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): May 2, 2000
PECO ENERGY TRANSITION TRUST
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(Issuer of Transition Bonds)
PECO ENERGY COMPANY
(Grantor of Issuer and Servicer of Transition Bonds)
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(Exact name of registrant as specified in its charter)
Delaware 333-31646 51-0382130
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(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
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(Address of principal executive offices) (Zip Code)
(302) 888-7532
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name or former address, if changed since last report)
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Item 5. Other Events
Reference is made to the registration statement on Form S-3, as amended
(Registration No. 333-31646), filed by PECO Energy Company and PECO Energy
Transition Trust with the Securities and Exchange Commission under the
Securities Act of 1933, as amended. Pursuant to such registration statement,
$1,000,000,000 aggregate principal amount of Transition Bonds Series 2000-A were
issued and sold by PECO Energy Transition Trust. The transaction was closed on
May 2, 2000.
In connection with this transaction, PECO Energy Company and PECO Energy
Transition Trust 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 registrants have duly caused this report to be signed on their
behalf by the undersigned hereunto duly authorized.
PECO ENERGY TRANSITION TRUST
(Issuer of Transition Bonds)
By: /s/ Thomas R. Miller
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Thomas R. Miller
Beneficiary Trustee
PECO ENERGY COMPANY,
(Grantor of PECO Energy Transition Trust and
Servicer of the Transition Bonds)
By: /s/ C.A. McNeill, Jr.
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C.A. McNeill, Jr.
Chairman of the Board, President and
Chief Executive Officer
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EXHIBIT INDEX
Exhibit No. Exhibit
- ----------- -------
1.1 Underwriting Agreement dated April 27, 2000 among PECO Energy
Transition Trust, PECO Energy Company and Salomon Smith
Barney, Inc., as representative of the several underwriters
named therein.
4.1 Second Amended and Restated Trust Agreement for PECO Energy
Transition Trust dated as of May 2, 2000 among George Shicora
and Thomas R. Miller, 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 (Incorporated by
reference to Exhibit 4.3.1 to PECO Energy Transition Trust's
Current Report on Form 8-K dated March 31, 1999).
4.3.2 Series Supplement dated as of May 2, 2000 between PECO Energy
Transition Trust and The Bank of New York.
10.1 Intangible Transition Property Sale Agreement dated as of
March 25, 1999, as amended and restated as of May 2, 2000,
between PECO Energy Transition Trust and PECO Energy Company.
10.2 Master Servicing Agreement dated as of March 25, 1999, as
amended and restated as of May 2, 2000, between PECO Energy
Transition Trust and PECO Energy Company.
PECO ENERGY TRANSITION TRUST
PECO ENERGY COMPANY
UNDERWRITING AGREEMENT
April 27, 2000
To Salomon Smith Barney Inc., as
representative of the Underwriters
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,
as amended and restated as of May 2, 2000 (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, as amended and restated as of
May 2, 2000 (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
Second Amended and Restated Trust Agreement, dated as of May 2, 2000 (the "Trust
Agreement"), among the Company, First Union Trust Company, National Association,
as issuer trustee (the "Issuer Trustee"), and George R. Shicora and Thomas R.
Miller, 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. 333-31646) 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);
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(b) Each Preliminary Prospectus, at the time of circulation thereof by
the Underwriters, conformed in all 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
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became effective) with the Commission, as the case may be, conformed in all
material 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
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and authority to sell the Intangible Transition Property to the Issuer as
described in the Prospectus;
(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
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statute, order, rule or regulation of any court or governmental 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
Orders, 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 May 2, 2000, 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
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during the period mentioned in subparagraph (d) below which in the judgment
of the Company 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
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of, any "transition bonds" (as defined in the Statute) issued by a trust or
other special purpose 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
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 Orders, 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
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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 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 Agreement and the
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
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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 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
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;
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(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 contemplated herein, except such as have been
obtained under the Statute and the Qualified Rate Orders 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) each of the Qualified Rate Orders has been duly
authorized and adopted by the
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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.
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
<PAGE>
14
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 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 Orders 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 Pennsylvania Competition Act," "The Qualified Rate
Orders And The Intangible Transition Charges," "The Indenture," "The
Sale Agreement," "The Master Servicing Agreement," "The Transition
Bonds," "United States Taxation," "Material Commonwealth of
Pennsylvania 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
<PAGE>
15
been issued, no proceedings for that purpose have been instituted or
threatened, and the Registration 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 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 Orders 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
<PAGE>
16
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 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,
<PAGE>
17
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 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
<PAGE>
18
parts to be performed or satisfied at or prior to the Time of
Delivery;
(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or, to the Company's knowledge,
threatened; and
(iii) since the dates as of which information is given in the
Prospectus (exclusive of any supplement thereto), there has been no
material adverse change in 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 Qualified Rate Orders 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.
<PAGE>
19
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) 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 Orders 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
<PAGE>
20
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 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 Orders.
(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;
<PAGE>
21
(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.
(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).
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
<PAGE>
22
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 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
<PAGE>
23
heading "Underwriting the Series 2000-A Bonds" 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, 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
<PAGE>
24
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 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
<PAGE>
25
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 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
<PAGE>
26
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.
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 Orders 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 hostilities, declaration by the United States of a national emergency or war
or other calamity or crisis the effect of which on financial markets is such as
to make it, in the judgment of the 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
<PAGE>
27
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 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"
<PAGE>
28
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>
29
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: Vice President and Treasurer
PECO Energy Transition Trust
By: /s/ Thomas R. Miller
--------------------------------
Name: Thomas R. Miller
Title: Beneficial Trustee
(Principal Financial and
Accounting Officer)
Accepted, April 27, 2000
Salomon Smith Barney Inc.
By: Salomon Smith Barney Inc.
By: /s/ Paul Addison
---------------------------------
Name: Paul Addison
Title: Managing Director
For itself and the other
several Underwriters, if any,
named in Schedule II to the
foregoing Agreement.
<PAGE>
SCHEDULE I
Underwriting Agreement dated April 27, 2000
Registration Statement No. 333-31646
Representative:
Salomon Smith Barney Inc.
