<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 14, 1999
REGISTRATION NO. 333-74671
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
PRE-EFFECTIVE AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
MASSACHUSETTS RRB
SPECIAL PURPOSE TRUST BEC-1
(ISSUER OF SECURITIES)
BEC FUNDING LLC
(DEPOSITOR OF THE TRUST DESCRIBED HEREIN)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CERTIFICATE OF FORMATION)
<TABLE>
<S> <C>
DELAWARE 04-3454484
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
BEC FUNDING LLC
800 BOYLSTON STREET, 35TH FLOOR
BOSTON, MASSACHUSETTS 02199
TELEPHONE: (617) 369-6000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
ROBERT J. WEAFER, JR.
BEC FUNDING LLC
800 BOYLSTON STREET, 35TH FLOOR
BOSTON, MASSACHUSETTS 02199
TELEPHONE: (617) 369-6000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C> <C>
HEMMIE CHANG, ESQ. STANLEY KELLER, ESQ. ERIC TASHMAN, ESQ.
ROPES & GRAY PALMER & DODGE LLP BROWN & WOOD LLP
ONE INTERNATIONAL PLACE ONE BEACON STREET 555 CALIFORNIA STREET
BOSTON, MASSACHUSETTS 02110 BOSTON, MASSACHUSETTS 02108 SAN FRANCISCO, CALIFORNIA 94104
(617) 951-7000 (617) 573-0100 (415) 772-1200
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after this Registration Statement becomes effective as determined by
market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
- ---------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ---------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES NOR IS IT SEEKING AN OFFER
TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE
THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION DATED JULY 14, 1999.
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JULY , 1999.
$[ ] RATE REDUCTION CERTIFICATES
MASSACHUSETTS RRB
SPECIAL PURPOSE TRUST BEC-1
ISSUER OF THE CERTIFICATES
BEC FUNDING LLC
ISSUER OF THE NOTES
BOSTON EDISON COMPANY
SELLER AND SERVICER
<TABLE>
<CAPTION>
INITIAL SCHEDULED FINAL FINAL
CERTIFICATE PRINCIPAL UNDERWRITING PROCEEDS TO DISTRIBUTION TERMINATION
RATE AMOUNT PRICE(%) PRICE($) DISCOUNT TRUST DATE DATE
----------- --------- -------- -------- ------------ ----------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A-1............
Class A-2............
Class A-3............
Class A-4............
Class A-5............
*The total price to the public is $ , the total amount of the underwriting discount is $ .
The total amount of proceeds before deduction of expenses is $ .
</TABLE>
SEE "RISK FACTORS" BEGINNING ON PAGE 16 OF THE ACCOMPANYING PROSPECTUS TO READ
ABOUT FACTORS YOU SHOULD CONSIDER BEFORE BUYING THE CERTIFICATES.
EACH CERTIFICATE REPRESENTS AN INTEREST IN THE RELATED CLASS OF BEC FUNDING LLC
NOTES, WHICH ARE OWNED BY THE TRUST.
NEITHER THE CERTIFICATES, THE NOTES OR THE PROPERTY SECURING THE NOTES IS AN
OBLIGATION OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY GOVERNMENTAL AGENCY,
AUTHORITY OR INSTRUMENTALITY OF THE COMMONWEALTH OR OF BOSTON EDISON OR ANY OF
ITS AFFILIATES, EXCEPT FOR BEC FUNDING LLC, WHICH IS AN AFFILIATE OF BOSTON
EDISON.
NEITHER THE FULL FAITH AND CREDIT NOR THE TAXING POWER OF THE COMMONWEALTH OF
MASSACHUSETTS NOR ANY POLITICAL SUBDIVISION, AGENCY, AUTHORITY OR
INSTRUMENTALITY OF THE COMMONWEALTH IS PLEDGED TO THE PAYMENT OF PRINCIPAL OF,
OR INTEREST ON, THE CERTIFICATES OR THE NOTES, OR THE PAYMENTS SECURING THE
NOTES. FURTHERMORE, NEITHER THE COMMONWEALTH OF MASSACHUSETTS NOR ANY POLITICAL
SUBDIVISION, AGENCY, AUTHORITY OR INSTRUMENTALITY OF THE COMMONWEALTH WILL
APPROPRIATE ANY FUNDS FOR THE PAYMENT OF ANY OF THE CERTIFICATES OR NOTES.
Neither the Securities and Exchange Commission nor any other regulatory body has
approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus supplement or the accompanying prospectus. Any
representation to the contrary is a criminal offense.
LEHMAN BROTHERS
BANC ONE CAPITAL MARKETS, INC.
BANCBOSTON ROBERTSON STEPHENS
BEAR, STEARNS & CO. INC.
BNY CAPITAL MARKETS, INC.
CIBC WORLD MARKETS
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SALOMON SMITH BARNEY
STATE STREET CAPITAL MARKETS, LLC
[ ], 1999
<PAGE> 3
This prospectus supplement does not contain all of the information that you
should know about this offering. You will find additional information in the
accompanying prospectus. The prospectus for this offering of certificates
consists of both this prospectus supplement and the accompanying prospectus. You
should read both of these documents in full before buying the certificates.
No dealer, salesperson, or other person is authorized to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus
supplement and the accompanying prospectus is an offer to sell only the
securities offered hereby, but only under circumstances and in jurisdictions
where it is lawful to do so. The information contained in this prospectus
supplement and the accompanying prospectus is current only as of its date.
The underwriters expect to deliver the certificates through the facilities
of The Depository Trust Company against payment in New York, New York on [
], 1999.
----------------------------
S-2
<PAGE> 4
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Risk Factors................................................ S-4
Description of the Certificates............................. S-4
Description of the Notes.................................... S-4
Transition Property......................................... S-7
Underwriting................................................ S-8
Ratings..................................................... S-9
PROSPECTUS
Prospectus Summary.......................................... 4
Risk Factors................................................ 16
Defined Terms............................................... 24
Available Information....................................... 24
Reports to Holders.......................................... 24
Incorporation of Documents by Reference..................... 24
Energy Deregulation and New Massachusetts
Market Structure.......................................... 26
Description of the Transition Property...................... 28
The Trust................................................... 37
The Agencies................................................ 37
The Note Issuer............................................. 38
The Seller and Servicer..................................... 40
Servicing................................................... 46
Description of the Notes.................................... 54
Description of the Certificates............................. 64
Federal Income Tax Consequences............................. 73
State Taxation.............................................. 77
ERISA Considerations........................................ 77
Use of Proceeds............................................. 79
Plan of Distribution........................................ 79
Legal Matters............................................... 80
Glossary.................................................... 81
Financial Statements........................................ F-1
</TABLE>
----------------------------
Through and including , 1999 (the 90th day after the date of
this prospectus supplement and the accompanying prospectus), all dealers
effecting transactions in these securities, whether or not participating in this
offering, may be required to deliver a prospectus supplement and the
accompanying prospectus. This is in addition to a dealer's obligation to deliver
a prospectus supplement and the accompanying prospectus when acting as an
underwriter and when offering an unsold allotment or subscription.
S-3
<PAGE> 5
RISK FACTORS
You should consider carefully the risks of investing in the certificates.
The section entitled "Risk Factors," which begins on page 16 of the accompanying
prospectus, discusses material risks of investing in the certificates.
DESCRIPTION OF THE CERTIFICATES
The trust will issue the certificates in minimum denominations of $1,000
and in integral multiples of that amount. The certificates will consist of
[ ] classes, in the initial principal amounts, bearing the interest rates
and having the scheduled final distribution dates and final termination dates
listed below:
<TABLE>
<CAPTION>
SCHEDULED
INITIAL CERTIFICATE FINAL FINAL
PRINCIPAL INTEREST DISTRIBUTION TERMINATION
CLASS AMOUNT RATE DATE DATE
- ----- --------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
A-1
A-2
A-3
A-4
A-5
</TABLE>
The scheduled final distribution date for a class of certificates is the
date by which the trust expects to distribute in full all interest on and
principal of that class of certificates. The final termination date for a class
of certificates is the legal maturity date of that class. The failure to
distribute principal of any class of certificates in full by the final
termination date for that class is an event of default, and the certificate
trustee may, and with the written direction of the holders of at least a
majority in principal amount of all outstanding certificates shall, declare the
unpaid principal amount of all outstanding notes and accrued interest to be due
and payable. See "Description of the Certificates -- Events of Default" in the
prospectus.
DISTRIBUTIONS OF INTEREST
Interest on each class of certificates will accrue from its issuance date
at the interest rate listed in the table above. Beginning March 15, 2000, the
trust is required to distribute interest semiannually on March 15 and September
15 (or, if any distribution date is not a business day, the following business
day) of each year. On each distribution date, the certificate trustee will
distribute interest to the extent paid on the related class of notes to the
holders of each class of certificates as of the close of business on the record
date. The record date for any distribution of interest on and principal of the
certificates will be the business day immediately before the distribution date.
Each distribution date will also be a payment date for interest on and principal
of the notes.
DISTRIBUTIONS OF PRINCIPAL
On each distribution date, the certificate trustee will distribute
principal as paid on the related class of notes to the holders of each class of
certificates as of the close of business on the record date.
DESCRIPTION OF THE NOTES
BEC Funding LLC, the note issuer, will issue and sell the BEC Funding LLC
notes to the trust in exchange for the net proceeds from the sale of the
certificates by the trust. Each class of notes secures the payment of the
related class of certificates and has the same principal balance, interest rate,
amortization schedule and legal maturity date as the related class of
certificates.
S-4
<PAGE> 6
The notes will consist of 5 classes, in the initial principal amounts and
bearing the interest rates and having the scheduled maturity dates and final
maturity dates listed below:
<TABLE>
<CAPTION>
INITIAL NOTE SCHEDULED FINAL
PRINCIPAL INTEREST MATURITY MATURITY
CLASS AMOUNT RATE DATE DATE
- ----- --------- -------- --------- --------
<S> <C> <C> <C> <C>
A-1
A-2
A-3
A-4
A-5
</TABLE>
The scheduled maturity date for a class of notes is the date by which the
note issuer expects to distribute in full all interest on and principal of that
class of notes. The final maturity date for a class of notes is the legal
maturity date of that class.
INTEREST
Interest on each class of notes will accrue from its issuance date at the
interest rate listed in the table above. Beginning March 15, 2000, the note
issuer is required to pay interest semiannually on March 15 and September 15
(or, if any payment date is not a business day, the following business day) of
each year, to the trust. The note issuer will pay interest on the notes prior to
paying principal of the notes. See "Description of the Notes -- Allocations and
Payments" in the prospectus.
On each payment date, the note issuer will pay interest as follows:
- if there has been a payment default, any unpaid interest payable on any
prior payment dates, together with interest at the applicable note
interest rate on any of this unpaid interest; and
- accrued interest on the principal balance of each class of notes as of
the close of business on the preceding payment date, or the date of the
original issuance of the class of notes if applicable, after giving
effect to all payments of principal made on the preceding payment date,
or the date of the original issuance of the class of notes if applicable.
If there is a shortfall in the amounts necessary to make these interest
payments, the note trustee will distribute interest pro rata to each class of
notes based on the outstanding principal amount of that class and the applicable
interest rate. The note issuer will calculate interest on the basis of a 360-day
year of twelve 30-day months.
PRINCIPAL
After paying interest as described above, the note issuer will pay any
principal on each payment date as follows:
(1) to the holders of the A-1 notes, until the principal balance of that
class has been reduced to zero;
(2) to the holders of the A-2 notes, until the principal balance of that
class has been reduced to zero;
(3) to the holders of the A-3 notes, until the principal balance of that
class has been reduced to zero;
(4) to the holders of the A-4 notes, until the principal balance of that
class has been reduced to zero; and
(5) to the holders of the A-5 notes, until the principal balance of that
class has been reduced to zero.
S-5
<PAGE> 7
The note issuer will not, however, pay principal on a payment date of any
class of notes if making the payment would reduce the principal balance of a
class to an amount lower than that specified in the expected amortization
schedule for that class on that payment date. If an event of default under the
note indenture has occurred and is continuing, the note trustee may declare the
unpaid principal amount of all outstanding notes and accrued interest to be due
and payable.
The following expected amortization schedule lists the scheduled
outstanding principal balance for each class of notes on each payment date from
the issuance date to the scheduled maturity date, after giving effect to the
payments expected to be made on the payment date. In preparing the following
table, we have assumed, among other things, that:
- the certificates are issued on [ ];
- payments on the certificates are made on each distribution date,
commencing March 15, 2000;
- the servicing fee equals 0.05 percent annually of the initial principal
amount of the notes;
- there are no net earnings on amounts on deposit in the collection
account;
- operating expenses, the administration fee (which will be $75,000 per
year, payable semiannually) and amounts owed to the note trustee, the
Delaware trustee and the certificate trustee are in the aggregate
$[ ] per [ ], and these amounts are payable in arrears; and
- payments arising from the property securing the notes are deposited in
the collection account as expected.
EXPECTED AMORTIZATION SCHEDULE
OUTSTANDING PRINCIPAL BALANCE
<TABLE>
<CAPTION>
PAYMENT CLASS
DATE BALANCE TOTAL
------- ------------ -------
<S> <C> <C>
</TABLE>
We cannot assure you that the principal balances of the classes of notes
and the related classes of certificates will be reduced at the rates indicated
in the table above. The actual rates of reduction in class principal balances
may be slower (and cannot be faster) than those indicated in the table.
COLLECTION ACCOUNT AND SUBACCOUNTS
The note trustee will establish a collection account to hold amounts
remitted by the servicer of the property securing the notes. The collection
account will consist of four subaccounts:
- a general subaccount;
- a reserve subaccount;
- an overcollateralization subaccount; and
- a capital subaccount.
Withdrawals from and deposits to these subaccounts will be made as described
under "Description of the Notes -- Allocations and Payments" in the prospectus.
S-6
<PAGE> 8
OVERCOLLATERALIZATION AMOUNT
The note trustee will collect amounts arising from the property securing
the notes exceeding those that are necessary to pay interest on and principal of
the notes and fees and expenses of servicing and retiring the notes and the
certificates, which are intended to enhance the likelihood that payments on the
notes will be made on a timely basis. These amounts will fund the required
overcollateralization amount. The overcollateralization amount for the notes
will be $[ ], which is 0.50 percent of the initial principal amount of
the notes. The note trustee will collect the overcollateralization amount
ratably over the life of the certificates in equal increments of $[ ]
and will deposit these amounts on each payment date into the
overcollateralization subaccount as set forth below:
REQUIRED OVERCOLLATERALIZATION LEVEL SCHEDULE
<TABLE>
<CAPTION>
REQUIRED REQUIRED
PAYMENT OVERCOLLATERALIZATION PAYMENT OVERCOLLATERALIZATION
DATE LEVEL DATE LEVEL
- ------- --------------------- -------- ---------------------
<S> <C> <C> <C>
</TABLE>
OTHER CREDIT ENHANCEMENT
CAPITAL SUBACCOUNT. Before the issuance of the notes, Boston Edison
Company will contribute capital of $[ ] to the note issuer. This amount
is equal to 0.50 percent of the initial principal amount of the notes and is the
capital level required to be maintained under the note indenture. The note
trustee will deposit the capital into the capital subaccount. The note trustee
will draw on amounts in the capital subaccount, to the extent amounts available
in the general subaccount, reserve subaccount and overcollateralization
subaccount are insufficient to pay interest on and principal of the notes and
fees and expenses of servicing and retiring the notes and the certificates.
RESERVE SUBACCOUNT. The note trustee will allocate to the reserve
subaccount any amounts remitted to the collection account exceeding amounts
necessary to:
- pay fees and expenses related to the servicing and retirement of the
notes and certificates;
- pay interest on and principal of the notes;
- fund the capital subaccount to the required capital level; and
- fund the overcollateralization subaccount to the required
overcollateralization level.
The note trustee will draw on amounts in the reserve subaccount, to the extent
amounts available in the general subaccount are insufficient to pay the amounts
listed above.
TRANSITION PROPERTY
The notes are secured primarily by the transition property, which is the
right to assess and collect all revenues arising from a portion of the
transition charge included in the bills of all classes of retail users of Boston
Edison's distribution system within its geographic service territory as in
effect on July 1, 1997. This portion of the transition charge, which is a
usage-based, per kilowatt-hour charge, is referred to as the "RTC charge." The
RTC charge will initially constitute a portion of the transition charge. The RTC
charge may increase, but will not exceed the transition charge, which is capped
at 3.35 cents/kilowatt-hour.
As of the date of this prospectus supplement, the RTC charge is expected to
be approximately [ ] cents per kilowatt-hour.
S-7
<PAGE> 9
UNDERWRITING
The note issuer, Boston Edison, the trust and the underwriters for the
offering named below have entered into an underwriting agreement relating to the
certificates. Assuming that conditions in the underwriting agreement are met,
each underwriter has severally agreed to purchase the respective principal
amount of certificates indicated in the following table.
<TABLE>
<CAPTION>
NAME CLASS A-1 CLASS A-2 CLASS A-3 CLASS A-4 CLASS A-5
- ---- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Lehman Brothers Inc.
Goldman, Sachs & Co.
Banc One Capital Markets, Inc.
BancBoston Robertson Stephens Inc.
Bear, Stearns & Co. Inc.
BNY Capital Markets, Inc.
CIBC World Markets Corp.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
PaineWebber Incorporated
Prudential Securities Incorporated
Salomon Smith Barney Inc.
State Street Capital Markets, LLC
Total
</TABLE>
Certificates sold by the underwriters to the public will be initially
offered at the initial public offering prices set forth on the cover of this
prospectus supplement. The trust has been advised that the underwriters propose
initially to offer the certificates to dealers at the initial public offering
prices, less a selling concession not to exceed the percentage of the
certificate denomination set forth below, and that the underwriters may allow
and dealers may reallow a discount not to exceed the percentage of the
certificate denomination set forth below:
<TABLE>
<CAPTION>
CLASS SELLING CONCESSION REALLOWANCE DISCOUNT
- ----- ------------------ --------------------
<S> <C> <C>
Class A-1...................................................
Class A-2...................................................
Class A-3...................................................
Class A-4...................................................
Class A-5...................................................
</TABLE>
After the initial public offering, the public offering prices, selling
concessions and reallowance discounts may change as a result of market trading.
The certificates are a new issue of securities with no established trading
market. The trust has been advised by the underwriters that the underwriters
intend to make a market in the certificates but are not obligated to do so and
may discontinue market making at any time without notice. No assurance can be
given as to the ability of holders of the certificates to resell the
certificates.
In connection with the offering, the underwriters may purchase and sell
certificates in the open market. These transactions may include short sales,
stabilizing transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the underwriters of a greater principal
amount of certificates than they are required to purchase in the offering.
Stabilizing transactions consist of bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the certificates while
the offering is in progress.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because these underwriters have repurchased certificates
sold by or for the account of an underwriter in stabilizing or short covering
transactions.
S-8
<PAGE> 10
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the certificates. As a result, the price of the
certificates may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These activities may be effected in the
over-the-counter market or otherwise.
The note issuer estimates that its share of the total expenses of the
offering, excluding underwriting discounts and commissions, will be
approximately $[ ].
The note issuer and Boston Edison have agreed to indemnify the several
underwriters, the Massachusetts Development Finance Agency, the Massachusetts
Health and Educational Facilities Authority and the trust against certain
liabilities, including liabilities under the Securities Act of 1933.
Goldman, Sachs & Co., as financial advisor to Boston Edison, has rendered
certain financial advisory services to Boston Edison in respect of the note
issuer and the trust and has received from it a customary fee for such services.
RATINGS
The certificates will not be issued unless prior to closing at least two
nationally recognized statistical rating organizations have rated the
certificates in a category signifying investment grade (i.e., the equivalent of
BBB- or higher). Each nationally recognized statistical rating organization that
rates the certificates will give each class of notes the same rating as the
related class of certificates.
S-9
<PAGE> 11
[This page intentionally left blank]
<PAGE> 12
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE
SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND
EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE
SECURITIES NOR IS IT SEEKING AN OFFER TO BUY THESE SECURITIES IN ANY
JURISDICTION WHERE THE OFFER
OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION DATED JULY 14, 1999.
PROSPECTUS
MASSACHUSETTS RRB
SPECIAL PURPOSE TRUST BEC-1
ISSUER OF THE CERTIFICATES
RATE REDUCTION CERTIFICATES
ISSUABLE IN CLASSES
BEC FUNDING LLC
ISSUER OF THE NOTES
BOSTON EDISON COMPANY
SELLER AND SERVICER
SEE "RISK FACTORS" BEGINNING ON PAGE 16 TO READ ABOUT FACTORS YOU SHOULD
CONSIDER BEFORE BUYING THE CERTIFICATES.
THE TRUST MAY SELL ONE OR MORE CLASSES OF CERTIFICATES AS DESCRIBED IN THE
PROSPECTUS SUPPLEMENT. EACH CERTIFICATE REPRESENTS AN INTEREST IN THE RELATED
CLASS OF BEC FUNDING LLC NOTES. THE ASSETS OF THE TRUST WILL CONSIST SOLELY OF
THE NOTES.
NEITHER THE CERTIFICATES, THE NOTES OR THE PROPERTY SECURING THE NOTES IS AN
OBLIGATION OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY GOVERNMENTAL AGENCY,
AUTHORITY OR INSTRUMENTALITY OF THE COMMONWEALTH OR OF BOSTON EDISON OR ANY OF
ITS AFFILIATES, EXCEPT FOR BEC FUNDING LLC, WHICH IS AN AFFILIATE OF BOSTON
EDISON.
NEITHER THE FULL FAITH AND CREDIT NOR THE TAXING POWER OF THE COMMONWEALTH OF
MASSACHUSETTS NOR ANY POLITICAL SUBDIVISION, AGENCY, AUTHORITY OR
INSTRUMENTALITY OF THE COMMONWEALTH IS PLEDGED TO THE PAYMENT OF PRINCIPAL OF,
OR INTEREST ON, THE CERTIFICATES OR THE NOTES, OR THE PAYMENTS SECURING THE
NOTES. FURTHERMORE, NEITHER THE COMMONWEALTH OF MASSACHUSETTS NOR ANY POLITICAL
SUBDIVISION, AGENCY, AUTHORITY OR INSTRUMENTALITY OF THE COMMONWEALTH WILL
APPROPRIATE ANY FUNDS FOR THE PAYMENT OF ANY OF THE CERTIFICATES OR NOTES.
Neither the Securities and Exchange Commission nor any other regulatory body has
approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
[DATE]
<PAGE> 13
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY.................... 4
RISK FACTORS.......................... 16
DEFINED TERMS......................... 24
AVAILABLE INFORMATION................. 24
REPORTS TO HOLDERS.................... 24
INCORPORATION OF DOCUMENTS BY
REFERENCE........................... 24
ENERGY DEREGULATION AND NEW
MASSACHUSETTS MARKET STRUCTURE...... 26
Statutory Overview.................. 26
Settlement Agreement................ 26
Exit Charge......................... 27
Reconciliation...................... 27
Third Party Billing Options......... 28
Federal Initiatives................. 28
DESCRIPTION OF THE TRANSITION
PROPERTY............................ 28
Financing Order and Issuance Advice
Letter........................... 28
Transition Property................. 29
Transition Charge................... 29
Adjustments to the RTC Charge....... 30
Pledge by The Commonwealth of
Massachusetts.................... 31
Sale and Assignment of Transition
Property......................... 32
Seller Representations and
Warranties and Repurchase
Obligation....................... 32
Bankruptcy and Creditors' Rights
Issues........................... 35
THE TRUST............................. 37
THE AGENCIES.......................... 37
THE NOTE ISSUER....................... 38
Officers and Directors.............. 38
THE SELLER AND SERVICER............... 40
Boston Edison Revenues, Customer
Base and Energy Consumption...... 40
Estimated Consumption and Estimated
Variance......................... 41
Billing and Collections............. 42
Loss Experience..................... 43
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Days Revenue Outstanding............ 44
Aging of Receivables................ 44
Year 2000 Computer Issue............ 44
SERVICING............................. 46
Servicing Procedures................ 46
Servicing Standards and Covenants... 47
Remittances to Collection Account... 48
Servicing Compensation.............. 48
Third Party Suppliers............... 48
Servicer Representations and
Warranties....................... 49
Statements by Servicer.............. 50
Evidence as to Compliance........... 51
Matters Regarding the Servicer...... 51
Servicer Defaults................... 52
Rights When Servicer Defaults....... 52
Waiver of Past Defaults............. 53
Successor Servicer.................. 53
Amendment........................... 53
DESCRIPTION OF THE NOTES.............. 54
Security............................ 54
Collection Account.................. 54
Interest and Principal.............. 55
Optional Redemption................. 56
Mandatory Redemption................ 56
Overcollateralization Subaccount.... 56
Capital Subaccount.................. 57
Reserve Subaccount.................. 57
Allocations and Payments............ 57
Actions by Noteholders.............. 59
Note Events of Default; Rights Upon
note Event Of Default............ 59
Covenants of the Note Issuer........ 61
Reports to Noteholders.............. 63
Annual Compliance Statement......... 63
DESCRIPTION OF THE CERTIFICATES....... 64
Payments and Distributions.......... 64
Voting of the Certificates.......... 65
Events of Default................... 66
</TABLE>
2
<PAGE> 14
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Redemption.......................... 68
Reports to Certificateholders....... 68
Supplemental Certificate
Indentures....................... 68
List of Certificateholders.......... 69
Registration and Transfer of the
Certificates..................... 69
Book-Entry Registration and
Definitive Certificates.......... 69
FEDERAL INCOME TAX CONSEQUENCES....... 73
General............................. 73
Treatment of the Certificates....... 73
Taxation of U.S.
Certificateholders............... 74
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Sale or Other Taxable Disposition of
Certificates..................... 75
Non-U.S. Certificateholders......... 75
Information Reporting and Backup
Withholding...................... 76
STATE TAXATION........................ 77
ERISA CONSIDERATIONS.................. 77
USE OF PROCEEDS....................... 79
PLAN OF DISTRIBUTION.................. 80
LEGAL MATTERS......................... 80
GLOSSARY.............................. 81
FINANCIAL STATEMENTS.................. F-1
</TABLE>
3
<PAGE> 15
PROSPECTUS SUMMARY
This summary highlights some information from this prospectus. Because this
is a summary, it does not contain all of the information that may be important
to you. You should read both this prospectus and the prospectus supplement
before you buy the certificates.
Transaction Overview............ Massachusetts law permits electric
companies, such as Boston Edison Company, to
recover the costs of investments and
obligations that cannot be recouped through
market-based rates in a competitive
electricity generation market. These costs
are known as "transition costs." An electric
company recovers transition costs through a
charge called a "transition charge" that is
assessed on ratepayers. Massachusetts law
permits special purpose entities formed by
electric companies to issue securities
secured by the right to receive a portion,
which may become all, of the revenues
arising from the transition charge, if doing
so would save money for the electric
company's ratepayers. This right is referred
to as the "transition property." See
"Description of the Transition Property."
The following sets forth the primary steps
of the transaction underlying the offering
of the certificates:
- Boston Edison will sell the transition
property to the note issuer in exchange
for the proceeds from the sale of the
notes.
- The note issuer will sell the notes to the
trust in exchange for the proceeds from
the sale of the certificates.
- The trust, whose sole assets are the
notes, will sell the certificates to the
underwriters named in the prospectus
supplement.
- Boston Edison will act as the servicer of
the transition property and as the
administrator of the note issuer.
Neither the certificates, the notes or the
property securing the notes is an obligation
of The Commonwealth of Massachusetts or any
governmental agency, authority or
instrumentality of the Commonwealth or of
Boston Edison or any of its affiliates,
except BEC Funding LLC, which is an
affiliate of Boston Edison.
4
<PAGE> 16
The following diagram shows the parties to the transactions related to this
offering and summarizes their roles and their relationships to each other:
[The omitted graphic reflects the various
parties to the transaction, their
roles and their contractual relationships
to various other parties.]
LOGO
5
<PAGE> 17
Risk Factors................... You should consider, among other things, the
following material risks of investing in the
certificates. These risks may delay the
distribution of interest on and principal of
the certificates or cause you to suffer a
loss on your investment.
- Payments on the notes are the sole source
of distributions on the certificates.
- There may be challenges that attempt to
limit, alter or amend either the
Massachusetts Department of
Telecommunications and Energy's order
creating the transition property or the
provisions of Chapter 164 of the
Massachusetts Acts of 1997 that make the
order irrevocable.
- Since the rate of collections arising from
the transition property is based on the
amount of electricity consumed by
customers, these collections may be
insufficient to pay required distributions
on the certificates.
- The charge assessed to ratepayers to
collect amounts sufficient to pay required
distributions on the certificates may not
exceed the cap of 3.35 cents/kilowatt-hour
on Boston Edison's transition charge.
- If there is an event of default on the
notes and the certificates, the note
trustee is unlikely to be able to resell
the transition property.
- If Boston Edison were to cease servicing
the transition property, it may be
difficult to find a suitable successor
servicer.
- If Boston Edison were to become a debtor
in a bankruptcy case, a court may hold
that the transition property is Boston
Edison's property and may be reached by
its creditors.
For a more detailed discussion of the
material risks of investing in the
certificates, you should carefully read the
discussion under "Risk Factors," which
begins on page 16.
Seller and Servicer ........... Boston Edison is an electric company that
primarily distributes electric energy to
retail customers in the City of Boston and
39 surrounding cities and towns. See "The
Seller and Servicer."
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<PAGE> 18
The Certificates............... Massachusetts RRB Special Purpose Trust
BEC-1 Rate Reduction Certificates.
The trust may issue the certificates in one
or more classes under the certificate
indenture between the trust and the
certificate trustee. Each class of
certificates will represent fractional
undivided beneficial interests in the
related class of notes and the proceeds of
that class of notes. Holders of each class
of certificates will receive payments
received by the trust on the related class
of notes. These payments will be the only
source of distributions on a class of
certificates.
Issuer of Certificates......... Massachusetts RRB Special Purpose Trust
BEC-1.
Certificate Trustee............ The Bank of New York.
The Notes...................... BEC Funding LLC Notes.
Each class of notes and the related class of
certificates will have the same aggregate
principal amount, expected amortization
schedule and interest rate, as described in
the prospectus supplement. The notes will be
secured primarily by the transition
property.
See "Description of the Notes."
Note Issuer.................... BEC Funding LLC.
Note Trustee................... The Bank of New York.
Interest....................... Interest on each class of certificates will
accrue at the interest rate specified in the
prospectus supplement. The certificate
trustee will distribute interest accrued on
each class of certificates on each
distribution date, to the extent of interest
paid on the related class of notes.
Principal...................... The certificate trustee will distribute
principal of each class of certificates in
the amounts and on the distribution dates
specified in the expected amortization
schedule in the prospectus supplement, but
only to the extent of principal paid on the
related class of notes. See "Description of
the Notes -- Allocations and Payments" and
"Description of the Certificates -- Payments
and Distributions."
On any payment date, the note issuer will
pay principal of the notes only until the
outstanding principal balances of the
various classes of notes have been reduced
to the principal balances specified for
those classes in the expected amortization
schedule.
7
<PAGE> 19
If cash is not available, however, the
certificate trustee will pay principal of a
class of certificates later than set forth
in the expected amortization schedule. If an
event of default under the certificate
indenture has occurred and is continuing for
any class of certificates, the certificate
trustee may, and with the written direction
of the holders of at least a majority in
principal amount of the outstanding
certificates will, declare the unpaid
principal amount of the outstanding notes
and accrued interest to be due and payable.
See "Description of the
Certificates -- Events of Default."
RTC charge..................... Boston Edison has obtained from the
Massachusetts Department of
Telecommunications and Energy, which
regulates electric companies in
Massachusetts, an order designating the
transition costs and approving the costs of
issuing, servicing and retiring the notes
and the certificates to be financed through
this transaction. This order is known as a
"financing order." To enable Boston Edison
to recover its transition costs and
associated costs, the financing order
authorizes the billing and collection of the
RTC charge (as defined in the glossary on
page 81).
The RTC charge is nonbypassable in that
customers must pay it whether or not they
purchase electricity from Boston Edison or a
third party supplier of electricity, and
whether or not their distribution system is
being operated by Boston Edison or a
successor distribution company. The RTC
charge will initially constitute a portion
of the transition charge. The RTC charge may
increase, but will not exceed the transition
charge, which is capped at 3.35
cents/kilowatt-hour.
See "Description of the Transition
Property -- Financing Order and Issuance
Advice Letter."
Customers...................... All classes of retail users of Boston
Edison's distribution system within its
geographic service territory as in effect on
July 1, 1997.
Adjustments to the RTC charge.. The servicer will calculate and set the RTC
charge at least annually at a level
estimated to generate sufficient revenues:
- to pay fees and expenses related to the
servicing and retirement of the notes and
certificates;
- to pay interest on the notes;
8
<PAGE> 20
- to pay principal of each class of notes
according to its expected amortization
schedule; and
- to fund the overcollateralization
subaccount to the required
overcollateralization level and to
replenish the capital subaccount to the
required capital level.
Adjustments to the RTC charge are limited by
Boston Edison's maximum permitted transition
charge. The transition charge may not exceed
3.35 cents/kilowatt-hour. At the time of the
issuance of the certificates, Boston Edison's
transition charge is expected to be [ ]
cents/kilowatt-hour. This includes a
projected RTC charge of [ ]
cents/kilowatt-hour.
The servicer will base adjustments to the
RTC charge on updated assumptions as to
various factors, including electricity usage
by customers and the rate of charge-offs.
These adjustments will continue until
interest on and principal of all classes of
notes and related classes of certificates
have been paid or distributed in full. See
"Description of the Transition
Property -- Adjustments to the RTC Charge."
The servicer will file a request referred to
as a true-up advice letter, annually before
the anniversary date of the financing order,
for an increase or decrease in the RTC
charge. The servicer may also file true-up
advice letters before the end of any
calendar quarter or payment date to adjust
the RTC charge. In addition, the servicer
may file a non-routine true-up advice letter
to revise its method for calculating the RTC
charge.
See "Description of the Transition
Property -- Adjustments to the RTC Charge."
Commonwealth Pledge............ The Commonwealth of Massachusetts has
pledged and agreed with the note issuer, the
trust and the certificateholders that it
will not alter the provisions of the statute
that make the RTC charge irrevocable and
binding or limit or alter the transition
property or the financing order until the
certificates are fully paid and discharged.
Optional Redemption............ The note issuer may redeem the notes and
cause the trust to redeem the certificates
on any payment date if the outstanding
principal balance of the notes (after giving
effect to payments that would otherwise be
made on a payment date) is less than five
percent of the initial principal balance of
the
9
<PAGE> 21
notes. Upon redemption, the note issuer will
pay an aggregate amount equal to the
outstanding principal amount of the notes
and accrued but unpaid interest as of the
redemption date. See "Description of the
Certificates -- Redemption."
Mandatory Redemption........... If the seller is required to, or elects to,
repurchase the transition property under the
circumstances described under "Description
of the Transition Property -- Seller
Representations and Warranties and
Repurchase Obligation," the note issuer will
be required to redeem the notes on or before
the fifth business day following the date of
repurchase and the trust will be required to
redeem the certificates on the same day.
Upon redemption, the note issuer will pay an
aggregate amount equal to the outstanding
principal amount of the notes and accrued
but unpaid interest as of the redemption
date.
Collection Account and.........
Subaccounts The note issuer will establish a collection
account to hold payments arising from the
RTC charge as well as the capital
contribution to the note issuer. The
collection account will consist of four
subaccounts:
- a general subaccount;
- a reserve subaccount;
- an overcollateralization subaccount for
the overcollateralization amount; and
- a capital subaccount for capital
contributions to the note issuer.
All amounts in the collection account not
allocated to any other subaccount will be
allocated to the general subaccount.
Withdrawals from and deposits to these
subaccounts will be made as described under
"Description of the Notes -- Allocations and
Payments."
Overcollateralization
Subaccount..................... The note trustee will collect the
overcollateralization amount specified in
the prospectus supplement to enhance the
likelihood that payments on the notes will
be made on a timely basis.
The note trustee will hold the
overcollateralization amount for all classes
of notes in the overcollateralization
subaccount. The overcollateralization amount
will be available to pay any periodic
shortfalls in amounts available to pay the
fees and expenses of servicing and retiring
the notes and the certificates and to make
scheduled payments on the notes after
10
<PAGE> 22
withdrawals from the general subaccount and
reserve subaccount.
Capital Subaccount............. Prior to the issuance of the notes, Boston
Edison will contribute capital to the note
issuer in the amount specified in the
prospectus supplement. The note issuer will
deposit the capital into the capital
subaccount. The note trustee will draw on
amounts in the capital subaccount to the
extent amounts available in the general
subaccount, the reserve subaccount and the
overcollateralization subaccount are
insufficient to pay interest on and
principal of the notes and the fees and
expenses of servicing and retiring the notes
and the certificates. If the note trustee
uses amounts on deposit in the capital
subaccount, on subsequent payment dates the
capital subaccount will be replenished to
the extent the servicer remits payments
arising from the RTC charge exceeding the
amounts required to pay amounts having a
higher priority of payment. See "Description
of the Notes -- Allocations and Payments."
Reserve Subaccount............. The note trustee will allocate to the
reserve subaccount any amounts remitted to
the collection account exceeding the amounts
necessary to:
- pay fees and expenses related to the
servicing and retirement of the notes and
certificates;
- pay interest on and principal of the
notes;
- fund the capital subaccount to the
required capital level; and
- fund the overcollateralization subaccount
to the required overcollateralization
level.
The note trustee will draw on amounts in the
reserve subaccount, to the extent amounts
available in the general subaccount are
insufficient to pay the amounts listed
above.
Collections; Allocations;
Distributions.................. Starting with the first deemed collection
date after the closing, the servicer will
remit daily to the collection account an
amount equal to the actual RTC charges
billed, less an allowance for estimated
charge-offs, within two business days after
the day payments arising from the RTC charge
are deemed to be collected. See "Servicing
-- Remittances to Collection Account."
11
<PAGE> 23
On each payment date, or for any amount
payable under clauses (1) through (4) below,
on any business day, the note trustee will
allocate amounts in the collection account,
including net earnings on these amounts
(other than on amounts in the capital
subaccount), as follows:
(1) all amounts owed by the note issuer to
the note trustee, the Delaware trustee
and the certificate trustee will be
paid;
(2) the servicing fee and all unpaid
servicing fees from any prior payment
dates will be paid to the servicer;
(3) the administration fee and all unpaid
administration fees from any prior
payment dates will be paid to the note
issuer's administrator;
(4) so long as no event of default has
occurred or would be caused by payment,
all other fees, expenses and
indemnities payable by the note issuer
will be paid to the persons entitled
thereto, provided that the total amount
paid since the previous payment date
and on the current payment date may
not, in the aggregate, exceed $100,000;
(5) first, any overdue semiannual interest
and second, semiannual interest will be
transferred to the certificate trustee,
as noteholder, for distribution to the
certificateholders;
(6) first, funds necessary to pay any
principal in default or, on the final
maturity date of a class of notes, the
outstanding principal balance of such
class, and second, principal based on
priorities described in the prospectus
supplement will be transferred to the
certificate trustee, as noteholder, for
distribution to the applicable
certificateholders according to the
expected amortization schedule for each
class;
(7) unpaid operating expenses and
indemnities payable by the note issuer
will be paid to the persons entitled
thereto;
(8) allocate to the capital subaccount the
amount, if any, by which the capital
subaccount needs to be funded to equal
the required capital level as of that
payment date;
12
<PAGE> 24
(9) allocate to the overcollateralization
subaccount the amount, if any, by which
the overcollateralization subaccount
needs to be funded to equal the
required overcollateralization level as
of a payment date;
(10) the balance, if any, will be allocated
to the reserve subaccount for
distribution on subsequent payment
dates; and
(11) following the repayment of all notes
and certificates, the balance, if any,
will be released to the note issuer.
If on any payment date, or for any amounts
payable under clauses (1) through (4) above,
on any business day, funds on deposit in the
general subaccount are insufficient to make
the transfers contemplated by clauses (1)
through (6) above, the note trustee will
first, draw from amounts on deposit in the
reserve subaccount, second, draw from
amounts on deposit in the
overcollateralization subaccount and third,
draw from amounts on deposit in the capital
subaccount, up to the amount of the
shortfall, in order to make the transfers
described above. In addition, if on any
payment date funds on deposit in the general
subaccount are insufficient to make the
transfers described in clauses (8) and (9)
above, the note trustee will draw from
amounts on deposit in the reserve subaccount
to make the required transfers. See
"Description of the Notes--Allocations and
Payments."
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<PAGE> 25
The following diagram provides a general summary of the flow of funds from
the customers through the servicer to the collection account, and the various
allocations from the collection account:
[The omitted graphic depicts the flow of funds
from the Customers through the Servicer to the collection
account, and the various allocations from the collection account.]
14
<PAGE> 26
Servicing....................... The servicer will service and manage the
transition property and receive payments
arising from the RTC charge in the same
manner that it services bill collections for
its own account and the accounts it services
for others, if any.
Servicing Compensation.......... The servicer will be entitled to receive an
annual servicing fee in an amount equal to:
- 0.05 percent of the initial principal
balance of the notes for so long as the
servicer bills the RTC charge concurrently
with other charges for services; or
- up to 1.25 percent of the initial
principal balance of the notes if the RTC
charge is billed separately to customers.
The note trustee will pay the servicing fee
semiannually on each payment date.
Tax Status of the
Certificates.................... For federal income tax purposes, the trust
will be treated as a "grantor trust," and
thus not taxable as a corporation, and each
class of certificates will be treated as
representing ownership of a fractional
undivided beneficial interest in the related
class of notes. Interest and original issue
discount, if any, on the certificates, and
any gain on the sale of the certificates,
generally will be included in gross income
of certificateholders for federal income tax
purposes. See "Federal Income Tax
Consequences." Interest on the certificates
and any profit on the sale of the
certificates are exempt from Massachusetts
personal income taxes, and the certificates
are exempt from Massachusetts personal
property taxes. See "State Taxation."
15
<PAGE> 27
RISK FACTORS
You should consider carefully the following factors before you decide
whether to buy the certificates:
CERTIFICATEHOLDERS COULD EXPERIENCE PAYMENT DELAYS OR LOSSES AS A RESULT OF
LIMITED SOURCES OF PAYMENT FOR THE CERTIFICATES AND LIMITED CREDIT ENHANCEMENT.
You could experience payment delays or losses on the certificates because
payments on the notes are the sole source of distributions on the certificates.
The notes are the sole assets of the trust. The transition property and the
other note collateral, which is expected to be of relatively small value, are in
turn the only sources of payments on the notes.
There will be no forms of credit enhancement for the certificates except
for the right to adjust the RTC charge and amounts held in the
overcollateralization subaccount, capital subaccount and reserve subaccount. We
do not anticipate that the certificates will have the benefit of any liquidity
facility or of any third-party credit enhancement, such as guarantees, letters
of credit or insurance.
If distributions are not made on the certificates in a timely manner as a
result of nonpayment of the related notes, the holders of at least a majority of
the outstanding principal amount of the certificates may direct the certificate
trustee to bring an action against the note issuer to foreclose on the
transition property and the other note collateral securing the notes. There is
not likely to be a market, however, for the sale of the transition property and
the other note collateral.
CERTIFICATEHOLDERS COULD EXPERIENCE PAYMENT DELAYS OR LOSSES AS A RESULT OF
AMENDMENT, REPEAL OR INVALIDATION OF THE RESTRUCTURING STATUTE OR BREACH OF THE
COMMONWEALTH PLEDGE.
Although, under the Massachusetts restructuring statute, The Commonwealth
of Massachusetts has pledged that it will not alter the provisions of the
statute that make the RTC charge irrevocable and binding, or limit or alter the
transition property or the financing order, it is possible that actions could be
taken (even if such actions were ultimately found to be unlawful) to alter the
transition property or the financing order.
LEGISLATIVE ACTIONS
Under Massachusetts law, citizens have the ability to submit laws enacted
by the Massachusetts legislature for approval or rejection directly by the
voters by means of referendum petitions. In November 1998, the voters approved
the restructuring statute by referendum. Massachusetts law does not provide for
any additional referendum on the restructuring statute.
In addition, under Massachusetts law, citizens have the ability to propose
laws (and constitutional amendments) for approval or rejection by the voters by
means of initiative petitions. Generally, any matter that is a proper subject of
legislation can become the subject of an initiative. Among other procedural
requirements, in order to qualify for submission to the electorate, an
initiative petition must be submitted to the Massachusetts Attorney General
signed by more than three percent of the total number of votes cast for governor
in the preceding election. Among other matters, the Attorney General must
certify that the initiative petition is not substantially the same as any
measure which has been qualified for submission or submitted to the voters at
either of the two preceding biennial state elections. The initiative petition
becomes law if it is approved by voters equal
16
<PAGE> 28
in number to at least thirty percent of the total number of ballots cast in the
election and also by a majority of voters voting on the petition.
We are not aware of any proposed or pending initiative petition or of any
proposed or pending legislation in the Massachusetts legislature that would
affect any of the provisions of the restructuring statute other than bills
proposing technical corrections, and we are not aware of any pending suit that
challenges any of the provisions of the statute, relating to the issuance by the
Massachusetts Department of Telecommunications and Energy of a financing order,
the creation or characterization of the transition property or the issuance of
"electric rate reduction bonds," such as the certificates.
In the opinion of Palmer & Dodge LLP, counsel to the trust, under
applicable constitutional principles relating to the impairment of contracts,
The Commonwealth of Massachusetts could not repeal or amend the restructuring
statute, either by means of the legislative process or the voter initiative
process, or take or refuse to take any action required under its pledge
described above if the repeal or amendment or the action or inaction would
substantially impair the rights of the owners of the transition property or the
certificateholders, absent a demonstration by The Commonwealth of Massachusetts
that an impairment is narrowly tailored and is necessary to advance an important
public interest, such as a "great public calamity."
There have been numerous cases in which legislative or popular concerns
with the burden of taxation or governmental charges have led to adoption of
legislation reducing or eliminating taxes or charges that supported bonds or
other contractual obligations entered into by public instrumentalities. Courts
have not considered these concerns by themselves to provide sufficient
justification for a substantial impairment of the pledged security provided by
the taxes or governmental charges for the bonds or obligations. Based on the
case law referred to above (which, however, does not address directly the
certificates and the pledge described above), it would appear unlikely that The
Commonwealth of Massachusetts could reduce, modify or alter the transition
property, or take or refuse to take any action regarding the transition property
in a manner that would substantially impair the rights of the owners of the
transition property or the certificateholders.
Nonetheless, we cannot assure you that a repeal or amendment of the
restructuring statute will not be adopted or sought or that any action or
refusal to act by The Commonwealth of Massachusetts will not occur, any of which
may constitute a violation of the Commonwealth's pledge with the owners of the
transition property and the certificateholders. If a violation of this pledge
occurred, costly and time consuming litigation might ensue. Any litigation might
adversely affect the price of the certificates and your ability to resell the
certificates and might delay the timing of distributions on the certificates.
Moreover, given the lack of controlling judicial precedent directly addressing
the certificates and the Commonwealth's pledge, we cannot predict the outcome of
any litigation with certainty, and, accordingly, you could experience a delay in
receipt of distributions on or incur a loss on your investment in the
certificates.
COURT DECISIONS
If a court were to determine that the relevant provisions of the
restructuring statute or the financing order are unlawful, invalid or
unenforceable in whole or in part, it could adversely affect the validity of the
certificates or the trust's ability to make distributions on the certificates.
In either case, you could suffer a loss on your investment in the certificates.
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<PAGE> 29
SHORTFALL IN RTC CHARGE PAYMENTS AS A RESULT OF INACCURATE FORECASTING OR
UNANTICIPATED DELINQUENCIES COULD LEAD TO PAYMENT DELAYS OR LOSSES.
Because the RTC charge is assessed based on kilowatt-hours of electricity
consumed by customers, a shortfall of payments arising from the RTC charge could
result if the servicer inaccurately forecasts electricity consumption or
underestimates customer delinquencies or charge-offs when setting the RTC
charge. A shortfall could cause distributions on the certificates to be made
later than expected or not at all. As a result, principal of the certificates
may not be paid according to the expected amortization schedule, which would
lengthen the weighted average life of the certificates. In addition, a change in
energy consumption by customers may also result in principal of the certificates
not being paid by the final maturity date of the certificates or not being paid
at all. For the same reasons, payments of interest on the certificates could
also be delayed or not made.
Inaccurate forecasting of electricity consumption by the servicer could
result from, among other things:
- warmer winters or cooler summers, resulting in less electricity
consumption than forecasted;
- general economic conditions being worse than expected, causing customers
to migrate from Boston Edison's or a successor distribution company's
service territory or reduce their electricity consumption;
- the occurrence of a natural disaster, such as a hurricane or blizzard,
unexpectedly disrupting electrical service and reducing consumption;
- problems with energy generation, transmission or distribution resulting
from a change in the market structure of the electric industry;
- large customers ceasing business or departing Boston Edison's or a
successor distribution company's service territory;
- customers consuming less electricity because of increased conservation
efforts; or
- large customers switching to self-generation or co-generation of electric
power without being required to pay an exit charge to mitigate the
revenues lost by their reduced consumption of electricity delivered by
Boston Edison or a successor distribution company. See "Energy
Deregulation and New Massachusetts Market Structure."
Inaccurate forecasting of delinquencies or charge-offs by the servicer
could result from, among other things:
- unexpected deterioration of the economy or the occurrence of a natural
disaster, causing greater charge-offs than expected or forcing Boston
Edison or a successor distribution company to grant additional payment
relief to more customers;
- a change in law that makes it more difficult for Boston Edison or a
successor distribution company to disconnect nonpaying customers, or that
requires Boston Edison or a successor distribution company to apply more
lenient credit standards in accepting customers; or
- the introduction into the energy markets of less creditworthy third party
energy suppliers who collect and remit payments arising from the RTC
charge to the servicer on behalf of customers.
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<PAGE> 30
CAP ON RTC CHARGE MAY LEAD TO INSUFFICIENT REVENUES TO MAKE PAYMENTS.
You may experience payment delays or defaults on the certificates because
the servicer will not be able to increase the RTC charge above Boston Edison's
maximum permitted transition charge. The transition charge may not exceed 3.35
cents/kilowatt-hour. At the time of the issuance of the certificates, Boston
Edison's transition charge is expected to be [ ] cents/kilowatt-hour. This
includes a projected RTC charge of [ ] cents/kilowatt-hour.
The financing order provides that the transition charge will not be reduced
below the RTC charge, although the RTC charge is still restricted by the
transition charge cap of 3.35 cents/kilowatt-hour. If the RTC charge needs to be
increased above the transition charge then in effect, the filing of a true-up
advice letter with the Department to increase the RTC charge will also effect an
increase in the transition charge, within the limits of the cap described above.
See "Description of the Transition Property -- Transition Charge."
LIMITED RIGHTS AND REMEDIES MAY IMPAIR ABILITY TO REALIZE ON COLLATERAL.
If there is an event of default on the notes and the note trustee elects to
foreclose on the transition property, the note trustee is unlikely to be able to
resell the transition property because of its unique nature. In addition,
although the seller is required to repurchase the transition property for a
price equal to the outstanding principal amount of the notes and accrued
interest under the limited circumstances described in "Description of the
Transition Property -- Seller Representations and Warranties and Repurchase
Obligation," we cannot assure you that the seller would be able to repurchase
the transition property if it were required to do so.
The requirement to repurchase the transition property would arise if, among
other things, there has been a breach of the seller's representations and
warranties as of the closing date that:
- the financing order under which the transition property has been created
is in full force and effect and the issuance advice letter has been filed
in accordance with the financing order;
- the process by which the financing order was adopted and approved, and
the financing order and issuance advice letter, comply with all
applicable laws, rules and regulations;
- the certificateholders are entitled to the protections of the statute
and, accordingly, the financing order is not revocable by the
Massachusetts Department of Telecommunications and Energy; or
- the transition property constitutes a property right,
but only if a breach continues beyond a 90-day grace period and has a material
adverse effect on certificateholders. See "Description of the Transition
Property -- Seller Representations and Warranties and Repurchase Obligation."
The seller will not be in breach of the representations and warranties in
the sale agreement as a result of a change in law by legislative enactment,
constitutional amendment or initiative petition. A repeal of the statute, an
amendment voiding the transition property or the adoption of a federal statute
prohibiting the recovery of transition costs are examples of changes in law. If
any change in law were to occur, the servicer, on behalf of the
certificateholders, would be required to bring legal action, at the note
issuer's expense, seeking to overturn the change. Any litigation may adversely
affect the price and the resale market for the certificates.
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ADDITIONAL ISSUANCES OF CERTIFICATES MAY AFFECT PAYMENTS ON OUTSTANDING
CERTIFICATES.
The issuance of other certificates by a separate trust might delay or
reduce the distributions that you receive on the certificates, because the
revenues arising from Boston Edison's transition charge will be shared among the
various issuances of certificates. As a result, if collections of the transition
charge are insufficient to pay interest on and principal of each series of
outstanding certificates, the certificates the trust is offering will only
receive their pro rata portion of the collections according to the ratio of the
RTC charges otherwise applicable to the separate series of certificates. The
terms of any new issuance of certificates secured by the remaining portion of
Boston Edison's transition charge will not require the prior review or consent
of certificateholders. The seller has, however, agreed in the transition
property sale agreement not to sell other transition property to secure another
issuance of notes and, in turn, another issuance of certificates if it would
cause the then existing ratings on the certificates to be downgraded. Further,
the servicer may not ultimately be able to increase the RTC charge for the
certificates to generate revenues sufficient to pay the fees and expenses of
servicing and retiring the notes and the certificates and interest on and
principal of the certificates.
LITIGATION AND OTHER EVENTS IN JURISDICTIONS OTHER THAN MASSACHUSETTS COULD
ADVERSELY AFFECT CERTIFICATEHOLDERS.
A legal action successfully challenging under the U.S. Constitution or
other federal law a state restructuring statute similar to the Massachusetts
restructuring statute adopted by a jurisdiction other than Massachusetts could
establish legal principles that would serve as a basis to challenge the
restructuring statute. Whether or not a subsequent court challenge to the
restructuring statute would be successful would depend on the similarity of the
other statute and the applicability of the legal precedent to the restructuring
statute. Although the restructuring statute would not become invalid
automatically as a result of a court decision invalidating another state's
statute, such a decision could establish a legal precedent for a successful
challenge to the restructuring statute that could adversely affect
certificateholders. Accordingly, the market value of the certificates could be
reduced. In addition, legal challenges, legislative, administrative, political
or other actions in other states challenging stranded cost recovery or
securitization of stranded cost recovery could adversely affect the market for
certificates. Legal challenges brought in jurisdictions other than Massachusetts
would not, however, directly affect the restructuring statute or the interests
of the certificateholders. Similarly, legislative, administrative, political or
other actions in other states (such as California which has already implemented
a competitive market structure for its electric generation industry) would not
directly impact the restructuring statute or the interests of certificateholders
but could heighten awareness of the political and other risks associated with
these types of securities as perceived by the capital markets, and in that way,
limit the ability of certificateholders to resell the certificates and impair
their value. We cannot assure you that future challenges to stranded cost
recovery or stranded cost securitizations in other states will not significantly
impair your ability to resell the certificates and the value of the
certificates.
PROBLEMS WITH THE SERVICING OF TRANSITION PROPERTY MAY CAUSE PAYMENT DELAYS OR
LOSSES.
CHANGE IN SERVICER MAY LEAD TO PAYMENT DELAYS OR LOSSES.
If, as a result of insolvency or liquidation or otherwise, Boston Edison
were to cease servicing the transition property, determining any adjustments to
the RTC charge or
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collecting payments arising from the RTC charge, it may be difficult to find a
suitable successor servicer. As a result, the timing of recovery of payments
arising from the RTC charge could be delayed. The note issuer will rely on the
servicer to determine any adjustments to the RTC charge and for customer billing
and collection. Any successor servicer may have less experience than Boston
Edison and less capable forecasting, billing and collection systems than those
employed by Boston Edison. Given the complexity of the tasks to be performed by
the servicer and the expertise required, a successor servicer may experience
difficulties in collecting payments arising from the RTC charge and determining
appropriate adjustments to the RTC charge.
The servicing fee would likely increase if the note issuer were to engage a
successor servicer. In addition, any successor servicer under current law may
not be able to invoke the remedy of shutting off service to a customer for
nonpayment of the RTC charge and thus may experience higher delinquencies. Also,
a change in the servicer will cause payment instructions to change, which may
lead to a period of disruption in which customers continue to remit payment
according to the former payment instructions, resulting in delays in collection
that could result in payment delays on the certificates.
BILLING OF THE RTC CHARGE BY THIRD PARTY SUPPLIERS MAY CAUSE DELAYS IN
REMITTANCES.
When a third party supplier bills, collects and remits the RTC charge to
the servicer, there is a greater risk that the servicer will receive payments
arising from the RTC charge later than it otherwise would. A third party
supplier is an entity that supplies energy to customers and has contracted with
the servicer to bill and collect the RTC charge. The risk of nonpayment due to
default, bankruptcy or insolvency of the third party supplier holding the funds
will increase the longer that the delay in receipt of payment lasts. Third party
supplier billing also places increased information requirements on the servicer.
The servicer has the responsibility of accounting for payments arising from the
RTC charge due to certificateholders regardless of which entity bills customers
for the RTC charge.
Any third party supplier that bills and collects payments arising from the
RTC charge will be required to pay these amounts, regardless of whether payments
are received from customers, within 15 days after the servicer's bill to the
third party supplier. The third party supplier will, in effect, replace the
customer as the obligor for these amounts, and the servicer, on behalf of the
note issuer, will have no right to collect the payments arising from the RTC
charge from the customer. Therefore, the servicer will be relying on the credit
of the third party supplier, rather than on the credit of the customers. In
addition, to the extent that a few third party suppliers bill and collect the
RTC charge, the note issuer may be relying on a small number of third party
suppliers, rather than a large number of customers, to remit payments arising
from the RTC charge. In this case, a default in the remittance of payments
arising from the RTC charge by a single third party supplier that bills and
collects the RTC charge from a large number of customers may adversely affect
the timing of distributions on the certificates. See "Servicing -- Third Party
Suppliers."
Neither Boston Edison nor the servicer will pay any shortfalls resulting
from the failure of any third party supplier to remit payments arising from the
RTC charge to the servicer. Although the servicer will take into account revenue
shortfalls arising from a default by a third party supplier when periodically
adjusting the RTC charge, any shortfalls that occur may cause delays in
distributions on the certificates.
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POSSIBLE PAYMENT DELAYS MAY RESULT FROM THE YEAR 2000 COMPUTER ISSUE.
The year 2000 computer issue could cause significant delays in
distributions to certificateholders. The year 2000 computer issue is the result
of computer programs that were written using two digits rather than four to
define an applicable year. Boston Edison uses various software applications and
embedded chip technology that could be affected by the year 2000 computer issue.
If computer programs with date-sensitive functions are not year 2000 compliant,
they may recognize a date using "00" as the year 1900 rather than the year 2000.
This could result in system failures or miscalculations causing disruptions of
operations. Possible disruptions to Boston Edison's operations, include, among
other things, the inability of Boston Edison, as servicer, to bill and collect
the RTC charge, and the inability of Boston Edison to meter electricity usage.
In addition, the year 2000 computer issue could cause Boston Edison or its
suppliers to fail to deliver electricity. In that event, revenues arising from
the RTC charge may decrease because the RTC charge is calculated based on
electricity usage by customers. This also could result in delays in
distributions on the certificates. See "The Seller and Servicer -- Year 2000
Computer Issue."
BANKRUPTCY AND CREDITORS' RIGHTS ISSUES
BANKRUPTCY OF SELLER COULD DELAY OR REDUCE PAYMENTS ON CERTIFICATES AND
ADVERSELY AFFECT THE ABILITY TO RESELL TRANSITION PROPERTY.
If the seller were to become a debtor in a bankruptcy case, and a creditor
or bankruptcy trustee of the seller or the seller itself as debtor in possession
were to take the position that the transition property constituted property of
the seller's bankruptcy estate, and a court were to adopt this position, then
delays or reductions in payments on the certificates could result. For example,
a creditor or bankruptcy trustee of the seller or the seller itself as debtor in
possession might argue that the sale of the transition property to the note
issuer was a loan to the note issuer from the seller, secured by a pledge of the
transition property. Regardless of any adverse determination in a seller
bankruptcy proceeding, the mere fact of a seller bankruptcy proceeding could
have an adverse effect on the resale market for the certificates and the market
value of the certificates.
Because the RTC charge is a usage-based charge, if the seller were to
become the debtor in a bankruptcy case, a creditor of, or a bankruptcy trustee
for, the seller, or the seller itself as debtor in possession could argue that
the note issuer should pay a portion of the costs of the seller associated with
the generation, transmission or distribution of the electricity the price of
which gave rise to the payments arising from the RTC charge that are used to
make distributions on the certificates. If a court were to adopt this position,
the amounts paid to the note trustee, and thus to the holders of the
certificates, could be reduced.
Regardless of whether the seller is the debtor in a bankruptcy case, if a
court were to accept the arguments of a creditor of the seller that transition
property comes into existence only as customers use electricity, a tax,
government lien or other lien on property of the seller arising before the
transition property came into existence may have priority over the note issuer's
interest in the transition property, which could reduce the amounts distributed
to certificateholders. See "Description of the Transition Property--Bankruptcy
and Creditors' Rights Issues."
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BANKRUPTCY OF THE SERVICER OR A THIRD PARTY SUPPLIER COULD ALSO DELAY OR
REDUCE PAYMENTS.
The bankruptcy or insolvency of the servicer or a third party supplier
could result in delays or reductions in distributions on the certificates. Each
of the servicer and any third party supplier will remit payments arising from
the RTC charge out of its general funds and will not segregate these amounts
from its general funds. In the event of a bankruptcy of the servicer or a third
party supplier, the note trustee likely will not have a perfected interest in
commingled funds and the inclusion of the commingled funds in the bankruptcy
estate of the servicer or third party supplier may result in delays in
distributions on the certificates. Furthermore, if the servicer is in
bankruptcy, it may stop performing its functions as servicer and it may be
difficult to find a third party to act as successor servicer. See "-- Problems
with the servicing of transition property may cause payment delays or
losses -- Change in servicer may lead to payment delays or losses."
POSSIBLE FEDERAL PREEMPTION OF THE RESTRUCTURING STATUTE MAY PROHIBIT RECOVERY
OF THE RTC CHARGE.
Federal preemption of the restructuring statute could prevent
certificateholders from receiving distributions on the certificates and cause a
loss on their investment in the certificates. The Massachusetts electric
industry is governed by federal law and regulated by the Federal Energy
Regulatory Commission. In the past, bills have been introduced in Congress to
prohibit the recovery of charges similar to the RTC charge. Although Congress
has not enacted any law that would prohibit the recovery of charges similar to
the RTC charge, it may do so in the future. Enactment of a federal law
prohibiting the recovery of charges similar to the RTC charge might have the
effect of preempting the statute and thereby prohibiting the recovery of the RTC
charge, which would cause delays and losses on the payment of the certificates.
NATURE OF THE CERTIFICATES
RESALE MARKET IS LIMITED.
We cannot assure you that you will be able to resell the certificates or
that a trading market for the certificates will develop or, if one does develop,
that it will continue for the life of the certificates. We do not expect to list
the certificates on any securities exchange.
HIGH RATINGS DO NOT MEAN THAT PAYMENTS WILL BE MADE ON TIME.
You should understand that the ratings of the certificates issued by
nationally recognized statistical rating organizations address only the
likelihood of the ultimate distribution of principal by the legal maturity date
and the timely distribution of interest on the certificates. A rating is not an
indication that these rating organizations believe that principal payments are
likely to be distributed on time according to the expected amortization
schedule. You should not rely on ratings for that purpose.
POSSIBILITY OF EARLY REDEMPTION MAY LEAD TO LOWER RETURN ON INVESTMENT.
The note issuer has the option to redeem all of the outstanding notes on
any payment date if, after giving effect to the payments that would otherwise be
made on that payment date, the outstanding principal balance of the notes would
be less than five percent of the initial principal balance of the notes. In
addition, the note issuer may be required to redeem the notes if the seller is
required to repurchase the transition property as a result of a breach of the
seller's representations and warranties in the sale agreement as described under
"Description of the Transition Property -- Seller Representations and Warranties
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and Repurchase Obligation." Redemption of the notes will require the certificate
trustee to redeem the certificates. Redemption will cause the certificates to be
retired earlier than would otherwise be expected. We cannot predict whether the
note issuer will redeem the notes, or whether you will be able to receive an
equivalent rate of return on reinvestment of the proceeds arising from any
redemption.
DEFINED TERMS
Capitalized terms used in this prospectus are defined in the glossary,
which begins on page 81.
AVAILABLE INFORMATION
BEC Funding LLC, the note issuer, has filed a registration statement
relating to the certificates and the notes with the Securities and Exchange
Commission. This prospectus is a part of the registration statement. This
prospectus, together with the prospectus supplement, describes the material
terms of each material document filed as an exhibit to the registration
statement. This prospectus and the prospectus supplement do not, however,
contain all of the information contained in the registration statement and
related exhibits. You can inspect the registration statement and the related
exhibits without charge at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at its
regional offices located as follows: Chicago Regional Office, Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and New York
Regional Office, 7 World Trade Center, 13th Floor, New York, New York 10048. You
may obtain copies of the registration statement and related exhibits at the
above locations at prescribed rates. You may obtain information on the operation
of the public reference facilities by calling the Commission at 1-800-SEC-0330.
You can also inspect information filed electronically with the Commission,
including reports and proxy and information statements, at the Commission's site
on the World Wide Web at http://www.sec.gov.
The note issuer will file annual, quarterly and special reports and other
information with the Securities and Exchange Commission. The note issuer may
stop filing periodic reports with the Commission at the beginning of any fiscal
year following the issuance of the certificates if there are fewer than 300
holders of the certificates.
REPORTS TO HOLDERS
During any period when the trust issues the certificates in book-entry
form, Boston Edison Company, acting as the servicer of the property securing the
notes, or a successor servicer, will provide periodic reports concerning the
certificates. You may obtain copies of the periodic reports by requesting them
from your broker or dealer. If you are the registered holder of the
certificates, you will receive the reports from the certificate trustee. See
"Description of the Notes -- Reports to Noteholders" and "Description of the
Certificates -- Reports to Certificateholders."
INCORPORATION OF DOCUMENTS BY REFERENCE
All reports and other documents filed by the note issuer with the
Securities and Exchange Commission after the date of this prospectus and prior
to the termination of this offering will be incorporated by reference in this
prospectus and considered to be part of
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this prospectus. Any statement in this prospectus or in the prospectus
supplement, or in a document incorporated or deemed to be incorporated by
reference, will be deemed to be modified or superseded if the note issuer files
a document that modifies that statement. Any statement as modified or superseded
shall constitute a part of this prospectus or the prospectus supplement.
You can request from the note issuer a free copy of any document
incorporated by reference in the registration statement (except exhibits) by
writing to BEC Funding LLC at 800 Boylston Street, 35th Floor, Boston
Massachusetts 02199, or by calling (617) 369-6000.
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ENERGY DEREGULATION AND NEW MASSACHUSETTS MARKET STRUCTURE
The electric utility industry is experiencing intensifying competitive
pressures in the electricity generation market. Historically, electric utilities
operated as regulated monopolies in their service territories and were the
primary suppliers of electricity. In Massachusetts, the Massachusetts Department
of Telecommunications and Energy (formerly the Department of Public Utilities)
set electric companies' rates based upon their costs of providing services and
allowing for a reasonable return on their prudent capital investments. Changes
to the traditional legal and regulatory framework and market structure are
occurring at both the state and federal levels.
STATUTORY OVERVIEW
At the state level, we expect that the Massachusetts electric industry will
change dramatically in the near future because of the enactment of Chapter 164
of the Massachusetts Acts of 1997, referred to as the "restructuring statute"
and the completion of related restructuring settlement agreements between the
Department and Massachusetts electric companies. The restructuring statute was
enacted in November 1997 and established a comprehensive framework for the
restructuring of the Massachusetts electric industry. The restructuring statute
required that on or before January 1, 1998, electric companies file a plan for
restructuring their operations to allow for retail competition in electricity
generation supply. See "-- Settlement Agreement."
Under the restructuring statute, approval of an electric company's
restructuring plan permits an electric company to recover transition costs
through a transition charge, which is a separate charge assessed to ratepayers
based on consumption of electricity. Generally, transition costs consist of the
costs of prudently incurred investments and obligations that an electric company
may not be able to recover through market-based rates in a competitive
electricity generation market. The restructuring statute requires that an
electric company take reasonable steps to mitigate to the maximum extent
possible the total amount of its transition costs. Approval of a restructuring
plan by the Department means, among other things, that the Department has found
reasonable mitigation of transition costs by the electric company submitting the
plan. The restructuring statute also permits an electric company to cause a
special purpose entity to issue securities, such as the certificates, secured by
the revenues arising from a portion, which may be adjusted to become all, of its
transition charge, if doing so will result in savings to ratepayers.
The restructuring statute also contemplates that an electric company's
customers will be permitted to contract with third party suppliers of
electricity and that the company will continue to distribute electricity whether
generated by itself or a third party supplier on a regulated basis. The
restructuring statute provides that retail customers may choose their
electricity supplier as of March 1, 1998. Customers who do not choose another
electricity supplier may continue to buy electricity from the utility.
SETTLEMENT AGREEMENT
In January 1998, the Department determined that Boston Edison's
restructuring settlement agreement substantially complied with the provisions of
the restructuring statute. The settlement agreement provides for, among other
things, an accounting of Boston Edison's transition costs, efforts to mitigate
the transition costs and rates for Boston Edison's electricity generation,
transmission, distribution and other services. To meet rate reduction
requirements in its settlement agreement and to mitigate the amount of its
transition costs, Boston Edison has divested its fossil generating assets and
its nuclear
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generation assets. As part of its settlement agreement, Boston Edison's rates
include a transition charge designed to recover its transition costs.
EXIT CHARGE
Although the RTC charge is nonbypassable, meaning that customers must pay
it whether or not they purchase energy from Boston Edison or a third party
supplier of energy, and whether or not their distribution system is being
operated by Boston Edison or a successor distribution company, customers may
reduce their electricity usage through the use of on-site generation or
cogeneration equipment. As a result, revenues generated by the RTC charge may
decrease. The restructuring statute contemplates that a customer that reduces
purchases of electricity through the operation of, or purchases from operators
of, on-site generation or cogeneration equipment may be required to pay an exit
charge. The servicer would remit to the note trustee a pro rata portion of the
exit charge based on the amount attributable to the RTC charge. However, a
customer will not have to pay an exit charge if:
- the customer provided less than or equal to ten percent of the annual
gross revenues collected by Boston Edison (or a successor distribution
company) in the year prior to the customer leaving the distribution
system; provided, that if two or more customers who, at any time within a
36-month period, leave the distribution system, represent in the
aggregate ten percent or more of the annual gross revenues collected by
Boston Edison (or a successor distribution company) in the year prior to
exit from the distribution system, these customers will pay an exit
charge based upon that portion of the annual gross revenues that is above
ten percent;
- the customer reduces purchases through the operation of, or purchases
from, on-site renewable energy technologies, fuel cells or cogeneration
equipment with a combined heat and power system efficiency of at least
50%; or
- the customer reduces purchases through the operation of, or purchases
from, an on-site generation or cogeneration facility of 60 kilowatts or
less.
Any exit charge may be equal to but no greater than the expected value of
the transition charge payments the customer would have paid but for the
operation of on-site generation or cogeneration equipment. If the Department
determines that on-site generation and cogeneration activities will cause a
decrease in future purchases of electricity and transition charge payments and
that a decrease will have a significant adverse impact on electric bills to be
paid by other customers in Boston Edison's or a successor distribution company's
service territory during the remaining period of transition cost recovery, then
the Department may order an exit charge to be paid upon terms and criteria as it
determines, notwithstanding the exceptions listed above.
RECONCILIATION
The restructuring statute also provides that the Department will review, at
intervals of not less than every 18 months from the date of the financing order,
each financing order creating an irrevocable right for an electric company to
recover a portion, which may become all, of its transition charge to pay
interest on and principal of electric rate reduction bonds, such as the
certificates. The review will be limited to a comparison of assumed transition
costs based on assumed mitigation to the actual transition costs determined
through actual mitigation. If the amount of transition costs authorized to be
recovered through a financing order exceeds the actual amount of those
transition costs, then the electric company will pay ratepayers with a uniform
rate credit based on usage that in total equals the amount of the excess. The
financing order provides that any reconciliation or adjustment will not affect
the RTC charge.
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THIRD PARTY BILLING OPTIONS
The restructuring statute authorizes and directs the Department to commence
an investigation and study of consolidated billing options starting on or after
January 1, 2000. The investigation would consider the manner in which metering,
meter maintenance and testing, customer billing and information services have
been provided by distribution companies, such as Boston Edison, since March 1,
1998 to analyze and determine, among other things, whether those services should
be unbundled from other distribution services and provided through a competitive
market. The study would also include an investigation and review of whether the
exclusivity of electric company distribution service territories should be
terminated or altered in any manner. If the Department determines that those
services should be unbundled and subjected to competition, or that territorial
exclusivity should be terminated or altered in any manner, the Department must,
no later than January 1, 2001, file its recommendations, along with drafts of
legislation necessary to implement its recommendations, with the Massachusetts
legislature. The Department's financing order issued to Boston Edison provides
credit and remittance criteria for third party suppliers to accommodate the
billing of the RTC charge by third party suppliers. A third party supplier is an
entity that supplies energy to customers and has contracted with the servicer to
bill and collect the RTC charge. See "Risk Factors -- Problems with the
servicing of transition property may cause payment delays or losses -- Billing
of the RTC charge by third party suppliers may cause delays in remittances."
FEDERAL INITIATIVES
In addition to the changes occurring in the Massachusetts market and
regulatory environment discussed throughout this section, federal legislative
efforts may also significantly alter the national market for electricity. For
example, at the federal level, the National Energy Policy Act of 1992 was
designed to increase competition in the wholesale electric generation market by
easing regulatory restrictions on producers of wholesale power and by
authorizing the Federal Energy Regulatory Commission to mandate access to
electric transmission systems by wholesale power generators. See "Risk
Factors -- Possible federal preemption of the restructuring statute may prohibit
recovery of the RTC charge."
DESCRIPTION OF THE TRANSITION PROPERTY
The restructuring statute and Boston Edison's restructuring settlement
agreement with the Massachusetts Department of Telecommunications and Energy
permit Boston Edison to recover transition costs through the assessment of a
transition charge, although Boston Edison has a duty to mitigate its transition
costs. Examples of transition costs include the costs of electricity generation
facilities, power purchase contracts with third-party generators of electricity
and regulatory assets. Regulatory assets reflect incurred costs that otherwise
would have been expensed, but have been capitalized because those costs probably
would have been recovered in future rates under the traditional ratemaking
structure.
FINANCING ORDER AND ISSUANCE ADVICE LETTER
The restructuring statute authorizes the Department to issue a financing
order, which is a regulatory order that approves the amount of Boston Edison's
transition costs that it is permitted to finance through the issuance of
electric rate reduction bonds, such as the certificates. On December 3, 1998,
Boston Edison filed its application for a financing order with the Department.
The Department issued a financing order dated April 2, 1999, which
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authorizes the issuance of approximately $805 million aggregate principal amount
of the certificates, although Boston Edison must still demonstrate savings to
ratepayers.
The financing order, together with the issuance advice letter, establishes,
among other things, the RTC charge, to recover reimbursable transition costs
amounts specified in the financing order. The RTC charge is nonbypassable in
that customers must pay it whether or not they purchase energy from Boston
Edison or a third party supplier of energy, and whether or not their
distribution system is being operated by Boston Edison or a successor
distribution company. The restructuring statute provides that the right to
collect payments based on the RTC charge is a property right which may be
pledged, assigned or sold in connection with the issuance of the certificates.
Under the statute and the financing order, the owner of the transition property
is entitled to assess the RTC charge until it has received payments from
customers sufficient to retire all outstanding notes and certificates and to pay
fees and expenses of servicing and retiring the notes and the certificates. The
RTC charge, as adjusted from time to time, is a portion, which may become all,
of the transition charge and will be expressed as an amount per kilowatt-hour of
electricity usage by a customer. The RTC charge will not be separately
identified on customer bills, although customer bills will note that a portion
of the transition charge has been sold to the note issuer.
The financing order requires the seller to submit an issuance advice letter
relating to the certificates to the Department. The issuance advice letter will
establish the initial RTC charge and become effective when it is filed with the
Department. The financing order permits the Servicer to file requests, referred
to as true-up advice letters, to adjust up or down the RTC charge at various
times to enhance the likelihood of retirement of each class of certificates on a
timely basis. See "-- Adjustments to the RTC Charge."
TRANSITION PROPERTY
The transition property is a property right consisting of the right, title
and interest to all revenues, collections, claims, payments, money or proceeds
of or arising from the RTC charge. The notes will be secured by the transition
property, as well as the other note collateral described under "Description of
the Notes -- Security."
TRANSITION CHARGE
The transition charge is designed to recover on a fully reconciling basis
all of Boston Edison's transition costs. The transition charge is the rate
mechanism through which Boston Edison is allowed to recover its transition
costs. It is determined according to the methodology specified in Boston
Edison's settlement agreement and subsequent proceedings before the Department
under that settlement agreement. The transition charge may increase or decrease
as a result of the variable component described below, but may not exceed 3.35
cents/kilowatt-hour under the settlement agreement. The RTC charge will
initially constitute a portion of the transition charge. The RTC charge may
increase, but will not exceed the transition charge. See "Risk Factors -- Cap on
RTC charge may lead to insufficient revenues to make payments."
The transition charge consists of both a fixed and a variable component.
The fixed component consists of the portion of the transition costs whose
amounts have been set at the time of the settlement agreement or in subsequent
proceedings. In general, the dollar amounts of the fixed component do not
change. The following are examples of transition costs included in the fixed
component of the transition charge:
- the net balance of Boston Edison's unrecovered investment in its fossil
generation assets and related regulatory assets;
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- the retail share of the net balance of Boston Edison's unrecovered
investment in the Pilgrim nuclear power station and related regulatory
assets; and
- the prefunded balance of Boston Edison's portion of the decommissioning
trust being transferred to the buyer in connection with the sale of the
Pilgrim nuclear power station.
The financing order authorizes the recovery of the fixed component through the
RTC charge.
The variable component consists of the portion of the transition costs the
amount of which have been estimated in the settlement agreement. The amounts in
the variable component will be reconciled to the actual amounts and will vary
over time. The following are examples of transition costs included in the
variable component of the transition charge:
- Pilgrim nuclear power station fixed operating costs;
- above-market payments to power suppliers under Boston Edison's long-term
power purchase contracts;
- above-market fuel transportation costs;
- employee retraining and severance costs;
- damages, costs or net recoveries from claims associated with Boston
Edison's generating business that accrued prior to sale that were not
assigned to the buyers; and
- payments by Boston Edison in lieu of property taxes to the Town of
Plymouth, Massachusetts to compensate the town for the loss of property
tax revenues.
The transition charge may increase or decrease while the certificates are
outstanding because the amount of the variable component will fluctuate. In
addition, Boston Edison will make payments to the Town of Plymouth and for
employee retraining and severance costs the amounts of which cannot be estimated
at this time. These payments will constitute transition costs and will increase
the transition charge.
The financing order provides that the transition charge will not be reduced
below the RTC charge, although the transition charge is still limited by the
transition charge cap of 3.35 cents/kilowatt-hour. If the RTC charge needs to be
increased above the transition charge then in effect, the filing of a true-up
advice letter with the Department to increase the RTC charge will also effect an
increase in the transition charge, within the limits of the cap described above.
The Massachusetts restructuring statute provides that Boston Edison must
meet the required rate reduction on or before September 1, 1999 and that the
rate reduction, adjusted up or down for inflation, will remain in effect through
December 31, 2004. If Boston Edison's rates, including the transition charge,
exceed the maximum total rate permitted during the required rate reduction
period, then the Department will adjust Boston Edison's rates and charges, other
than the RTC charge, to the extent necessary to achieve the required rate
reduction. To the extent that the Department adjusts these other charges, and
Boston Edison is not allowed to collect on a current basis any rate or charge
that it would otherwise be entitled to collect, the portion of these rates or
charges not collected on a current basis shall be deferred at the carrying
charge in effect for those charges.
ADJUSTMENTS TO THE RTC CHARGE
Initially and during the life of the certificates, at least annually the
servicer will calculate and set the RTC charge at a level estimated to generate
revenues sufficient to pay fees and expenses of servicing and retiring the notes
and the certificates, to pay
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<PAGE> 42
interest on and principal of the notes and certificates and to fund and
replenish other subaccounts as required for the upcoming year. The servicer will
increase or decrease the RTC charge over the life of the certificates as a
result of several factors, including:
- changes in electricity sales forecasts;
- changes in payment patterns and charge-off experience (including defaults
by third party suppliers);
- changes in any ongoing fees, costs and expenses related to the notes and
the certificates; and
- unpaid interest on or deferred principal of the notes.
If the servicer estimates that the RTC charge in effect at any given time will
collect payments in excess of that necessary to meet required payments, then the
servicer may, through an adjustment by filing a true-up advice letter, reduce
the RTC charge. The adjustments to the RTC charge will continue until all
interest on and principal of all classes of notes and related classes of
certificates have been paid or distributed in full.
The RTC charge will be a portion (which may be adjusted to be all) of
Boston Edison's transition charge. As a result, the RTC charge may be limited by
Boston Edison's maximum permitted transition charge, which in no event may
exceed 3.35 cents/kilowatt-hour. Therefore, the servicer may not always be able
to increase the RTC charge to meet anticipated payments of interest on and
principal of the notes and as a result distributions on the certificates may be
delayed or you may suffer a loss on your investment.
The financing order provides that the servicer will file true-up advice
letters periodically as follows:
- the servicer will file a routine true-up advice letter with the
Department annually prior to each anniversary of the financing order,
with resulting adjustments up or down to the RTC charge to become
effective on the first day of the next succeeding calendar month, or the
date as may be specified in the true-up advice letter, so long as the
effective date is at least 15 days after the filing of the true-up advice
letter;
- the servicer may file a routine true-up advice letter with the Department
before the end of any calendar quarter or payment date, with resulting
adjustments up or down to the RTC charge to become effective on the first
day of the next succeeding calendar month, or the date as may be
specified in the true-up advice letter, so long as the effective date is
at least 15 days after the filing of the true-up advice letter; and
- the servicer will file a non-routine true-up advice letter with the
Department if the method it uses to calculate the RTC charge requires
modifications to more accurately project and generate adequate revenues,
with the modifications to become effective when reviewed and approved by
the Department within 60 days after filing.
True-up advice letters will take into account amounts available in the general
subaccount and reserve subaccount, and amounts necessary to fund the
overcollateralization subaccount and to replenish the capital subaccount to
their required levels, in addition to amounts payable on the notes and the
certificates and related fees and expenses.
PLEDGE BY THE COMMONWEALTH OF MASSACHUSETTS
The Commonwealth of Massachusetts has pledged and agreed with the note
issuer, the trust and the certificateholders that it will not alter the
provisions of the restructuring
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<PAGE> 43
statute that make the RTC charge irrevocable and binding or limit or alter the
transition property or the financing order until the certificates are fully paid
and discharged.
SALE AND ASSIGNMENT OF TRANSITION PROPERTY
The seller has agreed in the transition property sale agreement not to sell
transition property to secure another issuance of notes, and, in turn,
certificates, if it would cause the then existing ratings on the certificates to
be downgraded.
On the issuance date of the certificates, the seller will sell and assign
to the note issuer, without recourse, its entire interest in the transition
property. The note issuer will apply the net proceeds from the sale of the notes
to the trust to purchase the transition property. The seller's financial
statements will indicate that it is not the owner of the transition property,
and for financial reporting and tax purposes the seller will treat the notes as
representing debt of the seller.
