might otherwise be entitled in any Proceedings in the courts
of any jurisdiction and irrevocably agrees, to the extent permitted by
applicable law, that it will not claim any such immunity in any Proceedings.
12. Definitions
As used in this Agreement:--
"Additional Termination Event" has the meaning specified in, Section 5(b).
"Affected Party" has the meaning specified in Section 5(b).
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"Affected Transactions" means (a) with respect to any Termitiiation Event
consisting of an Illegality, all Transactions affected by the occurrence of such
Termination Event and (b) with respect to any other Termination Event, all
Transactions.
"Affiliate" means, subject to the Schedule, in relation to any person, any
entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control" of
any entity or person means ownership of a majority of the voting power of the
entity or person.
"Applicable Rate" means:--
(a) in respect of obligations payable or deliverable (or which would have been
but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;
(b) in respect of an obligation to pay an amount under Section 6(e) of either
party from and after the date (determined in accordance with Section 6(d)(ii))
on which that amount is payable, the Default Rate;
(c) in respect of all other obligations payable or deliverable (or which would
have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default
Rate; and
(d) in all other cases, the Termination Rate.
"consent" includes a consent, approval, action, authorisation, exemption,
notice, filing, registration or exchange control consent.
"Credit Event Upon Merger" has the meaning specified in Section 5(b).
"Credit Support Document" means any agreement or instrument that is specified as
such in this Agreement.
"Credit Support Provider" has the meaning specified in the Schedule.
"Default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus 1% per annum.
"Defaulting Party" has the meaning specified in Section 6(a).
"Early Termination Date" means the date determined in accordance with Section
6(a) or 6(b)(iii).
"Event of Default" has the meaning specified in Section 5(a) and, if applicable,
in the Schedule.
"Illegality" has the meaning specified in Section 5(b).
"law" includes any treaty, law, rule or regulation and "lawful" and "unlawful"
will be construed accordingly.
"Local Business Day" means, subject to the Schedule, a day on which commercial
banks are open for business (including dealings in foreign exchange and foreign
currency deposits) (a) in relation to any obligation under Section 2(a)(i), in
the place(s) specified in the relevant Confirmation or, if not so specified, as
otherwise agreed by the parties in writing or determined pursuint to provisions
contained, or incorporated by reference, in this Agreement, (b) in relation to
any other payment, in the place where the relevant account is located, (c) in
relation to any notice or other communication, including notice contemplated
under Section 5(a)(i), in the city specified in the address for notice provided
by the recipient and, in the case of a notice contemplated by Section 2(b), in
the place where the relevant new account is to be located and (d) in relation to
Section 5(a)(v)(2), in the relevant locations for performance with respect to
such Specified Transaction.
"Loss" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, an amount that party reasonably
determines in good faith to be its total losses and costs (or gain, in which
case expressed as a negative number) in connection with this Agreement or that
Terminated Transaction or group of Terminated Transactions, as the case may be,
including any loss of bargain, cost of funding or, at the election of such party
but without duplication, loss or cost incurred as a result of its terminating,
liquidating, obtaining or reestablishing any hedge or related trading position
(or any gain
11
<PAGE>
resulting from any of them). Loss includes losses and costs (or gains) in
respect of any payment or delivery required to have been made (assuming
satisfaction of each applicable condition precedent) on or before the relevant
Early Termination Date and not made, except, so as to avoid duplication, if
Section 6(e)(i)(1) or (3) or 6(e)(ii)(2)(A) applies. Loss does not include a
party's legal fees and out-of-pocket expenses referred to under Section 9. A
party will determine its Loss as of the relevant Early Termination Date, or, if
that is not reasonably practicable, as of the earliest date thereafter as is
reasonably practicable. A party may (but need not) determine its Loss by
reference to quotations of relevant rates or prices from one or more leading
deniers in the relevant markets.
"Market Quotation" means, with respect to one or more Terminated Transactions
and a party making the determination, an amount determined on the basis of
quotations from Reference Market-makers. Each quotation will be for an amount,
if any, that would be paid to such party (expressed as a negative number) or by
such party (expressed as a positive number) in consideration of an agreement
between such party (taking into account any existing Credit Support Document
with respect to the obligations of such party) and the quoting Reference
Market-maker to enter into a transaction (the "Replacement Transaction") that
would have the effect of preserving for such party the economic equivalent of
any payment or delivery (whether the underlying obligation was absolute or
contingent and assuming the satisfaction of each applicable condition precedent)
by the parties under Section 2(a)(i) in respect of such Terminated Transaction
or group of Terminated Transactions that would, but for the occurrence of the
relevant Early Termination Date, have been required after that date. For this
purpose, Unpaid Amount,; in respect of the Terminated Transaction or group of
Terminated Transactions are to be excluded but, without limitation, any payment
or delivery that would, but for the relevant Early Termination Date, have been
required (assuming satisfaction of each applicable condition precedent) after
that Early Termination Date is to be included. The Replacement Transaction would
be subject to such documentation as such party and the Reference Market-maker
may, in good faith, agree. The party making the determination (or its agent)
will request each Reference Market-maker to provide its quotation to the extent
reasonably practicable as of the same day and time (without regard to different
time zones) on or as soon as reasonably practicable after the relevant Early
Termination Date. The day and time as of which those quotations are to be
obtained will be selected in good faith by the party obliged to make a
determination under Section 6(e), and, if each party is so obliged, after
consultation with the other. If more than three quotations are provided, the
Market Quotation will be the arithmetic mean of the quotations, without regard
to the quotations having the highest and lowest values. If exactly three such
quotations are provided, the Market Quotation will be the quotation remaining
after disregarding the highest and lowest quotations. For this purpose, if more
than one quotation has the same highest value or lowest value, then one of such
quotations shall be disregarded. If fewer than three quotations are provided, it
will be deemed that the Market Quotation in respect of such Terminated
Transaction or group of Terminated Transactions cannot be determined.
"Non-default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the Non-defaulting Party (as certified by it) if
it were to fund the relevant amount.
"Non-defaulting Party" has the meaning specified in Section 6(a).
"Potential Event of Default" means any event which, with the,giving of notice or
the lapse of time or both, would constitute an Event of Default.
"Reference Market-makers" means four leading dealers in the relevant market
selected by the party determining a Market Quotation in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria that
such party applies generally at the time in deciding whether to offer or to make
an extension of credit and (b) to the extent practicable, from among such
dealers having an office in the same city.
"Scheduled Payment Date" means a date on which a payment or, delivery is to be
made under Section 2(a)(i) with respect to a Transaction.
"Set-off" means set-off, offset, combination of accounts, right of retention or
withholding or similar right or requirement to which the payer of an amount
under Section 6 is entitled or subject (whether arising under
12
<PAGE>
this Agreement, another contract, applicable law or otherwise) that is exercised
by, or imposed on, such payer.
"Settlement Amount" means, with respect to a party and any Early Termination
Date, the sum of:--
(a) the Market Quotations (whether positive or negative) for each Terminated
Transaction or group of Terminated Transactions for which a Market Quotation is
determtined; and
(b) such party's Loss (whether positive or negative and without reference to any
Unpaid Amounts) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation cannot be determined or would not (in
the reasonable belief of the party making the determination) produce a
commercially reasonable result.
"Specified Entity" has the meaning specified in the Schedule.
"Specified Indebtedness" means, subject to the Schedule, any obligation (whether
present or future, contingent or otherwise, as principal or surety or otherwise)
in respect of borrowed money.
"Specified Transaction" means, subject to the Schedule, (a) any transaction
(including an agreement with respect thereto) now existing or hereafter entered
into between one party to this Agreement (or any Credit Support Provider of
such party or any applicable Specified Entity of such party) and the other party
to this Agreement (or any Credit Support Provider of such other party or any
applicable Specified Entity of such other party) which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions), (b) any combination of
these transactions and (c) any other transaction identified as a Specified
Transaction in this Agreement or the relevant confirmation.
"Terminated Transactions" means with respect to any Early Termination Date (a)
if resulting from a Termination Event, all Affected Transactions and (b) if
resulting from an Event of Default, all Transactions (in either case) in effect
immediately before the effectiveness of the notice designating that Early
Termination Date (or, if "Automatic Early Termination" applies, immediately
before that Early Termination Date).
"Termination Event" means an Illegality or, if specified to be applicable, a
Credit Event Upon Merger or an Additional Termination Event.
"Termination Rate" means a rate per annum equal to the arithmetic mean of the
cost (without proof or evidence of any actual cost) to each party (as certified
by such party) if it were to fund or of funding such amounts.
"Unpaid Amounts" owing to any party means, with respect to an Early Termination
Date, the aggregate of (a) in respect of all Terminated Transactions, the
amounts that became payable (or that would have become payable but for Section
2(a)(iii)) to such party under Section 2(a[)(i) on or prior to such Early
Termination Date and which remain unpaid as at such Early Termination Date and
(b) in respect of each Terminated Transaction, for each obligation under Section
2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be
settled by delivery to such party on or prior to such Early Termination Date and
which has not been so settled as at such Early Termination Date, an amount equal
to the fair market value of that which was (or would have been) required to be
delivered as of the originally scheduled date for delivery, in each case
together with (to the extent permitted under applicable law) interest, in the
currency of such amounts, from (and including) the date such amounts or
obligations were or would have been required to have been paid or performed to
(but excluding) such Early Termination Date, at the Applicable Rate. Such
amounts of interest will be calculated on the basis of daily compounding and the
actual number of days elapsed. The fair market value of any obligation referred
to in clause (b) above shall be reasonably determined
13
<PAGE>
by the party obliged to make the determination under Section 6(e) or, if each
party is so obliged, it shall be the average of the fair market values
reasonably determined by both parties.
IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
PECO Energy Transition Trust
- ------------------------------- ---------------------------------------
(Name of Party) (Name of Party)
By:____________________________ By:
Name: ------------------------------------
Title: Name:
Date: Title:
Date:
14
SCHEDULE
to the
Master Agreement
(Local Currency - Single Jurisdiction)
dated as of March 18, 1999
Between
Goldman Sachs Mitsui Marine Derivative Products, L.P., a partnership organized
under the laws of the State of Delaware located at 85 Broad Street, New York,
New York 10004 ("Party X"), and PECO Energy Transition Trust, a business trust
existing under the laws of the State of Delaware ("Party Y").
Part 1
Termination Provisions
In this Agreement:
(a) "Specified Entity" means in relation to Party X for the
purpose of:
Section 5(a)(v), Inapplicable
Section 5(a)(vi), Inapplicable
Section 5(a)(vii), The Goldman Sachs Group, L.P.
Section 5(b)(ii), Inapplicable
in relation to Party Y for the purpose of:
Section 5(a)(v), Inapplicable
Section 5(a)(vi), Inapplicable
Section 5(a)(vii), Inapplicable
Section 5(b)(ii), Inapplicable
(b) "Specified Transaction" will have the meaning specified in Section 12
of this Agreement.
(c) The "Failure to Pay or Deliver" provisions of Section 5(a)(i) will
apply to Party X and Party Y; provided, however, that (i) failure by
the party to make, when due, any payment under this Agreement or
delivery under Section 2(a)(i) or 2(d) required to be made by it will
constitute an Event of Default if such failure is not remedied on or
before the fifth Local Business Day after the occurrence of such
failure (the "Grace Period") and (ii) notwithstanding the aforesaid
Grace Period, the "Payment Date" specified in a Confirmation of a
Transaction on
<PAGE>
2
which Party X fails to make a payment is the due date for payment by
Party X's Credit Support Provider to Party Y under Party X's Credit
Support Document. Upon the occurrence of an Event of Default under
Section 5(a)(i) with Party X as the Defaulting Party, Party Y shall
appoint a Swap Agent meeting the qualifications therefor set forth in
Section 7 (c)(ii) of this Agreement (as amended by Part 4(e) of this
Schedule) who shall have 30 days to locate a Replacement Counterparty
and Party Y may assign Party X's rights and obligations under this
Agreement to such Replacement Counterparty, all in accordance with the
procedures set forth in Section 7(c)(iii) of this Agreement (as
amended by Part 4(e) of this Schedule). If, upon the conclusion of
such 30 day period, Party X's rights and obligations under this
Agreement have not been assigned to such Replacement Counterparty,
Party Y may declare an Early Termination Date which shall be as of the
end of such 30 day period. The provisions of Sections 7(c)(iv) and
7(c)(v) of this Agreement (each as amended by Part 4(e) of this
Schedule) shall apply to any assignment of or efforts to assign Party
X's rights and obligations pursuant to this clause (c).
(d) The "Breach of Agreement" provisions of Section 5(a) (ii) will be
inapplicable to Party Y.
(e) The "Credit Support Default" provisions of Section 5(a)(iii) will be
inapplicable to Party Y.
(f) The "Misrepresentation" provisions of Section 5(a) (iv) will be
inapplicable to Party Y.
(g) The "Default Under Specified Transaction" provisions of Section 5(a)(v)
will be inapplicable to either Party X or Party Y.
(h) The "Cross Default" provisions of Section 5(a) (vi) will be
inapplicable to either Party X or Party Y.
(i) The "Credit Event Upon Merger" provisions of Section 5(b)(ii) will be
inapplicable to either Party X or Party Y.
(j) Each of the following shall constitute Additional Termination Events:
(i) the Series 1999-A Class A-3 Transition Bonds being called for an
optional redemption, (ii) the principal and interest on the Series
1999-A Class A-3 Transition Bonds being declared immediately due and
payable pursuant to the Indenture and (iii) the events specified in
Section 7(c) of this Agreement (as amended by Part 4(e) of this
Schedule) as Additional Termination Events regardless of whether Party
X's
<PAGE>
3
rights and obligations under this Agreement are assigned to a
Replacement Counterparty. In the case of the Additional Termination
Event specified in clause (i) of this paragraph, this Agreement shall
automatically early terminate effective on the Redemption Date for the
Series 1999-A Class A-3 Transition Bonds without any action by Party X
or Party Y and there shall be no early termination payment arising
from such Additional Termination Event. In the case of the Additional
Termination Event specified in clause (ii) of this paragraph, Party Y
shall be the Affected Party and either Party X or Party Y may elect to
declare an Early Termination Date, in which case such Early
Termination Date shall be the date upon which principal and interest
thereon was declared immediately due and payable. In the case of the
Additional Termination Event specified in clause (iii) of this
paragraph the Affected Party shall be Party X and only Party Y may
elect to declare an Early Termination Date, in which case such Early
Termination Date shall be the date declared as provided in Section
7(c) of this Agreement.
(k) The "Automatic Early Termination" provisions of Section 6(a) will not
apply to Party X or Party Y.
(l) Payments on Early Termination. For the purpose of Section 6(e) of this
Agreement the Second Method and Market Quotation will apply provided,
however, that no payment shall be owed by either Party X or Party Y if
the event giving rise to the termination is an optional redemption of
the Series 1999-A Class A-3 Transition Bonds. In no event shall Party
Y be obligated to pay any amount determined in accordance with Section
6(e) (i) (3) unless and until the Transition Bonds have been fully
paid and discharged in accordance with their terms under the Indenture.
Party X agrees that any claims of Party X under this Agreement are
subordinated to the claims of the Transition Bondholders against Party
Y. Party Y covenants and agrees that under no circumstances will any
amounts be distributed to the beneficiary of Party Y as a dividend,
distribution or return of capital until such time as all amounts owed
to Party X have been fully and finally paid. Party Y further agrees to
reimburse Party X for payments made by Party X to Party Y in respect
of termination of this Agreement to the extent that amounts in
compensation for the termination of this Agreement are received by
Party Y from any person other than Party X.
Part 2
Documents to be Delivered
<PAGE>
4
For the purpose of Section 4(a):
(a) Tax forms, documents or certificates to be delivered are:
Each party agrees to complete, accurately and in a manner reasonably
satisfactory to the other party, and to execute, arrange for any
required certification of, and deliver to the other party(or to such
government or taxing authority as the other party reasonably directs),
any form or document (including, but not limited to, United States
Internal Revenue Service Forms 1001, 4224, and W-9) that may be
required or reasonably requested in order to allow the other party to
make a payment under this Agreement without any deduction or
withholding for or on account of any Tax or with such deduction or
withholding at reduced rate, promptly upon the earlier of (i)
reasonable demand by the other party and (ii) learning that the form or
document is required.
(b) Other documents to be delivered are:
(i) At the execution of this Agreement, each party shall deliver
to the other party, certified evidence of the authority,
incumbency and specimen signature of each authorized person
executing any document on its behalf and on behalf of its
Credit Support Provider, if any, in connection with this
Agreement. Such evidence is covered by the Section 3(d)
representation.
(ii) Party X upon request shall promptly deliver to the other
party, a copy of its most recent annual balance sheets
prepared in accordance with accounting principles that are
generally accepted for institutions of its type in the
jurisdiction of its organization consistently applied and
reviewed by independent public accountants, including the
same for its Credit Support Provider, if any. Such documents
are covered by the Section 3(d) representation.
(iii) Each party shall promptly deliver to the other party an
opinion of counsel, including, if applicable, an opinion in
respect of any Credit Support Document, substantially in the
form of Annex A. Party Y shall further deliver to Party X
letters from counsel to Party Y to the collective effect
that Party X may rely on the opinions of such counsel
regarding authorization, execution, delivery and
enforceability of the Sale Agreement, the Servicing
Agreement and the Indenture as if such opinions were
addressed to Party
<PAGE>
5
X. Documents delivered pursuant to this clause (iii) are not
covered by the Section 3(d) representation.
(iv) Each party upon request shall promptly deliver to the other
party such other public information respecting its and, if
applicable, its Credit Support Provider's, condition or
operations, financial or otherwise, as may reasonably be
requested from time to time. Such documents are covered by
the Section 3(d) representation.
(vi) At execution of this Agreement, Party X shall deliver to
Party Y the Guarantee of its Credit Support Provider. Such
Guarantee is not covered by the Section 3(d)
representation.
Part 3
Miscellaneous
(a) Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of New York without reference to
choice of laws doctrine, except that (i) the capacity, power or
authority of Party Y to enter into this Agreement and any issue
relating to the interpretation of Party Y's resolution authorizing
this Agreement will be governed by and construed in accordance with
the laws of the State of Delaware and (ii) any issue relating to the
interpretation of the Indenture applicable to Party Y will be governed
and construed in accordance with the laws of the Commonwealth of
Pennsylvania. Section 11(b)(i) of this Agreement is deleted and in
substitution is amended by adding thereto the following: "(ii)
regardless of the law which applies to this Agreement, with respect to
any Proceedings, each party irrevocably submits to the non-exclusive
jurisdiction of the courts of the States of Delaware and New York and
the United States District Courts for the District of Delaware and the
Southern District of New York; and".
(b) "Affiliate" will have the meaning specified in Section 12, but as to
Party Y will not include PECO Energy Company or affiliates thereof.