390 Greenwich Street
New York, NY 10013
Title, Purchase Price and Description of Securities:
Title: PECO Energy Transition Trust
$1,000,000,000 Transition Bonds
Series 2000-A
Principal amount, Price to Public, Underwriting
Discounts and Commissions and Proceeds to Issuer:
<TABLE>
<CAPTION>
Total
Principal Underwriting
Amount of Price to Discounts and Proceeds to
Class Public Commissions Issuer
-------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Per Class
A-1 Bond $ 110,000,000 $109,989,924 $ 220,000 $109,769,924
Per Class
A-2 Bond $ 140,000,000 $139,869,255 $ 420,000 $139,449,255
Per Class
A-3 Bond $ 398,838,452 $397,848,455 $1,994,192 $395,854,263
Per Class
A-4 Bond $ 351,161,548 $350,362,936 $1,755,808 $348,607,128
-------------- ------------ ---------- ------------
Total $1,000,000,000 $998,070,570 $4,390,000 $993,680,570
============== ============ ========== ============
</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: May 2, 2000, 9:30 a.m.,
Philadelphia time,
Philadelphia, PA
<PAGE>
3
SCHEDULE II
<TABLE>
<CAPTION>
Principal Amount of Transition Bonds to be Purchased
- --------------------------------------------------------------------------------------------------------------------------
Underwriters Class A-1 Bonds Class A-2 Bonds Class A-3 Bonds Class A-4 Bonds Total
- ------------ --------------- --------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Salomon Smith $ 64,900,000 $ 82,600,000 $235,314,687 $207,185,313 $ 590,000,000
Barney Inc.
Bank One Capital $ 8,250,000 $ 10,500,000 $ 29,912,884 $ 26,337,116 $ 75,000,000
Markets, Inc.
First Union $ 8,250,000 $ 10,500,000 $ 29,912,884 $ 26,337,116 $ 75,000,000
Securities, Inc.
Bank of America $ 5,500,000 $ 7,000,000 $ 19,941,923 $ 17,558,077 $ 50,000,000
Securities LLC
Credit Suisse $ 5,500,000 $ 7,000,000 $ 19,941,923 $ 17,558,077 $ 50,000,000
First Boston
Corporation
Goldman, Sachs & Co. $ 5,500,000 $ 7,000,000 $ 19,941,923 $ 17,558,077 $ 50,000,000
Janney Montgomery $ 5,500,000 $ 7,000,000 $ 19,941,923 $ 17,558,077 $ 50,000,000
Scott LLC
Barclays Capital $ 1,100,000 $ 1,400,000 $ 3,988,385 $ 3,511,615 $ 10,000,000
BNY Capital $ 1,100,000 $ 1,400,000 $ 3,988,385 $ 3,511,615 $ 10,000,000
Markets, Inc.
Mellon Financial $ 1,100,000 $ 1,400,000 $ 3,988,385 $ 3,511,615 $ 10,000,000
Markets, LLC
Prudential $ 1,100,000 $ 1,400,000 $ 3,988,385 $ 3,511,615 $ 10,000,000
Securities
Incorporated
</TABLE>
<PAGE>
4
<TABLE>
<CAPTION>
Principal Amount of Transition Bonds to be Purchased
- --------------------------------------------------------------------------------------------------------------------------
Underwriters Class A-1 Bonds Class A-2 Bonds Class A-3 Bonds Class A-4 Bonds Total
- ------------ --------------- --------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Pryor, Counts & $ 1,100,000 $ 1,400,000 $ 3,988,385 $ 3,511,615 $ 10,000,000
Co., Inc.
TD Securities $ 1,100,000 $ 1,400,000 $ 3,988,385 $ 3,511,615 $ 10,000,000
(USA) Inc.
------------ ------------ ------------ ------------ --------------
Total $110,000,000 $140,000,000 $398,838,452 $351,161,548 $1,000,000,000
============ ============ ============ ============ ==============
</TABLE>
================================================================================
PECO ENERGY TRANSITION TRUST
SECOND AMENDED AND RESTATED
TRUST AGREEMENT
as of May 2, 2000
AMONG
GEORGE SHICORA and THOMAS R. MILLER, 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>
<CAPTION>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
<S> <C> <C>
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
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
ARTICLE V
INVESTMENT AND APPLICATION OF TRUST FUNDS
Page
----
<S> <C> <C>
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
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
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
ARTICLE X
TERMINATION OF TRUST
Page
----
<S> <C> <C>
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
</TABLE>
Exhibit 1 Issuer Trustee Fee Schedule
Exhibit 2 Certificate of Trust
iii
<PAGE>
SECOND AMENDED AND RESTATED TRUST AGREEMENT dated as of May 2, 2000 among
PECO Energy Company, a Pennsylvania corporation, as Grantor and Owner, First
Union Trust Company, National Association, a national banking corporation, as
Issuer Trustee, Delaware Trustee and Independent Trustee, and George Shicora, an
individual, and Thomas R. Miller, 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 Amended and Restated Trust Agreement dated as of February 19, 1999
(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 Second 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.
"Bond Trustee" means The Bank of New York, as Bond Trustee under the
Indenture, and its successors.
<PAGE>
"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. ss.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. ss. 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, dated as of March 1, 1999, 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.
"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).
2
<PAGE>
"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 (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
3
<PAGE>
(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 Amended and Restated Master Servicing Agreement between the
Trust and PECO Energy, as Servicer thereunder (the "Master Servicing
Agreement"), the Amended and Restated Intangible Transition Property 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 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.
4
<PAGE>
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
(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
5
<PAGE>
Grantor has appointed First Union Trust Company, National Association as Issuer
Trustee, Delaware Trustee and Independent Trustee, and George Shicora and Thomas
R. Miller 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. 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 has been or 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
6
<PAGE>
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 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 ss. 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:
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(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);
(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
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otherwise) and will be audited annually by an independent accounting firm which
shall provide such audit to the Bond Trustee;
(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 paid the initial organization
expenses of the Trust and shall be permitted to pay 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 Intangible 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;
(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;
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(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, any qualified rate orders or PECO
Energy's or the Trust's rights under the Competition Act or any qualified rate
orders 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.
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
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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.
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.
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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 any qualified rate orders 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, one or more Registration Statements on either Form S-3
or Form S-1 (collectively, the "1933 Act Registration Statements"), including
any pre-effective or post-effective amendments to such 1933 Act Registration
Statements (including the prospectus supplement, the prospectus and the exhibits
contained therein), relating to the registration under the Securities Act of
1933, as amended, of each Series of 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 each Series of
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 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.
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(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
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
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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.
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
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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
(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.
17
<PAGE>
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, 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
18
<PAGE>
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.
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.
19
<PAGE>
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
Thomas R. Miller 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; 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.
20
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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.