SELLER REPRESENTATIONS AND WARRANTIES AND REPURCHASE OBLIGATION
In the transition property sale agreement, the seller will represent and
warrant to the note issuer, as of the closing date, among other things, that:
(a) the information describing the seller in "The Seller and Servicer"
section of the prospectus is correct in all material respects;
(b) the seller has transferred the transition property, free and clear of
all security interests, liens, charges and encumbrances (other than any
created by Section 1H(e) of Chapter 164 of the Massachusetts General
Laws and any in favor of the note issuer);
(c) the transition property has been validly transferred and sold to the
note issuer and all filings (including filings with the Massachusetts
Department of Telecommunications and Energy under the statute)
necessary in any jurisdiction to give the note issuer an ownership
interest (subject to any lien created by Section 1H(e) of Chapter 164
of the Massachusetts General Laws) in the transition property have been
made;
(d) under the laws of The Commonwealth of Massachusetts (including the
statute) and the United States in effect on the closing date:
- the financing order pursuant to which the transition property has been
created is in full force and effect;
- the certificateholders are entitled to the protections of the statute
and, accordingly, the financing order is not revocable by the
Department;
- The Commonwealth of Massachusetts may not alter the provisions of the
restructuring statute that make the RTC charge irrevocable and
binding, limit or alter the transition property, the financing order
and all rights thereunder, in a manner that would substantially impair
the rights of certificateholders, absent a demonstration by the
Commonwealth that an impairment is narrowly-tailored and is necessary
to advance an important public interest, such as a "great public
calamity," until the certificates, together with accrued interest, are
fully met and discharged;
- the process by which the financing order was adopted and approved, and
the financing order and issuance advice letter, comply with all
applicable laws, rules and regulations;
- the issuance advice letter has been filed in accordance with the
financing order;
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<PAGE> 44
- the Department may not, either by rescinding, altering or amending the
financing order, in any way reduce or impair the value of the
transition property either directly or indirectly by taking
reimbursable transition costs amounts into account when setting other
rates for the seller, in a manner that would substantially impair the
rights of certificateholders, absent a demonstration by The
Commonwealth of Massachusetts that an impairment is narrowly-tailored
and is necessary to advance an important public interest, such as a
"great public calamity," until the certificates, together with accrued
interest, are fully met and discharged; and
- no approval or filing with any other governmental body is required in
connection with the creation of the transition property, except those
that have been obtained or made;
(e) based on information available to the seller on the closing date, the
assumptions used in calculating the initial RTC charge are reasonable
and are made in good faith;
(f) on the effectiveness of the financing order and the issuance advice
letter:
- all of the transition property constitutes an existing property right;
- the transition property consists of the right, title and interest in
and to all revenues, collections, claims, payments, money, or proceeds
of or arising from the RTC charge, as adjusted from time to time, and
all rights to obtain adjustments to the RTC charge pursuant to the
financing order; and
- the owner of the transition property is legally entitled to collect
payments arising from the RTC charge in the aggregate sufficient to
pay the interest on and principal of the notes, to pay the fees and
expenses of servicing the notes and the certificates, to replenish the
capital subaccount to the required capital level and to fund the
overcollateralization subaccount to the required overcollateralization
level until the notes and the certificates are paid in full.
(g) the seller is a corporation duly organized, validly existing and in
good standing under the laws of The Commonwealth of Massachusetts, with
corporate power and authority to own its properties as owned on the
closing date and to conduct its business as conducted by it on the
closing date and to execute, deliver and perform the terms of the sale
agreement;
(h) the execution, delivery and performance of the sale agreement have been
duly authorized by all necessary corporate action on the part of the
seller;
(i) the sale agreement constitutes a legal, valid and binding obligation of
the seller, enforceable against it in accordance with its terms,
subject to applicable insolvency, reorganization, moratorium,
fraudulent transfer and other laws relating to or affecting creditors'
or secured parties' rights generally from time to time in effect and to
general principles of equity, regardless of whether considered in a
proceeding in equity or law;
(j) the consummation of the transactions contemplated by the sale agreement
do not conflict with the seller's articles of organization or by-laws
or any material agreement to which the seller is a party or bound,
result in the creation or imposition of any lien upon the seller's
properties pursuant to the terms of a material agreement (other than
any that may be granted under the transaction documents or any lien
created by Section 1H(e) of Chapter 164 of the Massachusetts General
Laws) or violate any existing law or any existing order, rule or
regulation applicable to the seller;
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<PAGE> 45
(k) no governmental approvals, authorizations, consents, orders or other
actions or filings are required for the seller to execute, deliver and
perform its obligations under the sale agreement except those which
have previously been obtained or made; and
(l) except as disclosed to the note issuer, no court or administrative
proceeding is pending and, to the seller's knowledge, no court or
administrative proceeding is threatened and, to the seller's knowledge,
no investigation is pending or threatened:
- asserting the invalidity of, or seeking to prevent the consummation of
the transactions contemplated by, the sale agreement;
- seeking a determination that might materially and adversely affect the
performance by the seller of its obligations under the sale agreement;
or
- which might adversely affect the federal or state income tax
classification of the notes or the certificates as debt.
Notwithstanding the above, the seller makes no representation or warranty
that any amounts actually collected arising from the RTC charge will in fact be
sufficient to meet payment obligations on the notes or that assumptions made in
calculating the RTC charge will in fact be realized.
In the event of a breach by the seller of any representation specified in
clause (d) or clause (f) above that has a material adverse effect on the
certificateholders, the seller will be obligated to repurchase the transition
property from the note issuer at a purchase price equal to the outstanding
principal amount of the notes and all accrued and unpaid interest, excluding any
premium or penalty of any kind; provided, however, that the seller shall not be
obligated to repurchase the transition property if:
(a) within 90 days after the date of the occurrence of the breach, the
breach is cured or the seller takes remedial action so that there is
not and will not be a material adverse effect on the certificateholders
as a result of the breach; and
(b) the seller either:
- if the seller had, immediately prior to the breach, a long term debt
rating of at least "A3" by Moody's Investors Service, Inc. and "BBB"
by Standard & Poor's or the equivalent by each of the other nationally
recognized statistical rating organizations, enters into a binding
agreement with the note issuer to pay any amounts necessary so that
all interest payments due on the notes during the 90-day period will
be paid in full; or
- if the seller does not have these long term debt ratings immediately
prior to the breach, and, within two business days after the
occurrence of the breach, deposits an amount in escrow with the note
trustee sufficient to pay all interest payments, taking into account
amounts available in the collection account, which will become due on
the notes during the 90-day period.
Any escrowed amounts will be used by the note trustee to make interest payments
if there are not sufficient funds otherwise available. The sale agreement
provides that any change in the law by legislative enactment, constitutional
amendment or initiative petition that renders any of the representations and
warranties untrue would not constitute a breach under the sale agreement.
In the event of a breach by the seller of any other representation or
warranty specified in clauses (b), (c), (g), (h), (i) or (j) above that has a
material adverse effect on the certificateholders, if, within 90 days after the
date of the breach, the breach has not been
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<PAGE> 46
cured and the seller has not taken remedial action so that there is not and will
not be a material adverse effect on the certificateholders as a result of the
breach, then the seller shall be required to repurchase the transition property
for the repurchase price described above. After the payment by the seller of the
repurchase price, no person or entity shall have any other claims, rights or
remedies against the seller under or arising from the sale agreement, except for
the indemnity rights of the indemnified persons described below.
In the event of the seller's willful misconduct or gross negligence in the
performance of its duties or observance of the covenants under the sale
agreement or a breach of any representation or warranty in the sale agreement
other than those that trigger the seller's repurchase obligation, the seller
shall be required to indemnify, defend and hold harmless the note issuer, the
note trustee (for the benefit of the noteholders) and the certificate trustee
(for the benefit of the certificateholders) against any costs, expenses, losses,
claims, damages and liabilities incurred as a result of the breach; provided,
however, the seller may, at its election and in full satisfaction of its
indemnity obligation, repurchase the transition property at the repurchase price
described above, in which case no person or entity shall have any claims, rights
or remedies against the seller under or arising from the sale agreement, except
for the indemnity rights of the indemnified persons described below. The
remedies provided for in the sale agreement are the sole and exclusive remedies
of the note issuer, the note trustee (for the benefit of the noteholders) and
the certificate trustee (for the benefit of the certificateholders) against the
seller for breach of its representations and warranties in the sale agreement.
In addition, the seller shall indemnify and hold harmless the note trustee
(for itself), the Delaware trustee, the certificate trustee (for itself), the
trust, the state agencies and any of their respective affiliates, officers,
directors, employees and agents against any expenses (including legal fees and
expenses), losses, claims, taxes, damages and liabilities incurred by any of
these persons as a result of the seller's willful misconduct or gross negligence
in the performance of its duties or observance of the covenants under the sale
agreement or a breach by the seller of its representations and warranties in the
sale agreement, except to the extent of amounts either resulting from the
willful misconduct or gross negligence of the indemnified person or resulting
from a breach of a representation or warranty made by the indemnified person in
the transaction documents that gives rise to the seller's breach.
The seller will also agree to take any legal or administrative action,
including defending against or instituting and pursuing legal actions, as may be
reasonably necessary to protect the note issuer, the noteholders and the
certificateholders from claims, state actions or other actions or proceedings of
third parties which, if successfully pursued would result in a breach of any
representation described above. The seller shall be entitled to be reimbursed by
the note issuer for the costs and expenses of taking these actions. The seller
will also agree that it will not at any time assert any security interest, lien,
charge or encumbrance against the transition property.
BANKRUPTCY AND CREDITORS' RIGHTS ISSUES
TRUE SALE
The seller will represent and warrant in the sale agreement that the
transfer of the transition property to the note issuer is a valid sale and
assignment of the transition property from the seller to the note issuer. The
seller will also represent and warrant that it will take the appropriate actions
under the statute to perfect this sale. The restructuring statute provides that
the transactions described in the sale agreement shall constitute a sale of the
transition property to the note issuer, and the seller and the note issuer will
treat the
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<PAGE> 47
transactions as a sale under applicable law, although for financial reporting
and federal income tax purposes the transactions will be treated as debt of the
seller.
Should the transfer of the transition property to the note issuer be
recharacterized as a borrowing by the seller, the restructuring statute provides
that there is a perfected first priority statutory lien on the transition
property that secures all obligations to the certificateholders. In addition, in
the sale agreement, the seller grants to the note issuer a security interest in
the transition property and covenants that it will take appropriate actions to
perfect the security interest, although the seller takes the position that it
has no rights in the transition property to which a security interest could
attach.
Under the statute and the financing order, on the effective date of the
issuance advice letter, the transition property identified in the issuance
advice letter constitutes a property right that continuously exists as property
for all purposes. Nonetheless, if the seller were to become the debtor in a
bankruptcy case, a creditor of, or a bankruptcy trustee for, the seller, or the
seller itself as debtor in possession, may attempt to take the position that,
because the payments based on the RTC charge are usage-based charges, transition
property comes into existence only as customers use electricity. If a court were
to adopt this position, we cannot assure you that either the statutory lien
created by the statute or the security interest granted in the sale agreement
would be valid as to electricity consumed after the commencement of a bankruptcy
case by or against the seller.
If a court were to determine that the transition property has not been sold
to the note issuer, and that the statutory lien created by the restructuring
statute and the security interest granted in the sale agreement are invalid
against payments arising from the RTC charge that become collectible as a result
of the consumption of electricity consumed after the commencement of a
bankruptcy case of the seller, then the certificate trustee, as noteholder and
for the benefit of holders of the certificates, would be an unsecured creditor
of the seller, and delays or reductions in distributions on the certificates
could result.
Whether or not the court determined that the transition property had been
sold to the note issuer, the court may rule that any payments arising from the
RTC charge that become collectible as a result of the consumption of electricity
after the commencement of the seller's bankruptcy cannot be transferred to the
note trustee or the certificate trustee, thus resulting in delays or reductions
of distributions on the certificates.
SUBSTANTIVE CONSOLIDATION
The seller and the note issuer have taken steps to reduce the risk that in
the event the seller or an affiliate of the seller were to become the debtor in
a bankruptcy case, a court would order that the assets and liabilities of the
note issuer be substantively consolidated with those of the seller or an
affiliate. These steps include the fact that the note issuer is a separate,
special purpose limited liability company, the organizational documents of which
provide that it shall not commence a voluntary bankruptcy case without the
unanimous affirmative vote of all of its directors, including two directors
independent of the seller. Nonetheless, these steps may not be completely
effective, and thus if the seller or an affiliate of the seller were to become a
debtor in a bankruptcy case, a court may order that the assets and liabilities
of the note issuer be consolidated with those of the seller or an affiliate,
thus resulting in delays or reductions in distributions on the certificates.
Other factors that may tend to support consolidation include the ownership of
the note issuer by the seller, the designation of officers or employees of the
seller as directors, other than independent directors, of the note issuer and
the existence of indemnities by the seller for some liabilities of the note
issuer.
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<PAGE> 48
THE TRUST
The Massachusetts Development Finance Agency and the Massachusetts Health
and Educational Facilities Authority will form the trust prior to the sale of
the certificates specifically for the purpose of acquiring the notes from the
note issuer. The trust will be a Delaware business trust. The Massachusetts
Development Finance Agency, the Massachusetts Health and Educational Facilities
Authority and The Bank of New York (Delaware), a Delaware banking corporation,
not acting in its individual capacity but acting as the Delaware trustee on
behalf of the trust, will enter into a declaration of trust to create the trust.
The trust will not be an agency or instrumentality of The Commonwealth of
Massachusetts. The trust will have no assets other than the notes. The
declaration of trust will not permit the trust to engage in any activities other
than holding the notes, issuing the certificates, acting as paying agent and
engaging in other related activities.
Each class of certificates will represent a fractional undivided beneficial
interest in the related class of notes, including all amounts due and to become
due under the related class of notes, and will represent the right to receive
the payments on the related class of notes. See "Description of the
Certificates -- Payments and Distributions."
The note issuer, the Massachusetts Development Finance Agency, the
Massachusetts Health and Educational Facilities Authority, the trust, the
Delaware trustee and the certificate trustee will enter into a fee and indemnity
agreement under which the note issuer will pay the Delaware trustee's and the
certificate trustee's reasonable compensation and reasonable fees and expenses.
The fee and indemnity agreement will further provide that the note issuer will
indemnify the trust, the Delaware trustee, the certificate trustee, the
Massachusetts Development Finance Agency and the Massachusetts Health and
Educational Facilities Authority for, and hold them harmless against, any loss,
liability or expense incurred by them arising from the failure of any party to
perform its obligations under the various transaction documents.
The fiscal year of the trust will be the calendar year.
As of the date of this prospectus, because the trust has not yet been
formed, we have not included any financial statements or related information for
the trust.
THE AGENCIES
The Massachusetts Development Finance Agency is a body politic and
corporate and a public instrumentality of The Commonwealth of Massachusetts. It
is responsible for providing bond issuance, lending and real estate development
services to promote economic development throughout Massachusetts. This agency
was formally created in September 1998 by a legislative merger of the former
Massachusetts Industrial Finance Agency and the Massachusetts Government Land
Bank. The Massachusetts Health and Educational Facilities Authority is an
independent public authority created by the Massachusetts legislature in 1968 to
assist nonprofit health, educational and cultural institutions to borrow funds
at tax-exempt rates, providing access to low-cost capital for those
institutions.
The statute contemplates state sponsorship of individual utility rate
reduction bond issuances through the Massachusetts Development Finance Agency
and the Massachusetts Health and Educational Facilities Authority. These state
entities have participated in the structuring of the transaction relating to the
issuance of the certificates and related matters.
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<PAGE> 49
The certificates do not represent an interest in, or an obligation of, The
Commonwealth of Massachusetts, any governmental agency, authority or
instrumentality of the Commonwealth or Boston Edison Company or any of its
affiliates. None of these entities or the trust will guarantee or insure the
certificates, the notes or the property securing the notes.
Neither The Commonwealth of Massachusetts nor any governmental agency,
authority or instrumentality of the Commonwealth nor Boston Edison Company or
any of its affiliates will have any obligation relating to the certificates, the
notes or the property securing the notes, except for Boston Edison's duties and
obligations as the seller and the servicer of the transition property.
Neither the full faith and credit nor the taxing power of The Commonwealth
of Massachusetts nor any political subdivision, agency, authority or
instrumentality of the Commonwealth is pledged to the payment of principal of,
or interest on, the certificates or the notes, or the payments securing the
notes. Furthermore, neither The Commonwealth of Massachusetts nor any political
subdivision, agency, authority or instrumentality of the Commonwealth will
appropriate any funds for the payment of any of the certificates or the notes.
THE NOTE ISSUER
The note issuer is a limited liability company organized under the laws of
the State of Delaware. The seller is the sole member of the note issuer. The
principal executive office of the note issuer is located at 800 Boylston Street,
35th Floor, Boston, Massachusetts 02199. The telephone number of the note issuer
is (617)369-6000. The seller organized the note issuer for the limited purpose
of holding and servicing the transition property and issuing notes secured by
the transition property and the other note collateral and related activities.
The note issuer's organizational documents restrict it from engaging in other
activities. The assets of the note issuer will consist primarily of the
transition property and the other collateral for the notes. In addition, the
note issuer's organizational documents require it to operate in a manner
intended to reduce the likelihood that it would be consolidated in the seller's
bankruptcy estate if the seller becomes involved in a bankruptcy proceeding.
The note issuer is a recently formed entity and, as of the date of this
prospectus, has not carried on any business activities. We have included audited
financial statements of the note issuer beginning at page F-1 of this
prospectus.
OFFICERS AND DIRECTORS
The directors of the note issuer oversee the management of its property and
business. The following is a list of the officers and directors of the note
issuer:
<TABLE>
<CAPTION>
NAME AGE TITLE
- ---- --- -----------------------------------
<S> <C> <C>
James J. Judge.......... 43 Director
Robert J. Weafer,
Jr. .................. 52 President, Director
Emilie G. O'Neil........ 38 Vice President, Treasurer, Director
Theodora S. Convisser... 51 Secretary
Andrew L. Stidd......... 42 Director
Kevin P. Burns.......... 30 Director
</TABLE>
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All of the note issuer's officers and directors, other than those directors
who are independent of Boston Edison and its affiliates, have served in their
capacities since February 11, 1999. The independent directors have served in
their capacities since July [ ], 1999. The officers and directors will devote
as much time as is necessary to the affairs of the note issuer. The note issuer
will have sufficient officers, directors and employees to carry on its business.
Robert J. Weafer, Jr. is President and a director of the note issuer. Mr.
Weafer has been the Vice President -- Finance and Controller of Boston Edison
since 1995, and he has been a Vice President, the Controller and the Chief
Accounting Officer of Boston Edison since 1991.
James J. Judge is a director of the note issuer. Mr. Judge has served as
Senior Vice President -- Corporate Services and Treasurer of Boston Edison since
1995. Previously, Mr. Judge served Boston Edison as Assistant Treasurer from
1989 to 1995 and as Director of Corporate Planning from 1993 to 1995.
Emilie G. O'Neil is Vice President, Treasurer and a director of the note
issuer. Ms. O'Neil has been the Manager of Corporate Finance for Boston Edison
since 1991.
Theodora S. Convisser is the Secretary of the note issuer. Ms. Convisser
has served as the Clerk of Boston Edison since 1986 and as Assistant General
Counsel since 1984.
Andrew L. Stidd is an independent director of the note issuer. Mr. Stidd
has held the position of President of Global Securitization Services, LLC since
January 1998. He served as Managing Director of Global Securitization Services,
LLC between December 1996 and December 1997. Prior to joining Global
Securitization Services, LLC, Mr. Stidd was Vice President and Director of Lord
Securities Corporation, where he was employed since 1992.
Kevin P. Burns is an independent director of the note issuer. Mr. Burns has
been a Vice President of Global Securitization Services, LLC since December
1996. Prior to joining Global Securitization Services, LLC, Mr. Burns served as
a Director at Lord Securities Corporation from 1992 to 1996.
The note issuer will not compensate its officers and will not compensate
its directors, other than the two directors that are independent of Boston
Edison and its affiliates, for their services on behalf of the note issuer. The
initial aggregate annual compensation for both of the independent directors will
be $3,500. Any officer will serve at the discretion of the note issuer's
directors. The note issuer's organizational documents provide that it will
indemnify its officers and directors against liabilities incurred in connection
with their services on behalf of the note issuer.
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<PAGE> 51
THE SELLER AND SERVICER
Boston Edison was incorporated under Massachusetts law in 1886. Boston
Edison is an electric company primarily engaged in the business of supplying
electricity at retail to an area of approximately 590 square miles, including
the City of Boston and 39 surrounding cities and towns. In 1998, Boston Edison
served an average of approximately 660,000 customers. Boston Edison comprises
the major portion of the assets and revenues of BEC Energy, its parent holding
company.
As an investor-owned electric company, Boston Edison is regulated by the
Massachusetts Department of Telecommunications and Energy and the Federal Energy
Regulatory Commission. The seller is also regulated by the Nuclear Regulatory
Commission because of its ownership of nuclear generation assets.
BOSTON EDISON REVENUES, CUSTOMER BASE AND ENERGY CONSUMPTION
Several factors influence the number of Boston Edison's retail customers
and their electric energy consumption. One of these factors is the general
economic climate in Boston Edison's service territory, which affects migration
of residential, commercial and industrial customers into or out of the service
territory. Another factor influencing sales of electricity is temperature.
Boston Edison's electricity sales are typically higher in the winter and summer
when heating or cooling demands are highest than in the spring and fall when
temperatures tend to be more moderate. The level of business activity of
commercial and industrial customers also tends to influence their electricity
consumption. Other factors affecting the electricity consumption of retail
customers, primarily over the longer term, include the availability of more
energy-efficient appliances and other products and retail customers' ability to
acquire these products.
The table below sets forth Boston Edison's total billed retail revenues
from retail sales of electrical energy for the years 1994 to 1998:
BILLED RETAIL REVENUES
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Billed Retail
Revenues ($ in
000's):
Residential.......... 425,591 441,088 454,393 473,450 437,032
Commercial........... 760,010 804,378 824,862 880,959 826,294
Industrial........... 142,538 147,739 148,111 148,453 137,818
Street Lighting...... 23,487 24,167 24,431 24,811 22,742
--------- --------- --------- --------- ---------
Total...... 1,351,626 1,417,372 1,451,797 1,527,673 1,423,886
</TABLE>
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The table below sets forth the number of Boston Edison's retail customers
by class for the years 1994-1998:
RETAIL CUSTOMERS
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Average Number of Retail
Customers:
Residential................. 570,340 569,710 572,816 576,576 576,535
Commercial.................. 80,756 79,313 79,964 81,006 78,835
Industrial.................. 1,634 1,599 1,552 1,527 1,492
Street lighting............. 2,951 3,094 3,131 3,219 3,144
------- ------- ------- ------- -------
Total............. 655,681 653,716 657,463 662,328 660,006
</TABLE>
The table below sets forth Boston Edison's billed retail energy sales for
the years 1994 to 1998:
BILLED RETAIL ENERGY SALES (GIGAWATT-HOURS)
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Billed Retail Energy Sales
(Gigawatt-hours):
Residential................. 3,524 3,516 3,590 3,590 3,624
Commercial.................. 7,451 7,578 7,798 8,038 8,267
Industrial.................. 1,537 1,534 1,539 1,474 1,493
Street lighting............. 131 132 131 131 132
------- ------- ------- ------- -------
Total............. 12,643 12,760 13,058 13,233 13,516
</TABLE>
ESTIMATED CONSUMPTION AND ESTIMATED VARIANCE
Boston Edison's calculation of the initial RTC charge and subsequent
adjustments are based on electricity sales estimates. The servicer will use
these estimates to calculate and set the RTC charge at a level intended to
generate revenues sufficient to pay interest on and principal of the
certificates, to pay fees and expenses of servicing and retiring the notes and
the certificates, to replenish the capital subaccount and to fund the
overcollateralization amount.
Boston Edison conducts sales estimate variance analyses on a regular basis
to monitor the accuracy of energy estimates against recorded consumption. The
table below presents the estimates of Boston Edison's billed retail energy sales
in gigawatt-hours for the years 1994 through 1998. There are 1,000,000
kilowatt-hours in a gigawatt-hour. Each estimate was made in the prior year. For
example, the 1994 estimate of 12,678 gigawatt-hours was prepared in 1993.
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<PAGE> 53
ANNUAL ESTIMATED VARIANCES
BILLED RETAIL ENERGY SALES (GIGAWATT-HOURS)
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Estimate......................... 12,678 12,732 12,635 13,152 13,427
Actual........................... 12,643 12,760 13,058 13,233 13,516
Variance......................... -35 28 423 81 89
Percentage Variance.............. -0.28% 0.22% 3.35% 0.62% 0.66%
</TABLE>
Actual usage depends on several factors, including temperatures and
economic conditions. For example, while Boston Edison's methodology for
estimating usage assumes normal conditions, abnormally hot summers can add an
extra 1.5 to 2.5% in electricity sales. Regional economic conditions can also
affect sales as retail customers curb electricity usage to save money,
businesses close and retail customers migrate from Boston Edison's service
territory. Accordingly, variations in conditions will affect the accuracy of any
estimate.
BILLING AND COLLECTIONS
CREDIT POLICY
Boston Edison's credit and collections policies are regulated by the
Massachusetts Department of Telecommunications and Energy. Under the
Department's regulations, Boston Edison is obligated to provide service to all
customers within its service territory.
On application for service, the identification and credit standing of all
residential customers is verified through the use of a major credit-reporting
bureau. In instances where nonresidential customers do not meet minimum credit
standards, credit must be established. This can be done through providing a
security deposit (normally twice the average monthly bill), furnishing a surety
bond and/or a bank letter of credit. The Department does not permit Boston
Edison to obtain security deposits from its residential customers.
According to the Department's regulations, Boston Edison may refuse to
provide service, at any location, to an applicant who is indebted to it for any
service previously furnished to the applicant. Boston Edison will commence
service, however, if a reasonable payment plan for the indebtedness is first
made between a residential applicant and Boston Edison, and it may likewise
commence service for an industrial or commercial applicant.
BILLING PROCESS
Boston Edison bills its customers once every 26 to 34 days, with
approximately an equal number of bills being distributed each business day. For
the year ending December 31, 1998, Boston Edison mailed out an average of 33,000
bills on each business day to customers in its various customer categories.
Approximately 7,200 residential and small business customers, which
constitute approximately one percent of Boston Edison's retail customers, choose
to be billed using Boston Edison's budget billing program. For these customers
Boston Edison determines and bills a monthly budget amount based on the last
twelve months of billing history for each account. The budget amount is
recalculated each March and September, if necessary. Overpayments or
underpayments for actual usage during the prior year are reconciled on each
customer's September bill.
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<PAGE> 54
For accounts with potential billing errors exception reports are generated
for manual review. This review examines accounts that have abnormally high or
low bills, potential meter-reading errors and possible meter malfunctions.
COLLECTION PROCESS
Boston Edison receives the majority of its payments via the U.S. mail;
however, other payment options are also available. These options include
electronic payments, electronic fund transfers, as well as direct payment at
Boston Edison's payment agency network and field office locations.
Boston Edison considers residential customer bills to be delinquent if they
are unpaid 45 days after the billing date. Boston Edison considers
nonresidential customer bills to be delinquent if they are unpaid 25 days after
the billing date. In general, Boston Edison's collection process begins when
balances are unpaid for 45 days or more from the billing date. At that time
Boston Edison begins collection activities ranging from delinquency notice
mailings, to telephone calls, to personal collection and ending with electricity
shut-off. Boston Edison also uses collection agencies and legal collection
experts as needed throughout this process.
RESTORATION OF SERVICE
Before restoring service that has been shut-off for non-payment, Boston
Edison has the right to require the payment of all of the following charges:
- amounts owing on an account including the amount of any past-due balance
for charges for which Boston Edison may disconnect service if they are
unpaid and legal noticing requirements were met prior to service
termination, the current billing and a credit deposit, if applicable;
- any miscellaneous charges associated with the reconnection of service
(i.e., reconnection charges, field collection charges and/or returned
check charges);
- any charges assessed for unusual costs incidental to the termination or
restoration of service which have resulted from the customer's action or
negligence; and
- any unpaid closing bills from other accounts in the name of the customer
of record.
LOSS EXPERIENCE
The following table sets forth information relating to Boston Edison's
annual net charge-offs for retail customers for the years 1994 to 1998 and net
charge-offs for the period beginning January 1, 1999 and ending May 31, 1999:
<TABLE>
<CAPTION>
MAY 31,
1994 1995 1996 1997 1998 1999
----------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Charge-Offs
($):............... $14,797,853 $14,241,497 $14,168,852 $14,640,534 $15,093,674 $3,765,722
Percentage of Billed
Retail Revenues:... 1.1% 1.0% 1.0% 1.0% 1.1% 0.7%
</TABLE>
From 1994 to 1998 the annual net charge-offs for all retail customers have
remained relatively consistent. During this period, the annual ratios of net
charge-offs to billed retail revenues have been between 1.0% and 1.1%.
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<PAGE> 55
Boston Edison determines a customer's account to be inactive (or finaled)
on the date:
- the customer gives notice requesting discontinuance of service,
- a new customer applies for service at a location where the customer of
record has not yet discontinued service, or
- the customer's service has been shut off due to non-payment.
Boston Edison's policy is to charge-off a finaled account to bad debt
expense 120 days after the date the account is determined to be finaled if
payment has not been received.
DAYS REVENUE OUTSTANDING
The following table sets forth information relating to the average number
of days retail customer bills remained outstanding for the years 1994 to 1998
and for the period from January 1, 1999 to May 31, 1999:
<TABLE>
<CAPTION>
MAY 31,
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
Average number of days
outstanding............... 46 46 46 44 45 44
</TABLE>
AGING OF RECEIVABLES
The following table sets forth information relating to the aging of Boston
Edison's accounts receivable for all classes of customers on December 31st of
each year shown and as of May 31, 1999. This historical information is presented
because Boston Edison's actual accounts receivable aging experience may affect
the amounts charged-off, and consequently the total amounts remitted that arise
from the RTC charge.
<TABLE>
<CAPTION>
MAY 31,
1994 1995 1996 1997 1998 1999
----- ----- ----- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Percentage Outstanding After:
less than 30 days....... 50.07% 50.51% 49.31% 48.03% 46.42% 52.13%
30 days................. 13.28% 13.58% 14.07% 16.74% 15.66% 14.86%
60 days................. 4.82% 5.89% 5.67% 6.17% 6.34% 6.53%
90 days................. 2.67% 4.35% 3.86% 3.82% 4.30% 3.73%
120 days................ 29.16% 25.66% 27.09% 25.23% 27.28% 22.75%
</TABLE>
During the last five and a half years, the accounts receivable aging
experience for Boston Edison has remained relatively consistent with no
discernible trend upwards or downwards.
YEAR 2000 COMPUTER ISSUE
The year 2000 computer issue is the result of computer programs that were
written using two digits rather than four to define an applicable year. If
computer programs with date-sensitive functions are not year 2000 compliant,
they may recognize a date using "00" as the year 1900 rather than the year 2000.
This could result in system failures or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions and engage in other normal business activities. Boston Edison has a
year 2000 program in place that has been addressing the risk of non-
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<PAGE> 56
compliant internal business software, internal non-business software and
embedded chip technology and external noncompliance of third parties.
Boston Edison is addressing the year 2000 issue on a coordinated basis.
Boston Edison has inventoried and assessed all date-sensitive information and
transaction processing computer systems and has determined that approximately
one-third of business critical systems software needs modification or
replacement. Boston Edison defines its business critical systems as those which
are necessary for the delivery of and billing and accounting for electricity to
its customers. Plans have been developed and are being implemented to correct
and test all affected systems, with priorities assigned based on the importance
of the supported activity. As systems are being remediated or replaced, they are
tested for operational and year 2000 compliance in their own environment. After
completion of implementation, the systems are then tested for their integration
and compliance with other interactive systems. Boston Edison completed the
efforts necessary to implement and test its critical computer systems to
alleviate the year 2000 issue as of the end of the second quarter of 1999. In
addition, all other non-critical systems have been inventoried and assessed.
Approximately one-third of these systems require modification or replacement.
Under the year 2000 plan, each non-critical system has a form of readiness
acceptance commensurate with its business importance. The more important and
complex systems are being tested as a means of acceptance. Less important and
non-complex systems may refer to industry test results, vendor test results
and/or vendor statements of readiness as a means of acceptance. Boston Edison
completed the remediation, replacement and testing of 99% of its non-critical
computer systems by the end of the second quarter of 1999. All non-critical
systems are scheduled for completion by the third quarter of 1999.
Boston Edison has also inventoried its non-information technology systems
that may be date-sensitive and that use embedded technology such as
micro-controllers or micro-processors. Approximately 27% of these systems
require modification or replacement. The three categories of these systems are
(1) telecommunications, (2) distribution system controls and (3) other
distribution equipment. Boston Edison is 55%, 100% and 80% complete,
respectively, with its efforts to resolve and remediate the systems that have
been identified as year 2000 non-compliant within each category. Boston Edison
expects completion of resolution and testing by the end of the second quarter of
1999.
In addition to its internal efforts, Boston Edison has initiated formal
communications with its significant suppliers, service providers and other
vendors to determine the extent to which Boston Edison may be vulnerable to
their failure to correct their own year 2000 issues. Boston Edison has received
responses from over 500 third party vendors including all business critical
vendors. Approximately 40% of the vendors indicated their systems would not be
adversely impacted by year 2000 issues. All of these vendors contacted have
indicated that they will be year 2000 compliant by the end of the fourth quarter
of 1999. In addition, Boston Edison has contacted all of its significant power
suppliers. Each has indicated that they either are or will be year 2000
compliant by the end of the fourth quarter of 1999. In addition to the risk
faced from its dependence on third party suppliers for year 2000 compliance,
Boston Edison has a risk that power will not be available from the New England
Power Pool (NEPOOL) for the purchase and distribution to Boston Edison's
customers. Should NEPOOL fail to resolve its year 2000 issues as planned, there
would be an adverse impact on Boston Edison and its customers. To mitigate this
risk, efforts are being coordinated with NEPOOL to establish inter-utility
testing guidelines to determine year 2000 readiness. Boston Edison is also a
participant in the NEPOOL/ISO New England Year 2000 Joint Oversight Committee
which has responsibility for the
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<PAGE> 57
operational reliability of NEPOOL. Overall regional activities, including those
of NEPOOL/ISO New England, will be coordinated by the Northeast Power
Coordinating Council, whose activities will be incorporated into the
interregional coordinating effort by the North American Electric Reliability
Council. The target for the completion of this effort is mid-1999.
In addition, parts of the global infrastructure, including national banking
systems, electrical power grids, gas pipelines, transportation facilities,
communications and government activities, may not be fully functional after 1999
due to the year 2000 issue. Infrastructure failures could significantly reduce
Boston Edison's ability to acquire energy and its ability to serve its customers
as effectively as they are now being served.
Boston Edison believes that its efforts to address the year 2000 issue will
allow it to successfully avoid any material adverse effect on its operations or
financial condition. However, it recognizes that failing to resolve year 2000
issues on a timely basis would, in a most reasonable worst case scenario,
significantly limit its ability to acquire and distribute energy or process its
daily business transactions for a period of time, especially if such failure is
coupled with third party or infrastructure failures. Similarly, Boston Edison
could be significantly affected by the failure of one or more significant
suppliers, customers or components of the infrastructure to conduct their
respective operations normally after 1999. Adverse effects on Boston Edison
could include, among other things, business disruption, increased costs, loss of
business and other similar risks.
Boston Edison's year 2000 program includes contingency plans. If required,
these plans are intended to address both internal risks as well as potential
external risks related to vendors, customer and energy suppliers. Plans have
been developed in conjunction with available national and regional guidance and
are based on system emergency plans that were developed and successfully tested
over the past several years. Included within its contingency plans are
procedures for the procurement of short-term power supplies and emergency
distribution system restoration procedures. The contract with ISO New England
requires that ISO New England dispatch at all times sufficient resources to meet
total New England load requirements. ISO New England has the responsibility and
authority to dispatch all regional generation sources including maintaining
sufficient operating reserves to respond to unanticipated system conditions. ISO
New England, in conjunction with the New England Power Pool has an extensive
year 2000 readiness program underway to ensure that it will have sufficient
generation and transmission resources to reliably serve load. In addition, ISO
New England plans to increase its operating reserves during the early year 2000
period from approximately 15% to 40%.
The foregoing discussion regarding year 2000 project timing, effectiveness,
implementation and costs includes forward-looking statements that are based on
Boston Edison's current evaluation using available information. Factors that
might cause material changes include, but are not limited to, the availability
of key year 2000 personnel, the readiness of third parties and Boston Edison's
ability to respond to unforeseen year 2000 complications.
SERVICING
SERVICING PROCEDURES
The servicer, on behalf of the note issuer, will manage, service and
administer, and bill and collect payments arising from, the transition property
according to the terms of the servicing agreement between the servicer and the
note issuer. The servicer's duties will
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<PAGE> 58
include responding to inquiries of customers and the Massachusetts Department of
Telecommunications and Energy regarding the transition property and the RTC
charge, calculating electricity usage, accounting for collections, furnishing
periodic reports and statements to the note issuer, the note trustee and the
certificate trustee and periodically adjusting the RTC charge.
In addition, the servicer will take legal or administrative actions,
including defending against or instituting and pursuing legal actions and
appearing or testifying in hearings or similar proceedings, as may be reasonably
necessary to block or overturn any attempts to cause a repeal of, modification
of or supplement to the restructuring statute or the financing order or the
rights of holders of transition property by legislative enactment, initiative
petition or constitutional amendment that would be adverse to
certificateholders. The cost of any action will be payable from payments arising
from the RTC charge as an expense of the note issuer.
SERVICING STANDARDS AND COVENANTS
The servicing agreement will require the servicer, in servicing and
administering the transition property, to employ or cause to be employed
procedures and exercise or cause to be exercised the same care it customarily
employs and exercises in servicing and administering bill collections for its
own account and for others.
Consistent with the foregoing, the servicer may in its own discretion waive
any late payment charge or any other fee or charge relating to delinquent
payments, if any, and may waive, vary or modify any terms of payment of any
amounts payable by a customer, in each case, if the waiver or action:
- would comply with the servicer's customary practices or those of any
successor servicer for comparable assets that it services for itself and
for others;
- would not materially adversely affect the certificateholders; and
- would comply in all material respects with applicable law.
In addition, the servicer may write off any amounts that it deems uncollectible
according to its customary practices.
In the servicing agreement, the servicer will covenant that, in servicing
the transition property it will:
- manage, service, administer and make collections of payments arising from
the transition property with reasonable care and in compliance with
applicable law, including all applicable guidelines of the Massachusetts
Department of Telecommunications and Energy, using the same degree of
care and diligence that the servicer exercises for bill collections for
its own account and for others;
- follow customary standards, policies and procedures for the industry in
performing its duties as servicer;
- use all reasonable efforts, consistent with its customary servicing
procedures, to bill and collect the RTC charge;
- comply in all material respects with laws applicable to and binding on it
relating to the transition property; and
- submit at least annually a true-up advice letter to the Department
seeking an adjustment, if any, of the RTC charge.
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<PAGE> 59
REMITTANCES TO COLLECTION ACCOUNT
The servicer will remit daily to the note trustee an amount equal to the
actual RTC charges billed, less an allowance for estimated RTC charge
charge-offs, within two business days after the day payments arising from the
RTC charge are deemed to be collected. The deemed collection date for payments
arising from the RTC charge payments will be the weighted average number of
days, based on Boston Edison's historical collections experience, that a monthly
bill for services remains outstanding before payment. Currently, Boston Edison
estimates the deemed collection date to occur, on average, 45 days after the
date RTC charges are billed. The servicer expects to review the deemed
collection date not less than annually and may adjust the deemed collection date
based on actual payment patterns.
Each year, the servicer will reconcile remittances of estimated payments
arising from RTC charges with the note trustee to more accurately reflect the
amount of billed RTC charges that should have been remitted, based on the actual
system-wide charge-off percentage, as reduced for estimates of partially paid
bills (which are deemed to have paid the RTC charge in full). To the extent the
remittances of estimated payments arising from the RTC charge exceed the actual
payments arising from the RTC charge collected by the servicer, the servicer
will be entitled to receive a payment from the note trustee in an amount equal
to the excess remittance, or to withhold the excess amount from any subsequent
remittance to the note trustee. To the extent the remittances of estimated
payments arising from the RTC charge are less than the actual payments arising
from the RTC charge collected, the servicer will remit the amount of the
shortfall to the note trustee on the next remittance date following the
determination. Although the servicer will remit estimated payments arising from
the RTC charge to the note trustee, the servicer is not obligated to make any
payments on the notes or the certificates.
SERVICING COMPENSATION
The servicer will be entitled to receive an annual servicing fee in an
amount equal to:
- 0.05 percent of the initial principal amount of the notes for so long as
the servicer bills the RTC charge concurrently with other charges for
services; or
- up to 1.25 percent of the initial principal balance of the notes if the
RTC charge is being billed separately to customers.
The note trustee will pay the servicing fee semiannually (together with any
portion of the servicing fee that remains unpaid from prior payment dates) to
the extent of available funds prior to the distribution of any interest on and
principal of the notes. See "Description of the Notes -- Allocations and
Payments."
THIRD PARTY SUPPLIERS
As part of the deregulation of the Massachusetts electric industry, the
restructuring statute contemplates that electricity metering and billing
services may be unbundled from distribution services. See "Energy Deregulation
and New Massachusetts Market Structure -- Third Party Billing Options." As a
result, third party suppliers may bill, collect and remit the RTC charge in the
future. When a third party supplier bills, collects and remits billed amounts
arising from the RTC charge, there is a greater risk that the servicer will
receive payments arising from the RTC charge later than it otherwise would. The
greater the delay in receipt of payment, the larger the amount of payments that
bear the risk of non-payment due to default, bankruptcy or insolvency of the
third party supplier holding
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<PAGE> 60
the funds. Third party supplier billing also places increased information
requirements on the servicer. The servicer will have the responsibility of
accounting for payments arising from the RTC charge due to certificateholders
regardless of which entity provides a customer's electric power.
Any third party supplier that bills and collects the RTC charge will be
required to pay all amounts arising from the RTC charge billed by the third
party supplier, regardless of whether payments are received from customers,
within 15 days of the servicer's bill to the third party supplier for amounts
arising from the RTC charge. The third party supplier will, in effect, replace
the customer as the obligor for these amounts, and the servicer, on behalf of
the note issuer, will have no right to collect payments arising from the RTC
charge from the customer.
To mitigate the risks associated with a third party supplier, if and so
long as a third party supplier does not maintain at least a 'BBB' (or the
equivalent) long-term unsecured credit rating from Moody's and S&P, a third
party supplier will be required to maintain with the servicer, or as directed by
the servicer, a deposit or comparable security equal to one month's maximum
estimated collections of payments arising from the RTC charge, as agreed upon by
the servicer and the third party supplier. In the event of a default in the
remittance of payments arising from the RTC charge by a third party supplier,
the servicer will take these amounts into account in adjusting the RTC charge.
The servicer will also have access to information from the third party supplier
regarding kilowatt-hour billing and electricity usage by customers to provide
proper reporting and to fulfill its obligations under the servicing agreement.
The servicer will be entitled, within seven days after a default by a third
party supplier in remitting to the servicer any amounts arising from the RTC
charge, to assume responsibility for billing the RTC charge to the customers of
the third party supplier or to assign that responsibility to a third party.
Neither Boston Edison nor the servicer will pay any shortfalls resulting
from the failure of any third party supplier to remit payments arising from the
RTC charge to the servicer. The true-up adjustment mechanism for the RTC charge,
as well as the overcollateralization amount and the amounts deposited in the
capital subaccount, are intended to mitigate the risk of shortfalls. Any
shortfalls that occur will delay the distribution of interest on and principal
of the certificates.
SERVICER REPRESENTATIONS AND WARRANTIES
In the servicing agreement, the servicer will represent and warrant to the
note issuer, as of the closing of the issuance of the certificates, among other
things, that:
- the servicer is a corporation duly organized and in good standing under
the laws of The Commonwealth of Massachusetts, with corporate power and
authority to own its properties as owned by it on the issuance date and
to conduct its business as its business is conducted by it on the
issuance date and to execute, deliver and carry out the terms of the
servicing agreement;
- the execution, delivery and carrying out of the terms of the servicing
agreement have been duly authorized by all necessary corporate action on
the part of the servicer;
- the servicing agreement constitutes a legal, valid and binding obligation
of the servicer, enforceable against it in accordance with its terms,
subject to insolvency, reorganization, moratorium, fraudulent transfer
and other laws relating to or affecting creditors' rights generally from
time to time in effect and to general principles of equity, regardless of
whether considered in a proceeding in equity or at law;
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<PAGE> 61
- the consummation of the transactions contemplated by the servicing
agreement does not conflict with the servicer's articles of organization
or by-laws or any material agreement to which the servicer is a party or
bound, result in the creation or imposition of any lien on the servicer's
properties pursuant to a material agreement or violate any existing law
or any existing order, rule or regulation applicable to the servicer;
- the servicer has all material licenses necessary for it to perform its
obligations under the servicing agreement;
- no governmental approvals, authorizations or filings are required for the
servicer to execute, deliver and perform its obligations under the
servicing agreement except those which have previously been obtained or
made; and
- except as disclosed to the note issuer, no court or administrative
proceeding is pending and, to the servicer's knowledge, no court or
administrative proceeding is threatened and, to the servicer's knowledge,
no investigation is pending or threatened, asserting the invalidity of,
or seeking to prevent the consummation of the transactions contemplated
by, the servicing agreement or seeking a determination that might
materially and adversely affect the performance by the servicer of its
obligations under the servicing agreement.
In the event of willful misconduct or gross negligence by the servicer
under the servicing agreement or in the event of the servicer's breach in any
material respect of any of the representations and warranties in the preceding
paragraph, the servicer will indemnify, defend and hold harmless the note
issuer, the note trustee (for the benefit of the noteholders) and the
certificate trustee (for the benefit of the certificateholders) against any
costs, expenses, losses, claims, damages and liabilities incurred as a result of
these events; provided, however, that the servicer shall not be liable for any
costs, expenses, losses, claims, damages or liabilities resulting from the
willful misconduct or gross negligence of the indemnified persons; and,
provided, further, that the servicer shall not be liable for any costs,
expenses, losses, claims, damages or liabilities, regardless of when incurred,
after the notes and the certificates have been discharged in full.
In the event of willful misconduct or gross negligence by the servicer
under the servicing agreement or in the event of the servicer's breach in any
material respect of any of the representations and warranties above, the
servicer will indemnify, defend and hold harmless the note trustee (for itself),
the certificate trustee (for itself), the Delaware trustee, the trust, the state
agencies and any of their respective affiliates, officers, directors, employees
and agents against any costs, expenses, losses, claims, damages and liabilities
incurred as a result of these events; provided, however, that the servicer shall
not be liable for any costs, expenses, losses, claims, damages or liabilities
resulting from the willful misconduct or gross negligence of the indemnified
person or resulting from a breach of a representation or warranty made by an
indemnified person in the transaction documents that gives rise to the
servicer's breach.
STATEMENTS BY SERVICER
On or before March 31 of each year, the servicer will prepare and furnish
annually to the note trustee, the certificate trustee and the note issuer a
statement for the previous year setting forth either the amount of any excess
payments arising from the RTC charge remitted by the servicer to the note
trustee or the amount of any shortfall in remittances.
In addition, the servicer will prepare, and the note trustee will furnish
to the noteholders on each payment date the semiannual servicer's certificate
described under "Description of the Notes -- Reports to Noteholders." The
servicer will also prepare and
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<PAGE> 62
the certificate trustee will furnish to the certificateholders on a distribution
date the report described under "Description of the Certificates -- Reports to
Certificateholders."
EVIDENCE AS TO COMPLIANCE
The servicing agreement will provide that a firm of independent public
accountants, at the note issuer's expense, will furnish to the note issuer, the
note trustee and the certificate trustee on or before March 31 of each year,
beginning March 31, 2000, a statement as to compliance by the servicer with
standards relating to the servicing of the transition property during the
preceding twelve months ended December 31 (or preceding period since the closing
date of the issuance of the certificates in the case of the first statement).
This report will state that the accounting firm has performed agreed upon
procedures in connection with the servicer's compliance with the servicing
procedures of the servicing agreement, identifying the results of the procedures
and including any exceptions noted. The report will also indicate that the
accounting firm providing the report is independent of the servicer within the
meaning of the Code of Professional Ethics of the American Institute of
Certified Public Accountants.
The servicing agreement will also provide for delivery to the note issuer,
the note trustee and the certificate trustee, on or before March 31 of each
year, beginning March 31, 2000, of a certificate signed by an officer of the
servicer stating that the servicer has fulfilled its obligations under the
servicing agreement throughout the preceding twelve months ended December 31 (or
preceding period since the closing date of the issuance of the certificates in
the case of the first certificate) or, if there has been a default in the
fulfillment of any obligation under the servicing agreement, describing each
default. The servicer has agreed to give the note issuer, the note trustee and
the certificate trustee notice of servicer defaults under the servicing
agreement.
You may obtain copies of the statements and certificates by sending a
written request addressed to the certificate trustee.
MATTERS REGARDING THE SERVICER
The servicing agreement will provide that Boston Edison may not resign from
its obligations and duties as servicer thereunder, except when either:
- Boston Edison determines that performance of its duties is no longer
permissible under applicable law; or
- Boston Edison receives notice from the nationally recognized statistical
rating organizations rating the certificates that Boston Edison's
resignation will not result in a reduction or withdrawal of the then
current ratings on any class of certificates and consent of the
Massachusetts Department of Telecommunications and Energy.
No resignation by Boston Edison as servicer will become effective until a
successor servicer has assumed Boston Edison's servicing obligations and duties
under the servicing agreement.
The servicing agreement will further provide that neither the servicer nor
any of its directors, officers, employees, and agents will be liable to the note
issuer, the note trustee, the trust, the noteholders, the certificate trustee,
the Delaware trustee, the certificateholders or any other person or entity,
except as provided under the servicing agreement, for taking any action or for
refraining from taking any action under the servicing agreement or for errors in
judgment; provided, however, that neither the servicer nor any person or entity
will be protected against any liability that would otherwise be imposed by
reason of willful misconduct or gross negligence in the performance of duties.
In addition, the servicing
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agreement will provide that the servicer is under no obligation to appear in,
prosecute, or defend any legal action, except as provided in the servicing
agreement at the note issuer's expense.
Under the circumstances specified in the servicing agreement, any entity
into which the servicer may be merged or consolidated, or any entity resulting
from any merger or consolidation to which the servicer is a party, or any entity
succeeding to the business of the servicer or its obligations as servicer, which
corporation or other entity in each of the foregoing cases assumes the
obligations of the servicer, will be the successor of the servicer under the
servicing agreement.
SERVICER DEFAULTS
Servicer defaults under the servicing agreement will include, among other
things:
- any failure by the servicer to remit payments arising from the RTC charge
into the collection account as required under the servicing agreement,
which failure continues unremedied for five business days after written
notice from the note issuer or the note trustee is received by the
servicer;
- any failure by the servicer duly to observe or perform in any material
respect any other covenant or agreement in the servicing agreement, which
failure materially and adversely affects the rights of noteholders and
which continues unremedied for 60 days after the giving of notice of a
failure (a) to the servicer by the note issuer or (b) to the note trustee
or to the servicer by holders of notes evidencing not less than 25
percent in principal amount of the outstanding notes;
- any representation or warranty made by the servicer in the servicing
agreement shall prove to have been incorrect in a material respect when
made, which has a material adverse effect on the noteholders and which
material adverse effect continues unremedied for a period of 60 days
after the giving of notice to the servicer by the note issuer or the note
trustee; and
- events of bankruptcy, insolvency, receivership or liquidation of the
servicer.
RIGHTS WHEN SERVICER DEFAULTS
In the event of a servicer default that remains unremedied, either the note
trustee or holders of notes evidencing not less than 25 percent in principal
amount of then outstanding notes may terminate all the rights and obligations of
the servicer (other than the servicer's indemnity obligation) under the
servicing agreement, whereupon a successor servicer appointed by the note
trustee will succeed to all the responsibilities, duties and liabilities of the
servicer under the servicing agreement. In addition, when a servicer defaults,
each of the following shall be entitled to apply to the Massachusetts Department
of Telecommunications and Energy for sequestration and payment of revenues
arising from the transition property:
- the certificateholders (subject to the provisions of the certificate
indenture) and the certificate trustee as beneficiary of any statutory
lien permitted by the statute;
- the note issuer or its assignees; or
- pledgees or transferees, including transferees under the restructuring
statute of the transition property.
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If, however, a bankruptcy trustee or similar official has been appointed for the
servicer, and no servicer default other than an appointment of a bankruptcy
trustee or similar official has occurred, that trustee or official may have the
power to prevent the note trustee or the noteholders from effecting a transfer
of servicing. The note trustee may appoint, or petition a court of competent
jurisdiction for the appointment of, a successor servicer which satisfies
criteria specified by the nationally recognized statistical rating organizations
rating the certificates. The note trustee may make arrangements for compensation
to be paid to the successor servicer.
WAIVER OF PAST DEFAULTS
Holders of notes evidencing at least a majority in principal amount of the
then outstanding notes, on behalf of all noteholders, may waive any default by
the servicer in the performance of its obligations under the servicing agreement
and its consequences, except a default in making any required remittances to the
collection account under the servicing agreement. The servicing agreement
provides that no waiver will impair the noteholders' rights relating to
subsequent defaults.
SUCCESSOR SERVICER
If for any reason a third party assumes the role of the servicer under the
servicing agreement, the servicing agreement will require the servicer to
cooperate with the note issuer, the note trustee and the successor servicer in
terminating the servicer's rights and responsibilities under the servicing
agreement, including the transfer to the successor servicer of all cash amounts
then held by the servicer for remittance or subsequently acquired. The servicing
agreement will provide that the note issuer shall be liable for its reasonable
costs and expenses incurred in transferring servicing responsibilities (which
shall not include any set-up costs for the successor) to the successor servicer.
AMENDMENT
The servicing agreement may be amended by the parties thereto, without the
consent of the noteholders or the certificateholders, but with the consent of
the note trustee, for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of that agreement or of modifying in
any manner the rights of the noteholders or the certificateholders, provided
that the action will not, as certified in a certificate of an officer of the
servicer delivered to the note trustee and the note issuer, materially and
adversely affect the interest of any noteholder. The servicing agreement may
also be amended by the servicer and the note issuer with the consent of the note
trustee and the holders of notes evidencing at least a majority in principal
amount of the then outstanding notes for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of the agreement
or of modifying in any manner the rights of the noteholders; provided that an
amendment of the provisions of the servicing agreement relating to the
servicer's remittance and RTC charge adjustment obligations will not result in a
reduction or withdrawal of the then existing rating of the certificates by a
nationally recognized statistical rating organization that rates the
certificates.
Each nationally recognized statistical rating organization that rates the
certificates will be given 10 business days' prior notice of any amendment to
any of the note indenture and the other financing documents relating to the
issuance of the notes and certificates. Each rating organization will also
receive a copy of any notice, filing or report distributed by the servicer, the
note issuer's independent accountants, the note issuer, the note trustee or the
certificate trustee.
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DESCRIPTION OF THE NOTES
The note issuer will issue the notes to the trust under the terms of a note
indenture between the note issuer and The Bank of New York, a New York banking
corporation, acting as the note trustee. Each class of notes will be in an
aggregate principal amount equal to the initial aggregate principal amount of
the related class of certificates. The following summary describes the material
terms and provisions of the note indenture. The particular terms of the notes of
any class will be established in the note indenture. This summary is not
complete. You should read this summary together with the prospectus supplement
and the terms and provisions of the note indenture, a form of which is filed as
an exhibit to the registration statement relating to this prospectus, prior to
buying the certificates.
The note issuer may issue the notes in one or more classes. All notes of
the same class will be identical in all respects except for their denominations.
The note issuer may not issue any additional notes under the note indenture.
SECURITY
To secure the payment of interest on and principal of the notes, the note
issuer will grant to the note trustee a security interest in all of the note
issuer's right, title and interest in and to:
- the transition property;
- the transition property sale agreement;
- the transition property servicing agreement;
- the collection account and all amounts or investment property on deposit
in the collection account;
- all other property of whatever kind owned from time to time by the note
issuer;
- all present and future claims, demands, causes and choses in action on
account of any or all of the foregoing and all payments on or under the
foregoing; and
- all proceeds on account of any or all of the foregoing.
We refer to the assets in which the note issuer will grant the note trustee a
security interest as the "note collateral."
The note collateral will not include, however, the following:
- amounts in the collection account released as permitted under the note
indenture including net investment earnings on the capital subaccount
that have been released to the note issuer by the note trustee under the
terms of the note indenture; and
- proceeds from the sale of the notes required to pay costs of issuance of
the notes and the certificates.
- amounts payable by the note issuer to the note trustee, certificate
trustee and Delaware trustee under the fee and indemnity agreement.
COLLECTION ACCOUNT
The note issuer will establish, in the name of the note trustee, a
segregated identifiable account with an eligible institution (as described in
the next paragraph). The
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note trustee will hold the collection account for the benefit of the
noteholders. The collection account will consist of four subaccounts:
- a general subaccount;
- a reserve subaccount;
- an overcollateralization subaccount for the overcollateralization amount;
and
- a capital subaccount for capital contributions to the note issuer.
All amounts in the collection account not allocated to any other subaccount will
be allocated to the general subaccount. Unless the context indicates otherwise,
all references to the collection account include each of the four subaccounts.
An "eligible institution" means (a) the corporate trust department of the
note trustee or (b) a depository institution organized under the laws of the
United States of America or any state or the District of Columbia (or any
domestic branch of a foreign bank), which has either a long-term unsecured debt
rating of 'AA' by Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc. ("S&P"), and 'Aa2' by Moody's Investors Service,
Inc. ("Moody's") or a certificate of deposit rating of 'A-1+' by S&P and 'P-1'
by Moody's, or any other long-term, short-term or certificate of deposit rating
acceptable to S&P and Moody's and whose deposits are insured by the Federal
Deposit Insurance Corporation.
Funds in the collection account may be invested in any of the following:
- direct obligations of, or obligations fully and unconditionally
guaranteed as to timely payment by, the United States of America;
- demand deposits, time deposits, certificates of deposit or bankers'
acceptances of eligible institutions;
- commercial paper (other than commercial paper issued by Boston Edison)
having, at the time of investment, a rating in the highest investment
category from each of the rating agencies;
- money market funds having a rating in the highest investment category
from each of the ratings agencies;
- repurchase obligations for any security that is a direct obligation of,
or fully guaranteed by, the United States of America or its approved
agencies or instrumentalities, entered into with depository institutions;
or
- any other investment permitted by each of the rating agencies,
in each case which mature on or before the business day preceding the next
payment date. We refer to each of the investments listed above as the "eligible
investments." The note trustee will have access to the collection account for
the purpose of making deposits and withdrawals under the note indenture.
INTEREST AND PRINCIPAL
Interest will accrue on the principal balance of a class of notes at the
per annum rate specified in the prospectus supplement and will be payable on the
payment dates specified in the prospectus supplement. Collections arising from
the RTC charge held by the note trustee in the general subaccount and any
amounts that are available in the reserve
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subaccount, the overcollateralization subaccount and capital subaccount will be
used to make interest payments to the noteholders of each class on each payment
date.
Principal of each class of notes will be payable in the amounts and on the
payment dates specified in the prospectus supplement to the extent of available
cash, and with the other limitations described below. The prospectus supplement
will set forth the expected amortization schedule for the various classes of
notes. On any payment date, the note issuer will pay principal of a class of
notes only until the outstanding principal balance of that class has been
reduced to the principal balance specified in the expected amortization
schedule.
However, if insufficient collections arising from the RTC charge are in the
collection account on any payment date, principal of any class of notes may be
paid later than expected. The entire unpaid principal amount of the notes will
be due and payable on the date on which a note event of default has occurred and
is continuing, if the note trustee or the holders of at least a majority in
principal amount of the outstanding notes have declared the notes to be
immediately due and payable. See "-- Note Events of Default; Rights Upon Note
Event of Default."
OPTIONAL REDEMPTION
The note issuer may redeem the notes, at its option, on any payment date
and cause the trust to redeem the certificates on any payment date if the
outstanding principal balance of the notes (after giving effect to payments that
would otherwise be made on that payment date) is less than five percent of the
initial principal balance of the notes. In the case of redemption, the note
issuer will pay the outstanding principal amount of the notes and accrued but
unpaid interest as of the redemption date. Unless otherwise specified in the
prospectus supplement, the note issuer will give notice of the redemption to the
trust by first-class mail, postage prepaid, mailed not less than five days nor
more than 25 days prior to the redemption date.
MANDATORY REDEMPTION
If the seller is required to, or elects to, repurchase the transition
property as described under "Description of the Transition Property -- Seller
Representations and Warranties and Repurchase Obligation," the note issuer will
be required to redeem the notes on or before the fifth business day following
the date of repurchase at a price equal to the principal amount of the notes
together with any accrued but unpaid interest thereon.
OVERCOLLATERALIZATION SUBACCOUNT
The note trustee will collect amounts arising from the transition property
exceeding that necessary to pay interest on and principal of the notes and
related fees and expenses, which are intended to enhance the likelihood that
payments on the notes will be made in a timely manner. The servicer will
calculate and set the RTC charge at a level that is intended to collect the
overcollateralization amount ratably over the life of the notes according to a
schedule set forth in the prospectus supplement.
On each payment date, all payments arising from the RTC charge remitted to
the collection account will be deposited in the respective subaccounts,
including the overcollateralization subaccount, as described under "--
Allocations and Payments." Amounts in the overcollateralization subaccount will
be invested in eligible investments.
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The servicer will, through a separate non-cash memorandum account, account
for and ultimately credit to ratepayers, any amounts remaining in the collection
account after the certificates are paid in full, such as any
overcollateralization amounts, including interest earnings. These amounts will
be released to the note issuer when the certificates are retired. These amounts
will inure to the benefit of ratepayers through a credit to their transition
charge or if there is no transition charge, through a credit to other rates.
CAPITAL SUBACCOUNT
Before the issuance of the notes, Boston Edison will contribute capital to
the note issuer in the amount specified in the prospectus supplement. The note
trustee will deposit the capital into the capital subaccount. On each payment
date, the note trustee will draw on amounts in the capital subaccount, if any,
to the extent amounts available in the general subaccount, the reserve
subaccount and the overcollateralization subaccount are insufficient to make
scheduled payments on the notes and pay fees and expenses. Deposits to the
capital subaccount will be made as described under "-- Allocations and
Payments." Amounts in the capital subaccount will be invested in eligible
investments. Boston Edison will be entitled to the earnings on amounts in the
capital subaccount.
RESERVE SUBACCOUNT
The note trustee will allocate to the reserve subaccount any amounts
remitted to the collection account exceeding amounts necessary to:
- pay fees and expenses related to the servicing and retirement of the
notes;
- pay interest on and principal of the notes;
- fund the capital subaccount up to the required capital level; and
- fund the overcollateralization subaccount up to the required
overcollateralization level.
The note trustee will draw on amounts in the reserve subaccount, to the extent
amounts available in the general subaccount are insufficient to pay the amounts
listed above. Amounts in the reserve subaccount will be invested in eligible
investments.
ALLOCATIONS AND PAYMENTS
On any business day that the note trustee receives a written request from
the servicer requesting repayment for any excess remittances to the collection
account, the note trustee shall make payment of the amount due from amounts on
deposit in the general subaccount, the reserve subaccount, the
overcollateralization subaccount and the capital subaccount, in that order and
only to the extent required to make the payment. See "Servicing -- Remittances
to Collection Account."
On any business day that the note trustee receives a written request from
the note issuer's administrator stating that any fees, costs, expenses and
indemnities payable by the note issuer, as described in clauses (1) through (4)
below, will become due and payable prior to the next succeeding payment date,
and setting forth the amount and nature of the expense, as well as any
supporting documentation that the note trustee may reasonably request, the note
trustee, after receiving the information, will make payment of the expense on or
before the date the payment is due from amounts on deposit in the general
subaccount, the reserve subaccount, the overcollateralization subaccount and the
capital subaccount, in that order and only to the extent required to make the
payment.
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On each payment date, or for any amount payable under clauses (1) through
(4) below, on any business day, the note trustee will apply, all amounts on
deposit in the collection account, including net earnings on those amounts
(other than on amounts in the capital subaccount) to pay the following amounts
in the following priority:
(1) all amounts owed by the note issuer to the note trustee, the Delaware
trustee and the certificate trustee will be paid;
(2) the servicing fee and all unpaid servicing fees from any prior payment
dates will be paid to the servicer;
(3) the administration fee and all unpaid administration fees from prior
payment dates will be paid to the note issuer's administrator;
(4) so long as no event of default has occurred or would be caused by a
payment, all other fees, expenses and indemnities payable by the note
issuer will be paid to the persons entitled thereto, provided that the
total amount paid since the previous payment date and on the current
payment date may not, in the aggregate, exceed $100,000;
(5) first, any overdue interest after a payment default (together with, to
the extent lawful, interest on overdue interest at the applicable note
interest rate) and second, interest currently due and payable will be
transferred to the certificate trustee, as noteholder, for
distribution to the certificateholders;
(6) first, funds necessary to pay any principal payable as a result of a
note event of default or on the final maturity date of a class of
notes and second, principal based on priorities described in the
prospectus supplement will be transferred to the certificate trustee,
as noteholder, for distribution to the applicable certificateholders
according to the expected amortization schedule for each class;
(7) unpaid operating expenses and indemnities payable by the note issuer
will be paid to the persons entitled thereto;
(8) the amount, if any, by which the capital subaccount needs to be funded
to equal the required capital level as of a payment date will be
allocated to the capital subaccount;
(9) the amount, if any, by which the overcollateralization subaccount
needs to be funded to equal the required overcollateralization level
as of a payment date will be allocated to the overcollateralization
subaccount;
(10) the balance, if any, will be allocated to the reserve subaccount for
distribution on a subsequent payment date; and
(11) following the repayment of all notes and certificates, the balance, if
any, will be released to the note issuer.
If on any payment date, or for any amounts payable under clauses (1)
through (4) above, on any business day, funds on deposit in the general
subaccount are insufficient to make the transfers contemplated by clauses (1)
through (6) above, the note trustee will:
- first, draw from amounts on deposit in the reserve subaccount;
- second, draw from amounts on deposit in the overcollateralization
subaccount; and
- third, draw from amounts on deposit in the capital subaccount,
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up to the amount of the shortfall, in order to make the transfers described
above. In addition, if on any payment date funds on deposit in the general
subaccount are insufficient to make the transfers described in clauses (8) and
(9)above, the note trustee will draw from amounts on deposit in the reserve
subaccount to make the required transfers. If on any payment date funds on
deposit in the collection account are insufficient to make the transfers
contemplated by clause (5) above, the note trustee will allocate the funds in
the collection account among the classes pro rata, as specified in the
prospectus supplement.
ACTIONS BY NOTEHOLDERS
The certificate trustee, on behalf of the trust as sole initial holder of
the notes, has the right to vote and give consents and waivers for modifications
to any class of notes and to the provisions of other agreements under the note
indenture. With some exceptions, the holders of a majority of the outstanding
principal amount of the notes shall have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the note
trustee, or exercising any trust or power conferred on the note trustee under
the note indenture, provided that:
- the direction shall not be in conflict with any rule of law or with the
note indenture;
- other than in the case of a default in the payment of any principal or
redemption price or a default in the payment of interest on any note, any
direction to the note trustee to sell or liquidate the note collateral
shall be by the holders of 100% of the outstanding principal amount of
the notes;
- if the note trustee elects to maintain possession of the note collateral
in compliance with the note indenture, then any direction to the note
trustee by holders of notes representing less than 100% of the
outstanding principal amount of the notes to sell or liquidate the note
collateral shall be of no force and effect; and
- the note trustee may take any other action deemed proper by the note
trustee that is not inconsistent with the direction.
NOTE EVENTS OF DEFAULT; RIGHTS ON NOTE EVENT OF DEFAULT
An event of default on the notes is defined in the note indenture as being:
- a default in the payment of interest on any note that is not cured within
five business days after the payment date;
- a default in the payment of the then unpaid principal of any note on the
final maturity date;
- a default in the payment of the redemption price for any note on a
redemption date;
- a default in the observance or performance in any material respect of any
covenant or agreement of the note issuer made in the note indenture, and
which continues unremedied for 30 days after notice is given to the note
issuer by the note trustee or to the note issuer and the note trustee by
the holders of at least 25 percent in principal amount of the notes then
outstanding;
- any representation or warranty made by the note issuer in the note
indenture or in any certificate delivered by the note issuer in
connection with the note indenture proving to have been incorrect in a
material respect when made and which continues unremedied for a period of
30 days after notice is given to the note issuer
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by the note trustee or to the note issuer and the note trustee by the
holders of at least 25 percent in principal amount of the notes then
outstanding; or
- events of bankruptcy, insolvency, receivership or liquidation of the note
issuer.
If a note event of default should occur and be continuing on the notes, the
note trustee or holders of not less than a majority in principal amount of the
notes then outstanding may declare the notes to be immediately due and payable.
Under circumstances set forth in the note indenture, the holders of a majority
in principal amount of notes then outstanding may rescind the declaration.
If the notes have been declared to be due and payable following a note
event of default, the note trustee may, in its discretion, either sell the
transition property or elect to maintain possession of the transition property
and continue to apply payments arising from the RTC charge remitted to the note
trustee as if there had been no declaration of acceleration. We expect that
there will be a limited resale market, if any, for the transition property
following a foreclosure because of the unique nature of the transition property
as an asset and other factors discussed in this prospectus.
In addition, the note trustee is prohibited from selling the transition
property following a note event of default, other than a default in the payment
of any principal or redemption price or a default in the payment of interest on
any note, unless:
- the holders of all the outstanding notes consent to the sale;
- the proceeds of the sale are sufficient to pay in full the accrued
interest on and the principal of the outstanding notes; or
- the note trustee determines that the proceeds of the transition property
would not be sufficient on an ongoing basis to make all payments on the
notes as those payments would have become due if the notes had not been
declared due and payable, and the note trustee obtains the consent of the
holders of 66 2/3 percent of the outstanding amount of the notes.
In case a note event of default occurs and is continuing, the note trustee
will be under no obligation to exercise any of the rights or powers under the
notes at the request or direction of any of the holders of notes if the note
trustee reasonably believes it will not be adequately indemnified against the
costs, expenses and liabilities that it might incur in complying with the
request. The holders of a majority in principal amount of the outstanding notes
will have the right to direct the time, method and place of conducting any
proceeding or any remedy available to the note trustee and the holders of a
majority in principal amount of the outstanding notes may, in some cases, waive
any default with respect thereto, except a default in the payment of principal
or interest or a default arising from a covenant or provision of the note
indenture that cannot be modified without the consent of all of the holders of
the outstanding notes of all classes affected.
No holder of any note will have the right to institute any proceeding on
the notes, unless:
- the holder previously has given to the note trustee written notice of a
continuing event of default;
- the holders of not less than 25 percent in principal amount of the
outstanding notes have made written request of the note trustee to
institute the proceeding in its own name as note trustee;
- the holder or holders have offered the note trustee reasonable indemnity;
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- the note trustee has failed for 60 days after receipt of notice to
institute a proceeding; and
- no direction inconsistent with the written request has been given to the
note trustee during the 60-day period by the holders of a majority in
principal amount of the outstanding notes.
In addition, the servicer will covenant that it will not at any time
institute against the note issuer or the trust any bankruptcy, reorganization or
other proceeding under any federal or state bankruptcy or similar law.
COVENANTS OF THE NOTE ISSUER
The note issuer may not consolidate with or merge into any other entity,
unless:
- the entity formed by or surviving a consolidation or merger of the note
issuer is organized under the laws of the United States, any state or the
District of Columbia;
- the entity expressly assumes by an indenture supplemental to the note
indenture the note issuer's obligation to make due and punctual payments
on the notes and the performance or observance of every agreement and
covenant of the note issuer under the note indenture;
- no event of default will have occurred and be continuing immediately
after the merger or consolidation of the note issuer;
- the transaction will not result in a reduction or withdrawal of the then
current ratings on any class of notes or certificates;
- the note issuer has received an opinion of counsel to the effect that the
consolidation or merger would have no material adverse tax consequence to
the note issuer, the trust, any noteholder or any certificateholder and
the consolidation or merger complies with the note indenture and all
conditions precedent relating to the transaction have been complied with;
and
- any action as is necessary to maintain the lien and security interest
created by the note indenture will have been taken.
The note issuer may not convey or transfer any of its properties or assets
to any person or entity, unless:
(a) the person or entity acquiring the properties and assets:
- is a United States citizen or an entity organized under the laws of
the United States, any state or the District of Columbia;
- expressly assumes by an indenture supplemental to the note indenture
the note issuer's obligation to make due and punctual payments on the
notes and the performance or observance of every agreement and
covenant of the note issuer under the note indenture;
- expressly agrees by a supplemental indenture that all right, title and
interest so conveyed or transferred will be subject and subordinate to
the rights of noteholders;
- unless otherwise expressly waived by the note issuer, expressly agrees
to indemnify, defend and hold harmless the note issuer against and
from any loss, liability or expense arising under or related to the
note indenture and the notes; and
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- expressly agrees by means of a supplemental indenture that the person
(or if a group of persons, then one specified person) shall make all
filings with the Securities and Exchange Commission (and any other
appropriate person) required by the Securities Exchange Act of 1934 in
connection with the notes;
(b) no event of default under the note indenture will have occurred and be
continuing immediately after the transaction;
(c) the transaction will not result in a reduction or withdrawal of the
then current ratings on any class of certificates;
(d) the note issuer has received an opinion of counsel to the effect that
the transaction will not have any material adverse tax consequence to the note
issuer, the trust, any noteholder or any certificateholder and the conveyance or
transfer complies with the note indenture and all conditions precedent relating
to the transaction have been complied with; and
(e) any action as is necessary to maintain the lien and security interest
created by the note indenture shall have been taken.
The note issuer will not, among other things:
- except as expressly permitted by the note indenture, sell, transfer,
exchange or otherwise dispose of any of the assets of the note issuer,
unless directed to do so by the note trustee;
- claim any credit on, or make any deduction from the principal or interest
payable on, the notes (other than amounts properly withheld under the
Internal Revenue Code of 1986) or assert any claim against any present or
former noteholder because of the payment of taxes levied or assessed on
any part of the note collateral;
- terminate its existence, dissolve or liquidate in whole or in part;
- permit the validity or effectiveness of the note indenture to be
impaired;
- permit the lien of the note indenture to be amended, hypothecated,
subordinated, terminated or discharged or permit any person to be
released from any covenants or obligations arising from the notes except
as may be expressly permitted by the note indenture;
- permit any lien, charge, excise, claim, security interest, mortgage or
other encumbrance, other than the lien and security interest created by
the note indenture or the statutory lien under the restructuring statute,
to be created on or extend to or otherwise arise on or burden the note
collateral or any part of it or any interest in it or the proceeds from
it; or
- except for the statutory lien under the statute, permit the lien of the
note indenture not to constitute a valid first priority security interest
in the note collateral.
The note issuer may not engage in any business other than financing,
purchasing, owning and managing the transition property in the manner
contemplated by the note indenture and the other financing documents relating to
the issuance of the notes and certificates and related activities. The note
issuer will not issue, incur, assume, guarantee or otherwise become liable for
any indebtedness except for the notes.
The note issuer will not, except for any eligible investments as
contemplated by the note indenture and the other financing documents relating to
the issuance of the notes and certificates, make any loan or advance or credit
to, or guarantee, endorse or otherwise become contingently liable in connection
with the obligations, stocks or dividends of, or
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own, purchase, repurchase or acquire (or agree contingently to do so) any stock,
obligations, assets or securities of, or any other interest in, or make any
capital contribution to, any other person. The note issuer will not, other than
expenditures in an annual amount not to exceed $25,000, make any expenditure (by
long-term or operating lease or otherwise) for capital assets (either real or
personal property). The note issuer will not, directly or indirectly, make
payments to or distributions from the collection account except in compliance
with the note indenture and the other financing documents relating to the
issuance of the notes and the certificates.
The note issuer will not make any payments, distributions or dividends to
any owner of beneficial interests in the note issuer arising from the beneficial
interests in the note issuer if any note event of default has occurred and is
continuing or if distributions cause the book value of the remaining equity in
the note issuer to decline below 0.50 percent of the initial principal amount of
the notes outstanding under the note indenture.
The note issuer will deliver to, among others, the note trustee and the
certificate trustee the annual accountant's certificates, compliance
certificates, reports regarding distributions and statements to noteholders and
the certificateholders required by the servicing agreement.
REPORTS TO NOTEHOLDERS
On or prior to each payment date, the servicer will prepare and provide to
the note issuer, the note trustee and the certificate trustee a statement to be
delivered to the noteholders on the payment date. Each statement will include
(to the extent applicable) the following information for a payment date or the
period since the previous payment date, as applicable:
- the amount of the distribution to noteholders allocable to principal;
- the amount of the distribution to noteholders allocable to interest;
- the outstanding principal balance of the notes, after giving effect to
payments allocated to principal reported above; and
- the difference, if any, between the outstanding principal balance of the
notes and the principal amount scheduled to be outstanding on a payment
date according to the expected amortization schedule.
The note trustee will deliver to each holder of the notes information in
the note trustee's possession that may be required to enable the holder to
prepare its federal and state income tax returns. See "Federal Income Tax
Consequences" and "State Taxation."
ANNUAL COMPLIANCE STATEMENT
The note issuer will file annually with the note trustee, the certificate
trustee, the state agencies and the nationally recognized statistical rating
organizations rating the certificates a written statement as to whether it has
fulfilled its obligations under the note indenture.
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DESCRIPTION OF THE CERTIFICATES
The trust will issue the certificates under the certificate indenture
between the trust and The Bank of New York, a New York banking corporation,
acting as the certificate trustee. The following summary describes the material
terms and provisions of the certificate indenture. The particular terms of the
certificates of any class will be established in the certificate indenture. This
summary is not complete. You should read this summary together with the
prospectus supplement and the terms and provisions of the certificate indenture,
a form of which is filed as an exhibit to the registration statement relating to
this prospectus, before buying the certificates.
Each class of certificates will represent a fractional undivided beneficial
interest in the related class of notes and the proceeds thereof. Each
certificate will be issued in the minimum denominations specified in the
prospectus supplement. The trust may not issue any additional certificates under
the certificate indenture.
Each class of certificates will bear interest at the rate per annum borne
by the related class of notes. See "Description of the Notes -- Interest and
Principal." Payments of interest and principal made on any class of notes are
required to be passed through to holders of the related class of certificates at
the times and in the manner described below. See "-- Payments and Distributions"
below and "Description of the Notes -- Interest and Principal."
PAYMENTS AND DISTRIBUTIONS
The certificate trustee is scheduled to receive payments of interest on and
principal of the notes on each payment date. The note trustee will make payments
on the notes on any payment date as described under "Description of the Notes --
Allocations and Payments."
The certificate trustee will distribute on each distribution date to the
holders of each class of certificates all payments of interest on and principal
of the related class of notes, other than payments received following a payment
default on a class of notes, the receipt of which is confirmed by the
certificate trustee by 1:00 p.m. New York City time on a distribution date or,
if receipt is confirmed after 1:00 p.m. New York City time on a distribution
date, then on the following business day. Each distribution, other than the
final distribution for any certificate, will be made by the certificate trustee
to the holders of record of the certificates of the applicable class on the
record date for a distribution date. If a payment of principal or interest on
any class of the notes, other than a payment received following a payment
default on a class of notes, is not received by the certificate trustee on a
distribution date but is received within five days thereafter, it will be
distributed to the holders of record on the date receipt is confirmed by the
certificate trustee, if receipt is confirmed by the certificate trustee by 1:00
p.m. New York City time or, if receipt is confirmed after 1:00 p.m. New York
City time, then on the following business day. If payment is received by the
certificate trustee after the five-day period, it will be treated as a payment
received following a payment default on a class of notes and distributed as
described below.
Any payment received by the certificate trustee following a payment default
on any class of notes ("Special Payments") will be distributed on the later of
the date receipt is confirmed by the certificate trustee and the date on which
any Special Payment is scheduled to be distributed by the certificate trustee (a
"Special Distribution Date"). However, in the case of any Special Payment
receipt of which is confirmed after 1:00 p.m. New York City time, a Special
Payment will be distributed on the following business day.
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The certificate trustee will mail notice to the holders of record of
certificates of the applicable class as of the most recent record date not less
than 20 days prior to the Special Distribution Date on which any Special Payment
is scheduled to be distributed for certificates of a class stating the
anticipated Special Distribution Date. Each distribution of any Special Payment
will be made by the certificate trustee on the Special Distribution Date to the
holders of record of the certificates of a class as of the most recent record
date. See "-- Events of Default" below.
The certificate indenture requires the certificate trustee to establish and
maintain for each class of certificates, for the trust, and on behalf of the
certificateholders, one or more non-interest bearing certificate accounts for
the deposit of payments on the related class of notes. The certificate trustee
is required to deposit any payments received by it arising from the notes in the
appropriate certificate account. The certificate trustee will distribute all
amounts so deposited to holders of the certificates on a distribution date or a
Special Distribution Date, as appropriate, unless a different date for
distribution of the amount is specified in the certificate indenture.
At a time, if any, that the certificates are issued in registered form and
not to the Depository Trust Company ("DTC") or its nominee, distributions by the
certificate trustee from the certificate accounts on a distribution date or a
Special Distribution Date will be made by check mailed to each holder of record
of a certificate on the applicable record date at its address appearing on the
register maintained for the certificates, or, on application by a holder of any
certificates in the principal amount of $1,000,000 or more to the certificate
trustee not later than the applicable record date, by wire transfer to an
account maintained by the payee in New York, New York. The final distribution
for the certificates, however, will be made only on presentation and surrender
of the certificates at the office or agency of the certificate trustee specified
in the notice given by the certificate trustee of the final distribution. The
certificate trustee will mail notice of the final distribution to the
certificateholders, specifying the date set for the final distribution and the
amount of the final distribution.
If any Special Distribution Date or other date specified in this prospectus
for distribution of any distributions to certificateholders is not a business
day, distributions scheduled to be made on a Special Distribution Date or other
date may be made on the following business day and no interest shall accrue on
the distribution during the intervening period.
VOTING OF THE CERTIFICATES
The nominee for DTC as sole initial holder of the certificates, has the
right to vote and give consents and waivers relating to any modifications to any
class of certificates. With some exceptions, the holders of at least a majority
of the outstanding principal amount of the certificates shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the certificate trustee, or exercising any trust or power conferred
on the certificate trustee under the certificate indenture, including any right
of the certificate trustee as holder of the notes, in each case unless a
different percentage is specified in the certificate indenture; provided,
however, that, among other things:
- the direction shall not be in conflict with any rule of law or with the
certificate indenture and would not involve the certificate trustee in
personal liability or expense;
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- the certificate trustee shall not have determined that the action so
directed would be unjustly prejudicial to the certificateholders not
taking part in the direction; and
- the certificate trustee may take any other action deemed proper by the
certificate trustee that is not inconsistent with the direction.
If the certificate trustee is required to seek instructions from the holders of
the certificates regarding any action or vote, the certificate trustee will take
the action or vote for or against any proposal in proportion to the principal
amount of the certificates taking the corresponding position.
EVENTS OF DEFAULT
An event of default on the certificates under the certificate indenture is
defined as the occurrence and continuance of a note event of default. For a
description of the note events of default, see "Description of the Notes -- Note
Events of Default; Rights On Note Event of Default."
The certificate indenture provides that, if a note event of default occurs
and is continuing, the certificate trustee may and, with the written direction
of holders representing not less than a majority of the outstanding principal
amount of the certificates, shall vote all the notes in favor of declaring the
unpaid principal amount of the notes and accrued interest to be due and payable.
In addition, the certificate indenture provides that, if a note event of default
occurs and is continuing, the certificate trustee may and, with the written
direction of holders representing not less than a majority of the outstanding
principal amount of the certificates, shall vote all the notes in favor of
directing the note trustee as to the time, method and place of conducting any
proceeding for any remedy available to the note trustee, including the sale of
any or all of the notes, without recourse to or warranty by the certificate
trustee or any certificateholder, to any person or entity, or of exercising any
trust or power conferred on the note trustee under the note indenture.
Notwithstanding the foregoing, the certificate trustee may, but shall not
be obligated to, refrain, in its sole discretion, from liquidating any notes if
the certificate trustee determines that amounts receivable from the note
collateral for the applicable class of notes will be sufficient to pay (a) all
interest on and principal of that class of notes according to its terms without
regard to any declaration of acceleration and (b) all sums due to the
certificate trustee and any other administrative expenses specified in the
certificate indenture.
In addition, the certificate trustee is prohibited from selling any notes
following note events of default, other than payment defaults, unless (x) the
certificate trustee determines that the amounts receivable from the note
collateral are not sufficient to pay in full the principal of and accrued
interest on the notes and to pay all sums due to the certificate trustee and
other administrative expenses specified in the certificate indenture and the
certificate trustee obtains the written consent of holders of certificates
representing 66 2/3 percent of the outstanding principal amount of certificates
or (y) the certificate trustee obtains the written consent of holders of 100
percent of the outstanding principal amount of certificates. Any proceeds
received by the certificate trustee on any sale will be deposited in the
certificate account and will be distributed to the certificateholders on a
Special Distribution Date.
If a breach by The Commonwealth of Massachusetts of its pledge under the
statute has occurred, then the certificate trustee, in its own name and as
trustee of an express trust, as holder of the notes, shall be, to the extent
permitted by state and federal law,
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entitled and empowered to institute any suits, actions or proceedings at law, in
equity or otherwise, to enforce the pledge and to collect any monetary damages
as a result of a breach, and may prosecute any of these suits, actions or
proceedings to final judgment or decree.