(c) Addresses for Notices. For the purpose of Section 10:
Address for notices or communications to Party X:
Address: 85 Broad Street
New York, New York 10004
<PAGE>
6
Attention: Legal Department
Facsimile No.: 212-902-3876
Telephone No.: 212-902-1000
Address for Notices or communications to Party Y:
Address: c/o First Union Trust Company National
Association
One Rodney Square
920 King Street
Wilmington, Delaware 19801
Telephone No.: 302-888-7532
(d) Credit Support Document. Details of any Credit Support Document: Party
X - Guarantee of The Goldman Sachs Group, L.P., dated as of March 18,
1999, substantially in the form of Annex B Party Y - None.
(e) Credit Support Provider. Party X - The Goldman Sachs Group, L.P. Party
Y - None; it being understood that in no event shall the Bond Trustee
be deemed to be a Credit Support Provider.
(f) Calculation Agent. The Calculation Agent is Party X, unless specified
otherwise in a Confirmation in relation to the relevant Transaction;
provided, however, that, if Party Y objects to any calculation, Party
X and Party Y will negotiate in good faith to agree on an independent
swaps dealer of the highest credit standing to make such calculation,
which will be binding on Party X and Party Y absent manifest error.
The costs of such dealer will be borne equally by Party X and Party Y.
If Party X is a Defaulting Party, the Calculation Agent will be Party
Y. Party X agrees that on or prior to each Interest Determination Date
it will notify the Servicer of LIBOR as determined by Party X.
Part 4
Other Provisions
(a) ISDA Definitions. The 1991 ISDA Definitions (the "1991 Definitions") as
published by the International Swaps and Derivatives Association, Inc.,
shall be deemed a part of this Agreement as if fully set forth herein.
The 1991 Definitions
<PAGE>
7
and the provisions of Section 12 of this Agreement shall be deemed a
part of each Confirmation as if set forth in full therein.
(b) Interpretation. In the event of any inconsistency between the
provisions of the Schedule and the Definitions, this Schedule will
prevail. In the event of any inconsistency between the provisions of
this Schedule and the printed Agreement of which it forms a part, this
Schedule will prevail. In the event of any inconsistency between the
provisions of any Confirmation and this Schedule, such Confirmation
will prevail for the purpose of the relevant Transaction.
(c) Expenses. Section 9 of this Agreement, bearing the heading "Expenses,"
is amended as follows: (1) on the first line strike the first word "A"
and insert before the words "Defaulting Party" the words: "Party X, if
it is the"; (2) on the first line strike the words "the other party"
and insert therein the words "Party Y"; (3) on the second line strike
the words "such other party" and insert therein the words "Party Y";
(4) on the fifth line, after the words "costs of collection" and
before the ".", insert the words ", and all fees, costs and expenses
paid or payable by Party Y to Reference market- makers to the extent
necessary to determine or obtain Market Quotations."; and (5) at the
end of the paragraph insert: "If Party Y is a Defaulting Party by
reason of an early termination of any Transaction, Party X will not
except as provided in Section 6 of this Agreement (as amended by Part
1(l) of this Schedule) request indemnification from Party Y and Party
Y will not indemnify Party X for any resulting expenses, including any
actual or consequential losses or damages incurred by Party X or its
Credit Support Provider."
(d) Consent to Recording. Each party consents to the recording of the
telephone conversations of relevant personnel of the parties and their
Affiliates in connection with this Agreement or any potential
Transaction.
(e) Transfer. The Transfer provision of Section 7 is amended by: (A)
deleting at the end of subparagraph (b) the period and replacing it
with "; and" and (B) adding the following new subparagraph (c):
"(c) in the event of a Downgrade Event (as defined below), an
assignment of Party X's rights and obligations under this Agreement may
be required as follows:
<PAGE>
8
(i) For the purpose of this Agreement, "Downgrade Event" means either
(A) a failure of Party X's Credit Support Provider to maintain ratings
by both of the Required Rating Agencies at least equal to the Required
Rating therefor or (B) the failure of Party X to maintain in effect any
arrangements established pursuant to subparagraph (c)(ii) below unless
the Rating Agency Condition is satisfied in connection therewith.
"Qualified Replacement Counterparty" means a Replacement Counterparty
that (X) satisfies the Required Rating for each of the Required Rating
Agencies or (Y) enters into such other arrangement as will result in
the Series 1999- A Class A-3 Transition Bonds receiving a rating not
less than would be received if such Replacement Counterparty satisfied
the Required Rating for each of the Required Rating Agencies. "Rating
Agency" means any rating agency rating the Series 1999-A Class A-3
Transition Bonds at the time of issuance thereof at the request of
Party Y. 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 Party Y.
"Rating Agency Condition" means, with respect to any action, the
notification in writing by each Rating Agency to, among others, Party
Y, that such action will not result in a reduction or withdrawal of the
then current rating by such Rating Agency of the Series 1999-A Class
A-3 Transition Bonds. "Replacement Counterparty" means a replacement
for Party X selected as provided in this Clause (c). "Required Rating"
means Aa3 in the case of Moody's Investors Service, Inc. ("Moody's")
and either AA or A-l+ in the case of Standard & Poor's Ratings Group
("Standard & Poor's") "Required Rating Agencies" means both Moody's and
Standard & Poor's.
(ii) In the event of a Downgrade Event, Party X must either (A) assign
its rights and obligations under this Agreement to a Qualified
Replacement Counterparty or (B) establish such other arrangement as
will satisfy the Rating Agency Condition, which may include providing a
guaranty of its obligations hereunder or collateralizing any net
present value of its obligations hereunder.
(iii) If, within 30 days of a Downgrade Event, Party X has not
successfully made the assignment or established the arrangement
specified in subparagraph (c) (ii) above, then Party Y shall appoint a
recognized swap dealer which is a member of the International Swaps
and Derivatives Association, Inc. with capital and surplus of at least
$50 million (the "Swap Agent") to independently solicit a Replacement
Counterparty, who shall not be the Swap Agent or an Affiliate
<PAGE>
9
thereof, for a period not exceeding 30 days. During such 30 day
period, the Swap Agent shall seek to find a Qualified Replacement
Counterparty, or if a Qualified Replacement Counterparty cannot be
found, the Swap Agent will identify the highest rated Replacement
Counterparty available that in any event is rated above Party X by at
least one of the Required Rating Agencies. In either case, during such
30 day period the Swap Agent shall be limited to obtaining a Qualified
Replacement Counterparty or Replacement Counterparty who is willing to
intermediate the credit risk of Party X to Party Y by entering into a
transaction with Party X under terms substantially the same as this
Agreement to hedge or offset the risk that such Qualified Replacement
Counterparty or Replacement Counterparty has to Party Y under this
Agreement. If the Swap Agent is successful in identifying a
Replacement Counterparty, Party Y may execute an agreement
(substantially in the form of this Agreement) with the Replacement
Counterparty and this Agreement and Party X's rights and obligations
shall be deemed to have been assigned to such Replacement Counterparty
effective as of the Payment Date immediately succeeding such
execution, without any further action by Party X. Party X shall be
deemed to have consented to such assignment and to have entered into
another transaction with the Replacement Counterparty on substantially
the same terms as this Agreement but with the Replacement Counterparty
as Party Y thereunder. Upon such assignment, Party X shall be released
from all further obligations and liabilities arising under this
Agreement after the effective date of such assignment except that
Party X shall be liable for any amount paid to the Replacement
Counterparty for assuming Party X's rights and obligations under this
Agreement and shall receive any amounts paid by such Replacement
Counterparty to assume such rights and obligations and Party X's
obligations regarding the costs of soliciting a Replacement
Counterparty pursuant to subparagraph (c)(iv) and for fees and
expenses pursuant to subparagraph (v) below until an assignment to a
Qualified Replacement Counterparty is successfully completed shall
survive. If, upon the conclusion of such 30 day period, a Qualified
Replacement Counterparty has not assumed Party X's rights and
obligations under this Agreement, an Additional Termination Event will
occur with Party X as the Affected Party and Party Y, in its sole
discretion, may determine whether or not to (i) replace Party X with a
prospective Replacement Counterparty, if any, and/or (ii) declare an
Early Termination Date, which shall be as of the end of such 30 day
period.
<PAGE>
10
(iv) If a Downgrade Event shall have occurred and Party X's rights and
obligations under this Agreement have not been assigned to a Qualified
Replacement Counterparty pursuant to subparagraphs (c)(ii) or (iii)
above and Party X has not established and maintained in effect the
other arrangements specified in subparagraph (c)(ii) above, Party Y
shall appoint a Swap Agent to independently solicit a Replacement
Counterparty more satisfactory to each of the Rating Agencies in
accordance with the procedure set forth in subparagraph (c) (iii)
above, provided, however, that such Replacement Counterparty shall not
be required to enter into a transaction with Party X to intermediate,
hedge or offset risk. Such search shall be renewed every 6 months
thereafter until an assignment to a Qualified Replacement Counterparty
has been successfully completed. The costs of such solicitation shall
be paid by the original Party X in accordance with the next
subparagraph (c)(v). At the conclusion of each such 6 month period in
which an assignment to a Qualified Replacement Counterparty has not
been successfully completed, an Additional Termination Event will
occur with Party X as the Affected Party and Party Y, in its sole
discretion, may determine whether or not to (i) replace the then
current Party X with a prospective Replacement Counterparty, if any,
and/or (ii) declare an Early Termination Date, which shall be as of
the end of such 6 month period. The original Party X shall not be
liable for any termination payments in connection with any termination
occurring after it has been replaced by a Replacement Counterparty or
a Qualified Replacement Counterparty.