21
<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: Vice President and Treasurer
-----------------------------
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
-----------------------------
GEORGE SHICORA, not in his
individual capacity but solely as a
Beneficiary Trustee
/s/ George Shicora
------------------------------------
THOMAS R. MILLER, not in his
individual capacity but solely as a
Beneficiary Trustee
/s/ Thomas R. Miller
------------------------------------
22
<PAGE>
EXHIBIT 1
ISSUER TRUSTEE FEE SCHEDULE
For services performed pursuant to the Second Amended and Restated Trust
Agreement to which this Exhibit 1 is attached, the Issuer Trustee shall be
entitled to the following fees:
- $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 Second 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. ss. 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
------------------------------
SERIES SUPPLEMENT
Dated as of May 2, 2000
------------------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1. Definitions.......................................................2
SECTION 2. Designation; Series Issuance Dates................................4
SECTION 3. Initial Principal Amount; Bond Rate; Expected
Final Payment Date; Series Termination Date; Class
Termination Dates.................................................4
SECTION 4. Payment Dates; Expected Amortization Schedule
for Principal; Interest; Overcollateralization
Amount; Monthly Allocated Balances................................5
SECTION 5. Authorized Initial Denominations..................................6
SECTION 6. Redemption........................................................6
SECTION 7. Credit Enhancement................................................7
SECTION 8. Amendments to Indenture...........................................7
SECTION 9. Delivery and Payment for the Series 2000-A
Transition Bonds; Form of the Series 2000-A
Transition Bonds..................................................9
SECTION 10. Confirmation of Indenture........................................10
SECTION 11. Counterparts.....................................................10
SECTION 12. Governing Law....................................................10
SECTION 13. Issuer Obligation................................................10
Schedule A Expected Amortization Schedule
Schedule B Monthly Allocated Balances
Exhibit A Form of Transition Bond
<PAGE>
SERIES SUPPLEMENT dated as of May 2, 2000 (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 and for modifying certain provisions of the Indenture. 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 $1,000,000,000 to be known as the Issuer's Transition Bonds, Series
2000-A (the "Series 2000-A Transition Bonds"). All acts and all things necessary
to make the Series 2000-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 2000-A Transition Bonds and to modify certain provisions
of the Indenture in connection with the Second Qualified Rate Order (as defined
in the Servicing Agreement) and any subsequent Qualified Rate Orders.
In order to secure the payment of principal of and interest on the Series
2000-A Transition Bonds, and to further secure the payment of principal of and
interest on the Series 1999-A Bonds issued on March 25, 1999, in each case
issued and to be issued under the Indenture and/or any Series Supplement, the
Issuer hereby Grants, and confirms its prior Grant on March 25, 1999 in
connection with the issuance of the Series 1999-A Bonds, 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
<PAGE>
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) all Swap Agreements with respect to the
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
2
<PAGE>
Article One but with such additional provisions as are specified in the related
Series Supplement. With respect to the Series 2000-A Transition Bonds, the
following definitions shall apply:
"Adjustment Date" shall mean initially each August 12th, until August 12,
2008, and commencing on February 14, 2009, such date and the 14th day of each
month thereafter until the Series Termination Date.
"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 May 14, 2008, and
commencing on January 14, 2009, such date and the 14th day of each month
thereafter until the Series Termination Date.
"Class Termination Date" means, with respect to any Class of the Series
2000-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 2000-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.
"Monthly Allocated Interest Balance" has the meaning set forth in Section
4(e) of this Supplement.
"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(d) of
this Supplement.
3
<PAGE>
"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
2000-A Transition Bonds shall be designated generally as the Issuer's Transition
Bonds, Series 2000-A and further denominated as Classes A-1 through A-4.
(b) Series Issuance Date. The Series 2000-A Transition Bonds that are
authenticated and delivered by the Bond Trustee to or upon the order of the
Issuer on May 2, 2000 (the "Series Issuance Date") shall have as their date of
authentication May 2, 2000. Each other Series 2000-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. The Transition Bonds of
each Class of the Series 2000-A Transition Bonds shall have the initial
principal amounts, bear interest at the rates per annum and shall have Expected
Final Payment Dates and Class Termination Dates as set forth below:
4
<PAGE>
Initial
Principal Bond Expected Final Class
Class Amount Rate Payment Date Termination Date
- ----- ----------- ----- ----------------- ------------------
A-1 110,000,000 7.180% September 1, 2001 September 1, 2003
A-2 140,000,000 7.300% September 1, 2002 September 1, 2004
A-3 398,838,452 7.625% March 1, 2009 March 1, 2010
A-4 351,161,548 7.650% September 1, 2009 March 1, 2010
The Bond Rate for each Class shall be computed on the basis of a 360-day
year of twelve 30-day months.
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 2000-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, 2000 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 2000-A Transition Bondholders of record as of the
related Record Date amounts payable in respect of the Series 2000-A Transition
Bonds pursuant to Section 8.02(e) of the Indenture as principal, in accordance
with the Expected Amortization Schedule. Available funds in the Series 2000-A
Subaccount will be allocated in a sequential manner, to the extent funds are
available, as follows: (1) to the holders of the Series 2000-A Transition Bonds,
Class A-1, until this Class is retired in full, (2) to the holders of the Series
2000-A Transition Bonds, Class A-2, until this Class is retired in full, (3) to
the holders of the Series 2000-A Transition Bonds, Class A-3, until this Class
is retired in full, and (4) to the holders of the Series 2000-A Transition
Bonds, Class A-4, until this Class is retired in full. Other than in the event
of an acceleration of payments following an Event of Default or 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 2000-A Transition Bonds to the amount specified in the
Expected Amortization Schedule which is attached as
5
<PAGE>
Schedule A hereto for such Class and Payment Date. In the event of an
acceleration of payments following an Event of Default on the Series 2000-A
Transition Bonds, principal payments on each Class of Series 2000-A Transition
Bonds will be made on a pro rata basis based on the respective Outstanding
Amount of each Class as of the prior Payment Date.
(c) Interest. Interest will be payable on each Class of the Series 2000-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 2000-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 2000-A Transition Bonds shall be $20,000,000.
(e) Monthly Allocated Balances. The Monthly Allocated Interest Balance and
Monthly Allocated Principal Balance for any Monthly Allocation Date and the
Series 2000-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 2000-A Transition Bonds in whole.
SECTION 5. Authorized Initial Denominations. The Series 2000-A Transition
Bonds shall be issuable in the Authorized Initial Denominations.
SECTION 6. Redemption. (a) Mandatory Redemption. The Series 2000-A
Transition Bonds shall not be subject to mandatory redemption except as provided
in
6
<PAGE>
Section 10.02 of the Indenture in the event that the Issuer receives Liquidated
Damages. If the Issuer receives Liquidated Damages from the Seller as a result
of a breach of a representation and warranty under the Sale Agreement which
relates to one or more of the Qualified Rate Orders, but not all of the
Qualified Rate Orders, then (i) only the Affected Transition Bonds will be
redeemed and (ii) the Redemption Price shall be equal to the then outstanding
principal amount of the Affected Transition Bonds as of the Liquidated Damages
Redemption Date plus accrued interest to such Redemption Date.