Any funds (a) representing payments received arising from notes in default,
(b) representing the proceeds from the sale by the certificate trustee of any
notes or (c) otherwise arising from a certificate event of default, held by the
certificate trustee in the certificate account shall, to the extent practicable,
be invested and reinvested by the certificate trustee in eligible investments
permitted under the certificate indenture maturing in not more than 60 days or a
lesser time as is required for the distribution of any funds on a Special
Distribution Date, pending the distribution of the funds to certificateholders
as described in this prospectus.
The certificate indenture provides that, for the certificates of any class,
within 30 days after the occurrence of any event that is, or after notice or
lapse of time or both would become, a certificate event of default for a class
of certificates, the certificate trustee will give to the trust, note trustee
and the certificateholders notice, transmitted by mail, of all uncured or
unwaived defaults known to it. Except in the case of a default relating to the
payment of principal of or interest on any of the notes, however, the
certificate trustee will be protected in withholding notice if in good faith it
determines that the withholding of notice is in the interests of the
certificateholders.
The certificate indenture contains a provision entitling the certificate
trustee to be indemnified by the certificateholders before proceeding to
exercise any right or power under the certificate indenture at the request or
direction of certificateholders.
In some cases, the holders of certificates representing not less than a
majority of the outstanding principal amount of the certificates may waive any
certificate event of default and thereby annul any previous direction given by
the certificate trustee with respect thereto, except a default:
- in the deposit or distribution of any payment on the notes or Special
Payment required to be made on any class of certificates;
- in the payment of principal of or interest on any of the notes; or
- arising from any covenant or provision of the certificate indenture that
cannot be modified or amended without the consent of the holders of each
certificate affected by a default.
With this direction, the certificate trustee shall vote a corresponding
percentage of the notes in favor of the waiver. The notes provide that, with
some exceptions, the holders of not less than a majority of the outstanding
principal amount of the notes may waive any note event of default or any event
that is, or after notice or passage of time, or both, would be, a note event of
default.
The trust may hold two or more classes of notes, each of which may have a
different interest rate, a different or potentially different schedule for the
repayment of principal and different rights in the security for the notes.
Accordingly, the certificateholders of one class may have divergent or
conflicting interests from the certificateholders of other classes. As a result,
the note trustee and the certificate trustee may be required to seek the
appointment of additional trustee(s) to represent the interests of one or more
classes with divergent or conflicting interests.
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REDEMPTION
The trust will redeem the certificates if the notes are redeemed. The trust
will give notice of redemption to each certificateholder to be redeemed by
first-class mail, postage prepaid, mailed not less than five days nor more than
25 days prior to the redemption date.
REPORTS TO CERTIFICATEHOLDERS
On each distribution date, Special Distribution Date or any other date
specified in the certificate indenture for distribution of any payments on any
class of certificates, the certificate trustee will include with each
distribution a statement setting forth the following information, in each case,
to the extent received by the certificate trustee from the note trustee, no
later than two business days prior to a distribution date, Special Distribution
Date or other date specified herein for distribution:
- the amount of the distribution to certificateholders allocable to
principal and interest, in each case per $1,000 original principal amount
of each class of certificates;
- the aggregate outstanding principal balance of the certificates, after
giving effect to distributions allocated to principal reported above; and
- the difference, if any, between the aggregate outstanding principal
balance of the certificates and the principal amount scheduled to be
outstanding on a distribution date according to the expected amortization
schedule.
So long as the note trustee and the certificate trustee are the same, the note
trustee will agree to prepare and provide the statements to the certificate
trustee.
Within the prescribed period of time for tax reporting purposes after the
end of each calendar year during the term of the notes, the certificate trustee
will mail to each person or entity who at any time during a calendar year has
been a certificateholder and received any distribution on the certificates, a
statement containing information for the purposes of a certificateholder's
preparation of federal and state income tax returns. See "Federal Income Tax
Consequences" and "State Taxation."
SUPPLEMENTAL CERTIFICATE INDENTURES
The certificate trustee and the Delaware trustee, on behalf of the trust,
will, from time to time, and without the consent of the certificateholders,
enter into one or more agreements supplemental to the certificate indenture to:
- add to the covenants of the trust for the benefit of the
certificateholders, or to surrender any right or power in the certificate
indenture conferred on the trust;
- correct or supplement any provision in the certificate indenture or in
any supplemental certificate indenture that may be defective or
inconsistent with any other provision in the certificate indenture or in
any supplemental agreement or to make any other provisions regarding
matters or questions arising under the certificate indenture; provided
that none of these actions shall adversely affect in any material respect
the interests of the certificateholders;
- cure any ambiguity or correct any mistake; or
- qualify, if necessary, the certificate indenture, including any
supplemental certificate indenture, under the Trust Indenture Act of
1939.
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In addition, the certificate trustee and the Delaware trustee, acting on
behalf of the trust, will, with the consent of certificateholders holding not
less than a majority of the outstanding principal amount of the certificates of
all affected classes, enter into one or more certificate indentures supplemental
to the certificate indenture for the purpose of, among other things, adding any
provisions to or changing in any manner or eliminating any of the provisions of
the certificate indenture. However, no supplemental certificate indenture may,
among other things, without the consent of each certificateholder affected
thereby:
- change any date of payment on any certificate, or change the place of
payment where, or the currency in which, any certificate is payable, or
impair the right to sue for the enforcement of any payment or
distribution on or after the distribution date, Special Distribution Date
or other date specified in the prospectus;
- permit the disposition of any note held by the trust except as permitted
by the certificate indenture, or otherwise deprive any certificateholder
of the benefit of the ownership of the related notes held by the trust;
- modify the provisions in the certificate indenture relating to amendments
with the consent of certificateholders, except to increase the percentage
vote necessary to approve amendments or to add further provisions which
cannot be modified or waived without the consent of all
certificateholders; or
- adversely affect the status of the trust as a grantor trust not taxable
as a corporation for federal income tax purposes.
Promptly following the execution of any amendment to the certificate indenture
(other than an amendment described in the preceding paragraph), the certificate
trustee will furnish written notice of the substance of an amendment to each
certificateholder.
LIST OF CERTIFICATEHOLDERS
With the written request of any certificateholder or group of
certificateholders of record holding certificates evidencing not less than ten
percent of the outstanding principal amount of the certificates, the certificate
trustee will give a certificateholder or certificateholders access during
business hours to the current list of certificateholders for purposes of
communicating with other certificateholders about their rights under the
certificate indenture.
Neither the declaration of trust nor the certificate indenture provides for
any annual or other meetings of certificateholders.
REGISTRATION AND TRANSFER OF THE CERTIFICATES
If so specified in the prospectus supplement, the certificates will be
issued in definitive form and will be transferable and exchangeable at the
office of the registrar identified in the prospectus supplement. No service
charge will be made for any registration or transfer of the certificates, but
the owner may be required to pay a sum sufficient to cover any tax or other
governmental charge.
BOOK-ENTRY REGISTRATION AND DEFINITIVE CERTIFICATES
One or more classes of the certificates will be issued as book-entry
certificates, and these classes will be represented by one or more certificates
registered in the name of a nominee for the depository, DTC.
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the Uniform Commercial Code and a "clearing
agency" registered under the
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provisions of Section 17A of the Securities Exchange Act. DTC was created to
hold securities for its participating organizations ("Participants") and
facilitate the clearance and settlement of securities transactions between
Participants through electronic book-entry changes in their accounts, thereby
eliminating the need for physical movement of certificates. Participants include
securities brokers and dealers, banks, trust companies and clearing corporations
and may include other organizations. Indirect access to the DTC system also is
available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly ("Indirect Participants").
Investors that are not Participants or Indirect Participants but desire to
purchase, sell or otherwise transfer ownership of, or other interests in,
book-entry certificates may do so only through Participants and Indirect
Participants. In addition, these beneficial owners will receive all
distributions on the book-entry certificates through DTC and its Participants.
Under a book-entry format, beneficial owners will receive payments after a
distribution date because, while payments are required to be forwarded to Cede &
Co., as nominee for DTC, on a distribution date, DTC will forward the payments
to its Participants which thereafter will be required to forward them to
Indirect Participants or beneficial owners. The only registered
certificateholder will be Cede & Co., as nominee of DTC, and the beneficial
owners will not be recognized by the certificate trustee as certificateholders
under the certificate indenture. Beneficial owners will be permitted to exercise
the rights of certificateholders under the certificate indenture, only
indirectly through the Participants who in turn will exercise their rights
through DTC.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among participants
on whose behalf it acts regarding the book-entry certificates and is required to
receive and transmit distributions of interest on and principal of the
book-entry certificates. Participants and Indirect Participants with which
beneficial owners have accounts for book-entry certificates similarly are
required to make book-entry transfers and receive and transmit the payments on
behalf of their respective beneficial owners.
Because DTC can act only on behalf of Participants, who in turn act on
behalf of Indirect Participants and banks, the ability of a beneficial owner to
pledge its interest in the book-entry certificates to persons or entities that
do not participate in the DTC system, or otherwise take actions arising from its
interest in the book-entry certificates, may be limited due to the lack of a
physical certificate evidencing its interest.
DTC has advised the certificate trustee that it will take any action
permitted to be taken by a certificateholder under the certificate indenture
only at the direction of one or more Participants to whose account with DTC
interests in the book-entry certificates are credited.
CEDEL holds securities for the CEDEL Participants and facilitates the
clearance and settlement of securities transactions between CEDEL Participants
through electronic book-entry changes in accounts of CEDEL Participants, thereby
eliminating the need for physical movement of certificates. Transactions may be
settled in CEDEL in any of 28 currencies, including United States dollars. CEDEL
provides to its CEDEL Participants, among other things, services for
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. CEDEL interfaces with domestic
markets in several countries. As a professional depository, CEDEL is regulated
by the Luxembourg Monetary Institute. CEDEL Participants are recognized
financial institutions around the world, including underwriters, securities
brokers and dealers, banks, trust companies, clearing corporations and other
organizations and may
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include the underwriters. Indirect access to CEDEL is also available to others,
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a CEDEL Participant, either directly or
indirectly.
The Euroclear System was created in 1968 to hold securities for Euroclear
Participants and to clear and settle transactions between Euroclear Participants
through simultaneous electronic book-entry delivery against payment, thereby
eliminating the need for physical movement of certificates and any risk from
lack of simultaneous transfers of securities and cash. Transactions may now be
settled in Euroclear in any of 32 currencies, including United States dollars.
The Euroclear System includes various other services, including securities
lending and borrowing, and interfaces with domestic markets in several countries
generally similar to the arrangements for cross-market transfers with DTC. The
Euroclear System is operated by the Euroclear Operator (or Euroclear), under
contract with the Cooperative. All operations are conducted by the Euroclear
Operator, and all Euroclear securities clearance accounts and Euroclear cash
accounts are accounts with the Euroclear Operator, not the Cooperative. The
Cooperative establishes policy for the Euroclear System on behalf of Euroclear
Participants. Euroclear Participants include banks (including central banks),
securities brokers and dealers and other professional financial intermediaries
and may include the underwriters. Indirect access to the Euroclear System is
also available to other firms that clear through or maintain a custodial
relationship with a Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions. The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawal of
securities and cash from the Euroclear System, and receipt of payments for
securities in the Euroclear System. All securities in the Euroclear System are
held on a fungible basis without attribution of specific certificates to
specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear Participants and has no record
of or relationship with persons holding through Euroclear Participants.
Distributions for certificates held through CEDEL or Euroclear will be
credited to the cash accounts of CEDEL Participants or Euroclear Participants in
compliance with the relevant system's rules and procedures. These distributions
will be subject to tax reporting in compliance with relevant United States tax
laws and regulations. See "Federal Income Tax Consequences." CEDEL will take any
other action permitted to be taken by a certificateholder under the certificate
indenture on behalf of a CEDEL Participant and the Euroclear Operator will take
any other action permitted to be taken by a certificateholder under the
certificate indenture on behalf of a Euroclear Participant only under its
relevant rules and procedures and limited by its depositary's ability to effect
these actions on its behalf through DTC.
Cede, as nominee for DTC, will hold the certificates. CEDEL will hold
omnibus positions in the certificates on behalf of the CEDEL Participants and
Euroclear will hold omnibus positions in the certificates on behalf of the
Euroclear Participants, in each case through customers' securities accounts in
their names on the books of their respective depositaries, which in turn will
hold positions in customers' securities accounts in the depositaries' names on
the books of DTC.
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Transfers between the Participants will comply with DTC rules. Transfers
between CEDEL Participants and Euroclear Participants will comply with their
applicable rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL
Participants or Euroclear Participants, on the other, will be effected in DTC
under DTC rules on behalf of the relevant European international clearing system
by its depositary; however, these cross-market transactions will require
delivery of instructions to the relevant European international clearing system
by the counterparty in the system according to its rules and procedures and
within its established deadlines. The relevant European international clearing
system will, if the transaction meets its settlement requirements, deliver
instructions to its depositary to take action to effect final settlement on its
behalf by delivering or receiving securities in DTC, and making or receiving
payment under normal procedures for same-day funds settlement applicable to DTC.
CEDEL Participants and Euroclear Participants may not deliver instructions
directly to their depositaries.
Because of time zone differences, credits of securities in CEDEL or
Euroclear as a result of a transaction with a Participant will be made during
the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and the credit or any transactions in the
securities settled during the processing will be reported to the relevant CEDEL
Participant or Euroclear Participant on that business day. Cash received in
CEDEL or Euroclear as a result of sales of securities by or through a CEDEL
Participant or a Euroclear Participant to a Participant will be received with
value on the DTC settlement date but will be available in the relevant CEDEL or
Euroclear cash account only as of the business day following settlement in DTC.
Although DTC, CEDEL and Euroclear have agreed to the foregoing procedures
in order to facilitate transfers of securities among participants of DTC, CEDEL
and Euroclear, they are under no obligation to perform or continue to perform
these procedures and these procedures may be discontinued at any time.
If any of DTC, Cedel or Euroclear should discontinue its services, the
certificate trustee would seek an alternative depository, if available, or cause
the issuance of definitive certificates to the owners of certificates or their
nominees in the manner described below.
Definitive certificates initially issued in book-entry form will be issued
to beneficial owners or their nominees, rather than to DTC or its nominee only
if:
- the DTC advises the certificate trustee in writing that DTC is no longer
willing or able to properly discharge its responsibilities as depository
for the certificates and the certificate trustee is unable to locate a
qualified successor; or
- after the occurrence of an event of default under the certificate
indenture, holders of certificates representing not less than 50 percent
of the outstanding principal amount of certificates advise DTC in writing
that the continuation of a book-entry system through DTC is no longer in
the best interests of certificateholders.
If either of the events described in the immediately preceding paragraph
occurs, DTC is required to notify all Participants of the availability through
DTC of definitive certificates for the beneficial owners. With the surrender by
DTC of the certificate or certificates representing the book-entry certificates,
together with instructions for reregistration, the certificate trustee will
issue (or cause to be issued) to the beneficial owners identified in the
instructions the definitive certificates to which they are entitled, and
thereafter the certificate trustee will recognize the holders of the Definitive
Certificates as certificateholders under the certificate indenture.
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<PAGE> 84
FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a summary of the material federal income tax consequences
to certificateholders, and is based on the opinion of Palmer & Dodge LLP. Palmer
& Dodge LLP has advised the Trust that the description of those material federal
income tax consequences in this summary is accurate in all material respects.
The opinion of Palmer & Dodge LLP is based on some assumptions and is limited by
some qualifications stated in this discussion or in that opinion. This
discussion is based on current provisions of the Code, currently applicable
Treasury regulations, and judicial and administrative rulings and decisions.
Legislative, judicial or administrative changes could alter or modify the
statements and conclusions in this discussion. Any legislative, judicial or
administrative changes or new interpretations may be retroactive and could
affect tax consequences to certificateholders.
This discussion applies to certificateholders who acquire the certificates
at original issue for cash equal to the issue price of those certificates and
hold the certificates as capital assets. This discussion does not address all of
the tax consequences relevant to a particular certificateholder in light of that
certificateholder's circumstances, and some certificateholders may be subject to
special tax rules and limitations not discussed below (e.g., life insurance
companies, tax-exempt organizations, financial institutions, dealers in
securities, S corporations, taxpayers subject to the alternative minimum tax
provisions of the Code, broker-dealers, and persons who hold the certificates as
part of a hedge, straddle, "synthetic security", or other integrated investment,
risk reduction or constructive sale transaction). This discussion also does not
address the tax consequences to nonresident aliens, foreign corporations,
foreign partnerships or foreign trusts that are subject to U.S. federal income
tax on a net basis on income with respect to a certificate because that income
is effectively connected with the conduct of a U.S. trade or business. Those
holders generally are taxed in a manner similar to U.S. Certificateholders;
however, special rules not applicable to U.S. Certificateholders may apply. In
addition, except as described below, this discussion does not address any tax
consequences under state, local or foreign tax laws. CONSEQUENTLY, YOU ARE URGED
TO CONSULT YOUR TAX ADVISER TO DETERMINE THE FEDERAL, STATE, LOCAL AND FOREIGN
INCOME AND ANY OTHER TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION
OF THE CERTIFICATES.
In addition, as provided in Treasury regulations, some trusts in existence on
August 20, 1996, and treated as U.S. Persons prior to that date, may elect to
continue to be treated for federal income tax purposes as U.S. Persons.
This discussion assumes that each certificate is issued in registered form.
Moreover, this discussion assumes that any original issue discount on the
certificates (i.e., any excess of the stated redemption price at maturity of the
certificate over its issue price) is less than a statutory minimum amount (equal
to 0.25 percent of its stated redemption price at maturity multiplied by the
certificate's weighted average maturity), all as provided in the Treasury's
original issue discount regulations.
TREATMENT OF THE CERTIFICATES
The seller has received a ruling from the Internal Revenue Service holding
that the notes are obligations of the seller for federal income tax purposes.
Palmer & Dodge LLP will opine that the trust will not be a business entity
classified as a corporation or a publicly traded partnership treated as a
corporation, but will be treated as a grantor trust.
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<PAGE> 85
Further, Palmer & Dodge LLP will opine that each class of certificates will
evidence ownership of a fractional undivided beneficial interest in the related
class of notes.
Assuming that the certificates represent ownership of undivided interests
in the related notes for federal income tax purposes, based on the assumptions
and subject to the qualifications stated herein, it is the opinion of Palmer &
Dodge LLP that the material federal income tax consequences to
certificateholders are as follows:
TAXATION OF U.S. CERTIFICATEHOLDERS
PAYMENTS OF INTEREST
Stated interest on the certificates will be taxable as ordinary interest
income when received or accrued by U.S. Certificateholders under their method of
accounting. Generally, interest received on the certificates will constitute
"investment income" for purposes of Code limitations on the deductibility of
investment interest expense.
ORIGINAL ISSUE DISCOUNT
As noted above, this discussion assumes that any original issue discount on
the certificates is less than the statutory minimum amount. Accordingly, unless
a special election is made to treat all interest on a certificate as original
issue discount, any original issue discount generally will be taken into income
by a U.S. Certificateholder as gain from the retirement of a certificate (as
described below under "-- Sale or Other Taxable Disposition of Certificates")
ratably as principal payments are made on the Certificates.
MARKET DISCOUNT AND PREMIUM
If a U.S. Certificateholder purchases (including a purchase at original
issuance for a price less than the issue price) a certificate for an amount that
is less than the principal balance of the certificate, the difference will be
treated as "market discount" unless it is less than a statutory minimum amount.
This market discount will generally be treated as accruing ratably on the
certificate during the period from the date of acquisition to the maturity date
of the certificate, unless the U.S. Certificateholder makes an election to
accrue the market discount on a constant yield to maturity basis. The U.S.
Certificateholder will be required to treat any principal payment on, or any
gain realized on the sale, exchange, retirement or other disposition of the
certificate as ordinary income to the extent of the lesser of:
- the amount of the payment or gain; or
- the market discount which is treated as having accrued on the Certificate
at the time of the payment or disposition and which has not previously
been included in income.
In addition, a U.S. Certificateholder may be required to defer the deduction of
all or a portion of the interest paid or accrued on any indebtedness incurred or
maintained to purchase or carry a certificate with market discount, until the
maturity of the certificate or its earlier disposition in a taxable transaction.
In the alternative, a U.S. Certificateholder may elect to include market
discount in income currently as it accrues on either a ratable or semiannual
compounding basis, in which case the rules described above will not apply. The
election to include market discount in income as it accrues will apply to all
market discount instruments acquired by the U.S. Certificateholder on or after
the first day of the taxable year to which the election
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<PAGE> 86
applies and may not be revoked without the consent of the Internal Revenue
Service. Generally, currently included market discount is treated as ordinary
interest for United States federal income tax purposes.
A purchaser who acquires a certificate at a premium (i.e., at a purchase
price greater than the principal balance) may elect to offset the premium
against interest income on the certificate on a constant yield to maturity
basis. Any amortized premium will reduce the adjusted basis of the certificate.
If the certificate is redeemed before maturity for a price less than the
adjusted basis of the certificate, a U.S. Certificateholder will be allowed an
ordinary loss deduction for the unamortized premium. An election to amortize
bond premium applies to all bonds acquired by a U.S. Certificateholder on or
after the first day of the taxable year to which the election applies and can be
revoked only with the consent of the Internal Revenue Service.
SALE OR OTHER TAXABLE DISPOSITION OF CERTIFICATES
If there is a sale, exchange, redemption, retirement or other taxable
disposition of a certificate, a U.S. Certificateholder generally will recognize
gain or loss equal to the difference between (a) the amount of cash and the fair
market value of any other property received (other than amounts attributable to,
and taxable as, accrued stated interest) and (b) the U.S. Certificateholder's
adjusted tax basis in the certificate. The adjusted tax basis in the certificate
generally will equal its cost, increased by any original issue discount or
market discount included in income with respect to the certificate prior to its
disposition and reduced by any payments reflecting principal or original issue
discount previously received with respect to the certificate and any amortized
premium. Although the market discount rules may apply, gain or loss generally
will be capital gain or loss if the certificate was held as a capital asset.
NON-U.S. CERTIFICATEHOLDERS
In general, a non-U.S. Certificateholder will not be subject to U.S.
federal income or withholding tax on interest (including original issue
discount) on a certificate unless:
- the non-U.S. Certificateholder is a controlled foreign corporation that
is related to the seller through stock ownership;
- the non-U.S. Certificateholder is a bank which receives interest as
described in Code Section 881(c)(3)(A); or
- the non-U.S. Certificateholder actually or constructively owns 10% or
more of the total combined voting power of all classes of stock of the
seller entitled to vote.
In order for interest payments to qualify for the exemption from U.S. taxation
described above, the Withholding Agent must have received (in the year in which
a payment of interest or principal occurs or in either of the two preceding
years) a statement that:
- is signed by the non-U.S. Certificateholder under penalty of perjury;
- certifies that the non-U.S. Certificateholder is not a U.S. Person; and
- provides the name and address of the non-U.S. Certificateholder.
The statement may be made on a Form W-8 or substantially similar substitute
form, and the non-U.S. Certificateholder must inform the Withholding Agent of
any change in the information on the statement within 30 days of the change. If
a certificate is held through a securities clearing organization or other
financial institution, the organization or
75
<PAGE> 87
institution may provide a signed statement to the Withholding Agent certifying
under penalties of perjury that the Form W-8 (or suitable substitute) has been
received by it from the Certificateholder or from another qualifying financial
institution. However, in that case, the signed statement must be accompanied by
a copy of the Form W-8 or substitute form provided by the non-U.S.
Certificateholder to the organization or institution holding the certificate on
behalf of the non-U.S. Certificateholder.
Generally, any gain or income realized by a non-U.S. Certificateholder from
the sale, exchange, redemption, retirement or other disposition of a certificate
(other than gain attributable to accrued interest or original issue discount,
which is addressed above) will not incur U.S. federal income tax liability,
provided, in the case of a certificateholder who is an individual, that the
certificateholder is not present in the United States for 183 or more days
during the taxable year in which a disposition of a certificate occurs.
Exceptions may be applicable, and non-U.S. Certificateholders should consult a
tax adviser regarding the tax consequences of a disposition of a certificate.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Some certificateholders may be subject to backup withholding at the rate of
31% on interest (including original issue discount) and proceeds received from
the disposition of a certificate. Generally, backup withholding will apply if
the certificateholder fails to provide identifying information (such as the
payee's taxpayer identification number) in the manner required, or if the payee
has failed to report properly the receipt of reportable interest or dividend
payments and the Internal Revenue Service has notified the payor that backup
withholding is required. Some certificateholders (including, among others,
corporations and some tax-exempt organizations) generally are not subject to
backup withholding.
Backup withholding and information reporting generally will not apply to a
certificate issued in registered form that is beneficially owned by a non-U.S.
Certificateholder if the certification of non-U.S. status is provided to the
Withholding Agent as described above in "-- Non-U.S. Certificateholders," as
long as the payor does not have actual knowledge that the certificateholder is a
U.S. Person. The Withholding Agent may be required to report annually to the
Internal Revenue Service and to each non-U.S. Certificateholder the amount of
interest paid to, and the tax withheld, if any, for each non-U.S.
Certificateholder.
If payments of principal and interest are made to the beneficial owner of a
certificate by or through the foreign office of a custodian, nominee or other
agent of that beneficial owner, or if the proceeds of the sale of certificates
are made to the beneficial owner of a certificate through a foreign office of a
"broker" (as defined in the pertinent Treasury regulations), the proceeds will
not be subject to backup withholding (absent actual knowledge that the payee is
a U.S. Person). Information reporting (but not backup withholding) will apply,
however, to a payment by a foreign office of a custodian, nominee, agent or
broker that:
- is a U.S. Person;
- is a controlled foreign corporation for U.S. federal income tax purposes;
or
- derives 50% or more of its gross income from the conduct of a U.S. trade
or business for a specified three-year period, unless the broker has in
its records documentary evidence that the holder is a non-U.S.
Certificateholder and other conditions are met (including that the broker
has no actual knowledge that the certificateholder is a U.S.
Certificateholder) or the certificateholder otherwise establishes an
exemption.
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<PAGE> 88
Payment through the U.S. office of a custodian, nominee, agent or broker is
subject to both backup withholding at a rate of 31% and information reporting,
unless the certificateholder certifies that it is a non-U.S. Person under
penalties of perjury or otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules from a payment to a
certificateholder would be allowed as a refund or a credit against that
certificateholder's U.S. federal income tax, provided that the required
information is furnished to the Internal Revenue Service.
Regulations regarding the withholding and information reporting rules
discussed above were issued by the Treasury Department in October 1997. In
general, the regulations did not significantly alter the substantive withholding
and information reporting requirements but rather unified the prior
certification procedures and forms and clarified reliance standards. In
addition, the regulations permit the shifting of primary responsibility for
withholding to financial intermediaries acting on behalf of beneficial owners.
The regulations are generally effective for payments made after December 31,
2000, although there are transition rules. Under the regulations, new forms
generally will have to be solicited from U.S. Certificateholders earlier than
replacements for expiring existing forms otherwise would have been solicited.
You should consult your tax adviser about the impact, if any, of the
regulations.
STATE TAXATION
In the opinion of Palmer & Dodge LLP, interest on the certificates and any
profit on the sale of the certificates are exempt from Massachusetts personal
income taxes, and the certificates are exempt from Massachusetts personal
property taxes. Palmer & Dodge LLP has not opined and will not opine as to other
Massachusetts tax consequences arising with respect to the certificates. You
should be aware, however, that the certificates are included in the measure of
Massachusetts estate and inheritance taxes and the certificates and the interest
on the certificates are included in the measure of Massachusetts corporate
excise and franchise taxes. This discussion does not address the taxation of the
trust or the tax consequences of the purchase, ownership or disposition of the
certificates under any state or local tax law other than that of The
Commonwealth of Massachusetts. You should consult your tax adviser regarding
state and local tax consequences.
ERISA CONSIDERATIONS
ERISA and/or Section 4975 of the Code impose restrictions and requirements
on Plans, and on persons who are fiduciaries for Plans in connection with the
investment of Plan Assets. Generally, any person who has discretionary authority
or control over the management or disposition of Plan Assets, and any person who
provides investment advice about Plan Assets for a fee or other consideration,
is a fiduciary for those Plan Assets. For those Plans that are governed by
ERISA, ERISA imposes on Plan fiduciaries specific fiduciary responsibilities,
including investment prudence, diversification and investing according to the
documents governing the Plan.
PROHIBITED TRANSACTIONS
ERISA and Section 4975 of the Code prohibit a broad range of transactions
involving Plan Assets and Parties in Interest, unless a statutory or
administrative exemption applies. Parties in Interest and Plan fiduciaries that
participate in a prohibited transaction may be
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<PAGE> 89
liable for penalties under ERISA and/or excise taxes imposed under Section 4975
of the Code. These prohibited transactions generally are described in Section
406 of ERISA and Section 4975 of the Code.
Some governmental and church plans are not governed by ERISA or Section
4975 of the Code. The prohibited transaction provisions described above do not
apply to these plans. If a plan is exempt from taxation under Section 501(a) of
the Code as a plan described in Section 401(a) of the Code, however, it may lose
its tax exemption if it engages in a prohibited transaction described in Section
503 of the Code.
Any fiduciary or other Plan investor considering whether to purchase the
certificates on behalf of a Plan or with Plan Assets should determine whether
the purchase is consistent with its fiduciary duties and whether the purchase
would constitute or result in a non-exempt prohibited transaction under ERISA
and/or Section 4975 of the Code because Boston Edison, the certificate trustee,
the underwriters or any of their affiliates is a Party in Interest under the
investing plan and may be deemed to be benefiting from the issuance of the
certificates. In particular, the certificates may not be purchased with Plan
Assets if any of Boston Edison, the certificate trustee, the underwriters or any
of their affiliates:
- has investment or administrative discretion over the Plan Assets used to
effect the purchase;
- has authority or responsibility to give, or regularly gives, investment
advice regarding the Plan Assets, for a fee and under an agreement or
understanding that the advice will serve as a primary basis for
investment decisions for the Plan Assets, and will be based on the
particular investment needs of the Plan; or
- unless exemptive relief applies under a Department of Labor Prohibited
Transaction Exemption, is an employer maintaining or contributing to the
Plan.
Each purchaser of the certificates will be deemed to have represented and
warranted that its purchase of the certificates or any interest in the
certificates does not violate the limitations described above.
PLAN ASSET REGULATION
The certificates are likely to be treated as "equity interests" in the
trust under a plan asset regulation issued by the Department of Labor, which
provides that beneficial interests in a trust are equity interests. Generally,
the plan asset regulation provides that if Plans acquire a "significant" equity
interest in an entity, the entity may be considered to hold Plan Assets.
Therefore, if the certificates are purchased with Plan Assets, the assets of the
trust may be deemed Plan Assets of the investing Plans which, in turn, would
subject the trust and its assets to the fiduciary responsibility provisions of
ERISA and the prohibited transaction provisions of ERISA and Section 4975 of the
Code. Even though only minimal administrative activity is expected at the trust
level, it is likely that the trust will interact with Boston Edison, the
certificate trustee, the underwriters and their affiliates. If Boston Edison,
the certificate trustee, the underwriters or any of their affiliates is a Party
in Interest to a Plan that purchases certificates, violations of the prohibited
transaction rules could occur at the trust level, unless a statutory or
administrative exemption applies or an exception applies under the plan asset
regulation.
Before purchasing any certificates, a Plan fiduciary, other Plan investor
or Party in Interest should consider whether a prohibited transaction might
arise by reason of any relationship between the investing Plan and Boston
Edison, the certificate trustee, the underwriters or any of their affiliates.
The Department of Labor has issued some class
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exemptions that may afford exemptive relief for otherwise prohibited
transactions arising from the purchase or holding of the certificates, including
Department of Labor Prohibited Transaction Exemptions 96-23 (Class Exemption for
Plan Asset Transactions Determined by In-House Investment Managers); 95-60
(Class Exemption for Certain Transactions Involving Insurance Company General
Accounts); 91-38 (Class Exemption for Certain Transactions Involving Bank
Collective Investment Funds); 90-1 (Class Exemption for Certain Transactions
Involving Insurance Company Pooled Separate Accounts); and 84-14 (Class
Exemption for Plan Assets Transactions Determined by Independent Qualified
Professional Asset Managers). A purchaser of the certificates should be aware,
however, that even if the conditions specified in one or more of the above
exemptions are met, the scope of the relief provided by the exemption might not
cover all acts which might be construed as prohibited transactions.
Plans would not have a "significant" equity interest in the trust, and
application of the plan asset regulation would be avoided, if Benefit Plan
Investors (as defined in the plan asset regulation) own less than 25% of each
class of equity in the trust. However, there is no commitment to limit purchases
of certificates by Benefit Plan Investors in this manner.
CONCLUSION
In light of the foregoing, Plan fiduciaries or other Plan investors
considering whether to purchase the certificates with Plan Assets of any Plan
and Parties in Interest should consult their own legal advisors regarding
whether the trust assets would be considered Plan Assets, the consequences that
would apply if the trust assets were considered Plan Assets, and the
availability of exemptive relief from the prohibited transaction rules or an
exception under the Plan Asset Regulation. Fiduciaries and other Plan investors
should also consider the fiduciary standards under ERISA or other applicable law
in the context of the Plan's particular circumstances before authorizing an
investment of Plan Assets in the certificates. Among other factors, fiduciaries
and other Plan investors should consider whether the investment:
- satisfies the diversification requirement of ERISA or other applicable
law;
- complies with the Plan's governing instruments; and
- is prudent in light of the "Risk Factors" and other factors discussed in
this prospectus.
USE OF PROCEEDS
The trust will use the net proceeds received from the sale of the
certificates to purchase the notes from the note issuer. The note issuer will
use the net proceeds from the sale of the notes to purchase the transition
property from the seller and to pay the costs of issuing the notes and the
certificates. The seller will use the net proceeds from the sale of the
transition property for general corporate purposes and to repay outstanding debt
and reduce the amount of outstanding equity.
PLAN OF DISTRIBUTION
The trust may sell the certificates to or through the underwriters named in
the prospectus supplement by a negotiated firm commitment underwriting and
public reoffering by the underwriters or another underwriting arrangement that
may be specified in the prospectus supplement or the trust may offer or place
the certificates either directly or through agents. The note issuer and the
trust intend that certificates will be offered
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through these various methods from time to time and that offerings may be made
concurrently through more than one of these methods or that an offering of the
certificates may be made through a combination of these methods.
The distribution of certificates may be effected in one or more
transactions at a fixed price or prices, which may be changed, or at market
prices prevailing at the time of sale, at prices related to prevailing market
prices or in negotiated transactions or otherwise at varying prices to be
determined at the time of sale.
In connection with the sale of the certificates, underwriters or agents may
receive compensation in the form of discounts, concessions or commissions.
Underwriters may sell certificates to dealers at prices less a concession.
Underwriters may allow, and the dealers may reallow, a concession to other
dealers. Underwriters, dealers and agents that participate in the distribution
of the certificates may be deemed to be underwriters and any discounts or
commissions received by them from the trust and any profit on the resale of the
certificates by them may be deemed to be underwriting discounts and commissions
under the Securities Act. We will identify any of these underwriters or agents,
and describe any compensation we give them, in the prospectus supplement.
LEGAL MATTERS
Certain legal matters relating to the notes will be passed on by Ropes &
Gray, Boston, Massachusetts, counsel to the seller and the note issuer. Certain
legal matters relating to the certificates and certain federal and state income
tax consequences of the issuance of the certificates will be passed upon by
Palmer & Dodge LLP, Boston, Massachusetts, counsel to the trust, and Krokidas &
Bluestein LLP, Boston, Massachusetts, co-counsel to the trust. Certain legal
matters relating to the certificates will be passed upon by Richards, Layton &
Finger, P.A., Wilmington, Delaware, Delaware counsel to the trust, and by Brown
& Wood LLP, San Francisco, California, counsel to the underwriters.
EXPERTS
The financial statements of BEC Funding LLC as of April 30, 1999 and for
the period from January 29, 1999 (date of inception) to April 30, 1999 included
in this prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in accounting and auditing.
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GLOSSARY
As used in this prospectus the terms below have the following meanings:
CEDEL -- Cedel Bank, a societe anonyme incorporated under the laws of
Luxembourg as a professional directory
CEDEL Participants -- participating organizations in CEDEL
Code -- The Internal Revenue Code of 1986
Cooperative -- Euroclear Clearance System, S.C., a Belgium cooperative
corporation
Definitive Certificates -- certificates issued in fully registered,
certificated form
DTC -- The Depository Trust Company
ERISA -- the Employee Retirement Income Security Act of 1974
Euroclear Operator or Euroclear -- Morgan Guaranty Trust Company of New
York, Brussels, Belgium office
Euroclear Participants -- participants of the Euroclear System
Indirect Participants -- banks, brokers, dealers, trust companies and other
entities that clear through or maintain a custodial relationship with a DTC
participant either directly or indirectly
Moody's -- Moody's Investors Service, Inc.
Non-U.S. Certificateholder -- a beneficial owner of a certificate that is
not a U.S. Certificateholder
Participant -- an organization that participates in DTC
Parties in Interest -- "parties in interest" under ERISA and "disqualified
persons" under the Code
Plan Assets -- assets of Plans
Plans -- employee benefit plans and other plans and arrangements, including
individual retirement accounts and annuities, Keogh plans and some collective
investment funds and insurance company general or separate accounts in which the
assets of these plans, accounts or arrangements are invested
RTC charge -- a portion, which may become all, of Boston Edison's
transition charge, authorized by the financing order to recover the transition
costs specified in the financing order
Special Distribution Date -- the later of the date on which any Special
Payment is confirmed to be received by the certificate trustee, or the date the
Special Payment is scheduled to be delivered to the certificate trustee
Special Payment -- any payment received by the certificate trustee
following a payment default on any class of notes
S&P -- Standard & Poor's Rating Services, a division of The McGraw-Hill
Companies, Inc.
Terms and Conditions -- the Terms and Conditions Governing Use of Euroclear
and the related Operating Procedures of the Euroclear System and applicable
Belgium law
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U.S. Certificateholder -- a beneficial owner of a certificate that is a
U.S. Person
U.S. Person --
- a citizen or resident of the United States;
- a corporation (or entity treated as a corporation for tax purposes)
created or organized in the United States, or under the laws of the
United States or of any state (including the District of Columbia);
- a partnership (or entity treated as a partnership for tax purposes)
organized in the United States, or under the laws of the United States
or of any state (including the District of Columbia) unless provided
otherwise by future Treasury regulations;
- an estate the income of which is includible in gross income for U.S.
Federal income tax purposes regardless of its source; or
- a trust if a court within the United States is able to exercise
primary supervision over the administration of the trust and one or
more U.S. Persons have the authority to control all substantial
decisions of the trust.
Withholding Agent -- the last U.S. Person in the chain of payment of
interest payments prior to payment to a non-U.S. Certificateholder
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
FINANCIAL STATEMENTS:
Report of Independent Accountants........................... F-2
Statement of Operations for the period from January 29, 1999
(date of inception) to April 30, 1999..................... F-3
Balance Sheet as of April 30, 1999.......................... F-4
Statement of Changes in Member's Equity for the period from
January 29, 1999 (date of inception) to April 30, 1999.... F-5
Statement of Cash Flows for the period from January 29, 1999
(date of inception) to April 30, 1999..................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 95
REPORT OF INDEPENDENT ACCOUNTANTS
To the Member of BEC Funding LLC:
In our opinion, the accompanying balance sheet and the related statements
of operations, changes in member's equity and cash flows present fairly, in all
material respects, the financial position of BEC Funding LLC (the "Company") at
April 30, 1999, and the results of its operations and its cash flows for the
period from January 29, 1999 (date of inception) to April 30, 1999, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
LOGO
June 7, 1999
F-2
<PAGE> 96
BEC FUNDING LLC
(A SPECIAL PURPOSE ENTITY)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JANUARY 29, 1999 (DATE OF INCEPTION) TO APRIL 30, 1999
<TABLE>
<S> <C>
Revenues.................................................... $ 0
Operating expenses..................................... 0
----
Operating income (loss)................................ 0
Interest expense, net....................................... 10
Bank Fees................................................... 71
----
Net loss.......................................... $(81)
====
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE> 97
BEC FUNDING LLC
(A SPECIAL PURPOSE ENTITY)
BALANCE SHEET
APRIL 30, 1999
<TABLE>
<S> <C>
ASSETS
Current Assets:
Cash................................................... $ 651
Members' contribution receivable -- due from
affiliate............................................. 1,000
----------
Total current assets.............................. 1,651
Debt issuance costs.................................... 1,223,069
----------
Total Assets...................................... $1,224,720
==========
LIABILITIES AND MEMBER'S EQUITY
Current Liabilities:
Due to affiliates...................................... 1,223,801
----------
Total current liabilities......................... 1,223,801
Commitments and contingencies (Note D)
Member's equity............................................. 919
----------
Total Liabilities and Member's Equity............. $1,224,720
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE> 98
BEC FUNDING LLC
(A SPECIAL PURPOSE ENTITY)
STATEMENT OF CHANGES IN MEMBER'S EQUITY
FOR THE PERIOD FROM JANUARY 29, 1999 (DATE OF INCEPTION) TO APRIL 30, 1999
<TABLE>
<S> <C>
Member's equity at January 29, 1999......................... $ 0
Initial member's contributions.............................. 1,000
Net loss.................................................... (81)
------
Member's equity at April 30, 1999........................... $ 919
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE> 99
BEC FUNDING LLC
(A SPECIAL PURPOSE ENTITY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 29, 1999 (DATE OF INCEPTION) TO APRIL 30, 1999
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss............................................... $ (81)
Changes in assets and liabilities
Members' contribution receivable - due from
affiliate............................................. (1,000)
Debt issuance costs.................................... (1,223,069)
Due to affiliates...................................... 1,222,801
-----------
Net cash used by operating activities.................. (1,349)
===========
Cash flows from investing activities:
Member's contributions................................. 1,000
-----------
Net cash used in investing activities.................. 1,000
-----------
Cash flows from financing activities:
Loan from BEC Energy........................................ 1,000
-----------
Net cash provided by financing activities................... 1,000
-----------
Net increase in cash........................................ 651
Cash at beginning of period................................. 0
-----------
Cash at end of period....................................... $ 651
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE> 100
BEC FUNDING LLC
(A SPECIAL PURPOSE ENTITY)
NOTES TO FINANCIAL STATEMENTS
A. OVERVIEW
NATURE OF BUSINESS
BEC Funding LLC is a special purpose, single member limited liability
company whose sole member is Boston Edison Company ("BECo"), a provider of
electric services. BEC Funding LLC is a wholly owned subsidiary of BECo, which
is a wholly owned subsidiary of BEC Energy.
BEC Funding LLC was organized on January 29, 1999 under the laws of the
State of Delaware for the sole purpose of acquiring and holding transition
property which BEC Funding LLC will acquire from BECo. The purchase price of
such transition property will be paid from proceeds of indebtedness secured by
the transition property and other collateral (the "Acquisition Indebtedness").
Transition property is the right to recover transition costs pursuant to a
non-bypassable reimbursable transition cost ("RTC") charge as authorized by a
financing order of the Commonwealth of Massachusetts Department of
Telecommunications and Energy (the "DTE") pursuant to certain provisions of
Chapter 164 of the Acts of the Massachusetts General Court of 1997 (the
"Electric Industry Restructuring Act"). Ultimately, the assets of BEC Funding
LLC will consist primarily of transition property acquired from BECo and other
collateral for the Acquisition Indebtedness.
It is expected that both its own organizational documents and debt
covenants relating to Acquisition Indebtedness, when incurred, will restrict BEC
Funding LLC's business activities to financing, purchasing, owning and managing
transition property. The organizational documents and documentation related to
the Acquisition Indebtedness will also require that BEC Funding LLC be operated
in a manner intended to reduce the likelihood that it would be consolidated in
BECo's bankruptcy estate if BECo became a debtor in a bankruptcy case.
BEC Funding LLC is legally separate from BECo. The assets and revenues of
BEC Funding LLC, including, without limitation, the transition property, are not
available to creditors of BECo nor BEC Energy, and the transition property and
other debt collateral will not be an asset of BECo nor BEC Energy. BEC Funding
LLC has had no significant operations to date. BEC Funding LLC has not acquired
the transition property, nor has the Acquisition Indebtedness been issued to
date.
BASIS OF PRESENTATION
The financial statements present BEC Funding LLC's results of operations
and its financial condition as it operated as a subsidiary of BECo. The
financial statements presented may not be indicative of the results that would
have been achieved had BEC Funding LLC operated as an unaffiliated entity.
As of April 30, 1999, BEC Funding LLC has relied on a $1,000 loan from BEC
Energy, an affiliated entity, to fund its initial operations. Alternative
sources of funding will need to be obtained either through external debt or
additional contributions by members for future operations. The DTE, as part of
the regulatory review process for this proposed issuance of debt, has approved
future funding by BECo of BEC Funding LLC.
F-7
<PAGE> 101
BEC FUNDING LLC
(A SPECIAL PURPOSE ENTITY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
INCOME TAXES
BEC Funding LLC is organized as a single member limited liability company.
Income or losses will be passed through to BECo, and accordingly there is no
provision for income taxes.
DEFERRED COSTS
Debt issuance costs associated with the proposed debt issuance incurred by
BECo and billed to BEC Funding LLC are deferred on the accompanying financial
statements and are expected to be amortized ratably over the life of the
underlying securities.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
C. RELATED PARTIES
BECo provides management, consulting and financial services to BEC Funding
LLC for a fee. Services are provided to BEC Funding LLC from BECo in accordance
with recent guidelines issued by the DTE relative to transactions between
regulated entities and unregulated affiliated entities, as specified in more
detail in DTE Order 98-118. BECo will also act as servicer of transition
property pursuant to a contract with BEC Funding LLC.
In February 1999, BEC Energy issued a $1,000 loan to BEC Funding LLC. The
note matures on December 31, 1999, with simple interest accruing on the
outstanding amount at the annual rate of 5.34%.
D. COMMITMENTS AND CONTINGENCIES
The issuance of the proposed debt and transfer of the transition property
from BECo to BEC Funding LLC is contingent upon BECo's sale of the Pilgrim
Nuclear Power Station generating facility. This sale is expected to take place
in July 1999.
F-8
<PAGE> 102
[This page intentionally left blank]
<PAGE> 103
[This page intentionally left blank]
<PAGE> 104
LOGO
$[ ] RATE REDUCTION CERTIFICATES
MASSACHUSETTS RRB
SPECIAL PURPOSE TRUST BEC-1
ISSUER OF THE CERTIFICATES
CLASS A-1 [$ ]
CLASS A-2 [$ ]
CLASS A-3 [$ ]
CLASS A-4 [$ ]
CLASS A-5 [$ ]
BEC FUNDING LLC
ISSUER OF NOTES
BOSTON EDISON COMPANY
SELLER AND SERVICER
----------------------------
PROSPECTUS SUPPLEMENT
----------------------------
LEHMAN BROTHERS
GOLDMAN, SACHS & CO.
BANC ONE CAPITAL MARKETS, INC.
BANCBOSTON ROBERTSON STEPHENS
BEAR, STEARNS & CO. INC.
BNY CAPITAL MARKETS, INC.
CIBC WORLD MARKETS
MERRILL LYNCH & CO.
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SALOMON SMITH BARNEY
STATE STREET CAPITAL MARKETS, LLC
<PAGE> 105
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than
underwriting discounts and commissions. All amounts shown are estimates, except
the Securities and Exchange Commission registration fee.
<TABLE>
<CAPTION>
ITEM AMOUNT
- ---- -------
<S> <C>
Securities and Exchange Commission Registration Fee... $
Blue Sky Fees and Expenses............................
Printing and Engraving Expenses.......................
Trustees' Fees and Expenses...........................
Accountants' Fees and Expenses........................
Legal Fees and Expenses...............................
Rating Agency Fees....................................
Public Agency Fees....................................
Miscellaneous Fees and Expenses.......................
-------
Total....................................... $
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 18-108 of the Delaware Limited Liability Company Act provides that
subject to such standards and restrictions, if any, as are set forth in its
limited liability company agreement, a limited liability company may and has the
power to indemnify and hold harmless any member or other person from and against
any and all claims and demands whatsoever.
Sections 10.01 and 10.02 of the Limited Liability Company Agreement of the
note issuer provide that, to the fullest extent permitted by applicable law, the
note issuer shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (including
actions by or in the right of the note issuer to procure a judgment in its
favor) by reason of the fact that he is or was a director, manager, officer,
employee or agent of the note issuer, or is or was serving at the request of the
note issuer as a manager, director, officer, employee or agent of another
company, partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit,
proceeding or in enforcing such person's right to indemnification hereunder, if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the note issuer, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful, provided that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the note issuer unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of
II-1
<PAGE> 106
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses as the Court of
Chancery or such other court shall deem proper. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a presumption
that the person did not act in good faith and in a manner that he reasonably
believed to be in or not opposed to the best interests of the note issuer, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
BEC Funding LLC has directors' and officers' liability insurance policies
in force insuring directors and officers of BEC Funding LLC.
Section 67 of the Massachusetts Business Corporation Law provides that a
corporation may indemnify its directors, officers, employees and other agents
and persons who serve at its request as directors, officers, employees or other
agents of another organization to the extent specified in the corporation's
Articles of Organization, or in a Bylaw or vote adopted by a majority of the
stockholders.
Under Section 9 of its Bylaws, Boston Edison Company indemnifies, to the
extent legally permissible, each of its directors and officers (including
persons who serve at its request as directors, officers or trustees of another
organization in which it has any interest, as a shareholder, creditor or
otherwise) against all liabilities and expenses, including amounts paid in
satisfaction of judgments, in compromise or as fines and penalties, and counsel
fees, reasonably incurred by such person in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or criminal,
in which such person may be involved or with which such person may be
threatened, while in office or thereafter, by reason of such person's being or
having been such a director, officer or trustee, except with respect to any
matter as to which such person shall have been adjudicated in any proceeding not
to have acted in good faith in the reasonable belief that his or her action was
in the best interests of the corporation. The note issuer believes that the
officers and the non-independent directors of the note issuer are serving at the
request of Boston Edison Company and are therefore entitled to such indemnity
from Boston Edison Company.
Boston Edison Company has directors' and officers' liability insurance
policies in force insuring directors and officers of Boston Edison Company and
its subsidiaries.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Certificate of Formation of the Registrant.+
3.2 Limited Liability Company Agreement of the Registrant.+
4.1 Form of Note Indenture.
4.2 Form of Certificate Indenture.
4.3 Form of Declaration of Trust.
4.4 Form of Note.
4.5 Form of Rate Reduction Certificate.
</TABLE>
II-2
<PAGE> 107
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
5.1 Opinion of Ropes & Gray with respect to legality of the
Notes.*
5.2 Opinion of Richards, Layton & Finger, P.A. with respect to
legality of the Rate Reduction Certificates.*
5.3 Opinion of Richards, Layton & Finger, P.A. with respect to
due authorization of the Notes by the Registrant.*
8.1 Opinion of Palmer & Dodge LLP with respect to federal and
state tax matters.*
10.1 Form of Transition Property Purchase and Sale Agreement.
10.2 Form of Transition Property Servicing Agreement.
10.3 Form of Note Purchase Agreement.
10.4 Form of Administration Agreement.
10.5 Form of Fee and Indemnity Agreement.
23.1 Consent of Ropes & Gray (contained in its opinion to be
filed as Exhibit 5.1).*
23.2 Consent of Palmer & Dodge LLP (contained in its opinions to
be filed as Exhibits 8.1 and 99.3).*
23.3 Consent of Richards, Layton & Finger, P.A. (contained in its
opinions to be filed as Exhibits 5.2 and 5.3).*
23.4 Consent of PricewaterhouseCoopers LLP.
25.1 Statement of Eligibility and Qualification of Note Trustee
on Form T-1.
25.2 Statement of Eligibility and Qualification of Certificate
Trustee on Form T-1.
27.1 Financial Data Schedule.
99.1 Application for Financing Order.+
99.2 Financing Order.+
99.3 Opinion of Palmer & Dodge LLP with respect to impairment of
contracts.*
</TABLE>
- -------------------------
* To be filed by amendment.
+ Previously filed.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant, on behalf of Massachusetts RRB Special Purpose
Trust BEC-1, hereby undertakes as follows:
(a)(1) to file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement: (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) to
reflect in the prospectus any facts or events arising after the effective date
of the Registration Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the Registration Statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a twenty percent
II-3
<PAGE> 108
change in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement; and (iii) to
include any material information with respect to the plan of distribution not
previously disclosed in the Registration Statement or any material change to
such information in the Registration Statement; provided, however, that
(a)(1)(i) and (a)(1)(ii) will not apply if the information required to be
included in a post-effective amendment by those paragraphs is contained in
periodic reports filed pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the Registration
Statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering hereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities registered which remain unsold at the termination of the
offering.
(b) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934), with respect to the Trust that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) That insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions described under Item 15
above, or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(d) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 109
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3, and has duly caused this Pre-Effective
Amendment No. 2 to Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boston, The Commonwealth
of Massachusetts, on this 14th day of July, 1999.
BEC FUNDING LLC,
as Registrant
By: EMILIE G. O'NEIL
---------------------------------------
Name: Emilie G. O'Neil
Title: Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Pre-Effective Amendment No. 2 to Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
ROBERT J. WEAFER, JR. President and Director (principal July 14, 1999
- ------------------------------------------ executive officer)
Robert J. Weafer, Jr.
EMILIE G. O'NEIL Vice President, Treasurer and Director July 14, 1999
- ------------------------------------------ (principal financial and accounting
Emilie G. O'Neil officer)
JAMES JUDGE Director July 14, 1999
- ------------------------------------------
James Judge
</TABLE>
II-5
<PAGE> 110
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
1.1 Form of Underwriting Agreement
4.1 Form of Note Indenture
4.2 Form of Certificate Indenture
4.3 Form of Declaration of Trust
4.4 Form of Note
4.5 Form of Rate Reduction Certificate
10.1 Form of Transition Property Purchase and Sale Agreement
10.2 Form of Transition Property Servicing Agreement
10.3 Form of Note Purchase Agreement
10.4 Form of Administration Agreement
10.5 Form of Fee and Indemnity Agreement
23.4 Consent of PricewaterhouseCoopers LLP
25.1 Statement of Eligibility and Qualification of Note Trustee
on Form T-1
25.2 Statement of Eligibility and Qualification of Certificate
Trustee on Form T-1
27.1 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 1.1
MASSACHUSETTS RRB SPECIAL PURPOSE TRUST BEC-1
RATE REDUCTION CERTIFICATES
BEC FUNDING LLC
BOSTON EDISON COMPANY
UNDERWRITING AGREEMENT
New York, New York
[ ], 1999
To the Representatives named in Schedule I
hereto of the Underwriters named in
Schedule II hereto
Ladies and Gentlemen:
1. Introduction. Massachusetts RRB Special Purpose Trust
BEC-1, a Delaware business trust to be formed (the "Trust"), will sell to the
underwriters named in Schedule II hereto (the "Underwriters"), for whom you (the
"Representatives") are acting as representatives, the principal amount of
Massachusetts RRB Special Purpose Trust BEC-1 Rate Reduction Certificates
identified in Schedule I hereto (the "Certificates"). If the firm or firms
listed in Schedule I hereto include only the firm or firms listed in Schedule II
hereto, then the terms "Underwriters" and "Representatives," as used herein,
shall each be deemed to refer to such firm or firms.
The Trust will be formed pursuant to a Declaration of Trust to be dated
prior to the Closing Date (as hereinafter defined) (the "Declaration of Trust"),
by The Bank of New York (Delaware), as Delaware Trustee (the "Delaware
Trustee"), and the Massachusetts Development Finance Agency and the
Massachusetts Health and Educational Facilities Authority (each an "Agency,"
and, collectively, the "Agencies"), acting jointly as settlors thereunder
pursuant to Chapter 164 of the Massachusetts Acts of 1997 (the "Statute"). The
Certificates will be issued pursuant to a Certificate Indenture dated as of
[ ], 1999 (the "Certificate Indenture"), between the Trust, the Delaware
Trustee and The Bank of New York, as Certificate Trustee (the "Certificate
Trustee"). The assets of the Trust will consist solely of the BEC Funding LLC
Notes (the "Notes"), issued by BEC Funding LLC, a Delaware limited liability
company (the "Note Issuer"), and the payments received with respect thereto.
The Notes will be issued pursuant to a Note Indenture dated as of [ ],
1999 (the "Note Indenture"), between the Note Issuer and
<PAGE> 2
The Bank of New York, as Note Trustee (the "Note Trustee"), and
purchased by the Trust pursuant to a Note Purchase Agreement dated as of
[ ], 1999 (the "Note Purchase Agreement"), between the Note Issuer and the
Trust. Each Class of Certificates will correspond to a Class of Notes and will
represent fractional undivided beneficial interests in such underlying Class of
Notes and the proceeds thereof. The Notes will be secured primarily by, and will
be payable from, the Transition Property described in the Issuance Advice
Letter. Such Transition Property will be sold to the Note Issuer by Boston
Edison Company, a Massachusetts corporation (the "Company"), pursuant to a
Transition Property Purchase and Sale Agreement dated as of [ ], 1999
(the "Sale Agreement"), between the Company, as Seller, and the Note Issuer. The
Transition Property will be serviced pursuant to a Transition Property Servicing
Agreement dated as of [ ], 1999 (as amended and supplemented from time to
time, the "Servicing Agreement"), between the Company, as Servicer, and the Note
Issuer.
Capitalized terms used and not otherwise defined herein shall have the
respective meanings given to them in the Note Indenture.
2. Representations and Warranties.
(a) Each of the Company and the Note Issuer represents and
warrants to, and agrees with, each Underwriter as set forth below in
this Section 2(a). Certain terms used in this Section 2(a) are defined
in paragraph (iii) below.
(i) If the offering of the Certificates is a Delayed
Offering (as specified in Schedule I hereto), paragraph (a)
below is applicable and, if the offering of the Certificates
is a Non-Delayed Offering (as so specified), paragraph (b)
below is applicable.
a. The Note Issuer, the Notes and the
Certificates meet the requirements for the
use of Form S-3 under the Securities Act of
1933 (the "Act"), and the Note Issuer has
filed with the Securities and Exchange
Commission (the "SEC") a registration
statement (file number 333-74671) on such
Form, including a basic prospectus, for
registration under the Act of the offering
and sale of the Certificates. The Note
Issuer may have filed one or more amendments
thereto, and may have used a Preliminary
Final Prospectus, each of which has
previously been furnished to you. Such
registration statement, as so amended, and
in the form heretofore delivered to you, has
become effective. The offering of the
Certificates is a Delayed Offering and,
although the Basic Prospectus may not
include all the information with respect to
the Certificates and the offering thereof
required by the Act and the rules thereunder
to be included in the Final Prospectus, the
Basic Prospectus includes all such
information required by the Act and the
rules thereunder to be included therein as
of the Effective Date. The Note Issuer will
next file with the SEC pursuant to Rules 415
and 424(b)(2) or (5) a final supplement to
the form of prospectus included in such
registration statement relating to the
Certificates
2
<PAGE> 3
and the offering thereof. As filed, such
final prospectus supplement shall include
all required information with respect to the
Certificates and the offering thereof and,
except to the extent the Representatives
shall agree in writing to a modification,
shall be in all substantive respects in the
form furnished to you prior to the Execution
Time or, to the extent not completed at the
Execution Time, shall contain only such
specific additional information and other
changes (beyond that contained in the Basic
Prospectus and any Preliminary Final
Prospectus) as the Note Issuer has advised
you, prior to the Execution Time, will be
included or made therein.
b. The Note Issuer, the Notes and the
Certificates meet the requirements for the
use of Form S-3 under the Act and the Note
Issuer has filed with the SEC a registration
statement (file number 333-74671) on such
Form, including a basic prospectus, for
registration under the Act of the offering
and sale of the Certificates. The Note
Issuer may have filed one or more amendments
thereto, including a Preliminary Final
Prospectus, each of which has previously
been furnished to you. The Note Issuer will
next file with the SEC either (x) a final
prospectus supplement relating to the
Certificates in accordance with Rules 430A
and 424(b)(1) or (4), or (y) prior to the
effectiveness of such registration
statement, an amendment to such registration
statement, including the form of final
prospectus supplement. In the case of clause
(x), the Note Issuer has included in such
registration statement, as amended at the
Effective Date, all information (other than
Rule 430A Information) required by the Act
and the rules thereunder to be included in
the Final Prospectus with respect to the
Certificates and the offering thereof. As
filed, such final prospectus supplement or
such amendment and form of final prospectus
supplement shall contain all Rule 430A
Information, together with all other such
required information, with respect to the
Certificates and the offering thereof and,
except to the extent the Representatives
shall agree in writing to a modification,
shall be in all substantive respects in the
form furnished to you prior to the Execution
Time or, to the extent not completed at the
Execution Time, shall contain only such
specific additional information and other
changes (beyond that contained in the Basic
Prospectus and any Preliminary Final
Prospectus) as the Note Issuer has advised
you, prior to the Execution Time, will be
included or made therein.
(ii) On the Effective Date, the Registration
Statement did or will, and when the Final Prospectus is first
filed (if required) in accordance with Rule 424(b) and on the
Closing Date, the Final Prospectus (and any supplement
thereto) will, comply in all material respects with the
applicable requirements of
3
<PAGE> 4
the Act, the Securities Exchange Act of 1934 (the "Exchange
Act") and the Trust Indenture Act of 1939 (the "Trust
Indenture Act") and the respective rules thereunder; on the
Effective Date, the Registration Statement did not or will not
contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary in order to make the statements therein not
misleading; on the Effective Date and on the Closing Date the
Note Indenture and the Certificate Indenture did or will
comply in all material respects with the requirements of the
Trust Indenture Act and the rules and regulations thereunder;
and, on the Effective Date, the Final Prospectus, if not filed
pursuant to Rule 424(b), did not or will not, and on the date
of any filing pursuant to Rule 424(b) and on the Closing Date,
the Final Prospectus (together with any supplement thereto)
will not, include any untrue statement of a material fact or
omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that
neither the Note Issuer nor the Company makes any
representations or warranties as to (i) that part of the
Registration Statement which shall constitute the Statements
of Eligibility and Qualification (Forms T-1) under the Trust
Indenture Act of the Note Trustee and the Certificate Trustee
or (ii) the information contained in or omitted from the
Registration Statement or the Final Prospectus (or any
supplement thereto) in reliance upon and in conformity with
information furnished in writing to the Note Issuer by or on
behalf of any Underwriter through the Representatives
specifically for inclusion in the Registration Statement or
the Final Prospectus (or any supplement thereto). No stop
order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose
have been instituted.
(iii) The terms which follow, when used in this
Agreement, shall have the meanings indicated. The term "the
Effective Date" shall mean each date that the Registration
Statement and any post-effective amendment or amendments
thereto became or become effective and each date after the
date hereof on which a document incorporated by reference in
the Registration Statement is filed. "Execution Time" shall
mean the date and time that this Agreement is executed and
delivered by the parties hereto. "Basic Prospectus" shall mean
the prospectus referred to in paragraph (a)(i) above contained
in the Registration Statement at the Effective Date including,
in the case of a Non-Delayed Offering, any Preliminary Final
Prospectus. "Preliminary Final Prospectus" shall mean any
preliminary prospectus supplement to the Basic Prospectus
which describes the Certificates and the offering thereof and
is used prior to filing of the Final Prospectus. "Final
Prospectus" shall mean the prospectus supplement relating to
the Certificates that is first filed pursuant to Rule 424(b)
after the Execution Time, together with the Basic Prospectus
or, if, in the case of a Non-Delayed Offering, no filing
pursuant to Rule 424(b) is required, shall mean the form of
final prospectus relating to the Certificates, including the
Basic Prospectus, included in the Registration Statement at
the Effective Date. "Registration Statement" shall mean the
registration statement referred to in paragraph (a)(i) above,
including all incorporated documents, exhibits and financial
statements, as amended at the Execution Time (or, if not
effective at the Execution Time, in the form in which it
4
<PAGE> 5
shall become effective) and, in the event any post-effective
amendment thereto becomes effective prior to the Closing Date
(as hereinafter defined), shall also mean such registration
statement as so amended. Such term shall include any Rule 430A
Information deemed to be included therein at the Effective
Date as provided by Rule 430A. "Rule 415," "Rule 424," "Rule
430A" and "Regulation S-K" refer to such rules or regulation
under the Act. "Rule 430A Information" means information with
respect to the Certificates and the offering thereof permitted
to be omitted from the Registration Statement when it becomes
effective pursuant to Rule 430A. Any reference herein to the
Registration Statement, the Basic Prospectus, any Preliminary
Final Prospectus or the Final Prospectus shall be deemed to
refer to and include the documents incorporated by reference
therein pursuant to Item 12 of Form S-3 which were filed under
the Exchange Act on or before the Effective Date of the
Registration Statement or the issue date of the Basic
Prospectus, any Preliminary Final Prospectus or the Final
Prospectus, as the case may be; and any reference herein to
the terms "amend," "amendment" or "supplement" with respect to
the Registration Statement, the Basic Prospectus, any
Preliminary Final Prospectus or the Final Prospectus shall be
deemed to refer to and include the filing of any document
under the Exchange Act after the Effective Date of the
Registration Statement or the issue date of the Basic
Prospectus, any Preliminary Final Prospectus or the Final
Prospectus, as the case may be, deemed to be incorporated
therein by reference. A "Non-Delayed Offering" shall mean an
offering of Certificates which is intended to commence
promptly after the effective date of a registration statement,
with the result that, pursuant to Rules 415 and 430A, all
information (other than Rule 430A Information) with respect to
the Certificates so offered must be included in such
registration statement at the effective date thereof. A
"Delayed Offering" shall mean an offering of Certificates
pursuant to Rule 415 which does not commence promptly after
the effective date of a registration statement, with the
result that only information required pursuant to Rule 415
need be included in such registration statement at the
effective date thereof with respect to the Certificates so
offered. Whether the offering of the Certificates is a
Non-Delayed Offering or a Delayed Offering shall be set forth
in Schedule I hereto.
3. Purchase and Sale. Subject to the terms and conditions and
in reliance upon the representations and warranties herein set forth, the Trust
will sell to each Underwriter, and each Underwriter agrees, severally and not
jointly, to purchase from the Trust, at the purchase price for each class of
Certificates set forth in Schedule II hereto, the respective principal amount of
each class of Certificates set forth opposite the name of each Underwriter on
Schedule II hereto. Simultaneously with the execution and delivery of this
Agreement, and as a condition precedent to the effectiveness of this Agreement,
the Agencies will deliver to the Company, the Note Issuer and the
Representatives an executed copy of the certificate attached hereto as Appendix
A.
4. Delivery and Payment. Delivery of and payment for the
Certificates shall be made at 9:00 AM Eastern Standard Time on [ ], 1999
(or such later date not later than five business days after such specified date
as the Representatives shall designate), which date and time may be postponed
by agreement between the Representatives and the Note Issuer or as
5
<PAGE> 6
provided in Section 9 hereof (such date and time of delivery and payment for the
Certificates being herein called the "Closing Date"). Delivery of the
Certificates shall be made to the Representatives for the respective accounts of
the several Underwriters against payment by the several Underwriters through the
Representatives of the purchase price thereof to the Trust by wire transfer of
immediately available funds in U.S. dollars. Delivery of the Certificates shall
be made at such location as the Representatives shall reasonably designate at
least one business day in advance of the Closing Date. The Certificates to be so
delivered shall be initially represented by Certificates registered in the name
of Cede & Co., as nominee of The Depository Trust Company ("DTC"). The interests
of beneficial owners of the Certificates will be represented by book entries on
the records of DTC and participating members thereof. Definitive Certificates
will be available only under limited circumstances described in the Final
Prospectus.
The Trust will have the Certificates available for inspection,
checking and packaging by the Representatives in New York, New York, not later
than 1:00 PM on the business day prior to the Closing Date.
5. Covenants.
(a) Covenants of the Note Issuer. The Note Issuer covenants
and agrees with the several Underwriters that:
(i) The Note Issuer will use its best efforts to
cause the Registration Statement, if not effective at the
Execution Time, and any amendment thereto, to become
effective. Prior to the termination of the offering of the
Certificates, the Note Issuer will not file any amendment of
the Registration Statement or supplement (including the Final
Prospectus or any Preliminary Final Prospectus) to the Basic
Prospectus unless the Note Issuer has furnished you a copy for
your review prior to filing and will not file any such
proposed amendment or supplement to which you reasonably
object. Subject to the foregoing sentence, the Note Issuer
will cause the Final Prospectus, properly completed in a form
approved by you, and any supplement thereto to be filed with
the SEC pursuant to the applicable paragraph of Rule 424(b)
within the time period prescribed and will provide evidence
satisfactory to the Representatives of such timely filing. The
Note Issuer will promptly advise the Representatives (i) when
the Registration Statement, if not effective at the Execution
Time, and any amendment thereto, shall have become effective,
(ii) when the Final Prospectus, and any supplement thereto,
shall have been filed with the SEC pursuant to Rule 424(b),
(iii) when, prior to termination of the offering of the
Certificates, any amendment to the Registration Statement
shall have been filed or become effective, (iv) of any request
by the SEC for any amendment of the Registration Statement or
supplement to the Final Prospectus or for any additional
information, (v) of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement or
the institution or threatening of any proceeding for that
purpose and (vi) of the receipt by the Note Issuer of any
notification with respect to the suspension of the
qualification of the Certificates for sale in any jurisdiction
or the initiation or threatening of any proceeding for such
purpose. The Note
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<PAGE> 7
Issuer will use its best efforts to prevent the issuance of
any such stop order and, if issued, to obtain as soon as
possible the withdrawal thereof.
(ii) If, at any time when a prospectus relating to
the Certificates is required to be delivered under the Act,
any event occurs as a result of which the Final Prospectus as
then supplemented would include any untrue statement of a
material fact or omit to state any material fact necessary to
make the statements therein in the light of the circumstances
under which they were made not misleading, or if it shall be
necessary to amend the Registration Statement or supplement
the Final Prospectus to comply with the Act or the Exchange
Act or the respective rules thereunder, the Note Issuer
promptly will (i) prepare and file with the SEC, subject to
the second sentence of paragraph (a) of this Section 5, an
amendment or supplement which will correct such statement or
omission or effect such compliance and (ii) supply any
supplemented Prospectus to you in such quantities as you may
reasonably request.
(iii) As soon as practicable, the Note Issuer will
use its reasonable efforts to cause the Trust to make
generally available to the Certificateholders and the
Representatives an earnings statement or statements of the
Trust which will satisfy the provisions of Section 11(a) of
the Act and Rule 158 under the Act.
(iv) The Note Issuer will furnish to the
Representatives and counsel for the Underwriters, without
charge, copies of the Registration Statement (including
exhibits thereto) and, so long as delivery of a prospectus by
an Underwriter or dealer may be required by the Act, as many
copies of any Preliminary Final Prospectus and the Final
Prospectus and any supplement thereto as the Representatives
may reasonably request. The Note Issuer shall furnish or cause
to be furnished to the Representatives copies of all reports
on Form SR required by Rule 463 under the Act. The Note Issuer
will pay the expenses of printing or other production of all
documents relating to the offering.
(v) The Note Issuer will arrange for the
qualification of the Certificates for sale under the laws of
such jurisdictions as the Representatives may designate, will
maintain such qualifications in effect so long as required for
the distribution of the Certificates and will arrange for the
determination of the legality of the Certificates for purchase
by institutional investors; provided, however, that in no
event shall the Note Issuer be obligated to qualify to do
business in any jurisdiction where it is not now so qualified
or to take any action that would subject it to service of
process in suits, other than those arising out of the offering
or sale of the Certificates, in any jurisdiction where it is
not now so subject.
(vi) Until 90 days after the date hereof, the Note
Issuer will not, without the written consent of the
Representatives, offer, sell or contract to sell, or otherwise
dispose of, directly or indirectly, or announce the offering
of, any asset-backed securities of a trust or other special
purpose vehicle (other than the Notes and the Certificates).
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<PAGE> 8
(vii) For a period from the date of this Agreement
until the retirement of the Certificates or until such time as
the Underwriters shall cease to maintain a secondary market in
the Certificates, whichever occurs first, the Note Issuer will
deliver to the Representatives the annual statements of
compliance and the annual independent auditor's servicing
reports furnished to the Note Issuer or the Note Trustee
pursuant to the Servicing Agreement or the Note Indenture, as
applicable, as soon as such statements and reports are
furnished to the Note Issuer or the Note Trustee.
(viii) So long as any of the Certificates are
outstanding, the Note Issuer will furnish to the
Representatives (i) as soon as available, a copy of each
report of the Note Issuer or the Trust filed with the SEC
under the Exchange Act, or mailed to Certificateholders, (ii)
a copy of any filings with the Massachusetts Department of
Transportation and Energy ("DTE") pursuant to the Financing
Order, including, but not limited to, any Advice Letters, and
(iii) from time to time, any information concerning the
Company, the Note Issuer or the Trust, as the Representatives
may reasonably request.
(ix) To the extent, if any, that any rating necessary
to satisfy the condition set forth in Section 6(r) of this
Agreement is conditioned upon the furnishing of documents or
the taking of other actions by the Note Issuer on or after the
Closing Date, the Note Issuer shall furnish such documents and
take such other actions.
(b) Covenants of the Company. The Company covenants and agrees
with the several Underwriters that, to the extent that the Note Issuer
has not already performed such act pursuant to Section 5(a):
(i) The Company will use its best efforts to cause
the Registration Statement, if not effective at the Execution
Time, and any amendment thereto, to become effective. The
Company will use its best efforts to prevent the issuance by
the SEC of any stop order suspending the effectiveness of the
Registration Statement and, if issued, to obtain as soon as
possible the withdrawal thereof.
(ii) The Company will cause the proceeds from the
sale of the Transition Property to be applied for the purposes
described in the Prospectus under the caption "Use of
Proceeds."
(iii) Until 90 days after the date hereof, the
Company will not, without the written consent of the
Representatives, offer, sell or contract to sell, or otherwise
dispose of, directly or indirectly, or announce the offering
of, any asset-backed securities of a trust or other special
purpose vehicle (other than the Notes and the Certificates).
(iv) So long as any of the Certificates are
outstanding and the Company is the Servicer, the Company will
furnish to the Representatives (i) as soon as available, a
copy of each report of the Trust filed with the SEC under the
8
<PAGE> 9
Exchange Act, or mailed to Certificateholders, (ii) a copy of
any filings with the DTE pursuant to the Financing Order,
including, but not limited to, any Advice Letters, and (iii)
from time to time, any information concerning the Company, the
Note Issuer or the Trust, as the Representatives may
reasonably request.
(v) To the extent, if any, that any rating necessary
to satisfy the condition set forth in Section 6(r) of this
Agreement is conditioned upon the furnishing of documents or
the taking of other actions by the Company on or after the
Closing Date, the Company shall furnish such documents and
take such other actions.
(vi) If, at any time when a prospectus relating to
the Certificates is required to be delivered under the Act,
any event occurs as a result of which the Final Prospectus as
then supplemented would include any untrue statement of a
material fact or omit to state any material fact necessary to
make the statements therein in the light of the circumstances
under which they were made not misleading, or if it shall be
necessary to amend the Registration Statement or supplement
the Final Prospectus to comply with the Act or the Exchange
Act or the respective rules thereunder, the Company at the
Note Issuer's expense promptly will (i) prepare and file with
the SEC, subject to the second sentence of paragraph (a) of
this Section 5, an amendment or supplement which will correct
such statement or omission or effect such compliance and (ii)
supply any supplemented Prospectus to you in such quantities
as you may reasonably request.
6. Conditions to the Obligations of the Underwriters. The
obligations of the Underwriters to purchase the Certificates shall be subject to
the accuracy of the representations and warranties on the part of the Note
Issuer and the Company contained herein as of the Execution Time and the Closing
Date and on the part of the Company contained in Article III of the Sale
Agreement and in Section 6.01 of the Servicing Agreement as of the Closing Date,
to the accuracy of the statements of the Note Issuer, the Company and the Trust
made in any certificates pursuant to the provisions hereof, to the performance
by the Note Issuer, the Company and the Trust of their obligations hereunder to
be performed on or prior to the Closing Date and to the following additional
conditions:
(a) If the Registration Statement has not become effective
prior to the Execution Time, unless the Representatives agree in
writing to a later time, the Registration Statement will become
effective not later than (i) 6:00 PM Eastern Standard Time, on the date
of determination of the public offering price, if such determination
occurred at or prior to 3:00 PM Eastern Standard Time on such date, or
(ii) 12:00 Noon Eastern Standard Time on the business day following the
day on which the public offering price was determined, if such
determination occurred after 3:00 PM Eastern Standard Time on such
date; if filing of the Final Prospectus, or any supplement thereto, is
required pursuant to Rule 424(b), the Final Prospectus, and any such
supplement, shall have been filed in the manner and within the time
period required by Rule 424(b); and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and
no proceedings for that purpose shall have been instituted or
threatened.
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<PAGE> 10
(b) The Representatives shall have received opinions of
counsel for the Company, portions of which may be delivered by Ropes &
Gray, outside counsel for the Company, portions of which may be
delivered by [ ], in-house counsel for the Company, and portions
of which may be delivered by Richards, Layton & Finger, P.A., special
Delaware counsel for the Company, each dated the Closing Date, in form
and substance reasonably satisfactory to the Representatives, to the
effect that:
(i) the Company (a) has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the jurisdiction in which it is chartered or organized
and (b) has all requisite corporate power and authority to own
its properties, conduct its business as presently conducted
and execute, deliver and perform its obligations under this
Agreement, the Sale Agreement and the Servicing Agreement;
(ii) the Sale Agreement and the Servicing Agreement
have been duly authorized, executed and delivered, and
constitute legal, valid and binding instruments enforceable
against the Company in accordance with their terms (subject,
as to enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium or other similar laws
or equitable principles affecting creditors' rights generally
from time to time in effect);
(iii) to the knowledge of such counsel, there is no
pending or threatened action, suit or proceeding before any
court or governmental agency, authority or body or any
arbitrator involving the Company or any of its subsidiaries of
a character required to be disclosed in the Registration
Statement which is not adequately disclosed in the Final
Prospectus, and there is no franchise, contract or other
document of a character required to be described in the
Registration Statement or Final Prospectus, or to be filed as
an exhibit, which is not described or filed as required;
(iv) this Agreement has been duly authorized,
executed and delivered by the Company;
(v) no consent, approval, authorization or order of
any court or governmental agency or body is required to be
obtained by the Company for the consummation of the
transactions contemplated herein, except such as have been
obtained under the Statute, the DTE Regulations (as defined in
Section 1.01 of the Servicing Agreement) and the Act and such
as may be required under the blue sky laws of any jurisdiction
in connection with the purchase and distribution of the
Certificates by the Underwriters and such other approvals
(specified in such opinion) as have been obtained;
(vi) neither the execution and delivery of this
Agreement, the Sale Agreement, the Servicing Agreement, the
Administration Agreement nor the consummation of the
transactions contemplated by this Agreement, the Sale
Agreement, the Servicing Agreement or the Administration
Agreement nor the fulfillment of the terms of this Agreement,
the Sale Agreement, the Servicing Agreement
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<PAGE> 11
Agreement or the Administration Agreement by the Company, will
(A) conflict with, result in any breach of any of the terms or
provisions of, or constitute (with or without notice or lapse
of time) a default under the articles of incorporation, bylaws
or other organizational documents of the Company, or conflict
with or breach any of the material terms or provisions of, or
constitute (with or without notice or lapse of time) a default
under, any indenture, material agreement or other material
instrument filed as an Exhibit to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1999, (B)
result in the creation or imposition of any lien upon any
properties of the Company pursuant to the terms of any such
indenture, agreement or other instrument (other than as
contemplated by the Basic Documents and Section 1H(e) of the
Statute), or (C) violate any Massachusetts or federal law or
any order, rule or regulation applicable to the Company of any
Massachusetts or federal court or regulatory body,
administrative agency or other governmental instrumentality
having jurisdiction over the Company, or any of its
properties; and
(vii) upon the delivery of the fully executed Sale
Agreement to the Note Issuer and the payment of the purchase
price of the Transition Property by the Note Issuer to the
Seller pursuant to the Sale Agreement, then (A) the transfer
of the Transition Property by the Seller to the Note Issuer
pursuant to the Sale Agreement conveys the Seller's right,
title and interest in the Transition Property to the Note
Issuer and will be treated as an absolute transfer of all of
the Seller's right, title, and interest in the Transition
Property, other than for federal and state income tax
purposes, (B) such transfer of the Transition Property is
perfected, (C) such transfer has priority over any other
assignment of the Transition Property, and (D) the Transition
Property is free and clear of all liens created prior to its
transfer to the Note Issuer pursuant to the Sale Agreement.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than The
Commonwealth of Massachusetts or the United States, to the extent
deemed proper and specified in such opinion, upon the opinion of other
counsel of good standing believed to be reliable and who are
satisfactory to counsel for the Underwriters and (B) as to matters of
fact, to the extent deemed proper, on certificates of responsible
officers of the Company. References to the Final Prospectus in this
paragraph (b) include any supplements thereto at the Closing Date.
(c) The Representatives shall have received opinions of
counsel for the Note Issuer, portions of which may be delivered by
Ropes & Gray, outside counsel for the Note Issuer, and portions of
which may be delivered by [ ], Esq., in-house counsel for
the Note Issuer, and portions of which may be delivered by Richards,
Layton & Finger, P.A., special Delaware counsel for the Note Issuer,
each dated the Closing Date, in form and substance reasonably
satisfactory to the Representatives, to the effect that:
(i) the Note Issuer has been duly formed and is
validly existing in good standing as a limited liability
company under the laws of the State of Delaware, with all
necessary limited liability company power and authority to
11
<PAGE> 12
execute, deliver and perform its obligations under this
Agreement, the Sale Agreement, the Servicing Agreement, the
Note Indenture, the Note Purchase Agreement, the
Administration Agreement, the Fee and Indemnity Agreement and
the Notes;
(ii) the Sale Agreement, the Servicing Agreement, the
Note Indenture, the Note Purchase Agreement, the
Administration Agreement and the Fee and Indemnity Agreement
have been duly authorized, executed and delivered, and
constitute legal, valid and binding instruments enforceable
against the Note Issuer in accordance with their terms
(subject, as to enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency, moratorium or other
similar laws or equitable principles affecting creditors'
rights generally from time to time in effect); and the Notes
have been duly authorized and executed, and when authenticated
in accordance with the provisions of the Note Indenture and
delivered to and paid for by the Trust in accordance with the
terms of the Note Purchase Agreement, will constitute legal,
valid and binding obligations of the Note Issuer entitled to
the benefits of the Note Indenture (subject, as to enforcement
of remedies, to applicable bankruptcy, reorganization,
insolvency, moratorium or other similar laws or equitable
principles affecting creditors' rights generally from time to
time in effect);
(iii) the Sale Agreement, the Servicing Agreement,
the Note Indenture, the Note Purchase Agreement, the
Administration Agreement, the Fee and Indemnity Agreement and
the Notes conform to the descriptions thereof contained in the
Final Prospectus;
(iv) the Note Indenture has been duly qualified under
the Trust Indenture Act;
(v) to the knowledge of such counsel, after having
made inquiry of officers of the Note Issuer, but without
having made any other investigation, there is no pending or
threatened action, suit or proceeding before any court or
governmental agency, authority or body or any arbitrator
involving the Note Issuer, or challenging the Notes, the
Financing Order or the collection of the RTC Charge or the use
and enjoyment of transition property under the Statute of a
character required to be disclosed in the Registration
Statement which is not adequately disclosed in the Final
Prospectus, and there is no franchise, contract or other
document relating to the Note Issuer, the Notes or the
Financing Order of a character required to be described in the
Registration Statement or Final Prospectus, or to be filed as
an exhibit, which is not described or filed as required; and
the statements included or incorporated in the Final
Prospectus under the headings "Energy Deregulation and New
Massachusetts Market Structure" (to the extent the Statute is
described), "Description of the Transition Property," "The
Note Issuer," "Servicing" (to the extent the Servicing
Agreement is described) and "Description of the Notes" fairly
summarize the matters described therein;
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<PAGE> 13
(vi) the Registration Statement has become effective
under the Act; any required filing of the Basic Prospectus,
any Preliminary Final Prospectus and the Final Prospectus, and
any supplements thereto, pursuant to Rule 424(b) have been
made in the manner and within the time period required by Rule
424(b); to the knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement has
been issued, no proceedings for that purpose have been
instituted or threatened, and the Registration Statement and
the Final Prospectus (other than the financial statements and
other financial and statistical information contained therein
as to which such counsel need express no opinion) comply as to
form in all material respects with the applicable requirements
of the Act, the Exchange Act and the Trust Indenture Act and
the respective rules thereunder; and such counsel has no
reason to believe that at the Effective Date the Registration
Statement contained any untrue statement of a material fact or
omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not
misleading or that the Final Prospectus as of its date and the
Closing Date includes any untrue statement of a material fact
or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under
which they were made, not misleading (other than the financial
statements and other financial and statistical information
contained therein as to which such counsel need express no
opinion);
(vii) this Agreement has been duly authorized,
executed and delivered by the Note Issuer;
(viii) no consent, approval, authorization or order
of any Massachusetts or federal court or governmental agency
or body is required to be obtained by the Note Issuer for the
issuance of the Notes or the consummation by the Note Issuer
of transactions contemplated herein, except such as have been
obtained under the Statute, the DTE Regulations and the Act
and such as may be required under the blue sky laws of any
jurisdiction in connection with the purchase and distribution
of the Certificates by the Underwriters and such other
approvals (specified in such opinion) as have been obtained;
(ix) neither the execution and delivery of this
Agreement, Sale Agreement, the Servicing Agreement, the Note
Indenture, the Note Purchase Agreement, the Administration
Agreement or the Fee and Indemnity Agreement, nor the issue
and sale of the Notes, nor the consummation of the
transactions contemplated by this Agreement, Sale Agreement,
the Servicing Agreement, the Note Indenture, the Note Purchase
Agreement, the Administration Agreement or the Fee and
Indemnity Agreement, nor the fulfillment of the terms of this
Agreement, Sale Agreement, the Servicing Agreement, the Note
Indenture, the Note Purchase Agreement, the Administration
Agreement or the Fee and Indemnity Agreement by the Note
Issuer, will (A) conflict with, result in any breach of any of
the terms or provisions of, or constitute (with or without
notice or lapse of time) a default under the Limited Liability
Company Agreement of the Note Issuer, or conflict with or
breach any of the material terms or provisions of,
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<PAGE> 14
or constitute (with or without notice or lapse of time) a
default under, any indenture, agreement or other instrument
known to such counsel and to which the Note Issuer is a party
or by which the Note Issuer is bound, (B) result in the
creation or imposition of any lien upon any properties of the
Note Issuer pursuant to the terms of any such indenture,
agreement or other instrument (other than as contemplated by
the Basic Documents and Section 1H(e) of the Statute), or (C)
violate any Massachusetts or federal law or any order, rule or
regulation applicable to the Note Issuer of any Massachusetts
or federal court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality
having jurisdiction over the Note Issuer, or any of its
properties;
(x) Upon the giving of value by the Note Trustee to
the Note Issuer with respect to the Collateral, (I) the Note
Indenture creates in favor of the Note Trustee a security
interest in the rights of the Note Issuer in the Collateral,
(II) such security interest is valid against the Note Issuer
(subject to the rights of any third parties holding security
interests in such Collateral perfected in the manner described
in Sections 1H(d) and (e) of the Statute), and has attached
and (III) such security interest is perfected; and
(xi) the Note Issuer is not an "investment company"
or under the "control" of an "investment company" as such
terms are defined under the Investment Company Act of 1940, as
amended.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than The
Commonwealth of Massachusetts or the United States, to the extent
deemed proper and specified in such opinion, upon the opinion of other
counsel of good standing believed to be reliable and who are
satisfactory to counsel for the Underwriters and (B) as to matters of
fact, to the extent deemed proper, on certificates of responsible
officers of the Note Issuer and public officials. References to the
Final Prospectus in this paragraph (c) include any supplements thereto
at the Closing Date.