(v) In all circumstances, Party X shall be responsible for the payment
of the Swap Agent's reasonable fees and all other reasonable fees and
expenses of Party Y as a result of any assignment or proposed
assignment hereunder, and shall promptly make such payments."
(f) Waiver of Jury Trial. Each party irrevocably waives any and all rights
to trial by jury in any legal proceeding instituted in connection with
this Agreement or any Transaction to the fullest extent permitted by
law. As to any matter for which a jury trial cannot be waived, each
party agrees not to assert any such matter as a cross claim or
counterclaim in, nor move to consolidate the same with, any legal
proceeding in which a jury trial is waived.
(g) Parties to Rely on Their Own Expertise. Each party shall enter into
each Transaction governed by this Agreement in reliance only upon its
own judgment. Neither party holds
<PAGE>
11
itself out as advising, or any of its employees or agents as having
the authority to advise, the other party as to whether or not it
should enter into any such Transaction or as to any subsequent actions
relating thereto or on any other commercial matters concerned with any
Transaction governed by this Agreement, and neither party shall have
any responsibility or liability whatsoever in respect of any advice of
this nature given, or views expressed, by it or any of such persons to
the other party, whether or not such advice is given or such views are
expressed at the request of the other party.
(h) Immunity of Members of Party Y. No representation or agreement
contained in this Agreement shall be deemed to be the covenant or
agreement of any trustee, officer, attorney, agent or employee of
Party Y or any Credit Support Provider thereof in an individual
capacity. No recourse shall be had for any payment under this
Agreement or any claim based hereon against any trustee, officer,
agent, attorney or employee of Party Y or any Credit Support Provider
thereof past, present or future, or its successors or assigns, as
such, either directly or through Party Y or any Credit Support
Provider thereof, or any such successor corporation, whether by virtue
of any constitutional provision, statutes or rule of law, or by the
enforcement of any assessment or penalty, or otherwise, all of such
liability of such trustee, officers, agents, attorneys or employees
being hereby released as a condition of and as a consideration for the
execution and delivery of this Agreement.
(i) Facsimile and Telex Confirmation. The parties agree that they may from
time to time confirm the terms and conditions of any Transaction
entered into between them pursuant to the terms of this Agreement by
means of a telex or facsimile transmission from one party to another
followed by a telex or facsimile transmission confirming the terms of
the Transaction and any such exchange of telexes or facsimile
transmissions shall constitute a Confirmation for all purposes
hereunder.
(j) Counterparts. The Agreement and this Schedule may be executed in
several counterparts, each of which shall be an original and all of
which shall together constitute one instrument.
(k) No Bankruptcy Petition. Prior to the date that is one year and one day
after the date upon which all amounts payable in respect of Transition
Bonds issued by PECO Energy Transition Trust (the "Transition Bonds")
have been paid in accordance with the terms thereof, Party X shall not
institute against, or join any other person in instituting against,
Party Y, any
<PAGE>
12
bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any federal or state
bankruptcy or similar law (including proceedings seeking to
consolidate the assets of Party Y and PECO Energy Company), provided
that Party X may assert its own claims against Party Y once any such
proceedings have been instituted by another person.
(l) Accuracy of Specified Information. Section 3(d) is hereby amended by
adding in the third line thereof after the word "respect" and before
the period the words "or, in the case of audited or unaudited
financial statements or balance sheets, a fair presentation of the
financial condition of the relevant person (but unaudited financial
statements or balance sheets shall be subject to year end
adjustments)".
(m) Additional Representations. Section 3 is hereby amended by adding the
following additional Subsections:
(g) No Agency. It is entering into this Agreement and each
Transaction as principal (and not as agent or in any other capacity,
fiduciary or otherwise).
(h) Line of Business. It has entered into this Agreement
(including each Transaction evidenced hereby) in conjunction with the
line of business (including financial intermediation services) or the
financing of its business.
(i) Eligible Swap Participant. It is an Eligible Swap Participant
as defined in 17 C.F.R. ss. 35.1(b)(2)(vi).
(n) Illegality. The definition of "Illegality" in Section 5(b) (i) is hereby
amended by adding in the first and third lines thereof after the word
"applicable" and before the word "law" the words "United States federal or
state". It is agreed that the parties will not treat any event as an
"Illegality" without the prior receipt of a written opinion from an independent
law firm experienced in swap agreements, selected by the parties, that an
"Illegality" exists. No termination payments shall be owed by either Party X or
Party Y as a result of any illegality.
(o) No Recourse. Party Y's Transition Bonds, and all Series and Classes thereof
represent a beneficial interest in the property of Party Y only and do not
represent an interest in or obligation of either Party X or the holders of the
Transition Bonds, and no recourse may be (i) had by the holders of the
Transition Bonds against Party X or its assets with respect to the Transition
Bonds and/or this Agreement or (ii) had by Party X against the holders of
<PAGE>
13
the Transition Bonds for any reason. Without limitation of Party X's rights
under Section 5(a)(i) of this Agreement, Party Y's obligations to Party X under
this Agreement and each Confirmation are payable only if all amounts first
required to be paid to Party Y's Transition Bondholders have been paid in
accordance with the terms of the Indenture.
(p) Equitable Relief. Party X shall not request that any court issue attachment
remedies against Party Y with respect to any lawsuit, dispute or claim under
this Agreement.
(q) Regarding Party X. Party Y acknowledges and agrees that Party X had no
involvement in and, accordingly, accepts no responsibility for: (i) the
establishment, structure, or choice of assets of Party Y or any series; (ii) the
selection of any person performing services for or acting on behalf of Party Y;
(iii) the selection of Party X as a swap provider; (iv) the terms of the
Transition Bonds; (v) the preparation of or passing on the disclosure and other
information contained in any offering circular, prospectus, series supplement,
trust deed, or any other agreements or documents used by Party Y or any other
party in connection with the marketing and sale of the Transition Bonds, except
with respect to written information furnished to Party Y by Party X which
describes Party X for use in Party Y's required disclosure documents; (vi) the
ongoing operations and administration of Party Y, including the furnishing of
any information to Party Y which is not specifically required under this
Agreement; or (vii) any other aspect of Party Y's existence except for those
matters specifically identified in this Agreement.
(r) Certain Definitions. Section 1 (a) of this Agreement is hereby amended by
adding the following sentence: "All capitalized terms used in this Schedule and
not defined herein shall have the meanings as set forth in that certain
Indenture dated March 1, 1999 between Party Y and The Bank of New York (the
"Indenture").
<PAGE>
14
IN WITNESS WHEREOF, the parties have executed this Agreement by their duly
authorized officers as of the date hereof.
GOLDMAN SACHS PECO ENERGY TRANSITION TRUST
MITSUI MARINE
DERIVATIVE PRODUCTS, L.P.
By:/s/ C. Douglas Fuge
- ----------------------------- By: /s/ George Shicora
Name: C Douglas Fuge ------------------------------
Title: (solely in its capacity
as Issuer Trustee and not
as a principal to this
Agreement)
Name: George Shicora
Title:
SCHEDULE
to the
Master Agreement
(Local Currency - Single Jurisdiction)
dated as of March 18, 1999
Between
Citibank, N.A., New York, a national banking association located at 399 Park
Avenue, New York, New York 10043 ("Party"), and PECO Energy Transition Trust,
a business trust existing under the laws of the State of Delaware ("Party Y").
Part 1
Termination Provisions
In this Agreement:
(a) "Specified Entity" means in relation to Party X for the purpose of:
Section 5(a)(v), Inapplicable
Section 5(a)(vi), Inapplicable
Section 5(a)(vii), Inapplicable
Section 5(b)(ii), Inapplicable
in relation to Party Y for the purpose of:
Section 5(a)(v), Inapplicable
Section 5(a)(vi), Inapplicable
Section 5(a)(vii), Inapplicable
Section 5(b)(ii), Inapplicable
(b) "Specified Transaction" will have the meaning specified in Section 12 of
this Agreement.
<PAGE>
(c) The "Failure to Pay or Deliver" provisions of Section 5(a)(i) will apply to
Party X and Party Y; provided, however, that (i) failure by the party to
make, when due, any payment under this Agreement or delivery under Section
2(a)(i) or 2(d) required to be made by it will constitute an Event of
Default if such failure is not remedied on or before the fifth Local
Business Day after the occurrence of such failure. Upon the occurrence of
an Event of Default under Section 5(a)(i) with Party X as the Defaulting
Party, Party Y shall appoint a Swap Agent meeting the qualifications
therefor set forth in Section 7(c)(ii) of this Agreement (as amended by
Part 4(e) of this Schedule) who shall have 30 days to locate a Replacement
Counterparty and Party Y may assign Party X's rights and obligations under
this Agreement to such Replacement Counterparty, all in accordance with the
procedures set forth in Section 7(c)(iii) of this Agreement (as amended by
Part 4(e) of this Schedule). If, upon the conclusion of such 30 day period,
Party X's rights and obligations under this Agreement have not been
assigned to such Replacement Counterparty, Party Y may declare an Early
Termination Date which shall be as of the end of such 30 day period. The
provisions of Sections 7(c)(iv) and 7(c)(v) of this Agreement (each as
amended by Part 4 (e) of this Schedule) shall apply to any assignment of or
efforts to assign Party X's rights and obligations pursuant to this clause
(c).
(d) The "Breach of Agreement" provisions of Section 5(a)(ii) will be
inapplicable to Party Y.