(b) Optional Redemption. The Series 2000-A Transition Bonds shall not be
subject to optional redemption by the Issuer except that the Series 2000-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 or equal to 5% of the initial principal
balance thereof. Notwithstanding Section 10.01 of the Indenture, with respect to
an optional redemption pursuant to this Section 6(b), the Issuer shall deposit
with the Bond Trustee the Redemption Price of the Transition Bonds to be
redeemed plus accrued interest thereon to the Redemption Date on or prior to the
date that notice of such redemption is furnished.
SECTION 7. Credit Enhancement. No credit enhancement (other than the
Overcollateralization Amount) is provided for the Series 2000-A Transition
Bonds.
SECTION 8. Amendments to Indenture. In connection with the issuance of the
Series 2000-A Transition Bonds, the Indenture shall be amended as follows:
(a) Section 1.01(a) of the Indenture shall be amended by (i) amending the
definition of "Eligible Investments" by replacing the entire proviso at the end
thereof with the phrase "in each case which mature no later than the Business
Day prior to the next Payment Date for that Series or Class; (ii) amending the
definition of "Liquidated Damages" by deleting the phrase "5.01(c)(ii) or" in
the second line thereof; (iii) amending the definition of "Liquidated Damages
Redemption Date" by adding the word "Affected" after the phrase "for the
redemption of" in the second line thereof; (iv) amending the definition of "Sale
Agreement" by replacing the phrase "Intangible Transition Property Sale
Agreement dated as of March 25, 1999" with the phrase "Intangible Transition
Property Sale Agreement dated
7
<PAGE>
as of March 25, 1999, as amended and restated as of May 2, 2000"; and (v)
amending the definition of "Servicing Agreement" by replacing the phrase "Master
Servicing Agreement dated as of March 25, 1999" with the phrase "Master
Servicing Agreement dated as of March 25, 1999, as amended and restated as of
May 2, 2000".
(b) Section 1.01(b) of the Indenture shall be amended by (i) adding the
term "Affected Transition Bonds" in proper alphabetical order and (ii) replacing
the term "Qualified Rate Order" with the term "Qualified Rate Orders".
(c) Section 3.06(a) of the Indenture shall be amended by replacing the
phrase "July 1st" in the first line thereof with the phrase "March 31st" and by
replacing the phrase "July 1" in the last line thereof with the phrase "March
31".
(d) Section 3.10(vi) of the Indenture shall be amended by replacing the
term "Qualified Rate Order" with the term "Qualified Rate Orders" in each of the
second line and third line thereof.
(e) Section 8.02(d)(i) of the Indenture shall be amended by adding the
following phrase at the end thereof: "; provided that the Bond Trustee shall not
receive any such Indemnity Amounts if an Event of Default is reasonably expected
to occur as a result of the payment of any such Indemnity Amounts; provided,
further, that prior to the payment of any such Indemnity Amount, the Issuer
shall provide notice to the Rating Agencies of the Indemnity Amount and, if
reasonably required by the Rating Agencies, the Issuer shall deliver an
Officer's Certificate (and other backup information supporting the Officer's
Certificate reasonably required by the Rating Agencies) to the Rating Agencies
certifying that such payment is reasonably expected not to result in an Event of
Default".
(f) Section 8.02(d)(ii) of the Indenture shall be amended by adding the
following phrase at the end thereof: "; provided that the Issuer Trustee shall
not receive any such Indemnity Amounts if an Event of Default is reasonably
expected to occur as a result of the payment of any such Indemnity Amounts;
provided, further, that prior to the payment of any such Indemnity Amount, the
Issuer shall provide notice to the Rating Agencies of the Indemnity Amount and,
if reasonably required by the Rating Agencies, the Issuer shall deliver an
Officer's Certificate (and other backup information supporting the Officer's
Certificate reasonably required by the Rating Agencies) to the Rating
8
<PAGE>
Agencies certifying that such payment is reasonably expected not to result in an
Event of Default".
(g) Section 8.02(f) of the Indenture shall be amended by (i) adding the
following phrase at the end of clause (iv) thereof: "provided that if the Issuer
receives Liquidated Damages from the Seller as a result of a breach of a
representation and warranty under the Sale Agreement which relates to one or
more of the Qualified Rate Orders, but not all of the Qualified Rate Orders,
then only the Redemption Price and accrued interest for the Affected Transition
Bonds shall be paid to Transition Bondholders of such Series, and any amounts
due to any Counterparty pursuant to a Swap Agreement entered into in connection
with the issuance of the Affected Transition Bonds shall be paid to such
Counterparty;" and (ii) adding the following phrase at the end of clause (vi)
thereof: "provided that if the Issuer receives Liquidated Damages from the
Seller as a result of a breach of a representation and warranty under the Sale
Agreement which relates to one or more of the Qualified Rate Orders, but not all
of the Qualified Rate Orders, then the balance, if any, will remain in the
Collection Account".
(h) Section 10.02(a) of the Indenture shall be amended by adding the
following phrase at the end of clause (ii) thereof: "; provided that if the
Issuer receives Liquidated Damages from the Seller as a result of a breach of a
representation and warranty under the Sale Agreement which relates to one or
more of the Qualified Rate Orders, but not all of the Qualified Rate Orders,
then (1) only the Affected Transition Bonds will be redeemed and (2) the
Redemption Price shall be equal to the then outstanding principal amount of the
Affected Transition Bonds as of the Liquidated Damages Redemption Date plus
accrued interest to such Redemption Date".
(i) Section 11.04 of the Indenture shall be amended by replacing the phrase
"Standard & Poor's Corporation, 26 Broadway (15th Floor), New York, NY 10004"
with the phrase "Standard & Poor's Rating Services, 55 Water Street (41st
Floor), New York, NY 10041".
SECTION 9. Delivery and Payment for the Series 2000-A Transition Bonds;
Form of the Series 2000-A Transition Bonds. The Bond Trustee shall deliver the
Series 2000-A Transition Bonds to the Issuer when authenticated in accordance
with Section 2.02 of the Indenture. The Series 2000-A Transition Bonds of each
Class shall be in the form of Exhibits A-1 through A-4 hereto.
9
<PAGE>
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
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).