(d) The Representatives shall have received opinions of
counsel for the Trust and the Agencies, portions of which may be
delivered by Palmer & Dodge LLP, special counsel for the Trust and the
Agencies, and portions of which may be delivered by Richards, Layton &
Finger, P.A., special Delaware counsel for the Trust, each dated the
Closing Date, in form and substance reasonably satisfactory to the
Representatives, to the effect that:
(i) the Declaration of Trust, the Certificate
Indenture and the Certificates conform in all material
respects with the descriptions thereof contained in the Final
Prospectus under the headings "The Trust" and "Description of
the Certificates" (other than information regarding DTC, CEDEL
and Euroclear, as to which we express no opinion) and in the
Prospectus Summary under the headings "The Certificates,"
"Issuer of Certificates," "Certificate Trustee," "Interest"
and "Principal";
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<PAGE> 15
(ii) the Trust has been duly created and is validly
existing in good standing as a business trust under Delaware
Business Trust Act, 12 Del.C. Section 3801, et seq.;
(iii) each of the Agencies is a duly created and
validly existing body politic and corporate and a public
instrumentality of The Commonwealth of Massachusetts with the
necessary power, authority and legal right to execute, deliver
and perform all of its obligations under the Declaration of
Trust and the issuance resolution of each Agency;
(iv) the Declaration of Trust has been duly
authorized, executed and delivered by the Agencies and,
assuming the due authorization, execution and delivery thereof
by the Delaware Trustee, constitutes a legal, valid and
binding instrument enforceable against the Agencies in
accordance with its terms, except as enforcement thereof may
be subject to or limited by bankruptcy, insolvency,
moratorium, reorganization, fraudulent conveyance or other
similar laws relating to or affecting the enforcement of
creditors' rights generally, and except as limited by general
equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at
law);
(v) the Certificate Indenture has been duly
authorized, executed and delivered by the Delaware Trustee on
behalf of the Trust and, assuming the due authorization,
execution and delivery thereof by the Certificate Trustee,
constitutes a legal, valid and binding instrument, enforceable
against the Trust in accordance with its terms, except as
enforcement thereof may be subject to or limited by
bankruptcy, insolvency, moratorium, reorganization, fraudulent
conveyance or other similar laws relating to or affecting the
enforcement of creditors' rights generally, and except as
limited by general equitable principles (regardless of whether
such enforceability is considered in a proceeding in equity or
at law);
(vi) the Certificates have been duly authorized and
executed and, when authenticated in accordance with the
provisions of the Certificate Indenture and delivered to and
paid for by the Underwriters pursuant to this Agreement, (A)
will be duly issued in conformity with the Statute, (B) will
constitute legal and valid obligations of the Trust, (C) will
be entitled to the benefits of the Certificate Indenture, (D)
will constitute "electric rate reduction bonds" under Section
1H of the Statute and (E) will be entitled to the benefits and
protections afforded under the Statute;
(vii) the Note Purchase Agreement has been duly
authorized, executed and delivered by the Delaware Trustee on
behalf of the Trust and, assuming due authorization, execution
and delivery thereof by BEC Funding LLC, constitutes a legal,
valid and binding instrument, enforceable against the Trust in
accordance with its terms, except as enforcement thereof may
be subject to or limited by bankruptcy, insolvency,
moratorium, reorganization, fraudulent conveyance or other
similar laws relating to or affecting the enforcement of
creditors' rights
15
<PAGE> 16
generally, and except as limited by general equitable
principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law);
(viii) the issuance resolutions of the Agencies have
been duly and validly adopted by the Agencies in compliance
with all applicable laws and are in full force and effect;
(ix) pursuant to the issuance resolutions of the
Agencies, the Agencies have validly authorized and approved
the formation of the Trust, the issuance of the Certificates
and all other transactions and actions contemplated by the
Basic Documents or required to be taken by the Agencies as
conditions precedent to the issuance of the Certificates; such
authorizations and approvals are valid and in full force and
effect;
(x) the Certificate Indenture has been duly qualified
under the Trust Indenture Act of 1939, as amended;
(xi) the statements included in the Final Prospectus
under the headings "The Trust," "The Agencies" and
"Description of the Certificates" fairly summarize the matters
described therein (other than matters related to DTC, CEDEL or
Euroclear, as to which we express no opinion) and the
statements included or incorporated in the Final Prospectus
under the headings "Federal Income Tax Consequences," "State
Taxation" and "ERISA Considerations," and under the following
subheadings of the heading "Risk Factors": "Legislative
actions," "Court decisions," "Bankruptcy and Creditors' Rights
Issues" and "Possible federal preemption of the statute may
prohibit recovery of the RTC charge," to the extent that they
constitute matters of Massachusetts or federal law or legal
conclusions with respect thereto, provide a fair and accurate
summary of such law or conclusions;
(xii) to the actual knowledge of the lawyers in such
counsel's firm responsible for preparing such opinion after
consultation with such other lawyers in such firm and review
of such documents in such counsel's possession as such counsel
considers appropriate, but without examination of the docket
of any court or agency or any other special investigation,
there is no pending or threatened action, suit or proceeding
before any court or governmental agency, authority or body or
any arbitrator challenging the validity or enforceability of
the issuance resolutions of the Agencies or actions taken by
the Agencies in connection therewith or otherwise involving
the Agencies or relating to the Certificates or the Trust of a
character required to be described in the Registration
Statement or Final Prospectus, or to be filed as an exhibit,
which is not described or filed as required;
(xiii) to the knowledge of such counsel, the
Registration Statement and the Final Prospectus (other than
(A) the financial statements and other financial, numerical,
statistical and quantitative information contained therein,
(B) information contained under the captions "The Note Issuer"
and "The Seller and Servicer," (C) information regarding DTC,
CEDEL and Euroclear and (D) the
16
<PAGE> 17
statement of eligibility of the Trustee on Form T-l and the
documents incorporated by reference therein, as to which we
make no statement and express no opinion) comply as to form in
all material respects with the applicable requirements of the
Act, the Exchange Act and the Trust Indenture Act and the
respective rules thereunder, and such counsel has no reason to
believe that at the Effective Date the Registration Statement
contained any untrue statement of a material fact or omitted
to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading or
that the Final Prospectus as of its date and the Closing Date
includes any untrue statement of a material fact or omits to
state a material fact necessary to make the statements
therein, in the light of the circumstances under which they
were made, not misleading (other than (A) the financial
statements and other financial, numerical, statistical and
quantitative information contained therein, (B) information
contained under the captions "The Note Issuer" and "The Seller
and Servicer," (C) information regarding DTC, CEDEL and
Euroclear and (D) the statement of eligibility of the Trustee
on Form T-l and the documents incorporated by reference
therein, as to which we make no statement and express no
opinion);
(xiv) this Agreement has been duly authorized,
executed and delivered by the Delaware Trustee on behalf of
the Trust;
(xv) no consent, approval, authorization or order of
any court or governmental agency or body is required to be
obtained by the Delaware Trustee, the Certificate Trustee or
the Trust under Massachusetts or federal law for the issuance
of the Certificates by the Trust, except such as have been
obtained under the Statute, the DTE Regulations and the Act
and such as may be required under the blue sky laws of any
jurisdiction in connection with the purchase and distribution
of the Certificates by the Underwriters and such other
approvals (specified in such opinion) as have been obtained;
(xvi) neither the execution and delivery of this
Agreement or the Certificate Indenture, nor the issuance and
sale of the Certificates, nor the consummation of the
transactions contemplated by this Agreement or the Certificate
Indenture, nor the fulfillment of the terms of this Agreement
or the Certificate Indenture by the Trust 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 Certificate of Trust or Declaration of Trust
or other procedural documents of the Trust, 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 Trust is a party or by which the
Trust is bound, (B) result in the creation or imposition of
any lien upon any properties of the Trust pursuant to the
terms of any such indenture, agreement or other instrument
(except as contemplated by the Basic Documents or created
pursuant to the Statute), or (C) violate any Massachusetts or
federal law, order, rule or regulation applicable to the Trust
of any Massachusetts or federal court or of any federal or
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<PAGE> 18
Massachusetts state regulatory body, administrative agency or
other governmental instrumentality having jurisdiction over
the Trust, or any of its properties;
(xvii) neither the execution and delivery of the
Declaration of Trust, nor the consummation of the transactions
contemplated by the Declaration of Trust, nor the fulfillment
of the terms of the Declaration of Trust by the Agencies will
(A) conflict with, result in any breach of any of the terms or
provisions of, or constitute (with or without notice or lapse
of time) a default under the bylaws or procedural documents of
the Agencies, 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
Agencies are parties or by which the Agencies are bound, (B)
result in the creation or imposition of any lien upon any
properties of the Agencies pursuant to the terms of any such
indenture, agreement or other instrument (except as
contemplated by the Basic Documents or created pursuant to the
Statute), or (C) violate any Massachusetts or federal law,
order, rule or regulation applicable to the Agencies of any
Massachusetts or federal court or of any federal or
Massachusetts state regulatory body, administrative agency or
other governmental instrumentality having jurisdiction over
the Agencies, or any of their properties; and
(xviii) the Trust is not an "investment company" or
under the "control" of an "investment company" as such terms
are defined under the Investment Company Act of 1940, as
amended.
In rendering such opinion, such counsel may (A) rely as to matters
involving the application of laws of any jurisdiction other than The
Commonwealth of Massachusetts or the United States, to the extent
deemed proper and specified in such opinion, upon the opinion of other
counsel of good standing believed to be reliable and who are
satisfactory to counsel for the Underwriters, (B) as to matters
relating to actions taken by the Company, the Note Issuer, the Note
Trustee, the DTE and the Servicer, assume such matters which are the
subject of opinions rendered by counsel to such parties hereunder or
under the Basic Documents, and (C) rely as to matters of fact, to the
extent deemed proper, on certificates of authorized representatives of
the Trust, the Agencies and public officials. References to the Final
Prospectus in this paragraph (d) include any supplements thereto at the
Closing Date.
(e) The Representatives shall have received an opinion of
Winthrop Stimson Putnam & Roberts, counsel to the Note Trustee, dated
the Closing Date, in form and substance reasonably satisfactory to the
Representatives, to the effect that:
(i) the Note Trustee is validly existing as a state
banking institution in good standing under the laws of the
State of New York;
(ii) the Note Indenture has been duly authorized,
executed and delivered, and constitutes a legal, valid and
binding instrument enforceable against the Note Trustee in
accordance with its terms (subject, as to enforcement
18
<PAGE> 19
of remedies, to applicable bankruptcy, reorganization,
insolvency, moratorium or other similar laws or equitable
principles affecting creditors' rights generally from time to
time in effect); and
(iii) the Notes have been duly authenticated by the
Note Trustee.
(f) The Representatives shall have received an opinion of
Winthrop Stimson Putnam & Roberts, counsel to the Certificate Trustee,
dated the Closing Date, in form and substance reasonably satisfactory
to the Representatives, to the effect that:
(i) the Certificate Trustee is validly existing as a
state banking institution in good standing under the laws of
the State of New York;
(ii) the Certificate Indenture has been duly
authorized, executed and delivered by the Certificate Trustee
and constitutes a legal, valid and binding instrument
enforceable against the Certificate Trustee in accordance with
its terms (subject, as to enforcement of remedies, to
applicable bankruptcy, reorganization, insolvency, moratorium
or other similar laws or equitable principles affecting
creditors' rights generally from time to time in effect); and
(iii) the Certificate Trustee has duly authenticated
and delivered the Certificates issued on the Closing Date on
behalf of the Trust;
(g) The Representatives shall have received an opinion of
Richards, Layton & Finger, P.A., counsel to the Delaware Trustee, dated
the Closing Date, in form and substance reasonably satisfactory to the
Representatives, to the effect that:
(i) the Delaware Trustee is duly incorporated and is
validly existing as a banking corporation in good standing
under the laws of the State of Delaware, with full corporate
trust power and authority to enter into and perform its
obligations under the Declaration of Trust, and under the Note
Purchase Agreement and the Certificate Indenture on behalf of
the Trust; and
(ii) the Declaration of Trust, the Note Purchase
Agreement (on behalf of the Trust) and this Agreement (on
behalf of the Trust) have been duly authorized, executed and
delivered by the Delaware Trustee, and constitute legal, valid
and binding instruments enforceable against the Delaware
Trustee in accordance with their terms (subject, as to
enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium or other similar laws
or equitable principles affecting creditors' rights generally
from time to time in effect);
(iii) the Delaware Trustee has duly executed the
Certificates issued on the Closing Date on behalf of the
Trust;
(h) The Representatives shall have received from Brown & Wood
LLP, counsel for the Underwriters, such opinion or opinions, dated the
Closing Date, with respect to the issuance and sale of the Notes and
the Certificates, the Note Indenture, the Certificate
19
<PAGE> 20
Indenture, the Registration Statement, the Final Prospectus (together
with any supplement thereto) and other related matters as the
Representatives may reasonably require, and the Company, the Note
Issuer and the Trust shall have furnished to such counsel such
documents as they request for the purpose of enabling them to pass upon
such matters.
(i) The Representatives shall have received a certificate of
the Note Issuer, signed by an officer of the Note Issuer, dated the
Closing Date, to the effect that the signer of such certificate has
carefully examined the Registration Statement, the Final Prospectus,
any supplement to the Final Prospectus and this Agreement and that:
(i) the representations and warranties of the Note
Issuer in this Agreement and in the Note Indenture are true
and correct in all material respects on and as of the Closing
Date with the same effect as if made on the Closing Date, and
the Note Issuer has complied with all the agreements and
satisfied all the conditions on its part to be performed or
satisfied at or prior to the Closing Date;
(ii) no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings
for that purpose have been instituted or, to the Note Issuer's
knowledge, threatened; and
(iii) since the dates as of which information is
given in the Final Prospectus (exclusive of any supplement
thereto), there has been no material adverse change in (x) the
condition (financial or other), earnings, business or
properties of the Note Issuer, whether or not arising from
transactions in the ordinary course of business, or (y) the
Transition Property, except as set forth in or contemplated in
the Final Prospectus (exclusive of any supplement thereto).
(j) The Representatives shall have received a certificate of
the Company, signed by an executive officer of the Company, dated the
Closing Date, to the effect that the signers of such certificate have
carefully examined the Registration Statement, the Final Prospectus,
any supplement to the Final Prospectus and this Agreement and that:
(i) the representations and warranties of the Company
in this Agreement, the Sale Agreement and the Servicing
Agreement are true and correct in all material respects on and
as of the Closing Date with the same effect as if made on the
Closing Date, and the Company has complied with all the
agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to the Closing Date;
(ii) no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings
for that purpose have been instituted or, to the Company's
knowledge, threatened; and
(iii) since the dates as of which information is
given in the Final Prospectus (exclusive of any supplement
thereto), there has been no material adverse change in (x) the
condition (financial or other), earnings, business or
properties of the Company and its subsidiaries taken as a
whole, whether or not arising from transactions in the
ordinary course of business, or (y) the Transition
20
<PAGE> 21
Property, except as set forth in or contemplated in the Final
Prospectus (exclusive of any supplement thereto).
(k) At the Closing Date, PricewaterhouseCoopers LLP shall have
furnished to the Representatives (i) a letter or letters (which may
refer to letters previously delivered to one or more of the
Representatives), dated as of the Closing Date, in form and substance
satisfactory to the Representatives, confirming that they are
independent accountants within the meaning of the Act and the Exchange
Act and the respective applicable published rules and regulations
thereunder and stating in effect that they have performed certain
specified procedures as a result of which they determined that certain
information of an accounting, financial or statistical nature (which is
limited to accounting, financial or statistical information derived
from the general accounting records of the Company and the Note Issuer)
set forth in the Registration Statement and the Final Prospectus,
including information specified by the Underwriters and set forth under
the captions "Prospectus Summary," "Description of the Transition
Property," "The Seller and Servicer," "Description of the Notes" and
"Description of the Certificates" in the Final Prospectus, agrees with
the accounting records of the Company and the Note Issuer, excluding
any questions of legal interpretation, and (ii) the opinion or
certificate, dated as of the Closing Date, in form and substance
satisfactory to the Representatives, satisfying the requirements of
Section 2.10(7) of the Note Indenture.
References to the Final Prospectus in this paragraph (k)
include any supplement thereto at the date of the letter.
In addition, at the Execution Time, PricewaterhouseCoopers LLP
shall have furnished to the Representatives a letter or letters, dated
as of the Execution Time, in form and substance satisfactory to the
Representatives, to the effect set forth above.
(l) Subsequent to the Execution Time or, if earlier, the dates
as of which information is given in the Registration Statement
(exclusive of any amendment thereof) and the Final Prospectus
(exclusive of any supplement thereto), there shall not have been any
change, or any development involving a prospective change, in or
affecting either (i) the business, properties or financial condition of
the Company or the Note Issuer or (ii) the Transition Property, the
Notes, the Certificates, the Financing Order or the Statute, the effect
of which is, in the judgment of the Representatives, so material and
adverse as to make it impractical or inadvisable to proceed with the
offering or delivery of the Notes or the Certificates as contemplated
by the Registration Statement (exclusive of any amendment thereof) and
the Final Prospectus (exclusive of any supplement thereto).
(m) The Representatives shall have received on the Closing
Date an opinion letter or letters of Ropes & Gray, counsel to the
Company and the Note Issuer, dated the Closing Date, in form and
substance reasonably satisfactory to the Representatives, (i) with
respect to the characterization of the transfer of the Transition
Property by the Company to the Note Issuer as a "true sale" for
bankruptcy purposes and (ii) to the effect that a court would not order
the substantive consolidation of the assets and liabilities of
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<PAGE> 22
the Note Issuer with those of the Company in the event of a bankruptcy,
reorganization or other insolvency proceeding involving the Company.
(n) The Representatives shall have received on the Closing
Date an opinion letter of Palmer & Dodge LLP, special counsel to the
Agencies and the Trust, dated the Closing Date, in form and substance
reasonably satisfactory to the Representatives, to the effect that a
court would not order the substantive consolidation of the assets and
liabilities of the Agencies with those of the Trust.
(o) The Representatives shall have received on the Closing
Date an opinion letter or letters of counsel for the Company, portions
of which may be delivered by Ropes & Gray, outside counsel for the
Company, and portions of which may be delivered by [ ], in-house
counsel for the Company, each dated the Closing Date, in form and
substance reasonably satisfactory to the Representatives, to the effect
that: (i) the Financing Order has been duly authorized and adopted by
the DTE and the Financing Order, giving effect to the Issuance Advice
Letter, is in full force and effect; in reliance on the opinion of
Palmer & Dodge LLP that the Certificates are "electric rate reduction
bonds" under Section 1H(a) of the Statute, as of the issuance of the
Certificates, the Certificates are entitled to the protections provided
in Sections 1H(b)(3) and 1H(c)(4) of the Statute; (ii) the Financing
Order is no longer subject to appeal by any person in state courts of
The Commonwealth of Massachusetts; and (iii) the Servicer is authorized
to file periodic RTC Charge adjustments to the extent necessary to
ensure the timely recovery of revenues sufficient to provide for the
payment of an amount equal to the sum of the periodic RRB payment
requirements for the upcoming year, which includes indemnity
obligations of the Note Issuer for its officers and directors, trustee
fees, liabilities of the Trust and liabilities of the Note Issuer to
the Underwriters under this Agreement.
(p) The Representatives shall have received on the Closing
Date an opinion letter or letters of Palmer & Dodge LLP, special
counsel for the Agencies and the Trust, dated the Closing Date, in form
and substance reasonably satisfactory to the Representatives, to the
effect that any state action (whether by legislative, DTE, citizen
initiative or otherwise) to revoke or limit the Financing Order, the
Issuance Advice Letter, the Transition Property or the RTC Charge in a
manner which would substantially impair the rights of
Certificateholders would be subject to a successful constitutional
contracts clause defense.
(q) The Representatives shall have received on the Closing
Date an opinion letter or letters of Richards, Layton & Finger, P.A.,
special Delaware counsel to the Note Issuer, dated the Closing Date, in
form and substance reasonably satisfactory to the Representatives, to
the effect that: (i) if properly presented to a Delaware court, a
Delaware court applying Delaware law, would conclude that (x) in order
for a person to file a voluntary bankruptcy petition on behalf of the
Note Issuer, the affirmative vote of the Note Issuer's Sole Member and
the affirmative vote of all of the Directors (including the Independent
Directors), as provided in Section 2.07(ii) of the LLC Agreement of the
Note Issuer, is required, and (y) such provision, contained in Section
2.07(ii) of the LLC Agreement, that requires the affirmative vote of
the Note Issuer's Sole Member and the
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<PAGE> 23
affirmative vote of all of the Directors (including the Independent
Directors) in order for a person to file a voluntary bankruptcy
petition on behalf of the Note Issuer, constitutes a legal, valid and
binding agreement of the Sole Member and is enforceable against the
Sole Member, in accordance with its terms; and (ii) the LLC Agreement
constitutes a legal, valid and binding agreement of the Sole Member
thereunder, and is enforceable against the Sole Member in accordance
with its terms.
(r) The Notes and the Certificates shall have been rated in
the highest long-term rating category by each of the Rating Agencies.
(s) On or prior to the Closing Date, the Note Issuer shall
have delivered to the Representatives evidence, in form and substance
reasonably satisfactory to the Representatives, that appropriate
filings have been or are being made in accordance with the Statute and
other applicable law reflecting the grant of a security interest by the
Note Issuer in the Collateral to the Note Trustee.
(t) On or prior to the Closing Date, the Note Issuer shall
have delivered to the Representatives evidence, in form and substance
satisfactory to the Representatives, of the DTE's issuance of the
Financing Order relating to the Transition Property and the Issuance
Advice Letter.
(u) Prior to the Closing Date, the Note Issuer, the Company
and the Trust shall have furnished to the Representatives such further
information, certificates, opinions and documents as the
Representatives may reasonably request.
If any of the conditions specified in this Section 6 shall not
have been fulfilled in all material respects when and as provided in this
Agreement, or if any of the opinions and certificates mentioned above or
elsewhere in this Agreement shall not be in all material respects reasonably
satisfactory in form and substance to the Representatives and counsel for the
Underwriters, this Agreement and all obligations of the Underwriters hereunder
may be canceled at, or at any time prior to, the Closing Date by the
Representatives. Notice of such cancellation shall be given to the Note Issuer
and the Trust in writing or by telephone or electronic mail confirmed in
writing.
The documents required to be delivered by this Section 6 shall
be delivered at the office of Ropes & Gray, Boston, Massachusetts, on the
Closing Date.
7. Expenses. Upon the sale of the Certificates, the Note
Issuer will pay or cause to be paid all costs and expenses incident to the
performance of the obligations of the Company, the Note Issuer and the Trust
hereunder, including, without limiting the generality of the foregoing, all
costs, taxes and expenses incident to the issue and delivery of the Certificates
to the Underwriters, all fees, disbursements and expenses of the Company's, the
Note Issuer's and the Trust's counsel and accountants, all costs and expenses
incident to the preparation, printing and filing of the Registration Statement
(including all exhibits thereto), any preliminary prospectus, the Basic
Prospectus, any Preliminary Final Prospectus, the Final Prospectus and any
amendments thereof or supplements thereto, all costs and expenses incurred in
connection with blue sky qualifications, examining the legality of the
Certificates for the investment and the
23
<PAGE> 24
rating of the Certificates, all costs and expenses of the Note Trustee, the
Certificate Trustee and the Delaware Trustee, all costs and expenses incurred in
the acquisition or preparation of documents required to be delivered by the
Company, the Note Issuer or the Trust in connection with the closing of the
transactions contemplated hereby, all costs and expenses required in connection
with any filing with the National Association of Securities Dealers in
connection with the transactions contemplated hereby, and all costs and expenses
of the printing and distribution of all documents in connection with the
Certificates. Except as provided in this Section 7 and Section 8 hereof, the
Underwriters will pay their own costs and expenses, including any advertising
expenses in connection with any offer they may make of the Certificates, but
excluding fees and expenses of counsel to the Underwriters in connection with
the transactions contemplated hereby, which fees and expenses of counsel shall
be included in, and become part of the Underwriters' fees and expenses to be
paid by the Note Issuer.
If the sale of the Certificates provided for herein is not
consummated because any condition to the obligations of the Underwriters set
forth in Section 6 hereof is not satisfied, because of any termination pursuant
to Section 10 hereof or because of any refusal, inability or failure on the part
of the Company, the Note Issuer or the Trust to perform any agreement herein or
comply with any provision hereof other than by reason of a default (including
under Section 9) by any of the Underwriters, the Company and the Note Issuer
will, jointly and severally, reimburse the Underwriters upon demand for all
out-of-pocket expenses (including reasonable fees and disbursements of counsel)
that shall have been incurred by the Underwriters in connection with the
proposed purchase and sale of the Certificates.
8. Indemnification and Contribution.
(a) The Company and the Note Issuer will, jointly and
severally, indemnify and hold harmless each Underwriter, the Trust and
the Agencies, the directors, officers, members, employees and agents of
each Underwriter, the Trust and the Agencies and each person who
controls any Underwriter, the Trust and the Agencies within the meaning
of either the Act or the Exchange Act against any and all losses,
claims, damages or liabilities, joint or several, to which they or any
of them may become subject under the Act, the Exchange Act or other
Federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in
the Registration Statement for the registration of the Certificates as
originally filed or in any amendment thereof, or any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, any
untrue statement or alleged untrue statement of a material fact
contained in the Basic Prospectus, any Preliminary Final Prospectus or
the Final Prospectus, or in any amendment thereof or supplement
thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and will
reimburse each such indemnified party, as incurred, for any legal or
other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or
action; provided, however, that neither the Company nor the Note Issuer
will be liable in any such case to the extent that
24
<PAGE> 25
any such loss, claim, damage or liability arises out of or is based
upon any such untrue statement or alleged untrue statement or omission
or alleged omission made therein in reliance upon and in conformity
with written information furnished to the Note Issuer or the Company by
or on behalf of any Underwriter through the Representatives
specifically for inclusion therein. This indemnity agreement will be in
addition to any liability which the Company and the Note Issuer may
otherwise have.
(b) Each Underwriter severally agrees to indemnify and hold
harmless the Company, the Note Issuer, the Trust and the Agencies, each
of their directors, each of their officers (if any) who signs the
Registration Statement, and each person who controls the Company or the
Note Issuer within the meaning of either the Act or the Exchange Act,
to the same extent as the foregoing indemnity from the Company and the
Note Issuer to each Underwriter, but only with reference to written
information relating to such Underwriter furnished to the Note Issuer
or the Company by or on behalf of such Underwriter through the
Representatives specifically for inclusion in the documents referred to
in the foregoing indemnity. This indemnity agreement will be in
addition to any liability which any Underwriter may otherwise have. The
Note Issuer, the Company and the Agencies acknowledge that the
statements set forth in the last paragraph of the cover page, under the
heading "Underwriting" or "Plan of Distribution" in any Preliminary
Final Prospectus or the Final Prospectus constitute the only
information furnished in writing by or on behalf of the several
Underwriters for inclusion in the documents referred to in the
foregoing indemnity, and you, as the Representatives, confirm that such
statements are correct.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the indemnifying party
in writing of the commencement thereof; but the failure so to notify
the indemnifying party (i) will not relieve it from liability under
paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the
forfeiture by the indemnifying party of substantial rights and defenses
and (ii) will not, in any event, relieve the indemnifying party from
any obligations to any indemnified party other than the indemnification
obligation provided in paragraph (a) or (b) above. The indemnifying
party shall be entitled to appoint counsel of the indemnifying party's
choice at the indemnifying party's expense to represent the indemnified
party in any action for which indemnification is sought (in which case
the indemnifying party shall not thereafter be responsible for the fees
and expenses of any separate counsel retained by the indemnified party
or parties except as set forth below); provided, however, that such
counsel shall be reasonably satisfactory to the indemnified party.
Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party
shall have the right to employ separate counsel (including local
counsel), and the indemnifying party shall bear the reasonable fees,
costs and expenses of such separate counsel if (i) the use of counsel
chosen by the indemnifying party to represent the indemnified party
would present such counsel with a conflict of interest, (ii) the actual
or potential defendants in, or targets of, any such action include both
the indemnified party and the indemnifying party and the indemnified
party shall have reasonably concluded that there may be legal defenses
25
<PAGE> 26
available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, (iii)
the indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of the institution of such
action or (iv) the indemnifying party shall authorize the indemnified
party to employ separate counsel at the expense of the indemnifying
party. An indemnifying party will not, without the prior written
consent of the indemnified parties, settle or compromise or consent to
the entry of any judgment with respect to any pending or threatened
claim, action, suit or proceeding in respect of which indemnification
or contribution may be sought hereunder (whether or not the indemnified
parties are actual or potential parties to such claim or action) unless
such settlement, compromise or consent includes an unconditional
release of each indemnified party from all liability arising out of
such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a)
or (b) of this Section 8 is unavailable to or insufficient to hold
harmless an indemnified party for any reason, the Company, the Note
Issuer and the Underwriters agree to contribute to the aggregate
losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating or
defending same) (collectively "Losses") to which the Company, the Note
Issuer and one or more of the Underwriters may be subject in such
proportion as is appropriate to reflect the relative benefits received
by the Company, Note Issuer and the Underwriters, respectively, from
the offering of the Certificates and the Notes; provided, however, that
in no case shall any Underwriter (except as may be provided in any
agreement among underwriters relating to the offering of the
Certificates) be responsible for any amount in excess of the
underwriting discount or commission applicable to the Certificates
purchased by such Underwriter hereunder. If the allocation provided by
the immediately preceding sentence is unavailable for any reason, the
Company, the Note Issuer and the Underwriters shall contribute in such
proportion as is appropriate to reflect not only such relative benefits
but also the relative fault of the Company, the Note Issuer and of the
Underwriters in connection with the statements or omissions which
resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by the Note Issuer shall be deemed to
be equal to the total net proceeds from the offering (before deducting
expenses) of the Certificates (which shall be equal to the net proceeds
from the sale of the Notes to the Trust (before deducting expenses)),
and benefits received by the Underwriters shall be deemed to be equal
to the total underwriting discounts and commissions, in each case as
set forth on the cover page of the Final Prospectus. Relative fault
shall be determined by reference to whether any alleged untrue
statement or omission relates to information provided by the Company,
the Note Issuer or the Underwriters. The Company, the Note Issuer and
the Underwriters agree that it would not be just and equitable if
contribution were determined by pro rata allocation or any other method
of allocation which does not take account of the equitable
considerations referred to above. Notwithstanding the provisions of
this paragraph, no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 8, each person who
controls an Underwriter within the meaning of either the Act or the
Exchange Act and each director, officer, employee and agent of an
Underwriter shall
26
<PAGE> 27
have the same rights to contribution as such Underwriter, and each
person who controls the Note Issuer or the Company within the meaning
of either the Act or the Exchange Act, each officer of the Note Issuer
or the Company who shall have signed the Registration Statement and
each director of the Note Issuer or the Company shall have the same
rights to contribution as the Note Issuer or the Company, subject in
each case to the applicable terms and conditions of this paragraph. The
Underwriters' obligations in this paragraph to contribute are several
in proportion to their respective underwriting obligations and not
joint.
9. Default by an Underwriter. If any one or more Underwriters
shall fail to purchase and pay for any of the Certificates agreed to be
purchased by such Underwriter or Underwriters hereunder the Representatives may
in their discretion arrange for the Underwriters or another party or other
parties to purchase such Certificates on the terms contained herein. If within
36 hours after such default by any Underwriter the Representatives do not
arrange for the purchase of such Certificates, the nondefaulting Underwriters
shall be obligated severally to take up and pay for (in the respective
proportions which the amount of Certificates set forth opposite the names of all
the remaining Underwriters) the Certificates which the defaulting Underwriter or
Underwriters agreed but failed to purchase; provided, however, that in the event
that the aggregate amount of Certificates which the defaulting Underwriter or
Underwriters agreed but failed to purchase shall exceed 10% of the aggregate
amount of Certificates set forth in Schedule II hereto, the nondefaulting
Underwriters shall have the right to purchase all, but shall not be under any
obligation to purchase any, of the Certificates, and if such nondefaulting
Underwriters do not purchase all the Certificates, this Agreement will terminate
without liability to any nondefaulting Underwriter, the Note Issuer or the
Company. In the event of a default by any Underwriter as set forth in this
Section 9, the Closing Date shall be postponed for such period, not exceeding
seven days, as the Representatives shall determine in order that the required
changes in the Registration Statement and the Final Prospectus or in any other
documents or arrangements may be effected. Nothing contained in this Agreement
shall relieve any defaulting Underwriter of its liability, if any, to the Note
Issuer and the Company and any nondefaulting Underwriter for damages occasioned
by its default hereunder.
10. Termination. This Agreement shall be subject to
termination in the absolute discretion of the Representatives, by notice given
to the Company, the Note Issuer and the Agencies prior to delivery of and
payment for the Certificates, if prior to such time there shall have occurred
(i) any change, or any development involving a prospective change, in or
affecting (A) the business, properties or financial condition of the Company or
the Note Issuer, (B) the Transition Property, the Notes, the Certificates, the
Financing Order or the Statute, the effect of which, in the judgment of the
Representatives, materially impairs the investment quality of the Certificates
or makes it impractical or inadvisable to market the Certificates; (ii) a
suspension or material limitation in trading in securities generally on the New
York Stock Exchange; (iii) a suspension or material limitation in trading in the
securities of the Company; (iv) a general moratorium on commercial banking
activities shall have been declared either by Federal, New York state or
Massachusetts state authorities or (v) any outbreak or escalation of hostilities
involving the United States or the declaration by the United States of a
national emergency or war the effect of which on financial markets is such as to
make it, in the judgment of the Representatives, impracticable or inadvisable to
proceed with the offering or delivery of the Certificates as contemplated by the
Final Prospectus (exclusive of any supplement thereto).
27
<PAGE> 28
11. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
Company or its officers, the Note Issuer or its officers and of the Underwriters
set forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any Underwriter
or of the Company, the Note Issuer or any of the officers, directors or
controlling persons referred to in Section 8 hereof, and will survive delivery
of and payment for the Certificates. The provisions of Sections 7 and 8 hereof
shall survive the termination or cancellation of this Agreement.
12. Notices. All communications hereunder shall be in English
and in writing, and any such notice, direction, consent or waiver may be given
by United States mail, courier service, facsimile transmission or electronic
mail (confirmed by telephone, United States mail or courier service in the case
of notice by facsimile transmission or electronic mail) or any other customary
means of communication, and any such notice, direction, consent or waiver shall
be effective when delivered, or if mailed, three days after deposit in the
United States mail with proper postage for ordinary mail prepaid, and if sent to
the Representatives, to them at the address specified in Schedule I hereto; and
if sent to the Company, to it at Boston Edison Company, 800 Boylston Street,
Boston, Massachusetts 02199, Attention: Manager, Corporate Finance; and if sent
to the Note Issuer, to it at BEC Funding LLC, 800 Boylston Street, 35th Floor,
Boston, Massachusetts 02199, Attention: President; and if sent to the Agencies,
to each at Massachusetts Development Finance Agency, 75 Federal Street, Boston,
Massachusetts 02110, Attention: General Counsel, and Massachusetts Health and
Educational Facilities Authority, 99 Summer Street, 10th Floor, Boston,
Massachusetts 02110, Attention: General Counsel. The parties hereto, by notice
to the others, may designate additional or different addresses for subsequent
communications.
13. Successors. This Agreement will inure to the benefit of
and be binding upon the parties hereto and their respective successors and the
officers and directors and controlling persons referred to in Section 8 hereof,
and no other person will have any right or obligation hereunder.
14. Applicable Law. This Agreement will be governed by and
construed in accordance with the laws of the State of New York.
15. Counterparts. This Agreement may be signed in any number
of counterparts, each of which shall be deemed an original, which taken together
shall constitute one and the same instrument.
16. Miscellaneous. Time shall be of the essence of this
Agreement. As used herein, the term "business day" shall mean any day when the
SEC's office in Washington, D.C. is open for business.
28
<PAGE> 29
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us the enclosed duplicate hereof,
whereupon this letter and your acceptance shall represent a binding agreement
among the Company, the Note Issuer and the several Underwriters.
Very truly yours,
BOSTON EDISON COMPANY
By: ______________________________________
Name:
Title:
BEC FUNDING LLC
By: ______________________________________
Name:
Title:
CONFIRMED AND ACCEPTED
on behalf of each of the Underwriters
Lehman Brothers Inc.
By: ______________________________________
(Lehman Brothers Inc.)
Goldman, Sachs & Co.
By: ______________________________________
(Goldman, Sachs & Co.)
S-1
<PAGE> 30
SCHEDULE I TO THE
UNDERWRITING AGREEMENT
Underwriting Agreement dated __________, 1999
Registration Statement No. 333-74671
Representative(s):
Lehman Brothers Inc.
Three World Financial Center
200 Vesey Street
New York, New York 10285
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Title: Massachusetts RRB Special Purpose Trust BEC-1
$ [ ] Rate Reduction Certificates
Principal amount, Price to Public, Underwriting Discounts and
Commissions and Proceeds to Trust:
<TABLE>
<CAPTION>
Underwriting
Total Principal Price to Discounts and Proceeds to
Amount of Class Public Commissions Trust
--------------- -------- ------------- -----------
<S> <C> <C> <C> <C>
Per Class A-1
Certificate $ % % %
Per Class A-2
Certificate $ % % %
Per Class A-3
Certificate $ % % %
Per Class A-4
Certificate $ % % %
Per Class A-5
Certificate $ % % %
Per Class A-6
Certificate $ % % %
Per Class A-7
Certificate $ % % %
--------------- -------- ------------- -----------
Total $ $ $ $
</TABLE>
<PAGE> 31
Plus the Underwriters will be reimbursed by the Note Issuer for:
$ [ ] of expenses,
consisting of $ [ ]
of out-of-pocket expenses and
$ [ ] for Underwriters Counsel
Original Issue Discount (if any): $ [ ]
Redemption provisions: Optional Redemption and Mandatory
Redemption as set forth in Article X of
the Note Indenture
Other provisions:
Closing Date, Time and Location: [ ], 1999
9:00 a.m., Eastern Standard Time
Boston, Massachusetts
Type of Offering: Delayed Offering
<PAGE> 32
SCHEDULE II TO THE
UNDERWRITING AGREEMENT
<TABLE>
<CAPTION>
Principal Amount of Certificates to be Purchased
--------------------------------------------------------------------------------------------------------
Class A-1 Class A-2 Class A-3 Class A-4 Class A-5 Class A-6 Class A-7
Underwriters Certificates Certificates Certificates Certificates Certificates Certificates Certificates Total
- ---------------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Lehman Brothers Inc. $ $ $ $ $ $ $ $
Goldman, Sachs & Co. $ $ $ $ $ $ $ $
. . . . $ $ $ $ $ $ $ $
Total................. $ $ $ $ $ $ $ $
============ ============ ============ ============ ============ ============ ============ =====
</TABLE>
<PAGE> 33
APPENDIX A TO THE
UNDERWRITING AGREEMENT
CERTIFICATE OF THE AGENCIES PURSUANT
TO FINANCING ORDER APPROVING FINAL TERMS AND
CONDITIONS OF BEC FUNDING LLC NOTES AND MASSACHUSETTS
RRB SPECIAL PURPOSE TRUST BEC-1 RATE REDUCTION CERTIFICATES
Pursuant to order number 24 of the Financing Order, the
Massachusetts Development Finance Agency and the Massachusetts Health and
Educational Facilities Authority (collectively, the "Agencies"), hereby approve
the final terms and conditions of the BEC Funding LLC Notes (the "Notes") and
the Massachusetts RRB Special Purpose Trust BEC-1 Rate Reduction Certificates
(the "Certificates"), as set forth in the underwriting agreement dated as of
July [ ], 1999 by and among BEC Funding LLC, Boston Edison Company and Lehman
Brothers Inc. and Goldman, Sachs & Co., as representatives (the
"Representatives") of the Underwriters named therein (the "Underwriting
Agreement").
In furtherance of this approval, the Agencies shall cause the
Massachusetts RRB Special Purpose Trust BEC-1 to be formed as a Delaware
business trust (the "Trust") prior to the Closing Date, and to issue the
Certificates and otherwise comply with the terms and conditions of the
Underwriting Agreement.
BEC Funding LLC, Boston Edison Company and the Representatives are
entitled to rely on this certificate as if this certificate were a part of, and
the Agencies were parties to, the Underwriting Agreement.
Capitalized terms used herein and not otherwise defined shall have the
meaning set forth in the Underwriting Agreement.
MASSACHUSETTS DEVELOPMENT FINANCE AGENCY
By: ____________________________________
Name:
Title:
MASSACHUSETTS HEALTH AND EDUCATION
FACILITIES AUTHORITY
By: ____________________________________
Name:
Title:
<PAGE> 1
Exhibit 4.1
================================================================================
BEC FUNDING LLC,
AS NOTE ISSUER
AND
THE BANK OF NEW YORK,
AS NOTE TRUSTEE
------------------------------
NOTE INDENTURE
DATED AS OF [ ], 1999
------------------------------
$ [ ]
BEC FUNDING LLC NOTES
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
Definitions and Incorporation by Reference
<S> <C> <C>
Section 1.01. Definitions..................................................................................2
Section 1.02. Incorporation by Reference of Trust Indenture Act...........................................10
Section 1.03. Rules of Construction.......................................................................10
ARTICLE II
The Notes
Section 2.01. Terms of the Notes..........................................................................11
Section 2.02. Form........................................................................................13
Section 2.03. Execution, Authentication and Delivery......................................................13
Section 2.04. Temporary Notes.............................................................................13
Section 2.05. Registration; Registration of Transfer and Exchange.........................................14
Section 2.06. Mutilated, Destroyed, Lost or Stolen Notes..................................................15
Section 2.07. Persons Deemed Owner........................................................................16
Section 2.08. Payment of Principal and Interest; Interest on Overdue Principal; Principal and
Interest Rights Preserved...................................................................16
Section 2.09. Cancellation................................................................................17
Section 2.10. Authentication and Delivery of Notes........................................................17
Section 2.11. Release of Collateral.......................................................................22
ARTICLE III
Covenants
Section 3.01. Payment of Principal and Interest...........................................................22
Section 3.02. Maintenance of Office or Agency.............................................................22
Section 3.03. Money for Payments To Be Held in Trust......................................................22
Section 3.04. Existence...................................................................................24
Section 3.05. Protection of Collateral....................................................................24
Section 3.06. Opinions as to Collateral...................................................................24
Section 3.07. Performance of Obligations; Servicing; Commission Filings...................................25
Section 3.08. Negative Covenants..........................................................................27
Section 3.09. Annual Statement as to Compliance...........................................................27
Section 3.10. Note Issuer May Consolidate, etc............................................................28
Section 3.11. Successor or Transferee.....................................................................29
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 3.12. No Other Business...........................................................................29
Section 3.13. No Borrowing................................................................................29
Section 3.14. Servicer's Obligations......................................................................30
Section 3.15. No Additional Notes.........................................................................30
Section 3.16. Guarantees, Loans, Advances and Other Liabilities...........................................30
Section 3.17. Capital Expenditures........................................................................30
Section 3.18. Non-Routine Periodic Adjustment.............................................................30
Section 3.19. Restricted Payments.........................................................................30
Section 3.20. Notice of Events of Default.................................................................30
Section 3.21. Further Instruments and Acts................................................................30
ARTICLE IV
Satisfaction and Discharge; Defeasance
Section 4.01. Satisfaction and Discharge of Note Indenture; Defeasance....................................31
Section 4.02. Conditions to Defeasance....................................................................32
Section 4.03. Application of Trust Money..................................................................33
Section 4.04. Repayment of Moneys Held by Paying Agent....................................................33
ARTICLE V
Remedies
Section 5.01. Events of Default...........................................................................33
Section 5.02. Acceleration of Maturity; Rescission and Annulment..........................................35
Section 5.03. Collection of Indebtedness and Suits for Enforcement by Note Trustee........................35
Section 5.04. Remedies; Priorities........................................................................37
Section 5.05. Optional Preservation of the Collateral.....................................................38
Section 5.06. Limitation of Suits.........................................................................38
Section 5.07. Unconditional Rights of Noteholders To Receive Principal and Interest.......................39
Section 5.08. Restoration of Rights and Remedies..........................................................39
Section 5.09. Rights and Remedies Cumulative..............................................................39
Section 5.10. Delay or Omission Not a Waiver..............................................................40
Section 5.11. Control by Noteholders......................................................................40
Section 5.12. Waiver of Past Defaults.....................................................................40
Section 5.13. Undertaking for Costs.......................................................................41
Section 5.14. Waiver of Stay or Extension Laws............................................................41
Section 5.15. Action on Notes.............................................................................41
Section 5.16. Performance and Enforcement of Certain Obligations..........................................41
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
ARTICLE VI
The Note Trustee
<S> <C> <C>
Section 6.01. Duties of Note Trustee......................................................................42
Section 6.02. Rights of Note Trustee......................................................................43
Section 6.03. Individual Rights of Note Trustee...........................................................44
Section 6.04. Note Trustee's Disclaimer...................................................................44
Section 6.05. Notice of Defaults..........................................................................44
Section 6.06. Reports by Note Trustee to Holders..........................................................44
Section 6.07. Compensation and Indemnity..................................................................45
Section 6.08. Replacement of Note Trustee.................................................................45
Section 6.09. Successor Note Trustee by Merger............................................................46
Section 6.10. Appointment of Co-Trustee or Separate Trustee...............................................47
Section 6.11. Eligibility; Disqualification...............................................................48
Section 6.12. Preferential Collection of Claims Against Note Issuer.......................................48
Section 6.13. Representations and Warranties of Note Trustee..............................................48
ARTICLE VII
Noteholders' Lists and Reports
Section 7.01. Note Issuer To Furnish Note Trustee Names and Addresses of Noteholders......................48
Section 7.02. Preservation of Information; Communications to Noteholders..................................49
Section 7.03. Reports by Note Issuer......................................................................49
Section 7.04. Reports by Note Trustee.....................................................................49
ARTICLE VIII
Accounts, Disbursements and Releases
Section 8.01. Collection of Money.........................................................................50
Section 8.02. Collection Account..........................................................................50
Section 8.03. General Provisions Regarding the Collection Account.........................................53
Section 8.04. Release of Collateral.......................................................................54
Section 8.05. Opinion of Counsel..........................................................................54
Section 8.06. Reports by Independent Accountants..........................................................55
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
ARTICLE IX
Supplemental Note Indentures
<S> <C> <C>
Section 9.01. Supplemental Note Indentures Without Consent of Noteholders.................................55
Section 9.02. Supplemental Note Indentures with Consent of Noteholders....................................56
Section 9.03. Execution of Supplemental Note Indentures...................................................58
Section 9.04. Effect of Supplemental Note Indenture.......................................................58
Section 9.05. Conformity with Trust Indenture Act.........................................................58
ARTICLE X
Redemption of Notes
Section 10.01. Optional Redemption by Note Issuer..........................................................58
Section 10.02. Form of Optional Redemption Notice..........................................................59
Section 10.03. Notes Payable on Optional Redemption Date or Payment Date...................................59
Section 10.04. Mandatory Redemption by Note Issuer.........................................................59
Section 10.05. Form of Mandatory Redemption Notice.........................................................60
Section 10.06. Notes Payable on Mandatory Redemption Date or Payment Date..................................60
ARTICLE XI
Miscellaneous
Section 11.01. Compliance Certificates and Opinions, etc...................................................60
Section 11.02. Form of Documents Delivered to Note Trustee.................................................62
Section 11.03. Acts of Noteholders.........................................................................63
Section 11.04. Notices, etc................................................................................63
Section 11.05. Notices to Noteholders; Waiver..............................................................64
Section 11.06. Conflict with Trust Indenture Act...........................................................64
Section 11.07. Effect of Headings and Table of Contents....................................................65
Section 11.08. Successors and Assigns......................................................................65
Section 11.09. Separability................................................................................65
Section 11.10. Benefits of Note Indenture..................................................................65
Section 11.11. Legal Holidays..............................................................................65
Section 11.12. GOVERNING LAW...............................................................................65
Section 11.13. Counterparts................................................................................65
Section 11.14. Recording of Note Indenture.................................................................65
Section 11.15. Trust Obligation............................................................................66
Section 11.16. No Recourse to Note Issuer..................................................................66
Section 11.17. Inspection..................................................................................66
</TABLE>
iv
<PAGE> 6
<TABLE>
<CAPTION>
Page
----
<S> <C>
SIGNATURE PAGE..................................................................................................S-1
</TABLE>
SCHEDULE A -- Expected Amortization Schedule
SCHEDULE B -- Required Overcollateralization Level Schedule
EXHIBIT A-1 -- Form of Sale Agreement
EXHIBIT A-2 -- Form of Servicing Agreement
EXHIBIT B -- Form of Note
v
<PAGE> 7
NOTE INDENTURE dated as of [ ], 1999, between BEC FUNDING LLC, a
Delaware limited liability company (the "Note Issuer"), and THE BANK OF NEW
YORK, a New York banking corporation, as trustee (the "Note Trustee").
RECITALS
The Note Issuer has duly authorized the execution and delivery of this Note
Indenture to provide for the issuance of its Notes with an aggregate principal
amount of $[ ] and the Note Issuer and the Note Trustee are executing and
delivering this Note Indenture in order to provide for the issuance of the
Notes.
GRANTING CLAUSE
The Note Issuer hereby Grants to the Note Trustee at the Issuance Date, as
Note Trustee for the benefit of the Holders of the Notes, all of the Note
Issuer's right, title and interest in and to (a) the Transition Property
transferred by the Seller to the Note Issuer pursuant to the Sale Agreement and
all proceeds thereof, (b) the Sale Agreement, (c) the Servicing Agreement, (d)
the Administration Agreement, (e) the Collection Account (including all
subaccounts thereof) and all amounts or investment property on deposit therein
or credited thereto from time to time, (f) all other property of whatever kind
owned from time to time by the Note Issuer, including accounts, general
intangibles, equipment and inventory, (g) the security interest with respect to
the Transition Property granted by the Seller to the Note Issuer, (h) all
present and future claims, demands, causes and choses in action in respect of
any or all of the foregoing and all payments on or under and all proceeds of
every kind and nature whatsoever in respect of any or all of the foregoing,
including all proceeds of the conversion thereof, voluntary or involuntary, into
cash or other liquid property, all cash proceeds, accounts, accounts receivable,
notes, drafts, acceptances, chattel paper, checks, deposit accounts, insurance
proceeds, condemnation awards, rights to payment of any and every kind, and
other forms of obligations and receivables, instruments and other property which
at any time constitute all or part of or are included in the proceeds of any of
the foregoing and (i) all proceeds of the foregoing (collectively, the
"Collateral"; it being understood that the following do not constitute
Collateral: (i) amounts required to be released pursuant to or contemplated in
the terms hereof, including net investment earnings on the Capital Subaccount
that are required to be released to the Note Issuer pursuant to Article VIII,
(ii) proceeds from the sale of the Notes required to pay costs of issuance with
respect to the Notes or the Certificates as set forth on the flow of funds
memorandum delivered on the Issuance Date (together with any interest earnings
thereon) [and (iii), amounts payable to the Note Trustee, the Certificate
Trustee and the Delaware Trustee under this Note Indenture, the Certificate
Indenture and the Fee and Indemnity Agreement] it being understood that such
amounts described in clauses (i), (ii) and (iii) above shall not be subject to
Section 3.16.
The foregoing Grant is made in trust to secure the payment of principal of,
interest on, and any other amounts owing in respect of, the Notes equally and
ratably without prejudice, priority or distinction, except as expressly provided
in this Note Indenture, and to secure compliance with the provisions of this
Note Indenture with respect to the Notes, all as provided in this Note
Indenture. This Note Indenture constitutes a security agreement within the
meaning of the UCC to the extent that, under Massachusetts law, the provisions
of the UCC are applicable hereto.
<PAGE> 8
The Note Trustee, as trustee on behalf of the Holders of the Notes,
acknowledges such grant, accepts the trusts hereunder in accordance with the
provisions hereof and agrees to perform its duties herein required.
AND IT IS HEREBY COVENANTED, DECLARED AND AGREED between the parties hereto
that all Notes are to be issued, countersigned and delivered and that all of the
Collateral is to be held and applied, subject to the further covenants,
conditions, releases, uses and trusts hereinafter set forth, and the Note
Issuer, for itself and any successor, does hereby covenant and agree to and with
the Note Trustee and its successors in said trust, for the benefit of the
Holders, as follows:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
------------------------------------------
Section 1.01. (a) DEFINITIONS. Except as otherwise specified herein or as
the context may otherwise require, the following terms have the respective
meanings set forth below for all purposes of this Note Indenture.
"ACT" has the meaning specified in Section 11.03(a).
"ADMINISTRATION AGREEMENT" means the Administration Agreement dated as of
[ ], 1999, between Boston Edison Company, as Administrator, and the Note
Issuer, as the same may be amended and supplemented from time to time.
"ADMINISTRATOR" means Boston Edison Company, a Massachusetts corporation,
or any successor Administrator under the Administration Agreement.
"AFFILIATE" means, with respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"AGENCIES" means collectively the Massachusetts Development Finance Agency
and the Massachusetts Health and Educational Facilities Authority.
"AUTHORIZED OFFICER" means, with respect to the Note Issuer, any officer of
the Note Issuer who is authorized to act for the Note Issuer in matters relating
to the Note Issuer and who is identified on the list of Authorized Officers
delivered by the Note Issuer to the Note Trustee on the Issuance Date (as such
list may be modified or supplemented by the Note Issuer from time to time
thereafter).
"BASIC DOCUMENTS" means, collectively, this Note Indenture, the Certificate
Indenture, the Declaration of Trust, the Sale Agreement, the Servicing
Agreement, the Administration
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<PAGE> 9
Agreement, the Note Purchase Agreement, the Fee and Indemnity Agreement and the
Underwriting Agreement.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a day on
which banking institutions or trust companies in New York, New York, Boston,
Massachusetts or Wilmington, Delaware are authorized or obligated by law,
regulation or executive order to remain closed.
"CAPITAL SUBACCOUNT" has the meaning set forth in Section 8.02(a).
"CERTIFICATE ISSUER" has the meaning set forth in the Certificate
Indenture.
"CERTIFICATE INDENTURE" means the Certificate Indenture dated as of
[ ], 1999, between the Certificate Issuer, the Delaware Trustee and the
Certificate Trustee, as the same may be further amended and supplemented from
time to time.
"CERTIFICATE TRUSTEE" means the Person acting as certificate trustee under
the Certificate Indenture.
"CERTIFICATES" has the meaning set forth in the Certificate Indenture.
"CLASS" means any one of the classes of Notes.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, and Treasury Regulations promulgated thereunder.
"COLLATERAL" has the meaning specified in the Granting Clause of this Note
Indenture.
"COLLECTION ACCOUNT" has the meaning specified in Section 8.02(a).
"CORPORATE TRUST OFFICE" means the principal office of the Note Trustee at
which at any particular time its corporate trust business shall be administered,
which office at the date of the execution of this Note Indenture is located at
101 Barclay Street, Floor 12 East, New York, New York 10286, Attention: Asset
Backed Finance Unit, or at such other address as the Note Trustee may designate
from time to time by notice to the Noteholders and the Note Issuer, or the
principal corporate trust office of any successor Note Trustee (the address of
which the successor Note Trustee will notify the Noteholders and the Note
Issuer).
"COVENANT DEFEASANCE OPTION" has the meaning specified in Section 4.01(b).
"DECLARATION OF TRUST" has the meaning set forth in the Certificate
Indenture.
"DEFAULT" means any occurrence that is, or with notice or the lapse of time
or both would become, an Event of Default.
"DELAWARE TRUSTEE" means the Person acting as Delaware Trustee under the
Declaration of Trust and the Certificate Indenture.
"DTC AGREEMENT" has the meaning set forth in the Certificate Indenture.
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<PAGE> 10
"DTE" means the Massachusetts Department of Telecommunications and Energy
and any successor thereto.
"DUFF & PHELPS" means Duff & Phelps Credit Rating Co. or its successor.
"ELIGIBLE DEPOSIT ACCOUNT" means either (a) a segregated trust account with
an Eligible Institution or (b) a segregated trust account with the corporate
trust department of a depository institution organized under the laws of the
United States of America or any one of the states thereof or the District of
Columbia (or any domestic branch of a foreign bank), having corporate trust
powers and acting as trustee for funds deposited in such account, so long as any
of the securities of such depository institution shall have a credit rating from
each Rating Agency in one of its generic rating categories which signifies
investment grade.
"ELIGIBLE INSTITUTION" means (a) the corporate trust department of the Note
Trustee; PROVIDED, HOWEVER, that an account with the Note Trustee will only be
an Eligible Deposit Account if it is a segregated trust account or (b) a
depository institution organized under the laws of the United States of America,
any State or the District of Columbia (or any domestic branch of a foreign
bank), which (i) has either (A) a long-term unsecured debt rating of AA by
Standard & Poor's and Aa2 by Moody's or (B) a certificate of deposit rating of
A-1+ by Standard & Poor's and P-1 by Moody's, or any other long-term, short-term
or certificate of deposit rating acceptable to the Rating Agencies and (ii)
whose deposits are insured by the FDIC. If so qualified under clause (b) above,
the Note Trustee may be considered an Eligible Institution for the purposes of
clause (a) of the definition of Eligible Deposit Account.
"ELIGIBLE INVESTMENTS" mean instruments or investment property which
evidence:
(a) direct obligations of, or obligations fully and unconditionally
guaranteed as to timely payment by, the United States of America;
(b) demand deposits, time deposits, certificates of deposit or
bankers' acceptances of depository institutions meeting the requirements of
clause (b) of the definition of Eligible Institution;
(c) commercial paper (other than commercial paper of the Seller)
having, at the time of the investment or contractual commitment to invest
therein, a rating from each of the Rating Agencies from which a rating is
available in the highest investment category granted thereby;
(d) investments in money market funds having a rating from each of
the Rating Agencies from which a rating is available in the highest
investment category granted thereby (including funds for which the Note
Trustee or any of its Affiliates is investment manager or advisor);
(e) repurchase obligations with respect to any security that is a
direct obligation of, or fully guaranteed by, the United States of America
or any agency or instrumentality thereof the obligations of which are
backed by the full faith and credit of the United States of America, in
either case entered into with depository institutions meeting the
requirements of clause (b) of the definition of Eligible Institution; and
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<PAGE> 11
(f) any other investment permitted by each of the Rating Agencies,
in each case which mature on or before the Business Day preceding the next
Payment Date.
"EVENT OF DEFAULT" has the meaning specified in Section 5.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXPECTED AMORTIZATION SCHEDULE" means, with respect to each Class of
Notes, the schedule attached as Schedule A hereto.
"FDIC" means the Federal Deposit Insurance Corporation or any successor.
"FEE AND INDEMNITY AGREEMENT" means the fee and indemnity agreement dated
as of [ ], 1999, among the Note Issuer, the Delaware Trustee, the
Certificate Trustee and the Agencies..
"FINAL MATURITY DATE" means, with respect to any Class of Notes, the Final
Maturity Date therefor.
"FITCH" means Fitch IBCA, Inc. or its successor.
"GENERAL SUBACCOUNT" has the meaning set forth in Section 8.02(a).
"GRANT" means mortgage, pledge, collaterally assign and grant a lien upon
and a security interest pursuant to this Note Indenture. A Grant of the
Collateral or of any other agreement or instrument shall include all rights,
powers and options (but none of the obligations) of the Granting party
thereunder, including after an Event of Default which is continuing the
immediate and continuing right to claim for, collect, receive and give receipt
for payments in respect of the Collateral and all other moneys payable
thereunder, to give and receive notices and other communications, to make
waivers or other agreements, to exercise all rights and options, to bring
Proceedings in the name of the Granting party or otherwise and generally to do
and receive anything that the Granting party is or may be entitled to do or
receive thereunder or with respect thereto.
"INDEPENDENT" means, when used with respect to any specified Person, that
the Person (a) is in fact independent of the Note Issuer, any other obligor upon
the Notes, the Seller, the Servicer and any Affiliate of any of the foregoing
Persons, (b) does not have any direct financial interest or any material
indirect financial interest in the Note Issuer, any such other obligor, the
Seller, the Servicer or any Affiliate of any of the foregoing Persons and (c) is
not connected with the Note Issuer, any such other obligor, the Seller, the
Servicer or any Affiliate of any of the foregoing Persons as an officer,
employee, promoter, underwriter, trustee, partner, director or person performing
similar functions.
"INDEPENDENT CERTIFICATE" means a certificate or opinion to be delivered to
the Note Trustee under the circumstances described in, and otherwise complying
with, the applicable requirements of Section 11.01, made by an Independent
appraiser or other expert appointed by an Issuer Order and consented to by the
Note Trustee, and such opinion or certificate shall state
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<PAGE> 12
that the signer has read the definition of "Independent" in this Note Indenture
and that the signer is Independent within the meaning thereof.
"ISSUANCE DATE" has the meaning set forth in Section 2.01(c)(i).
"ISSUER ORDER" and "ISSUER REQUEST" means a written order or request signed
in the name of the Note Issuer by any one of its Authorized Officers and
delivered to the Note Trustee.
"LEGAL DEFEASANCE OPTION" has the meaning specified in Section 4.01(b).
"MANDATORY REDEMPTION DATE" has the meaning specified in Section 10.04.
"MANDATORY REDEMPTION PRICE" has the meaning specified in Section 10.04.
"MINIMUM DENOMINATION" means $1,000 or any integral multiple thereof.
"MOODY'S" means Moody's Investors Service Inc. or its successor.
"NOTEHOLDER" or "HOLDER" means the Person in whose name a Note is
registered on the Note Register.
"NOTE INDENTURE" or "THIS NOTE INDENTURE" means this instrument as
originally executed and, as from time to time supplemented or amended by one or
more indentures supplemental hereto entered into pursuant to the applicable
provisions hereof, as so supplemented or amended, or both, and shall include the
forms and terms of the Notes established hereunder.
"NOTE INTEREST RATE" has the meaning specified in Section 2.01(b).
"NOTE ISSUER" means the party named as such in this Note Indenture until a
successor replaces it and, thereafter, means the successor and, for purposes of
any provision contained herein and required by the Trust Indenture Act, each
other obligor on the Notes.
"NOTE PURCHASE AGREEMENT" has the meaning set forth in the Certificate
Indenture.
"NOTE REGISTER" and "NOTE REGISTRAR" have the respective meanings specified
in Section 2.05.
"NOTES" has the meaning specified in Section 2.01(a).
"NOTE TRUSTEE" means The Bank of New York, a New York banking corporation,
as Note Trustee under this Note Indenture, or any successor Note Trustee under
this Note Indenture.
"OFFICER'S CERTIFICATE" means a certificate signed by any Authorized
Officer of the Note Issuer, under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.01, and delivered to
the Note Trustee.
"OPERATING EXPENSES" means all fees, costs and expenses of, and indemnities
owed by, the Note Issuer, including all amounts owed by the Note Issuer to the
Note Trustee, the Certificate Issuer, the Certificate Trustee, the Delaware
Trustee and any fees payable to the
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<PAGE> 13
Agencies with respect to the issuance of any Certificates, the Servicing Fee,
the Administration Fee, any fees, costs and expenses payable or reimbursable by
the Note Issuer to the Administrator and legal and accounting fees, costs and
expenses of the Note Issuer and the Certificate Issuer.
"OPINION OF COUNSEL" means one or more written opinions of counsel who may,
except as otherwise expressly provided in this Note Indenture, be an employee of
or counsel to the Note Issuer and who shall be reasonably satisfactory to the
Note Trustee, and which opinion or opinions shall be addressed to the Note
Trustee, as trustee, shall comply with any applicable requirements of Section
11.01, and shall be in form and substance reasonably satisfactory to the Note
Trustee.
"OPTIONAL REDEMPTION DATE" means the Payment Date specified by the Note
Issuer for the redemption of the Notes pursuant to Section 10.01.
"OPTIONAL REDEMPTION PRICE" has the meaning specified in Section 10.01.
"OUTSTANDING" means, as of the date of determination, all Notes theretofore
authenticated and delivered under this Note Indenture except:
(i) Notes theretofore cancelled by the Note Registrar or
delivered to the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in the
necessary amount has been theretofore deposited with the Note Trustee or
any Paying Agent in trust for the Holders of such Notes (PROVIDED, HOWEVER,
that if such Notes are to be redeemed, notice of such redemption has been
duly given pursuant to this Note Indenture or provision made therefor,
reasonably satisfactory to the Note Trustee); and
(iii) Notes in exchange for or in lieu of other Notes which have
been authenticated and delivered pursuant to this Note Indenture unless
proof satisfactory to the Note Trustee is presented that any such Notes are
held by a bona fide purchaser;
PROVIDED, HOWEVER, that in determining whether the Holders of the requisite
Outstanding Amount of the Notes or any Class thereof have given any request,
demand, authorization, direction, notice, consent or waiver hereunder or under
any Basic Document, Notes owned by the Note Issuer, any other obligor upon the
Notes, the Seller or any Affiliate of any of the foregoing Persons shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the Note Trustee shall be protected in relying upon any such request,
demand, authorization, direction, notice, consent or waiver, only Notes that the
Note Trustee actually knows to be so owned shall be so disregarded. Notes so
owned that have been pledged in good faith may be regarded as Outstanding if the
pledgee establishes to the satisfaction of the Note Trustee the pledgee's right
so to act with respect to such Notes and that the pledgee is not the Note
Issuer, any other obligor upon the Notes, the Seller or any Affiliate of any of
the foregoing Persons.
"OUTSTANDING AMOUNT" means the aggregate principal amount of all Notes or,
if the context requires, all Notes of a Class, Outstanding at the date of
determination.
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<PAGE> 14
"OVERCOLLATERALIZATION SUBACCOUNT" has the meaning specified in Section
8.02(a).
"PAYING AGENT" means the Note Trustee or any other Person that meets the
eligibility standards for the Note Trustee specified in Section 6.11 and is
authorized by the Note Issuer to make payment of principal of or interest on the
Notes on behalf of the Note Issuer.
"PAYMENT DATE" has the meaning specified in Section 2.01(c)(ii).
"PERSON" means any individual, corporation, limited liability company,
estate, partnership, joint venture, association, joint stock company, trust
(including any beneficiary thereof), unincorporated organization or government
or any agency or political subdivision thereof.
"PREDECESSOR NOTE" means, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.06 in lieu of a mutilated, lost,
destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
"PROCEEDING" means any suit in equity, action at law or other judicial or
administrative proceeding.
"PROJECTED PRINCIPAL BALANCE" means, as of any Payment Date on any Class of
Notes, the sum of the projected outstanding principal amount of such Class of
Notes for such Payment Date set forth in the Expected Amortization Schedule.
"RATING AGENCY" means, collectively, Moody's, Standard & Poor's, Fitch and
Duff & Phelps. If no such organization or successor is any longer in existence,
"Rating Agency" shall be a nationally recognized statistical rating organization
or other comparable Person designated by the Note Issuer, notice of which
designation shall be given to the Note Trustee, the Certificate Trustee and the
Servicer.
"RATING AGENCY CONDITION" means, with respect to any action, that each
Rating Agency shall have been given ten days prior notice thereof and that each
of the Rating Agencies shall have notified the Servicer, the Note Issuer, the
Note Trustee, the Agencies and the Certificate Trustee in writing that such
action will not result in a reduction or withdrawal of the then current rating
by such Rating Agency of any Class of the Notes or any Class of the
Certificates.
"RECORD DATE" means, with respect to a Payment Date, Optional Redemption
Date or Mandatory Redemption Date, the close of business on the last day of the
calendar month preceding the calendar month in which such Payment Date, Optional
Redemption Date or Mandatory Redemption Date occurs.
"REGISTERED HOLDER" means the Person in whose name a Note is registered on
the Note Register on the applicable Record Date.
"REPURCHASE DATE" has the meaning specified in the Sale Agreement.
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<PAGE> 15
"REQUIRED CAPITAL LEVEL" means, as of any Payment Date, the sum of .50
percent of the initial principal amount of the Notes.
"REQUIRED OVERCOLLATERALIZATION LEVEL" means, as of any Payment Date, the
amount required to be on deposit in the Overcollateralization Subaccount as
specified in Schedule B hereto.
"RESERVE SUBACCOUNT" has the meaning specified in Section 8.02(a).
"RESPONSIBLE OFFICER" means any officer within the Corporate Trust Office,
including any Managing Director, Vice President, Assistant Vice President,
Secretary, Assistant Secretary or Assistant Treasurer or any other officer of
the Note Trustee customarily performing functions similar to those performed by
any of the above designated officers and also, with respect to a particular
matter, any other officer to whom such matter is referred because of such
officer's knowledge and familiarity with the particular subject.
"SALE AGREEMENT" means the Transition Property Purchase and Sale Agreement
dated as of [ ], 1999, between the Note Issuer and the Seller, in the form
of Exhibit A-1, as amended and supplemented from time to time.
"SCHEDULED MATURITY DATE" means, with respect to any Class of Notes, the
Scheduled Maturity Date therefor, as specified in Section 2.01(b).
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SEMIANNUAL INTEREST" has the meaning specified in Section 2.01(c)(iv).
"SEMIANNUAL PRINCIPAL" means, with respect to any Payment Date on any Class
of Notes, the excess, if any, of the Outstanding Amount of such Class of Notes
over the outstanding principal balance of such Class of Notes specified for such
Payment Date in the Expected Amortization Schedule.
"SERVICING AGREEMENT" means the Transition Property Servicing Agreement
dated as of [ ], 1999, between the Note Issuer and the Servicer, in the
form of Exhibit A-2, as amended and supplemented from time to time.
"STANDARD & POOR'S" means Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc. or its successor.
"STATE" means any one of the 50 states of the United States of America or
the District of Columbia.
"STATUTE" means Chapter 164 of the Massachusetts Acts of 1997.
"SUCCESSOR SERVICER" has the meaning specified in Section 3.07(e).
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939 as in force on
the date hereof, unless otherwise specifically provided.
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<PAGE> 16
"UCC" means, unless the context otherwise requires, the Uniform Commercial
Code, as in effect in the relevant jurisdiction, as amended from time to time.
"U.S. GOVERNMENT OBLIGATIONS" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the Note Issuer's option.
(b) Except as otherwise specified herein or as the context may otherwise
require, the following terms have the respective meanings set forth in the
Servicing Agreement as in effect on the Issuance Date for all purposes of this
Note Indenture, and the definitions of such terms are equally applicable both to
the singular and plural forms of such terms:
Section of
Term Servicing Agreement
- --------------------------------------------------------- -------------------
Advice Letter............................................ Section 1.01
Administration Fee....................................... Section 1.01
Financing Order.......................................... Section 1.01
Non-Routine Periodic Adjustment.......................... Section 1.01
Overcollateralization Amount............................. Section 1.01
Principal Balance........................................ Section 1.01
RTC Charge............................................... Section 1.01
RTC Charge Collections................................... Section 1.01
Seller................................................... Section 1.01
Servicer................................................. Section 1.01
Servicer Default......................................... Section 1.01
Servicing Fee............................................ Section 1.01
Transition Property...................................... Section 1.01
SECTION 1.02. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever
this Note Indenture refers to a provision of the Trust Indenture Act, the
provision is incorporated by reference in and made a part of this Note
Indenture. The following Trust Indenture Act terms used in this Note Indenture
have the following meanings:
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Note Indenture.
"indenture trustee" or "institutional trustee" means the Note Trustee.
"obligor" on the indenture securities means the Note Issuer and any other
obligor on the indenture securities.
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<PAGE> 17
All other Trust Indenture Act terms used in this Note Indenture that are
defined by the Trust Indenture Act, defined by Trust Indenture Act reference to
another statute or defined by Commission rule have the meanings assigned to them
by such definitions.
SECTION 1.03. RULES OF CONSTRUCTION. Unless the context otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting principles
as in effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation;
(v) words in the singular include the plural and words in the
plural include the singular;
(vi) the words "herein," "hereof," "hereunder" and other words of
similar import refer to this Note Indenture as a whole and not to any
particular Article, Section or other subdivision; and
(vii) all references in this Note Indenture to designated
"Articles," "Sections" and other subdivisions are to the designated
Articles, Sections and other subdivisions of this Note Indenture;
ARTICLE II
THE NOTES
---------
SECTION 2.01. TERMS OF THE NOTES.
(a) AUTHORIZATION; DESIGNATION. The issuance of the Notes in an aggregate
initial principal amount of $[ ] is hereby authorized and the Notes
shall be designated as the BEC Funding LLC Notes (the "Notes"), and further
denominated as Classes A-[ ] through A-[ ].
(b) INITIAL PRINCIPAL AMOUNT; NOTE INTEREST RATE; SCHEDULED MATURITY DATE;
FINAL MATURITY DATE. The Notes of each Class shall have the initial principal
amount, bear interest at the rates per annum and shall have Scheduled Maturity
Dates and Final Maturity Dates as set forth below:
11
<PAGE> 18
<TABLE>
<CAPTION>
Initial Principal Note Interest Scheduled Final Maturity
Class Amount Rate Maturity Date Date
----- ----------------- ------------- ------------- --------------
<S> <C> <C>
A-1 $ %
...
</TABLE>
The Note Interest Rate shall be computed on the basis of a 360-day year of
twelve 30-day months.
The Notes shall be issuable in not less than Minimum Denominations.
(c) AUTHENTICATION DATE; PAYMENT DATES; EXPECTED AMORTIZATION SCHEDULE FOR
PRINCIPAL; SEMIANNUAL INTEREST.
(i) AUTHENTICATION DATE. The Notes that are authenticated and
delivered by the Note Trustee to or upon the order of the Note Issuer on [
] 1999 (the "Issuance Date") shall have as their date of authentication [
], 1999.
(ii) PAYMENT DATES. The Payment Dates for the Notes shall be
September 15 and March 15 of each year or, if any such date is not a
Business Day, the next succeeding Business Day, commencing on March 15,
2000 and continuing until the earlier of repayment of the Notes in full or
the Final Maturity Date for Class A-[ ] of the Notes.
(iii) EXPECTED AMORTIZATION SCHEDULE FOR PRINCIPAL. Unless an
Event of Default shall have occurred and be continuing and the unpaid
principal amount of all Notes and accrued interest thereon has been
declared to be due and payable, on each Payment Date, the Note Trustee
shall pay to the Noteholders of record as of the related Record Date
amounts payable pursuant to Section 8.02(d) as principal, in the following
order and priority: [(1) to the holders of the Class A-1 Notes, until the
Outstanding Amount of such Class of Notes thereof has been reduced to zero;
(2) to the holders of the Class A-2 Notes, until the Outstanding Amount of
such Class of Notes thereof has been reduced to zero; (3) to the holders of
the Class A-3 Notes, until the Outstanding Amount of such Class of Notes
thereof has been reduced to zero; (4) to the holders of the Class A-4
Notes, until the Outstanding Amount of such Class of Notes thereof has been
reduced to zero; (5) to the holders of the Class A-5 Notes until the
Outstanding Amount of such Class of Notes thereof has been reduced to zero;
(6) to the holders of the Class A-6 Notes, until the Outstanding Amount of
such Class of Notes thereof has been reduced to zero; and (7) to the
holders of the Class A-7 Notes until the Outstanding Amount of such Class
of Notes thereof has been reduced to zero]; PROVIDED, HOWEVER, that in no
event shall a principal payment pursuant to this Section 2.01(c)(iii) on
any Class on a Payment Date be greater than the amount that reduces the
Outstanding Amount of such Class of Notes to the amount specified in the
Expected Amortization Schedule.
(iv) SEMIANNUAL INTEREST. Semiannual Interest will be payable on
each Class of Notes on each Payment Date in an amount equal to one-half of
the product of (i) the applicable Note Interest Rate and (ii) the
Outstanding Amount of the related Class of
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<PAGE> 19
Notes as of the close of business on the preceding Payment Date after
giving effect to all payments of principal made to the holders of the
related Class of Notes on such preceding Payment Date; PROVIDED, HOWEVER,
that with respect to the initial Payment Date or, if no payment has yet
been made, interest on the outstanding principal balance will accrue from
and including the Issuance Date to, but excluding, that Payment Date.
SECTION 2.02. FORM. The Notes and the Note Trustee's certificate of
authentication shall be in substantially the forms set forth in Exhibit B, with
such appropriate insertions, omissions, substitutions and other variations as
are required or permitted by this Note Indenture and may have such letters,
numbers or other marks of identification and such legends or endorsements placed
thereon as may, consistently herewith, be determined by the officers executing
such Notes, as evidenced by their execution of such Notes. Any portion of the
text of any Note may be set forth on the reverse thereof, with an appropriate
reference thereto on the face of the Note.
The Notes shall be typewritten, printed, lithographed or engraved or
produced by any combination of these methods (with or without steel engraved
borders), all as determined by the officers executing such Notes, as evidenced
by their execution of such Notes.
The terms of the Notes set forth in Exhibit B are part of the terms of this
Note Indenture.
SECTION 2.03. EXECUTION, AUTHENTICATION AND DELIVERY. The Notes shall be
executed on behalf of the Note Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be manual or
facsimile.
Notes bearing the manual or facsimile signature of individuals who were at
any time Authorized Officers of the Note Issuer shall bind the Note Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
At any time and from time to time after the execution and delivery of this
Note Indenture, the Note Issuer may deliver Notes executed by the Note Issuer to
the Note Trustee pursuant to an Issuer Order for authentication; and the Note
Trustee shall authenticate and deliver such Notes as in this Note Indenture
provided and not otherwise.
No Note shall be entitled to any benefit under this Note Indenture or be
valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Note Trustee by the manual signature of one of its authorized
signatories, and such certificate upon any Note shall be conclusive evidence,
and the only evidence, that such Note has been duly authenticated and delivered
hereunder.
SECTION 2.04. TEMPORARY NOTES. Pending the preparation of definitive Notes,
the Note Issuer may execute, and upon receipt of an Issuer Order the Note
Trustee shall authenticate and deliver, temporary Notes which are printed,
lithographed, typewritten, mimeographed or otherwise produced, of the tenor of
the definitive Notes in lieu of which they are issued and with such variations
not inconsistent with the terms of this Note Indenture as the officers executing
such Notes may determine, as evidenced by their execution of such Notes.
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<PAGE> 20
If temporary Notes are issued, the Note Issuer will cause definitive Notes
to be prepared without unreasonable delay. After the preparation of definitive
Notes, the temporary Notes shall be exchangeable for definitive Notes upon
surrender of the temporary Notes at the office or agency of the Note Issuer to
be maintained as provided in Section 3.02, without charge to the Holder. Upon
surrender for cancellation of any one or more temporary Notes, the Note Issuer
shall execute and the Note Trustee shall authenticate and deliver in exchange
therefor a like principal amount of definitive Notes of Minimum Denominations.
Until so exchanged, the temporary Notes shall in all respects be entitled to the
same benefits under this Note Indenture as definitive Notes.
SECTION 2.05. REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE. The Note
Issuer shall cause to be kept a register (the "Note Register") in which, subject
to such reasonable regulations as it may prescribe, the Note Issuer shall
provide for the registration of Notes and the registration of transfers of
Notes. The Note Trustee shall be "Note Registrar" for the purpose of registering
Notes and transfers of Notes as herein provided. Upon any resignation of any
Note Registrar, the Note Issuer shall promptly appoint a successor or, if it
elects not to make such an appointment, assume the duties of Note Registrar.
If a Person other than the Note Trustee is appointed by the Note Issuer as
Note Registrar, the Note Issuer will give the Note Trustee prompt written notice
of the appointment of such Note Registrar and of the location, and any change in
the location, of the Note Register, and the Note Trustee shall have the right to
inspect the Note Register at all reasonable times and to obtain copies thereof,
and the Note Trustee shall have the right to rely upon a certificate executed on
behalf of the Note Registrar by a Responsible Officer thereof as to the names
and addresses of the Holders of the Notes and the principal amounts and number
of such Notes.
Upon surrender for registration of transfer of any Note at the office or
agency of the Note Issuer to be maintained as provided in Section 3.02, the Note
Issuer shall execute, and the Note Trustee shall authenticate and the Noteholder
shall obtain from the Note Trustee, in the name of the designated transferee or
transferees, one or more new Notes in any Minimum Denominations, of a like Class
and aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other Notes in any
Minimum Denominations, of a like Class and aggregate principal amount, upon
surrender of the Notes to be exchanged at such office or agency. Whenever any
Notes are so surrendered for exchange, the Note Issuer shall execute, and the
Note Trustee shall authenticate and the Noteholder shall obtain from the Note
Trustee, the Notes which the Noteholder making the exchange is entitled to
receive.
All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Note Issuer, evidencing the same debt, and
entitled to the same benefits under this Note Indenture, as the Notes
surrendered upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed by, or be accompanied by (a) a written
instrument of transfer in form satisfactory to the Note Trustee duly executed by
the Holder thereof or such Holder's attorney duly authorized in writing, with
such signature guaranteed by an institution which is a member of one of the
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following recognized Signature Guaranty Programs: (i) The Securities Transfer
Agent Medallion Program (STAMP); (ii) The New York Stock Exchange Medallion
Program (MSP); (iii) The Stock Exchange Medallion Program (SEMP); or (iv) in
such other guarantee program acceptable to the Note Trustee, and (b) such other
documents as the Note Trustee may require.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Note Issuer may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes, other than
exchanges pursuant to Section 2.04 not involving any transfer.
The preceding provisions of this Section notwithstanding, the Note Issuer
shall not be required to make and the Note Registrar need not register transfers
or exchanges of Notes selected for redemption or of any Note for a period of 15
days preceding the due date for any payment with respect to the Note.