(e) The "Credit Support Default" provisions of Section 5(a)(iii) will be
inapplicable to Party Y.
(f) The "Misrepresentation" provisions of Section 5(a)(iv) will be inapplicable
to Party Y.
(g) The "Default Under Specified Transaction" provisions of Section 5(a)(v)
will be inapplicable to either Party X or Party Y.
(h) The "Cross Default" provisions of Section 5(a)(vi) will be inapplicable to
either Party X or Party Y.
(i) The "Credit Event Upon Merger" provisions of Section 5(b)(ii) will be
inapplicable to either Party X or Party Y.
<PAGE>
(j) Each of the following shall constitute Additional Termination Events: (i)
the Series 1999-A Class A-5 Transition Bonds being called for an optional
redemption, (ii) the principal and interest on the Series 1999-A Class A-5
Transition Bonds being declared immediately due and payable pursuant to the
Indenture and (iii) the events specified in Section 7(c) of this Agreement
(as amended by Part 4(e) of this Schedule) as Additional Termination Events
regardless of whether Party X's rights and obligations under this Agreement
are assigned to a Replacement Counterparty. In the case of the Additional
Termination Event specified in clause (i) of this paragraph, this Agreement
shall automatically early terminate effective on the Redemption Date for
the Series 1999-A Class A-5 Transition Bonds without any action by Party X
or Party Y and there shall be no early termination payment arising from
such Additional Termination Event. In the case of the Additional
Termination Event specified in clause (ii) of this paragraph, Party Y shall
be the Affected Party and either Party X or Party Y may elect to declare an
Early Termination Date, in which case such Early Termination Date shall be
the date upon which principal and interest thereon was declared immediately
due and payable. In the case of the Additional Termination Event specified
in clause (iii) of this paragraph the Affected Party shall be Party X and
only Party Y may elect to declare an Early Termination Date, in which case
such Early Termination Date shall be the date declared as provided in
Section 7(c) of this Agreement.
(k) The "Automatic Early Termination" provisions of Section 6(a) will not apply
to Party X or Party Y.
(l) Payments on Early Termination. For the purpose of Section 6(e) of this
Agreement the Second Method and Market Quotation will apply provided,
however, that no payment shall be owed by either Party X or Party Y if the
event giving rise to the termination is an optional redemption of the
Series 1999-A Class A-5 Transition Bonds. In no event shall Party Y be
obligated to pay any amount determined in accordance with Section
6(e)(i)(3) unless and until the Transition Bonds have been fully paid and
discharged in accordance with their terms under the Indenture. Party X
agrees that any claims of Party X under this Agreement are subordinated to
the claims of the Transition Bondholders against Party Y. Party Y covenants
and agrees that under no circumstances will any amounts be distributed to
the beneficiary of Party Y as a dividend, distribution or return of capital
until such time as all amounts owed to Party X have been fully and finally
paid. Party Y further agrees to reimburse Party X for payments made by
Party X to Party Y in respect of termination of this Agreement to the
extent that amounts in compensation for the termination of this Agreement
are received by Party Y from any person other than Party X.
Part 2
Documents to be Delivered
For the purpose of Section 4(a):
(a) Tax forms, documents or certificates to be delivered are:
Each party agrees to complete, accurately and in a manner reasonably
satisfactory to the other party, and to execute, arrange for any required
certification of, and deliver to the other party (or to such government or
taxing authority as the other party reasonably directs), any form or
document (including, but not limited to, United States Internal Revenue
Service Forms 1001, 4224, and W-9) that may be required or reasonably
requested in order to allow the other party to make a payment under this
Agreement without any deduction or withholding for or on account of any Tax
or with such deduction or withholding at reduced rate, promptly upon the
earlier of (i) reasonable demand by the other party and (ii) learning that
the form or document is required.
<PAGE>
(b) Other documents to be delivered are:
(i) At the execution of this Agreement, each party shall deliver to
the other party, certified evidence of the authority, incumbency
and specimen signature of each authorized person executing any
document on its behalf and on behalf of its Credit Support
Provider, if any, in connection with this Agreement. Such
evidence is covered by the Section 3(d) representation.
(ii) Party X upon request shall promptly deliver to the other party, a
copy of its most recent Annual Report containing consolidated
balance sheets prepared in accordance with accounting principles
that are generally accepted for institutions of its type in the
jurisdiction of its organization consistently applied and
certified by independent public accountants, provided, that Party
X shall not be required to deliver such information so long as
such information is publicly available to Party Y. Such
information is covered by the Section 3(d) representation so long
as such information is either provided by Party X or is obtained
from publicly available information that has been provided by
Party X.
(iii)Party X upon request shall promptly deliver to the other party,
if available, a copy of its most recent unaudited interim
consolidated balance sheets prepared in accordance with
accounting principles that are generally accepted for
institutions of its type in the jurisdiction of its organization
in each case consistently applied, provided that Party X shall
not be required to deliver such information so long as such
information is publicly available to Party Y. Such information is
covered by the Section 3(d) representation so long as such
information is either provided by Party X or is obtained from
publicly available information that has been provided by Party X.
(iv) Each party shall promptly deliver to the other party an opinion
of counsel, including, if applicable, an opinion in respect of
any Credit Support Document, substantially in the form of Annex
A. Party Y shall further deliver to Party X letters from counsel
to Party Y to the collective effect that Party X may rely on the
opinions of such counsel regarding authorization, execution,
delivery and enforceability of the Sale Agreement, the Servicing
Agreement and the Indenture as if such opinions were addressed to
Party X. Documents delivered pursuant to this clause (iv) are not
covered by the Section 3(d) representation.
(v) Each party upon request shall promptly deliver to the other party
such other public information respecting its condition or
operations, financial or otherwise, as may reasonably be
requested from time to time provided that Party X shall not be
required to deliver such information so long as such information
is publicly available to Party Y. Such information is covered by
the Section 3(d) representation so long as such information is
either provided by Party X or is obtained from publicly available
information that has been provided by Party X.
<PAGE>
Part 3
Miscellaneous
(a) Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of New York without reference to
choice of laws doctrine, except that (i) the capacity, power or authority
of Party Y to enter into this Agreement and any issue relating to the
interpretation of Party Y's resolution authorizing this Agreement will be
governed by and construed in accordance with the laws of the State of
Delaware and (ii) any issue relating to the interpretation of the Indenture
applicable to Party Y will be governed and construed in accordance with the
laws of the Commonwealth of Pennsylvania. Section 11(b)(i) of this
Agreement is deleted and in substitution is amended by adding thereto the
following: "(ii) regardless of the law which applies to this Agreement,
with respect to any Proceedings, each party irrevocably submits to the
non-exclusive jurisdiction of the courts of the States of Delaware and New
York and the United States District Courts for the District of Delaware and
the Southern District of New York; and".
(b) "Affiliate" will have the meaning specified in Section 12, but as to Party
Y will not include PECO Energy Company or affiliates thereof.
(c) Addresses for Notices. For the purpose of Section 10:
Address for notices or communications to Party X:
Address: 399 Park Avenue 7th Floor
New York, New York 10043
Attention: Vice President in charge of Global Derivatives
Address for Notices or communications to Party Y:
Address: c/o First Union Trust Company National Association
One Rodney Square 920 King Street
Wilmington, Delaware 19801
Telephone No.: 302-888-7532
(d) Credit Support Document. Details of any Credit Support Document:
Party X - None.
Party Y - None.
<PAGE>
(e) Credit Support Provider. Party X - None.
Party Y - None; it being understood that in no event shall the Bond Trustee
be deemed to be a Credit Support Provider.
(f) Calculation Agent. The Calculation Agent is Party X, unless specified
otherwise in a Confirmation in relation to the relevant Transaction;
provided, however, that, if Party Y objects to any calculation, Party X and
Party Y will negotiate in good faith to agree on an independent swaps
dealer of the highest credit standing to make such calculation, which will
be binding on Party X and Party Y absent manifest error. The costs of such
dealer will be borne equally by Party X and Party Y. If Party X is a
Defaulting Party, the Calculation Agent will be Party Y. Party X agrees
that on or prior to each Interest Determination Date it will notify the
Servicer of LIBOR as determined by Party X.
Part 4
Other Provisions
(a) ISDA Definitions. The 1991 ISDA Definitions (the "1991 Definitions") as
published by the International Swaps and Derivatives Association, Inc.,
shall be deemed a part of this Agreement as if fully set forth herein. The
1991 Definitions and the provisions of Section 12 of this Agreement shall
be deemed a part of each Confirmation as if set forth in full therein.
(b) Interpretation. In the event of any inconsistency between the provisions of
the Schedule and the Definitions, this Schedule will prevail. In the event
of any inconsistency between the provisions of this Schedule and the
printed Agreement of which it forms a part, this Schedule will prevail. In
the event of any inconsistency between the provisions of any Confirmation
and this Schedule, such Confirmation will prevail for the purpose of the
relevant Transaction.
(c) Expenses. Section 9 of this Agreement, bearing the heading "Expenses," is
amended as follows: (1) on the first line strike the first word "A" and
insert before the words "Defaulting Party" the words: "Party X, if it is
the"; (2) on the first line strike the words "the other party" and insert
therein the words "Party Y"; (3) on the second line strike the words "such
other party" and insert therein the words "Party Y"; (4) on the fifth line,
after the words "costs of collection" and before the "." insert
the words ", and all fees, costs and expenses paid or payable by Party Y to
Reference market-makers to the extent necessary to determine or obtain
Market Quotations."; and (5) at the end of the paragraph insert: "If Party
Y is a Defaulting Party by reason of an early termination of any
Transaction, Party X will not except as provided in Section 6 of this
Agreement (as amended by Part 1(l) of this Schedule) request
indemnification from Party Y and Party Y will not indemnify Party X for any
resulting expenses, including any actual or consequential losses or damages
incurred by Party X."