10
<PAGE>
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/ Thomas J. Provenzano
-------------------------------------
Name: Thomas J. Provenzano
Title: Vice President
11
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Expected Amortization Schedule
Outstanding Principal Balance
Payment Date Class A-1 Class A-2 Class A-3 Class A-4 Series 2000-A
- ------------ ----------- ----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Series Issuance Date.. 110,000,000 140,000,000 398,838,452 351,161,548 1,000,000,000
September 1, 2000..... 110,000,000 140,000,000 398,838,452 351,161,548 1,000,000,000
March 1, 2001......... 62,081,471 140,000,000 398,838,452 351,161,548 952,081,417
September 1, 2001..... 0 140,000,000 398,838,452 351,161,548 890,000,000
March 1, 2002......... 0 68,928,136 398,838,452 351,161,548 818,928,136
September 1, 2002..... 0 0 398,838,452 351,161,548 750,000,000
March 1, 2003......... 0 0 398,838,452 351,161,548 750,000,000
September 1, 2003..... 0 0 398,838,452 351,161,548 750,000,000
March 1, 2004......... 0 0 398,838,452 351,161,548 750,000,000
September 1, 2004..... 0 0 398,838,452 351,161,548 750,000,000
March 1, 2005......... 0 0 398,838,452 351,161,548 750,000,000
September 1, 2005..... 0 0 398,838,452 351,161,548 750,000,000
March 1, 2006......... 0 0 398,838,452 351,161,548 750,000,000
September 1, 2006..... 0 0 398,838,452 351,161,548 750,000,000
March 1, 2007......... 0 0 398,838,452 351,161,548 750,000,000
September 1, 2007..... 0 0 398,838,452 351,161,548 750,000,000
March 1, 2008......... 0 0 376,413,585 351,161,548 727,575,133
September 1, 2008..... 0 0 348,838,452 351,161,548 700,000,000
March 1, 2009......... 0 0 0 351,161,548 351,161,548
September 1, 2009..... 0 0 0 0 0
March 1, 2010......... 0 0 0 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>
June 1, 2000.......................... 11,335,047 --
July 1, 2000.......................... 15,344,430 --
August 1, 2000........................ 19,880,821 --
September 1, 2000..................... 24,921,671 --
October 1, 2000....................... 5,860,167 7,449,228
November 1, 2000...................... 12,127,490 15,416,018
December 1, 2000...................... 18,091,187 22,996,849
January 1, 2001....................... 23,950,499 30,444,990
February 1, 2001...................... 30,496,670 38,766,241
March 1, 2001......................... 37,696,645 47,918,583
April 1, 2001......................... 6,198,559 10,696,336
May 1, 2001........................... 12,131,238 20,933,865
June 1, 2001.......................... 17,669,661 30,491,060
July 1, 2001.......................... 23,208,919 40,049,695
August 1, 2001........................ 29,244,409 50,464,636
September 1, 2001..................... 35,976,368 62,081,417
October 1, 2001....................... 6,026,170 12,690,993
November 1, 2001...................... 11,845,275 24,945,912
December 1, 2001...................... 17,173,884 36,167,856
January 1, 2002....................... 22,367,208 47,104,891
February 1, 2002...................... 27,938,266 58,837,428
March 1, 2002......................... 33,747,645 71,071,864
April 1, 2002......................... 5,391,423 11,928,692
May 1, 2002........................... 10,531,897 23,302,150
June 1, 2002.......................... 15,323,997 33,904,776
July 1, 2002.......................... 20,114,015 44,502,883
August 1, 2002........................ 25,332,185 56,048,246
September 1, 2002..................... 31,153,522 68,928,136
October 1, 2002....................... 5,254,639 --
November 1, 2002...................... 10,217,783 --
December 1, 2002...................... 14,725,198 --
January 1, 2003....................... 19,108,589 --
February 1, 2003...................... 23,782,708 --
March 1, 2003......................... 28,637,645 --
April 1, 2003......................... 4,957,627 --
May 1, 2003........................... 9,684,198 --
June 1, 2003.......................... 14,089,731 --
July 1, 2003.......................... 18,490,788 --
August 1, 2003........................ 23,285,552 --
September 1, 2003..................... 28,637,645 --
October 1, 2003....................... 5,272,012 --
November 1, 2003...................... 10,233,758 --
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Monthly Allocated Monthly Allocated
Monthly Allocation Date Interest Balance Principal Balance
- ----------------------- ------------------ -----------------
<S> <C> <C>
December 1, 2003...................... 14,730,371 --
January 1, 2004....................... 19,100,257 --
February 1, 2004...................... 23,769,833 --
March 1, 2004......................... 28,637,645 --
April 1, 2004......................... 4,956,412 --
May 1, 2004........................... 9,683,008 --
June 1, 2004.......................... 14,088,905 --
July 1, 2004.......................... 18,489,896 --
August 1, 2004........................ 23,284,751 --
September 1, 2004..................... 28,637,645 --
October 1, 2004....................... 5,376,048 --
November 1, 2004...................... 10,351,765 --
December 1, 2004...................... 14,835,936 --
January 1, 2005....................... 19,188,703 --
February 1, 2005...................... 23,825,187 --
March 1, 2005......................... 28,637,645 --
April 1, 2005......................... 4,957,630 --
May 1, 2005........................... 9,684,020 --
June 1, 2005.......................... 14,089,489 --
July 1, 2005.......................... 18,490,401 --
August 1, 2005........................ 23,285,176 --
September 1, 2005..................... 28,637,645 --
October 1, 2005....................... 5,250,289 --
November 1, 2005...................... 10,131,763 --
December 1, 2005...................... 14,541,759 --
January 1, 2006....................... 18,826,142 --
February 1, 2006...................... 23,539,803 --
March 1, 2006......................... 28,637,645 --
April 1, 2006......................... 4,952,684 --
May 1, 2006........................... 9,681,077 --
June 1, 2006.......................... 14,089,359 --
July 1, 2006.......................... 18,487,247 --
August 1, 2006........................ 23,279,815 --
September 1, 2006..................... 28,637,645 --
October 1, 2006....................... 5,389,289 --
November 1, 2006...................... 10,359,806 --
December 1, 2006...................... 14,834,519 --
January 1, 2007....................... 19,179,254 --
February 1, 2007...................... 23,813,481 --
March 1, 2007......................... 28,637,645 --
April 1, 2007......................... 4,972,495 --
May 1, 2007........................... 9,704,644 --
June 1, 2007.......................... 14,110,761 --
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Monthly Allocated Monthly Allocated
Monthly Allocation Date Interest Balance Principal Balance
- ----------------------- ------------------ -----------------
<S> <C> <C>
July 1, 2007.......................... 18,497,979 --
August 1, 2007........................ 23,280,298 --
September 1, 2007..................... 28,637,645 --
October 1, 2007....................... 5,638,132 4,414,971
November 1, 2007...................... 10,620,078 8,316,111
December 1, 2007...................... 15,027,315 11,767,222
January 1, 2008....................... 19,289,203 15,104,517
February 1, 2008...................... 23,856,237 18,680,759
March 1, 2008......................... 28,637,645 22,424,867
April 1, 2008......................... 4,824,756 4,788,710
May 1, 2008........................... 9,415,760 9,345,415
June 1, 2008.......................... 13,690,269 13,587,989
July 1, 2008.......................... 17,945,258 17,811,190
August 1, 2008........................ 22,583,990 22,415,265
September 1, 2008..................... 27,782,697 27,575,133
October 1, 2008....................... 4,877,526 63,650,577
November 1, 2008...................... 9,506,354 124,055,689
December 1, 2008...................... 13,704,594 178,841,742
January 1, 2009....................... 17,786,861 232,114,368
February 1, 2009...................... 22,162,157 289,210,957
March 1, 2009......................... 26,731,395 348,838,452
April 1, 2009......................... 2,333,212 60,999,018
May 1, 2009........................... 4,552,848 119,028,704
June 1, 2009.......................... 6,619,322 173,054,180
July 1, 2009.......................... 8,676,449 226,835,267
August 1, 2009........................ 10,918,982 285,463,581
September 1, 2009..................... 13,431,929 351,161,548
</TABLE>
<PAGE>
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 2000-A, 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
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, on each March 1 and September 1 or
if any such day is not a Business Day, the next succeeding Business Day,
commencing on September 1, 2000 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 most recent Payment Date on which interest has been
paid to
<PAGE>
2
but excluding such Payment Date or, if no interest has yet been paid, from
May 2, 2000. Interest will be computed on the basis of a 360-day year of twelve
30-day months. 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: May 2, 2000
This is one of the Class [ ] Transition Bonds of the Series 2000-A
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 2000-A, 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 2000-A
Transition Bond, in which this Class [ ] Transition Bond represents an interest,
consists of four 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
May 2, 2000 (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 2000-A
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 2000-A Transition Bonds in whole or from time to time in part pursuant to
Section 10.01 of the Indenture, (iii) the Issuer shall have called for the
redemption of the Series 2000-A 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 (iv) the Issuer, at its option, shall
have called for the redemption of the Series 2000-A Transition Bonds in whole
pursuant to Section 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 the account designated by such
Clearing Agency and except
<PAGE>
7
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.