SECTION 2.06. MUTILATED, DESTROYED, LOST OR STOLEN NOTES. If (i) any
mutilated Note is surrendered to the Note Trustee, or the Note Trustee receives
evidence to its satisfaction of the destruction, loss or theft of any Note, and
(ii) there is delivered to the Note Trustee such security or indemnity as may be
required by it to hold the Note Issuer and the Note Trustee harmless, then, in
the absence of notice to the Note Issuer, the Note Registrar or the Note Trustee
that such Note has been acquired by a protected purchaser, the Note Issuer shall
execute and, upon its request, the Note Trustee shall authenticate and deliver,
in exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Note, a replacement Note of like Class, tenor and principal amount, bearing a
number not contemporaneously outstanding; PROVIDED, HOWEVER, that if any such
destroyed, lost or stolen Note, but not a mutilated Note, shall have become or
within seven days shall be due and payable, or shall have been called for
redemption, instead of issuing a replacement Note, the Note Issuer may pay such
destroyed, lost or stolen Note when so due or payable or upon the Optional
Redemption Date or Mandatory Redemption Date, as applicable, without surrender
thereof. If, after the delivery of such replacement Note or payment of a
destroyed, lost or stolen Note pursuant to the proviso to the preceding
sentence, a protected purchaser of the original Note in lieu of which such
replacement Note was issued presents for payment such original Note, the Note
Issuer and the Note Trustee shall be entitled to recover such replacement Note
(or such payment) from the Person to whom it was delivered or any Person taking
such replacement Note from such Person to whom such replacement Note was
delivered or any assignee of such Person, except a protected purchaser, and
shall be entitled to recover upon the security or indemnity provided therefor to
the extent of any loss, damage, cost or expense incurred by the Note Issuer or
the Note Trustee in connection therewith.
Upon the issuance of any replacement Note under this Section, the Note
Issuer may require the payment by the Holder of such Note of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other reasonable expenses (including the fees and expenses of
the Note Trustee) connected therewith.
Every replacement Note issued pursuant to this Section in replacement of
any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Note Issuer, whether or not the
mutilated, destroyed, lost or stolen Note shall be at any time
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enforceable by anyone, and shall be entitled to all the benefits of this Note
Indenture equally and proportionately with any and all other Notes duly issued
hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.07. PERSONS DEEMED OWNER. Prior to due presentment for
registration of transfer of any Note, the Note Issuer, the Note Trustee and any
agent of the Note Issuer or the Note Trustee may treat the Person in whose name
any Note is registered (as of the day of determination) as the owner of such
Note for the purpose of receiving payments of principal of and interest on such
Note and for all other purposes whatsoever, whether or not such Note be overdue,
and neither the Note Issuer, the Note Trustee nor any agent of the Note Issuer
or the Note Trustee shall be affected by notice to the contrary.
SECTION 2.08. PAYMENT OF PRINCIPAL AND INTEREST; INTEREST ON OVERDUE
PRINCIPAL; PRINCIPAL AND INTEREST RIGHTS PRESERVED.
(a) Any installment of interest or principal payable on any Note which is
punctually paid or duly provided for by the Note Issuer on the applicable
Payment Date shall be paid to the Person in whose name such Note (or one or more
Predecessor Notes) is registered on the Record Date for such Payment Date, by
check mailed first-class, postage prepaid to such Person's address as it appears
on the Note Register on such Record Date, except that with respect to Notes
registered on the Record Date in the name of the Certificate Trustee payments
will be made by wire transfer in immediately available funds to the account
designated by the Certificate Trustee and except for the final installment of
principal payable with respect to such Note on a Payment Date which shall be
payable as provided below. The funds represented by any such checks returned
undelivered shall be held in accordance with Section 3.03 hereof.
(b) The principal of each Note of each Class shall be paid, to the extent
funds are available therefor in the Collection Account, in installments on each
Payment Date specified in Section 2.01. Notwithstanding the foregoing, the
entire unpaid principal amount of the Notes shall be due and payable, if not
previously paid, on the date on which an Event of Default shall have occurred
and be continuing, if the Note Trustee or the Holders of the Notes representing
not less than a majority of the Outstanding Amount of the Notes have declared
the Notes to be immediately due and payable in the manner provided in Section
5.02. All payments of principal on the Notes shall be made pro rata to the
Noteholders entitled thereto. The Note Trustee shall notify the Person in whose
name a Note is registered at the close of business on the Record Date preceding
the Payment Date on which the Note Issuer expects that the final installment of
principal of and interest on such Note will be paid. Such notice shall be mailed
no later than five days prior to such final Payment Date and shall specify that
such final installment will be payable only upon presentation and surrender of
such Note and shall specify the place where such Note may be presented and
surrendered for payment of such installment. Notices in connection with
redemptions of Notes shall be mailed to Noteholders as provided in Section
10.02.
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(c) If the Note Issuer defaults in a payment of interest on the Notes when
due, the Note Issuer shall pay such defaulted interest (plus interest on such
defaulted interest at the applicable Note Interest Rate to the extent lawful).
The Note Issuer may pay such defaulted interest (plus interest on such defaulted
interest) to the Persons who are Noteholders on a subsequent special record
date, which date shall be at least five Business Days prior to the payment date.
The Note Issuer shall fix or cause to be fixed any such special record date and
payment date, and, at least 20 days before any such special record date, the
Note Issuer shall mail to each affected Noteholder a notice that states the
special record date, the payment date and the amount of defaulted interest (plus
interest on such defaulted interest) to be paid.
SECTION 2.09. CANCELLATION. All Notes surrendered for payment, registration
of transfer, exchange or redemption shall, if surrendered to any Person other
than the Note Trustee, be delivered to the Note Trustee and shall be promptly
cancelled by the Note Trustee. The Note Issuer may at any time deliver to the
Note Trustee for cancellation any Notes previously authenticated and delivered
hereunder which the Note Issuer may have acquired in any manner whatsoever, and
all Notes so delivered shall be promptly cancelled by the Note Trustee. No Notes
shall be authenticated in lieu of or in exchange for any Notes cancelled as
provided in this Section, except as expressly permitted by this Note Indenture.
All cancelled Notes may be held or disposed of by the Note Trustee in accordance
with its standard retention or disposal policy as in effect at the time.
SECTION 2.10. AUTHENTICATION AND DELIVERY OF NOTES. On the Issuance Date,
the Notes shall be executed by the Note Issuer and delivered to the Note Trustee
for authentication and thereupon the same shall be authenticated and delivered
by the Note Trustee upon Issuer Request and upon delivery by the Note Issuer to
the Note Trustee, and receipt by the Note Trustee, or the causing to occur by
the Note Issuer, of the following:
(1) NOTE ISSUER ACTION. An Issuer Order authorizing and directing the
execution, authentication and delivery of the Notes by the Note Trustee and
specifying the principal amount of Notes to be authenticated.
(2) AUTHORIZATIONS.
(a) An Opinion of Counsel that no authorization, approval or
consent of any governmental body or bodies at the time having
jurisdiction in the premises is required for the valid issuance,
authentication and delivery of such Notes, except for such
registrations as are required under the blue sky and securities laws
of any State or such authorizations, approvals or consents of
governmental bodies that have been obtained and copies of which have
been delivered with such Opinion of Counsel.
(b) An Opinion of Counsel that no authorization, approval or
consent of any governmental body or bodies at the time having
jurisdiction in the premises is required for the valid execution and
delivery by the Note Issuer of each of the Basic Documents to which
the Note Issuer is a party, except for such authorizations, approvals
or consents of governmental bodies that have been obtained and copies
of which have been delivered with such Opinion of Counsel.
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(3) AUTHORIZING CERTIFICATE. A certificate of an Authorized Officer of
the Note Issuer certifying that the Note Issuer has duly authorized the
execution and delivery of this Note Indenture and the execution,
authentication and delivery of the Notes.
(4) THE COLLATERAL. The Note Issuer shall have caused all Collateral
to have been Granted to the Note Trustee or, if requested by the Note
Trustee, its nominee and will have caused all related filings with the DTE
pursuant to the Statute and other filings in connection with such Grant to
have been duly made.
(5) CERTIFICATES OF THE NOTE ISSUER AND THE SELLER.
(a) An Officer's Certificate from the Note Issuer, dated as of
the Issuance Date:
(i) to the effect that the Note Issuer is not in
Default under this Note Indenture and that the issuance of the
Notes applied for will not result in any Default or in any
material breach of any of the terms, conditions or provisions of
or constitute a default under any material indenture, mortgage,
deed of trust or other agreement or instrument to which the Note
Issuer is a party or by which it or its property is bound or any
order of any court or administrative agency entered in any
Proceeding to which the Note Issuer is a party or by which it or
its property may be bound or to which it or its property may be
subject; and that all conditions precedent provided in this Note
Indenture relating to the authentication and delivery of the
Notes applied for have been complied with;
(ii) all instruments furnished to the Note Trustee
pursuant to this Note Indenture conform to the requirements set
forth in this Note Indenture and constitute all of the documents
required to be delivered hereunder for the Note Trustee to
authenticate and deliver the Notes applied for, and all
conditions precedent provided for in this Note Indenture relating
to the authentication and delivery of the Notes have been
complied with;
(iii) to the effect that the Note Issuer has not
assigned any interest or participation in the Collateral except
for the lien of this Note Indenture; the Note Issuer has the
power and right to Grant the Collateral to the Note Trustee as
security hereunder; and the Note Issuer, subject to the terms of
this Note Indenture, has Granted to the Note Trustee all of its
right, title and interest in and to such Collateral free and
clear of any lien, mortgage, pledge, charge, security interest,
adverse claim or other encumbrance arising as a result of actions
of the Note Issuer or through the Note Issuer, except the lien of
this Note Indenture;
(iv) to the effect that the Note Issuer has appointed
the firm of Independent certified public accountants as
contemplated in Section 8.06 hereof;
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(v) to the effect that attached thereto are duly
executed, true and complete copies of the Sale Agreement and the
Servicing Agreement; and
(vi) stating that all filings with the DTE pursuant to
the Statute and all UCC financing statements with respect to the
Collateral which are required to be filed by the terms of the
Sale Agreement, the Servicing Agreement or this Note Indenture
have been filed as required.
(b) An Officer's Certificate (as defined in the Sale Agreement)
from the Seller, dated as of the Issuance Date, to the effect that (i)
the representations and warranties set forth in Article III of the
Sale Agreement are true and correct and (ii) the attached copies of
the Financing Order and Issuance Advice Letter creating the Transition
Property are true and correct.
(6) OPINION OF COUNSEL. An Opinion of Counsel, portions of which may
be delivered by counsel for the Note Issuer, portions of which may be
delivered by counsel for the Seller and the Servicer, and portions of which
may be delivered by counsel for the Certificate Issuer, dated the Issuance
Date, in each case subject to the customary exceptions, qualifications and
assumptions contained therein, to the collective effect that:
(a) the Note Indenture has been duly qualified under the Trust
Indenture Act;
(b) the Note Issuer has the power and authority to execute and
deliver this Note Indenture and to issue the Notes, and this Note
Indenture and the Notes have been duly authorized and the Note Issuer
is duly formed and is validly existing in good standing under the laws
of the jurisdiction of its organization;
(c) the Note Indenture has been duly authorized, executed and
delivered by the Note Issuer;
(d) the Notes applied for have been duly authorized and executed
and, when authenticated in accordance with the provisions of the Note
Indenture and delivered against payment of the purchase price
therefor, will constitute valid and binding obligations of the Note
Issuer, entitled to the benefits of the Note Indenture;
(e) this Note Indenture, the Sale Agreement, the Servicing
Agreement and the Fee and Indemnity Agreement are valid and binding
agreements of the Note Issuer, enforceable in accordance with their
respective terms, except as such enforceability may be subject to
bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and other laws relating to or affecting the rights of
creditors generally and general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or
at law);
(f) (I) to the extent that the provisions of Section 1H(d) of the
Statute apply to the grant of a security interest by the Note Issuer
in the Collateral
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pursuant to this Note Indenture, then upon the giving of value by the
Note Trustee to the Note Issuer with respect to the Collateral, (A)
this Note Indenture creates in favor of the Note Trustee a security
interest in the rights of the Note Issuer in the Collateral, (B) such
security interest is valid and enforceable against the Note Issuer and
third parties (subject to the rights of any third parties holding
security interests in such Collateral perfected in the manner
described in Section 1H(d) of the Statute), and has attached, (C) such
security interest is perfected, and (D) such perfected security
interest is of first priority (subject to any statutory lien in favor
of the holders of the rate reduction bonds issued pursuant to the
Financing Order and the trustee or the representative for such holders
pursuant to Section 1H(e) of the Statute). (II) To the extent that the
provisions of Section 1H(d) of the Statute do not apply to the grant
of a security interest by the Note Issuer in the Collateral pursuant
to this Note Indenture, then upon the giving of value by the Note
Trustee to the Note Issuer with respect to the Collateral, (A) this
Note Indenture creates in favor of the Note Trustee a security
interest in the rights of the Note Issuer in the Collateral, and such
security interest is enforceable against the Note Issuer with respect
to such Collateral, (B) such security interest is perfected, and (C)
such perfected security interest is of first priority (subject to any
statutory lien in favor of the holders of the rate reduction bonds
issued pursuant to the Financing Order and the trustee or the
representative for such holders pursuant to Section 1H(e) of the
Statute);
(g) either (A) the Registration Statement covering the Notes and
the Certificates is effective under the Securities Act and, to the
best of such counsel's knowledge and information, no stop order
suspending the effectiveness of such Registration Statement has been
issued under the Securities Act and no proceedings for that purpose
have been initiated or are pending or threatened by the Commission or
(B) the Notes and the Certificates are exempt from the registration
requirements under the Securities Act;
(h) the Note Issuer is not now and, assuming that the Note Issuer
uses the proceeds of the sale of the Notes for the purpose of
acquiring Transition Property in accordance with the terms of the Sale
Agreement, following the sale of the Notes to the Certificate Issuer
and the Certificates to the underwriter, underwriters, placement agent
or agents or similar Person, neither the Note Issuer nor the
Certificate Issuer will be required to be registered under the
Investment Company Act of 1940, as amended;
(i) the Sale Agreement is a valid and binding agreement of the
Seller enforceable against the Seller in accordance with its terms
except as such enforceability may be subject to bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and other
laws relating to or affecting the rights of creditors generally and
general principles of equity (regardless of whether such enforcement
is considered in a proceeding in equity or at law);
(j) the Servicing Agreement is a valid and binding agreement of
the Servicer enforceable against the Servicer in accordance with its
terms except as
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such enforceability may be subject to bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and other laws
relating to or affecting the rights of creditors generally and general
principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law);
(k) upon the delivery of the fully executed Sale Agreement to the
Note Issuer and the payment of the purchase price of the Transition
Property by the Note Issuer to the Seller pursuant to the Sale
Agreement, then (I) the transfer of the Transition Property by the
Seller to the Note Issuer pursuant to the Sale Agreement conveys the
Seller's right, title and interest in the Transition Property to the
Note Issuer and will be treated under state law as an absolute
transfer of all of the Seller's right, title, and interest in the
Transition Property, other than for federal and state income and
franchise tax purposes, (II) such transfer of the Transition Property
is perfected, (III) such transfer has priority over any other
assignment of the Transition Property and (IV) the Transition Property
is free and clear of all liens created prior to its transfer to the
Note Issuer pursuant to the Sale Agreement; and
(l) such other matters as the Note Trustee may reasonably
require.
(7) ACCOUNTANT'S CERTIFICATE OR OPINION. A certificate or opinion,
addressed to the Note Issuer and the Note Trustee complying with the
requirements of Section 11.01(a) hereof, of a firm of Independent certified
public accountants of recognized national reputation to the effect that (a)
such accountants are Independent with respect to the Note Issuer within the
meaning of the Note Indenture, and are independent public accountants
within the meaning of the standards of The American Institute of Certified
Public Accountants, and (b) with respect to the Collateral, they have made
such calculations as they deemed necessary for the purpose and determined
that, based on the assumptions used in calculating the initial RTC Charge,
as of the Issuance Date such RTC Charge is sufficient to pay (a) Operating
Expenses when incurred, plus (b) the Overcollateralization Amount, plus (c)
interest on the Notes at their respective Note Interest Rates when due,
plus (d) principal of the Notes in accordance with the Expected
Amortization Schedule.
(8) RATING AGENCY CONDITION. The Note Trustee shall receive evidence
reasonably satisfactory to it that the Rating Agency Condition will be
satisfied.
(9) OTHER REQUIREMENTS. Such other documents, certificates,
agreements, instruments or opinions as the Note Trustee may reasonably
require.
SECTION 2.11. RELEASE OF COLLATERAL. Subject to Section 11.01, the Note
Trustee shall release property from the lien of this Note Indenture only as
specified in Section 8.02(d) or upon receipt of an Issuer Request accompanied by
an Officer's Certificate, an Opinion of Counsel and Independent Certificates in
accordance with Trust Indenture Act ss.ss.314(c) and 314(d)(l) or an Opinion of
Counsel in lieu of such Independent Certificates to the effect that the Trust
Indenture Act does not require any such Independent Certificates.
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ARTICLE III
COVENANTS
---------
SECTION 3.01. PAYMENT OF PRINCIPAL AND INTEREST. The Note Issuer will duly
and punctually pay the principal of and interest on the Notes in accordance with
the terms of the Notes and this Note Indenture. Amounts properly withheld under
the Code by any Person from a payment to any Noteholder of interest or principal
shall be considered as having been paid by the Note Issuer to such Noteholder
for all purposes of this Note Indenture.
SECTION 3.02. MAINTENANCE OF OFFICE OR AGENCY. The Note Issuer will
maintain in the Borough of Manhattan, The City of New York, an office or agency
where Notes may be surrendered for registration of transfer or exchange. The
Note Issuer hereby initially appoints the Note Trustee to serve as its agent for
the foregoing purposes. The Note Issuer will give prompt written notice to the
Note Trustee of the location, and of any change in the location, of any such
office or agency. If at any time the Note Issuer shall fail to maintain any such
office or agency or shall fail to furnish the Note Trustee with the address
thereof, such surrenders may be made at the Corporate Trust Office, and the Note
Issuer hereby appoints the Note Trustee as its agent to receive all such
surrenders.
SECTION 3.03. MONEY FOR PAYMENTS TO BE HELD IN TRUST. As provided in
Section 8.02(a), all payments of amounts due and payable with respect to any
Notes that are to be made from amounts withdrawn from the Collection Account
pursuant to Section 8.02(d) shall be made on behalf of the Note Issuer by the
Note Trustee or by another Paying Agent, and no amounts so withdrawn from the
Collection Account for payments of Notes shall be paid over to the Note Issuer
except as provided in this Section and Section 8.02.
The Note Issuer will cause each Paying Agent other than the Note Trustee to
execute and deliver to the Note Trustee an instrument in which such Paying Agent
shall agree with the Note Trustee (and if the Note Trustee acts as Paying Agent,
it hereby so agrees), subject to the provisions of this Section, that such
Paying Agent will:
(i) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise disposed
of as herein provided and pay such sums to such Persons as herein provided;
(ii) give the Note Trustee notice of any default by the Note
Issuer of which it has actual knowledge (or any other obligor upon the
Notes) in the making of any payment required to be made with respect to the
Notes;
(iii) at any time during the continuance of any such default, upon
the written request of the Note Trustee, forthwith pay to the Note Trustee
all sums so held in trust by such Paying Agent;
(iv) immediately resign as a Paying Agent and forthwith pay to
the Note Trustee all sums held by it in trust for the payment of Notes if
at any time it ceases to
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meet the standards required to be met by a Paying Agent at the time of its
appointment; and
(v) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Notes of any applicable
withholding taxes imposed thereon and with respect to any applicable
reporting requirements in connection therewith.
The Note Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Note Indenture or for any other purpose, by
Issuer Order direct any Paying Agent to pay to the Note Trustee all sums held in
trust by such Paying Agent, such sums to be held by the Note Trustee upon the
same trusts as those upon which the sums were held by such Paying Agent; and
upon such payment by any Paying Agent to the Note Trustee, such Paying Agent
shall be released from all further liability with respect to such money.
Subject to applicable laws with respect to escheat of funds, any money held
by the Note Trustee or any Paying Agent in trust for the payment of any amount
due with respect to any Note and remaining unclaimed for two years after such
amount has become due and payable shall be discharged from such trust and be
paid to the Note Issuer on Issuer Request; and, subject to Section 11.16, the
Holder of such Note shall thereafter, as an unsecured general creditor, look
only to the Note Issuer for payment thereof (but only to the extent of the
amounts so paid to the Note Issuer), and all liability of the Note Trustee or
such Paying Agent with respect to such trust money shall thereupon cease;
PROVIDED, HOWEVER, that the Note Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Note Issuer cause
to be published once, in a newspaper published in the English language,
customarily published on each Business Day and of general circulation in The
City of New York, notice that such money remains unclaimed and that, after a
date specified therein, which shall not be less than 30 days from the date of
such publication, any unclaimed balance of such money then remaining will be
repaid to the Note Issuer. The Note Trustee may also adopt and employ, at the
expense of the Note Issuer, any other reasonable means of notification of such
repayment (including mailing notice of such repayment to Holders whose Notes
have been called but have not been surrendered for redemption or whose right to
or interest in moneys due and payable but not claimed is determinable from the
records of the Note Trustee or of any Paying Agent, at the last address of
record for each such Holder).
SECTION 3.04. EXISTENCE. The Note Issuer will keep in full effect its
existence, rights and franchises as a limited liability company under the laws
of the State of Delaware (unless it becomes, or any successor Note Issuer
hereunder is or becomes, organized under the laws of any other State or of the
United States of America, in which case the Note Issuer will keep in full effect
its existence, rights and franchises under the laws of such other jurisdiction)
and will obtain and preserve its qualification to do business in each
jurisdiction in which such qualification is or shall be necessary to protect the
validity and enforceability of this Note Indenture, the Notes, the Collateral
and each other instrument or agreement included in the Collateral.
SECTION 3.05. PROTECTION OF COLLATERAL. The Note Issuer will from time to
time execute and deliver all such supplements and amendments hereto and all such
filings with the DTE
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pursuant to the Statute, financing statements, continuation statements,
instruments of further assurance and other instruments, and will take such other
action necessary or advisable to:
(i) maintain or preserve the lien and security interest (and the
priority thereof) of this Note Indenture or carry out more effectively the
purposes hereof;
(ii) perfect, publish notice of or protect the validity of any
Grant made or to be made by this Note Indenture;
(iii) enforce any of the Collateral;
(iv) preserve and defend title to the Collateral and the rights
of the Note Trustee and the Noteholders in such Collateral against the
claims of all Persons and parties, including the challenge by any party to
the validity or enforceability of the Financing Order, any Advice Letter or
the Transition Property or any proceeding relating thereto and institute
any action or proceeding necessary to compel performance by the DTE or The
Commonwealth of Massachusetts of any of its obligations or duties under the
Statute, the Financing Order or any Advice Letter; or
(v) pay any and all taxes levied or assessed upon all or any
part of the Collateral.
The Note Issuer hereby designates the Note Trustee its agent and
attorney-in-fact to execute any filings with the DTE pursuant to the Statute,
financing statement, continuation statement or other instrument required by the
Note Trustee pursuant to this Section, it being understood that the Note Trustee
shall have no such obligation.
SECTION 3.06. OPINIONS AS TO COLLATERAL.
(a) On the Issuance Date, the Note Issuer shall furnish to the Note Trustee
an Opinion of Counsel either stating that, in the opinion of such counsel, (A)
such action has been taken (and reciting the details of such action) with
respect to the recording and filing of this Note Indenture and any other
requisite documents, and with respect to the execution and filing of any filings
with the DTE pursuant to the Statute, financing statements and continuation
statements, as are necessary to perfect the lien and security interest of this
Note Indenture and that no such additional filings are necessary while any Notes
are Outstanding, or (B) no such action is necessary to make such lien and
security interest effective.
(b) Prior to the effectiveness of any amendment to the Sale Agreement, the
Note Issuer shall furnish to the Note Trustee an Opinion of Counsel either (A)
stating that, in the opinion of such counsel, all filings, including filings
with the DTE pursuant to the Statute and any UCC financing statements, have been
executed and filed that are necessary fully to preserve and protect the interest
of the Note Issuer and the Note Trustee in the Transition Property and the
proceeds thereof, and reciting the details of such filings or referring to prior
Opinions of Counsel in which such details are given, or (B) stating that, in the
opinion of such counsel, no such action shall be necessary to preserve and
protect such interest.
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SECTION 3.07. PERFORMANCE OF OBLIGATIONS; SERVICING; COMMISSION FILINGS.
(a) The Note Issuer (i) will diligently pursue any and all actions to
enforce its rights under each instrument or agreement included in the Collateral
and (ii) will not take any action and will use its reasonable efforts not to
permit any action to be taken by others that would release any Person from any
of such Person's covenants or obligations under any such instrument or agreement
or that would result in the amendment, hypothecation, subordination, termination
or discharge of, or impair the validity or effectiveness of, any such instrument
or agreement, except, in each case, as expressly provided in this Note
Indenture, the Sale Agreement, the Servicing Agreement or such other instrument
or agreement.
(b) The Note Issuer may contract with other Persons to assist it in
performing its duties under this Note Indenture, and any performance of such
duties by a Person identified to the Note Trustee in an Officer's Certificate of
the Note Issuer shall be deemed to be action taken by the Note Issuer.
Initially, the Note Issuer has contracted with the Servicer to assist the Note
Issuer in performing its duties under this Note Indenture.
(c) The Note Issuer will punctually perform and observe all of its
obligations and agreements contained in this Note Indenture, the Basic Documents
and in the instruments and agreements included in the Collateral, including
filing or causing to be filed all filings with the DTE pursuant to the Statute,
UCC financing statements and continuation statements required to be filed by it
by the terms of this Note Indenture, the Sale Agreement and the Servicing
Agreement in accordance with and within the time periods provided for herein and
therein. Except as otherwise expressly permitted therein, the Note Issuer shall
not waive, amend, modify, supplement or terminate any Basic Document or any
provision thereof without the written consent of the Note Trustee (which consent
shall not be withheld if (i) the Note Trustee shall have received an Officer's
Certificate stating that such waiver, amendment, modification, supplement or
termination shall not adversely affect in any material respect the interests of
the Noteholders or the holders of Certificates and (ii) the Rating Agency
Condition shall have been satisfied with respect thereto) or the Holders of at
least a majority of the Outstanding Amount of Notes.
(d) If the Note Issuer shall have knowledge of the occurrence of a Servicer
Default under the Servicing Agreement, the Note Issuer shall promptly give
written notice thereof to the Note Trustee and the Rating Agencies, and shall
specify in such notice the action, if any, the Note Issuer is taking with
respect of such default. If a Servicer Default shall arise from the failure of
the Servicer to perform any of its duties or obligations under the Servicing
Agreement with respect to the Transition Property or the RTC Charge, the Note
Issuer shall take all reasonable steps available to it to remedy such failure.
(e) As promptly as possible after the giving of notice of termination to
the Servicer, the Agencies and the Rating Agencies of the Servicer's rights and
powers pursuant to Section 7.01 of the Servicing Agreement, the Note Issuer,
subject to the approval of the DTE pursuant to the Financing Order, shall
appoint a successor Servicer (the "Successor Servicer") with the Note Trustee's
prior written consent thereto (which consent shall not be unreasonably
withheld), and such Successor Servicer shall accept its appointment by a written
assumption in a form acceptable to the Note Issuer and the Note Trustee. A
Person shall qualify as a Successor Servicer only if such Person satisfies the
requirements of the Servicing Agreement. If within
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30 days after the delivery of the notice referred to above, the Note Issuer
shall not have obtained such a new Servicer, the Note Trustee may petition the
DTE or a court of competent jurisdiction to appoint a Successor Servicer. In
connection with any such appointment, the Note Issuer may make such arrangements
for the compensation of such successor as it and such successor shall agree,
subject to the limitations set forth below and in the Servicing Agreement, and
in accordance with Section 5.02 of the Servicing Agreement, the Note Issuer
shall enter into an agreement with such successor for the servicing of the
Transition Property (such agreement to be in form and substance satisfactory to
the Note Trustee).
(f) Upon any termination of the Servicer's rights and powers pursuant to
the Servicing Agreement, the Note Trustee shall promptly notify the Note Issuer,
the Noteholders, the Agencies and the Rating Agencies. As soon as a Successor
Servicer is appointed, the Note Issuer shall notify the Note Trustee, the
Noteholders, the Agencies and the Rating Agencies of such appointment,
specifying in such notice the name and address of such Successor Servicer.
(g) Without derogating from the absolute nature of the assignment granted
to the Note Trustee under this Note Indenture or the rights of the Note Trustee
hereunder, the Note Issuer agrees that it will not, without the prior written
consent of the Note Trustee or the Holders of at least a majority in Outstanding
Amount of the Notes, amend, modify, waive, supplement, terminate or surrender,
or agree to any amendment, modification, supplement, termination, waiver or
surrender of, the terms of any Collateral or the Basic Documents, or waive
timely performance or observance of any material term by the Seller or the
Servicer under the Sale Agreement or the Servicing Agreement, respectively. If
any such amendment, modification, supplement or waiver shall be so consented to
by the Note Trustee or such Holders, the Note Issuer agrees to execute and
deliver, in its own name and at its own expense, such agreements, instruments,
consents and other documents as shall be necessary or appropriate in the
circumstances. The Note Issuer agrees that no such amendment, modification,
supplement or waiver shall adversely affect the rights of the Holders of the
Notes Outstanding at the time of any such amendment, modification, supplement or
waiver.
(h) The Note Issuer shall file with the Commission such periodic reports,
if any, as are required from time to time under Section 13 of the Exchange Act.
(i) The Note Issuer shall make all filings required under the Statute relating
to the transfer of the ownership or security interest in the Transition Property
other than those required to be made by the Seller pursuant to the Basic
Documents.
SECTION 3.08. NEGATIVE COVENANTS. So long as any Notes are Outstanding, the
Note Issuer shall not:
(i) except as expressly permitted by this Note Indenture, sell,
transfer or otherwise dispose of any of the properties or assets of the
Note Issuer, including those included in the Collateral, unless directed to
do so by the Note Trustee in accordance with Article V;
(ii) claim any credit on, or make any deduction from the
principal or interest payable in respect of, the Notes (other than amounts
properly withheld from such
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payments under the Code) or assert any claim against any present or former
Noteholder by reason of the payment of the taxes levied or assessed upon
any part of the Collateral;
(iii) terminate its existence or dissolve or liquidate in whole or
in part; or
(iv) (A) permit the validity or effectiveness of this Note
Indenture to be impaired, or permit the lien of this Note Indenture to be
amended, hypothecated, subordinated, terminated or discharged, or permit
any Person to be released from any covenants or obligations with respect to
the Notes under this Note Indenture except as may be expressly permitted
hereby, (B) permit any lien, charge, excise, claim, security interest,
mortgage or other encumbrance (other than the lien of this Note Indenture
and any statutory lien under Section 1H(e) of the Statute) to be created by
the Note Issuer on or extend to or otherwise arise upon or burden the
Collateral or any part thereof or any interest therein or the proceeds
thereof or (C) subject to any statutory lien under Section 1H(e) of the
Statute, permit the lien of this Note Indenture not to constitute a valid
first priority security interest in the Collateral.
SECTION 3.09. ANNUAL STATEMENT AS TO COMPLIANCE. The Note Issuer will
deliver to the Note Trustee, the Certificate Trustee and the Rating Agencies not
later than [March 31] of each year (commencing with [March 31, 2000]), an
Officer's Certificate stating, as to the Authorized Officer signing such
Officer's Certificate, that
(i) a review of the activities of the Note Issuer during the
preceding twelve months ended December 31 (or, in the case of the Officer's
Certificate to be delivered on or before March 31, 2000, the period of time
from the date of this Note Indenture until December 31, 1999), and of
performance under this Note Indenture has been made under such Authorized
Officer's supervision; and
(ii) to such Authorized Officer's knowledge, based on such
review, the Note Issuer has complied with all conditions and covenants
under this Note Indenture throughout such twelve month period, or, if there
has been a default in so complying with any such condition or covenant,
specifying each such default known to such Authorized Officer and the
nature and status thereof.
SECTION 3.10. NOTE ISSUER MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.
(a) The Note Issuer shall not consolidate or merge with or into any other
Person, unless
(i) the Person (if other than the Note Issuer) formed by or
surviving such consolidation or merger shall be a Person organized and
existing under the laws of the United States of America, any State or the
District of Columbia and shall expressly assume, by an indenture
supplemental hereto, executed and delivered to the Note Trustee, in form
and substance reasonably satisfactory to the Note Trustee, the due and
punctual payment of the principal of and interest on all Notes and the
performance or observance of every agreement and covenant of this Note
Indenture on the part of the Note Issuer to be performed or observed, all
as provided herein;
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(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Note Issuer shall have received an Opinion of Counsel
(and shall have delivered copies thereof to the Note Trustee) to the effect
that such transaction will not have any material adverse tax consequence to
the Note Issuer, the Certificate Issuer, any Noteholder or any
Certificateholder;
(v) any action as is necessary to maintain the lien and security
interest created by this Note Indenture shall have been taken; and
(vi) the Note Issuer shall have delivered to the Note Trustee an
Officer's Certificate and an Opinion of Counsel each stating that such
consolidation or merger and such supplemental note indenture comply with
this Section 3.10 and that all conditions precedent herein provided for
relating to such transaction have been complied with (including any filing
required by the Exchange Act).
(b) Except as specifically provided herein, the Note Issuer shall not
convey or transfer any of its properties or assets, including those included in
the Collateral, to any Person, unless
(i) the Person that acquires by conveyance or transfer the
properties and assets of the Note Issuer the conveyance or transfer of
which is hereby restricted shall (A) be a United States citizen or a Person
organized and existing under the laws of the United States of America, any
State or the District of Columbia, (B) expressly assumes, by an indenture
supplemental hereto, executed and delivered to the Note Trustee, in form
and substance reasonably satisfactory to the Note Trustee, the due and
punctual payment of the principal of and interest on all Notes and the
performance or observance of every agreement and covenant of this Note
Indenture on the part of the Note Issuer to be performed or observed, all
as provided herein, (C) expressly agrees by means of such supplemental note
indenture that all right, title and interest so conveyed or transferred
shall be subject and subordinate to the rights of Holders of the Notes, (D)
unless otherwise expressly waived by the Note Issuer, expressly agrees to
indemnify, defend and hold harmless the Note Issuer against and from any
loss, liability or expense arising under or related to this Note Indenture
and the Notes and (E) expressly agrees by means of such supplemental note
indenture that such Person (or if a group of Persons, then one specified
Person) shall make all filings with the Commission (and any other
appropriate Person) required by the Exchange Act in connection with the
Notes;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
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(iv) the Note Issuer shall have received an Opinion of Counsel
(and shall have delivered copies thereof to the Note Trustee) to the effect
that such transaction will not have any material adverse tax consequence to
the Note Issuer, the Certificate Issuer, any Noteholder or any
Certificateholder;
(v) any action as is necessary to maintain the lien and security
interest created by this Note Indenture shall have been taken; and
(vi) the Note Issuer shall have delivered to the Note Trustee an
Officer's Certificate and an Opinion of Counsel each stating that such
conveyance or transfer and such supplemental note indenture comply with
this Section 3.10 and that all conditions precedent herein provided for
relating to such transaction have been complied with (including any filing
required by the Exchange Act).
SECTION 3.11. SUCCESSOR OR TRANSFEREE.
(a) Upon any consolidation or merger of the Note Issuer in accordance with
Section 3.10(a), the Person formed by or surviving such consolidation or merger
(if other than the Note Issuer) shall succeed to, and be substituted for, and
may exercise every right and power of, the Note Issuer under this Note Indenture
with the same effect as if such Person had been named as the Note Issuer herein.
(b) Except as set forth in Section 6.07, upon a conveyance or transfer of
all the assets and properties of the Note Issuer pursuant to Section 3.10(b),
BEC Funding LLC will be released from every covenant and agreement of this Note
Indenture to be observed or performed on the part of the Note Issuer with
respect to the Notes immediately upon the delivery of written notice to the Note
Trustee stating that BEC Funding LLC is to be so released.
SECTION 3.12. NO OTHER BUSINESS. The Note Issuer shall not engage in any
business other than financing, purchasing, owning and managing the Transition
Property in the manner contemplated by this Note Indenture and the Basic
Documents and activities incidental thereto.
SECTION 3.13. NO BORROWING. The Note Issuer shall not issue, incur, assume,
guarantee or otherwise become liable, directly or indirectly, for any
indebtedness except for the Notes.
SECTION 3.14. SERVICER'S OBLIGATIONS. The Note Issuer shall enforce the
Servicer's compliance with all of the Servicer's material obligations under the
Servicing Agreement.
SECTION 3.15. NO ADDITIONAL NOTES. The Note Issuer shall not issue any
additional Notes hereunder.
SECTION 3.16. GUARANTEES, LOANS, ADVANCES AND OTHER LIABILITIES. Except as
otherwise contemplated by the Sale Agreement, the Servicing Agreement or this
Note Indenture, the Note Issuer shall not make any loan or advance or credit to,
or guarantee (directly or indirectly or by an instrument having the effect of
assuring another's payment or performance on any obligation or capability of so
doing or otherwise), endorse or otherwise become contingently liable, directly
or indirectly, in connection with the obligations, stocks or dividends of, or
own, purchase,
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repurchase or acquire (or agree contingently to do so) any stock, obligations,
assets or securities of, or any other interest in, or make any capital
contribution to, any other Person.
SECTION 3.17. CAPITAL EXPENDITURES. Other than expenditures in an aggregate
amount not to exceed $[25,000] in any calendar year, the Note Issuer shall not
make any expenditure (by long-term or operating lease or otherwise) for capital
assets (either realty or personalty).
SECTION 3.18. NON-ROUTINE PERIODIC ADJUSTMENT. The Note Issuer agrees that
it shall not consent to a Non-Routine Periodic Adjustment pursuant to Section
4.01(c) of the Servicing Agreement unless the Rating Agency Condition shall have
been satisfied.
SECTION 3.19. RESTRICTED PAYMENTS. The Note Issuer shall not, directly or
indirectly, while the Notes are Outstanding (i) pay any dividend or make any
distribution (by reduction of capital or otherwise), whether in cash, property,
securities or a combination thereof, to any owner of a beneficial interest in
the Note Issuer or otherwise with respect to any ownership or equity interest or
security in or of the Note Issuer, (ii) redeem, purchase, retire or otherwise
acquire for value any such ownership or equity interest or security or (iii) set
aside or otherwise segregate any amounts for any such purpose; PROVIDED,
HOWEVER, that, if no Event of Default shall have occurred and be continuing, the
Note Issuer may make, or cause to be made, any such distributions to any owner
of a beneficial interest in the Note Issuer or otherwise with respect to any
ownership or equity interest or security in or of the Note Issuer using funds
distributed to the Note Issuer pursuant to Section 8.02 to the extent that such
distributions would not cause the amount of the capital subaccount to decline
below .50 percent of the original principal amount of the Notes. The Note Issuer
will not, directly or indirectly, make payments to or distributions from the
Collection Account except in accordance with this Note Indenture and the Basic
Documents.
SECTION 3.20. NOTICE OF EVENTS OF DEFAULT. The Note Issuer agrees to give
the Note Trustee and the Rating Agencies prompt written notice of each Event of
Default hereunder and each default on the part of the Seller or the Servicer of
its obligations under the Sale Agreement or the Servicing Agreement,
respectively.
SECTION 3.21. FURTHER INSTRUMENTS AND ACTS. Upon request of the Note
Trustee, the Note Issuer will execute and deliver such further instruments and
do such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Note Indenture.
ARTICLE IV
SATISFACTION AND DISCHARGE; DEFEASANCE
--------------------------------------
SECTION 4.01. SATISFACTION AND DISCHARGE OF NOTE INDENTURE; DEFEASANCE.
(a) This Note Indenture shall cease to be of further effect with respect to
the Notes and the Note Trustee, on reasonable demand of and at the expense of
the Note Issuer, shall execute proper instruments acknowledging satisfaction and
discharge of this Note Indenture with respect to the Notes, when
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(A) either
(1) all Notes theretofore authenticated and delivered (other
than (i) Notes that have been mutilated, destroyed, lost or stolen and
that have been replaced or paid as provided in Section 2.06 and (ii)
Notes for whose payment money has theretofore been deposited in trust
or segregated and held in trust by the Note Issuer and thereafter
repaid to the Note Issuer or discharged from such trust, as provided
in Section 3.03) have been delivered to the Note Trustee for
cancellation; or
(2) the Scheduled Maturity Date has occurred with respect to all
Notes not theretofore delivered to the Note Trustee for cancellation,
and the Note Issuer has irrevocably deposited or caused to be
irrevocably deposited with the Note Trustee cash, in trust for such
purpose, in an amount sufficient to pay and discharge the entire
indebtedness on such Notes not theretofore delivered to the Note
Trustee for cancellation on the Scheduled Maturity Date therefor;
(B) the Note Issuer has paid or caused to be paid all other sums
payable hereunder by the Note Issuer; and
(C) the Note Issuer has delivered to the Note Trustee an Officer's
Certificate, an Opinion of Counsel and (if required by the Trust Indenture
Act or the Note Trustee) an Independent Certificate from a firm of
certified public accountants, each meeting the applicable requirements of
Section 11.01(a) and each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Note
Indenture with respect to Notes have been complied with.
(b) Subject to Sections 4.01(c) and 4.02, the Note Issuer at any time may
terminate (i) all its obligations under this Note Indenture with respect to the
Notes ("Legal Defeasance Option") or (ii) its obligations under Sections 3.04,
3.05, 3.06, 3.07, 3.08, 3.09, 3.10, 3.12, 3.13, 3.14, 3.15, 3.16, 3.17 and 3.18
and the operation of Section 5.01(iv) ("Covenant Defeasance Option") with
respect to the Notes. The Note Issuer may exercise the Legal Defeasance Option
notwithstanding its prior exercise of the Covenant Defeasance Option.
If the Note Issuer exercises the Legal Defeasance Option, the maturity of
the Notes may not be accelerated because of an Event of Default. If the Note
Issuer exercises the Covenant Defeasance Option, the maturity of the Notes may
not be accelerated because of an Event of Default specified in Section 5.01(iv).
Upon satisfaction of the conditions set forth herein to the exercise of the
Legal Defeasance Option or the Covenant Defeasance Option, the Note Trustee, on
reasonable demand of and at the expense of the Note Issuer, shall execute proper
instruments acknowledging satisfaction and discharge of the obligations that are
terminated pursuant to such exercise.
(c) Notwithstanding Sections 4.01(a) and 4.01(b) above, (i) rights of
registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments
of principal and interest, (iv) Sections 4.03 and 4.04, (v) the rights,
obligations and immunities of the Note Trustee hereunder (including the rights
of the
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Note Trustee under Section 6.07 and the obligations of the Note Trustee under
Section 4.03) and (vi) the rights of Noteholders as beneficiaries hereof with
respect to the property deposited with the Note Trustee payable to all or any of
them, shall survive until the Notes as to which this Note Indenture or certain
obligations hereunder have been satisfied and discharged pursuant to Section
4.01(a) or 4.01(b) have been paid in full. Thereafter, the obligations in
Sections 6.07 and 4.04 shall survive.
SECTION 4.02. CONDITIONS TO DEFEASANCE. The Note Issuer may exercise the
Legal Defeasance Option or the Covenant Defeasance Option of Notes only if:
(a) the Note Issuer irrevocably deposits or causes to be
deposited in trust with the Note Trustee cash or U.S. Government
Obligations for the payment of principal of and interest on each such Note
to the Scheduled Maturity Date, Optional Redemption Date or Mandatory
Redemption Date therefor, as applicable;
(b) the Note Issuer delivers to the Note Trustee a certificate
from a nationally recognized firm of Independent accountants expressing its
opinion that the payments of principal and interest when due and without
reinvestment on the deposited U.S. Government Obligations plus any
deposited cash without investment will provide cash at such times and in
such amounts (but, in the case of the Legal Defeasance Option only, not
more than such amounts) as will be sufficient to pay in respect of the
Notes (i) subject to clause (ii), principal in accordance with the Expected
Amortization Schedule therefor, (ii) if to be redeemed, the Optional
Redemption Price or Mandatory Redemption Price, as applicable, therefor on
the related Optional Redemption Date or Mandatory Redemption Date, as
applicable and (iii) interest when due;
(c) in the case of the Legal Defeasance Option, 91 days pass
after the deposit is made and during the 91-day period no Default specified
in Section 5.01(v) or (vi) occurs which is continuing at the end of the
period;
(d) no Default has occurred and is continuing on the day of such
deposit and after giving effect thereto;
(e) in the case of an exercise of the Legal Defeasance Option,
the Note Issuer shall have delivered to the Note Trustee an Opinion of
Counsel stating that (i) the Note Issuer has received from, or there has
been published by, the Internal Revenue Service a ruling, or (ii) since the
date of execution of this Note Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and
based thereon such opinion shall confirm that, the Holders of the Notes
will not recognize income, gain or loss for federal income tax purposes as
a result of such legal defeasance and will be subject to federal income tax
on the same amounts, in the same manner and at the same times as would have
been the case if such legal defeasance had not occurred;
(f) in the case of an exercise of the Covenant Defeasance
Option, the Note Issuer shall have delivered to the Note Trustee an Opinion
of Counsel to the effect that the Holders of the Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
covenant defeasance and will be subject to federal income tax
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on the same amounts, in the same manner and at the same times as would have
been the case if such covenant defeasance had not occurred; and
(g) the Note Issuer delivers to the Note Trustee an Officer's
Certificate and an Opinion of Counsel, each stating that all conditions
precedent to the satisfaction and discharge of the Notes to the extent
contemplated by this Article IV have been complied with.
Before or after a deposit pursuant to this Section 4.02, the Note Issuer
may make arrangements satisfactory to the Note Trustee for the redemption of
such Notes at a future date in accordance with Article X.
SECTION 4.03. APPLICATION OF TRUST MONEY. All moneys or U.S. Government
Obligations deposited with the Note Trustee pursuant to Section 4.01 or 4.02
hereof shall be held in trust and applied by it, in accordance with the
provisions of the Notes and this Note Indenture, to the payment, either directly
or through any Paying Agent, as the Note Trustee may determine, to the Holders
of the particular Notes for the payment or redemption of which such moneys have
been deposited with the Note Trustee, of all sums due and to become due thereon
for principal and interest, but such moneys need not be segregated from other
funds except to the extent required herein or in the Servicing Agreement or
required by law.
SECTION 4.04. REPAYMENT OF MONEYS HELD BY PAYING AGENT. In connection with
the satisfaction and discharge of this Note Indenture or the Covenant Defeasance
Option or Legal Defeasance Option with respect to the Notes, all moneys then
held by any Paying Agent other than the Note Trustee under the provisions of
this Note Indenture with respect to such Notes shall, upon demand of the Note
Issuer, be paid to the Note Trustee to be held and applied according to Section
3.03 and thereupon such Paying Agent shall be released from all further
liability with respect to such moneys.
ARTICLE V
REMEDIES
--------
SECTION 5.01. EVENTS OF DEFAULT. "Event of Default", wherever used herein,
means any one of the following events (whatever the reason for such Event of
Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(i) default in the payment of any interest on any Note when the
same becomes due and payable, and such default shall continue for a period
of five days; or
(ii) default in the payment of the then unpaid principal of any
Note on the Final Maturity Date; or
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(iii) default in the payment of the Optional Redemption Price for
any Note on the Optional Redemption Date therefor, or a default in the
payment of the Mandatory Redemption Price for the Notes on the Mandatory
Redemption Date;
(iv) default in the observance or performance in any material
respect of any covenant or agreement of the Note Issuer made in this Note
Indenture (other than a covenant or agreement, a default in the observance
or performance of which is elsewhere in this Section specifically dealt
with), or any representation or warranty of the Note Issuer made in this
Note Indenture or in any certificate or other writing delivered pursuant
hereto or in connection herewith proving to have been incorrect in any
material respect as of the time when the same shall have been made, and
such default shall continue or not be cured, or the circumstance or
condition in respect of which such misrepresentation or warranty was
incorrect shall not have been eliminated or otherwise cured, for a period
of 30 days after there shall have been given, by registered or certified
mail, to the Note Issuer by the Note Trustee or to the Note Issuer and the
Note Trustee by the Holders of at least 25 percent of the Outstanding
Amount of the Notes, a written notice specifying such default or incorrect
representation or warranty and requiring it to be remedied and stating that
such notice is a "Notice of Default" hereunder; or
(v) the filing of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Note Issuer or any
substantial part of the Collateral in an involuntary case under any
applicable federal or state bankruptcy, insolvency or other similar law now
or hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Note Issuer or
for any substantial part of the Collateral, or ordering the winding-up or
liquidation of the Note Issuer's affairs, and such decree or order shall
remain unstayed and in effect for a period of 60 consecutive days; or
(vi) the commencement by the Note Issuer of a voluntary case
under any applicable federal or state bankruptcy, insolvency or other
similar law now or hereafter in effect, or the consent by the Note Issuer
to the entry of an order for relief in an involuntary case under any such
law, or the consent by the Note Issuer to the appointment or taking
possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Note Issuer or for any substantial
part of the Collateral, or the making by the Note Issuer of any general
assignment for the benefit of creditors, or the failure by the Note Issuer
generally to pay its debts as such debts become due, or the taking of
action by the Note Issuer in furtherance of any of the foregoing.
The Note Issuer shall deliver to a Responsible Officer of the Note Trustee
and the Rating Agencies, within ten days after an Authorized Officer has
knowledge of the occurrence thereof, written notice in the form of an Officer's
Certificate of any event which with the giving of notice and the lapse of time
would become an Event of Default under clause (iv), its status and what action
the Note Issuer is taking or proposes to take with respect thereto.
SECTION 5.02. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. If an
Event of Default should occur and be continuing, then and in every such case the
Note Trustee or the Holders of Notes representing not less than a majority of
the Outstanding Amount of the Notes
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may declare all the Notes to be immediately due and payable, by a notice in
writing to the Note Issuer (and to the Note Trustee if given by Noteholders),
and upon any such declaration the unpaid principal amount of the Notes, together
with accrued and unpaid interest thereon through the date of acceleration, shall
become immediately due and payable.
At any time after such declaration of acceleration of maturity has been
made and before a judgment or decree for payment of the money due has been
obtained by the Note Trustee as hereinafter in this Article V provided, the
Holders of Notes representing a majority of the Outstanding Amount of the Notes,
by written notice to the Note Issuer and the Note Trustee, may rescind and annul
such declaration and its consequences if:
(i) the Note Issuer has paid or deposited with the Note Trustee a sum
sufficient to pay
(A) all payments of principal of and interest on all Notes and
all other amounts that would then be due hereunder or upon such Notes
if the Event of Default giving rise to such acceleration had not
occurred; and
(B) all sums paid or advanced by the Note Trustee hereunder and
the reasonable compensation, expenses, disbursements and advances of
the Note Trustee and its agents and counsel; and
(ii) all Events of Default, other than the nonpayment of the principal
of the Notes that has become due solely by such acceleration, have been
cured or waived as provided in Section 5.12.
No such rescission shall affect any subsequent default or impair any right
consequent thereto.
SECTION 5.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY NOTE
TRUSTEE.
(a) The Note Issuer covenants that if (i) default is made in the payment of
any interest on any Note when the same becomes due and payable, and such default
continues for a period of five days, (ii) default is made in the payment of the
then unpaid principal of any Note on the Final Maturity Date for such Note or
(iii) default is made in the payment of the Optional Redemption Price or
Mandatory Redemption Price, as applicable, for any Note on the Optional
Redemption Date or Mandatory Redemption Date, as applicable, therefor, the Note
Issuer will, upon demand of the Note Trustee, pay to it, for the benefit of the
Holders of the Notes, the whole amount then due and payable on such Notes for
principal and interest, with interest upon the overdue principal and, to the
extent payment at such rate of interest shall be legally enforceable, upon
overdue installments of interest, at the respective rate borne by the Notes or
the applicable Class and in addition thereto such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Note
Trustee and its agents and counsel.
(b) Subject to Section 11.16, in case the Note Issuer shall fail forthwith
to pay such amounts upon such demand, the Note Trustee, in its own name and as
trustee of an express trust, may institute a Proceeding for the collection of
the sums so due and unpaid, and may prosecute
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such Proceeding to judgment or final decree, and may enforce the same against
the Note Issuer or other obligor upon such Notes and collect in the manner
provided by law out of the property of the Note Issuer or other obligor upon
such Notes, wherever situated, the moneys adjudged or decreed to be payable.
(c) If an Event of Default occurs and is continuing, the Note Trustee may,
as more particularly provided in Section 5.04, in its discretion, proceed to
protect and enforce its rights and the rights of the Noteholders, by such
appropriate Proceedings as the Note Trustee shall deem most effective to protect
and enforce any such rights, whether for the specific enforcement of any
covenant or agreement in this Note Indenture or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy or legal or
equitable right vested in the Note Trustee by this Note Indenture or by law.
(d) In case there shall be pending, relative to the Note Issuer or any
other obligor upon the Notes or any Person having or claiming an ownership
interest in the Collateral, Proceedings under Title 11 of the United States Code
or any other applicable federal or state bankruptcy, insolvency or other similar
law, or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Note Issuer or its property or such other obligor or
Person, or in case of any other comparable judicial Proceedings relative to the
Note Issuer or other obligor upon the Notes, or to the creditors or property of
the Note Issuer or such other obligor, the Note Trustee, irrespective of whether
the principal of any Notes shall then be due and payable as therein expressed or
by declaration or otherwise and irrespective of whether the Note Trustee shall
have made any demand pursuant to the provisions of this Section, shall be
entitled and empowered, by intervention in such Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount of
principal and interest owing and unpaid in respect of the Notes and to file
such other papers or documents as may be necessary or advisable in order to
have the claims of the Note Trustee (including any claim for reasonable
compensation to the Note Trustee and each predecessor Note Trustee, and
their respective agents, attorneys and counsel, and for reimbursement of
all expenses and liabilities incurred, and all advances made, by the Note
Trustee and each predecessor Note Trustee, except as a result of gross
negligence or willful misconduct and of the Noteholders allowed in such
Proceedings;
(ii) unless prohibited by applicable law and regulations, to vote
on behalf of the Holders of Notes in any election of a trustee, a standby
trustee or Person performing similar functions in any such Proceedings; and
(iii) to collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute all amounts received
with respect to the claims of the Noteholders and of the Note Trustee on
their behalf;
and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Noteholders to make
payments to the Note Trustee, and, in the event that the Note Trustee shall
consent to the making of payments directly to such Noteholders, to pay to the
Note Trustee such amounts as shall be sufficient to cover reasonable
compensation
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and other amounts owing hereunder to the Note Trustee, each predecessor Note
Trustee and their respective agents, attorneys and counsel, and all other
expenses and liabilities incurred, and all advances made, by the Note Trustee
and each predecessor Note Trustee except as a result of gross negligence or
willful misconduct.
(e) Nothing herein contained shall be deemed to authorize the Note Trustee
to authorize or consent to or vote for or accept or adopt on behalf of any
Noteholder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof or to authorize the Note
Trustee to vote in respect of the claim of any Noteholder in any such proceeding
except, as aforesaid, to vote for the election of a trustee in bankruptcy or
similar Person.
(f) All rights of action and of asserting claims under this Note Indenture,
or under any of the Notes, may be enforced by the Note Trustee without the
possession of any of the Notes or the production thereof in any trial or other
Proceedings relative thereto, and any such action or proceedings instituted by
the Note Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment, subject to the payment of the expenses,
disbursements and compensation of the Note Trustee, each predecessor Note
Trustee and their respective agents and attorneys, shall be for the ratable
benefit of the Holders of the Notes.
(g) In any Proceedings brought by the Note Trustee (and also any
Proceedings involving the interpretation of any provision of this Note Indenture
to which the Note Trustee shall be a party), the Note Trustee shall be held to
represent all the Holders of the Notes, and it shall not be necessary to make
any Noteholder a party to any such Proceedings.
SECTION 5.04. REMEDIES; PRIORITIES.
(a) If an Event of Default shall have occurred and be continuing, the Note
Trustee may do one or more of the following (subject to Section 5.05):
(i) institute Proceedings in its own name and as trustee of an
express trust for the collection of all amounts then payable on the Notes
or under this Note Indenture with respect thereto, whether by declaration
or otherwise, enforce any judgment obtained, and collect from the Note
Issuer and any other obligor upon such Notes moneys adjudged due;
(ii) institute Proceedings from time to time for the complete or
partial foreclosure of this Note Indenture with respect to the Collateral;
(iii) exercise any remedies of a secured party under the UCC or
the Statute and take any other appropriate action to protect and enforce
the rights and remedies of the Note Trustee and the Holders of the Notes;
and
(iv) sell the Collateral or any portion thereof or rights or
interest therein, at one or more public or private sales called and
conducted in any manner permitted by law;
PROVIDED, HOWEVER, that the Note Trustee may not sell or otherwise liquidate any
portion of the Collateral following an Event of Default, other than an Event of
Default described in Section
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5.01(i), (ii) or (iii), unless (A) the Holders of 100 percent of the Outstanding
Amount of the Notes consent thereto, (B) the proceeds of such sale or
liquidation distributable to the Noteholders are sufficient to discharge in full
all amounts then due and unpaid upon such Notes for principal and interest after
taking into account payment of all amounts due prior thereto pursuant to the
priorities set forth in Section 8.02(d) or (C) the Note Trustee determines that
the Collateral will not continue to provide sufficient funds for all payments on
the Notes as they would have become due if the Notes had not been declared due
and payable, and the Note Trustee obtains the consent of Holders of 66-2/3
percent of the Outstanding Amount of the Notes. In determining such sufficiency
or insufficiency with respect to clause (B) and (C), the Note Trustee may, but
need not, obtain and conclusively rely upon an opinion of an Independent
investment banking or accounting firm of national reputation as to the
feasibility of such proposed action and as to the sufficiency of the Collateral
for such purpose.
(b) If the Note Trustee collects any money pursuant to this Article V, it
shall pay out such money in accordance with the priorities set forth in Section
8.02(d).
SECTION 5.05. OPTIONAL PRESERVATION OF THE COLLATERAL. If the Notes have
been declared to be due and payable under Section 5.02 following an Event of
Default and such declaration and its consequences have not been rescinded and
annulled, the Note Trustee may, but need not, elect to maintain possession of
the Collateral. It is the desire of the parties hereto and the Noteholders that
there be at all times sufficient funds for the payment of principal of and
interest on the Notes, and the Note Trustee shall take such desire into account
when determining whether or not to maintain possession of the Collateral. In
determining whether to maintain possession of the Collateral, the Note Trustee
may, but need not, obtain and conclusively rely upon an opinion of an
Independent investment banking or accounting firm of national reputation as to
the feasibility of such proposed action and as to the sufficiency of the
Collateral for such purpose.
SECTION 5.06. LIMITATION OF SUITS. No Holder of any Note shall have any
right to institute any Proceeding, judicial or otherwise, with respect to this
Note Indenture, or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless:
(i) such Holder previously has given written notice to the Note
Trustee of a continuing Event of Default;
(ii) the Holders of not less than 25 percent of the Outstanding
Amount of the Notes have made written request to the Note Trustee to
institute such Proceeding in respect of such Event of Default in its own
name as Note Trustee hereunder;
(iii) such Holder or Holders have offered to the Note Trustee
indemnity satisfactory to it against the costs, expenses and liabilities to
be incurred in complying with such request;
(iv) the Note Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute such
Proceedings; and
(v) no direction inconsistent with such written request has been
given to the Note Trustee during such 60-day period by the Holders of a
majority of the Outstanding Amount of the Notes;
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it being understood and intended that no one or more Holders of Notes shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Note Indenture to affect, disturb or prejudice the rights of any other
Holders of Notes or to obtain or to seek to obtain priority or preference over
any other Holders or to enforce any right under this Note Indenture, except in
the manner herein provided.
In the event the Note Trustee shall receive conflicting or inconsistent
requests and indemnity from two or more groups of Holders of Notes, each
representing less than a majority of the Outstanding Amount of the Notes, the
Note Trustee in its sole discretion may determine what action, if any, shall be
taken, notwithstanding any other provisions of this Note Indenture.
SECTION 5.07. UNCONDITIONAL RIGHTS OF NOTEHOLDERS TO RECEIVE PRINCIPAL AND
INTEREST. Notwithstanding any other provisions in this Note Indenture, the
Holder of any Note shall have the right, which is absolute and unconditional,
(a) to receive payment of (i) the interest, if any, on such Note on or after the
due dates thereof expressed in such Note or in this Note Indenture, (ii) the
unpaid principal, if any, of such Notes on or after the Final Maturity Date
therefor or (iii) in the case of redemption, receive payment of the unpaid
principal of and interest, if any, on such Note on or after the Optional
Redemption Date or Mandatory Redemption Date, as applicable, therefor and (b) to
institute suit for the enforcement of any such payment, and such right shall not
be impaired without the consent of such Holder.
SECTION 5.08. RESTORATION OF RIGHTS AND REMEDIES. If the Note Trustee or
any Noteholder has instituted any Proceeding to enforce any right or remedy
under this Note Indenture and such Proceeding has been discontinued or abandoned
for any reason or has been determined adversely to the Note Trustee or to such
Noteholder, then and in every such case the Note Issuer, the Note Trustee and
the Noteholders shall, subject to any determination in such Proceeding, be
restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Note Trustee and the Noteholders shall
continue as though no such Proceeding had been instituted.
SECTION 5.09. RIGHTS AND REMEDIES CUMULATIVE. No right or remedy herein
conferred upon or reserved to the Note Trustee or to the Noteholders is intended
to be exclusive of any other right or remedy, and every right and remedy shall,
to the extent permitted by law, be cumulative and in addition to every other
right and remedy given hereunder or now or hereafter existing at law or in
equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 5.10. DELAY OR OMISSION NOT A WAIVER. No delay or omission of the
Note Trustee or any Noteholder to exercise any right or remedy accruing upon any
Default or Event of Default shall impair any such right or remedy or constitute
a waiver of any such Default or Event of Default or an acquiescence therein.
Every right and remedy given by this Article V or by law to the Note Trustee or
to the Noteholders may be exercised from time to time, and as often as may be
deemed expedient, by the Note Trustee or by the Noteholders, as the case may be.
SECTION 5.11. CONTROL BY NOTEHOLDERS. The Holders of a majority of the
Outstanding Amount of the Notes (or, if less than all Classes are affected, the
affected Class or Classes) shall
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have the right to direct the time, method and place of conducting any Proceeding
for any remedy available to the Note Trustee with respect to the Notes of such
Class or Classes or exercising any trust or power conferred on the Note Trustee
with respect to such Class or Classes; PROVIDED, HOWEVER, that
(i) such direction shall not be in conflict with any rule of law
or with this Note Indenture;
(ii) subject to the express terms of Section 5.04, any direction
to the Note Trustee to sell or liquidate the Collateral shall be by the
Holders of Notes representing not less than 100 percent of the Outstanding
Amount of the Notes;
(iii) if the conditions set forth in Section 5.05 have been
satisfied and the Note Trustee elects to retain the Collateral pursuant to
such Section, then any direction to the Note Trustee by Holders of Notes
representing less than 100 percent of the Outstanding Amount of the Notes
to sell or liquidate the Collateral shall be of no force and effect; and
(iv) the Note Trustee may take any other action deemed proper by
the Note Trustee that is not inconsistent with such direction;
PROVIDED, HOWEVER, that, subject to Section 6.01, the Note Trustee need not
take any action that it determines might involve it in liability or might
materially adversely affect the rights of any Noteholders not consenting to such
action.
SECTION 5.12. WAIVER OF PAST DEFAULTS. Prior to the declaration of the
acceleration of the maturity of the Notes as provided in Section 5.02, the
Holders of Notes of not less than a majority of the Outstanding Amount of the
Notes may waive any past Default or Event of Default and its consequences except
a Default (a) in payment of principal of or interest on any of the Notes or (b)
in respect of a covenant or provision hereof which cannot be modified or amended
without the consent of the Holder of each Note or of all Classes affected. In
the case of any such waiver, the Note Issuer, the Note Trustee and the Holders
of the Notes shall be restored to their former positions and rights hereunder,
respectively; but no such waiver shall extend to any subsequent or other Default
or impair any right consequent thereto.
Upon any such waiver, such Default shall cease to exist and be deemed to
have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred, for every
purpose of this Note Indenture; but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereto.
SECTION 5.13. UNDERTAKING FOR COSTS. All parties to this Note Indenture
agree, and each Holder of any Note by such Holder's acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Note Indenture, or in any
suit against the Note Trustee for any action taken, suffered or omitted by it as
Note Trustee, the filing by any party litigant in such suit of an undertaking to
pay the costs of such suit, and that such court may in its discretion assess
reasonable costs, including reasonable attorneys' fees, against any party
litigant in such suit, having due regard to the merits and good faith of the
claims or defenses made by such party litigant; but the
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provisions of this Section shall not apply to (a) any suit instituted by the
Note Trustee, (b) any suit instituted by any Noteholder, or group of
Noteholders, in each case holding in the aggregate more than 10 percent of the
Outstanding Amount of the Notes or (c) any suit instituted by any Noteholder for
the enforcement of the payment of (i) interest on any Note on or after the due
dates expressed in such Note and in this Note Indenture, (ii) the unpaid
principal, if any, of any Note on or after the Final Maturity Date therefor or
(iii) in the case of redemption, the unpaid principal of and interest on any
Note on or after the Optional Redemption Date or Mandatory Redemption Date, as
applicable, therefor.
SECTION 5.14. WAIVER OF STAY OR EXTENSION LAWS. The Note Issuer covenants
(to the extent that it may lawfully do so) that it will not at any time insist
upon, or plead or in any manner whatsoever, claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, that may affect the covenants or the performance of this
Note Indenture; and the Note Issuer (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law, and covenants
that it will not hinder, delay or impede the execution of any power herein
granted to the Note Trustee, but will suffer and permit the execution of every
such power as though no such law had been enacted.
SECTION 5.15. ACTION ON NOTES. The Note Trustee's right to seek and recover
judgment on the Notes or under this Note Indenture shall not be affected by the
seeking, obtaining or application of any other relief under or with respect to
this Note Indenture. Neither the lien of this Note Indenture nor any rights or
remedies of the Note Trustee or the Noteholders shall be impaired by the
recovery of any judgment by the Note Trustee against the Note Issuer or by the
levy of any execution under such judgment upon any portion of the Collateral or
upon any of the assets of the Note Issuer.
SECTION 5.16. PERFORMANCE AND ENFORCEMENT OF CERTAIN OBLIGATIONS.
(a) Promptly following a request from the Note Trustee to do so and at the
Note Issuer's expense, the Note Issuer agrees to take all such lawful action as
the Note Trustee may reasonably request to compel or secure the performance and
observance by the Seller and the Servicer, as applicable, of each of their
obligations to the Note Issuer under or in connection with the Sale Agreement
and the Servicing Agreement, respectively, in accordance with the terms thereof,
and to exercise any and all rights, remedies, powers and privileges lawfully
available to the Note Issuer under or in connection with the Sale Agreement and
the Servicing Agreement, respectively, to the extent and in the manner directed
by the Note Trustee, including the transmission of notices of default on the
part of the Seller or the Servicer thereunder and the institution of legal or
administrative actions or proceedings to compel or secure performance by the
Seller or the Servicer of each of their obligations under the Sale Agreement and
the Servicing Agreement, respectively.
(b) If an Event of Default has occurred, the Note Trustee may, and, at the
direction (which direction shall be in writing or by telephone (confirmed in
writing promptly thereafter)) of the Holders of 66-2/3 percent of the
Outstanding Amount of the Notes shall, subject to Article VI, exercise all
rights, remedies, powers, privileges and claims of the Note Issuer against the
Seller or the Servicer under or in connection with the Sale Agreement and the
Servicing Agreement, respectively, including the right or power to take any
action to compel or secure
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performance or observance by the Seller or the Servicer of each of their
obligations to the Note Issuer thereunder and to give any consent, request,
notice, direction, approval, extension or waiver under the Sale Agreement or the
Servicing Agreement, respectively, and any right of the Note Issuer to take such
action shall be suspended.
ARTICLE VI
THE NOTE TRUSTEE
----------------
SECTION 6.01. DUTIES OF NOTE TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the Note Trustee
shall exercise the rights and powers vested in it by this Note Indenture and use
the same degree of care and skill in their exercise as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs.
(b) Except during the continuance of an Event of Default:
(i) the Note Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Note Indenture and no
implied covenants or obligations shall be read into this Note Indenture
against the Note Trustee; and
(ii) in the absence of bad faith on its part, the Note Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Note Trustee and conforming to the requirements
of this Note Indenture; however, the Note Trustee shall examine the
certificates and opinions to determine whether or not they conform to the
requirements of this Note Indenture.
(c) The Note Trustee may not be relieved from liability for its own
negligent action, its own grossly negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section;
(ii) the Note Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer unless it is proved
that the Note Trustee was grossly negligent in ascertaining the pertinent
facts; and
(iii) the Note Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 5.11.
(d) Every provision of this Note Indenture that in any way relates to the
Note Trustee is subject to paragraphs (a) , (b) and (c) of this Section.
(e) The Note Trustee shall not be liable for interest on any money received
by it except as the Note Trustee may agree in writing with the Note Issuer.
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(f) Money held in trust by the Note Trustee need not be segregated from
other funds except to the extent required by law or the terms of this Note
Indenture, the Sale Agreement and the Servicing Agreement.
(g) No provision of this Note Indenture shall require the Note Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayments
of such funds or indemnity satisfactory to it against such risk or liability is
not reasonably assured to it.
(h) Every provision of this Note Indenture relating to the conduct or
affecting the liability of or affording protection to the Note Trustee shall be
subject to the provisions of this Section and to the provisions of the Trust
Indenture Act.
(i) In the event that the Trustee is also acting as Paying Agent or Note
Registrar hereunder, this Article VI shall also be afforded to such Paying Agent
or Note Registrar.
SECTION 6.02. RIGHTS OF NOTE TRUSTEE.
(a) The Note Trustee may conclusively rely and shall be fully protected in
relying on any document believed by it to be genuine and to have been signed or
presented by the proper person. The Note Trustee need not investigate any fact
or matter stated in the document.
(b) Before the Note Trustee acts or refrains from acting, it may require an
Officer's Certificate or an Opinion of Counsel. The Note Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on the
Officer's Certificate or Opinion of Counsel.
(c) The Note Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys or a custodian or nominee, and the Note Trustee shall not be
responsible for any misconduct or negligence on the part of, or for the
supervision of, any such agent, attorney, custodian or nominee appointed with
due care by it hereunder.
(d) The Note Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers; PROVIDED, HOWEVER, that the Note Trustee's conduct does not constitute
willful misconduct, gross negligence or bad faith.
(e) The Note Trustee may consult with counsel, and the advice or opinion of
counsel with respect to legal matters relating to this Note Indenture and the
Notes shall be full and complete authorization and protection from liability in
respect to any action taken, omitted or suffered by it hereunder in good faith
and in accordance with the advice or opinion of such counsel.
(f) The Note Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Note Indenture at the request or
direction of any Holder pursuant to this Note Indenture, unless such Holder
shall have offered to the note Trustee reasonable security or indemnity against
the costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction.
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(g) The Note Trustee shall not be charged with knowledge of any
default or Event of Default, unless either (1) a Responsible Officer of the Note
Trustee shall have actual knowledge of the default or Event of Default, or (2)
written notice of such default or Event of Default shall have been given to the
Trustee by the Note Issuer or by a Holder of the Notes.
SECTION 6.03. INDIVIDUAL RIGHTS OF NOTE TRUSTEE. The Note Trustee in its
individual or any other capacity may become the owner or pledgee of Notes and
may otherwise deal with the Note Issuer or its affiliates with the same rights
it would have if it were not Note Trustee. Any Paying Agent, Note Registrar,
co-registrar or co-paying agent may do the same with like rights. However, the
Note Trustee must comply with Sections 6.11 and 6.12.
SECTION 6.04. NOTE TRUSTEE'S DISCLAIMER. The Note Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Note Indenture or the Notes, it shall not be accountable for the Note
Issuer's use of the proceeds from the Notes, and it shall not be responsible for
any statement of the Note Issuer in the Note Indenture or in any document issued
in connection with the sale of the Notes or in the Notes other than the Note
Trustee's certificate of authentication.
SECTION 6.05. NOTICE OF DEFAULTS. If a Default occurs and is continuing and
if it is actually known to a Responsible Officer of the Note Trustee, the Note
Trustee shall mail to each Holder of Notes notice of the Default within 90 days
after it occurs. Except in the case of a Default in payment of principal of or
interest on any Note, the Note Trustee may withhold the notice if and so long as
a committee of its Responsible Officers in good faith determines that
withholding the notice is in the interests of Noteholders.
SECTION 6.06. REPORTS BY NOTE TRUSTEE TO HOLDERS.
(a) So long as the Note Trustee is the Note Registrar and Paying Agent, it
shall deliver to each Noteholder such information in its possession as may be
required to enable such holder to prepare its federal and state income tax
returns.
(b) On or prior to each Payment Date therefor, the Note Trustee will
deliver to each Holder of Notes on such Payment Date a statement as provided and
prepared by the Servicer which will include (to the extent applicable) the
following information as to the Notes with respect to such Payment Date or the
period since the previous Payment Date, as applicable:
(i) the amount of the distribution to Noteholders allocable to
principal;
(ii) the amount of the distribution to Noteholders allocable to
interest;
(iii) the aggregate outstanding Principal Balance of the Notes,
after giving effect to payments allocated to principal reported under (i)
above; and
(iv) the difference, if any, between the Principal Balance and
the Projected Principal Balance as of such Payment Date, after giving
effect to distributions to be made on such Payment Date.
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(c) The Note Issuer shall send the Note Trustee a copy of each of the
Certificate of Compliance delivered to it pursuant to Section 3.03 of the
Servicing Agreement and the Annual Accountant's Report delivered to it pursuant
to Section 3.04 of the Servicing Agreement to the Rating Agencies. A copy of
such certificate and report may be obtained by any Noteholder by a request in
writing to the Note Trustee.
(d) If the Note Trustee is also serving as the Certificate Trustee, it
shall also prepare the statements required to be delivered to Certificateholders
pursuant to Section 4.02(d) of the Certificate Indenture.
SECTION 6.07. COMPENSATION AND INDEMNITY. The Note Issuer shall pay to the
Note Trustee from time to time reasonable compensation for its services. The
Note Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Note Issuer shall reimburse the Note Trustee
for all reasonable out-of-pocket expenses disbursements and advances incurred or
made by it, including costs of collection, in addition to the compensation for
its services. Such expenses shall include the reasonable compensation and
expenses, disbursements and advances of the Note Trustee's agents, counsel,
accountants and experts. The Note Issuer shall indemnify the Note Trustee and
its officers, directors, employees and agents against any and all loss,
liability or expense (including attorneys' fees and expenses) incurred by it in
connection with the administration of this trust and the performance of its
duties hereunder. The Note Trustee shall notify the Note Issuer as soon as is
reasonably practicable of any claim for which it may seek indemnity. Failure by
the Note Trustee to so notify the Note Issuer shall not relieve the Note Issuer
of its obligations hereunder. The Note Issuer shall defend the claim and the
Note Trustee may have separate counsel and the Note Issuer shall pay the fees
and expenses of such counsel. The Note Issuer need not reimburse any expense or
indemnify against any loss, liability or expense incurred by the Note Trustee
through the Note Trustee's own willful misconduct, gross negligence or bad
faith.
The Note Issuer's payment obligations to the Note Trustee pursuant to this
Section shall survive the discharge of this Note Indenture or the earlier
resignation or removal of the Note Trustee. When the Note Trustee incurs
expenses after the occurrence of a Default specified in Section 5.01(v) or (vi)
with respect to the Note Issuer, the expenses are intended to constitute
expenses of administration under Title 11 of the United States Code or any other
applicable federal or state bankruptcy, insolvency or similar law.
SECTION 6.08. REPLACEMENT OF NOTE TRUSTEE. The Note Trustee may resign at
any time by so notifying the Note Issuer, PROVIDED, HOWEVER, that no such
resignation shall be effective until either (a) the Collateral has been
completely liquidated and the proceeds of the liquidation distributed to the
Noteholders or (b) a successor trustee having the qualifications set forth in
Section 6.11 has been designated and has accepted such trusteeship. The Holders
of a majority in Outstanding Amount of the Notes may remove the Note Trustee by
so notifying the Note Trustee and may appoint a successor Note Trustee. The Note
Issuer shall remove the Note Trustee if:
(i) the Note Trustee fails to comply with Section 6.11;
(ii) the Note Trustee is adjudged a bankrupt or insolvent;
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(iii) a receiver or other public officer takes charge of the Note
Trustee or its property; or
(iv) the Note Trustee otherwise becomes incapable of acting.
If the Note Trustee resigns or is removed or if a vacancy exists in the
office of Note Trustee for any reason (the Note Trustee in such event being
referred to herein as the retiring Note Trustee), the Note Issuer shall promptly
appoint a successor Note Trustee.
A successor Note Trustee shall deliver a written acceptance of its
appointment to the retiring Note Trustee and to the Note Issuer. Thereupon the
resignation or removal of the retiring Note Trustee shall become effective, and
the successor Note Trustee shall have all the rights, powers and duties of the
Note Trustee under this Note Indenture. The successor Note Trustee shall mail a
notice of its succession to Noteholders. The retiring Note Trustee shall
promptly transfer all property held by it as Note Trustee to the successor Note
Trustee.
If a successor Note Trustee does not take office within 60 days after the
retiring Note Trustee resigns or is removed, the retiring Note Trustee, the Note
Issuer or the Holders of a majority in Outstanding Amount of the Notes may
petition any court of competent jurisdiction for the appointment of a successor
Note Trustee.
If the Note Trustee fails to comply with Section 6.11, any Noteholder may
petition any court of competent jurisdiction for the removal of the Note Trustee
and the appointment of a successor Note Trustee.
Notwithstanding the replacement of the Note Trustee pursuant to this
Section, the Note Issuer's obligations under Section 6.07 shall continue for the
benefit of the retiring Note Trustee.
SECTION 6.09. SUCCESSOR NOTE TRUSTEE BY MERGER. If the Note Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Note Trustee.
In case at the time such successor or successors by merger, conversion or
consolidation to the Note Trustee shall succeed to the trusts created by this
Note Indenture any of the Notes shall have been authenticated but not delivered,
any such successor to the Note Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Note Trustee may authenticate such Notes
either in the name of any predecessor hereunder or in the name of the successor
to the Note Trustee; and in all such cases such certificates shall have the full
force which it is anywhere in the Notes or in this Note Indenture provided that
the certificate of the Note Trustee shall have.
SECTION 6.10. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.
(a) Notwithstanding any other provisions of this Note Indenture, at any
time, for the purpose of meeting any legal requirement of any jurisdiction in
which any part of the Collateral may at the time be located, the Note Trustee
shall have the power and may execute and deliver
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all instruments to appoint one or more Persons to act as a co-trustee or
co-trustees, or separate trustee or separate trustees, of all or any part of the
Collateral, and to vest in such Person or Persons, in such capacity and for the
benefit of the Noteholders, such title to the Collateral, or any part hereof,
and, subject to the other provisions of this Section, such powers, duties,
obligations, rights and trusts as the Note Trustee may consider necessary or
desirable. No co-trustee or separate trustee hereunder shall be required to meet
the terms of eligibility as a successor trustee under Section 6.11 and no notice
to Noteholders of the appointment of any co-trustee or separate trustee shall be
required under Section 6.08 hereof.
(b) Every separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Note Trustee shall be conferred or imposed upon and
exercised or performed by the Note Trustee and such separate trustee or
co-trustee jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Note Trustee
joining in such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed the
Note Trustee shall be incompetent or unqualified to perform such act or
acts, in which event such rights, powers, duties and obligations (including
the holding of title to the Collateral or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by such separate
trustee or co-trustee, but solely at the direction of the Note Trustee;
(ii) no trustee hereunder shall be personally liable by reason of
any act or omission of any other trustee hereunder; and
(iii) the Note Trustee may at any time accept the resignation of
or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Note Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Note Indenture and the
conditions of this Article VI. Each separate trustee and co-trustee, upon its
acceptance of the trusts conferred, shall be vested with the estates or property
specified in its instrument of appointment, either jointly with the Note Trustee
or separately, as may be provided therein, subject to all the provisions of this
Note Indenture, specifically including every provision of this Note Indenture
relating to the conduct of, affecting the liability of, or affording protection
to, the Note Trustee. Every such instrument shall be filed with the Note
Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the Note
Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Note Indenture on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all of
its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Note Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
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SECTION 6.11. ELIGIBILITY; DISQUALIFICATION. The Note Trustee shall at all
times satisfy the requirements of Trust Indenture Act ss. 310(a) and Section
26(a)(i) of the Investment Company Act of 1940. The Note Trustee shall have a
combined capital and surplus of at least $50,000,000 as set forth in its most
recent published annual report of condition and it shall have a long term debt
rating of A (or the equivalent thereof) or better by all of the Rating Agencies
from which a rating is available. The Note Trustee shall comply with Trust
Indenture Act ss. 310(b), including the optional provision permitted by the
second sentence of Trust Indenture Act ss. 310(b)(9); PROVIDED, HOWEVER, that
there shall be excluded from the operation of Trust Indenture Act ss. 310(b)(1)
any indenture or indentures under which other securities of the Note Issuer are
outstanding if the requirements for such exclusion set forth in Trust Indenture
Act ss. 310(b)(1) are met.
SECTION 6.12. PREFERENTIAL COLLECTION OF CLAIMS AGAINST NOTE ISSUER. The
Note Trustee shall comply with Trust Indenture Act ss. 311(a), excluding any
creditor relationship listed in Trust Indenture Act ss. 311(b). A Note Trustee
who has resigned or been removed shall be subject to Trust Indenture Act ss.
311(a) to the extent indicated.
SECTION 6.13. REPRESENTATIONS AND WARRANTIES OF NOTE TRUSTEE. The Note
Trustee hereby represents and warrants that:
(a) the Note Trustee is a banking corporation validly existing in
good standing under the laws of the State of New York; and
(b) the Note Trustee has full power, authority and legal right to
execute, deliver and perform this Note Indenture and the Basic Documents to
which the Note Trustee is a party and has taken all necessary action to
authorize the execution, delivery, and performance by it of this Note
Indenture and such Basic Documents.
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
------------------------------
SECTION 7.01. NOTE ISSUER TO FURNISH NOTE TRUSTEE NAMES AND ADDRESSES OF
NOTEHOLDERS. The Note Issuer will furnish or cause to be furnished to the Note
Trustee (a) not more than five days after the earlier of (i) each Record Date
and (ii) six months after the last Record Date, a list, in such form as the Note
Trustee may reasonably require, of the names and addresses of the Holders of
Notes as of such Record Date, (b) at such other times as the Note Trustee may
request in writing, within 30 days after receipt by the Note Issuer of any such
request, a list of similar form and content as of a date not more than 10 days
prior to the time such list is furnished; PROVIDED, HOWEVER, that so long as the
Note Trustee is the Note Registrar, no such list shall be required to be
furnished.
SECTION 7.02. PRESERVATION OF INFORMATION; COMMUNICATIONS TO NOTEHOLDERS.
(a) The Note Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of the Holders of Notes contained in the
most recent list furnished to the Note Trustee as provided in Section 7.01 and
the names and addresses of Holders of Notes
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received by the Note Trustee in its capacity as Note Registrar. The Note Trustee
may destroy any list furnished to it as provided in such Section 7.01 upon
receipt of a new list so furnished.
(b) Noteholders may communicate pursuant to Trust Indenture Act ss. 312(b)
with other Noteholders with respect to their rights under this Note Indenture or
under the Notes.
(c) The Note Issuer, the Note Trustee and the Note Registrar shall have the
protection of Trust Indenture Act ss. 312(c).
SECTION 7.03. REPORTS BY NOTE ISSUER.
(a) The Note Issuer shall:
(i) so long as the Note Issuer is required to file such
documents with the Commission, file with the Note Trustee, within 15 days
after the Note Issuer is required to file the same with the Commission,
copies of the annual reports and of the information, documents and other
reports (or copies of such portions of any of the foregoing as the
Commission may from time to time by rules and regulations prescribe) which
the Note Issuer may be required to file with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act;
(ii) file with the Note Trustee and the Commission in accordance
with rules and regulations prescribed from time to time by the Commission
such additional information, documents and reports with respect to
compliance by the Note Issuer with the conditions and covenants of this
Note Indenture as may be required from time to time by such rules and
regulations; and
(iii) supply to the Note Trustee (and the Note Trustee shall
transmit by mail to all Noteholders described in Trust Indenture Act ss.
313(c)) such summaries of any information, documents and reports required
to be filed by the Note Issuer pursuant to clauses (i) and (ii) of this
Section 7.03(a) as may be required by rules and regulations prescribed from
time to time by the Commission.
(b) Unless the Note Issuer otherwise determines, the fiscal year of the
Note Issuer shall end on December 31 of each year.