<PAGE>
(d) Consent to Recording. Each party consents to the recording of the telephone
conversations of relevant personnel of the parties and their Affiliates in
connection with this Agreement or any potential Transaction.
(e) Transfer. The Transfer provision of Section 7 is amended by: (A) deleting
at the end of subparagraph (b) the period and replacing it with A; and
(B) adding the following new subparagraph (c):
(c) in the event of a Downgrade Event (as defined below), an assignment of
Party X's rights and obligations under this Agreement may be required as
follows:
(i) For the purpose of this Agreement, "Downgrade Event" means either (A) a
failure of Party X to maintain ratings by both of the Required Rating
Agencies at least equal to the Required Rating therefor or (B) the failure
of Party X to maintain in effect any arrangements established pursuant to
subparagraph (c) (ii) below unless the Rating Agency Condition is satisfied
in connection therewith. "Qualified Replacement Counterparty" means a
Replacement Counterparty that (X) satisfies the Required Rating for each of
the Required Rating Agencies or (Y) enters into such other arrangement as
will result in the Series 1999-A Class A-5 Transition Bonds receiving a
rating not less than would be received if such Replacement Counterparty
satisfied the Required Rating for each of the Required Rating Agencies.
"Rating Agency" means any rating agency rating the Series 1999-A Class A-5
Transition Bonds at the time of issuance thereof at the request of Party Y.
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 Party Y. "Rating Agency Condition"
means, with respect to any action, the notification in writing by each
Rating Agency to, among others, Party Y, that such action will not result
in a reduction or withdrawal of the then current rating by such Rating
Agency of the Series 1999-A Class A-5 Transition Bonds. "Replacement
Counterparty" means a replacement for Party X selected as provided in this
Clause (c). "Required Rating" means Aa3 in the case of Moody's Investors
Service, Inc. ("Moody's") and either AA or A-l+ in the case of Standard &
Poor's Ratings Group ("Standard & Poor's"). "Required Rating Agencies"
means both Moody's and Standard & Poor's.
(ii) In the event of a Downgrade Event, Party X must either (A) assign its
rights and obligations under this Agreement to a Qualified Replacement
Counterparty or (B) establish such other arrangement as will satisfy the
Rating Agency Condition, which may include providing a guaranty of its
obligations hereunder or collateralizing any net present value of its
obligations hereunder.
<PAGE>
(iii) If, within 30 days of a Downgrade Event, Party X has not successfully made
the assignment or established the arrangement specified in subparagraph
(c)(ii) above, then Party Y shall appoint a recognized swap dealer which is
a member of the International Swaps and Derivatives Association, Inc. with
capital and surplus of at least $50 million (the "Swap Agent") to
independently solicit a Replacement Counterparty, who shall not be the Swap
Agent or an Affiliate thereof, for a period not exceeding 30 days. During
such 30 day period, the Swap Agent shall seek to find a Qualified
Replacement Counterparty, or if a Qualified Replacement Counterparty cannot
be found, the Swap Agent will identify the highest rated Replacement
Counterparty available that in any event is rated above Party X by at least
one of the Required Rating Agencies. In either case, during such 30 day
period the Swap Agent shall be limited to obtaining a Qualified Replacement
Counterparty or Replacement Counterparty who is willing to intermediate the
credit risk of Party X to Party Y by entering into a transaction with Party
X under terms substantially the same as this Agreement to hedge or offset
the risk that such Qualified Replacement Counterparty or Replacement
Counterparty has to Party Y under this Agreement. If the Swap Agent is
successful in identifying a Replacement Counterparty, Party Y may execute
an agreement (substantially in the form of this Agreement) with the
Replacement Counterparty and this Agreement and Party X's rights and
obligations shall be deemed to have been assigned to such Replacement
Counterparty effective as of the Payment Date immediately succeeding such
execution, without any further action by Party X. Party X shall be deemed
to have consented to such assignment and to have entered into another
transaction with the Replacement Counterparty on substantially the same
terms as this Agreement but with the Replacement Counterparty as Party Y
thereunder. Upon such assignment, Party X shall be released from all
further obligations and liabilities arising under this Agreement after the
effective date of such assignment except that Party X shall be liable for
any amount paid to the Replacement Counterparty for assuming Party X's
rights and obligations under this Agreement and shall receive any amounts
paid by such Replacement Counterparty to assume such rights and obligations
and Party X's obligations regarding the costs of soliciting a Replacement
Counterparty pursuant to subparagraph (c)(iv) and for fees and expenses
pursuant to subparagraph (v) below until an assignment to a Qualified
Replacement Counterparty is successfully completed shall survive. If, upon
the conclusion of such 30 day period, a Qualified Replacement Counterparty
has not assumed Party X's rights and obligations under this Agreement, an
Additional Termination Event will occur with Party X as the Affected Party
and Party Y, in its sole discretion, may determine whether or not to (i)
replace Party X with a prospective Replacement Counterparty, if any, and/or
(ii) declare an Early Termination Date, which shall be as of the end of
such 30 day period.
<PAGE>
(iv) If a Downgrade Event shall have occurred and Party X's rights and
obligations under this Agreement have not been assigned to a Qualified
Replacement Counterparty pursuant to subparagraphs (c) (ii) or (iii) above
and Party X has not established and maintained in effect the other
arrangements specified in subparagraph (c)(ii) above, Party Y shall appoint
a Swap Agent to independently solicit a Replacement Counterparty more
satisfactory to each of the Rating Agencies in accordance with the
procedure set forth in subparagraph (c) (iii) above, provided, however,
that such Replacement Counterparty shall not be required to enter into a
transaction with Party X to intermediate, hedge or offset risk. Such search
shall be renewed every 6 months thereafter until an assignment to a
Qualified Replacement Counterparty has been successfully completed. The
costs of such solicitation shall be paid by the original Party X in
accordance with the next subparagraph (c)(v). At the conclusion of each
such 6 month period in which an assignment to a Qualified Replacement
Counterparty has not been successfully completed, an Additional Termination
Event will occur with Party X as the Affected Party and Party Y, in its
sole discretion, may determine whether or not to (i) replace the then
current Party X with a prospective Replacement Counterparty, if any, and/or
(ii) declare an Early Termination Date, which shall be as of the end of
such 6 month period. The original Party X shall not be liable for any
termination payments in connection with any termination occurring after it
has been replaced by a Replacement Counterparty or a Qualified Replacement
Counterparty.
(v) In all circumstances, Party X shall be responsible for the payment of the
Swap Agent's reasonable fees and all other reasonable fees and expenses of
Party Y as a result of any assignment or proposed assignment hereunder, and
shall promptly make such payments."
(f) Waiver of Jury Trial. Each party irrevocably waives any and all rights to
trial by jury in any legal proceeding instituted in connection with this
Agreement or any Transaction to the fullest extent permitted by law. As to
any matter for which a jury trial cannot be waived, each party agrees riot
to assert any such matter as a cross claim or counterclaim in, nor move to
consolidate the same with, any legal proceeding in which a jury trial is
waived.
(g) Parties to Rely on Their Own Expertise. Each party shall enter into each
Transaction governed by this Agreement in reliance only upon its own
judgment. Neither party holds itself out as advising, or any of its
employees or agents as having the authority to advise, the other party as
to whether or not it should enter into any such Transaction or as to any
subsequent actions relating thereto or on any other commercial matters
concerned with any Transaction governed by this Agreement, and neither
party shall have any responsibility or liability whatsoever in respect of
any advice of this nature given, or views expressed, by it or any of such
persons to the other party, whether or not such advice is given or such
views are expressed at the request of the other party.
(h) Immunity of Members of Party Y. No representation or agreement contained in
this Agreement shall be deemed to be the covenant or agreement of any
trustee, officer, attorney, agent or employee of Party Y or any Credit
Support Provider thereof in an individual capacity. No recourse shall be
had for any payment under this Agreement or any claim based hereon against
any trustee, officer, agent, attorney or employee of Party Y or any Credit
Support Provider thereof past, present or future, or its successors or
assigns, as such, either directly or through Party Y or any Credit Support
Provider thereof, or any such successor corporation, whether by virtue of
any constitutional provision, statutes or rule of law, or by the
enforcement of any assessment or penalty, or otherwise, all of such
liability of such trustee, officers, agents, attorneys or employees being
hereby released as a condition of and as a consideration for the execution
and delivery of this Agreement.
(i) Facsimile and Telex Confirmation. The parties agree that they may from time
to time confirm the terms and conditions of any Transaction entered into
between them pursuant to the terms of this Agreement by means of a telex or
facsimile transmission from one party to another followed by a telex or
facsimile transmission confirming the terms of the Transaction and any such
exchange of telexes or facsimile transmissions shall constitute a
Confirmation for all purposes hereunder.
<PAGE>
(j) Counterparts. The Agreement and this Schedule may be executed in several
counterparts, each of which shall be an original and all of which shall
together constitute one instrument.
(k) No Bankruptcy Petition. Prior to the date that is one year and one day
after the date upon which all amounts payable in respect of Transition
Bonds issued by PECO Energy Transition Trust (the "Transition Bonds") have
been paid in accordance with the terms thereof, Party X shall not institute
against, or join any other person in instituting against, Party Y, any
bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any federal or state bankruptcy or
similar law (including proceedings seeking to consolidate the assets of
Party Y and PECO Energy Company), provided that Party X may assert its own
claims against Party Y once any such proceedings have been instituted by
another person.