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 [ ]
<PAGE>
8
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 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
<PAGE>
9
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, 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
<PAGE>
10
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,
as amended and restated
as of May 2, 2000
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions
SECTION 1.01. Definitions.................................................... 3
SECTION 1.02. Other Definitional Provisions..................................10
ARTICLE II
Conveyance of Intangible Transition Property
SECTION 2.01. Conveyance of Initial Intangible Transition Property...........11
SECTION 2.02. Conveyance of Subsequent Intangible Transition Property........12
SECTION 2.03. Conditions to Conveyance of Intangible Transition Property.....13
ARTICLE III
Representations and Warranties of Seller
SECTION 3.01. Organization and Good Standing.................................15
SECTION 3.02. Due Qualification..............................................15
SECTION 3.03. Power and Authority............................................16
SECTION 3.04. Binding Obligation.............................................16
SECTION 3.05. No Violation...................................................17
SECTION 3.06. No Proceedings.................................................17
SECTION 3.07. Approvals......................................................18
SECTION 3.08. The Intangible Transition Property.............................18
ARTICLE IV
Covenants of the Seller
SECTION 4.01. Corporate Existence............................................24
SECTION 4.02. No Liens or Conveyances........................................25
SECTION 4.03. Delivery of Collections........................................25
SECTION 4.04. Notice of Liens................................................26
SECTION 4.05. Compliance with Law............................................26
SECTION 4.06. Covenants Related to Intangible Transition Property............26
SECTION 4.07. Notice of Indemnification Events...............................28
<PAGE>
SECTION 4.08. Protection of Title............................................28
SECTION 4.09. Taxes..........................................................29
ARTICLE V
The Seller
SECTION 5.01. Liability of Seller; Indemnities and Liquidated Damages........30
SECTION 5.02. Merger or Consolidation of, or Assumption of the
Obligations of, Seller.......................................37
SECTION 5.03. Limitation on Liability of Seller and Others...................39
SECTION 5.04. Opinions of Counsel............................................40
ARTICLE VI
Miscellaneous Provisions
SECTION 6.01. Amendment......................................................41
SECTION 6.02. Notices........................................................42
SECTION 6.03. Assignment.....................................................43
SECTION 6.04. Limitations on Rights of Others................................43
SECTION 6.05. Severability...................................................43
SECTION 6.06. Separate Counterparts..........................................44
SECTION 6.07. Headings.......................................................44
SECTION 6.08. Governing Law..................................................44
SECTION 6.09. Assignment to Bond Trustee.....................................44
SECTION 6.10. Nonpetition Covenant...........................................45
SECTION 6.11. Limitation of Liability of Issuer Trustee......................46
SECTION 6.12. Perfection.....................................................46
<PAGE>
INTANGIBLE TRANSITION PROPERTY SALE AGREEMENT dated as of
March 25, 1999, as amended and restated as of May 2, 2000,
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
Orders;
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, on March 25, 1999, the Issuer, to secure its obligations under all
Transition Bonds and the Indenture, pledged all its right, title and interest in
certain Intangible Transition Property created by the Initial Qualified Rate
Order to the Bond Trustee for the benefit of the Transition Bondholders;
<PAGE>
2
WHEREAS the Issuer, to secure its obligations under additional Transition
Bonds and to further secure its obligations under the Series 1999-A Bonds issued
on March 25, 1999, will pledge all its right, title and interest in certain
Intangible Transition Property created by the Second Qualified Rate Order and by
any additional Qualified Rate Orders issued from time to time to the Bond
Trustee for the benefit of the Transition Bondholders;
WHEREAS the Issuer and the Seller desire to amend and restate this
Agreement to add provisions for the Second Qualified Rate Order and any
subsequent Qualified Rate Orders; and
WHEREAS the Issuer has determined that the transactions contemplated by the
Basic Documents are in the 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:
<PAGE>
3
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.
"Affected QRO" has the meaning specified in the definition of Affected
Transition Bonds.
"Affected Transition Bonds" means all of the Transition Bonds; provided
that if the Seller is obligated pursuant to Section 5.01(d)(i) to pay amounts
for deposit into the General Subaccount of the Collection Account for a breach
of a representation or warranty which relates to one or more of the Qualified
Rate Orders (any such Qualified Rate Order, an "Affected QRO"), but not all of
the Qualified Rate Orders, then "Affected Transition Bonds" shall mean only the
Series of Transition Bonds issued in connection with the Affected QRO.
<PAGE>
4
"Agreement" means this Intangible Transition Property Sale Agreement, as
amended and restated, and as the same may be further 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.
"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).
<PAGE>
5
"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.
"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 Qualified Rate Order" has the meaning specified in the Master
Servicing Agreement.
"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.
<PAGE>
6
"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 Affected
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 related to the Affected Transition Bonds.
"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.
<PAGE>
7
"Losses" has the meaning specified in the Master Servicing Agreement.
"Master Servicing Agreement" means the Master Servicing Agreement dated as
of March 25, 1999, as amended and restated as of May 2, 2000, 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,
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.