SECTION 7.04. REPORTS BY NOTE TRUSTEE. If required by Trust Indenture Act
ss. 313(a), within 60 days after [September 30] of each year, commencing with
the year after the issuance of the Notes, the Note Trustee shall mail to each
Holder of Notes as required by Trust Indenture Act ss. 313(c) a brief report
dated as of such date that complies with Trust Indenture Act ss. 313(a). The
Note Trustee also shall comply with Trust Indenture Act ss. 313(b); PROVIDed,
HOWEVer, that the initial report so issued shall be delivered not more than 12
months after the Issuance Date.
A copy of each report at the time of its mailing to Noteholders shall be
filed by the Note Trustee with the Commission and each stock exchange, if any,
on which the Notes are listed. The Note Issuer shall notify the Note Trustee if
and when the Notes are listed on any stock exchange.
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ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
------------------------------------
SECTION 8.01. COLLECTION OF MONEY. Except as otherwise expressly provided
herein, the Note Trustee may demand payment or delivery of, and shall receive
and collect, directly and without intervention or assistance of any fiscal agent
or other intermediary, all money and other property payable to or receivable by
the Note Trustee, the Certificate Trustee or the Delaware Trustee pursuant to
this Note Indenture, the Certificate Indenture and the Fee and Indemnity
Agreement. The Note Trustee shall apply all such money received by it as
provided in this Note Indenture. Except as otherwise expressly provided in this
Note Indenture, if any default occurs in the making of any payment or
performance under any agreement or instrument that is part of the Collateral,
the Note Trustee may take such action as may be appropriate to enforce such
payment or performance, subject to Article VI, including the institution and
prosecution of appropriate Proceedings. Any such action shall be without
prejudice to any right to claim a Default or Event of Default under this Note
Indenture and any right to proceed thereafter as provided in Article V.
SECTION 8.02. COLLECTION ACCOUNT.
(a) Prior to the Issuance Date, the Note Issuer shall open, at the Note
Trustee's Corporate Trust Office, or at another Eligible Institution, one or
more segregated trust accounts in the Note Trustee's name for the deposit of RTC
Charge Collections (collectively, the "Collection Account"). The Note Trustee
shall hold the Collection Account for the benefit of Noteholders. The Collection
Account will consist of four subaccounts: a general subaccount (the "General
Subaccount"), a reserve subaccount (the "Reserve Subaccount"), a subaccount for
the Overcollateralization Amount (the "Overcollateralization Subaccount") and a
capital subaccount (the "Capital Subaccount"). All amounts in the Collection
Account not allocated to any other subaccount shall be allocated to the General
Subaccount. Prior to the initial Payment Date, all amounts in the Collection
Account (other than funds deposited into the Capital Subaccount, together with
interest earnings thereon, up to the Required Capital Level) shall be allocated
to the General Subaccount. All references to the Collection Account shall be
deemed to include reference to all subaccounts contained therein. Withdrawals
from and deposits to each of the foregoing subaccounts of the Collection Account
shall be made as set forth in Section 8.02. The Collection Account shall at all
times be maintained in an Eligible Deposit Account and only the Note Trustee
shall have access to the Collection Account for the purpose of making deposits
in and withdrawals from the Collection Account in accordance with this Note
Indenture. Funds in the Collection Account shall not be commingled with any
other moneys. Except as provided in Section 8.03, all moneys deposited from time
to time in the Collection Account, all deposits therein pursuant to this Note
Indenture, and all investments made in Eligible Investments with such moneys,
including all income or other gain from such investments, shall be held by the
Note Trustee in the Collection Account as part of the Collateral as herein
provided.
(b) The Note Trustee shall have sole dominion and exclusive control over
all moneys in the Collection Account and shall apply such amounts therein as
provided in this Section 8.02. The Note Trustee shall also pay from the
Collection Account any amounts requested to be paid by the Servicer pursuant to
Section 4.03(b) of the Servicing Agreement.
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(c) All Estimated RTC Charge Payments shall be deposited in the General
Subaccount as provided in Section 4.03 of the Servicing Agreement. All deposits
to and withdrawals from the Collection Account and all allocations to the
subaccounts of the Collection Account shall be made by the Note Trustee in
accordance with the written instructions provided by the Servicer in the
Semiannual Servicer's Certificate or as otherwise provided herein.
(d) On any Business Day upon which the Note Trustee receives a written
request from the Administrator stating that any Operating Expense payable by the
Note Issuer (but only as described in clauses (i) through (iv) below) will
become due and payable prior to the next succeeding Payment Date, and setting
forth the amount and nature of such Operating Expenses, as well any supporting
documentation that the Note Trustee may reasonably request, the Note Trustee,
upon receipt of such information, will make payment of such Operating Expenses
on or before the date such payment is due from amounts on deposit in the General
Subaccount, the Reserve Subaccount, the Overcollateralization Subaccount and the
Capital Subaccount, in that order and only to the extent required to make such
payment.
On each Payment Date, the Note Trustee shall apply, at the direction of the
Servicer, all amounts on deposit in the Collection Account, including all net
earnings thereon (other than on amounts in the Capital Subaccount), to pay the
following amounts, in accordance with the Semiannual Servicer Certificate, in
the following priority:
(i) all amounts owed by the Note Issuer to the Note Trustee
(including legal fees and expenses) shall be paid to the Note Trustee
(subject to Section 6.07) and all amounts owed by the Note Issuer to the
Certificate Trustee and the Delaware Trustee under the Fee and Indemnity
Agreement shall be paid to the Certificate Trustee and the Delaware
Trustee, as appropriate;
(ii) the Servicing Fee for such Payment Date and all unpaid
Servicing Fees from prior Payment Dates shall be paid to the Servicer;
(iii) the Administration Fee and all unpaid Administration Fees
from prior Payment Dates shall be paid to the Administrator;
(iv) so long as no Default or Event of Default shall have
occurred and be continuing or would result from such payment, all other
Operating Expenses shall be paid to the Persons entitled thereto; PROVIDED,
HOWEVER, that the amount of Operating Expenses paid by the Note Trustee
with respect to any Semiannual Period ending on a Payment Date shall not,
in the aggregate, exceed $100,000;
(v) first, any overdue Semiannual Interest (together with, to
the extent lawful, interest on such overdue Semiannual Interest at the
applicable Note Interest Rate) and, second, Semiannual Interest for such
Payment Date shall be paid to the Noteholders;
(vi) first, principal due and payable on the Notes as a result of
an Event of Default or on the Final Maturity Date of the Notes, shall be
paid to the Noteholders and, second, Semiannual Principal for such Payment
Date shall be paid to the Noteholders;
(vii) unpaid Operating Expenses shall be paid to the Persons
entitled thereto;
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(viii) the amount, if any, by which the Required Capital Level with
respect to all Outstanding Notes exceeds the amount in the Capital
Subaccount as of such Payment Date shall be allocated to the Capital
Subaccount;
(ix) the amount, if any, by which the Required
Overcollateralization Level, with respect to all Outstanding Notes, exceeds
the amount in the Overcollateralization Subaccount as of such Payment Date
shall be allocated to the Overcollateralization Subaccount;
(x) the balance, if any, shall be allocated to the Reserve
Subaccount for distribution on subsequent Payment Dates; and
(xi) after principal of and interest on all Notes, and all of the
other foregoing amounts, have been paid in full, the balance, if any, shall
be paid to the Note Issuer, free from the lien of this Note Indenture.
All payments to the Noteholders pursuant to clauses (v) and (vi) above
shall be made to such holders pro rata based on the respective principal amounts
of Notes held by such Holders. Payments in respect of principal of and interest
on any Class of Notes will be made on a pro rata basis among all the Noteholders
of such Class.
(e) If on any Payment Date, or for any amounts payable under clauses (i)
through (iv) above, on any Business Day, funds on deposit in the General
Subaccount are insufficient to make the payments contemplated by clauses (i)
through (vi) of Section 8.02(d) above, the Note Trustee shall (i) FIRST, draw
from amounts on deposit in the Reserve Subaccount, (ii) SECOND, draw from
amounts on deposit in the Overcollateralization Subaccount and (III) THIRD, draw
from amounts on deposit in the Capital Subaccount, in each case, up to the
amount of such shortfall in order to make the payments contemplated by clauses
(i) through (vi) of Section 8.02(d). In addition, if on any Payment Date funds
on deposit in the General Subaccount are insufficient to make the allocations
contemplated by clauses (viii) and (ix) above, the Note Trustee shall draw from
amounts on deposit in the Reserve Subaccount to make such allocations. If on any
Payment Date funds on deposit in the Collection Account are insufficient to make
the transfers contemplated by clause (v) above, the Note Trustee will allocate
the funds in the Collection Account among the classes pro rata.
(f) On any Optional Redemption Date or Mandatory Redemption Date, the Note
Trustee shall pay to the Noteholders the Optional Redemption Price or Mandatory
Redemption Price, as the case may be.
(g) On the last day of each month, if the amount in the Capital Subaccount
exceeds the Required Capital Level, the Note Trustee shall pay to the Note
Issuer, upon receipt of an Issuer Request, free from the lien of this Note
Indenture, all amounts in the Capital Subaccount in excess of the Required
Capital Level.
SECTION 8.03. GENERAL PROVISIONS REGARDING THE COLLECTION ACCOUNT.
(a) So long as no Default or Event of Default shall have occurred and be
continuing, all or a portion of the funds in the Collection Account shall be
invested in Eligible Investments and
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reinvested by the Note Trustee upon Issuer Order; PROVIDED, HOWEVER, that (i)
such Eligible Investments shall not mature later than the Business Day prior to
the next Payment Date, (ii) such Eligible Investments shall not be sold,
liquidated or otherwise disposed of at a loss prior to the maturity thereof and
(iii) if such Eligible Investments have a maturity of one month or less, such
Eligible Investments (or the provider thereof) must have a long-term unsecured
debt rating of at least A2 by Moody's (or the equivalent thereof by the other
Rating Agencies) or a short-term rating of at least P-1 by Moody's (or the
equivalent thereof by the other Rating Agencies), and if such Eligible
Investments have a maturity of greater than one month, such Eligible Investments
(or the provider thereof) must have a long-term unsecured debt rating of at
least A1 by Moody's (or the equivalent thereof by the other Rating Agencies) and
a short-term rating of at least P-1 by Moody's (or the equivalent thereof by the
other Rating Agencies). All income or other gain from investments of moneys
deposited in the Collection Account shall be deposited by the Note Trustee in
the Collection Account, and any loss resulting from such investments shall be
charged to the Collection Account; PROVIDED, HOWEVER, that all income or other
gain from investments of moneys deposited in the Capital Subaccount shall be
retained in the Capital Subaccount, and any loss resulting from such investments
shall be charged to the Capital Subaccount. The Note Issuer will not direct the
Note Trustee to make any investment of any funds or to sell any investment held
in the Collection Account unless the security interest Granted and perfected in
such account will continue to be perfected in such investment or the proceeds of
such sale, in either case without any further action by any Person, and, in
connection with any direction to the Note Trustee to make any such investment or
sale, if requested by the Note Trustee, the Note Issuer shall deliver to the
Note Trustee an Opinion of Counsel, reasonably acceptable to the Note Trustee,
to such effect. In no event shall the Note Trustee be liable for the selection
of Eligible Investments or for investment losses incurred thereon. The Note
Trustee shall have no liability in respect of losses incurred as a result of the
liquidation of any Eligible Investment prior to its stated maturity or the
failure of the Note Issuer to provide timely written investment direction. The
Note Trustee shall have no obligation to invest or reinvest any amounts held
hereunder in the absence of written investment direction pursuant to an Issuer
Order.
(b) Subject to Section 6.01(c), the Note Trustee shall not in any way be
held liable by reason of any insufficiency in the Collection Account resulting
from any loss on any Eligible Investment included therein except for losses
attributable to the Note Trustee's failure to make payments on such Eligible
Investments issued by the Note Trustee, in its commercial capacity as principal
obligor and not as trustee, in accordance with their terms.
(c) If (i) the Note Issuer shall have failed to give written investment
directions for any funds on deposit in the Collection Account to the Note
Trustee by 11:00 a.m. Eastern Time (or such other time as may be agreed by the
Note Issuer and Note Trustee) on any Business Day; or (ii) a Default or Event of
Default shall have occurred and be continuing with respect to the Notes but the
Notes shall not have been declared due and payable pursuant to Section 5.02;
then the Note Trustee shall, to the fullest extent practicable, invest and
reinvest funds in the Collection Account in one or more investments which
qualify as investments in money market funds described under paragraph (d) of
the definition of Eligible Investments.
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SECTION 8.04. RELEASE OF COLLATERAL.
(a) The Note Trustee may, and when required by the provisions of this Note
Indenture shall, execute instruments to release property from the lien of this
Note Indenture, or convey the Note Trustee's interest in the same, in a manner
and under circumstances that are not inconsistent with the provisions of this
Note Indenture. No party relying upon an instrument executed by the Note Trustee
as provided in this Article VIII shall be bound to ascertain the Note Trustee's
authority, inquire into the satisfaction of any conditions precedent or see to
the application of any moneys.
(b) The Note Trustee shall, at such time as there are no Notes Outstanding,
release any remaining portion of the Collateral that secured the Notes from the
lien of this Note Indenture and release to the Note Issuer or any other Person
entitled thereto any funds then on deposit in the Collection Account. The Note
Trustee shall release property from the lien of this Note Indenture pursuant to
this Section 8.04(b) only upon receipt of an Issuer Request accompanied by an
Officer's Certificate, an Opinion of Counsel and (if required by the Trust
Indenture Act) Independent Certificates in accordance with Trust Indenture Act
ss.ss. 314(c) and 314(d)(1) meeting the applicable requirements of Section
11.01.
SECTION 8.05. OPINION OF COUNSEL. The Note Trustee shall receive at least
seven days' notice when requested by the Note Issuer to take any action pursuant
to Section 8.04(a), accompanied by copies of any instruments involved, and the
Note Trustee shall also require, as a condition to such action, an Opinion of
Counsel, in form and substance reasonably satisfactory to the Note Trustee,
stating the legal effect of any such action, outlining the steps required to
complete the same, and concluding that all conditions precedent to the taking of
such action have been complied with and such action will not materially and
adversely impair the security for the Notes or the rights of the Noteholders in
contravention of the provisions of this Note Indenture; PROVIDED, HOWEVER, that
such Opinion of Counsel shall not be required to express an opinion as to the
fair value of the Collateral. Counsel rendering any such opinion may rely,
without independent investigation, on the accuracy and validity of any
certificate or other instrument delivered to the Note Trustee in connection with
any such action.
SECTION 8.06. REPORTS BY INDEPENDENT ACCOUNTANTS. As of the Issuance Date,
the Note Issuer shall appoint a firm of Independent certified public accountants
of recognized national reputation for purposes of preparing and delivering the
reports or certificates of such accountants required by this Note Indenture. In
the event such firm requires the Note Trustee to agree to the procedures
performed by such firm, the Note Issuer shall direct the Note Trustee in writing
to so agree; it being understood and agreed that the Note Trustee will deliver
such letter of agreement in conclusive reliance upon the direction of the Note
Issuer, and the Note Trustee makes no independent inquiry or investigation to,
and shall have no obligation or liability in respect of, the sufficiency,
validity or correctness of such procedures. Upon any resignation by such firm
the Note Issuer shall provide written notice thereof to the Note Trustee and
shall promptly appoint a successor thereto that shall also be a firm of
Independent certified public accountants of recognized national reputation. If
the Note Issuer shall fail to appoint a successor to a firm of Independent
certified public accountants that has resigned within 15 days after such
resignation, the Note Trustee shall promptly notify the Note Issuer of such
failure in writing. If the Note Issuer shall not have appointed a successor
within 10 days thereafter the Note Trustee shall promptly
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appoint a successor firm of Independent certified public accountants of
recognized national reputation; PROVIDED, HOWEVER, that the Note Trustee shall
have no liability with respect to such appointment if the Note Trustee acted
with due care with respect thereto. The fees of such Independent certified
public accountants and its successor shall be payable by the Note Issuer.
ARTICLE IX
SUPPLEMENTAL NOTE INDENTURES
----------------------------
SECTION 9.01. SUPPLEMENTAL NOTE INDENTURES WITHOUT CONSENT OF NOTEHOLDERS.
(a) Without the consent of the Holders of any Notes but with prior notice
to the Rating Agencies, the Note Issuer and the Note Trustee, when authorized by
an Issuer Order, at any time and from time to time, may enter into one or more
indentures supplemental hereto (which shall conform to the provisions of the
Trust Indenture Act as in force at the date of the execution thereof), in form
reasonably satisfactory to the Note Trustee, for any of the following purposes:
(i) to correct or amplify the description of any property at any
time subject to the lien of this Note Indenture, or better to assure,
convey and confirm unto the Note Trustee any property subject or required
to be subjected to the lien of this Note Indenture, or to subject to the
lien of this Note Indenture additional property;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another person to the Note Issuer, and the
assumption by any such successor of the covenants of the Note Issuer herein
and in the Notes contained;
(iii) to add to the covenants of the Note Issuer, for the benefit
of the Holders of the Notes, or to surrender any right or power herein
conferred upon the Note Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any property
to or with the Note Trustee;
(v) to cure any ambiguity, to correct or supplement any
provision herein or in any supplemental note indenture which may be
inconsistent with any other provision herein or in any supplemental note
indenture or to make any other provisions with respect to matters or
questions arising under this Note Indenture or in any supplemental note
indenture; PROVIDED, HOWEVER, that such action shall not adversely affect
the interests of the Holders of the Notes or holders of the Certificates;
(vi) to evidence and provide for the acceptance of the
appointment hereunder by a successor trustee with respect to the Notes and
to add to or change any of the provisions of this Note Indenture as shall
be necessary to facilitate the administration of the trusts hereunder by
more than one trustee, pursuant to the requirements of Article VI; or
(vii) to modify, eliminate or add to the provisions of this Note
Indenture to such extent as shall be necessary to effect the qualification
of this Note Indenture under the
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Trust Indenture Act or under any similar federal statute hereafter enacted
and to add to this Note Indenture such other provisions as may be expressly
required by the Trust Indenture Act.
The Note Trustee is hereby authorized to join in the execution of any such
supplemental note indenture and to make any further appropriate agreements and
stipulations that may be therein contained.
(b) The Note Issuer and the Note Trustee, when authorized by an Issuer
Order, may, also without the consent of any of the Holders of the Notes, enter
into an indenture or indentures supplemental hereto for the purpose of adding
any provisions to, or changing in any manner or eliminating any of the
provisions of, this Note Indenture or of modifying in any manner the rights of
the Holders of the Notes under this Note Indenture; PROVIDED, however, that (i)
such action shall not, as evidenced by an Officer's Certificate, adversely
affect in any material respect the interests of the Noteholders or the holders
of Certificates and (ii) the Rating Agency Condition shall have been satisfied
with respect thereto.
SECTION 9.02. SUPPLEMENTAL NOTE INDENTURES WITH CONSENT OF NOTEHOLDERS. The
Note Issuer and the Note Trustee, when authorized by an Issuer Order, also may,
with prior notice to the Rating Agencies, the Agencies and with the consent of
the Holders of not less than a majority of the Outstanding Amount of the Notes
of each Class to be affected, by Act of such Holders delivered to the Note
Issuer and the Note Trustee, enter into an indenture or indentures supplemental
hereto for the purpose of adding any provisions to, or changing in any manner or
eliminating any of the provisions of, this Note Indenture or of modifying in any
manner the rights of the Holders of the Notes under this Note Indenture;
PROVIDED, HOWEVER, that no such supplemental note indenture shall, without the
consent of the Holder of each Outstanding Note of each Class affected thereby:
(i) change the date of payment of any installment of principal
of or interest on any Note, or reduce the principal amount thereof or the
interest rate thereon, change the provisions of this Note Indenture
relating to the application of collections on, or the proceeds of the sale
of, the Collateral to payment of principal of or interest on the Notes, or
change any place of payment where, or the coin or currency in which, any
Note or the interest thereon is payable, or impair the right to institute
suit for the enforcement of the provisions of this Note Indenture requiring
the application of funds available therefor, as provided in Article V, to
the payment of any such amount due on the Notes on or after the respective
due dates thereof (or, in the case of optional or mandatory redemption, on
or after the Optional Redemption Date or Mandatory Redemption Date, as
applicable);
(ii) reduce the percentage of the Outstanding Amount of the Notes
or of a Class thereof, the consent of the Holders of which is required for
any such supplemental note indenture, or the consent of the Holders of
which is required for any waiver of compliance with certain provisions of
this Note Indenture or certain defaults hereunder and their consequences
provided for in this Note Indenture;
(iii) modify or alter the provisions of the proviso to the
definition of the term "Outstanding";
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(iv) reduce the percentage of the Outstanding Amount of the Notes
required to direct the Note Trustee to direct the Note Issuer to sell or
liquidate the Collateral pursuant to Section 5.04;
(v) modify any provision of this Section except to increase any
percentage specified herein or to provide that certain additional
provisions of this Note Indenture or the Basic Documents cannot be modified
or waived without the consent of the Holder of each Outstanding Note
affected thereby;
(vi) modify any of the provisions of this Note Indenture in such
manner as to affect the calculation of the amount of any payment of
interest or principal due on any Note on any Payment Date (including the
calculation of any of the individual components of such calculation) or to
affect the rights of the Holders of Notes to the benefit of any provisions
for the mandatory redemption of the Notes contained herein; or
(vii) permit the creation of any lien ranking prior to or on a
parity with the lien of this Note Indenture with respect to any part of the
Collateral or, except as otherwise permitted or contemplated herein,
terminate the lien of this Note Indenture on any property at any time
subject hereto or deprive the Holder of any Note of the security provided
by the lien of this Note Indenture.
The Note Trustee may in its discretion determine whether or not any Notes
or Certificates of a Class would be affected by any supplemental note indenture
and any such determination shall be conclusive upon the Holders of all Notes and
holders of all Certificates of such Class, whether theretofore or thereafter
authenticated and delivered hereunder. The Note Trustee shall not be liable for
any such determination made in good faith.
It shall not be necessary for any Act of Noteholders under this Section to
approve the particular form of any proposed supplemental note indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Note Issuer and the Note Trustee of any
supplemental note indenture pursuant to this Section, the Note Issuer shall mail
to the Rating Agencies and the Holders of the Notes to which such amendment or
supplemental note indenture relates a notice setting forth in general terms the
substance of such supplemental note indenture. Any failure of the Note Trustee
to mail such notice, or any defect therein, shall not, however, in any way
impair or affect the validity of any such supplemental note indenture.
SECTION 9.03. EXECUTION OF SUPPLEMENTAL NOTE INDENTURES. In executing any
supplemental note indenture permitted by this Article IX or the modifications
thereby of the trusts created by this Note Indenture, the Note Trustee shall be
entitled to receive, and subject to Sections 6.01 and 6.02, shall be fully
protected in relying upon, an Opinion of Counsel stating that the execution of
such supplemental note indenture is authorized or permitted by this Note
Indenture. The Note Trustee may, but shall not be obligated to, enter into any
such supplemental note indenture that affects the Note Trustee's own rights,
duties, liabilities or immunities under this Note Indenture or otherwise.
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SECTION 9.04. EFFECT OF SUPPLEMENTAL NOTE INDENTURE. Upon the execution of
any supplemental note indenture pursuant to the provisions hereof, this Note
Indenture shall be and be deemed to be modified and amended in accordance
therewith with respect to each Class of Notes affected thereby, and the
respective rights, limitations of rights, obligations, duties, liabilities and
immunities under this Note Indenture of the Note Trustee, the Note Issuer and
the Holders of the Notes shall thereafter be determined, exercised and enforced
hereunder subject in all respects to such modifications and amendments, and all
the terms and conditions of any such supplemental note indenture shall be and be
deemed to be part of the terms and conditions of this Note Indenture for any and
all purposes. If required by the Note Trustee, Notes may bear a notation in form
approved by the Note Trustee as to any matter provided for in such supplemental
note indenture. If the Note Issuer or the Note Trustee shall so determine, new
Notes so modified as to conform, in the opinion of the Note Trustee and the Note
Issuer, to any such supplemental note indenture may be prepared and executed by
the Note Issuer and authenticated and delivered by the Note Trustee in exchange
for Outstanding Notes.
SECTION 9.05. CONFORMITY WITH TRUST INDENTURE ACT. Every amendment of this
Note Indenture and every supplemental note indenture executed pursuant to this
Article IX shall conform to the requirements of the Trust Indenture Act as then
in effect so long as this Note Indenture shall then be qualified under the Trust
Indenture Act.
ARTICLE X
REDEMPTION OF NOTES
-------------------
SECTION 10.01. OPTIONAL REDEMPTION BY NOTE ISSUER. The Note Issuer may, at
its option, redeem all, but not less than all, of the Notes on any Payment Date
if, after giving effect to payments that would otherwise be made on such Payment
Date, the Outstanding Amount has been reduced to less than five percent of the
initial principal balance thereof at a price equal to the outstanding principal
amount of the Notes to be redeemed plus accrued and unpaid interest thereon at
the Note Interest Rate to the Optional Redemption Date (such price being called
the "Optional Redemption Price"). If the Note Issuer shall elect to redeem the
Notes pursuant to this Section 10.01, it shall furnish written notice (which
notice shall state all items listed in Section 10.02) of such election to the
Note Trustee and the Rating Agencies not later than 25 days prior to the
Optional Redemption Date and shall deposit with the Note Trustee not later than
one Business Day prior to the Optional Redemption Date the Optional Redemption
Price of the Notes to be redeemed whereupon all such Notes shall be due and
payable on the Optional Redemption Date upon the furnishing of a notice
complying with Section 10.02 hereof to each Holder of the Notes pursuant to this
Section 10.01.
SECTION 10.02. FORM OF OPTIONAL REDEMPTION NOTICE. Notice of redemption
under Section 10.01 hereof shall be given by the Note Trustee by first-class
mail, postage prepaid, mailed not less than five days nor more than 25 days
prior to the Optional Redemption Date to each Holder of Notes to be redeemed, as
of the close of business on the Record Date preceding the Optional Redemption
Date at such Holder's address appearing in the Note Register.
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All notices of redemption shall state:
(1) the Optional Redemption Date;
(2) the Optional Redemption Price; and
(3) the place where such Notes are to be surrendered for payment of
the Optional Redemption Price (which shall be the office or agency of the
Note Issuer to be maintained as provided in Section 3.02 hereof).
Notice of redemption of the Notes to be redeemed shall be given by the Note
Trustee in the name and at the expense of the Note Issuer. Failure to give
notice of redemption, or any defect therein, to any Holder of any Note selected
for redemption shall not impair or affect the validity of the redemption of any
other Note.
SECTION 10.03. NOTES PAYABLE ON OPTIONAL REDEMPTION DATE OR PAYMENT DATE.
Notice of redemption having been given as provided in Section 10.02 hereof, the
Notes to be redeemed shall on the Optional Redemption Date become due and
payable at the Optional Redemption Price and (unless the Note Issuer shall
default in the payment of the Optional Redemption Price) no interest shall
accrue on the Optional Redemption Price for any period after the date to which
accrued interest is calculated for purposes of calculating the Optional
Redemption Price.
SECTION 10.04. MANDATORY REDEMPTION BY NOTE ISSUER. If the Seller is
required to repurchase the Transition Property pursuant to Section 5.01(b) of
the Sale Agreement, the Note Issuer shall be required to redeem all outstanding
Notes on or before the fifth Business Day following the Repurchase Date (such
date of mandatory redemption, the "Mandatory Redemption Date") for a purchase
price equal to the then outstanding principal amount of the Notes plus accrued
and unpaid interest thereon at the Note Interest Rate to the Mandatory
Redemption Date (such price being called the "Mandatory Redemption Price"). If
the Note Issuer is required to redeem the Notes pursuant to this Section 10.04,
it shall furnish written notice (which notice shall state all items listed in
Section 10.05) of such redemption to the Note Trustee and the Rating Agencies
not later than one Business Day before such Repurchase Date and shall deposit
with the Note Trustee, not later than one Business Day prior to the Mandatory
Redemption Date, the Mandatory Redemption Price of the Notes to be redeemed
whereupon all such Notes shall be due and payable on the Mandatory Redemption
Date upon the furnishing of a notice complying with Section 10.05 hereof to each
Holder of the Notes pursuant to this Section 10.04.
SECTION 10.05. FORM OF MANDATORY REDEMPTION NOTICE. Notice of redemption
under Section 10.04 hereof shall be given by the Note Trustee by first-class
mail, postage prepaid, mailed not less than five days prior to the Mandatory
Redemption Date to each Holder of Notes to be redeemed, as of the close of
business on the Record Date preceding the Mandatory Redemption Date at such
Holder's address appearing in the Note Register.
All notices of redemption shall state:
(1) the Mandatory Redemption Date;
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(2) the Mandatory Redemption Price; and
(3) the place where such Notes are to be surrendered for payment of
the Mandatory Redemption Price (which shall be the office or agency of the
Note Issuer to be maintained as provided in Section 3.02 hereof).
Notice of redemption of the Notes to be redeemed shall be given by the Note
Trustee in the name and at the expense of the Note Issuer. Failure to give
notice of redemption, or any defect therein, to any Holder of any Note selected
for redemption shall not impair or affect the validity of the redemption of any
other Note.
SECTION 10.06. NOTES PAYABLE ON MANDATORY REDEMPTION DATE OR PAYMENT DATE.
Notice of redemption having been given as provided in Section 10.05 hereof, the
Notes to be redeemed shall on the Mandatory Redemption Date become due and
payable at the Mandatory Redemption Price and (unless the Note Issuer shall
default in the payment of the Mandatory Redemption Price) no interest shall
accrue on the Mandatory Redemption price for any period after the date to which
accrued interest is calculated for purposes of calculating the Mandatory
Redemption Price.
ARTICLE XI
MISCELLANEOUS
-------------
SECTION 11.01. COMPLIANCE CERTIFICATES AND OPINIONS, ETC.
(a) Upon any application or request by the Note Issuer to the Note Trustee
to take any action under any provision of this Note Indenture, the Note Issuer
shall furnish to the Note Trustee (i) an Officer's Certificate stating that all
conditions precedent, if any, provided for in this Note Indenture relating to
the proposed action have been complied with, (ii) an Opinion of Counsel stating
that in the opinion of such counsel all such conditions precedent, if any, have
been complied with and (iii) (if required by the Trust Indenture Act) an
Independent Certificate from a firm of certified public accountants meeting the
applicable requirements of this Section, except that, in the case of any such
application or request as to which the furnishing of such documents is
specifically required by any provision of this Note Indenture, no additional
certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Note Indenture shall include:
(i) a statement that each signatory of such certificate or
opinion has read or has caused to be read such covenant or condition and
the definitions herein relating thereto;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
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(iii) a statement that, in the opinion of each such signatory,
such signatory has made such examination or investigation as is necessary
to enable such signatory to express an informed opinion as to whether or
not such covenant or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such
signatory, such condition or covenant has been complied with.
(b) (i) Prior to the deposit of any Collateral or other property or
securities with the Note Trustee that is to be made the basis for the release of
any property or securities subject to the lien of this Note Indenture, the Note
Issuer shall, in addition to any obligation imposed in Section 11.01(a) or
elsewhere in this Note Indenture, furnish to the Note Trustee an Officer's
Certificate certifying or stating the opinion of each person signing such
certificate as to the fair value (within 90 days of such deposit) to the Note
Issuer of the Collateral or other property or securities to be so deposited.
(ii) Whenever the Note Issuer is required to furnish to the Note
Trustee an Officer's Certificate certifying or stating the opinion of any
signer thereof as to the matters described in clause (i) above, the Note
Issuer shall also deliver to the Note Trustee an Independent Certificate as
to the same matters, if the fair value to the Note Issuer of the securities
to be so deposited and of all other such securities made the basis of any
such withdrawal or release since the commencement of the then-current
fiscal year of the Note Issuer, as set forth in the certificates delivered
pursuant to clause (i) above and this clause (ii), is ten percent or more
of the Outstanding Amount of the Notes, but such a certificate need not be
furnished with respect to any securities so deposited, if the fair value
thereof to the Note Issuer as set forth in the related Officer's
Certificate is less than $[25,000] or less than one percent of the
Outstanding Amount of the Notes.
(iii) Whenever any property or securities are to be released from
the lien of this Note Indenture other than pursuant to Section 8.02(d), the
Note Issuer shall also furnish to the Note Trustee an Officer's Certificate
certifying or stating the opinion of each person signing such certificate
as to the fair value (within 90 days of such release) of the property or
securities proposed to be released and stating that in the opinion of such
person the proposed release will not impair the security under this Note
Indenture in contravention of the provisions hereof.
(iv) Whenever the Note Issuer is required to furnish to the Note
Trustee an Officer's Certificate certifying or stating the opinion of any
signer thereof as to the matters described in clause (iii) above, the Note
Issuer shall also furnish to the Note Trustee an Independent Certificate as
to the same matters if the fair value of the property or securities and of
all other property, or securities released from the lien of this Note
Indenture (other than pursuant to Section 8.02(d) hereof) since the
commencement of the then-current calendar year, as set forth in the
certificates required by clause (iii) above and this clause (iv), equals 10
percent or more of the Outstanding Amount of the Notes, but such
certificate need not be furnished in the case of any release of property or
securities if the fair value thereof as set forth in the related Officer's
Certificate is less than $[25,000] or less than one percent of the then
Outstanding Amount of the Notes.
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(v) Notwithstanding Section 2.11 or any other provision of this
Section, the Note Issuer may (A) collect, liquidate, sell or otherwise
dispose of the Transition Property and the RTC Charge as and to the extent
permitted or required by the Basic Documents and (B) make cash payments out
of the Collection Account as and to the extent permitted or required by the
Basic Documents.
SECTION 11.02. FORM OF DOCUMENTS DELIVERED TO NOTE TRUSTEE. In any case
where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be certified
by, or covered by the opinion of, only one such Person, or that they be so
certified or covered by only one document, but one such Person may certify or
give an opinion with respect to some matters and one or more other such Persons
as to other matters, and any such Person may certify or give an opinion as to
such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Note Issuer may
be based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his or her certificate or
opinion is based are erroneous. Any such certificate of an Authorized Officer or
Opinion of Counsel may be based, insofar as it relates to factual matters, upon
a certificate or opinion of, or representations by, an officer or officers of
the Servicer, the Seller, the Note Issuer or the Administrator, stating that the
information with respect to such factual matters is in the possession of the
Servicer, the Seller, the Note Issuer or the Administrator, unless such counsel
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to such matters are erroneous.
Whenever in this Note Indenture, in connection with any application or
certificate or report to the Note Trustee, it is provided that the Note Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Note Issuer's compliance with any term hereof, it is
intended that the truth and accuracy, at the time of the granting of such
application or at the effective date of such certificate or report (as the case
may be), of the facts and opinions stated in such document shall in such case be
conditions precedent to the right of the Note Issuer to have such application
granted or to the sufficiency of such certificate or report. The foregoing shall
not, however, be construed to affect the Note Trustee's right to rely upon the
truth and accuracy of any statement or opinion contained in any such document as
provided in Article VI.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Note Indenture, they may, but need not, be consolidated
and form one instrument.
SECTION 11.03. ACTS OF NOTEHOLDERS.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Note Indenture to be given or taken by
Noteholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Noteholders in person or by agents
duly appointed in writing; and except as herein otherwise expressly
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provided such action shall become effective when such instrument or instruments
are delivered to the Note Trustee, and, where it is hereby expressly required,
to the Note Issuer. Such instrument or instruments (and the action embodied
therein and evidenced thereby) are herein sometimes referred to as the "Act" of
the Noteholders signing such instrument or instruments. Proof of execution of
any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Note Indenture and (subject to Section 6.01)
conclusive in favor of the Note Trustee and the Note Issuer, if made in the
manner provided in this Section.
(b) The fact and date of the execution by any person of any such instrument
or writing may be proved in any manner that the Note Trustee deems sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Notes shall bind the Holder of every Note
issued upon the registration thereof or in exchange therefor or in lieu thereof,
in respect of anything done, omitted or suffered to be done by the Note Trustee
or the Note Issuer in reliance thereon, whether or not notation of such action
is made upon such Note.
SECTION 11.04. NOTICES, ETC., TO NOTE TRUSTEE, NOTE ISSUER, AGENCIES AND
RATING AGENCIES.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or Act of Noteholders or other documents provided or permitted by this Note
Indenture to be made upon, given or furnished to or filed with:
(i) the Note Trustee by any Noteholder or by the Note Issuer
shall be sufficient for every purpose hereunder if made, given, furnished
or filed in writing by facsimile transmission, first-class mail or
overnight delivery service to or with the Note Trustee at its Corporate
Trust Office, or
(ii) the Note Issuer by the Note Trustee or by any Noteholder
shall be sufficient for every purpose hereunder if in writing and mailed,
first-class, postage prepaid, to the Note Issuer addressed to: BEC Funding
LLC, 800 Boylston Street, 35th Floor, Boston, Massachusetts 02199,
Attention: President, or at any other address previously furnished in
writing to the Note Trustee by the Note Issuer. The Note Issuer shall
promptly transmit any notice received by it from the Noteholders to the
Note Trustee.
(b) Notices required to be given to the Rating Agencies or the Agencies by
the Note Issuer or the Note Trustee shall be in writing, personally delivered or
mailed by certified mail, return receipt requested to (i) in the case of
Moody's, to: Moody's Investors Service, ABS Monitoring Department, 99 Church
Street, New York, New York 10007, (ii) in the case of Standard & Poor's, to:
Standard & Poor's Ratings Services, 55 Water Street, 40th Floor, New York, New
York 10041, Attention of Asset Backed Surveillance Department, (iii) in the case
of Fitch, to Fitch IBCA, Inc., One State Street Plaza, New York, New York 10004,
Attention of Commercial Asset-Backed Securities, (iv) in the case of Duff &
Phelps, to: Duff & Phelps Credit Rating Co., 17 State Street, 12th Floor, New
York, New York 10004, and (v) in the case of the Agencies, to (A) Massachusetts
Development Finance Agency, 75 Federal Street, Boston,
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Massachusetts 02110, Attention: General Counsel, and (B) Massachusetts Health
and Educational Facilities Authority, 99 Summer Street, 10th Floor, Boston,
Massachusetts 02110, Attention: General Counsel.
SECTION 11.05. NOTICES TO NOTEHOLDERS; WAIVER. Where this Note Indenture
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at such Noteholder's address as it appears on the Note Register, not
later than the latest date, and not earlier than the earliest date, prescribed
for the giving of such notice. In any case where notice to Noteholders is given
by mail, neither the failure to mail such notice nor any defect in any notice so
mailed to any particular Noteholder shall affect the sufficiency of such notice
with respect to other Noteholders, and any notice that is mailed in the manner
herein provided shall conclusively be presumed to have been duly given.
Where this Note Indenture provides for notice in any manner, such notice
may be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the Note Trustee
but such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a result of
a strike, work stoppage or similar activity, it shall be impractical to mail
notice of any event of Noteholders when such notice is required to be given
pursuant to any provision of this Note Indenture, then any manner of giving such
notice as shall be satisfactory to the Note Trustee shall be deemed to be a
sufficient giving of such notice.
Where this Note Indenture provides for notice to the Rating Agencies,
failure to give such notice shall not affect any other rights or obligations
created hereunder, and shall not under any circumstance constitute a Default or
Event of Default.
SECTION 11.06. CONFLICT WITH TRUST INDENTURE ACT. If any provision hereof
limits, qualifies or conflicts with another provision hereof that is required to
be included in this Note Indenture by any of the provisions of the Trust
Indenture Act, such required provision shall control.
The provisions of Trust Indenture Act ss.ss. 310 through 317 that impose
duties on any person (including the provisions automatically deemed included
herein unless expressly excluded by this Note Indenture) are a part of and
govern this Note Indenture, whether or not physically contained herein.
SECTION 11.07. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
SECTION 11.08. SUCCESSORS AND ASSIGNS. All covenants and agreements in this
Note Indenture and the Notes by the Note Issuer shall bind its successors and
assigns, whether so expressed or not.
All agreements of the Note Trustee in this Note Indenture shall bind its
successors.
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SECTION 11.09. SEPARABILITY. In case any provision in this Note Indenture
or in the Notes shall be invalid, illegal or unenforceable, the validity,
legality, and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
SECTION 11.10. BENEFITS OF NOTE INDENTURE. Nothing in this Note Indenture
or in the Notes, express or implied, shall give to any Person, other than the
parties hereto and their successors hereunder, and the Noteholders, and any
other party secured hereunder, and any other Person with an ownership interest
in any part of the Collateral, any benefit or any legal or equitable right,
remedy or claim under this Note Indenture.
SECTION 11.11. LEGAL HOLIDAYS. In any case where the date on which any
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Note Indenture) payment need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
SECTION 11.12. GOVERNING LAW. THIS NOTE INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS, WITHOUT REFERENCE
TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF
THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.13. COUNTERPARTS. This Note Indenture may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
SECTION 11.14. RECORDING OF NOTE INDENTURE. If this Note Indenture is
subject to recording in any appropriate public recording offices, such recording
is to be effected by the Note Issuer and at its expense accompanied by an
Opinion of Counsel (which may be counsel to the Note Trustee or any other
counsel reasonably acceptable to the Note Trustee) to the effect that such
recording is necessary either for the protection of the Noteholders or any other
Person secured hereunder or for the enforcement of any right or remedy granted
to the Note Trustee under this Note Indenture.
SECTION 11.15. TRUST OBLIGATION. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Note Issuer or the Note
Trustee on the Notes or under this Note Indenture or any certificate or other
writing delivered in connection herewith or therewith, against (i) the Note
Trustee in its individual capacity, (ii) any owner of a beneficial interest in
the Note Issuer or (iii) any partner, owner, beneficiary, agent, officer,
director or employee of the Note Trustee in its individual capacity, any holder
of a beneficial interest in the Note Issuer or the Note Trustee or of any
successor or assign of the Note Trustee in its individual capacity, except as
any such Person may have expressly agreed (it being understood that the Note
Trustee has no such obligations in its individual capacity).
SECTION 11.16. NO RECOURSE TO NOTE ISSUER. Notwithstanding any provision of
this Note Indenture or any Supplemental Note Indenture to the contrary,
Noteholders shall have no
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recourse against the Note Issuer, but shall look only to the Collateral, with
respect to any amounts due to the Noteholders hereunder.
SECTION 11.17. INSPECTION. The Note Issuer agrees that, on reasonable prior
notice, it will permit any representative of the Note Trustee, during the Note
Issuer's normal business hours, to examine all the books of account, records,
reports, and other papers of the Note Issuer, to make copies and extracts
therefrom, to cause such books to be audited by Independent certified public
accountants, and to discuss the Note Issuer's affairs, finances and accounts
with the Note Issuer's officers, employees, and Independent certified public
accountants, all at such reasonable times and as often as may be reasonably
requested. The Note Trustee shall and shall cause its representatives to hold in
confidence all such information except to the extent disclosure may be required
by law (and all reasonable applications for confidential treatment are
unavailing) and except to the extent that the Note Trustee may reasonably
determine that such disclosure is consistent with its obligations hereunder.
Notwithstanding anything herein to the contrary, the foregoing shall not be
construed to prohibit (i) disclosure of any and all information that is or
becomes publicly known, or information obtained by the Note Trustee from sources
other than the Note Issuer, provided such parties are rightfully in possession
of such information and do not have an obligation of confidentiality, (ii)
disclosure of any and all information (A) if required to do so by any applicable
statute, law, rule or regulation, (B) pursuant to any subpoena, civil
investigative demand or similar demand or request of any court or regulatory
authority exercising its proper jurisdiction, (C) in any preliminary or final
offering circular, registration statement or contract or other document
pertaining to the transactions contemplated by this Note Indenture or the Basic
Documents approved in advance by the Note Issuer or (D) to any affiliate,
independent or internal auditor, agent, employee or attorney of the Note Trustee
having a need to know the same, provided that such parties agree to be bound by
the confidentiality provisions contained in this Section 11.17, or (iii) any
other disclosure authorized by the Note Issuer.
66
<PAGE> 73
IN WITNESS WHEREOF, the Note Issuer and the Note Trustee have caused this
Note Indenture to be duly executed by their respective officers, thereunto duly
authorized and duly attested, all as of the day and year first above written.
BEC FUNDING LLC
By:
-----------------------------------
Name:
Title:
THE BANK OF NEW YORK,
not in its individual capacity but
solely as Note Trustee,
By:
-----------------------------------
Name:
Title:
S-1
<PAGE> 74
COMMONWEALTH OF MASSACHUSETTS, )
) ss.:
COUNTY OF [ ], )
On the _____ day of __________, 1999, before me,
_____________________________, a Notary Public in and for said county and state,
personally appeared _____________________, personally known to me (or proved to
me on the basis of satisfactory evidence) to be the person and officer whose
name is subscribed to the within instrument and acknowledged to me that he
executed the same in his authorized capacity, and that by his signature on the
instrument BEC Funding LLC, a Delaware limited liability company and the entity
upon which the person acted, executed this instrument.
WITNESS my hand and official seal.
----------------------------------------
Notary Public
My commission expires:
<PAGE> 75
COMMONWEALTH OF MASSACHUSETTS, )
) ss.:
COUNTY OF [ ], )
On the _____ day of __________, 1999, before me,
_____________________________, a Notary Public in and for said county and state,
personally appeared _____________________, personally known to me (or proved to
me on the basis of satisfactory evidence) to be the person and officer whose
name is subscribed to the within instrument and acknowledged to me that he
executed the same in his authorized capacity, and that by his signature on the
instrument The Bank of New York, the entity upon which the person acted,
executed this instrument.
WITNESS my hand and official seal.
----------------------------------------
Notary Public
My commission expires:
<PAGE> 76
SCHEDULE A
EXPECTED AMORTIZATION SCHEDULE
------------------------------
OUTSTANDING PRINCIPAL BALANCE
<TABLE>
<CAPTION>
Payment Date Class A-1 Class A-2 Class A-3 Class A-4 Class A-5 Class A-6 Class A-7 Total
- ------------ --------- --------- --------- --------- --------- --------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE> 77
SCHEDULE B
REQUIRED OVERCOLLATERALIZATION LEVEL SCHEDULE
---------------------------------------------
<TABLE>
<CAPTION>
Required Required
Overcollateralization Overcollateralization
Payment Date Level Payment Date Level
------------ --------------------- ------------ ---------------------
<S> <C> <C> <C>
</TABLE>
<PAGE> 78
EXHIBIT B
FORM OF NOTE
REGISTERED $[ ]
No. [ ]
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP NO. [ ]
THE PRINCIPAL OF THIS CLASS A-[ ] NOTE WILL BE PAID IN INSTALLMENTS AS SET
FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS CLASS A-[ ]
NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
BEC FUNDING LLC NOTES
CLASS A-[ ]
<TABLE>
<CAPTION>
Interest Rate Original Principal Amount Final Maturity Date
------------- ------------------------- -------------------
<S> <C> <C>
[ ]% $[ ]
</TABLE>
BEC Funding LLC, a limited liability company formed and existing under the
laws of the State of Delaware (herein referred to as the "Note Issuer"), for
value received, hereby promises to pay to Massachusetts RRB Special Purpose
Trust BEC-1, or registered assigns, the original Principal Amount shown above in
semiannual installments on the Payment Dates and in the amounts specified on the
reverse hereof or, if less, the amounts determined pursuant to Section 8.02 of
the Note Indenture, in each year, commencing on the date determined as provided
on the reverse hereof and ending on or before the Final Maturity Date and to pay
interest, at the Interest Rate shown above, on each September 15 and March 15 or
if any such day is not a Business Day, the next succeeding Business Day,
commencing on March 15, 2000 and continuing until the earlier of the payment of
the principal hereof or the Final Maturity Date (each a "Payment Date"), on the
principal amount of this Class A-[ ] Note. Interest on this Class A-[ ] Note
will accrue for each Payment Date from the most recent Payment Date on which
interest has been paid to but excluding such Payment Date or, if no interest has
yet been paid, from [ ], 1999. 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 A-[ ] Note shall be paid in the manner specified on the reverse hereof.
The principal of and interest on this Class A-[ ] Note are payable in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts. All payments made by the
Note Issuer with respect to this Class A-[ ] Note-shall be applied first to
interest due and payable on this Class A-[ ] Note as provided above
B-1
<PAGE> 79
and then to the unpaid principal of this Class A-[ ] Note, all in the manner set
forth in Section 8.02 of the Note Indenture.
Reference is made to the further provisions of this Class A-[ ] Note set
forth on the reverse hereof, which shall have the same effect as though fully
set forth on the face of this Class A-[ ] Note.
Unless the certificate of authentication hereon has been executed by the
Note Trustee whose name appears below by manual signature, this Class A-[ ] Note
shall not be entitled to any benefit under the Note Indenture referred to on the
reverse hereof, or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Note Issuer has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer.
Date: [ ], 1999
BEC FUNDING LLC
By:
-----------------------------------
Name:
Title:
B-2
<PAGE> 80
NOTE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
Dated: [ ], 1999
This is one of the Class A-[ ] Notes of the Notes, designated above and
referred to in the within-mentioned Note Indenture.
THE BANK OF NEW YORK,
not in its individual capacity but
solely as Note Trustee,
By:
-----------------------------------
Name:
Title:
B-3
<PAGE> 81
[REVERSE OF NOTE]
This Class A-[ ] Note is one of a duly authorized issue of Notes of the
Note Issuer, designated as its BEC Funding LLC Notes (herein called the
"Notes"), issuable in one or more Classes, and further designated as a Class
A-[ ] Note (collectively with all other Class A-[ ] Notes of this Issue, the
"Class A-[ ] Notes"), all issued under a Note Indenture dated as of
[ ], 1999 (the "Note Indenture"), between the Note Issuer and The
Bank of New York, as Note Trustee (the "Note Trustee," which term includes any
successor trustee under the Note Indenture), to which Note Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights and obligations thereunder of the Note Issuer, the Note
Trustee and the Holders of the Notes. All terms used in this Class A-[ ] Note
that are defined in the Note Indenture, as supplemented or amended, shall have
the meanings assigned to them in the Note Indenture.
The Class A-[ ] Notes and the other Classes of Notes issued by the Note
Issuer are and will be equally and ratably secured by the collateral pledged as
security therefor, as provided in the Note Indenture.
The principal of this Class A-[ ] Note shall be payable on each Payment
Date only to the extent that amounts in the Collection Account are available
therefor, and only until the outstanding principal balance thereof on such
Payment Date (after giving effect to all payments of principal, if any, made on
such Payment Date) has been reduced to the principal balance specified in the
Expected Amortization Schedule which is attached to the Note Indenture as
Schedule A, unless payable earlier either because (x) an Event of Default shall
have occurred and be continuing and the Note Trustee or the Holders of Notes
representing not less than a majority of the Outstanding Amount of the Notes
have declared the Notes to be immediately due and payable in accordance with
Section 5.02 of the Note Indenture, (y) the Note Issuer, at its option, shall
have called for the redemption of the Notes pursuant to Section 10.01 of the
Note Indenture or (z) the Note Issuer shall have called for the redemption of
the Notes pursuant to Section 10.04 of the Note Indenture if the Seller is
required to repurchase the Transition Property pursuant to Section 5.01(b) of
the Sale Agreement. However, actual principal payments may be made in lesser
than expected amounts and at later than expected times as determined pursuant to
Section 8.02 of the Note Indenture. The entire unpaid principal amount of this
Class A-[ ] Note shall be due and payable on the earlier of the Final Maturity
Date hereof, the optional Redemption Date, if any, and the Mandatory Redemption
Date, if any, herefor. Notwithstanding the foregoing, the entire unpaid
principal amount of the Notes shall be due and payable, if not then previously
paid, on the date on which an Event of Default shall have occurred and be
continuing and the Note Trustee or the Holders of the Notes representing not
less than a majority of the Outstanding Amount of the Notes have declared the
Notes to be immediately due and payable in the manner provided in Section 5.02
of the Note Indenture. All principal payments on the Class A-[ ] Notes shall be
made pro rata to the Class A-[ ] Noteholders entitled thereto based on the
respective principal amounts of the Class A-[ ] Notes held by them.
B-4
<PAGE> 82
Payments of interest on this Class A-[ ] Note due and payable on each
Payment Date, together with the installment of principal shall be made by check
mailed first-class, postage prepaid, to the Person whose name appears as the
Registered Holder of this Class A-[ ] Note (or one or more Predecessor Notes) on
the Note Register as of the close of business on the Record Date, except that
with respect to Notes registered on the Record Date in the name of the
Certificate Trustee, payments will be made by wire transfer in immediately
available funds to the account designated by the Certificate Trustee and except
for the final installment of principal payable with respect to this Class A-[ ]
Note on a Payment Date which shall be payable as provided below. Such checks
shall be mailed to the Person entitled thereto at the address of such Person as
it appears on the Note Register as of the applicable Record Date without
requiring that this Class A-[ ] Note be submitted for notation of payment. Any
reduction in the principal amount of this Class A-[ ] Note (or any one or more
Predecessor Notes) effected by any payments made on any Payment Date shall be
binding upon all future Holders of this Class A-[ ] Note and of any Note issued
upon the registration of transfer hereof or in exchange hereof or in lieu
hereof, whether or not noted hereon. If funds are expected to be available, as
provided in the Note Indenture, for payment in full of the then remaining unpaid
principal amount of this Class A-[ ] Note on a Payment Date, then the Note
Trustee, in the name of and on behalf of the Note Issuer, will notify the Person
who was the Registered Holder hereof as of the Record Date preceding such
Payment Date by notice mailed no later than five days prior to such final
Payment Date and shall specify that such final installment will be payable only
upon presentation and surrender of this Class A-[ ] Note and shall specify the
place where this Class A-[ ] Note may be presented and surrendered for payment
of such installment.
The Note Issuer shall pay interest on overdue installments of interest at
the Note Interest Rate to the extent lawful.
As provided in the Note Indenture, the Class A-[ ] Notes may be redeemed,
in whole but not in part, at the option of the Note Issuer on any Payment Date
at the Optional Redemption Price if, after giving effect to payments that would
otherwise be made on such Payment Date, the Outstanding Amount of the Class
A-[ ] Notes has been reduced to less than five percent of the initial principal
balance thereof. In addition, as provided in the Note Indenture, if the Seller
is required to repurchase the Transition Property pursuant to Section 5.01(b) of
the Sale Agreement, the Note Issuer will be required to redeem all outstanding
Notes, including the Class A-[ ] Notes, on or before the fifth Business Day
following the Repurchase Date (as defined in the Sale Agreement).
As provided in the Note Indenture and subject to certain limitations set
forth therein, the transfer of this Class A-[ ] Note may be registered on the
Note Register upon surrender of this Class A-[ ] Note for registration of
transfer at the office or agency designated by the Note Issuer pursuant to the
Note Indenture, duly endorsed by, or accompanied by (a) a written instrument of
transfer in form satisfactory to the Note Trustee duly executed by the Holder
hereof or his attorney duly authorized in writing, with such signature
guaranteed by an institution which is a member of one of the following
recognized Signature Guaranty Programs: (i) The Securities Transfer Agent
Medallion Program (STAMP); (ii) The New York Stock Exchange Medallion
B-5
<PAGE> 83
Program (MSP); (iii) The Stock Exchange Medallion Program (SEMP); or (iv) in
such other guarantee program acceptable to the Note Trustee, and (b) such other
documents as the Note Trustee may require, and thereupon one or more new Class
A-[ ] Notes of Minimum Denominations and in the same aggregate principal amount
will be issued to the designated transferee or transferees. No service charge
will be charged for any registration of transfer or exchange of this Class A-[ ]
Note, but the transferor may be required to pay a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection with any such
registration of transfer or exchange, other than exchanges pursuant to Section
2.04 or 9.06 of the Note Indenture not involving any transfer.
Each Noteholder, by acceptance of a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Note Issuer or the Note Trustee on the Notes or under the Note Indenture
or any certificate or other writing delivered in connection therewith, against
(i) the Note Trustee in its individual capacity, (ii) any owner of a beneficial
interest in the Note Issuer or (iii) any partner, owner, beneficiary, agent,
officer, director or employee of the Note Trustee in its individual capacity,
any holder of a beneficial interest in the Note Issuer or the Note Trustee or of
any successor or assign of the Note Trustee in its individual capacity, except
as any such Person may have expressly agreed (it being understood that the Note
Trustee has no such obligations in its individual capacity).
Prior to the due presentment for registration of transfer of this Class
A-[ ] Note, the Note Issuer, the Note Trustee and any agent of the Note Issuer
or the Note Trustee may treat the Person in whose name this Class A-[ ] Note is
registered (as of the day of determination) as the owner hereof for the purpose
of receiving payments of principal of and interest on this Class A-[ ] Note and
for all other purposes whatsoever, whether or not this. Class A-[ ] Note be
overdue, and neither the Note Issuer, the Note Trustee nor any such agent shall
be affected by notice to the contrary.
The Note Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Note Issuer and the rights of the Holders of the Notes under the Note Indenture
at any time by the Note Issuer with the consent of the Holders of Notes
representing a majority of the Outstanding Amount of all Notes at the time
Outstanding of each Class to be affected. The Note Indenture also contains
provisions permitting the Holders of Notes representing specified percentages of
the Outstanding Amount of the Notes, on behalf of the Holders of all the Notes,
to waive compliance by the Note Issuer with certain provisions of the Note
Indenture and certain past defaults under the Note Indenture and their
consequences. Any such consent or waiver by the Holder of this Class A-[ ] Note
(or any one of more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Class A-[ ] Note and of any Note
issued upon the registration of transfer hereof or in exchange hereof or in lieu
hereof whether or not notation of such consent or waiver is made upon this Class
A-[ ] Note. The Note Indenture also permits the Note Trustee to amend or waive
certain terms and conditions set forth in the Note Indenture without the consent
of Holders of the Notes issued thereunder.
B-6
<PAGE> 84
The term "Note Issuer" as used in this Class A-[ ] Note includes any
successor to the Note Issuer under the Note Indenture.
The Note Issuer is permitted by the Note Indenture, under certain
circumstances, to merge or consolidate, subject to the rights of the Note
Trustee and the Holders of Notes under the Note Indenture.
The Class A-[ ] Notes are issuable only in registered form in denominations
as provided in the Note Indenture, subject to certain limitations therein set
forth.
This Class A-[ ] Note and the Note Indenture shall be construed in
accordance with the laws of The Commonwealth of Massachusetts, 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 Note Indenture and no provision of this Class
A-[ ] Note or of the Note Indenture shall alter or impair the obligation of the
Note Issuer, which is absolute and unconditional, to pay the principal of and
interest on this Class A-[ ] Note at the times, place, and rate, and in the coin
or currency herein prescribed.
The Holder of this Class A-[ ] Note by the acceptance hereof agrees that,
notwithstanding any provision of the Note Indenture to the contrary, the Holder
shall have no recourse against the Note Issuer, but shall look only to the
Collateral, with respect to any amounts due to the Holder under this Class A-[ ]
Note.
B-7
<PAGE> 85
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
_________________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ___________________________________________________________________________
________________________________________________________________________________
(name and address of assignee)
the within Class A-[ ] Note and all rights thereunder, and hereby irrevocably
constitutes and appoints __________________, attorney, to transfer said Class
A-[ ] Note on the books kept for registration thereof, with full power of
substitution in the premises.
Dated:
------------------------- -----------------------------------
Signature Guaranteed:
- ---------------------------------------- -----------------------------------
- ----------------------------
* NOTE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Class A-[ ] Note
in every particular, without alteration, enlargement or any change
whatsoever.
B-8
<PAGE> 1
Exhibit 4.2
================================================================================
MASSACHUSETTS RRB SPECIAL PURPOSE TRUST BEC-1,
AS CERTIFICATE ISSUER
THE BANK OF NEW YORK (DELAWARE),
AS DELAWARE TRUSTEE
AND
THE BANK OF NEW YORK,
AS CERTIFICATE TRUSTEE
----------------------------
CERTIFICATE INDENTURE
DATED AS OF [ ], 1999
----------------------------
$ [ ]
MASSACHUSETTS RRB SPECIAL PURPOSE TRUST BEC-1
RATE REDUCTION CERTIFICATES
================================================================================
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
ARTICLE I Definitions.............................................................................................2
Section 1.01. Definitions.........................................................................................2
Section 1.02. Compliance Certificates and Opinions...............................................................10
Section 1.03. Form of Documents Delivered to Certificate Trustee.................................................11
Section 1.04. Acts of Certificateholders.........................................................................12
ARTICLE II The Certificates......................................................................................13
Section 2.01. Terms of the Certificates..........................................................................13
Section 2.02. Issuance of Certificates...........................................................................13
Section 2.03. Form, Denomination and Execution of Certificates...................................................15
Section 2.04. Authentication of Certificates.....................................................................16
Section 2.05. Temporary Certificates.............................................................................16
Section 2.06. Registration of Transfer and Exchange of Certificates..............................................17
Section 2.07. Certificateholders' Lists and Reports by Certificate Trustee.......................................17
Section 2.08. Mutilated, Destroyed, Lost or Stolen Certificates..................................................19
Section 2.09. Persons Deemed Owners..............................................................................19
Section 2.10. Cancellation.......................................................................................19
Section 2.11. Limitation of Liability for Payments...............................................................19
Section 2.12. Book-Entry and Definitive Certificates.............................................................20
Section 2.13. Tax Treatment......................................................................................21
ARTICLE III Covenants............................................................................................22
Section 3.01. Compliance with Declaration of Trust...............................................................22
Section 3.02. No Additional Certificates.........................................................................22
ARTICLE IV Distributions; Statements to Certificateholders.......................................................22
Section 4.01. Certificate Accounts...............................................................................22
Section 4.02. Distributions from Certificate Accounts............................................................23
Section 4.03. Statements to Certificateholders...................................................................25
Section 4.04. Investment of Special Payment Moneys...............................................................25
Section 4.05. Reduction in Principal.............................................................................26
ARTICLE V Defaults...............................................................................................26
Section 5.01. Events of Default..................................................................................26
Section 5.02. Incidents of Sale of Notes.........................................................................27
Section 5.03. Judicial Proceedings Instituted by Certificate Trustee; Certificate Trustee
May Bring Suit...............................................................................28
Section 5.04. Control by Certificateholders......................................................................28
Section 5.05. Waiver of Past Defaults............................................................................28
Section 5.06. Right of Certificateholders To Receive Payments Not To Be Impaired.................................29
Section 5.07. Certificateholders May Not Bring Suit Except Under Certain Conditions..............................29
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 5.08. Remedies Cumulative................................................................................30
ARTICLE VI The Certificate Trustee...............................................................................30
Section 6.01. Notice of Defaults.................................................................................30
Section 6.02. Certain Rights of Certificate Trustee..............................................................30
Section 6.03. Not Responsible for Recitals or Issuance of Certificates...........................................32
Section 6.04. May Hold Certificates..............................................................................32
Section 6.05. Money Held in Trust................................................................................32
Section 6.06. Compensation and Reimbursement; Indemnification....................................................33
Section 6.07. Corporate Certificate Trustee Required; Eligibility................................................33
Section 6.08. Resignation and Removal; Appointment of Successor..................................................34
Section 6.09. Acceptance of Appointment by Successor.............................................................36
Section 6.10. Merger, Conversion, Consolidation or Succession to Business........................................36
Section 6.11. Maintenance of Agencies............................................................................36
Section 6.12. Money for Certificate Payments To Be Held in Trust.................................................38
Section 6.13. Registration of Notes in Certificate Trustee's Name................................................38
Section 6.14. Representations and Warranties of Certificate Trustee..............................................39
Section 6.15. Withholding Taxes; Information Reporting...........................................................39
ARTICLE VII Supplemental Certificate Indentures..................................................................39
Section 7.01. Supplemental Certificate Indentures Without Consent of Certificateholders..........................39
Section 7.02. Supplemental Certificate Indentures With Consent of Certificateholders.............................40
Section 7.03. Documents Affecting Immunity or Indemnity..........................................................41
Section 7.04. Execution of Supplemental Certificate Indentures...................................................41
Section 7.05. Effect of Supplemental Certificate Indentures......................................................41
Section 7.06. Conformity with Trust Indenture Act................................................................41
Section 7.07. Reference in Certificates to Supplemental Certificate Indentures...................................42
ARTICLE VIII Amendments and Supplements to Notes, Note Indenture and Other Basic
Documents....................................................................................42
Section 8.01. Amendments and Supplements to Notes, Note Indenture and Other Basic
Documents....................................................................................42
ARTICLE IX Satisfaction and Discharge............................................................................42
Section 9.01. Satisfaction and Discharge of Certificate Indenture................................................42
ARTICLE X Miscellaneous Provisions...............................................................................44
Section 10.01. Commonwealth Pledge; Certificates and Notes Not Obligation of The
Commonwealth of Massachusetts, Agencies or Seller............................................44
Section 10.02. Limitation on Rights of Certificateholders........................................................45
Section 10.03. No Recourse to Certificate Issuer.................................................................45
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 10.04. Certificates Nonassessable and Fully Paid.........................................................45
Section 10.05. Notices...........................................................................................45
Section 10.06. Governing Law.....................................................................................48
Section 10.07. Severability of Provisions........................................................................48
Section 10.08. Conflict With Trust Indenture Act.................................................................48
Section 10.09. Effect of Headings and Table of Contents..........................................................49
Section 10.10. Successors and Assigns; Delegation................................................................49
Section 10.11. Benefits of Certificate Indenture.................................................................49
Section 10.12. Legal Holidays....................................................................................49
Section 10.13. Counterparts......................................................................................49
Section 10.14. The Delaware Trustee..............................................................................49
SIGNATURE PAGE..................................................................................................S-1
EXHIBIT A--FORM OF CERTIFICATE..................................................................................A-1
</TABLE>
iii
<PAGE> 5
CERTIFICATE INDENTURE, dated as of [ ], 1999, between MASSACHUSETTS
RRB SPECIAL PURPOSE TRUST BEC-1, a Delaware business trust (the "Certificate
Issuer") formed under the Declaration of Trust, THE BANK OF NEW YORK (DELAWARE),
as Delaware trustee (the "Delaware Trustee"), and THE BANK OF NEW YORK, as
certificate trustee (the "Certificate Trustee").
RECITALS
The Note Issuer intends to issue its BEC Funding LLC Notes (the "Notes")
with an aggregate principal amount of $[ ], consisting of Classes
A-[ ] through A-[ ], pursuant to the Note Indenture. In order to finance the
purchase of the Notes pursuant to the Note Purchase Agreement relating to the
Notes, the Certificate Issuer shall issue, pursuant to this Certificate
Indenture, its Massachusetts RRB Special Purpose Trust BEC-1 Rate Reduction
Certificates (the "Certificates") with an aggregate principal amount of
$[ ], consisting of Classes A-[ ] through A-[ ], each of which shall
represent a fractional undivided beneficial interest in the corresponding Class
of Notes and the proceeds thereof.
The Certificate Issuer has duly authorized the execution and delivery of
this Certificate Indenture to provide the terms and conditions for the issuance
of the Certificates. The Certificate Issuer is entering into this Certificate
Indenture, and the Certificate Trustee is accepting the trusts created hereby,
for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged.
GRANTING CLAUSE
The Certificate Issuer hereby grants to the Certificate Trustee on the
Issuance Date, as Certificate Trustee for the benefit of the Holders of the
Certificates, all of the Certificate Issuer's right, title and interest in and
to the Notes acquired pursuant to the Note Purchase Agreement, together with all
other property constituting the Trust Property relating to each such Class of
Notes, all as provided in this Certificate Indenture.
The foregoing Grant is made in trust to secure the payment of principal of
and interest on, and any other amounts owing in respect of, the Certificates,
and to secure compliance with the provisions of this Certificate Indenture with
respect to the Certificates, all as provided in this Certificate Indenture. This
Certificate Indenture constitutes a security agreement within the meaning of the
UCC to the extent that, under Massachusetts law, the provisions of the UCC are
applicable hereto.
The Certificate Trustee, as trustee on behalf of the Holders of the
Certificates, acknowledges such Grant, accepts the trusts hereunder in
accordance with the provisions hereof and agrees to perform its duties herein
required.
AND IT IS HEREBY COVENANTED, DECLARED AND AGREED between the parties hereto
that all Certificates are to be issued, countersigned and delivered and that all
of the Trust Property is to be held and applied, subject to the further
covenants, conditions, releases, uses and trusts hereinafter set forth, and the
Certificate Issuer, for itself and any successor, does
<PAGE> 6
hereby covenant and agree to and with the Certificate Trustee and its successors
in said trust, for the benefit of the Holders, as follows:
ARTICLE I
DEFINITIONS
-----------
Section 1.01. DEFINITIONS.
(a) For all purposes of this Certificate Indenture, except as otherwise
expressly provided or unless the context otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting principles
as in effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation;
(v) words in the singular include the plural and words in the
plural include the singular;
(vi) the words "herein," "hereof," "hereunder" and other words of
similar import refer to this Certificate Indenture as a whole and not to
any particular Article, Section or other subdivision;
(vii) all references in this Certificate Indenture to designated
"Articles," "Sections" and other subdivisions are to the designated
Articles, Sections and other subdivisions of this Certificate Indenture;
and
(viii) Whenever this Certificate Indenture refers to a provision of
the Trust Indenture Act, the provision is incorporated by reference in and
made a part of this Certificate Indenture. The following Trust Indenture
Act terms used in this Certificate Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Certificates.
"indenture security holder" means a Certificateholder.
"indenture to be qualified" means this Certificate Indenture.
"indenture trustee" or "institutional trustee" means the Certificate
Trustee.
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<PAGE> 7
"obligor" on the indenture securities means the Certificate Issuer and
any other obligor on the indenture securities.
All other Trust Indenture Act terms used in this Certificate Indenture that
are defined by the Trust Indenture Act, defined by Trust Indenture Act reference
to another statute or defined by Commission rule have the meaning assigned to
them by such definitions.
"ACT," when used with respect to any Certificateholder, has the meaning
specified in Section 1.04.
"AGENCIES" means collectively the Massachusetts Development Finance Agency
and the Massachusetts Health and Educational Facilities Authority.
"AUTHENTICATION AGENT" means the authentication agent appointed pursuant to
Section 6.11.
"AUTHORIZED AGENT" means any Paying Agent, Authentication Agent or
Certificate Registrar.
"AUTHORIZED REPRESENTATIVE" means, with respect to any entity, any person
who is authorized to act for such entity in matters relating to such entity and
who is identified on the list of Authorized Representatives delivered by such
entity to the Certificate Trustee on the Issuance Date (as such list may be
modified or supplemented from time to time thereafter).
"AVOIDABLE TAX" has the meaning set forth in Section 6.08(f).
"BOOK-ENTRY CERTIFICATES" means, with respect to any Certificate, a
beneficial interest in such Certificate, ownership and transfers of which shall
be made through book entries by a Clearing Agency as described in Section 2.12.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a day on
which banking institutions or trust companies in New York, New York, Boston,
Massachusetts or Wilmington, Delaware are authorized or obligated by law,
regulation or executive order to remain closed.
"BUSINESS TRUST STATUTE" shall mean Chapter 38 of Title 12 of the Delaware
Code, 12 Del.C., ss. 3801 ET SEQ., as the same may be amended from time to time
and any successor statute.
"CERTIFICATE ACCOUNT" means, with respect to any Class of Certificates, the
account or accounts created and maintained with respect to such Class of
Certificates pursuant to Section 4.01(a).
"CERTIFICATE INDENTURE" means this instrument as originally executed and,
as from time to time supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
as so supplemented or amended or both, and shall include the forms and terms of
the Certificates established hereunder.
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<PAGE> 8
"CERTIFICATE OWNER" means the Person who owns a Book-Entry Certificate.
"CERTIFICATE REGISTER" has the meaning set forth in Section 2.06.
"CERTIFICATE REGISTRAR" means, initially, the Certificate Trustee, pursuant
to Section 2.06, and any successor registrar that meets the eligibility
standards specified in Section 6.11(b).
"CERTIFICATE TRUSTEE" means The Bank of New York, as Certificate Trustee
under this Certificate Indenture, and its successors in interest, and any
successor Certificate Trustee appointed as provided herein.
"CERTIFICATE TRUSTEE EXPENSES" has the meaning set forth in Section 6.06.
"CERTIFICATE TRUSTEE INDEMNIFIED PERSONS" has the meaning set forth in
Section 6.06.
"CERTIFICATEHOLDER" or "HOLDER" means the Person in whose name a
Certificate is registered on the Certificate Register.
"CERTIFICATES" has the meaning set forth in Section 2.01(a).
"CLASS" means any one of the classes of Certificates; and, with respect to
the Notes, any one of the classes of Notes.
"CLEARING AGENCY" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act.
"CLEARING AGENCY PARTICIPANT" means a broker, dealer, bank, other financial
institution or other Person for whom from time to time a Clearing Agency effects
book entry transfers and pledges of securities deposited with the Clearing
Agency.
"COMMONWEALTH PLEDGE" has the meaning set forth in Section 10.01(a).
"CORPORATE TRUST OFFICE" means the principal office of the Certificate
Trustee at which at any particular time its corporate trust business shall be
administered, which office at the date of the execution of this Certificate
Indenture is located at 101 Barclay Street, Floor 12 East, New York, New York
10286, Attention: Asset Backed Finance Unit, or at such other address as the
Certificate Trustee may designate from time to time by notice to the
Certificateholders and the Certificate Issuer, or the principal corporate trust
office of any successor Certificate Trustee (the address of which the successor
Certificate Trustee will notify the Certificateholders and the Certificate
Issuer).
"DECLARATION OF TRUST" means the Declaration of Trust, relating to the
creation of the Certificate Issuer, dated as of [ ], 1999 by The Bank of
New York (Delaware), as Delaware Trustee, and the Massachusetts Development
Finance Agency and the Massachusetts Health and Educational Facilities
Authority, acting jointly as ettlors thereunder pursuant to the Statute, as the
same may be amended, supplemented or otherwise modified from time to time.
"DEFINITIVE CERTIFICATES" has the meaning set forth in Section 2.12(a).
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<PAGE> 9
"DISTRIBUTION DATE" means, with respect to any Class of Certificates, a
Payment Date with respect to the Notes.
"DTC AGREEMENT" means the agreement between the Certificate Trustee, on
behalf of the Certificate Issuer, and The Depository Trust Company, as the
initial Clearing Agency, dated as of [ ], 1999, relating to the
Certificates, as the same may be amended and supplemented from time to time.
"ELIGIBLE DEPOSIT ACCOUNT" means either (a) a segregated trust account with
an Eligible Institution or (b) a segregated trust account with the corporate
trust department of a depository institution organized under the laws of the
United States of America or any one of the states thereof or the District of
Columbia (or any domestic branch of a foreign bank), having corporate trust
powers and acting as trustee for funds deposited in such account, so long as any
of the securities of such depository institution shall have a credit rating from
each Rating Agency in one of its generic rating categories which signifies
investment grade.
"ELIGIBLE INSTITUTION" means (a) the corporate trust department of the
Certificate Trustee; PROVIDED, HOWEVER, that an account with the Certificate
Trustee will only be an Eligible Deposit Account if it is a segregated trust
account or (b) a depository institution organized under the laws of the United
States of America, any State or the District of Columbia (or any domestic branch
of a foreign bank), which (i) has either (A) a long-term unsecured debt rating
of AA by Standard & Poor's and Aa2 by Moody's or (B) a certificate of deposit
rating of A-1+ by Standard & Poor's and P-1 by Moody's, or any other long-term,
short-term or certificate of deposit rating acceptable to the Rating Agencies
and (ii) whose deposits are insured by the FDIC. If so qualified under clause
(b) above, the Certificate Trustee may be considered an Eligible Institution for
the purposes of clause (a) of the definition of Eligible Deposit Account.
"ELIGIBLE INVESTMENTS" means instruments or investment property that
evidence:
(i) direct obligations of, or obligations fully and
unconditionally guaranteed as to timely payment by, the United States of
America;
(ii) demand deposits, time deposits, certificates of deposit or
bankers' acceptances of depository institutions meeting the requirements of
clause (b) of the definition of Eligible Institutions;
(iii) commercial paper (other than commercial paper of the Seller)
having, at the time of the investment or contractual commitment to invest
therein, a rating from each of the Rating Agencies from which a rating is
available in the highest investment category granted thereby;
(iv) investments in money market funds having a rating from each
of the Rating Agencies from which a rating is available in the highest
investment category granted thereby (including funds for which the
Certificate Trustee or any of its Affiliates is investment manager or
advisor);
(v) repurchase obligations with respect to any security that is
a direct obligation of, or fully guaranteed by, the United States of
America or any agency or
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<PAGE> 10
instrumentality thereof the obligations of which are backed by the full
faith and credit of the United States of America, in either case entered
into with depository institutions meeting the requirements of clause (b) of
the definition of Eligible Institution; and
(vi) any other investment permitted by each of the Rating
Agencies,
in each case which mature on or before the Business Day preceding the next
Payment Date.
"EVENT OF DEFAULT" means, with respect to any Class of Certificates, (i) a
Note Event of Default with respect to the corresponding Class of Notes, or (ii)
a breach by The Commonwealth of Massachusetts of the Commonwealth Pledge
described in Section 10.01(a).
"FDIC" means the Federal Deposit Insurance Corporation or any successor.
"FEE AND INDEMNITY AGREEMENT" means the fee and indemnity agreement dated
as of [ ], 1999, among the Note Issuer, the Delaware Trustee, the
Certificate Trustee and the Agencies.
"FINAL TERMINATION DATE" means, with respect to any Class of Certificates,
the Final Maturity Date of the related Class of Notes.
"INTEREST RATE" has the meaning set forth in Section 2.01(b).
"MINIMUM DENOMINATION" means $1,000 or any integral multiple thereof.
"NOTE EVENT OF DEFAULT" means, with respect to any Class of Notes, any
Event of Default (as such term is defined in the Note Indenture) with respect to
such Class of Notes.
"NOTE INDENTURE" means the Note Indenture dated as of [ ], 1999,
between the Note Issuer and the Note Trustee, as amended and supplemented from
time to time.
"NOTE ISSUER" means BEC Funding LLC, a Delaware limited liability company,
and its successors in interest.
"NOTE PURCHASE AGREEMENT" means the Note Purchase Agreement dated as of
[ ], 1999, between the Note Issuer and the Certificate Issuer, as the
same may be amended or supplemented from time to time.
"NOTE TRUSTEE" means the Person acting as Note Trustee under the Note
Indenture.
"NOTES" has the meaning set forth in the recitals to this Certificate
Indenture.
"OFFICER'S CERTIFICATE" means a certificate signed by any Authorized
Representative of the Certificate Issuer, under the circumstances described in,
and otherwise complying with, the applicable requirements of Section 1.02, and
delivered to the Certificate Trustee.
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<PAGE> 11
"OPINION OF COUNSEL" means one or more written opinions of counsel who may,
except as otherwise expressly provided in this Certificate Indenture, be an
employee of or counsel to the Certificate Issuer and who shall be reasonably
satisfactory to the Certificate Trustee, and which opinion or opinions shall be
addressed to the Certificate Trustee, as trustee, shall comply with any
applicable requirements of Section 1.02, and shall be in form and substance
reasonably satisfactory to the Certificate Trustee.
"ORIGINAL PRINCIPAL AMOUNT" means, with respect to any Certificate, the
amount set forth as such on the face of such Certificate on the date of its
issuance.
"OUTSTANDING" means, as of the date of determination, all Certificates
theretofore authenticated and delivered under this Certificate Indenture except:
(i) Certificates theretofore cancelled by the Certificate
Registrar or delivered to the Certificate Registrar for cancellation;
(ii) Certificates or portions thereof the payment for which money
in the necessary amount has been theretofore deposited with the Certificate
Trustee or any Paying Agent in trust for the Holders of such Certificates
(PROVIDED, HOWEVER, that if such Certificates are to be redeemed, notice of
such redemption has been duly given pursuant to this Certificate Indenture
or provision therefor, reasonably satisfactory to the Certificate Trustee,
has been made); and
(iii) Certificates in exchange for or in lieu of other
Certificates that have been authenticated and delivered pursuant to this
Certificate Indenture unless proof satisfactory to the Certificate Trustee
is presented that any such Certificates are held by a bona fide purchaser;
PROVIDED, HOWEVER, that in determining whether the Holders of the requisite
Outstanding Amount of the Certificates or any Class thereof have given any
request, demand, authorization, direction, notice, consent or waiver hereunder
or under any Basic Document, Certificates owned by the Note Issuer, the
Certificate Issuer, any other obligor upon the Certificates, the Seller, or any
Affiliate of any of the foregoing Persons shall be disregarded and deemed not to
be Outstanding, except that, in determining whether the Certificate Trustee
shall be protected in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Certificates that a Responsible
Officer of the Certificate Trustee actually knows to be so owned shall be so
disregarded. Certificates so owned that have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction of the
Certificate Trustee the pledgee's right so to act with respect to such
Certificates and that the pledgee is not the Note Issuer, any other obligor upon
the Certificates, the Certificate Issuer, the Seller, or any Affiliate of any of
the foregoing Persons.
"OUTSTANDING AMOUNT" means the aggregate principal amount of all
Certificates, or, if the context requires, all Certificates of a Class,
Outstanding at the date of determination.
"PAYING AGENT" means the Certificate Trustee or any other Person that meets
the eligibility standards specified in Section 6.11(b) and is authorized by the
Certificate Issuer (with
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<PAGE> 12
the prior written approval of the Note Issuer) to make distributions of
principal of or interest with respect to the Certificates.
"PAYMENT" means, with respect to any Class of Notes, any payment (other
than a Special Payment but including any Redemption Payment) of principal of or
interest thereon.
"PAYMENT DATE" means, with respect to any Class of Notes, the date or dates
specified as Payment Dates therefor in the Note Indenture.
"PERSON" means any individual, corporation, limited liability company,
estate, partnership, joint venture, association, joint stock company, trust
(including any beneficiary thereof), unincorporated organization or government
or any agency or political subdivision thereof.
"RECORD DATE" means, with respect to any Distribution Date, the Business
Day immediately preceding such Distribution Date or, if Definitive Certificates
are issued, the last day of the calendar month preceding the calendar month in
which such Distribution Date occurs.
"REDEMPTION PAYMENT" means, with respect to any Class of Notes, any payment
of principal of and interest on the Notes of such Class due from the Note Issuer
upon the early redemption of such Class of Notes, other than any such payment
due by reason of the occurrence of a Note Event of Default with respect to such
Class of Notes.
"REQUEST" means a written request by the Certificate Issuer setting forth
the subject matter of the request accompanied by an Officer's Certificate and an
Opinion of Counsel as provided in Section 1.02.
"RESPONSIBLE OFFICER" means any officer within the Corporate Trust Office,
including any Managing Director, Vice President, Assistant Vice President,
Secretary, Assistant Secretary or Assistant Treasurer or any other officer of
the Certificate Trustee customarily performing functions similar to those
performed by any of the above designated officers and also, with respect to a
particular matter, any other officer to whom such matter is referred because of
such officer's knowledge and familiarity with the particular subject.
"SALE AGREEMENT" means the Transition Property Purchase and Sale Agreement
dated as of [ ], 1999, between the Seller and the Note Issuer, as amended
and supplemented from time to time.
"SCHEDULED FINAL DISTRIBUTION DATE" means, with respect to any Class of
Certificates, the Scheduled Maturity Date of the related Class of Notes.
"SECRETARY OF STATE" shall mean the Secretary of State of the State of
Delaware.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SELLER" means Boston Edison Company, a Massachusetts corporation, and its
permitted successors and assigns under the Sale Agreement.
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<PAGE> 13
"SERVICER" means Boston Edison Company, a Massachusetts corporation, in its
capacity as servicer under the Servicing Agreement, including its successors in
interest, until a successor Person shall have become the servicer pursuant to
the Servicing Agreement, and thereafter "Servicer" shall mean such successor
Person.
"SERVICING AGREEMENT" means the Transition Property Servicing Agreement
dated as of [ ], 1999, between the Servicer and the Note Issuer, as
amended and supplemented from time to time.
"SPECIAL DISTRIBUTION DATE" means, with respect to the distribution of any
Special Payment with respect to any Class of Notes, the later of (i) the date
receipt of such Special Payment is confirmed by the Certificate Trustee and (ii)
the date that is the earlier of (A) if the Certificate Trustee shall have
received such Special Payment without prior notice thereof, 20 days after such
receipt is confirmed or (B) unless such Special Payment represents the proceeds
of a sale of such Notes by the Certificate Trustee (in which event the Special
Distribution Date for such proceeds shall be the earliest date for which it is
practicable for the Certificate Trustee to give the 20-day notice required by
Section 4.02(d)), the date that is 20 days after the Certificate Trustee
receives notice from the Note Issuer of the anticipated payment of such Special
Payment; PROVIDED, HOWEVER, that in the event of the repurchase of the
Transition Property by the Seller, the Special Distribution Date shall mean a
date not later than five Business Days after receipt of such proceeds.
"SPECIAL PAYMENT" means, with respect to any Class of Notes, (i) any
payment of principal of or interest on (including any interest accruing upon
default), or any other amount in respect of, the Notes of such Class that is not
actually paid within five days after the Payment Date applicable thereto or (ii)
any proceeds from the sale of such Notes by the Certificate Trustee pursuant to
Article V hereof or the repurchase of the Transition Property by the Seller
pursuant to Article V of the Sale Agreement.