(l) Accuracy of Specified Information. Section 3(d) is hereby amended by adding
in the third line thereof after the word "respect" and before the period
the words "or, in the case of audited or unaudited financial statements or
balance sheets, a fair presentation of the financial condition of the
relevant person (but unaudited financial statements or balance sheets shall
be subject to year end adjustments)".
(m) Additional Representations. Section 3 is hereby amended by adding the
following additional Subsections:
(g) No Agency. It is entering into this Agreement and each Transaction as
principal (and not as agent or in any other capacity, fiduciary or
otherwise).
(h) Line of Business. It has entered into this Agreement (including each
Transaction evidenced hereby) in conjunction with the line of business
(including financial intermediation services) or the financing of its
business.
(i) Eligible Swap Participant. It is an Eligible Swap Participant as
defined in 17 C.F.R. SS. 35.1(b)(2)(vi).
(n) Illegality. The definition of "Illegality" in Section 5(b)(i) is hereby
amended by adding in the first and third lines thereof after the word
"applicable" and before the word "law" the words "United States federal or
state". It is agreed that the parties will not treat any event as an
"Illegality" without the prior receipt of a written opinion from an
independent law firm experienced in swap agreements, selected by the
parties, that an "Illegality" exists. No termination payments shall be owed
by either Party X or Party Y as a result of any illegality.
<PAGE>
(o) No Recourse. Party Y's Transition Bonds, and all Series and Classes thereof
represent a beneficial interest in the property of Party Y only and do not
represent an interest in or obligation of either Party X or the holders of
the Transition Bonds, and no recourse may be (i) had by the holders of the
Transition Bonds against Party X or its assets with respect to the
Transition Bonds and/or this Agreement or (ii) had by Party X against the
holders of the Transition Bonds for any reason. Without limitation of Party
X's rights under Section 5(a)(i) of this Agreement, Party Y's obligations
to Party X under this Agreement and each Confirmation are payable only if
all amounts first required to be paid to Party Y's Transition Bondholders
have been paid in accordance with the terms of the Indenture.
(p) Equitable Relief. Party X shall not request that any court issue attachment
remedies against Party Y with respect to any lawsuit, dispute or claim
under this Agreement.
(q) Regarding Party X. Party Y acknowledges and agrees that Party X had no
involvement in arid, accordingly, accepts no responsibility for: (i) the
establishment, structure, or choice of assets of Party Y or any series;
(ii) the selection of any person performing services for or acting on
behalf of Party Y; (iii) the selection of Party X as a swap provider; (iv)
the terms of the Transition Bonds; (v) the preparation of or passing on the
disclosure and other information contained in any offering circular,
prospectus, series supplement, trust deed, or any other agreements or
documents used by Party Y or any other party in connection with the
marketing and sale of the Transition Bonds, except with respect to written
information furnished to Party Y by Party X which describes Party X for use
in Party Y's required disclosure documents; (vi) the ongoing operations and
administration of Party Y, including the furnishing of any information to
Party Y which is not specifically required under this Agreement; or (vii)
any other aspect of Party Y's existence except for those matters
specifically identified in this Agreement.
(r) Certain Definitions. Section 1(a) of this Agreement is hereby amended by
adding the following sentence "All capitalized terms used in this Schedule
and not defined herein shall have the meanings as set forth in that certain
Indenture dated March 1, 1999 between Party Y and The Bank of New York (the
"Indenture")."
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement by their duly
authorized officers as of the date hereof.
CITIBANK, N.A., NEW YORK PECO ENERGY TRANSITION TRUST
By: /s/ Barbara Schweizer By: /s/ George Shicora
- -------------------------- -------------------------
Name: Barbara Schweizer Name: George Shicora
Title: Vice President Title: Beneficiary Trustee
CONFIRMATION
------------
Dated: March 18, 1999
To: PECO Energy Transition Trust
Attention: George Shicora
Phone Number: 215 841 5790
Facsimile Number: 215 841 6461
Re: Swap Transaction Series 1999-A Class A-3 Transition Bonds
Reference No.: NUUS903280 (6000000A00)
Ladies and Gentlemen:
The purpose of this letter agreement is to confirm the terms and conditions
of the Swap Transaction entered into between us on the Trade Date specified
below (the "Swap Transaction"). This letter agreement constitutes a
"Confirmation" as referred to in the Master Agreement specified below.
The definitions and provisions contained in the 1991 ISDA Definitions (as
published by the International Swaps and Derivatives Association, Inc.
("ISDA")) are incorporated into this Confirmation. For these purposes, all
references in such Definitions to a "Swap Transaction" shall be deemed to
apply to the Transactions referred to herein. In the event of any
inconsistency between those Definitions and provisions and this
Confirmation, this Confirmation will govern. In this Confirmation,
capitalized terms not defined herein or in the 1991 ISDA Definitions shall
have the same meanings as set forth in the Prospectus, dated March 18,
1999, PECO Energy Transition Trust Transition Bonds Issuable in Series.
1. This Confirmation supplements, forms part of, and is subject to, the
ISDA Master Agreement dated as of March 18, 1999, as amended and
supplemented from time to time, between you and us, and the Schedule
thereto (the "Agreement"). All provisions contained in the Agreement govern
this Confirmation except as expressly modified below and, in particular,
Party Y's obligations to make payments to Party X pursuant to the terms of
this confirmation are subject to the Schedule Part 4(o) provision entitled
"No Recourse."
2. The terms of the particular Transaction to which this Confirmation
relates are as follows:
Party X: Goldman Sachs Mitsui Marine Derivative Products, L.P.
<PAGE>
Party Y: Peco Energy Transition Trust
Initial Notional Amount: USD 667,000,000
Notional Amount for all Calculation
Periods from and including that which
commences on and includes
the Effective Date to and
including that which ends
on but excludes
March 1, 2001: USD 667,000,000
Notional Amount for all subsequent Calculation Periods:
A USD amount equal to the outstanding principal balance of the Floating Rate
Series 1999-A Class A-3 Transition Bonds as of the close of business on the
preceding Payment Date after giving effect to all payments of principal made to
the holders thereof on such preceding Payment Date pursuant to an optional
redemption, in whole or in part, or pursuant to other expected principal
repayments.
Early Redemption:
In the event that the Notional Amount amortizes in whole on a date other than a
Payment Date as a result of an optional redemption of the Class A-3 Transition
Bonds, then the redemption date shall be deemed to be the Termination Date.
Following any such Optional Redemption and cancellation, the parties shall be
relieved of all further payment obligations hereunder except for payment of all
accrued but yet unpaid amounts calculated to but excluding the redemption date,
if any, and any interest thereon. In the event that the Notional Amount
amortizes in part on a date other than a Payment Date as a result of an optional
redemption in part of the Class A-3 Transition Bonds, then the applicable
redemption date shall be deemed to be a Period End Date only with respect to the
Fixed and Floating Payments applicable to the redeemed portion of the Notional
Amount. On the redemption date, the parties shall be relieved of all further
payment obligations with regard to the redeemed portion of the Notional Amount
except for payment of all accrued but yet unpaid amounts (and any interest
thereon) with regard to the redeemed portion of the Notional Amount calculated
to but excluding the redemption date. Following any such Optional Redemption in
part, the Fixed and Floating Amounts subsequent to the redemption date shall be
adjusted by the Calculation Agent to give effect to such reduction.
Trade Date: March 18, 1999
Effective Date: March 25, 1999
Termination Date: March 1, 2006
Business Day: Philadelphia, PA, Wilmington, DE and New York, NY
Fixed Amounts: Fixed Rate Payer: Party Y
Fixed Rate Payer Period End Dates: Fixed Rate Payer Payment
Dates: Semiannually, on each March 1 and September 1, commencing on
September 1, 1999 and ending on the Termination Date, subject to no adjustment.
One Business Day preceding each Fixed Rate Payer Period End Date
Fixed Rate: 6.577%
Fixed Rate Day Count Fraction: 30/360
Floating Amounts: Floating Rate Payer: Party X
Floating Rate Payer Period End Dates: Floating Rate Payer Payment
<PAGE>
Dates: Semiannually, on each March 1 and September 1, commencing on September 1,
1999 and ending on the Termination Date, subject to adjustment in accordance
with the Following Business Day Convention. One Business Day preceding each
Floating Rate Payer Period End Date
Floating Rate Option: USD-LIBOR-BBA
Floating Rate Designated Maturity: 6 months
Floating Rate Spread: Plus 0.125%
Floating Rate Date Count Fraction: Actual/360
Floating Rate Reset Dates: The first Day of each Calculation
Period
3. Additional Provisions:
Early Termination Calculation:
If at any time the Agreement and this Transaction are terminated pursuant
to Section 6 of the Agreement, to the extent that a termination payment is
contemplated pursuant to the Agreement, the Settlement Amount shall be
calculated as though the Notional Amount for this Transaction was as set forth
in Annex A hereto under the column "Expected Notionals" (subject to any
necessary adjustments arising from a partial redemption) but with regard to
calculations related to the Calculation Period in which the Early Termination
Date occurs, the actual Notional Amount in effect on the first day of that
Calculation Period shall be used.
4. Account Details
Payments to Party X:
Account for payments in USD:
ABA/Bank No: 021000021
Account No: 9301034733
Name of Bank: Chase Manhattan Bank, New York
For the Account of: Goldman Sachs Mitsui
Marine Derivative Products, L.P.