<PAGE>
8
"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 Orders" has the meaning specified in the Master Servicing
Agreement.
"Qualified Transition Expenses" has the meaning specified in the Master
Servicing Agreement.
"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.
"Second Qualified Rate Order" has the meaning specified in the Master
Servicing Agreement.
<PAGE>
9
"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.
"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.
<PAGE>
10
"Trust Agreement" means the Second Amended and Restated Trust Agreement
dated as of May 2, 2000, 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:
Signature of
Term 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)
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)
<PAGE>
11
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) The
Seller and the Issuer hereby confirm that 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 irrevocably sold, transferred,
assigned, set over and
<PAGE>
12
otherwise conveyed 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 included, 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 was expressly stated to be a sale and,
pursuant to Section 2812(e) of the Statute, was and 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 hereby confirms that after giving
effect to that sale it had and will have 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>
13
(b) The Issuer does hereby confirm the purchase of the Initial Intangible
Transition Property from the Seller for the consideration set forth in paragraph
(a) above.
(c) The Seller and the Issuer each confirm that the purchase price for the
Initial Intangible Transition Property sold pursuant to this Agreement was 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
<PAGE>
14
of Sale identifying the Intangible Transition Property to be conveyed on
that date;
(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
<PAGE>
15
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;
(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 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.
<PAGE>
16
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
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).
<PAGE>
17
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
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
<PAGE>
18
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
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
<PAGE>
19
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
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
<PAGE>
20
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 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
<PAGE>
21
(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) Each 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 each 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 each 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 Intangible Transition Charges approved by the Qualified Rate Orders
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
<PAGE>
22
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, any Qualified Rate Order, the
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 Orders. (v) No other approval,
authorization, consent, order or other action of, or filing with, any court,
Federal or state regulatory body, administrative agency or other governmental
instrumentality is required in connection with the creation of the Intangible
Transition Property, except those that have been obtained or made. (vi) Except
as disclosed by the Seller to
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23
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 any 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
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 Orders in an amount equal to the aggregate
principal amount of Transition Bonds and Other
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24
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 Orders 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
Orders to the extent that in accordance with the Statute, the Qualified Rate
Orders and the rates and charges authorized under the Qualified Rate Orders are
declared to be irrevocable and (iii) paragraphs four through nineteen of the
Initial Qualified Rate Order and paragraphs four through eighteen of the Second
Qualified Rate Order (and the comparable paragraphs for any subsequent 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
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25
affairs 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
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26
the Seller is a party necessary to the proper administration of this Agreement
and the transactions contemplated hereby.
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
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Transition Charges, other than Intangible 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.
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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.
(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
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29
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 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
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30
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 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 Orders 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.
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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 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 this Agreement.
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(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.
(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
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33
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, the
Overcollateralization 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 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
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34
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 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.
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35
(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).
Notwithstanding the foregoing, if the Seller is obligated pursuant to this
Section 5.01(d)(i) to pay amounts for deposit into the General Subaccount of the
Collection Account for a breach of a representation and warranty which relates
to one or more of the Qualified Rate Orders, but not all of the Qualified Rate
Orders, then the Liquidated Damages Amount will include the then outstanding
principal amount of only the Affected Transition Bonds as of
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36
the Liquidated Damages Redemption Date and unpaid interest accrued thereon.
(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
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
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37
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
to exceed 1/12th of 1% of the annual outstanding balance of the Affected
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,
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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
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
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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
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
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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 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, division or sale 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
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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.
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:
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(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 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.
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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,
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
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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
the case of Standard & Poor's, to Standard & Poor's Corporation, 55 Water Street
(41st Floor), New York, New York 10041, 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
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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
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
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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
liability for the representations, warranties, covenants, agreements or other
obligations of the Issuer, hereunder or in any of the certificates, notices
<PAGE>
47
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.
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
<PAGE>
48
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
<PAGE>
49
Property will be perfected against all third persons, including any judicial
lien creditors.
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.
----------------------------
Title: Vice President
PECO ENERGY COMPANY, Seller,
by /s/ J. Barry Mitchell
---------------------------------
Title: Vice President and Treasurer
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/ Thomas J. Provenzano
------------------------
Title: Vice President
================================================================================
MASTER SERVICING
AGREEMENT
among
PECO ENERGY TRANSITION TRUST,
the other Issuers from
time to time party hereto
and
PECO ENERGY COMPANY
Servicer
Dated as of March 25, 1999,
as amended and restated
as of May 2, 2000
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
Definitions
SECTION 1.01. Definitions...................................................2
SECTION 1.02. Other Definitional Provisions................................14
ARTICLE II
Appointment and Authorization of Servicer
SECTION 2.01. Appointment of Servicer; Acceptance of Appointment...........15
SECTION 2.02. Authorization................................................15
SECTION 2.03. Dominion and Control over Serviced Intangible Transition
Property...................................................16
ARTICLE III
Billing Services
SECTION 3.01. Duties of Servicer...........................................17
SECTION 3.02. Collection and Allocation of Intangible Transition
Charges....................................................19
SECTION 3.03. Servicing and Maintenance Standards..........................21
SECTION 3.04. Servicer's Certificates......................................22
SECTION 3.05. Annual Statement as to Compliance; Notice of Default.........22
SECTION 3.06. Annual Independent Certified Public Accountants' Report......23
SECTION 3.07. Intangible Transition Property Documentation.................25
SECTION 3.08. Computer Records; Audits of Documentation....................25
SECTION 3.09. Defending Intangible Transition Property Against Claims......27
SECTION 3.10. Opinions of Counsel..........................................28
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ARTICLE IV
Services Related to Intangible
Transition Charges Adjustments
SECTION 4.01. Intangible Transition Charges Adjustments....................29
ARTICLE V
The Servicer
SECTION 5.01. Representations and Warranties of Servicer...................29
SECTION 5.02. Indemnities of Servicer; Release of Claims...................34
SECTION 5.03. Merger or Consolidation of, or Assumption of the
Obligations of, Servicer...................................36
SECTION 5.04. Assignment of Servicer's Obligations.........................38
SECTION 5.05. Limitation on Liability of Servicer and Others...............39
SECTION 5.06. PECO Energy Not To Resign as Servicer........................40
SECTION 5.07. Monthly Servicing Fee........................................40
SECTION 5.08. Servicer Expenses............................................41
SECTION 5.09. Appointments.................................................41
SECTION 5.10. Remittances..................................................42
SECTION 5.11. Servicer Advances............................................44
SECTION 5.12. Protection of Title..........................................44
ARTICLE VI
Servicer Default
SECTION 6.01. Servicer Default.............................................45
SECTION 6.02. Notice of Servicer Default...................................48
SECTION 6.03. Waiver of Past Defaults......................................49
SECTION 6.04. Appointment of Successor.....................................49
SECTION 6.05. Cooperation with Successor...................................51
ARTICLE VII
Miscellaneous Provisions
SECTION 7.01. Amendment....................................................51
SECTION 7.02. Notices......................................................52
SECTION 7.03. Assignment...................................................53
SECTION 7.04. Limitations on Rights of Others..............................53
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SECTION 7.05. Severability.................................................54
SECTION 7.06. Separate Counterparts........................................54
SECTION 7.07. Headings.....................................................54
SECTION 7.08. Governing Law................................................54
SECTION 7.09. Assignment to Bond Trustee...................................54
SECTION 7.10. Nonpetition Covenants........................................55
SECTION 7.11. Addition of Issuers..........................................56
SECTION 7.12. Termination by Issuers.......................................56
SECTION 7.13. Limitation of Liability of Trustee...........................56
EXHIBIT A Servicing Procedures
EXHIBIT B Supplement for Addition of Issuer
ANNEX 1 ITC Adjustment Process and Reports - PECO
Energy Transition Trust
<PAGE>
MASTER SERVICING AGREEMENT dated as of March 25, 1999, as
amended and restated as of May 2, 2000, among 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 has been servicing Intangible Transition Property in
accordance with the terms of this Agreement since the sale of Intangible
Transition Property by PECO Energy Company to the First Issuer on March 25,
1999;
WHEREAS the First Issuer and the Servicer desire to amend this Agreement to
make provisions for the Second Qualified Rate Order and any subsequent Qualified
Rate Orders;
WHEREAS the Servicer is willing to service the Intangible Transition
Property purchased from the Seller by each Issuer; and
<PAGE>
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:
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 amended and restated,
and as the same may be further amended and supplemented from time to time.