"SPECIAL RECORD DATE" means, with respect to any Special Distribution Date,
the close of business on the 15th day (whether or not a Business Day) preceding
such Special Distribution Date.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939 as in force on
the date hereof, unless otherwise specifically provided.
"TRUST PROPERTY" means, with respect to any Class of Certificates, the
Class of Notes corresponding to such Class of Certificates held as the property
of the Certificate Issuer and all monies at any time paid thereon and all monies
due and to become due thereunder, all rights of the Certificate Trustee or the
Certificate Issuer, as holder of such Class of Notes, in and to the Collateral
and any proceeds thereof, funds from time to time deposited in the Certificate
Account for such Class of Certificates and any proceeds from the sale by the
Certificate Trustee pursuant to Article V hereof of Notes of such Class.
"UNDERWRITERS" means the underwriters who purchase Certificates of any
Class from the Certificate Issuer and sell such Certificates in a public
offering.
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<PAGE> 14
(a) Except as otherwise specified herein or as the context may otherwise
require, the following terms have the respective meanings set forth in the Note
Indenture as in effect on the Issuance Date for all purposes of this Certificate
Indenture.
Section of
Term Note Indenture
------------------------------------------------ --------------
Administrator................................... 1.01(a)
Affiliate....................................... 1.01(a)
Basic Documents................................. 1.01(a)
Capital Subaccount.............................. 1.01(a)
Code............................................ 1.01(a)
Collateral...................................... 1.01(a)
DTE............................................. 1.01(a)
Duff & Phelps................................... 1.01(a)
Exchange Act.................................... 1.01(a)
Expected Amortization Schedule.................. 1.01(b)
Final Maturity Date............................. 1.01(a)
Financing Order................................. 1.01(b)
Fitch........................................... 1.01(a)
Issuance Date................................... 1.01(a)
Moody's......................................... 1.01(a)
Rating Agency................................... 1.01(a)
Rating Agency Condition......................... 1.01(a)
Scheduled Maturity Date......................... 1.01(a)
Standard & Poor's............................... 1.01(a)
State........................................... 1.01(a)
Statute......................................... 1.01(a)
Transition Property............................. 1.01(b)
UCC............................................. 1.01(a)
(b) When reference is made herein to the Certificates of any Class, such
reference shall mean the Certificates of such Class.
Section 1.02. COMPLIANCE CERTIFICATES AND OPINIONS. Upon any application or
request by the Certificate Issuer to the Certificate Trustee to take any action
under any provision of this Certificate Indenture, the Certificate Issuer shall
furnish to the Certificate Trustee an Officer's Certificate stating that, in the
opinion of the signer thereof, all conditions precedent, if any, provided for in
this Certificate Indenture relating to the proposed action have been complied
with and, if requested by the Certificate Trustee, an Opinion of Counsel stating
that in the opinion of such counsel all such conditions precedent, if any, have
been complied with, except that in the case of any such application or request
as to which the furnishing of such documents is specifically required by any
provision of this Certificate Indenture relating to such particular application
or request, no additional certificate or opinion need be furnished. Any such
application or request by the Certificate Issuer to the Certificate Trustee
shall also be accompanied by evidence reasonably satisfactory to the Certificate
Trustee that the Note Issuer has given its prior written approval of such
application or request.
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<PAGE> 15
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Certificate Indenture shall include:
(a) a statement that each signatory of such certificate or opinion
has read or caused to be read such covenant or condition and the
definitions herein relating thereto;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of each such signatory, such
signatory has made such examination or investigation as is necessary to
enable such signatory to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such signatory,
such condition or covenant has been complied with.
Section 1.03. FORM OF DOCUMENTS DELIVERED TO CERTIFICATE TRUSTEE. In any
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may certify
or give an opinion with respect to some matters and one or more other such
Persons as to other matters, and any such Person may certify or give an opinion
as to such matters in one or several documents.
Any certificate or opinion of an Authorized Representative of the
Certificate Issuer may be based, insofar as it relates to legal matters, upon a
certificate or opinion of, or representations by, counsel, unless such officer
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to the matters upon which his
certificate or opinion is based are erroneous. Any such certificate of an
Authorized Representative or Opinion of Counsel may be based, insofar as it
relates to factual matters, upon a certificate or opinion of, or representations
by, an officer or officers of the Servicer, the Seller, the Note Issuer or the
Administrator, stating that the information with respect to such factual matters
is in the possession of the Servicer, the Seller, the Note Issuer or the
Administrator, as the case may be, unless such officer or counsel knows, or in
the exercise of reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous.
Whenever in this Certificate Indenture, in connection with any application
or certificate or report to the Certificate Trustee, it is provided that the
Certificate Issuer shall deliver any document as a condition of the granting of
such application, or as evidence of the Certificate Issuer's compliance with any
term hereof, it is intended that the truth and accuracy, at the time of the
granting of such application or at the effective date of such certificate or
report (as the case may be), of the facts and opinions stated in such document
shall in such case be conditions precedent to the right of the Certificate
Issuer to have such application granted or to the sufficiency of such
certificate or report. The foregoing shall not, however, be construed to affect
the Certificate Trustee's right to rely upon the truth and accuracy of any
statement or opinion contained in any such document as provided in Article VI.
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<PAGE> 16
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Certificate Indenture, they may, but need not, be
consolidated and form one instrument.
Section 1.04. ACTS OF CERTIFICATEHOLDERS.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Certificate Indenture to be given or taken by
Certificateholders may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such Certificateholders in person or by
their agents duly appointed in writing; and except as herein otherwise expressly
provided such request, demand, authorization, direction, notice, consent, waiver
or other action shall become effective when such instrument or instruments are
delivered to the Certificate Trustee, and, where it is hereby expressly
required, to the Certificate Issuer and the Note Trustee. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Certificateholders signing such
instrument or instruments. Proof of execution of any such instrument or of a
writing appointing any such agent shall be sufficient for any purpose of this
Certificate Indenture and (subject to Article VI) conclusive in favor of the
Certificate Trustee, the Certificate Issuer and the Note Trustee, if made in the
manner provided in this Section.
(b) The fact and date of the execution by any Person of any such instrument
or writing may be proved in any manner that the Certificate Trustee deems
sufficient.
(c) The ownership of Certificates shall be proved by the Certificate
Register.
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Certificates shall bind the Holder of every
Certificate issued upon the registration thereof or in exchange therefor or in
lieu thereof, in respect of anything done, omitted or suffered to be done by the
Certificate Trustee, the Certificate Issuer or the Note Trustee in reliance
thereon, whether or not notation of such action is made upon such Certificate.
(e) The Certificate Issuer may at its option by delivery of an Officer's
Certificate to the Certificate Trustee set a record date to determine the
Holders of any Class of Certificates entitled to give any consent, request,
demand, authorization, direction, notice, waiver or other Act. Notwithstanding
316(c) of the Trust Indenture Act, such record date shall be the record date
specified in such Officer's Certificate, which shall be the date not more than
30 days prior to the first solicitation of Certificateholders in connection
therewith. If such a record date is fixed, such consent, request, demand,
authorization, direction, notice, waiver or other Act may be given before or
after such record date, but only the Holders of Certificates of the applicable
Class at the close of business on such record date shall be deemed to be
Certificateholders of such Class for the purposes of determining whether Holders
of the requisite aggregate Outstanding Amount of Certificates of such Class have
authorized or agreed or consented to such consent, request, demand,
authorization, direction, notice, waiver or other Act, and for that purpose the
aggregate Outstanding Amount of Certificates of such Class shall be computed as
of such record date; PROVIDED, HOWEVER, that no such consent, request, demand,
authorization, direction, notice, waiver or other Act by the Holders of
Certificates of such Class on such record date shall be
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<PAGE> 17
deemed effective unless it shall become effective pursuant to the provisions of
this Certificate Indenture not later than one year after the record date.
(f) Except as otherwise provided in the definition of Outstanding,
Certificates of any Class owned by or pledged to any Person shall have an equal
and proportional benefit under the provisions of this Certificate Indenture,
without preference, priority or distinction as among all of the Certificates of
that Class.
ARTICLE II
THE CERTIFICATES
----------------
Section 2.01. TERMS OF THE CERTIFICATES.
(a) AUTHORIZATION; DESIGNATION. The issuance of the Certificates is hereby
authorized and the Certificates shall be designated generally as the
Massachusetts RRB Special Purpose Trust BEC-1 Rate Reduction Certificates (the
"Certificates"), and further designated as Classes A-[ ] through A-[ ]. Each
such Class shall be in an aggregate principal amount equal to the corresponding
Class of Notes as set forth in the Note Purchase Agreement.
(b) INITIAL PRINCIPAL AMOUNT; CERTIFICATE INTEREST RATE; SCHEDULED FINAL
DISTRIBUTION DATE; FINAL TERMINATION DATE. The Certificates of each Class shall
have the initial principal amount, bear interest at the rates per annum and
shall have Scheduled Final Distribution Dates and Final Termination Dates as set
forth below:
<TABLE>
<CAPTION>
Initial Principal Certificate Scheduled Final Final Termination
Class Amount Interest Rate Distribution Date Date
----- ----------------- ------------- ----------------- -----------------
<S> <C> <C>
A-1 $ %
...
</TABLE>
The Interest Rate of the Certificates shall be computed on the basis of a
360-day year of twelve 30-day months.
Section 2.02. ISSUANCE OF CERTIFICATES. On the Issuance Date, the
Certificate Issuer, subject to the provisions of this Certificate Indenture and
the Note Purchase Agreement, shall issue, and the Delaware Trustee shall execute
on behalf of the Certificate Issuer and the Certificate Trustee shall
authenticate and deliver, in fully registered form only, the Certificates of the
Class corresponding to the Class of Notes issued on such Issuance Date, all in
accordance with the Note Purchase Agreement. Each Certificate represents a
fractional undivided beneficial interest in a corresponding Class of Notes and
the proceeds thereof. Prior to the execution and authentication of the
Certificates of any Class, the Certificate Trustee shall have received the
following:
(a) The Class of Notes, duly executed by the Note Issuer and authenticated
by the Note Trustee, corresponding to the Class of Certificates to be issued;
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<PAGE> 18
(b) A certificate of an Authorized Representative of the Note Issuer to the
effect that all conditions required to be satisfied under Section 2.10 of the
Note Indenture for the issuance of such Class of Notes and all conditions
required to be satisfied under the Note Purchase Agreement for the purchase of
the Notes by the Certificate Issuer have been satisfied, together with executed
copies of all documents, certificates, opinions, orders or approvals
establishing satisfaction of such conditions;
(c) An order of an Authorized Representative of the Certificate Issuer (i)
directing the Certificate Trustee to execute this Certificate Indenture to be
executed in connection with the Certificates to be issued hereunder, (ii)
directing the Delaware Trustee on behalf of the Certificate Issuer to execute
the Note Purchase Agreement and (iii) directing the Delaware Trustee to execute
on behalf of the Certificate Issuer, and the Certificate Trustee to
authenticate, as Authentication Agent, and deliver the Certificates to the
Underwriters named in said order for the purchase price specified therein and
directing the application of the proceeds thereof;
(d) An Opinion of Counsel, portions of which may be delivered by counsel to
the Certificate Issuer and portions of which may be delivered by counsel to the
Certificate Trustee, dated the Issuance Date in each case subject to the
customary exceptions, qualifications and assumptions contained therein (which
may include, for the purpose of the Issuance Date, the assumption that the
Financing Order has been duly authorized by the DTE and is in full force and
effect), to the effect that:
(i) this Certificate Indenture has been duly authorized,
executed and delivered by the parties hereto;
(ii) this Certificate Indenture constitutes a valid and binding
agreement of the parties hereto, enforceable in accordance with its terms
except as enforcement thereof may be subject to or limited by bankruptcy,
insolvency, moratorium, reorganization, fraudulent conveyance or other
similar laws relating to or affecting the enforcement of creditors' rights
generally and by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law),
including that the availability of specific enforcement or injunctive
relief is subject to the discretion of the court before which any such
proceeding is brought;
(iii) all instruments furnished to the Certificate Trustee as
conditions precedent to the delivery of the Certificates conform to the
requirements of this Certificate Indenture and constitute all documents
required to be delivered thereunder to authorize the Certificate Trustee to
execute, authenticate and deliver the Certificates;
(iv) the Certificates to be issued have been duly authorized and
executed and, when authenticated in accordance with the provisions of this
Certificate Indenture and delivered, will be validly issued by the
Certificate Issuer and entitled to the benefits of this Certificate
Indenture;
(v) the Note Purchase Agreement has been duly executed and
delivered by the Certificate Issuer and constitutes the legal, valid and
binding agreement of the Certificate Issuer, enforceable against the
Certificate Issuer in accordance with its terms, except as
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such enforceability may be subject to bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and other laws relating to
or affecting the rights of creditors generally and general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law);
(vi) the Certificate Issuer is a duly organized and validly
existing business trust under the Business Trust Statute and is in good
standing;
(vii) this Certificate Indenture has been duly qualified under the
Trust Indenture Act or no such qualification is necessary;
(viii) the Certificate Issuer constitutes a "special purpose trust"
and a "financing entity" under Section 1H(a) of the Statute, and the
Certificates constitute "electric rate reduction bonds" under Section 1H(a)
of the Statute and the Holders of the Certificates are entitled to the
rights and benefits thereunder;
(ix) the issuance of the Class of Certificates shall not
adversely affect the status of the Certificate Issuer as a grantor trust
not taxable as a corporation for federal income tax purposes; and
(x) such other matters as the Certificate Trustee may reasonably
require.
(e) Sufficient funds to pay the purchase price for the related Class of
Notes, as specified in Section 1(b) of the Note Purchase Agreement; and
(f) The Rating Agency Condition shall have been satisfied with respect to
the issuance of the Class of Certificates.
Section 2.03. FORM, DENOMINATION AND EXECUTION OF CERTIFICATES. The
Certificates shall be issued in registered form without coupons and shall be
substantially in the form attached hereto as Exhibit A, with the following
filled in: (a) the designation of the Classes thereof, which shall be the same
designation as the related Class or Classes of Notes, (b) the Certificate number
or numbers thereof, (c) the date of authentication thereof, which shall be the
same as the Issuance Date of the related Class or Classes of Notes, and (d) the
Original Principal Amount thereof, which shall equal, in the aggregate, the
principal amount of the Notes; and with such omissions, variations and
insertions as are permitted by this Certificate Indenture, and may have such
letters, numbers or other marks of identification and such legends or
endorsements printed, lithographed or engraved thereon as may be required to
comply with the rules of any securities exchange on which any Class or Classes
of the Certificates may be listed or to conform to any usage in respect thereof,
or as may, consistently herewith, be prescribed by the Certificate Trustee or by
the Certificate Issuer (with the prior written approval of the Note Issuer), and
as evidenced by the execution and authentication of such Certificates.
Except as provided in Section 2.12, the definitive Certificates of each
Class shall be printed, lithographed or engraved or produced by any combination
of these methods or may be produced in any other manner permitted by the rules
of any securities exchange on which the Certificates of such Class may be
listed, as evidenced by an order by an Authorized
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Representative of the Certificate Issuer, relating to the authentication of such
Certificates by the Certificate Trustee.
The Certificates of each Class shall be issued in not less than Minimum
Denominations.
The Certificates shall be executed on behalf of the Certificate Issuer by
the Delaware Trustee by manual or facsimile signature of a Responsible Officer
of the Delaware Trustee. Certificates bearing the manual or facsimile signature
of an individual who was, at the time when such signature was affixed,
authorized to sign on behalf of the Certificate Issuer shall be validly issued
by the Certificate Issuer, notwithstanding that such individual has ceased to be
so authorized prior to the authentication and delivery of such Certificates or
did not hold such office at the date of such Certificates. No Certificate shall
be entitled to any benefit under this Certificate Indenture, or be valid for any
purpose, unless there appears on such Certificate a certificate of
authentication substantially in the form set forth in Exhibit A hereto, executed
by the Certificate Trustee (or any Authentication Agent) by manual signature,
and such certificate of authentication upon any Certificate shall be conclusive
evidence, and the only evidence, that such Certificate has been duly
authenticated and delivered hereunder. All Certificates shall be dated the date
of their authentication.
Section 2.04. AUTHENTICATION OF CERTIFICATES. The Certificate Trustee shall
duly authenticate and deliver Certificates of each Class in authorized
denominations equaling, in the aggregate for each Class of Certificates, the
aggregate Original Principal Amount of the Notes of such Class.
Section 2.05. TEMPORARY CERTIFICATES. Pending the preparation of definitive
Certificates of any Class, the Delaware Trustee on behalf of the Certificate
Issuer may execute, and the Certificate Trustee or any Authentication Agent upon
written order of the Certificate Issuer shall authenticate and deliver,
temporary Certificates of such Class that are printed, lithographed, typewritten
or otherwise produced, in any denomination, containing substantially the same
terms and provisions as set forth in Exhibit A, except for such appropriate
insertions, omissions, substitutions and other variations relating to their
temporary nature as the Certificate Issuer may determine, as evidenced by the
execution of such temporary Certificates by the Delaware Trustee on behalf of
the Certificate Issuer.
If temporary Certificates of any Class are issued, the Certificate Issuer
will cause definitive Certificates of such Class to be prepared without
unreasonable delay. After the preparation of definitive Certificates of such
Class, the temporary Certificates shall be exchangeable for definitive
Certificates of such Class upon surrender of the temporary Certificates at the
Corporate Trust Office of the Certificate Trustee, or at the office or agency of
the Certificate Trustee maintained in accordance with Section 6.11, without
charge to the Holder. Upon surrender for cancellation of any one or more
temporary Certificates, the Delaware Trustee on behalf of the Certificate Issuer
shall execute and the Certificate Trustee shall authenticate and deliver in
exchange therefor definitive Certificates (of the same Class as the temporary
Certificates surrendered) of authorized denominations of a like aggregate
Original Principal Amount. Until so exchanged, such temporary Certificates shall
in all respects be entitled to the same benefits under this Certificate
Indenture as definitive Certificates of the same Class.
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Section 2.06. REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES. The
Certificate Trustee shall cause to be kept at the office of agency to be
maintained by it in accordance with the provisions of Section 6.11 a register
(the "Certificate Register") in which, subject to such reasonable regulations as
it may prescribe, the Certificate Trustee shall provide for the registration of
Certificates and of transfers and exchanges of Certificates as herein provided.
The Certificate Trustee shall initially be the registrar (the "Certificate
Registrar") for the purpose of registering Certificates and transfers and
exchanges of Certificates as herein provided.
Subject to this Section 2.06, upon surrender for registration of transfer
of any Certificate at the Corporate Trust Office or such other office or agency
maintained by the Certificate Trustee in accordance with Section 6.11, the
Delaware Trustee on behalf of the Certificate Issuer shall execute, and the
Certificate Trustee shall authenticate and deliver, in the name of the
designated transferee, one or more new Certificates (of the same Class as the
Certificates surrendered for registration of transfer) in authorized
denominations of a like aggregate Original Principal Amount; PROVIDED, HOWEVER,
that if any such surrendered Certificate shall have become or within 15 days
shall be due and payable or shall have been called for redemption, instead of
issuing a replacement Certificate, the Certificate Trustee may pay such
surrendered Certificate when so due and payable or upon the Special Distribution
Date without surrender thereof.
At the option of a Certificateholder, Certificates may be exchanged for
other Certificates (of the same Class as the Certificates surrendered for
registration of exchange) of authorized denominations of a like aggregate
Original Principal Amount, upon surrender of the Certificates to be exchanged at
any such office or agency. Whenever any Certificates are so surrendered for
exchange, the Delaware Trustee on behalf of the Certificate Issuer shall
execute, and the Certificate Trustee shall authenticate and deliver the
Certificates that the Certificateholder making the exchange is entitled to
receive.
Every Certificate presented or surrendered for registration of transfer or
exchange shall be duly endorsed or accompanied by a written instrument of
transfer in form satisfactory to the Certificate Trustee and the Certificate
Registrar duly executed by the Certificateholder thereof or its attorney duly
authorized in writing.
No service charge shall be made to a Certificateholder for any registration
of transfer or exchange of Certificates, but the Certificate Trustee shall
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer or exchange of Certificates.
All Certificates surrendered for registration of transfer or exchange shall
be cancelled and subsequently destroyed by the Certificate Trustee in accordance
with its customary practices.
Section 2.07. CERTIFICATEHOLDERS' LISTS AND REPORTS BY CERTIFICATE TRUSTEE.
(a) THE CERTIFICATE ISSUER TO FURNISH CERTIFICATE TRUSTEE WITH NAMES AND
ADDRESSES OF CERTIFICATEHOLDERS. The Certificate Registrar on behalf of the
Certificate Issuer will furnish or cause to be furnished to the Certificate
Trustee within 15 days after each Record Date, and at such other times as the
Certificate Trustee may request in writing, within 30 days after receipt by the
Certificate Issuer of any such request, a list, in such form as the Certificate
Trustee may
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reasonably require, of all information in the possession or control of the
Certificate Issuer as to the names and addresses of the Certificateholders, in
each case as of a date not more than 15 days prior to the time such list is
furnished; PROVIDED, HOWEVER, that so long as the Certificate Trustee is the
sole Certificate Registrar, no such list need be furnished; and PROVIDED
FURTHER, HOWEVER, that no such list need be furnished for so long as a copy of
the Certificate Register is being furnished to the Certificate Trustee pursuant
to Section 6.11.
Upon the written request of any Certificateholder or Certificateholders of
record holding Certificates evidencing not less than ten percent of the
aggregate Outstanding Amount of Certificates, the Certificate Trustee shall
afford such Certificateholder or Certificateholders access during business hours
to the current list of Certificateholders for purposes of communicating with
other Certificateholders with respect to their rights under this Certificate
Indenture.
(b) PRESERVATION OF INFORMATION. The Certificate Trustee shall preserve, in
as current a form as is reasonably practicable, the names and addresses of
Certificateholders contained in the most recent list furnished to the
Certificate Trustee as provided in Section 6.11 or Section 2.07(a), as the case
may be, and the names and addresses of Certificateholders received by the
Certificate Trustee in its capacity as Certificate Registrar, if so acting. The
Certificate Trustee may destroy any list furnished to it as provided in Section
6.11 or Section 2.07(a), as the case may be, upon receipt of a new list so
furnished.
(c) COMMUNICATIONS AMONG CERTIFICATEHOLDERS. Certificateholders may
communicate pursuant to Section 312(b) of the Trust Indenture Act with other
Certificateholders with respect to their rights under this Certificate Indenture
or under the Certificates.
(d) REPORTS BY CERTIFICATE TRUSTEE. To the extent that any of the events
described in Section 313(a) of the Trust Indenture Act shall have occurred,
within 60 days after December 31 of each year, commencing with the year 1999,
the Certificate Trustee shall transmit to the Certificateholders, as provided in
Section 313(c) of the Trust Indenture Act, a brief report dated as of such
December 31, if required by Section 313(a) of the Trust Indenture Act. The
Certificate Trustee also shall comply with Section 313(b) of the Trust Indenture
Act.
A copy of each report at the time of its mailing to Certificateholders
shall be filed by the Certificate Trustee with the Commission and with each
stock exchange, if any, on which the Certificates are listed and of which
listing the Certificate Trustee has been informed. The Certificate Issuer shall
notify the Certificate Trustee if and when the Certificates are listed on any
stock exchange.
(e) REPORTS BY THE CERTIFICATE ISSUER. Pursuant to Section 314(a)(4) of the
Trust Indenture Act, the Certificate Issuer shall furnish to the Certificate
Trustee, not less often than annually and prior to [ ] of each year, a
certificate prepared by the Delaware Trustee on behalf of the Certificate Issuer
as to the Certificate Issuer's compliance with all conditions and covenants
under this Certificate Indenture. For purposes of this Section 2.07(e), such
compliance shall be determined without regard to any period of grace or
requirement of notice provided under this Certificate Indenture. In addition,
the Certificate Trustee shall forward such Certificate to the
Certificateholders.
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(f) PROTECTIONS. The Certificate Issuer, the Certificate Trustee and the
Certificate Registrar shall have the protection of Section 312(c) of the Trust
Indenture Act.
Section 2.08. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES. If (a) any
mutilated Certificate is surrendered to the Certificate Registrar, or the
Certificate Registrar receives evidence to its satisfaction of the destruction,
loss or theft of any Certificate, and (b) there is delivered to the Certificate
Registrar and the Certificate Trustee such security, indemnity or bond as may be
required by them to save each of them harmless, then, in the absence of notice
to the Certificate Registrar or the Certificate Trustee that such Certificate
has been acquired by a bona fide purchaser, the Delaware Trustee, on behalf of
the Certificate Issuer shall execute, and the Certificate Trustee shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Certificate, a new Certificate (of the same Class as
the Certificate so mutilated, destroyed, lost or stolen) of like Original
Principal Amount. In connection with the issuance of any new Certificate under
this Section 2.08, the Certificate Trustee shall require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other expenses (including the fees and expenses of the
Certificate Trustee and the Certificate Registrar) connected therewith. Any
duplicate Certificate issued pursuant to this Section 2.08 shall constitute
conclusive evidence of the same interest in the Certificate Issuer, as if
originally issued, whether or not the lost, stolen or destroyed Certificate
shall be found at any time.
Every replacement Certificate issued pursuant to this Section in
replacement of any mutilated, destroyed, lost or stolen Certificate shall
constitute an original additional contractual obligation of the Certificate
Issuer, whether or not the mutilated, destroyed, lost or stolen Certificate
shall be at any time enforceable by anyone, and shall be entitled to all the
benefits of this Certificate Indenture equally and proportionately with any and
all other Certificates duly issued hereunder.
Section 2.09. PERSONS DEEMED OWNERS. Prior to due presentation of a
Certificate for registration of transfer, the Certificate Trustee, the
Certificate Registrar and any Paying Agent of the Certificate Trustee may treat
the Person in whose name any Certificate is registered as the owner of such
Certificate for the purpose of receiving distributions pursuant to Section 4.02
and for all other purposes whatsoever, and none of the Certificate Trustee, the
Certificate Registrar nor any Paying Agent of the Certificate Trustee shall be
affected by any notice to the contrary.
Section 2.10. CANCELLATION. All Certificates surrendered for payment or
transfer or exchange shall, if surrendered to any party hereto other than the
Certificate Registrar, be delivered to the Certificate Registrar for
cancellation. No Certificates shall be authenticated in lieu of or in exchange
for any Certificates cancelled as provided in this Section, except as expressly
permitted by this Certificate Indenture. All cancelled Certificates held by the
Certificate Registrar shall be delivered to the Certificate Trustee and, in
accordance with Section 2.06, destroyed.
Section 2.11. LIMITATION OF LIABILITY FOR PAYMENTS. All payments or
distributions made to Holders of Certificates under this Certificate Indenture
shall be made only from the Trust Property with respect to that Class of
Certificates and only to the extent that the Certificate Trustee shall have
sufficient income or proceeds from such Trust Property to make such
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payments in accordance with the terms of Article IV of this Certificate
Indenture. Each Holder of a Certificate of any Class, by its acceptance of a
Certificate of that Class, agrees that it will look solely to the income and
proceeds from the Trust Property with respect to that Class to the extent
available for distribution to the Holder thereof as provided in this Certificate
Indenture. It is expressly understood and agreed by the parties hereto that (a)
the Certificates are executed, authenticated and delivered by the Delaware
Trustee and the Certificate Trustee, respectively, not individually or
personally but solely in their respective capacity as Delaware Trustee and
Certificate Trustee of the Certificate Issuer in the exercise of the powers and
authority conferred and vested in them, and (b) under no circumstances shall the
Delaware Trustee or Certificate Trustee be personally liable for the payment of
any of the Certificates or any indebtedness or expenses of the Trust or be
liable for the breach or failure of any obligation, representation, warranty or
covenant made or undertaken by the Certificate Issuer under this Certificate
Indenture.
Section 2.12. BOOK-ENTRY AND DEFINITIVE CERTIFICATES.
(a) The Certificates of any Class may be issued in the form of one or more
typewritten certificates representing the Book-Entry Certificates of that Class,
to be delivered to The Depository Trust Company, the initial Clearing Agency,
by, or on behalf of, the Certificate Issuer. In such case, the Certificates of
such Class delivered to The Depository Trust Company shall initially be
registered on the Certificate Register in the name of Cede & Co., the nominee of
the initial Clearing Agency, and no Certificate Owner will receive a definitive
Certificate representing such Certificate Owner's interest in the Certificate of
such Class, except as provided in Section 2.12(c) below. Unless and until
definitive, fully registered Certificates ("Definitive Certificates") of such
Class have been issued pursuant to Section 2.12(c) below:
(i) the provisions of this Section 2.12 shall be in full force
and effect with respect to the Certificates of such Class;
(ii) the Certificate Issuer, the Paying Agent, the Certificate
Registrar and the Certificate Trustee may deal with the Clearing Agency for
all purposes (including the making of distributions on the Certificates of
such Class) as the authorized representative of the Certificate Owners of
Certificates of such Class;
(iii) to the extent that the provisions of this Section 2.12
conflict with any other provisions of this Certificate Indenture, the
provisions of this Section 2.12 shall control;
(iv) the rights of Certificate Owners of Certificates of such
Class shall be exercised only through the Clearing Agency and shall be
limited to those established by law and agreements between such Certificate
Owners and the Clearing Agency Participants; and until Definitive
Certificates of such Class are issued pursuant to Section 2.12(c) below,
the Clearing Agency will make book-entry transfers among the Clearing
Agency Participants and receive and transmit distributions of principal of
and interest on the Certificates of such Class to such Clearing Agency
Participants; and
(v) whenever this Certificate Indenture requires or permits
actions to be taken based upon instructions or directions of
Certificateholders holding Certificates of such
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Class representing a specified percentage of the aggregate Outstanding
Amount of Certificates of such Class, the Clearing Agency shall be deemed
to represent such percentage only to the extent that it has received
instructions to such effect from Certificate Owners or Clearing Agency
Participants owning or representing, respectively, Certificates
representing such percentage of the aggregate Outstanding Amount of
Certificates of such Class, and has delivered such instructions to the
Certificate Trustee; the Certificate Trustee shall have no obligation to
determine whether the Clearing Agency has in fact received any such
instructions.
(b) Whenever notice or other communication to the Holders of Certificates
of any Class issued in the form of Certificates representing Book-Entry
Certificates is required under this Certificate Indenture, unless and until
Definitive Certificates of such Class shall have been issued pursuant to Section
2.12(c), the Certificate Trustee shall give all such notices and communications
specified herein to be given to Holders of Certificates of such Class to the
Clearing Agency.
(c) If (i) the Clearing Agency advises the Certificate Trustee in writing
that the Clearing Agency is no longer willing or able to properly discharge its
responsibilities with respect to the Certificates of a Class, and the
Certificate Trustee or the Certificate Issuer is unable to locate a qualified
successor, (ii) the Certificate Issuer (with the prior written approval of the
Note Issuer) at its option advises the Certificate Trustee in writing that it
elects to terminate the book-entry system through the Clearing Agency with
respect to the Certificates of such Class or (iii) after the occurrence of a
Note Event of Default with respect to any Class of Certificates, Certificate
Owners representing beneficial interests aggregating at least a majority of the
Outstanding Amount of the Certificates advise the Clearing Agency and the
Certificate Trustee in writing that the continuation of a book-entry system
through the Clearing Agency is no longer in the best interests of the
Certificate Owners, then the Clearing Agency shall notify all Certificate Owners
and the Certificate Trustee of the occurrence of any such event and of the
availability of Definitive Certificates to Certificate Owners requesting the
same. Upon surrender to the Certificate Trustee of the typewritten certificate
or certificates representing the Book-Entry Certificates by the Clearing Agency,
accompanied by registration instructions, and upon written direction by the
Certificate Issuer, the Delaware Trustee shall execute on behalf of the
Certificate Issuer and the Certificate Trustee shall authenticate the Definitive
Certificates in accordance with the instructions of the Clearing Agency. None of
the Certificate Issuer, the Certificate Registrar or the Certificate Trustee
shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be fully protected in relying on, such
instructions. Upon the issuance of Definitive Certificates, the Certificate
Trustee shall recognize the Holders of the Definitive Certificates as
Certificateholders.
Section 2.13. TAX TREATMENT.
(a) It is the intention of the parties hereto that the Certificate Issuer
shall be treated as a "grantor trust" for federal income tax purposes and all
transactions contemplated by this Certificate Indenture will be reported
consistent with such treatment.
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(b) The provisions of this Certificate Indenture shall be construed, and
the affairs of the Certificate Indenture shall be conducted, so as to achieve
treatment of the Certificate Indenture as a "grantor trust" for federal income
tax purposes.
ARTICLE III
COVENANTS
---------
Section 3.01. COMPLIANCE WITH DECLARATION OF TRUST. The Certificate Issuer
covenants and agrees to operate in strict conformity with the Declaration of
Trust, the terms of which are incorporated herein by reference, and shall not
amend the Declaration of Trust except as expressly permitted thereunder or in
any manner that would adversely affect the interests of the Certificateholders.
This Certificate Indenture and the Declaration of Trust shall, together,
constitute the governing instrument of the Trust. To the extent that the
provisions of this Certificate Indenture and the Declaration of Trust conflict
with respect to the issuance of the Certificates and the rights of the holders
thereof, this Certificate Indenture shall control.
Section 3.02. NO ADDITIONAL CERTIFICATES. The Certificate Issuer shall not
issue any additional Certificates hereunder.
ARTICLE IV
DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS
-----------------------------------------------
Section 4.01. CERTIFICATE ACCOUNTS.
(a) The Certificate Trustee shall establish and maintain, for the
Certificate Issuer, on behalf of the Holders of Certificates of each Class one
or more segregated trust accounts with respect to such Class (each, a
"Certificate Account"), which shall be non-interest bearing except as provided
in Section 4.04, in the corporate trust department of an Eligible Institution,
in the name of the Certificate Trustee for the benefit of such
Certificateholders. The Certificate Trustee shall hold each Certificate Account
in trust for the benefit of the Holders of Certificates of the corresponding
Class, and shall make or permit withdrawals therefrom only as provided in this
Certificate Indenture. On each day when a Payment or Special Payment (other than
a Special Payment that represents the proceeds of any sale pursuant to Article V
hereof by the Certificate Trustee of any Note) is made to the Certificate
Trustee, as holder of Notes of any Class, the Certificate Trustee upon receipt
shall immediately deposit the aggregate amount of such Payment or Special
Payment in the Certificate Account for the corresponding Class of Certificates.
Upon the sale of any Note by the Certificate Trustee pursuant to Article V and
the realization of any proceeds thereof, the Certificate Trustee shall deposit
the aggregate amount of such proceeds as a Special Payment in the Certificate
Account for the Class of Certificates corresponding to the Class of the Note so
sold.
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(b) The Certificate Trustee shall present to the Note Trustee for payment
each Note on its Final Maturity Date, or, in the case of any redemption or
repayment of such Note in full prior to its Final Maturity Date, on the
applicable Payment Date therefor.
(c) The Certificate Trustee (or any Paying Agent other than the Certificate
Trustee) shall have sole dominion and exclusive control over all monies in the
Certificate Accounts and shall apply such amounts therein as provided in this
Article.
Section 4.02. DISTRIBUTIONS FROM CERTIFICATE ACCOUNTS.
(a) On any Distribution Date, the Certificate Trustee shall distribute out
of the Certificate Account for the corresponding Class of Certificates, in the
manner described in Section 4.02(e), the entire amount of such Payment deposited
therein pursuant to Section 4.01(a); PROVIDED, HOWEVER, that in the event
receipt of any such Payment is not confirmed by the Certificate Trustee by 1:00
p.m. (New York City time) on such Distribution Date, distribution thereof shall
be made on the day receipt thereof is confirmed by the Certificate Trustee by
1:00 p.m. (New York City time) or, if receipt thereof is confirmed by the
Certificate Trustee after 1:00 p.m. (New York City time), on the following
Business Day. There shall be so distributed to each Holder of such Class of
Certificates on the Record Date with respect to such Distribution Date (other
than as provided in Section 9.01 with respect to a final distribution) such
Certificateholder's fractional undivided share (based on the aggregate
Outstanding Amount of Certificates of such Class held by such Certificateholder)
of the aggregate amount in the related Certificate Account. The foregoing
notwithstanding, if a Payment is not received by the Certificate Trustee by the
day that is five days after the related Payment Date, it will be treated as a
Special Payment pursuant to Section 4.02(b).
The final distribution with respect to any Certificate, however, will be
made only upon presentation and surrender of such Certificate at the office or
agency of the Certificate Trustee specified in the notice given by the
Certificate Trustee with respect to such final payment. The Certificate Trustee
will provide notice of a final distribution to each Holder as of the date such
notice is given with respect to any Certificate as soon as practicable following
receipt of notice from the Note Trustee of a final payment on a corresponding
Note.
(b) On each Special Distribution Date with respect to the distribution of
any Special Payment with respect to any Class of Notes, the Certificate Trustee
shall distribute out of the Certificate Account for the corresponding Class of
Certificates, in the manner described in Section 4.02(e), the entire amount of
such Special Payment deposited therein pursuant to Section 4.01(a) and any
income and earnings received from the investment of such Special Payment
pursuant to Section 4.04; PROVIDED, HOWEVER, that in the event receipt of any
such Special Payment is not confirmed by the Certificate Trustee by 1:00 p.m.
(New York City time) on such Special Distribution Date, distribution thereof
shall be made on the day receipt thereof is confirmed by the Certificate Trustee
by 1:00 p.m. (New York City time) or, if receipt thereof is confirmed by the
Certificate Trustee after 1:00 p.m. (New York City time), on the following
Business Day. There shall be so distributed to each Holder of such Class of
Certificates on the Special Record Date with respect to such Special
Distribution Date (other than as provided in Section 9.01 with respect to a
final distribution) such Certificateholder's fractional undivided share (based
on the aggregate Outstanding Amount of Certificates of such Class held by such
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Certificateholder) of the aggregate amount of such Special Payment and any
income and earnings received from the investment of such Special Payment
pursuant to Section 4.04.
(c) The Certificate Trustee shall allocate amounts distributed to Holders
of Certificates of any Class on any Distribution Date or Special Distribution
Date as follows: (i) to the extent such amounts represent payments of principal
of the corresponding Class of Notes (including prepayments or redemption price),
or the proceeds of the sale of any such Note by the Certificate Trustee pursuant
to Article V (to the extent such proceeds exceed the unpaid interest on the
related class of Notes), such amounts shall be allocated to principal of such
Certificates and (ii) all other such amounts shall be allocated to interest on
such Certificates. The Certificate Trustee may conclusively rely on the payment
statement received by it from the Servicer pursuant to the Servicing Agreement
with any payment in respect of any Class of Notes as to whether the amount so
paid in respect of such Notes is in respect of principal of or interest on such
Notes. If no statement is received, such payments received with respect to any
Class of Notes shall first be allocable to interest to the extent of any
interest accrued and payable on such Class of Notes, and then to principal.
(d) The Certificate Trustee shall cause notice of each Special Payment with
respect to any Class of Notes to be mailed to each Holder of Certificates of the
corresponding Class at its address as it appears in the Certificate Register. In
the event of (i) the optional redemption of the Notes of any Class, such notice
shall be mailed not less than five days nor more than 25 days prior to the
Special Distribution Date on which any such Redemption Payment is scheduled to
be distributed, and (ii) the mandatory redemption of the Notes of any Class,
such notice shall be mailed not less than five days prior to the Special
Distribution Date on which any such Redemption Payment is scheduled to be
distributed. In the case of any other Special Payment, such notice shall be
mailed not less than 20 days prior to the Special Distribution Date on which any
Special Payment is scheduled to be distributed in respect of Certificates of
such Class stating such anticipated Special Distribution Date. Any such notice
mailed by the Certificate Trustee shall set forth:
(i) the Special Distribution Date or the Distribution Date, as
applicable, and the Special Record Date or Record Date therefor, as
applicable (except as otherwise provided in Section 9.01);
(ii) the amount of the Special Distribution for each $1,000
Original Principal Amount of Certificates of the applicable Class and the
amount thereof constituting principal and interest;
(iii) the reason for the Special Distribution; and
(iv) the total amount to be received on such date for each $1,000
Original Principal Amount of Certificates of the applicable Class but only,
in the case of a Special Payment, if the related Special Distribution Date
is also a Distribution Date.
(e) Distributions to Holders of Certificates shall be by check sent by
first-class mail to the address of such Holder appearing on the Certificate
Register at the relevant Record Date or Special Record Date or, upon written
application of a Holder of Certificates of any Class in the
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Original Principal Amount of $1,000,000 or more to the Certificate Trustee made
at any time not later than such Record Date or Special Record Date or continuing
in effect from a prior request, by wire transfer in immediately available funds
to the account of such Holder at such bank located in New York, New York having
wire transfer capability as may be designated by such Holder; PROVIDED, HOWEVER,
that the final distribution in respect of any Certificate shall be made only as
provided in Section 9.01. The foregoing notwithstanding, any distributions made
to Cede & Co., as the nominee of the initial Clearing Agency, shall be made by
wire transfer of immediately available funds.
Section 4.03. STATEMENTS TO CERTIFICATEHOLDERS.
(a) On each Distribution Date, Special Distribution Date or any other date
specified herein for distribution of any payments with respect to any Class of
Certificates, or as soon as practicable following such Distribution Date,
Special Distribution Date or other date (unless the Certificate Trustee is the
Note Trustee and the statement required below is provided by the Note Trustee no
later than two Business Days prior to such distribution), the Certificate
Trustee will send, with respect to each distribution, to Holders of Certificates
of such Class a statement with respect to such distribution to be made on such
Distribution Date, Special Distribution Date or other date, as the case may be,
setting forth the following information:
(i) the amount of such distribution to Holders of Certificates
allocable to (A) principal and (B) interest, in each case per $1,000
Original Principal Amount of each Class of Certificates;
(ii) the aggregate outstanding principal balance of the
Certificates, after giving effect to payments allocated to principal
reported under (i) above; and
(iii) the difference, if any, between the amount specified in (ii)
above and the principal amount scheduled to be outstanding on such date
according to the Expected Amortization Schedule.
In providing the foregoing statement, the Certificate Trustee may rely upon the
statements provided by the Note Trustee pursuant to Section 6.06 of the Note
Indenture. On each date on which the Certificate Trustee distributes any such
report to the Holders of the Certificates of any Class, the Certificate Trustee
shall also distribute such report to each Rating Agency.
(b) Within a reasonable period of time after the end of each calendar year
but not later than the latest date permitted by law, the Certificate Trustee
shall furnish to each Person who at any time during such calendar year was a
Holder of any Class of Certificates and received a distribution thereon, a
statement containing the sum of the amounts determined pursuant to clause (a)
(i) above with respect to such Class of Certificates for such calendar year, or,
in the event such Person was a Holder of such Class of Certificates during a
portion of such calendar year, for the applicable portion of such year, and such
other items as are readily available to the Certificate Trustee and that a
Certificateholder shall reasonably request as necessary for the purpose of such
Certificateholder's preparation of its federal income tax returns.
Section 4.04. INVESTMENT OF SPECIAL PAYMENT MONEYS. Any money received by
the Certificate Trustee pursuant to Section 4.01(a) representing a Special
Payment that is not to be
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promptly distributed, to the extent practicable, shall be invested in Eligible
Investments at the written direction of the Servicer by the Certificate Trustee
pending distribution of such Special Payment pursuant to Section 4.02. Any
investment made pursuant to this Section 4.04 shall be in such Eligible
Investments maturing in not more than 60 days or such lesser time as is required
for the distribution of any such funds on a Special Distribution Date pending
the distribution of such funds to Certificateholders as described herein. The
Certificate Trustee shall hold any such Eligible Investments until maturity.
Such Eligible Investments (i) shall not mature later than the Business Day
immediately preceding the Special Distribution Date relating to such invested
funds, (ii) (A) if such Eligible Investments have a maturity of one month or
less, such Eligible Investments (or the provider thereof) must have a long term
unsecured debt rating of at least A2 by Moody's or a certificate of deposit
rating of at least P-1 by Moody's, and (B) if such Eligible Investments have a
maturity of greater than one month, such Eligible Investments (or the provider
thereof) must have a long term unsecured debt rating of at least A1 by Moody's
and a certificate of deposit rating of at least P-1 by Moody's. The Certificate
Trustee shall have no liability with respect to any investment made pursuant to
this Section 4.04 (including any losses on such investments), other than by
reason of the willful misconduct or gross negligence of the Certificate Trustee.
All income and earnings from such investments shall be distributed, if and as
received, on such Special Distribution Date as part of such Special Payment and
shall be treated as payments of interest on the Certificates.
Section 4.05. REDUCTION IN PRINCIPAL. Any reduction in the principal amount
of any Certificate effected by any distribution in respect of principal thereof
shall be binding upon all Holders of such Certificate and of any Certificate
issued upon the registration or transfer thereof or in lieu thereof, whether or
not noted thereon.
ARTICLE V
DEFAULTS
--------
Section 5.01. EVENTS OF DEFAULT.
(a) If any Note Event of Default, other than a breach of the Commonwealth
Pledge by The Commonwealth of Massachusetts under the Statute and Section 10.01
hereunder, shall occur and be continuing, then, and in each and every case, the
Certificate Trustee may, and, upon the written direction of Holders representing
not less than a majority of the Outstanding Amount of the Certificates then
Outstanding, shall vote all the Notes in favor of declaring the unpaid principal
amount of all the Notes then outstanding and accrued interest thereon to be due
and payable in accordance with the provisions thereof. In addition, if a Note
Event of Default shall have occurred and be continuing, the Certificate Trustee
may, and, upon the written direction of Holders representing not less than a
majority of the Outstanding Amount of the Certificates of such Class then
Outstanding, shall vote all the Notes in favor of directing the Note Trustee as
to the time, method and place of conducting any proceeding for any remedy
available to the Note Trustee, including the sale of any or all of the Notes,
without recourse to or warranty by the Certificate Trustee or any
Certificateholder, to any person or entity, or of exercising any trust or power
conferred on the Note Trustee under the Note Indenture.
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(b) In addition, after a Note Event of Default shall have occurred and be
continuing, subject to Section 5.01(c), the Certificate Trustee may, and upon
the written direction of Holders of Certificates representing not less than a
majority of the Outstanding Amount of Certificates of such Class, by such
officer or agent as it may appoint, shall sell, convey, transfer and deliver any
Note or Notes, without recourse to or warranty by the Certificate Trustee or any
Certificateholder, to any Person, all upon such terms and conditions as the
Certificateholders may reasonably deem advisable and at such prices as the
Certificateholders may reasonably deem advisable, for cash. If the Certificate
Trustee so decides or is required to sell or otherwise dispose of the Notes
pursuant to this Section, the Certificate Trustee may, but is not obligated to,
take such of the actions described above as it may reasonably deem most
effectual to complete the sale or other disposition of the Notes, so as to
provide for the payment in full of all amounts due on the Certificates.
(c) The foregoing provisions of Section 5.01(b) notwithstanding, the
Certificate Trustee shall not sell any Notes following the occurrence of any
Event of Default, other than a Note Event of Default described in Section
5.01(i), (ii) or (iii) of the Note Indenture, unless (i) the Certificate Trustee
determines that the amounts receivable from the Collateral with respect to each
Class of Notes are not sufficient to pay in full the principal of and accrued
interest on the Notes and to pay an allocable share of all sums due to the
Certificate Trustee and any other administrative expenses specified in this
Certificate Indenture and the Certificate Trustee obtains the written consent of
Holders of Certificates of each such Class representing 66 2/3 percent of the
aggregate Outstanding Amount of the Certificates, or (ii) the Certificate
Trustee obtains the written consent of Holders of Certificates representing 100
percent of the aggregate Outstanding Amount of the Certificates.
Section 5.02. INCIDENTS OF SALE OF NOTES. Upon any sale of the Notes made
either under the power of sale given under this Certificate Indenture or
otherwise for the enforcement of this Certificate Indenture, the following shall
be applicable:
(a) CERTIFICATEHOLDERS AND CERTIFICATE TRUSTEE MAY PURCHASE NOTES. Any
Certificateholder, the Certificate Trustee in its individual or any other
capacity or any other Person (other than the Seller) may bid for and
purchase any of the Notes, and upon compliance with the terms of sale, may
hold, retain, possess and dispose of such Notes in their own absolute right
without further accountability.
(b) RECEIPT OF CERTIFICATE TRUSTEE SHALL DISCHARGE PURCHASER. The
receipt of the Certificate Trustee, on behalf of the Certificate Issuer,
shall be a sufficient discharge to any purchaser for its purchase money,
and, after paying such purchase money and receiving such receipt, such
purchaser or its personal representative or assigns shall not be obliged to
see to the application of such purchase money, or be in any way answerable
for any loss, misapplication or nonapplication thereof.
(c) APPLICATION OF MONEYS RECEIVED UPON SALE. Any moneys collected by
the Certificate Issuer or the Certificate Trustee upon any sale made either
under the power of sale given by this Certificate Indenture or otherwise
for the enforcement of this Certificate Indenture, shall be applied as
provided in Section 4.02.
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Section 5.03. JUDICIAL PROCEEDINGS INSTITUTED BY CERTIFICATE TRUSTEE;
CERTIFICATE TRUSTEE MAY BRING SUIT.
(a) If there shall be a failure to make payment of the principal of or
interest on any Note, then the Certificate Trustee in its own name, and as
trustee of an express trust, as holder of such Note, if directed in writing by
the Holders of a majority of the Outstanding Amount of the Certificates but
subject to the provisions of Article VI, shall be, to the extent permitted by
and in accordance with the terms of the Notes, entitled and empowered to
institute any suits, actions or proceedings at law, in equity or otherwise,
including the power to make a demand on the Note Trustee to take action under
the Note Indenture to enforce the Notes, for the collection of the sums so due
and unpaid on such Note and may prosecute any such claim or proceeding to
judgment or final decree with respect to the whole amount of any such sums so
due and unpaid.
(b) If there shall be a breach of the Commonwealth Pledge by The
Commonwealth of Massachusetts, then the Certificate Trustee, in its own name and
as trustee of an express trust, as holder of the Notes, shall be, to the extent
permitted by state and federal law, entitled and empowered to institute any
suits, actions or proceedings at law, in equity or otherwise, to enforce the
Commonwealth Pledge and to collect any monetary damages as a result of a breach
thereof, and may prosecute any such suit, action or proceeding to judgment or
final decree.
Section 5.04. CONTROL BY CERTIFICATEHOLDERS. The Holders of a majority of
the Outstanding Amount of the Certificates (or, if less than all Classes are
affected, the affected Class or Classes) shall have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Certificate Trustee, or exercising any trust or power conferred on the
Certificate Trustee under this Certificate Indenture, including any right of the
Certificate Trustee as holder of the Notes of the corresponding Class or
Classes, in each case unless a different percentage is specified herein;
PROVIDED, HOWEVER, that:
(a) such direction shall not be in conflict with any rule of law or
with this Certificate Indenture and would not involve the Certificate
Trustee in personal liability or expense;
(b) the Certificate Trustee shall not determine that the action so
directed would be unjustly prejudicial to the Holders of Certificates of
such Class or Classes not taking part in such direction;
(c) the Certificate Trustee may take any other action deemed proper by
the Certificate Trustee that is not inconsistent with such direction; and
(d) if a Note Event of Default with respect to such Class of Notes
shall have occurred and be continuing, such direction shall not obligate
the Certificate Trustee to vote more than a corresponding majority of the
related Notes held by the Certificate Issuer in favor of declaring the
unpaid principal amount of the Notes and accrued interest thereon to be due
and payable or directing any action by the Note Trustee with respect to
such Note Event of Default.
Section 5.05. WAIVER OF PAST DEFAULTS. Prior to the declaration of the
acceleration of the maturity of the Notes as provided in Section 5.01, the
Holders of Certificates of not less than a
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majority of the Outstanding Amount of the Certificates may waive any past
default or Note Event of Default and its consequences except a default (a) in
payment of principal of or interest on any of the Notes, (b) in respect of a
covenant or provision hereof that cannot be modified or amended without the
consent of the Holder of each Certificate or Classes affected or (c) in the
deposit or distribution of any Payment or Special Payment under Section 4.01 or
in the distribution of any payment under Section 4.02. Upon any such direction,
the Certificate Trustee shall vote such percentage of the Notes of the
corresponding Class held by the Certificate Trustee as corresponds to the
percentage of the aggregate Outstanding Amount of the Certificates of such Class
held by Holders who directed the Certificate Trustee to waive such default or
Note Event of Default hereunder.
Upon any waiver that is effective under the terms of such Class of Notes to
waive such default or Note Event of Default, such default or Note Event of
Default shall cease to exist with respect to this Certificate Indenture, and, in
the case of a default, any Note Event of Default arising therefrom shall be
deemed to have been cured for every purpose of this Certificate Indenture and
any written direction given by the Certificate Trustee on behalf of such
Certificateholders to the Note Trustee or in respect of any Notes shall be
annulled with respect thereto; but no such waiver shall extend to any subsequent
or other default or Note Event of Default or impair any right consequent
thereon.
Section 5.06. RIGHT OF CERTIFICATEHOLDERS TO RECEIVE PAYMENTS NOT TO BE
IMPAIRED. Anything in this Certificate Indenture to the contrary
notwithstanding, including Section 5.07 hereof, the right of any
Certificateholder to receive distributions of payments required pursuant to
Section 4.02 hereof on the Certificates when due, or to institute suit for the
enforcement of any such payment on or after the applicable Distribution Date,
Special Distribution Date or other date specified herein for the making of such
payment, shall not be impaired or affected without the consent of such
Certificateholder.
Section 5.07. CERTIFICATEHOLDERS MAY NOT BRING SUIT EXCEPT UNDER CERTAIN
CONDITIONS. A Certificateholder shall not have the right to institute any suit,
action or proceeding at law or in equity or otherwise with respect to this
Certificate Indenture, for the appointment of a receiver or for the enforcement
of any other remedy under this Certificate Indenture, unless:
(a) such Certificateholder has previously given written notice to the
Certificate Trustee of a continuing Note Event of Default with respect to
the Class of Certificates held by such Holder;
(b) the Holders of not less than 25 percent of the Outstanding Amount
of the Certificates have made written request to the Certificate Trustee to
institute such action, suit or proceeding in respect of such Note Event of
Default in its own name as Certificate Trustee hereunder;
(c) such Certificateholder or Certificateholders have offered to the
Certificate Trustee indemnity satisfactory to it against the costs,
expenses (including legal fees and expenses) and liabilities to be incurred
in complying with such request;
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(d) the Certificate Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute such action,
suit or proceedings; and
(e) no direction inconsistent with such written request has been given
to the Certificate Trustee during such 60-day period by the Holders of a
majority of the Outstanding Amount of the Certificates;
it being understood and intended that no one or more Holders of Certificates
shall have any right in any manner whatever by virtue of, or by availing of, any
provision of this Certificate Indenture to affect, disturb or prejudice the
rights of any other Holders of Certificates or to obtain or to seek to obtain
priority or preference over any other Certificateholders or to enforce any right
under this Certificate Indenture, except in the manner herein provided. The
provisions of this Section 5.07 shall be deemed to modify, to the fullest extent
permitted by law, the rights of the Certificateholders under Section 3816 of the
Business Trust Statute.
In the event the Certificate Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of
Certificates, each representing less than a majority of the Outstanding Amount
of the Certificates, the Certificate Trustee in its sole discretion may
determine what action, if any, shall be taken, notwithstanding any other
provisions of this Certificate Indenture.
Section 5.08. REMEDIES CUMULATIVE. No remedy given hereunder to the
Certificate Trustee or to any of the Certificateholders shall be exclusive of
any other remedy or remedies, and every such remedy shall be cumulative and in
addition to every other remedy given hereunder or now or hereafter given by
statute, law, equity or otherwise.
ARTICLE VI
THE CERTIFICATE TRUSTEE
-----------------------
Section 6.01. NOTICE OF DEFAULTS. As promptly as practicable after, and in
any event within 30 days after, receipt by a Responsible Officer of the
Certificate Trustee of written notice or actual knowledge of the occurrence of
any default (as such term is defined below) hereunder, the Certificate Trustee
shall transmit by mail to the Certificate Issuer, the Note Trustee and the
Holders of Certificates in accordance with Section 313(c) of the Trust Indenture
Act, notice of such default, unless such default shall have been cured or
waived; PROVIDED, HOWEVER, that, except in the case of a default in the payment
of the principal of or interest on any Note of the corresponding Class, the
Certificate Trustee shall be fully protected in withholding such notice if and
so long as a trust committee of Responsible Officers of the Certificate Trustee
in good faith determines that the withholding of such notice is in the interests
of the Holders of the Certificates. For the purpose of this Section, the term
"default" means any event that is, or after notice or lapse of time or both
would become, a Note Event of Default with respect to such Class of
Certificates.
Section 6.02. CERTAIN RIGHTS OF CERTIFICATE TRUSTEE. Subject to the
provisions of Section 315 of the Trust Indenture Act:
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(a) the Certificate Trustee may conclusively rely and shall be fully
protected in acting or refraining from acting in reliance upon any
resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture or other paper or
document believed by it to be genuine and to have been signed or presented
by the proper party or parties;
(b) any request or direction of the Certificate Issuer mentioned
herein shall be sufficiently evidenced by a Request, accompanied by
evidence reasonably satisfactory to the Certificate Trustee that the Note
Issuer has given its prior written approval of such request or direction;
(c) whenever in the administration of this Certificate Indenture the
Certificate Trustee shall deem it desirable that a matter be proved or
established prior to taking, suffering or omitting any action hereunder,
the Certificate Trustee (unless other evidence be herein specifically
prescribed) may, in the absence of bad faith on its part, conclusively rely
upon an Officers' Certificate of the Certificate Issuer;
(d) the Certificate Trustee may consult with counsel and the advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Certificate Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Certificate Indenture at
the request or direction of any of the Certificateholders pursuant to this
Certificate Indenture, unless such Certificateholders shall have offered to
the Certificate Trustee reasonable security or indemnity satisfactory to it
against the cost, expenses (including reasonable legal fees and expenses)
and liabilities that might be incurred by it in compliance with such
request or direction;
(f) the Certificate Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture or other paper or document;
(g) the Certificate Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents, attorneys, custodians or nominees and the Certificate Trustee shall
not be responsible for any misconduct or negligence on the part of, or for
the supervision of, any agent, attorney, custodian or nominee appointed
with due care by it hereunder;
(h) the Certificate Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance with
the direction of the Holders of Certificates relating to the time, method
and place of conducting any proceeding for any remedy available to the
Certificate Trustee, or exercising any trust or power conferred upon the
Certificate Trustee, under this Certificate Indenture;
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(i) the Certificate Trustee shall not be required to expend or risk
its own funds in the performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or indemnity
satisfactory to it against such risk is not reasonably assured to it;
(j) the Certificate Trustee shall not be personally liable for any
action taken or suffered or omitted to be taken by it in good faith and
reasonably believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Certificate Indenture; PROVIDED,
HOWEVER, that the Certificate Trustee's conduct does not constitute willful
misconduct, gross negligence or bad faith;
(k) in the event that the Certificate Trustee is also acting as Paying
Agent, Authenticating Agent or Certificate Registrar hereunder, the rights
and protections afforded to the Certificate Trustee pursuant to this
Article VI shall also be afforded to such Paying Agent, Authenticating
Agent or Certificate Registrar;
(l) the Certificate Trustee shall not be charged with knowledge of an
Event of Default unless a Responsible Officer obtains actual knowledge of
such event or the Certificate Trustee receives written notice of such event
from the Certificate Issuer, the Note Trustee, the Servicer or a majority
of the Holders of Certificates of the Class or Classes so affected; and
(m) without limiting its rights under bankruptcy law, when the
Certificate Trustee incurs expenses or renders services in connection with
the insolvency or bankruptcy of any party hereto or with the Basic
Documents to which it is a party, such expenses (including the fees and
expenses of its counsel) and the compensation for such services are
intended to constitute expenses of administration under any bankruptcy or
insolvency law.
Section 6.03. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF CERTIFICATES. The
recitals contained herein and in the Certificates, except the execution thereof
and the certificates of authentication, shall not be taken as the statements of
the Certificate Trustee, and the Certificate Trustee assumes no responsibility
for their correctness. Subject to Section 6.14, the Certificate Trustee makes no
representations as to the validity or sufficiency of this Certificate Indenture,
the Notes, any Basic Document or the Certificates.
Section 6.04. MAY HOLD CERTIFICATES. The Certificate Trustee, any Paying
Agent, any Certificate Registrar or any of their Affiliates or any other agent,
in their respective individual or any other capacity, may become the owner or
pledgee of Certificates and, subject to Sections 310(b) and 311 of the Trust
Indenture Act, may otherwise deal with the Certificate Issuer, the Note Issuer
or the Note Trustee with the same rights it would have if it were not
Certificate Trustee, Paying Agent, Certificate Registrar or such other agent.
Section 6.05. MONEY HELD IN TRUST. Money held by the Certificate Trustee or
the Paying Agent in trust hereunder need not be segregated from other funds
except to the extent required herein or by law and neither the Certificate
Trustee nor the Paying Agent shall have any liability for interest upon any such
moneys except as provided for herein.
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Section 6.06. COMPENSATION AND REIMBURSEMENT; INDEMNIFICATION.
(a) Pursuant to the Fee and Indemnity Agreement, the Note Issuer has agreed
to pay, or cause to be paid, to the Certificate Trustee from time to time
reasonable compensation for its services and to reimburse it for its reasonable
expenses.
(b) Pursuant to the Fee and Indemnity Agreement, the Note Issuer shall, but
solely from amounts payable under the Fee and Indemnity Agreement, indemnify,
defend and hold harmless the Certificate Trustee and any of the affiliates,
officers, directors, employees and agents of the Certificate Trustee (the
"Certificate Trustee Indemnified Persons") from and against any and all losses,
claims, actions, suits, taxes, damages, expenses and liabilities (including
liabilities under state or federal securities laws) of any kind and nature
whatsoever (collectively, "Certificate Trustee Expenses"), to the extent that
such Certificate Trustee Expenses arise out of or are imposed upon or asserted
against such Certificate Trustee Indemnified Persons with respect to the
execution, delivery or performance of this Certificate Indenture or the
transactions contemplated hereby; provided, HOWEVER, that the Note Issuer shall
not be required to indemnify any Certificate Trustee Indemnified Person for any
Certificate Trustee Expenses that result from the willful misconduct or gross
negligence of such Certificate Trustee Indemnified Person. The obligations of
the Note Issuer to indemnify the Certificate Trustee Indemnified Persons in this
Certificate Indenture shall survive the termination of the Fee and Indemnity
Agreement and the resignation or removal of the Certificate Trustee.
Notwithstanding anything to the contrary in this Certificate Indenture, the
Certificate Trustee shall have no recourse against the Certificate Issuer or the
Trust Property for payment of any amounts required to be paid to the Certificate
Trustee under this Section 6.06(b).
Section 6.07. CORPORATE CERTIFICATE TRUSTEE REQUIRED; ELIGIBILITY.
(a) The Certificate Trustee shall at all times be eligible to act as a
trustee under Section 310(a) of the Trust Indenture Act, shall have a combined
capital and surplus of at least $50,000,000 and shall have a long-term debt
rating of at least A by Moody's and Standard & Poor's. If such entity publishes
reports of conditions at least annually, pursuant to law or to the requirements
of federal, state, territorial or District of Columbia supervising or examining
authority, then for the purposes of this Section 6.07, the combined capital and
surplus of such entity shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published.
(b) In determining whether the Certificate Trustee has a conflicting
interest under Section 310(b) of the Trust Indenture Act and this Section, each
other Class of Certificates will be treated as having been issued under an
indenture other than this Certificate Indenture.
(c) If at any time the Certificate Trustee shall cease to be eligible in
accordance with the provisions of this Section 6.07, the Certificate Trustee
shall resign immediately in the manner and with the effect specified in Section
6.08.
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Section 6.08. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of the Certificate Trustee and no appointment
of a successor Certificate Trustee pursuant to this Article shall become
effective (i) until the acceptance of appointment by the successor Certificate
Trustee under Section 6.09 and (ii) other than in the case of paragraph (b)
below, unless a successor Certificate Trustee has been appointed and has
accepted such appointment and the Note Issuer and the Certificate Issuer have
received written confirmation from each of the Rating Agencies that no lowering
or withdrawal of the then current ratings of any Class of Certificates will
result from such appointment.
(b) The Certificate Trustee may resign at any time in the case of a
conflicting interest as determined in accordance with Section 6.07(b) by giving
written notice thereof to the Certificate Issuer, the Authorized Agents, the
Note Issuer and the Note Trustee. If an instrument of acceptance by a successor
Certificate Trustee shall not have been delivered to the Certificate Issuer and
the Certificate Trustee within 30 days after the giving of such notice of
resignation, the resigning Certificate Trustee may petition any court of
competent jurisdiction for the appointment of a successor Certificate Trustee.
(c) The Certificate Trustee may be removed at any time in the case of a
conflicting interest as determined in accordance with Section 6.07(b) by Act of
Certificateholders holding Certificates representing not less than 51 percent of
the Outstanding Amount of the Certificates delivered to the Certificate Trustee
and to the Certificate Issuer, the Note Issuer and the Note Trustee.
(d) Upon 30 days' written notice, the Certificate Trustee (i) may resign
with respect to the Certificates as a whole by giving such written notice to the
Certificate Issuer, the Authorized Agents, the Note Issuer and the Note Trustee
or (ii) may be removed with respect to the Certificates as a whole by Act of
Certificateholders holding Certificates representing not less than a majority of
the Outstanding Amount of Certificates delivered to the Certificate Issuer, the
Note Issuer and the Note Trustee. If an instrument of acceptance by a successor
Certificate Trustee with respect to the Certificates as a whole shall not have
been delivered to the Certificate Issuer, the Note Issuer and the Note Trustee
within 90 days after the giving of such notice of resignation or Act by the
Certificateholders as a whole for removal of the Certificate Trustee, the
Certificate Issuer may petition any court of competent jurisdiction for the
appointment of a successor Certificate Trustee with respect to the Certificates
as a whole.
(e) If at any time:
(i) the Certificate Trustee shall fail to comply with Section
310 of the Trust Indenture Act after written request therefor by the
Certificate Issuer or by any Holder of Certificates who has been a bona
fide Holder of Certificates for at least six months; or
(ii) the Certificate Trustee shall cease to be eligible under
Section 6.07 and shall fail to resign after written request therefor by the
Certificate Issuer or by any Certificateholder; or
(iii) the Certificate Trustee shall become incapable of acting or
shall be adjudged a bankrupt or insolvent or a receiver of the Certificate
Trustee or of its property
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shall be appointed or any public officer shall take charge or control of
the Certificate Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation;
then, in any case, (x) the Certificate Issuer may remove the Certificate Trustee
or (y) any Holder of Certificates who has been a bona fide Holder of
Certificates for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the removal
of the Certificate Trustee and the appointment of a successor Certificate
Trustee.
(f) If a Responsible Officer of the Certificate Trustee shall have received
written notice of an Avoidable Tax that has been or is likely to be asserted,
the Certificate Trustee shall promptly notify the Certificate Issuer and the
Note Issuer thereof and shall, within 30 days of such notification, resign
hereunder unless within such 30-day period the Certificate Trustee shall have
received notice that either the Certificate Issuer or the Note Issuer has agreed
to pay such tax. In such event, the Certificate Issuer (with the prior written
approval of the Note Issuer) shall promptly appoint a successor Certificate
Trustee in a jurisdiction where there are no Avoidable Taxes. As used herein, an
"Avoidable Tax" means a state or local tax: (i) upon (w) the Certificate Issuer,
(x) the Trust Property, (y) the Certificateholders or (z) the Certificate
Trustee for which the Certificate Trustee is entitled to seek reimbursement from
the Trust Property, and (ii) that would be avoided if the Certificate Trustee
were located in another state, or jurisdiction within a state, within the United
States. A tax shall not be an Avoidable Tax if either the Certificate Issuer or
the Note Issuer shall agree to pay, and shall pay, such tax.
(g) If the Certificate Trustee shall resign, be removed or become incapable
of acting, or if a vacancy shall occur in the office of the Certificate Trustee
for any reason, the Certificate Issuer (with the prior written approval of the
Note Issuer) shall promptly appoint a successor Certificate Trustee. If, within
one year after such resignation, removal or incapability, or the occurrence of
such vacancy, a successor Certificate Trustee shall be appointed by Act of the
Certificateholders representing not less than a majority of the Outstanding
Amount of the Certificates delivered to the Certificate Issuer, the Note Trustee
and the retiring Certificate Trustee, the successor Certificate Trustee so
appointed shall, forthwith upon its acceptance of such appointment, become the
successor Certificate Trustee and supersede the successor Certificate Trustee
appointed as provided above. If no successor Certificate Trustee shall have been
so appointed as provided above and accepted appointment in the manner
hereinafter provided, any Holder of Certificates who has been a bona fide Holder
of Certificates for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Certificate Trustee.
(h) The successor Certificate Trustee shall give notice of the resignation
and removal of the Certificate Trustee and appointment of the successor
Certificate Trustee by mailing written notice of such event by first-class mail,
postage prepaid, to the Holders as their names and addresses appear in the
Certificate Register and to each Rating Agency, the Certificate Issuer and the
Agencies. Each notice shall include the name of such successor Certificate
Trustee and the address of the corporate trust office of such successor
Certificate Trustee.
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(i) The Certificate Issuer shall notify the Rating Agencies and the
Agencies of any resignation and removal of the Certificate Trustee and
appointment of a successor Certificate Trustee under this Section 6.08.
Section 6.09. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. Every successor
Certificate Trustee appointed hereunder shall execute, acknowledge and deliver
to the Certificate Issuer and to the retiring Certificate Trustee an instrument
accepting such appointment, and thereupon the resignation or removal of the
retiring Certificate Trustee shall become effective and such successor
Certificate Trustee, without any further act, deed or conveyance, shall become
vested with all the rights, powers, trusts and duties of the retiring
Certificate Trustee; but, on request of the Certificate Issuer or the successor
Certificate Trustee, such retiring Certificate Trustee shall execute and deliver
an instrument transferring to such successor Certificate Trustee all the rights,
powers and trusts of the retiring Certificate Trustee and shall duly assign,
transfer and deliver to such successor Certificate Trustee all property and
money held by such retiring Certificate Trustee hereunder. Upon request of any
such successor Certificate Trustee, the Certificate Issuer, the retiring
Certificate Trustee and such successor Certificate Trustee shall execute and
deliver any and all instruments containing such provisions as shall be necessary
or desirable to transfer and confirm to, and for more fully and certainly
vesting in, such successor Certificate Trustee all such rights, powers and
trusts. No Certificate Trustee hereunder shall be liable for the acts or
omissions of any successor Certificate Trustee.
No successor Certificate Trustee shall accept its appointment unless at the
time of such acceptance such successor Certificate Trustee shall be qualified
and eligible under this Article and any and all amounts due and payable to the
predecessor Certificate Trustee have been paid.
Section 6.10. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any corporation into which the Certificate Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Certificate Trustee shall be a party,
or any corporation succeeding to all or substantially all of the corporate trust
business of the Certificate Trustee, shall be the successor of the Certificate
Trustee hereunder, provided such corporation shall be otherwise qualified and
eligible under this Article, without the execution or filing of any paper or any
further act on the part of any of the parties hereto. In case any Certificates
shall have been authenticated, but not delivered, by the Certificate Trustee
then in office, any successor by merger, conversion or consolidation to such
authenticating Certificate Trustee may adopt such authentication and deliver the
Certificates so authenticated with the same effect as if such successor
Certificate Trustee had itself authenticated such Certificates.
Section 6.11. MAINTENANCE OF AGENCIES.
(a) There shall at all times be maintained in the Borough of Manhattan, The
City of New York, an office or agency where Certificates may be presented or
surrendered for registration of transfer or for exchange, and for payment
thereof and where notices and demands to or upon the Certificate Trustee on
behalf of the Certificate Issuer in respect of the Certificates or of this
Certificate Indenture may be served. At no time shall there be any other such
office or agency outside the United States. Such office or agency shall be
initially at The Bank of New York, 101 Barclay Street, Floor 12 East, New York,
New York 10286, Attention: Asset-Backed
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Finance Unit. Written notice of any change of location thereof shall be given by
the Certificate Trustee to the Certificate Issuer, the Note Trustee, the Note
Issuer, the Certificateholders, the Agencies and the Rating Agencies. In the
event that no such office or agency shall be maintained or no such notice of
location or of change of location shall be given, presentations and demands may
be made and notices may be served at the Corporate Trust Office of the
Certificate Trustee.
(b) There shall at all times be a Certificate Registrar, an Authentication
Agent and a Paying Agent hereunder. Each such Authorized Agent shall be a bank
or trust company, shall be a entity organized and doing business under the laws
of the United States or any state, with a combined capital and surplus of at
least $50,000,000, shall have a long-term debt rating of at least A by Moody's
and Standard & Poor's and shall be authorized under such laws to exercise
corporate trust powers, subject to supervision by federal or state authorities.
The Certificate Trustee shall initially be the Paying Agent, Authentication
Agent, and, as provided in Section 2.06, Certificate Registrar hereunder. Each
Certificate Registrar, if other than the Certificate Trustee, shall furnish to
the Certificate Trustee, at stated intervals of not more than six months, and at
such other times as the Certificate Trustee may request in writing, a copy of
the Certificate Register.
(c) Any corporation into which any Authorized Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any Authorized Agent shall
be a party, or any corporation succeeding to the corporate trust business of any
Authorized Agent, shall be the successor of such Authorized Agent hereunder, if
such successor corporation is otherwise eligible under this Section, without the
execution or filing of any paper or any further act on the part of the parties
hereto or such Authorized Agent or such successor corporation.
(d) Any Authorized Agent may at any time resign by giving written notice of
resignation to the Certificate Trustee, the Certificate Issuer and the Note
Trustee. The Certificate Issuer (with the prior written approval of the Note
Issuer) may, and at the request of the Certificate Trustee shall, at any time
terminate the agency of any Authorized Agent by giving written notice of
termination to such Authorized Agent, the Note Trustee and to the Certificate
Trustee. Upon the resignation or termination of an Authorized Agent or in case
at any time any such Authorized Agent shall cease to be eligible under this
Section (when, in either case, no other Authorized Agent performing the
functions of such Authorized Agent shall have been appointed by the Certificate
Trustee), the Certificate Issuer (with the prior written approval of the Note
Issuer) shall promptly appoint one or more qualified successor Authorized
Agents, reasonably satisfactory to the Certificate Trustee, to perform the
functions of the Authorized Agent who has resigned or whose agency has been
terminated or who shall have ceased to be eligible under this Section. The
Certificate Issuer shall give written notice of any such appointment made by it
to the Certificate Trustee and the Note Trustee; and in each case the
Certificate Trustee shall mail notice of such appointment to all
Certificateholders as their names and addresses appear on the Certificate
Register.
(e) Pursuant to the Fee and Indemnity Agreement, the Note Issuer has agreed
to pay, or cause to be paid, from time to time to each Authorized Agent
reasonable compensation for its services and to reimburse it for its reasonable
expenses; PROVIDED, HOWEVER, that the Note Issuer
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shall have given prior consent to the appointment of such Authorized Agent
pursuant to the Fee and Indemnity Agreement, and no Authorized Agent shall have
any recourse against the Certificate Issuer or the Trust Property for payment of
such amounts.
Section 6.12. MONEY FOR CERTIFICATE PAYMENTS TO BE HELD IN TRUST.
(a) All moneys deposited with any Paying Agent for the purpose of any
payment on Certificates of any Class shall be deposited and held in trust for
the benefit of the Certificateholders of such Class entitled to such payment,
subject to the provisions of this Section. Moneys so deposited and held in trust
shall constitute a separate trust fund for the benefit of the Class of
Certificateholders with respect to which such money was deposited.
The Certificate Trustee may at any time, for the purpose of obtaining the
satisfaction and discharge of this Certificate Indenture or for any other
purpose, direct any Paying Agent to pay to the Certificate Trustee all sums held
in trust by such Paying Agent, such sums to be held by the Certificate Trustee
upon the same trusts as those upon which such sums were held by such Paying
Agent; and, upon such payment by any Paying Agent to the Certificate Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
(b) The Certificate Trustee will cause each Paying Agent other than the
Certificate Trustee to execute and deliver to the Certificate Trustee an
instrument in which such Paying Agent shall agree with the Certificate Trustee
(and, if the Certificate Trustee acts as Paying Agent, it hereby so agrees),
subject to the provisions of this Section, that such Paying Agent will:
(i) hold all sums held by it for the payment of amounts due with
respect to the Certificates in trust for the benefit of the Persons
entitled thereto until such sums shall be paid to such Persons or otherwise
disposed of as herein provided and pay such sums to such Persons as herein
provided;
(ii) give the Certificate Trustee notice of any default under the
Certificates of which it has actual knowledge (or any other obligor on the
Certificates) in the making of any payment required to be made with respect
to the Certificates;
(iii) at any time during the continuance of such default, upon the
written request of the Certificate Trustee, forthwith pay to the
Certificate Trustee all sums held by it in trust for the payment of the
Certificates if at any time it ceases to meet the standards required to be
met by a Paying Agent at the time of its appointment; and
(iv) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Certificates of any
applicable withholding taxes imposed thereon and with respect to any
applicable reporting requirements in connection therewith.
Section 6.13. REGISTRATION OF NOTES IN CERTIFICATE TRUSTEE'S NAME. The
Certificate Trustee agrees that all Notes and Eligible Investments, if any,
shall be issued in the name of the Certificate Trustee or its nominee, on behalf
of the Certificate Issuer, and held by the Certificate Trustee, or, if not so
held, the Certificate Trustee or its nominee, on behalf of the Certificate
Issuer, shall be reflected as the owner of such Notes or Eligible Investments,
as the case may be,
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in the register of the issuer of such Notes or Eligible Investments. In no event
shall the Certificate Trustee invest in, or hold, Notes or Eligible Investments
in a manner that would cause the Certificate Trustee not to have the ownership
interest in such Notes or Eligible Investments under the applicable provisions
of the Uniform Commercial Code in effect where the Certificate Trustee holds
such Notes or Eligible Investments or other applicable law then in effect.
Section 6.14. REPRESENTATIONS AND WARRANTIES OF CERTIFICATE TRUSTEE. The
Certificate Trustee hereby represents and warrants that:
(a) the Certificate Trustee is validly existing as a state banking
institution in good standing under the laws of the State of New York;
(b) the Certificate Trustee has full power, authority and legal right
to execute, deliver and perform this Certificate Indenture and the Basic
Documents to which the Certificate Trustee is a party and has taken all
necessary action to authorize the execution, delivery, and performance by
it of this Certificate Indenture and such Basic Documents; and
(c) when delivered by the Certificate Trustee, the Certificates will
have been duly executed by the Delaware Trustee on behalf of the
Certificate Issuer and duly authenticated by the Certificate Trustee.
Section 6.15. WITHHOLDING TAXES; INFORMATION REPORTING. The Certificate
Trustee, as trustee for the assets of a grantor trust, shall exclude and
withhold from each distribution of principal and interest and other amounts due
hereunder or under the Certificates any and all withholding taxes applicable
thereto as required by law. The Certificate Trustee agrees that it will act as
such withholding agent and, in connection therewith, whenever any present or
future taxes or similar charges are required to be withheld with respect to any
amounts payable in respect of the Certificates, to withhold such amounts and
timely pay the same to the appropriate authority in the name of and on behalf of
the Certificateholders, that it will file any necessary withholding tax returns
or statements when due, and that, as promptly as possible after the payment
thereof, it will deliver to each Certificateholder appropriate documentation
showing the payment thereof, together with such additional documentary evidence
as such Certificateholders may reasonably request from time to time. The
Certificate Trustee agrees to file any other information reports as it may be
required to file with respect to taxes. For purposes of reporting on Internal
Revenue Service Form 1041 (and any statement attached thereto) or any successor
form thereto, the Certificate Trustee will separately set forth information
reported with respect to each Class of Certificates.
ARTICLE VII
SUPPLEMENTAL CERTIFICATE INDENTURES
-----------------------------------
Section 7.01. SUPPLEMENTAL CERTIFICATE INDENTURES WITHOUT CONSENT OF
CERTIFICATEHOLDERS. Without the consent of Certificateholders, the Certificate
Issuer (with the prior written approval of the Note Issuer) may, and the
Certificate Trustee (subject to Section 7.03) shall, at any time
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and from time to time enter into one or more indentures supplemental hereto, in
form satisfactory to the Certificate Trustee, for any of the following purposes:
(a) to add to the covenants of the Certificate Issuer for the benefit
of the Certificateholders, or to surrender any right or power herein
conferred upon the Certificate Issuer;
(b) to correct or supplement any provision herein or in any
supplemental certificate indenture that may be defective or inconsistent
with any other provision herein or in any supplemental certificate
indenture or to make any other provisions with respect to matters or
questions arising under this Certificate Indenture; PROVIDED, HOWEVER, that
any such action shall not adversely affect in any material respect the
interests of the Certificateholders;
(c) to cure any ambiguity or correct any mistake; or
(d) to qualify, if necessary, this Certificate Indenture (including
any supplemental certificate indenture) under the Trust Indenture Act, or
under any similar federal statute hereafter enacted, and to add to this
Certificate Indenture such other provisions as may be expressly permitted
by the Trust Indenture Act, excluding, however, the provisions referred to
in Section 316(a)(2) of the Trust Indenture Act as in effect at the date as
of which this instrument was executed or any corresponding provision in any
similar federal statute hereafter enacted.
Section 7.02. SUPPLEMENTAL CERTIFICATE INDENTURES WITH CONSENT OF
CERTIFICATEHOLDERS. With the consent of the Certificateholders holding
Certificates representing not less than a majority of the aggregate Outstanding
Amount of Certificates of each Class affected thereby, by Act of said
Certificateholders delivered to the Certificate Issuer, the Note Trustee and the
Certificate Trustee, the Certificate Issuer (with the prior written approval of
the Note Issuer) may, and the Certificate Trustee (subject to Section 7.03)
shall, enter into an indenture or indentures supplemental hereto for the purpose
of adding any provisions to or changing in any manner or eliminating any of the
provisions of this Certificate Indenture or of modifying in any manner the
rights and obligations of the Holders of Certificates of each such Class under
this Certificate Indenture; PROVIDED, HOWEVER, that no such supplemental
indenture shall, without the consent of the Certificateholder of each
Outstanding Certificate affected thereby:
(a) reduce in any manner the amount of, or delay the timing of, any
receipt by the Certificate Trustee of payments on the Notes or
distributions that are required to be made herein on any Certificate, or
change any date of payment on any Certificate, or change the place of
payment where, or the coin or currency in which, any Certificate is
payable, or impair the right to institute suit for the enforcement of any
such payment or distribution on or after the Distribution Date, Special
Distribution Date or other date specified herein applicable thereto;
(b) permit the disposition of any Note in the Trust Property except as
permitted by this Certificate Indenture, or otherwise deprive any Holder of
Certificates of the benefit of the ownership of the Notes of the
corresponding Class in the Trust;
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(c) reduce the percentage of the aggregate Outstanding Amount of the
Certificates of any Class that is required for any such supplemental
indenture, or reduce such percentage required for any waiver or consent (of
compliance with certain provisions of this Certificate Indenture or certain
defaults hereunder and their consequences) provided for in this Certificate
Indenture;
(d) modify any of the provisions of this Section, except to increase
any percentage set forth herein or to provide that certain other provisions
of this Certificate Indenture cannot be modified or waived without the
consent of the Holder of each Certificate affected thereby; or
(e) adversely affect the status of the Trust as a grantor trust for
federal income tax purposes.
It shall not be necessary for any Act of Certificateholders under this
Section to approve the particular form of any proposed supplemental certificate
indenture, but it shall be sufficient if such Act shall approve the substance
thereof. The Certificate Issuer shall give each Rating Agency five Business Days
prior written notice of any such proposed supplemental certificate indenture.
Promptly after the execution by the Certificate Issuer and the Certificate
Trustee of any supplemental certificate indenture pursuant to this Section, the
Certificate Trustee shall mail to the Holders of the Certificates to which such
supplemental certificate indenture relates a notice setting forth in general
terms the substance of such supplemental certificate indenture. Any failure of
the Certificate Trustee to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such supplemental
certificate indenture.
Section 7.03. DOCUMENTS AFFECTING IMMUNITY OR INDEMNITY. If in the opinion
of the Certificate Trustee any document required to be executed by it pursuant
to the terms of Section 7.01 or 7.02 adversely affects any interest, right,
duty, immunity or indemnity in favor of the Certificate Trustee under this
Certificate Indenture, the Certificate Trustee may in its discretion decline to
execute such document.