Payments to Party Y:
Account for payments in USD:
ABA/Bank No: 021000018
Account No: 760009
Reference: Peco Energy
Transition Trust Ser 1999-A Cl
A-3 Sub A/C
Please confirm that the foregoing currently sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to us or by sending to us a letter or telex substantially
similar to this letter, which letter or telex sets forth the material terms of
the Swap Transaction to which this Confirmation relates and indicates Agreement
to those terms.
<PAGE>
Except if expressly agreed to by us in writing, we have not acted as your
advisor with respect to the desirability or appropriateness of entering into the
Swap Transaction confirmed hereby or with respect to your risk management needs
generally. This pertains not only to the financial and market risk management
risks and consequences of the confirmed or any proposed transaction, but also to
any legal, regulatory, tax, accounting and credit issues generated by such
transactions, which you must evaluate for yourself and in reliance on your own
professional advisors.
We believe any information provided to you by us in connection with the
confirmed or any proposed transaction to be accurate and reliable, but we cannot
and do not assume any liability for any erroneous information which we might
provide to you, other than information set forth in this Confirmation (Ref. No.:
NUUS903280 (6000000A00)).
Yours sincerely,
GOLDMAN SACHS MITSUI MARINE
DERIVATIVE PRODUCTS, L.P.
By: GSMMDPGP, Inc.,
General Partner
BY: /s/ Daniela Paolino
Name: Daniela Paolino
Title: Vice President
Confirmed as of the
date first above written:
PECO ENERGY TRANSITION TRUST
By: /s/ George Shicora
------------------
George Shicora
Beneficiary Trustee
Annex A
-------
For the Calculation Period Expected Minimum Maximum
ending on but excluding: Notionals: Notionals, Notionals:
9/1/99 667.0 667.0 667.0
3/1/00 667.0 667.0 667.0
9/1/00 667.0 667.0 667.0
3/1/01 667.0 667.0 667.0
9/1/01 667.0 0.0 667.0
3/1/02 608.8 0.0 667.0
9/1/02 549.4 0.O 667.0
3/1/03 481.4 0.0 667.0
9/l/03 330.2 0.0 667.0
3/1/04 161.2 0.0 667.0
9/1/04 0.0 0.0 667.0
3/l/05 0.0 0.0 667.0
9/l/05 0.0 0.0 667.0
3/1/06 0.0 0.0 667.0
Dated: March 18, 1999
To: PECO Energy Transition Trust
Attention: George Shicora
Phone Number: 215 841 5790
Facsimile Number: 215 841 5743
Re: Swap Transaction - Series 1999-A Class A-5
Transition Bonds Reference No.: 99LO21
______________________________________________________________________________
Ladies and Gentlemen:
The purpose of this letter agreement is to confirm the terms and conditions
of the Swap Transaction entered into between us on the Trade Date specified
below (the "Swap Transaction"). This letter agreement constitutes a
"Confirmation" as referred to in the Master Agreement specified below.
The definitions and provisions contained in the 1991 ISDA Definitions (as
published by the International Swaps and Derivatives Association, Inc. ("ISDA")
) are incorporated into this Confirmation. For these purposes, all references in
such Definitions to a "Swap Transaction" shall be deemed to apply to the
Transactions referred to herein. In the event of any inconsistency between those
Definitions and provisions and this Confirmation, this Confirmation will govern.
In this Confirmation, capitalized terms not defined herein or in the 1991 ISDA
Definitions shall have the same meanings as set forth in the Prospectus, dated
March 18, 1999, PECO Energy Transition Trust Transition Bonds Issuable in
Series.
1. This Confirmation supplements, forms part of, and is subject to, the
ISDA Master Agreement dated as of March 18, 1999, as amended and supplemented
from time to time, between you and us, and the Schedule thereto (the
"Agreement") . All provisions contained in the Agreement govern this
Confirmation except as expressly modified below and, in particular, Party Y's
obligations to make payments to Party X pursuant to the terms of this
Confirmation are subject to the Schedule Part 4(o) provision entitled "No
Recourse."
2. The terms of the particular Transaction to which this Confirmation
relates are as follows:
Party X: Citibank, N.A., New York
Party Y: PECO Energy Transition Trust
Initial Notional Amount: USD 464,600,000
<PAGE>
Notional Amount for all
Calculation Periods from and
including that which commences
on and includes the Effective
Date to and including that
which ends on but excludes
March 1, 2001: USD 464,600,000
Notional Amount for all
subsequent Calculation
Periods:
A USD amount equal to the outstanding principal balance of the
Floating Rate Series 1999-A Class A-5 Transition Bonds as of the
close of business on the preceding Payment Date after giving effect
to all payments of principal made to the holders thereof on such
preceding Payment Date pursuant to an optional redemption, in whole
or in part, or pursuant to other expected principal repayments.
Early Redemption:
In the event that the Notional Amount amortizes in whole on a date
other than a Payment Date as a result of an optional redemption of
the Class A-5 Transition Bonds, then the redemption date shall be
deemed to be the Termination Date. Following any such Optional
Redemption and cancellation, the parties shall be relieved of all
further payment obligations hereunder except for payment of
all accrued but yet unpaid amounts calculated to but excluding the
redemption date, if any, and any interest thereon.
In the event that the Notional Amount amortizes in part on a date
other than a Payment Date as a result of an optional redemption in
part of the Class A-5 Transition Bonds, then the applicable
redemption date shall be deemed to be a Period End Date only with
respect to the Fixed and Floating Payments applicable to the redeemed
portion of the Notional Amount. On the redemption date, the parties
shall be relieved of all further payment obligations with regard to
the redeemed portion of the Notional Amount except for payment of all
accrued but yet unpaid amounts (and any interest thereon) with regard
to the redeemed portion of the Notional Amount calculated to but
excluding the redemption date. Following any such Optional
Redemption in part, the Fixed and Floating Amounts subsequent to the
redemption date shall be adjusted by the Calculation Agent to give
effect to such reduction.
2
<PAGE>
Trade Date: March 18, 1999
Effective Date: March 25, 1999
Termination Date: March 1, 2009
Business Day: New York, NY
Fixed Amounts:
Fixed Rate Payer: Party Y
Fixed Rate Payer Period
End Dates: Semiannually, on each March 1 and September
1, commencing on September 1, 1999 and
ending on the Termination Date,
subject to no adjustment.
Fixed Rate Payer
Payment Dates: One Business Day preceding each Fixed Rate
Payer Period End Date
Fixed Rate: 6.9425%
Fixed Rate Day Count
Fraction: 30/360
Floating Amounts:
Floating Rate Payer: Party X
Floating Rate Payer
Period End Dates: Semi-annually, on each March 1 and
September 1, commencing on September 1,
1999 and ending on the Termination Date,
subject to adjustment in accordance with the
Following Business Day Convention.
Floating Rate Payer
Payment Dates: One Business Day preceding each Floating
Rate Payer Period End Date
Floating Rate Option: USD-LIBOR-BBA
Floating Rate
Designated Maturity: 6 months
3
<PAGE>
Floating Rate Spread: Plus 0.200%
Floating Rate Date
Count Fraction: Actual/360
Floating Rate Reset This first Day of each Calculation Period
Dates:
3. Additional Provisions:
Early Termination Calculation:
If at any time the Agreement and this Transaction are terminated pursuant
to Section 6 of the Agreement, to the extent that a termination payment is
contemplated pursuant: to the Agreement, the Settlement Amount shall be
calculated as though the Notional Amount for this Transaction was as set forth
in Annex A hereto under the column "Expected Notionals" (subject to any
necessary adjustments arising from a partial redemption) but with regard to
calculations related to that Calculation Period in which the Early Termination
Date occurs, the actual Notional Amount in effect on the first day of that
Calculation Period shall be used.
4. Account Details
Payments to Party X:
Account for payments in USD:
Citibank, N.A., New York
ABA #021000089
Account No. 00167679
Financial Futures
Reference Swap 99L201
Payments to Party Y:
Account for payments in USD:
ABA/Bank No: 021000018
For further credit to: 6LA #111565
Account No: 760009
Reference: Peco Energy Transition Trust Ser
1999-A Cl A-5 Sub A/C
Please confirm that the foregoing currently sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to us or by sending to us a letter or telex substantially
similar to this letter, which letter or telex sets forth the material terms of
the Swap Transaction to which this Confirmation relates and indicates Agreement
to those terms.
4
<PAGE>
Except if expressly agreed to by us in writing, we have not acted as your
advisor with respect to the desirability or appropriateness of entering into the
Swap Transaction confirmed hereby or with respect to your risk management needs
generally. This pertains not only to the financial and market risk management
risks and consequences of the confirmed or any proposed transaction, but also to
any legal, regulatory, tax, accounting and credit issues generated by such
transactions, which you must evaluate for yourself and in reliance on your own
professional advisors.
We believe any information provided to you by us in connection with the
confirmed or any proposed transaction to be accurate and reliable, but we cannot
and do not assume any liability for any erroneous information which we might
provide to you, other than information set forth in this Confirmation (Ref. No.:
99LO21).
Yours sincerely,
Citibank, N.A., New York
By: /s/ Sanjay Makker
------------------------------------
Name: Sanjay Makker
------------------------------------
Title: Assistant Vice President
------------------------------------
Confirmed as of the
date first above written:
PECO ENERGY TRANSITION TRUST
By: /s/ George Shicora
- -------------------------------
George Shicora
Beneficiary Trustee
5