"Annual Accountant's Report" has the meaning specified in Section 3.06(a).
"Basic Documents" has the meaning set forth in the Indentures.
"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,
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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 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, as
3
<PAGE>
adjusted in the Second Qualified Rate Order and such other adjustments that may
occur from time to time.
"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.
"Formation Documents" means, collectively, the Second Amended and Restated
Trust Agreement of the First Issuer dated as of May 2, 2000, 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.
4
<PAGE>
"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.
"Initial Intangible Transition Property" has the meaning set forth in the
Sale Agreements.
"Initial 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 Initial Intangible Transition Property and authorizes the imposition and
collection of the Intangible Transition Charges in respect of the Initial
Intangible Transition Property by PECO Energy or its assignee.
"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
5
<PAGE>
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
6
<PAGE>
electric service to Customers, to recover Qualified Transition Expenses pursuant
to the Qualified Rate Orders.
"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 Orders, 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 orders, 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
7
<PAGE>
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
8
<PAGE>
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
from time to time by 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.
9
<PAGE>
"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 Orders" means, collectively, the Initial Qualified Rate
Order, the Second Qualified Rate Order and from and after its date of issuance
any subsequent order of the PUC, adopted in accordance with the Statute,
10
<PAGE>
which creates Intangible Transition Property and authorizes the imposition and
collection of Intangible Transition Charges by PECO Energy or its assignee, and
any order supplemental to any of the foregoing.
"Qualified Transition Expenses" has the meaning assigned to that term in
the Qualified Rate Orders.
"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
11
<PAGE>
Rating Agency of any outstanding Series or Class of Transition Bonds issued by
such Issuer.
"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 as of March 25, 1999, as amended and restated as of May 2,
2000, and as the same may be further amended and supplemented from time to time,
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.
"Second Qualified Rate Order" means the order of the PUC issued on March
16, 2000, adopted in accordance with the Statute, which, among other things,
creates Intangible Transition Property to be transferred to the First Issuer on
the date hereof and authorizes the imposition and collection of Intangible
Transition Charges by PECO Energy or its assignee.
"Seller" means PECO Energy and its successors in interest to the extent
permitted hereunder.
12
<PAGE>
"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.
"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., as in effect from time to time.
13
<PAGE>
"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.
"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
14
<PAGE>
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. The First
Issuer hereby confirms the appointment of the Servicer. 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 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
15
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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 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
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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 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
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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, 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,
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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 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
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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 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
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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 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
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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 Orders 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 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
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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 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
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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 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.
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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 Orders 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 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,
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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.
(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
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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 Orders with
respect to the Intangible Transition Property. The costs of any such action
reasonably allocated 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
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(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 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
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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 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
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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 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,
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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 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
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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 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.
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(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 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
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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, 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
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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 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
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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 (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
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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 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
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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 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. In each Qualified Rate
Order the PUC authorizes PECO Energy to contract with an alternative party to
perform PECO Energy's obligations contemplated in such Qualified Rate Order, and
under each such Qualified Rate
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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; 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
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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 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
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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
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
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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 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
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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 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.
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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, 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.
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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 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
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(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
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
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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 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
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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 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
48
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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.
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
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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 Orders and this Agreement, (ii) the Rating Agency Condition
shall have been satisfied 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
50
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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 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.
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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 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, 55 Water Street (41st Floor), New York,
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New York 10041, 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 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.
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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.
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,
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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 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
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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 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,
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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
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the benefits of, the applicable terms and provisions of the Formation Documents
relating to the First Issuer.
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 PECO Energy
Transition Trust,
by /s/ Edward L. Truitt, Jr.
-------------------------------------
Title: Vice President
PECO ENERGY COMPANY, Servicer,
by /s/ J. Barry Mitchell
-------------------------------------
Title: Vice President and Treasurer
Acknowledged, Accepted and
Consented to:
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/ Thomas J. Provenzano
------------------------------
Title: 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,
as amended and restated as of May 2, 2000, 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
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2
Party pursuant to which such Third Party will be responsible 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 Qualified
Rate Orders.
"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 Qualified Rate Orders.
"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
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3
duties that the Servicer follows with respect to comparable assets that it
services for itself.
"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
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4
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 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.
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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 Transition 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.
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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
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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
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by the Servicer from or on behalf of Customers during prior 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.
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EXHIBIT B
Supplement for Addition of Issuer
SUPPLEMENT NO. __ dated as of [ ], to the Master Servicing
Agreement dated as of March 25, 1999, as amended and restated as of
May 2, 2000, 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 March
25, 1999, as amended and restated as of May 2, 2000 (as further amended,
supplemented or otherwise modified from time to time, the "Servicing
Agreement"), among 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.
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The New Issuer is executing this Supplement in accordance 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
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counterparts shall together constitute but one and the same 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.
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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:
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<PAGE>
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, as amended and restated as of May 2, 2000 (the
"Servicing Agreement"), among 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.
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"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
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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.
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"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
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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
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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
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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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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.
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