Section 7.04. EXECUTION OF SUPPLEMENTAL CERTIFICATE INDENTURES. In
executing, or accepting the additional trusts created by, any supplemental
certificate indenture permitted by this Article or the modifications thereby of
the trusts created by this Certificate Indenture, the Certificate Trustee shall
be entitled to receive, and shall be fully protected in relying upon, an Opinion
of Counsel stating that the execution of such supplemental certificate indenture
is authorized or permitted by this Certificate Indenture.
Section 7.05. EFFECT OF SUPPLEMENTAL CERTIFICATE INDENTURES. Upon the
execution of any supplemental certificate indenture under this Article, this
Certificate Indenture shall be modified in accordance therewith, and such
supplemental certificate indenture shall form a part of this Certificate
Indenture for all purposes; and every Holder of any Certificate theretofore or
thereafter authenticated and delivered hereunder shall be bound thereby.
Section 7.06. CONFORMITY WITH TRUST INDENTURE ACT. Every supplemental
certificate indenture executed pursuant to this Article shall conform to the
requirements of the Trust Indenture Act as then in effect.
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Section 7.07. REFERENCE IN CERTIFICATES TO SUPPLEMENTAL CERTIFICATE
INDENTURES. Certificates authenticated and delivered after the execution of any
supplemental certificate indenture pursuant to this Article may bear a notation
in form approved by the Certificate Trustee as to any matter provided for in
such supplemental certificate indenture; and, in such case, suitable notation
may be made upon Outstanding Certificates after proper presentation and demand.
ARTICLE VIII
AMENDMENTS AND SUPPLEMENTS TO NOTES, NOTE INDENTURE
---------------------------------------------------
AND OTHER BASIC DOCUMENTS
-------------------------
Section 8.01. AMENDMENTS AND SUPPLEMENTS TO NOTES, NOTE INDENTURE AND OTHER
BASIC DOCUMENTS. In the event that the Certificate Issuer or the Certificate
Trustee, as holder of the Notes in trust for the benefit of the Holders of
Certificates of the corresponding Class, receives a request for a consent to any
amendment, modification, waiver or supplement under the Notes, the Note
Indenture or any other Basic Document to which the Certificate Issuer or the
Certificate Trustee is a party, the Certificate Issuer shall forward such
request for consent to the Certificate Trustee, and the Certificate Trustee
shall forthwith send a notice of such proposed amendment, modification, waiver
or supplement, to each Holder of Certificates of such Class registered on the
Certificate Register as of such date. The Certificate Trustee shall request from
such Certificateholders directions as to (a) whether or not the Certificate
Trustee should take or refrain from taking any action that a holder of such Note
has the option to direct, (b) whether or not to give or execute or direct the
Certificate Issuer to give or execute any waivers, consents, amendments,
modifications or supplements as a holder of such Note and (c) how to vote such
Note if a vote has been called for with respect thereto; PROVIDED, HOWEVER, in
the case of any change to the terms of, or modification to, the Notes, the
Certificateholders may not direct any such action to be taken or direct whether
or not to give or execute any such waiver, consent, amendment, modification or
supplement that is not pursuant to the original terms of the Notes, unless the
Certificate Trustee obtains an Opinion of Counsel at the expense of the
Certificate Issuer of independent tax counsel to the effect that after any such
action, waiver, consent, amendment, modification or supplement the Trust will
continue to be treated as a "grantor trust" for federal income tax purposes.
Provided such a request for Certificateholder direction shall have been made, in
directing any action or casting any vote or giving any consent as the holder of
the Notes, the Certificate Trustee shall vote or consent with respect to such
Notes in the same proportion as the Certificates of the corresponding Class were
actually voted by Acts of the Holders thereof delivered to the Certificate
Trustee prior to two Business Days before the Certificate Trustee takes such
action or casts such vote or gives such consent.
ARTICLE IX
SATISFACTION AND DISCHARGE
--------------------------
Section 9.01. SATISFACTION AND DISCHARGE OF CERTIFICATE INDENTURE. This
Certificate Indenture shall cease to be of further effect with respect to the
Certificates, and the Certificate Trustee, on reasonable demand of and at the
expense of the Certificate Issuer, shall execute proper instruments
acknowledging satisfaction and discharge of this Certificate Indenture with
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respect to the Certificates, upon the distribution to all Holders of
Certificates and the Certificate Trustee of all amounts required to be
distributed to them pursuant to this Certificate Indenture and the disposition
of all property held as part of the Trust Property. The Certificate Issuer shall
pay or provide for the payment of all remaining liabilities of the Certificate
Trustee, but solely from amounts payable by the Note Issuer under the Fee and
Indemnity Agreement.
Notice of any distribution pursuant to the paragraph above shall be mailed
promptly by the Certificate Trustee to Holders of Certificates then outstanding.
Such notice shall specify the Distribution Date or Special Distribution Date, as
the case may be, upon which the Holders of Certificates may surrender their
Certificates to the Certificate Trustee for payment of the final distribution
and cancellation. Such notice shall be mailed (a) if with respect to a final
distribution, as soon as practicable following receipt of notice from the Note
Trustee of a final payment on a corresponding Note, (b) if with respect to a
Special Payment other than a Special Payment constituting a redemption, not
earlier than the 60th day and not later than the 20th day next preceding such
final distribution or (c) if with respect to a Special Payment constituting a
redemption of Notes, then in accordance with the provisions of the relevant
Section of Article IV hereof. Such notice shall specify (a) the Distribution
Date or Special Distribution Date, as the case may be, upon which the proposed
final payment of the Certificates will be made upon presentation and surrender
of such Certificates at the office or agency of the Certificate Trustee therein
specified, (b) the amount of any such proposed final payment and (c) that the
Record Date otherwise applicable to such Distribution Date or the Special Record
Date otherwise applicable to such Special Distribution Date, as the case may be,
is not applicable, payments being made only upon presentation and surrender of
the Certificates at the office or agency of the Certificate Trustee therein
specified. The Certificate Trustee shall give such notice to the Certificate
Registrar at the time such notice is given to Holders of Certificates. Upon
presentation and surrender of such Certificates, the Certificate Trustee shall
cause to be distributed to the Holders thereof amounts distributable thereon on
such Distribution Date or Special Distribution Date, as the case may be,
pursuant to Section 4.02.
In the event that all of the Holders of Certificates shall not surrender
their Certificates for cancellation within six months after the date specified
in the above mentioned written notice, the Certificate Trustee shall give a
second written notice to the remaining Holders of such Certificates to surrender
their Certificates for cancellation and receive the final distribution with
respect thereto. In the event that any money held by the Certificate Trustee for
the payment of distributions on the Certificates shall remain unclaimed for two
years (or such lesser time as the Certificate Trustee shall be satisfied, after
60 days' notice from the Certificate Issuer (with the prior written approval of
the Note Issuer), is one month prior to the escheat period provided under
applicable law) after the final distribution date with respect thereto, the
Certificate Trustee shall pay such money to the Note Trustee for deposit into
the collection account relating to the related Notes or, if such collection
account no longer exists, to the Note Issuer and the Certificate Trustee or Note
Issuer shall give written notice thereof to the Note Trustee, the Note Issuer
and the Certificate Issuer.
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ARTICLE X
MISCELLANEOUS PROVISIONS
------------------------
Section 10.01. COMMONWEALTH PLEDGE; CERTIFICATES AND NOTES NOT OBLIGATION
OF THE COMMONWEALTH OF MASSACHUSETTS, AGENCIES OR SELLER.
(a) The Certificate Issuer hereby finds and determines, and hereby
represents and warrants, that it constitutes a "special purpose trust" and a
"financing entity" under Section 1H(a) of the Statute, and that the Certificates
constitute "electric rate reduction bonds" under Section 1H(a) of the Statute
and that the Holders of the Certificates are entitled to the rights and benefits
thereunder. Pursuant to Section 1H(b)(3) of the Statute, The Commonwealth of
Massachusetts pledges and agrees with the Note Issuer, the Certificate Issuer
and the Holders of the Certificates (the "Commonwealth Pledge") as follows:
[T]he [C]ommonwealth [of Massachusetts] does hereby pledge and agree
with the owners of the transition property and holders of electric
rate reduction bonds that the [C]ommonwealth [of Massachusetts] shall
not (i) alter the provisions of this chapter which make the transition
charges imposed by the financing order irrevocable and binding or (ii)
limit or alter the reimbursable transition costs amounts, transition
property, financing orders, and all rights thereunder until the
electric rate reduction bonds, together with the interest thereon, are
fully met and discharged.
Further, the Certificate Issuer does hereby pledge and agree with the Note
Issuer and the Holders of the Certificates that it will not act in a manner
inconsistent with the Commonwealth Pledge and will not take any action that
would impair any rights of the Note Issuer or the Holders of the Certificates or
the Notes, the Transition Property or the Certificates. The Certificate Issuer
hereby further agrees to treat the Notes as debt of the Note Issuer, secured by,
among other things, the Transition Property and the equity of the Note Issuer on
deposit in the Capital Subaccount, for all purposes.
(b) Each Certificate represents a fractional undivided beneficial interest
in a corresponding Class of Notes and the proceeds thereof. The Certificates and
the Notes do not represent an interest in or obligation of The Commonwealth of
Massachusetts, the Agencies, any other governmental agency or instrumentality or
the Seller or any of its affiliates. None of the Certificates, the Notes or the
underlying Transition Property will be guaranteed or insured by The Commonwealth
of Massachusetts, the Agencies, the Certificate Issuer or any other governmental
agency or instrumentality or by the Seller or its affiliates.
Neither the full faith and credit nor the taxing power of The Commonwealth
of Massachusetts, the Agencies or any other governmental agency or
instrumentality is pledged to the payment of the principal of, purchase price
of, or interest on, the Certificates or the Notes, or to the payments in respect
of the Transition Property, nor are The Commonwealth of Massachusetts, the
Agencies or any other governmental agency or instrumentality in any manner
obligated to make any appropriation for the payment thereof.
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Section 10.02. LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS. The death or
incapacity of any Certificateholder shall not operate to terminate this
Certificate Indenture, the Declaration of Trust or the Certificate Issuer, nor
entitle such Certificateholder's legal representatives or heirs to claim an
accounting or to take any action or commence any proceeding in any court for a
partition or winding up of the Certificate Issuer, nor otherwise affect the
rights, obligations, and liabilities of the parties hereto or any of them.
Section 10.03. NO RECOURSE TO CERTIFICATE ISSUER. Notwithstanding any
provision of this Certificate Indenture or any supplemental certificate
indenture to the contrary, Holders shall have no recourse against the
Certificate Issuer or the Agencies, but shall look only to the Trust Property
with respect to any amounts due to the Holders hereunder and under the
Certificates.
Section 10.04. CERTIFICATES NONASSESSABLE AND FULLY PAID. Pursuant to
Section 3803(a) of the Business Trust Statute, Certificateholders shall be
entitled to the same limitation of personal liability extended to stockholders
of private corporations for profit organized under the General Corporation law
of the State of Delaware. Certificateholders shall not be personally liable for
obligations of the Certificate Issuer, the interests in the Certificate Issuer
represented by the Certificates shall be nonassessable for any losses or
expenses of the Certificate Issuer or for any reason whatsoever, and upon
authentication of the Certificates by the Certificate Trustee pursuant to
Section 2.04 the Certificates are and shall be deemed fully paid and
non-assessable. No Certificateholder shall have any right (except as expressly
provided herein) to vote or in any manner otherwise control the operation and
management of the Trust Property, the Certificate Issuer, or the obligations of
the parties hereto, nor shall anything set forth herein, or contained in the
terms of the Certificates, be construed so as to constitute the
Certificateholders from time to time as partners or members of an association.
Section 10.05. NOTICES.
(a) Unless otherwise specifically provided herein, all notices, directions,
consents and waivers required under the terms and provisions of this Certificate
Indenture shall be in English and in writing, and any such notice, direction,
consent or waiver may be given by United States mail, courier service, facsimile
transmission or electronic mail (confirmed by telephone, United States mail or
courier service in the case of notice by facsimile transmission or electronic
mail) or any other customary means of communication, and any such notice,
direction, consent or waiver shall be effective when delivered, or if mailed,
three days after deposit in the United States mail with proper postage for
ordinary mail prepaid,
if to the Agencies, to:
Massachusetts Development Finance Agency
75 Federal Street
Boston, Massachusetts 02110
Attention: General Counsel
Facsimile: (617) 727-8741
Telephone: (617) 451-2477
and
45
<PAGE> 50
Massachusetts Health and Educational Facilities Authority
99 Summer Street
10th Floor
Boston, Massachusetts 02110
Attention: General Counsel
Facsimile: (617) 737-8366
Telephone: (617) 737-8377
if to the Certificate Issuer, to:
The Bank of New York (Delaware), as Delaware Trustee for the
Massachusetts RRB Special Purpose
Trust BEC-1
c/o The Bank of New York
101 Barclay Street
Floor 12 East
New York, New York 10286
Attention: Asset Backed Finance Unit
Facsimile: (212) 815-5544
Telephone: (212) 815-5286
(with copies to the Agencies at the addresses listed herein)
if to the Certificate Trustee, to:
The Bank of New York
101 Barclay Street
Floor 12 East
New York, New York 10286
Attention: Asset Backed Finance Unit
Facsimile: (212) 815-5544
Telephone: (212) 815-5286
if to the Delaware Trustee, to:
The Bank of New York (Delaware)
c/o The Bank of New York
101 Barclay Street
Floor 12 East
New York, New York 10286
Attention: Asset Backed Finance Unit
Facsimile: (212) 815-5544
Telephone: (212) 815-5286
46
<PAGE> 51
if to the Note Issuer, to:
BEC Funding LLC
800 Boylston Street, 35th Floor
Boston, Massachusetts 02199
Attention: President
Facsimile: (617) 424-2605
Telephone: (617) 369-6000
if to the Note Trustee, to:
The Bank of New York
101 Barclay Street
Floor 12 East
New York, New York 10286
Attention: Asset Backed Finance Unit
Facsimile: (212) 815-5544
Telephone: (212) 815-5286
if to the Rating Agencies, to:
Standard & Poor's Ratings Services
55 Water Street, 40th Floor
New York, New York 10041
Attention: Asset Backed Surveillance Department
Facsimile: (212) 438-2655
Telephone: (212) 438-2000
Moody's Investors Service
99 Church Street
New York, New York 10007
Attention: ABS Monitoring Department
Facsimile: (212) 553-0573
Telephone: (212) 553-3686
Fitch IBCA, Inc.
One State Street Plaza
New York, New York 10004
Attention: Commercial Asset Backed Securities
Facsimile: (212) 908-0355
Telephone: (212) 908-0200
and
47
<PAGE> 52
Duff & Phelps Credit Rating Co.
17 State Street, 12th Floor
New York, New York 10004
Attention: Asset Backed Securities
Facsimile: (212) 908-0222
Telephone: (212) 908-0200
(b) The Certificate Issuer, the Certificate Trustee, the Note Issuer or the
Note Trustee, by notice to the others, may designate additional or different
addresses for subsequent notices or communications.
(c) Any notice or communication to Certificateholders shall be mailed by
first-class mail to the addresses for each Certificateholder shown on the
Certificate Register kept by the Certificate Registrar. Failure so to mail a
notice or communication or any defect in such notice or communication shall not
affect its sufficiency with respect to other Certificateholders.
(d) If a notice or communication is mailed in the manner provided above
within the time prescribed, it is conclusively presumed to have been duly given,
whether or not the addressee receives it.
(e) If the Certificate Issuer mails a notice or communication to the
Certificateholders, it shall mail a copy to the Certificate Trustee, to each
Paying Agent and to the Note Issuer at the same time.
(f) Notwithstanding the foregoing, all communications or notices to the
Certificate Trustee shall be deemed to be given only when received by a
Responsible Officer of the Certificate Trustee.
Section 10.06. GOVERNING LAW. THIS CERTIFICATE INDENTURE SHALL BE GOVERNED
AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAW OF THE STATE OF DELAWARE
WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAW.
Section 10.07. SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, agreements, provisions or terms of this Certificate Indenture shall
be for any reason whatsoever held invalid, then such covenants, agreements,
provisions or terms shall be deemed severable from the remaining covenants,
agreements, provisions or terms of this Certificate Indenture and shall in no
way affect the validity or enforceability of the other provisions of this
Certificate Indenture, or of the Certificates or the rights of the
Certificateholders thereof.
Section 10.08. CONFLICT WITH TRUST INDENTURE ACT. If any provision hereof
limits, qualifies or conflicts with another provision hereof that is required to
be included in this Certificate Indenture by any of the provisions of the Trust
Indenture Act, such required provision shall control.
The provisions of Sections 310 through 317 of the Trust Indenture Act that
impose duties on any Person (including the provisions automatically deemed
included herein unless expressly
48
<PAGE> 53
excluded by this Certificate Indenture) are a part of and govern this
Certificate Indenture, whether or not physically contained herein.
Section 10.09. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and
Section headings herein and in the Table of Contents are for convenience only
and shall not affect the construction hereof.
Section 10.10. SUCCESSORS AND ASSIGNS; DELEGATION.
(a) All covenants, agreements, representations and warranties in this
Certificate Indenture by the Certificate Trustee and the Certificate Issuer
shall bind and, to the extent permitted hereby, shall inure to the benefit of
and be enforceable by their respective successors and assigns, whether so
expressed or not.
(b) No party to this Certificate Indenture shall assign or delegate this
Certificate Indenture or all or any part of its rights or obligations hereunder
to any Person without the prior written consent of the other parties.
Section 10.11. BENEFITS OF CERTIFICATE INDENTURE. Nothing in this
Certificate Indenture or in the Certificates, express or implied, shall give to
any Person, other than the parties hereto and their successors hereunder, the
Certificateholders and, to the extent provided herein, the Note Issuer, any
benefit or any legal or equitable right, remedy or claim under this Certificate
Indenture.
Section 10.12. LEGAL HOLIDAYS. In any case where any date for any
distribution in respect of any Certificate shall not be a Business Day, then
(notwithstanding any other provision of this Certificate Indenture) payment need
not be made on such date, but may be made on the next succeeding Business Day
with the same force and effect as if made on such first date, and no interest
shall accrue during the intervening period.
Section 10.13. COUNTERPARTS. For the purpose of facilitating the execution
of this Certificate Indenture and for other purposes, this Certificate Indenture
may be executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and all of which counterparts
shall constitute but one and the same instrument.
Section 10.14. THE DELAWARE TRUSTEE. In performing its obligations
hereunder, the Delaware Trustee shall be entitled to the protections of the
declaration of Trust.
49
<PAGE> 54
IN WITNESS WHEREOF, the Certificate Issuer and the Certificate Trustee have
caused this Certificate Indenture to be duly executed by duly authorized
officers or representatives, all as of the day and year first above written.
MASSACHUSETTS RRB SPECIAL PURPOSE TRUST BEC-1
By: THE BANK OF NEW YORK (DELAWARE),
not in its individual capacity but solely as
Delaware Trustee
By:
----------------------------------------
Name:
Title:
THE BANK OF NEW YORK (DELAWARE),
not in its individual capacity but solely as
Delaware Trustee,
By:
----------------------------------------
Name:
Title:
THE BANK OF NEW YORK,
not in its individual capacity but solely as
Certificate Trustee,
By:
----------------------------------------
Name:
Title:
S-1
<PAGE> 55
EXHIBIT A
FORM OF CERTIFICATE
REGISTERED REGISTERED
NO. [ ] $ [ ]
MASSACHUSETTS RRB SPECIAL PURPOSE TRUST BEC-1
CLASS [ ]
RATE REDUCTION CERTIFICATE
SCHEDULED
FINAL FINAL
INTEREST DISTRIBUTION TERMINATION
RATE DATE DATE CUSIP
-------- ------------ ----------- -----
REGISTERED OWNER: Cede & Co.
PRINCIPAL AMOUNT:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUST OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
This Certificate evidences a fractional undivided beneficial interest in an
Underlying Note (as defined below) of the corresponding class issued by BEC
Funding LLC and the proceeds thereof, held by a trust, as more fully described
herein.
This Certificate does not represent an interest in or obligation of The
Commonwealth of Massachusetts, the Massachusetts Development Finance Agency or
Massachusetts Health and
<PAGE> 56
Educational Facilities Authority (collectively, the "Agencies"), any other
governmental agency or instrumentality or Boston Edison Company, a Massachusetts
corporation ("Boston Edison"), or any of its affiliates. None of the
Certificate, the Underlying Note or the underlying Transition Property (as
defined in the Certificate Indenture) will be guaranteed or insured by The
Commonwealth of Massachusetts, the Agencies, the Trust or any other governmental
agency or instrumentality or by Boston Edison or its affiliates.
Neither the full faith and credit nor the taxing power of The Commonwealth
of Massachusetts, either of the Agencies or any other governmental agency or
instrumentality is pledged to the payment of the principal of, purchase price
of, or interest on, this Certificate or the Underlying Note, or to the payments
in respect of the Transition Property, nor are The Commonwealth of
Massachusetts, either of Agencies or any other governmental agency or
instrumentality in any manner obligated to make any appropriation for the
payment thereof.
To the extent not otherwise defined herein, the capitalized terms used
herein have the meanings assigned to them in the Certificate Indenture.
THIS CERTIFIES THAT CEDE & CO., as nominee for The Depository Trust
Company, for value received, is the registered owner of a Principal Amount
(stated above) of nonassessable, fully-paid, fractional undivided beneficial
interest in the related Underlying Note and the proceeds thereof held by
Massachusetts RRB Special Purpose Trust BEC-1 (the "Trust"). The Trust is
created pursuant to a Declaration of Trust dated as of [ ], 1999 by The
Bank of New York (Delaware), as Delaware Trustee (the "Delaware Trustee"), and
the Agencies, acting jointly as Settlors thereunder pursuant to Chapter 164 of
the Massachusetts Acts of 1997 (the "Statute"). This Certificate is issued under
and is subject to the terms, provisions, and conditions of, a Certificate
Indenture dated as of [ ], 1999 (the "Certificate Indenture"), by and
among The Bank of New York (Delaware), as Delaware Trustee (the "Delaware
Trustee"), The Bank of New York, as Certificate Trustee (the "Certificate
Trustee"), and the Trust, a summary of certain of the pertinent provisions of
which is set forth below. This Certificate is one of the duly authorized class
of Certificates designated as "Massachusetts RRB Special Purpose Trust BEC-1
Rate Reduction Certificates, Class [ ], " (herein called the "Class [ ]
Certificates"). The Class [ ] Certificates are one of a class of
Certificates issued under the Certificate Indenture (such Class [ ]
Certificates, together with other Certificates heretofore or hereafter issued
under the Certificate Indenture being herein called the "Certificates"). The
holder of this Certificate (the "Holder"), by virtue of its acceptance hereof,
assents and agrees to be bound by the terms of the Certificate Indenture. This
Class [ ] Certificate represents a fractional undivided beneficial interest
in the note of the corresponding class (the "Underlying Note") issued by BEC
Funding LLC, as Note Issuer, together with the proceeds of the Underlying Note.
The Underlying Note is secured by a security interest in the property right
created under the Statute, pursuant to the order of the Massachusetts Department
of Telecommunications and Energy, DTE-98-118, issued on April 2, 1999, as
further clarified by the Order on the Agencies' Motion for Clarification dated
May 21, 1999 (collectively, the "Financing Order"), representing the irrevocable
right of Boston Edison or its assignee to be paid the amount that is determined
in the Financing Order through the collection of certain usage-
S-2
<PAGE> 57
based, per kilowatt hour charges, as adjusted from time to time, payable by
retail users, without regard to class, of Boston Edison's distribution system
within its geographic service territory as in effect on July 1, 1997, together
with certain related collateral, all as more fully described in the Note
Indenture.
The aggregate principal amount of all Certificates issued under the
Certificate Indenture equals the aggregate principal amount of the Underlying
Notes, and all such Certificates are and will be equally secured by the pledge
and covenants made therein, except as otherwise expressly provided or permitted
in the Certificate Indenture.
Subject to and in accordance with the terms of the Certificate Indenture,
there will be distributed on each March 15 and September 15 of each year or, if
any such day is not a Business Day, the next succeeding Business Day (each, a
"Distribution Date"), commencing on March 15, 2000 to the person in whose name
this Certificate is registered at the close of business on the last Business Day
immediately preceding the related Distribution Date or, if Definitive
Certificates are issued, the last day of the immediately preceding calendar
month (each, a "Record Date"), such Holder's fractional undivided interest in
the payments made on the Underlying Note due on the related Payment Date, the
receipt of which has been confirmed by the Certificate Trustee. Subject to and
in accordance with the terms of the Certificate Indenture, in the event that a
Special Payment on the Underlying Note is received by the Certificate Trustee,
from funds then available to the Certificate Trustee, there will be distributed
on the applicable Special Distribution Date, to the Person in whose name this
Certificate is registered on the Record Date preceding the Special Distribution
Date, as applicable, such Holder's fractional undivided share of such amount.
The Special Distribution Date will be determined as provided in the Certificate
Indenture. The Certificate Trustee will mail notice of each Special Payment and
the related Special Distribution Date to the Holder as provided in the
Certificate Indenture.
Distributions on this Certificate will be made as provided in the
Certificate Indenture by the Certificate Trustee by wire transfer or check
mailed to the Holder of record in the Certificate Register without the
presentation or surrender of this Certificate or the making of any notation
hereon, except that with respect to Certificates registered on the Record Date
in the name of the nominee of the Clearing Agency (initially, such nominee to be
Cede & Co.), payments will be made by wire transfer in immediately available
funds to the account designated by such nominee. Except as otherwise provided in
the Certificate Indenture and notwithstanding the above, the final distribution
on this Certificate will be made after due notice by the Certificate Trustee of
the pendency of such distribution and only upon presentation and surrender of
this Certificate at the office of the Paying Agent or the office or agency
maintained for that purpose by the Certificate Trustee in The City of New York.
Subject to and in accordance with the terms of the Certificate Indenture,
the Trust has represented and warranted under the Certificate Indenture that the
Trust constitutes a "special purpose trust" and a "financing entity" under
Section 1H(a) of the Statute, and that the Certificates constitute "electric
rate reduction bonds" under Section 1H(a) of the Statute and that the Holders
are entitled to the rights and benefits thereunder. Pursuant to Section 1H(b)(3)
of the
S-3
<PAGE> 58
Statute, The Commonwealth of Massachusetts, has pledged and agreed with the Note
Issuer, the Trust and the Holders (the "Commonwealth Pledge") as follows:
[T]he [C]ommonwealth [of Massachusetts] does hereby pledge and agree
with the owners of the transition property and holders of electric
rate reduction bonds that the [C]ommonwealth [of Massachusetts] shall
not (i) alter the provisions of this chapter which make the transition
charges imposed by the financing order irrevocable and binding or (ii)
limit or alter the reimbursable transition costs amounts, transition
property, financing orders, and all rights thereunder until the
electric rate reduction bonds, together with the interest thereon, are
fully met and discharged.
In addition, the Trust has pledged and agreed with the Note Issuer and the
Holders that it will not act in a manner inconsistent with the Commonwealth
Pledge and will not take any action that would impair any rights of the Note
Issuer or the Holders in the Notes, the Transition Property or the Certificates.
Reference is hereby made to the further provisions of this Certificate set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been executed by
an authorized officer of the Certificate Trustee, by manual signature, this
Certificate shall be entitled to any benefit under the Certificate Indenture or
any other Basic Document or be valid for any purpose.
THIS CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
DOMESTIC LAW OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAW.
Any reduction in the principal amount of any Certificate effected by any
distribution in respect of principal thereof shall be binding upon all Holders
of such Certificate and of any Certificate issued upon the registration or
transfer thereof or in lieu thereof, whether or not noted thereon.
It is expressly agreed and understood by the parties hereto that (a) this
Certificate is executed by The Bank of New York (Delaware) and authenticated and
delivered by The Bank of New York, not individually or personally but solely as
Delaware Trustee and Certificate Trustee, respectively, on behalf of the Trust
in the exercise of the powers and authority concerned and vested in them, (b)
the representations, undertakings and agreements herein made by the Delaware
Trustee and Certificate Trustee on behalf of the Trust are made and intended not
as personal representations, undertakings and agreements of either trustee, but
are made and intended for the purpose of binding only the Trust, (c) nothing
herein contained shall be construed as creating any liability on The Bank of New
York (Delaware) or The Bank of New
S-4
<PAGE> 59
York, individually or personally, to perform any covenant either expressed or
implied herein, except in their capacity as Delaware Trustee and Certificate
Trustee, respectively, all such liability being expressly waived by all Persons,
and (d) under no circumstances shall The Bank of New York (Delaware) or The Bank
of New York be personally liable for the payment of any indebtedness or expenses
of the Trust, or be personally liable for the breach or failure of any
obligation, representation, warranty or covenant made or undertaken by the Trust
under the Certificate Indenture.
S-5
<PAGE> 60
IN WITNESS WHEREOF, the Delaware Trustee on behalf of the Trust has caused
this Certificate to be duly executed.
MASSACHUSETTS RRB SPECIAL
PURPOSE TRUST BEC-1
By: THE BANK OF NEW YORK
(DELAWARE), not in its individual
capacity but solely as Delaware
Trustee
By:
-----------------------------------
Name:
Title:
S-6
<PAGE> 61
CERTIFICATE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
Dated: [ ]
This is one of the Certificates referred to in the within-mentioned
Certificate Indenture.
THE BANK OF NEW YORK, not in its
individual capacity but solely as
Certificate Trustee
By:
-----------------------------------
Name:
Title:
S-7
<PAGE> 62
[FORM OF REVERSE OF CERTIFICATE]
The Certificates are limited in right of payment, all as more
specifically set forth on the face hereof and in the Certificate Indenture. All
payments or distributions made to Holders under the Certificate Indenture shall
be made only from the Trust Property and only to the extent that the Certificate
Trustee shall have sufficient income or proceeds from the Trust Property to make
such payments in accordance with the terms of the Certificate Indenture. Each
Holder, by its acceptance hereof, agrees that it will look solely to the income
and proceeds from the Trust Property to the extent available for distribution to
such Holder as provided in the Certificate Indenture. This Certificate does not
purport to summarize the Certificate Indenture and reference is made to the
Certificate Indenture for information with respect to the interests, rights,
benefits, obligations, proceeds, and duties evidenced hereby. A copy of the
Certificate Indenture may be examined during normal business hours at the
principal office of the Certificate Trustee, and at such other places, if any,
designated by the Certificate Trustee, by any Holder upon request.
The Certificate Indenture permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights of the
Holders under the Certificate Indenture at any time by the Trust (with the prior
written approval of the Note Issuer) and the Certificate Trustee with the
consent of the Holders holding Certificates representing not less than a
majority of the aggregate Outstanding Amount of Certificates of each affected
Class issued by the Trust. Any such consent by the Holder of this Certificate
shall be conclusive and binding on such Holder and upon all future Holders of
this Certificate and of any Certificate issued upon the transfer hereof or in
exchange hereof or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Certificate Indenture also permits the amendment
thereof, in certain limited circumstances, without the consent of the Holders of
any of the Certificates.
As provided in the Certificate Indenture and subject to certain
limitations therein set forth, the transfer of this Certificate is registerable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies maintained by the Certificate Trustee in
its capacity as Certificate Registrar, or by any successor Certificate
Registrar, in the Borough of Manhattan, The City of New York, duly endorsed or
accompanied by a written instrument of transfer in form satisfactory to the
Certificate Trustee and the Certificate Registrar duly executed by the Holder
hereof or such Holder's attorney duly authorized in writing, and thereupon one
or more new Certificates of authorized denominations evidencing the same
aggregate fractional undivided beneficial interest in the Underlying Note will
be issued to the designated transferee or transferees.
The Certificates are issuable only as registered Certificates without
coupons in Minimum Denominations of $1,000 Original Principal Amount and
integral multiples thereof. As provided in the Certificate Indenture and subject
to certain limitations therein set forth, Certificates are exchangeable for new
Certificates of authorized denominations evidencing the same aggregate
fractional undivided beneficial interest in the Underlying Notes, as requested
by the Holder surrendering the same.
S-8
<PAGE> 63
THE HOLDER, BY PURCHASE OF THIS CERTIFICATE, WILL BE DEEMED TO REPRESENT
THAT SUCH PURCHASE WILL NOT RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, OR THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED, AND, IN EACH CASE, THE RULES AND REGULATIONS
THEREUNDER.
No service charge will be made for any such registration of transfer
or exchange, but the Certificate Trustee shall require payment of a sum
sufficient to cover any tax or governmental charge payable in connection
therewith.
The Certificate Trustee, the Certificate Registrar, and any agent of
the Certificate Trustee or the Certificate Registrar may treat the person in
whose name this Certificate is registered as the owner hereof for all purposes,
and neither the Certificate Trustee, the Certificate Registrar, nor any such
agent shall be affected by any notice to the contrary.
The obligations and responsibilities created by the Certificate
Indenture shall terminate with respect to the Certificates upon the distribution
to the Holders of all amounts required to be distributed to them pursuant to the
Certificate Indenture and the disposition of all property held as part of the
Trust Property, except certain indemnity obligations of the Note Issuer to the
Certificate Trustee under the Fee and Indemnity Agreement.
S-9
<PAGE> 1
EXHIBIT 4.3
================================================================================
MASSACHUSETTS DEVELOPMENT FINANCE AGENCY
ACTING JOINTLY WITH
MASSACHUSETTS HEALTH AND EDUCATIONAL FACILITIES AUTHORITY,
AS SETTLORS,
AND
THE BANK OF NEW YORK (DELAWARE),
AS DELAWARE TRUSTEE
----------------------------
DECLARATION OF TRUST
DATED AS OF [ ], 1999
----------------------------
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE.......................................................2
SECTION 1.1. Definitions................................................................................ 2
ARTICLE 2 ORGANIZATION.....................................................................................2
SECTION 2.1. Creation of Trust.......................................................................... 2
SECTION 2.2. Trust as Financing Entity.................................................................. 2
SECTION 2.3. Situs of the Trust......................................................................... 2
SECTION 2.4. Purposes and Powers........................................................................ 3
SECTION 2.5. Trust Property............................................................................. 3
SECTION 2.6. Issuance of Certificates................................................................... 4
SECTION 2.7. Organizational Expenses.................................................................... 4
SECTION 2.8. No Liability of the Agencies or Agency Personnel........................................... 4
SECTION 2.9. Independent Status......................................................................... 4
SECTION 2.10. Tax Treatment; Construction............................................................... 5
ARTICLE 3 DELIVERY OF CERTAIN DOCUMENTS....................................................................5
SECTION 3.1. Documents Relating to Issuance of Certificates............................................. 5
SECTION 3.2. Compliance with Securities Laws............................................................ 5
ARTICLE 4 THE DELAWARE TRUSTEE.............................................................................5
SECTION 4.1. Appointment................................................................................ 5
SECTION 4.2. Duties and Responsibilities................................................................ 5
SECTION 4.3. Prohibited Actions......................................................................... 6
SECTION 4.4. Acceptance of the Trusts................................................................... 6
SECTION 4.5. Limitation of Liability.................................................................... 6
SECTION 4.6. Compensation and Reimbursement; Indemnification............................................ 7
SECTION 4.7. Resignation................................................................................ 8
SECTION 4.8. Representations and Warranties of Delaware Trustee......................................... 8
SECTION 4.9. Reliance; Advice of Counsel................................................................ 9
SECTION 4.10. Delaware Trustee May Own Certificates.................................................... 10
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE AGENCIES..................................................10
SECTION 5.1. Representations and Warranties of Agencies................................................ 10
ARTICLE 6 TERMINATION OF DECLARATION......................................................................11
</TABLE>
-i-
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
SECTION 6.1. Termination of the Trust.................................................................... 11
ARTICLE 7 MISCELLANEOUS.....................................................................................11
SECTION 7.1. No Legal Title to Trust Property............................................................ 11
SECTION 7.2. Limitations on Rights of Others............................................................. 11
SECTION 7.3. Notices..................................................................................... 11
SECTION 7.4. Severability................................................................................ 13
SECTION 7.5. Amendments Without Consent of Holders....................................................... 13
SECTION 7.6. Amendments With Consent of Holders.......................................................... 14
SECTION 7.7. Form of Amendments.......................................................................... 15
SECTION 7.8. Counterparts................................................................................ 15
SECTION 7.9. Successors.................................................................................. 15
SECTION 7.10. No Petition Covenant....................................................................... 15
SECTION 7.11. Headings................................................................................... 16
SECTION 7.12. Governing Law.............................................................................. 16
</TABLE>
-ii-
<PAGE> 4
DECLARATION OF TRUST dated as of [ ], 1999 (as amended or restated from
time to time, the "Declaration"), by the Massachusetts Development Finance
Agency and the Massachusetts Health and Educational Facilities Authority, acting
jointly hereunder as Settlors pursuant to Chapter 164 of the Massachusetts Acts
of 1997 (the "Statute") (each an "Agency," and, collectively, the "Agencies")
and The Bank of New York (Delaware), a Delaware banking corporation, acting
hereunder not in its individual or corporate capacity but solely as trustee
under the laws of the State of Delaware (the "Delaware Trustee").
RECITALS
Pursuant to the Statute, an electric company in The Commonwealth of
Massachusetts may obtain from the Massachusetts Department of Telecommunications
and Energy (the "DTE") a financing order (as defined in the Statute) permitting
such utility to recover a portion of its transition costs (as defined in the
Statute) through the issuance of electric rate reduction bonds (as defined in
the Statute). The Statute further empowers a special purpose trust (as defined
in the Statute) established by the Agencies to issue such electric rate
reduction bonds.
Boston Edison Company, a Massachusetts corporation ("Boston Edison"), has
applied for and received a financing order from the DTE, and has requested the
Agencies to establish a special purpose trust to issue electric rate reduction
bonds.
The Trust created hereby (the "Trust") shall constitute a special purpose
trust and shall be empowered to issue one series with one or more classes of
certificates constituting Massachusetts RRB Special Purpose Trust BEC-1 Rate
Reduction Certificates (the "Certificates"). All such Certificates shall be
issued pursuant to an indenture (the "Certificate Indenture"), by and between
the Trust and a trustee (the "Certificate Trustee"), initially designated as The
Bank of New York, and each class of Certificates shall represent fractional
undivided beneficial interests in the corresponding class of BEC Funding LLC
Notes (the "Notes") issued by BEC Funding LLC, a special purpose limited
liability company (the "Note Issuer") created by Boston Edison. The Certificate
Indenture and this Declaration shall together constitute the governing
instrument of the Trust. The Trust shall purchase the Notes from the Note Issuer
pursuant to a note purchase agreement (a "Note Purchase Agreement") relating to
the Notes. The Notes will be issued pursuant to an indenture (the "Note
Indenture"), by and between the Note Issuer and a trustee (the "Note Trustee"),
initially designated as The Bank of New York, and secured by a pledge of and
lien upon transition property (as defined in the Statute) purchased by the Note
Issuer from Boston Edison together with any other assets of the Note Issuer.
Boston Edison will service such transition property for the benefit of the Note
Issuer pursuant to a transition property servicing agreement (the "Servicing
Agreement"), between Boston Edison as servicer (in such capacity, together with
any successor servicer, the "Servicer") and the Note Issuer. The Declaration,
the Certificate Indenture, the Note Purchase Agreement, the Note Indenture, the
Servicing Agreement, the Fee and Indemnity Agreement defined and described in
Section 2.7 hereof, the Transition Property Purchase and Sale Agreement between
the Note Issuer and Boston Edison, as seller, relating to the purchase and sale
of the transition property described above, the Administration Agreement between
the Note Issuer and Boston Edison, as administrator, relating to the
administration of such transition property, and the Underwriting
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Agreement among the Trust, the Note Issuer, Boston Edison and certain
underwriters, relating to the underwriting of the Certificates, are herein
collectively referred to as the "Basic Documents."
THE AGENCIES AND THE DELAWARE TRUSTEE AGREE AS FOLLOWS:
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 DEFINITIONS. All references herein to "the Declaration" or
"this Declaration" are to this Declaration of Trust, all references herein to
the "Trust" are to the trust created hereunder, and all references herein to
Articles, Sections, subsections, Schedules and Exhibits are to Articles,
Sections, subsections, Schedules and Exhibits of this Declaration, unless
otherwise specified. All capitalized terms used herein and not otherwise defined
shall have the meanings set forth in the Recitals hereto.
ARTICLE 2
ORGANIZATION
SECTION 2.1 CREATION OF TRUST. The Trust created hereby shall be known as
the "Massachusetts RRB Special Purpose Trust BEC-1," in which name the Delaware
Trustee may conduct the business of the Trust, make and execute contracts and
other instruments on behalf of the Trust and sue and be sued on behalf of the
Trust. In addition, the Delaware Trustee may conduct the business of the Trust
in its own name, as trustee hereunder, to the extent deemed necessary or
appropriate by the Delaware Trustee, in its sole discretion; provided that the
Delaware Trustee may rely conclusively upon an opinion of counsel as to whether
any proposed action is necessary or appropriate. It is the intention that the
Trust shall constitute a not-for-profit business trust under the Delaware
Business Trust Act (being Chapter 38 of Title 12 of the Delaware Code, 12 Del.
C., ss. 3801 et seq., as the same may be amended from time to time and any
successor statute) (the "Business Trust Act") and that this Declaration
(together with the Certificate Indenture) shall constitute the governing
instrument of such business trust. The Delaware Trustee and the Certificate
Trustee shall file the Certificate of Trust, substantially in the form attached
hereto as Exhibit A, pursuant to ss. 3810 et seq. of the Business Trust Act in
connection with the formation of the Trust as a not-for-profit business trust
under the Business Trust Act. The fiscal year of the Trust shall be the calendar
year.
SECTION 2.2 TRUST AS FINANCING ENTITY. The Agencies hereby find and
determine, and hereby represent and warrant, that the Trust constitutes a
"special purpose trust" and a "financing entity" within the meaning of the
Statute, and that the Trust is being established to issue "electric rate
reduction bonds" within the meaning of the Statute.
SECTION 2.3 SITUS OF THE TRUST. The office of the Trust shall be in care of
the Delaware Trustee at the corporate trust office (the "Office") at White Clay
Center, Route 273, Newark,
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Delaware 19711 (although any notice, direction, consent or waiver given to the
Delaware Trustee hereunder may be given in care of the address set forth in
Section 7.3(a) hereof), which Office shall be located in Delaware, or at such
other address in Delaware as the Delaware Trustee may designate by written
notice to the Agencies, the Certificate Trustee, the Note Issuer, the Note
Trustee, the Servicer, and the holders of the Certificates, and the Trust shall
conduct its business in such Office, separate and apart from that of the
Agencies and their affiliates. If and to the extent required pursuant to the
provisions of the Business Trust Act, all bank accounts of the Trust maintained
by the Delaware Trustee, except those bank accounts maintained by the
Certificate Trustee, shall be located in the State of Delaware. Any bank
accounts of the Trust maintained by the Delaware Trustee that are not required
to be located in the State of Delaware by the Business Trust Act may be
maintained in Delaware or New York, or such other location as is acceptable to
the Agencies. The Trust shall not have any employees in any state other than
Delaware; provided, however, that nothing herein shall restrict or prohibit the
Delaware Trustee (in its individual capacity but not as Delaware Trustee) from
having employees within or without the State of Delaware. If and to the extent
required pursuant to the provisions of the Business Trust Act, payments shall be
received by the Trust only in Delaware, and payments shall be made by the Trust
only from Delaware, except as otherwise provided in the Basic Documents. To the
extent the Business Trust Act does not require that payments be received in and
paid from Delaware, to the extent consistent with such act and the Basic
Documents, payments may be received and made by the Trust in and from Delaware,
New York or such other location as is acceptable to the Agencies. To the extent
required pursuant to the provisions of the Business Trust Act, the Delaware
Trustee shall conduct the Trust's activities from Delaware, sign documents on
behalf of the Trust in Delaware and maintain business records on behalf of the
Trust in Delaware.
SECTION 2.4 PURPOSES AND POWERS. (a) The Trust is constituted solely for
the purpose of acquiring and holding the Notes and issuing the Certificates,
applying the proceeds of the Notes to the payment of the Certificates and
entering into and performing its obligations under each of the Basic Documents
to which it is a party (which functions the Delaware Trustee shall perform or
cause to be performed on behalf of the Trust), and, except as set forth herein,
the Delaware Trustee is not authorized or empowered to acquire any other
investments or engage in any other activities on behalf of the Trust and, in
particular, the Delaware Trustee is not authorized or empowered to do anything
that would cause the Trust to fail to qualify as a "grantor trust" for federal
income tax purposes.
(b) The Delaware Trustee shall have all rights and powers set forth herein
and, to the extent not inconsistent herewith, in the Business Trust Act with
respect to accomplishing the purposes of the Trust.
SECTION 2.5 TRUST PROPERTY.
(a) The Agencies hereby assign, transfer, convey and set over to the
Delaware Trustee on behalf of the Trust the sum of $1.00. The Delaware Trustee
hereby acknowledges receipt of such amount in trust from the Agencies, which
amount shall constitute the initial trust property.
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(b) Upon issuance of the Certificates and purchase of the Notes, the
holders of the Certificates shall become the sole and exclusive beneficial
owners of the Trust estate established hereby. The Delaware Trustee hereby
declares that it shall hold the Notes, the security interest in the transition
property (as defined in the Statute) securing the Notes, any other assets
acquired directly or indirectly from the Note Issuer and the proceeds therefrom
(the "Trust Property") in trust as herein provided for the benefit of the
holders of the Certificates, subject to the rights of such holders under the
Certificate Indenture, from and after such date until termination of the Trust
as herein provided, or under the Basic Documents.
(c) Legal title to the Trust Property shall be vested at all times in
the Trust as a separate legal entity except where applicable law in any
jurisdiction requires title to any part of the Trust Property to be vested in a
trustee or trustees, in which case title shall be deemed to be vested in the
Delaware Trustee, a co-trustee and/or a separate trustee, as the case may be.
SECTION 2.6 ISSUANCE OF CERTIFICATES. The Trust shall execute and deliver
the Certificates only upon satisfaction of the terms of the Certificate
Indenture. The Certificates of each Class shall represent undivided beneficial
interests in the assets of the Trust consisting of the Notes of the
corresponding Class and payments thereon, and shall be issued in accordance with
the terms of the Certificate Indenture. The Certificate Indenture shall be
deemed a part of this Declaration, as the governing instrument of the Trust. To
the extent that the provisions of this Declaration and the Certificate Indenture
conflict with respect to the issuance of the Certificates and the rights of the
holders thereof, the Certificate Indenture shall control.
SECTION 2.7 ORGANIZATIONAL EXPENSES. The Delaware Trustee shall be
reimbursed, but solely from amounts payable by the Note Issuer under a fee and
indemnity agreement (the "Fee and Indemnity Agreement"), for organizational
expenses of the Trust as they may arise. The Delaware Trustee shall have no
recourse against the Agencies or the Trust for the reimbursement of such
expenses.
SECTION 2.8 NO LIABILITY OF THE AGENCIES OR AGENCY PERSONNEL. No recourse
shall be had by the Delaware Trustee for any claim based on this Declaration,
the Certificates, the Notes or the Basic Documents against any member, director,
officer, employee, agent or attorney of the Agencies unless such claim is based
upon the bad faith, fraud or deceit of such person. No covenant, stipulation,
obligation or agreement of the Agencies contained in this Declaration shall be
deemed to be a covenant, stipulation, obligation or agreement of any present or
future member, director, officer, employee or agent of the Agencies in his or
her individual capacity, and any member, director, officer, employee, agent or
attorney of the Agencies executing and delivering or directing the execution and
delivery of the Certificates shall not be liable personally thereon or be
subject to any personal liability or accountability by reason of the issuance of
the Certificates.
SECTION 2.9 INDEPENDENT STATUS. The Trust and each of the Agencies each
covenant and agree to hold itself out to the public under its own name as a
separate and distinct entity and will each conduct its business so as not to
mislead others as to its identity. The Trust shall cause those financial
statements and other records required by law, or otherwise required, to be
prepared and maintained separate and apart from those of the Agencies.
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SECTION 2.10 TAX TREATMENT; CONSTRUCTION.
(a) It is the intention of the parties hereto that the Trust shall be
treated as a "grantor trust" for federal income tax purposes and all
transactions contemplated by this Declaration will be reported consistently with
such treatment.
(b) The provisions of this Declaration shall be construed, and the
affairs of the Trust shall be conducted, so as to achieve treatment of the Trust
as a "grantor trust" for federal income tax purposes. Accordingly,
notwithstanding any other provision hereof to the contrary, this Declaration
shall be construed to establish a class or classes of ownership interests, with
each class representing undivided beneficial interests in a separate specified
asset or set of assets of the Trust and facilitating the direct investment in
such assets by the holders of the Certificates. The assets of the Trust shall
consist of the Notes and other assets described in this Declaration, and the
Delaware Trustee shall have no power hereunder to vary the investment of the
holders of the Certificates.
ARTICLE 3
DELIVERY OF CERTAIN DOCUMENTS
SECTION 3.1 DOCUMENTS RELATING TO ISSUANCE OF CERTIFICATES. The Delaware
Trustee is hereby directed to execute and deliver on behalf of the Trust from
time to time and as instructed in writing by the Agencies, all Basic Documents
to which the Trust or the Delaware Trustee may be a party, including the
Certificate Indenture, and any amendment or supplement thereto, a Note Purchase
Agreement, the Fee and Indemnity Agreement, the Underwriting Agreement, and all
other documents and instruments as may be necessary or desirable to issue the
Certificates pursuant to the provisions of the Certificate Indenture and to
purchase the Notes pursuant to the Note Purchase Agreement.
SECTION 3.2 COMPLIANCE WITH SECURITIES LAWS. To the extent instructed in
writing by the Agencies, the Delaware Trustee is hereby authorized to take such
action as may be necessary or desirable to comply with applicable state and
federal securities laws in connection with the issuance of the Certificates or
the administration of the Trust.
ARTICLE 4
THE DELAWARE TRUSTEE
SECTION 4.1 APPOINTMENT. For valuable consideration received, it is
mutually covenanted and agreed that the Delaware Trustee has been and by this
document is, appointed to serve as the trustee of the Trust in the State of
Delaware pursuant to Section 3807 of the Business Trust Act.
SECTION 4.2 DUTIES AND RESPONSIBILITIES. It is understood and agreed that,
except as provided in Section 2.4 hereof, the duties and responsibilities of the
Delaware Trustee shall be limited to (a) executing and delivering on behalf of
the Trust all Basic Documents to which the Trust or the Delaware Trustee may be
a party and, to the extent required by Article 3 hereof or deemed appropriate by
the Delaware Trustee, all other documents and instruments referred to in
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Article 3 hereof, (b) accepting legal process served on the Trust in the State
of Delaware and (c) the execution and delivery of all certifications required to
be filed with the Secretary of State of the State of Delaware in order to form,
maintain and terminate the existence of the Trust under the Business Trust Act.
No implied covenants or obligations shall be read into this Declaration against
the Delaware Trustee.
SECTION 4.3 PROHIBITED ACTIONS. Except as otherwise expressed herein and as
permitted under the Basic Documents, the Delaware Trustee shall not (i) take any
action with respect to any election by the Trust to file an amendment to this
Declaration, (ii) amend, change, modify or terminate any Basic Document, or
(iii) sell the Notes, any other Trust Property or any interest therein.
SECTION 4.4 ACCEPTANCE OF THE TRUSTS. By the execution hereof, the Delaware
Trustee accepts the trusts created hereinabove.
SECTION 4.5 LIMITATION OF LIABILITY. Except as otherwise expressly required
by this Declaration, the Delaware Trustee shall not have any duty or liability
with respect to the administration of the Trust, the investment of the Trust's
property or the payment of dividends or other distributions of income or
principal to the holders of the Certificates. The Delaware Trustee shall not be
liable for the acts or omissions of the Certificate Trustee, nor shall the
Delaware Trustee be liable for supervising or monitoring the performance of the
duties and obligations of the Certificate Trustee. The Delaware Trustee shall
not be personally liable under any circumstances, except for its own willful
misconduct or gross negligence. In particular, but not by way of limitation:
(a) the Delaware Trustee shall not be personally liable for any error
of judgment made in good faith by any officer within the corporate trust
department of the Delaware Trustee who has been assigned to perform or provide
trustee functions or services on behalf of the Trust;
(b) no provision of this Declaration shall require the Delaware
Trustee to expend or risk its personal funds or otherwise incur any financial
liability in the performance of its rights or powers hereunder, if the Delaware
Trustee shall have reasonable grounds for believing that repayment of such funds
or indemnity satisfactory to it against such risk or liability is not reasonably
assured or provided to it;
(c) it is expressly understood and agreed by the parties hereto that
(i) this Declaration is executed and delivered by The Bank of New York
(Delaware), not individually or personally but solely as Delaware Trustee of the
Trust, in the exercise of the powers and authority conferred and vested in it,
(ii) the representations, undertakings and agreements herein made on the part of
the Trust are made and intended not as personal representations, undertakings
and agreements by The Bank of New York (Delaware), but are made and intended for
the purpose of binding only the Trust, (iii) nothing herein contained shall be
construed as creating any liability of The Bank of New York (Delaware),
individually or personally, to perform any covenant either expressed or implied
contained herein, all such liability, if any, being expressly waived by the
parties who are signatories to this Declaration and by any person claiming by,
through or under such parties and (iv) under no circumstances shall The Bank of
New York (Delaware) be personally liable for the payment of any indebtedness or
expenses of
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the Trust or be liable for the breach or failure of any obligation,
representation, warranty or covenant made or undertaken by or on behalf of the
Trust under this Declaration;
(d) the Delaware Trustee shall not be personally responsible for the
validity or sufficiency of this Declaration or the Certificates or for the due
execution hereof by the Agencies;
(e) in the exercise or administration of the trusts hereunder, the
Delaware Trustee (i) may act directly or through agents (including affiliates,
such as The Bank of New York), attorneys, custodians or nominees pursuant to
agreements entered into with any of them, and the Delaware Trustee shall not be
liable for the default or misconduct or supervision of such agents, attorneys,
custodians or nominees if such agents, attorneys, custodians or nominees shall
have been selected by the Delaware Trustee in good faith and (ii) may, at the
expense of the Note Issuer, consult with attorneys, accountants and other
skilled persons to be selected in good faith and employed by it, and it shall
not be liable for anything done, suffered or omitted in good faith by it in
accordance with the advice or opinion of any such attorneys, accountants or
other skilled persons;
(f) except as expressly provided in this Section 4.5, in accepting and
performing the trusts hereby created, the Delaware Trustee acts solely as
trustee for the Trust and not in its individual capacity, and all persons having
any claim against the Delaware Trustee by reason of the transactions
contemplated by this Declaration shall look only to the Trust's property for
payment or satisfaction thereof;
(g) the Delaware Trustee's sole duty with respect to the custody,
safekeeping and physical preservation of the Trust Property shall be to deal
with such property in a manner similar to the manner in which the Delaware
Trustee deals with similar property for its own account, subject to the
protections and limitations on liability afforded to the Delaware Trustee under
this Declaration;
(h) the Delaware Trustee shall have no duty or liability for or with
respect to the value, genuineness, existence or sufficiency of the Trust
Property or the payment of any taxes or assessments levied thereon or in
connection therewith;
(i) the Delaware Trustee shall not be liable for any interest on any
moneys received by it on behalf of the Trust except as the Delaware Trustee may
otherwise agree with the Agencies;
(j) moneys held by the Delaware Trustee on behalf of the Trust need
not be segregated from other moneys except as the Delaware Trustee may otherwise
agree with the Agencies or as otherwise required by law; and
(k) the Delaware Trustee shall have the right at any time to seek
instructions concerning the administration of the Trust from any court of
competent jurisdiction.
SECTION 4.6 COMPENSATION AND REIMBURSEMENT; INDEMNIFICATION.
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(a) Pursuant to a Fee and Indemnity Agreement, the Note Issuer has
agreed to pay, or cause to be paid, to the Delaware Trustee from time to time
compensation for its services and to reimburse it for its reasonable expenses
hereunder. The Delaware Trustee shall have no recourse against the Agencies or
against the Notes, the payments received thereon or the proceeds therefrom, for
the payment of such compensation or for the reimbursement of such expenses.
(b) Pursuant to a Fee and Indemnity Agreement, the Note Issuer has
agreed to indemnify, defend and hold harmless the Delaware Trustee and any of
the affiliates, officers, directors, employees and agents of the Delaware
Trustee (the "Delaware Trustee Indemnified Persons") from and against any and
all losses, claims, actions, suits, taxes, damages, costs, expenses (including
the reasonable fees and expenses of its counsel) and liabilities (including
liabilities under state or federal securities laws) of any kind and nature
whatsoever (collectively, "Delaware Trustee Expenses"), to the extent that such
Delaware Trustee Expenses arise out of or are imposed upon or asserted against
such Delaware Trustee Indemnified Persons with respect to the creation,
operation or termination of the Trust, the execution, delivery or performance of
this Declaration or the transactions contemplated hereby; provided, however,
that the Note Issuer is not, and shall not be, required to indemnify any
Delaware Trustee Indemnified Person for any Delaware Trustee Expenses that
result from the willful misconduct or gross negligence of such Delaware Trustee
Indemnified Person. It is stated in the Fee and Indemnity Agreement that the
obligations of the Note Issuer pursuant to the Fee and Indemnity Agreement to
indemnify the Delaware Trustee Indemnified Persons shall survive the termination
of this Declaration and the resignation or removal of the Delaware Trustee. The
Delaware Trustee is hereby authorized to execute the Fee and Indemnity Agreement
on behalf of the Trust and to enforce the terms thereof on its own behalf and on
behalf of the Trust.
(c) Notwithstanding anything to the contrary in this Declaration, the
Delaware Trustee shall have no recourse against the Agencies or the Trust
Property for payment of any amounts required to be paid to the Delaware Trustee
under this Section 4.6. The Delaware Trustee shall have the benefit of any lien
in its favor imposed by the Statute to secure payment of any amounts required to
be paid to the Delaware Trustee under this Section 4.6 and the Note Indenture
states that such amounts shall be paid to the Delaware Trustee thereunder in the
order of priority imposed by Section 8.02 thereof.
SECTION 4.7 RESIGNATION. The Delaware Trustee may resign upon 30 days'
prior written notice to the Certificate Trustee, the Agencies and the Trust;
provided, however, that a successor Delaware Trustee satisfactory to the
Agencies shall have been appointed and agreed to serve. If a successor Delaware
Trustee shall not have been appointed by the Agencies within such 30-day period,
the Delaware Trustee may apply to the Court of Chancery of the State of Delaware
for the appointment of a successor Delaware Trustee. Any successor Delaware
Trustee must satisfy the requirement of Section 3807(a) of the Business Trust
Act.
SECTION 4.8 REPRESENTATIONS AND WARRANTIES OF DELAWARE TRUSTEE. The Bank of
New York (Delaware) hereby represents and warrants to the other parties hereto
that:
(a) It is a banking corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware.
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(b) It has full power, authority and legal right to execute, deliver
and perform this Declaration, and has taken all necessary action to authorize
the execution, delivery and performance by it of this Declaration.
(c) The execution, delivery and performance by it of this Declaration
(i) do not violate any requirement of federal law or the law of the State of
Delaware governing its banking and trust powers or any order, writ, judgment or
decree of any court, arbitrator or governmental authority applicable to it or
any of its assets, (ii) do not violate any provision of its charter or by-laws,
and (iii) do not violate any provision of, or constitute, with or without notice
or lapse of time, a default under, or result in the creation or imposition of
any Lien on any properties included in the Trust pursuant to the provisions of
any mortgage, indenture, contract, agreement or other undertaking to which it is
a party, which violation, default or Lien could reasonably be expected to have a
materially adverse effect on its performance or its ability to perform its
duties as a Trustee under this Declaration or on the transactions contemplated
in this Declaration.
(d) Its execution, delivery and performance of this Declaration shall
not require the authorization, consent or approval of, the giving of notice to,
the filing or registration with, or the taking of any other action in respect
of, any governmental authority or agency regulating the banking and corporate
trust activities of banks or trust companies in the jurisdiction in which the
Trust was formed (except for the filing of the Certificate of Trust with the
Secretary of State of the State of Delaware).
(e) This Declaration has been duly executed and delivered by it and,
assuming due authorization, execution and delivery hereof by the other parties
hereto, constitutes the legal, valid and binding agreement of it, enforceable
against it in accordance with the terms of this Declaration, except as
enforceability may be limited by bankruptcy, insolvency, reorganization, and
other similar laws affecting the enforcement of creditors' rights in general and
by general principles of equity, regardless of whether such enforceability is
considered in a proceeding in equity or at law.
SECTION 4.9 RELIANCE; ADVICE OF COUNSEL.
(a) The Delaware Trustee shall incur no liability to anyone in acting
upon any signature, instrument, notice, resolution, request, consent, order,
certificate, report, opinion, bond or other document or paper reasonably
believed by it to be genuine and reasonably believed by it to be signed by the
proper party or parties and need not investigate any fact or matter pertaining
to or in any such document. The Delaware Trustee may accept a certified copy of
a resolution of the board of directors or other governing body of any corporate
party as conclusive evidence that such resolution has been duly adopted by such
body and that the same is in full force and effect unless and until the Delaware
Trustee receives a certified copy of a resolution of such board of directors or
other body revoking the same. As to any fact or matter the method of the
determination of which is not specifically prescribed herein, the Delaware
Trustee may for all purposes hereof rely on a certificate, signed by the
president or any vice president or by the treasurer or other authorized officers
of the relevant party, as to such fact or matter, and such certificate shall
constitute full protection to it for any action taken or omitted to be taken by
it in good faith in reliance thereon.
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(b) In the exercise or administration of the trusts hereunder and in
the performance of its duties and obligations under this Declaration and the
Basic Documents, the Delaware Trustee: (i) may, at the expense of the Note
Issuer or any other party, to the extent provided in the Fee and Indemnity
Agreement, act directly or through its agents, attorneys, custodians or nominees
(including, if necessary, the granting of a power of attorney to any of its
officers not otherwise authorized to execute and deliver any Basic Document,
Certificate or other documents related thereto and to take any action in
connection therewith on behalf of the Delaware Trustee) pursuant to agreements
entered into with any of them, and the Delaware Trustee shall not be liable for
the conduct or misconduct of such agents, attorneys, custodians or nominees if
such agents, attorneys, custodians or nominees shall have been selected by the
Delaware Trustee with reasonable care; and (ii) may, at the expense of the Note
Issuer or any other party, to the extent provided in the Fee and Indemnity
Agreement, consult with counsel, accountants and other professionals to be
selected with reasonable care by it. The Delaware Trustee shall not be liable
for anything done, suffered or omitted in good faith by it in accordance with
the opinion or advice of any such counsel, accountant or other such persons
reasonably relied on and which, according to such opinion or advice, is not
contrary to this Declaration or any other Basic Document.
SECTION 4.10 DELAWARE TRUSTEE MAY OWN CERTIFICATES. The Delaware Trustee
in its individual or any other capacity may become the owner or pledgee of
Certificates and may deal with Boston Edison, the Note Issuer, the Note Trustee,
the Certificate Trustee, the Servicer, the Agencies and their respective
affiliates and with the holders of the Certificates in transactions in the same
manner as the Delaware Trustee would have if it were not a trustee under this
Declaration.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE AGENCIES
SECTION 5.1 REPRESENTATIONS AND WARRANTIES OF AGENCIES. Each Agency as a
settlor of the Trust will represent and warrant, as of the issuance date of the
Certificates, the following:
(a) such Agency has full power, authority and legal right, and has
taken all action necessary, to execute and deliver this Declaration and to
fulfill its obligations under, and to consummate the transactions contemplated
by, this Declaration;
(b) the making and performance by such Agency of this Declaration and
all documents required to be executed and delivered by it hereunder do not and
will not violate any law or regulation of the jurisdiction of its organization
or any other law or regulation applicable to it or violate any provision of, or
constitute, with or without notice or lapse of time, a default under, or result
in the creation or imposition of any lien on any properties included in the
Trust Property pursuant to, any mortgage, indenture, contract, agreement or
other undertaking to which such Agency is a party;
(c) this Declaration has been duly executed and delivered by such
Agency and constitutes its legal, valid and binding obligation, enforceable in
accordance with its terms; and
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(d) to the best knowledge of such Agency, all consents, licenses,
approvals, authorizations, exemptions, registrations, filings, opinions and
declarations from or with any agency, department, administrative authority,
statutory corporation or judicial entity necessary for the validity or
enforceability of such Agency's obligations under this Declaration have been
obtained, and no governmental authorizations other than any already obtained are
required in connection with the execution, delivery and performance of this
Declaration by such Agency.
ARTICLE 6
TERMINATION OF DECLARATION
SECTION 6.1 TERMINATION OF THE TRUST. The respective obligations and
responsibilities of the Agencies, the Delaware Trustee and the Trust created
hereby shall terminate with respect to any class of Certificates one year and
one day following the distribution to all holders of the Certificates of such
class of all amounts required to be distributed to them pursuant to the
Certificate Indenture and the disposition of all property held as part of the
Trust Property with respect to such class of Certificates. Upon the redemption
of all classes of Certificates and at the election of the Agencies, the Trust
shall dissolve. The Agencies shall pay or provide for the payment of all
remaining liabilities of the Trust and the Delaware Trustee, but solely from
amounts payable to the Agencies under the Fee and Indemnity Agreement, and
thereupon the Delaware Trustee shall file a certificate of cancellation under
the Business Trust Act and the Trust shall terminate, and any fees associated
with such filing shall be paid from amounts payable to the Agencies under the
Fee and Indemnity Agreement.
Notice of any termination of the Trust shall be mailed by the Certificate
Trustee promptly in accordance with the Certificate Indenture.
ARTICLE 7
MISCELLANEOUS
SECTION 7.1 NO LEGAL TITLE TO TRUST PROPERTY. As provided in Section 2.5(c)
hereof, the Agencies shall not have legal title to any part of the Trust
Property.
SECTION 7.2 LIMITATIONS ON RIGHTS OF OTHERS. Except as otherwise provided
herein, the provisions of this Declaration are solely for the benefit of the
Agencies, the Delaware Trustee, the Certificate Trustee and the holders of the
Certificates, and nothing in this Declaration, whether express or implied, shall
be construed to give to any other person any legal or equitable right, remedy or
claim in the Trust Property or under or in respect of this Declaration or any
covenants, conditions or provisions contained herein.
SECTION 7.3 NOTICES. (a) Unless otherwise specifically provided herein, all
notices, directions, consents and waivers required under the terms and
provisions of this Declaration shall be in English and in writing, and any such
notice, direction, consent or waiver may be given by United States mail, courier
service, facsimile transmission or electronic mail (confirmed by telephone,
United States mail or courier service in the case of notice by facsimile
transmission or
11
<PAGE> 15
electronic mail) or any other customary means of communication, and any such
notice, direction, consent or waiver shall be effective when delivered, or if
mailed, three days after deposit in the United States mail with proper postage
for ordinary mail prepaid,
if to the Trust, to:
The Bank of New York (Delaware), as Delaware Trustee for the
Massachusetts RRB Special Purpose Trust BEC-1
c/o The Bank of New York
101 Barclay Street
Floor 12 East
New York, NY 10286
Attention: Asset Backed Finance Unit
Facsimile: (212) 815-5544
Telephone: (212) 815-5286
with copies to:
Massachusetts Development Finance Agency
75 Federal Street
Boston, MA 02110
Attention: General Counsel
Facsimile: (617) 727-8741
Telephone: (617) 451-2477
and
Massachusetts Health and Educational Facilities Authority
99 Summer Street
10th Floor
Boston, MA 02110
Attention: General Counsel
Facsimile: (617) 737-8366
Telephone: (617) 737-8377
if to the Agencies, to:
Massachusetts Development Finance Agency
75 Federal Street
Boston, MA 02110
Attention: General Counsel
Facsimile: (617) 727-8741
Telephone: (617) 451-2477
and
12
<PAGE> 16
Massachusetts Health and Education Facilities Authority
99 Summer Street
10th Floor
Boston, MA 02110
Attention: General Counsel
Facsimile: (617) 737-8366
Telephone: (617) 737-8377
if to the Delaware Trustee, to:
The Bank of New York (Delaware)
c/o The Bank of New York
101 Barclay Street
Floor 12 East
New York, NY 10286
Attention: Asset Backed Finance Unit
Facsimile: (212) 815-5544
Telephone: (212) 815-5286
(b) The Trust, the Agencies or the Delaware Trustee, by
notice to the others, may designate additional or different addresses for
subsequent notices or communications.
(c) If a notice or communication is mailed in the
manner provided above within the time prescribed, it is conclusively presumed to
have been duly given, whether or not the addressee receives it.
SECTION 7.4 SEVERABILITY. If any one or more of the covenants, agreements,
provisions or terms of this Declaration shall be for any reason whatsoever held
invalid, then such covenants, agreements, provisions or terms shall be deemed
severable from the remaining covenants, agreements, provisions or terms of this
Declaration and shall in no way affect the validity or enforceability of the
other provisions of this Declaration.
SECTION 7.5 AMENDMENTS WITHOUT CONSENT OF HOLDERS. This Declaration may be
amended by the Delaware Trustee and the Agencies with the prior written consent
of the Certificate Trustee but without the consent of any of the holders of the
Certificates (but with prior notice to the rating agencies named in the
Certificate Indenture) to (i) cure any ambiguity; (ii) correct or supplement any
provision in this Declaration that may be defective or inconsistent with any
other provision in this Declaration; (iii) add to the covenants, restrictions or
obligations of the Delaware Trustee for the benefit of the holders of the
Certificates; (iv) evidence and provide for the acceptance of the appointment of
a successor trustee with respect to the Trust Property and add to or change any
provisions as shall be necessary to facilitate the administration of the trusts
hereunder by more than one trustee; or (v) add, change or eliminate any other
provision of this Declaration in any manner that shall not, as evidenced by an
opinion of counsel to the Agencies, adversely affect in any material respect the
interests of the holders of the Certificates; provided, however, that this
Declaration shall not be amended in any manner which (i) would cause the Trust
to be characterized as other than a "grantor trust" for federal income
13
<PAGE> 17
tax purposes or (ii) would affect the rights of the Agencies hereunder or under
the Basic Documents without the prior written consent of the Agencies or receipt
of an opinion of counsel to the Agencies to the effect that such amendment does
not adversely affect, in any manner, the interests of the Agencies under this
Declaration.
SECTION 7.6 AMENDMENTS WITH CONSENT OF HOLDERS. This Declaration may be
amended from time to time by the Delaware Trustee and the Agencies with the
consent of the Certificate Trustee and the holders of Certificates whose
Certificates evidence not less than a majority of the outstanding principal
amount of each affected class of the Certificates as of the close of business on
the preceding Certificate payment date (which consent, whether given pursuant to
this Section 7.6 or pursuant to any other provision of this Declaration or the
Certificate Indenture, shall be conclusive and binding on such Certificate
holder and on all future holders of such Certificates and of any Certificates
issued upon the transfer thereof or in exchange thereof or in lieu thereof
whether or not notation of such consent is made upon the Certificates) for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Declaration, or of modifying in any manner the rights
of the holders of the Certificates; provided, however, that no such amendment
shall (a) increase or reduce in any manner the amount of, or accelerate or delay
the timing of, payments that shall be required to be made on any Certificate
without the consent of the holder thereof; (b) adversely affect the rating of
any of the Certificates without the consent of the holders of all of the
outstanding principal amount of such affected Certificates; or (c) reduce the
aforesaid majority required to consent to any such amendment, without the
consent of all of the holders of the Certificates then outstanding. Prior to the
execution of any such amendment, supplement or consent, the Delaware Trustee
shall furnish written notification of the substance of such amendment,
supplement or consent to the rating agencies named in the Certificate Indenture.
14
<PAGE> 18
SECTION 7.7 FORM OF AMENDMENTS.
(a) Promptly after the execution of any amendment, supplement or
consent pursuant to Sections 7.5 and 7.6, the Delaware Trustee shall furnish
written notification of the substance of such amendment or consent to the
Certificate Trustee and the Agencies.
(b) The manner of obtaining such consents (and any other
consents of holders of the Certificates provided for in this Declaration or in
any other Basic Document) and of evidencing the authorization of the execution
thereof by holders of the Certificates shall be subject to such reasonable
requirements as the Delaware Trustee may prescribe to the extent not
inconsistent with the provisions of the Basic Documents.
(c) Promptly after the execution of any amendment to the
Certificate of Trust, the Delaware Trustee shall cause the filing of such
amendment with the Secretary of State of the State of Delaware.
(d) Prior to the execution of any amendment to this Declaration,
the Delaware Trustee shall receive an opinion of counsel to the effect that (i)
the execution of such amendment is authorized or permitted by this Declaration
and (ii) such execution will not adversely affect the treatment of the Trust as
a "grantor trust" for federal income tax purposes.
(e) The Delaware Trustee may, but shall not be obligated to,
enter into any such amendment that affects and only affects the Delaware
Trustee's own rights, duties or immunities under this Declaration or otherwise.
SECTION 7.8 COUNTERPARTS. This Declaration 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 one and the same instrument.
SECTION 7.9 SUCCESSORS. All covenants and agreements contained herein
shall be binding upon, and inure to the benefit of the Agencies, the Trust and
the Delaware Trustee and their respective successors and permitted assigns, all
as herein provided.
SECTION 7.10 NO PETITION COVENANT. Notwithstanding any other provision of
this Declaration or any Basic Document and notwithstanding any prior termination
of this Declaration, the Trust (or the Delaware Trustee on behalf of the Trust)
and the Agencies shall not, prior to the date which is one year and one day
after the termination of this Declaration, acquiesce, petition or otherwise
invoke or cause the Trust to invoke the process of any governmental authority
for the purpose of commencing or sustaining a case against the Trust under any
federal or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Trust or any substantial part of its property, or ordering the winding up
or liquidation of the affairs of the Trust.
15
<PAGE> 19
SECTION 7.11 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 7.12 GOVERNING LAW. This Declaration shall be governed by and
construed in accordance with the laws of the State of Delaware, without
reference to its conflict of law provisions, and the obligations, rights and
remedies of the parties hereunder shall be determined in accordance with such
laws.
16
<PAGE> 20
IN WITNESS WHEREOF, the Delaware Trustee and the Agencies have
caused this Declaration of Trust to be duly executed by duly authorized
officers, all as of the day and year first above written.
Massachusetts Development Finance
Agency, as a Settlor
By:______________________________
Name:
Title:
Massachusetts Health and
Education Facilities Authority, as a
Settlor
By:__________________________________
Name:
Title:
THE BANK OF NEW YORK (DELAWARE),
as Delaware Trustee
By:__________________________________
Name:
Title:
S-1
<PAGE> 21
EXHIBIT A TO THE
DECLARATION OF TRUST
CERTIFICATE OF TRUST OF
MASSACHUSETTS RRB SPECIAL PURPOSE TRUST BEC-1
THIS CERTIFICATE OF TRUST of Massachusetts RRB Special Purpose Trust BEC-1
(the "Trust"), dated as of [ ], 1999, is being duly executed and filed
by the undersigned, as trustees, to form a not-for-profit business trust under
the Delaware Business Trust Act (12 Del. C., ss. 3801 et seq.) (the "Act").
1. NAME. The name of the not-for-profit business trust formed hereby is
"Massachusetts RRB Special Purpose Trust BEC-1."
2. DELAWARE TRUSTEE. The name and business address of the trustee of the
Trust in the State of Delaware is The Bank of New York (Delaware),White Clay
Center, Route 273, Newark, Delaware 19711.
3. EFFECTIVE DATE. This Certificate of Trust shall be effective as of the
date filed.
4. SERIES. The Trust shall be a series Trust and shall issue series of
beneficial interests having separate rights, powers and duties with respect to
property or obligations of the Trust, as provided in Section 3804 and 3806(b)(2)
of the Act, such that the debts, liabilities, obligations and expenses incurred,
contracted for or otherwise existing with respect to a particular series shall
be enforceable against the assets of such series only, and not against the
assets of the Trust generally or any other series.
A-1
<PAGE> 22
IN WITNESS WHEREOF, the undersigned, being the sole trustees of the Trust,
have executed this Certificate of Trust in accordance with Section 3811(a) of
the Act.
THE BANK OF NEW YORK (DELAWARE), not in
its individual capacity but solely as Delaware Trustee
By: __________________________________________________
Name:
Title:
THE BANK OF NEW YORK, not in its individual
capacity but solely as Certificate Trustee
By: __________________________________________________
Name:
Title:
S-1
<PAGE> 23
An extra section break has been inserted above this paragraph. Do not delete
this section break if you plan to add text after the Table of
Contents/Authorities. Deleting this break will cause Table of
Contents/Authorities headers and footers to appear on any pages following the
Table of Contents/Authorities.
A-1
<PAGE> 1
FORM OF NOTE
REGISTERED $[ ]
No. [ ]
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP NO. [ ]
THE PRINCIPAL OF THIS CLASS A-[ ] NOTE WILL BE PAID IN INSTALLMENTS AS SET
FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS CLASS A-[ ]
NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
BEC FUNDING LLC NOTES
CLASS A-[ ]
<TABLE>
<CAPTION>
Interest Rate Original Principal Amount Final Maturity Date
------------- ------------------------- -------------------
<S> <C> <C>
[ ]% $[ ]
</TABLE>
BEC Funding LLC, a limited liability company formed and existing under the
laws of the State of Delaware (herein referred to as the "Note Issuer"), for
value received, hereby promises to pay to Massachusetts RRB Special Purpose
Trust BEC-1, or registered assigns, the original Principal Amount shown above in
semiannual installments on the Payment Dates and in the amounts specified on the
reverse hereof or, if less, the amounts determined pursuant to Section 8.02 of
the Note Indenture, in each year, commencing on the date determined as provided
on the reverse hereof and ending on or before the Final Maturity Date and to pay
interest, at the Interest Rate shown above, on each September 15 and March 15 or
if any such day is not a Business Day, the next succeeding Business Day,
commencing on March 15, 2000 and continuing until the earlier of the payment of
the principal hereof or the Final Maturity Date (each a "Payment Date"), on the
principal amount of this Class A-[ ] Note. Interest on this Class A-[ ] Note
will accrue for each Payment Date from the most recent Payment Date on which
interest has been paid to but excluding such Payment Date or, if no interest has
yet been paid, from [ ], 1999. 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 A-[ ] Note shall be paid in the manner specified on the reverse hereof.
The principal of and interest on this Class A-[ ] Note are payable in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts. All payments made by the
Note Issuer with respect to this Class A-[ ] Note-shall be applied first to
interest due and payable on this Class A-[ ] Note as provided above
B-1
<PAGE> 2
and then to the unpaid principal of this Class A-[ ] Note, all in the manner set
forth in Section 8.02 of the Note Indenture.
Reference is made to the further provisions of this Class A-[ ] Note set
forth on the reverse hereof, which shall have the same effect as though fully
set forth on the face of this Class A-[ ] Note.
Unless the certificate of authentication hereon has been executed by the
Note Trustee whose name appears below by manual signature, this Class A-[ ] Note
shall not be entitled to any benefit under the Note Indenture referred to on the
reverse hereof, or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Note Issuer has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer.
Date: [ ], 1999
BEC FUNDING LLC
By:
-----------------------------------
Name:
Title:
B-2
<PAGE> 1
FORM OF CERTIFICATE
REGISTERED REGISTERED
NO. [ ] $ [ ]
MASSACHUSETTS RRB SPECIAL PURPOSE TRUST BEC-1
CLASS [ ]
RATE REDUCTION CERTIFICATE
SCHEDULED
FINAL FINAL
INTEREST DISTRIBUTION TERMINATION
RATE DATE DATE CUSIP
-------- ------------ ----------- -----
REGISTERED OWNER: Cede & Co.
PRINCIPAL AMOUNT:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUST OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
This Certificate evidences a fractional undivided beneficial interest in an
Underlying Note (as defined below) of the corresponding class issued by BEC
Funding LLC and the proceeds thereof, held by a trust, as more fully described
herein.
This Certificate does not represent an interest in or obligation of The
Commonwealth of Massachusetts, the Massachusetts Development Finance Agency or
Massachusetts Health and
<PAGE> 2
Educational Facilities Authority (collectively, the "Agencies"), any other
governmental agency or instrumentality or Boston Edison Company, a Massachusetts
corporation ("Boston Edison"), or any of its affiliates. None of the
Certificate, the Underlying Note or the underlying Transition Property (as
defined in the Certificate Indenture) will be guaranteed or insured by The
Commonwealth of Massachusetts, the Agencies, the Trust or any other governmental
agency or instrumentality or by Boston Edison or its affiliates.
Neither the full faith and credit nor the taxing power of The Commonwealth
of Massachusetts, either of the Agencies or any other governmental agency or
instrumentality is pledged to the payment of the principal of, purchase price
of, or interest on, this Certificate or the Underlying Note, or to the payments
in respect of the Transition Property, nor are The Commonwealth of
Massachusetts, either of Agencies or any other governmental agency or
instrumentality in any manner obligated to make any appropriation for the
payment thereof.
To the extent not otherwise defined herein, the capitalized terms used
herein have the meanings assigned to them in the Certificate Indenture.
THIS CERTIFIES THAT CEDE & CO., as nominee for The Depository Trust
Company, for value received, is the registered owner of a Principal Amount
(stated above) of nonassessable, fully-paid, fractional undivided beneficial
interest in the related Underlying Note and the proceeds thereof held by
Massachusetts RRB Special Purpose Trust BEC-1 (the "Trust"). The Trust is
created pursuant to a Declaration of Trust dated as of [ ], 1999 by The
Bank of New York (Delaware), as Delaware Trustee (the "Delaware Trustee"), and
the Agencies, acting jointly as Settlors thereunder pursuant to Chapter 164 of
the Massachusetts Acts of 1997 (the "Statute"). This Certificate is issued under
and is subject to the terms, provisions, and conditions of, a Certificate
Indenture dated as of [ ], 1999 (the "Certificate Indenture"), by and
among The Bank of New York (Delaware), as Delaware Trustee (the "Delaware
Trustee"), The Bank of New York, as Certificate Trustee (the "Certificate
Trustee"), and the Trust, a summary of certain of the pertinent provisions of
which is set forth below. This Certificate is one of the duly authorized class
of Certificates designated as "Massachusetts RRB Special Purpose Trust BEC-1
Rate Reduction Certificates, Class [ ], " (herein called the "Class [ ]
Certificates"). The Class [ ] Certificates are one of a class of
Certificates issued under the Certificate Indenture (such Class [ ]
Certificates, together with other Certificates heretofore or hereafter issued
under the Certificate Indenture being herein called the "Certificates"). The
holder of this Certificate (the "Holder"), by virtue of its acceptance hereof,
assents and agrees to be bound by the terms of the Certificate Indenture. This
Class [ ] Certificate represents a fractional undivided beneficial interest
in the note of the corresponding class (the "Underlying Note") issued by BEC
Funding LLC, as Note Issuer, together with the proceeds of the Underlying Note.
The Underlying Note is secured by a security interest in the property right
created under the Statute, pursuant to the order of the Massachusetts Department
of Telecommunications and Energy, DTE-98-118, issued on April 2, 1999, as
further clarified by the Order on the Agencies' Motion for Clarification dated
May 21, 1999 (collectively, the "Financing Order"), representing the irrevocable
right of Boston Edison or its assignee to be paid the amount that is determined
in the Financing Order through the collection of certain usage-
S-2
<PAGE> 3
based, per kilowatt hour charges, as adjusted from time to time, payable by
retail users, without regard to class, of Boston Edison's distribution system
within its geographic service territory as in effect on July 1, 1997, together
with certain related collateral, all as more fully described in the Note
Indenture.
The aggregate principal amount of all Certificates issued under the
Certificate Indenture equals the aggregate principal amount of the Underlying
Notes, and all such Certificates are and will be equally secured by the pledge
and covenants made therein, except as otherwise expressly provided or permitted
in the Certificate Indenture.
Subject to and in accordance with the terms of the Certificate Indenture,
there will be distributed on each March 15 and September 15 of each year or, if
any such day is not a Business Day, the next succeeding Business Day (each, a
"Distribution Date"), commencing on March 15, 2000 to the person in whose name
this Certificate is registered at the close of business on the last Business Day
immediately preceding the related Distribution Date or, if Definitive
Certificates are issued, the last day of the immediately preceding calendar
month (each, a "Record Date"), such Holder's fractional undivided interest in
the payments made on the Underlying Note due on the related Payment Date, the
receipt of which has been confirmed by the Certificate Trustee. Subject to and
in accordance with the terms of the Certificate Indenture, in the event that a
Special Payment on the Underlying Note is received by the Certificate Trustee,
from funds then available to the Certificate Trustee, there will be distributed
on the applicable Special Distribution Date, to the Person in whose name this
Certificate is registered on the Record Date preceding the Special Distribution
Date, as applicable, such Holder's fractional undivided share of such amount.
The Special Distribution Date will be determined as provided in the Certificate
Indenture. The Certificate Trustee will mail notice of each Special Payment and
the related Special Distribution Date to the Holder as provided in the
Certificate Indenture.
Distributions on this Certificate will be made as provided in the
Certificate Indenture by the Certificate Trustee by wire transfer or check
mailed to the Holder of record in the Certificate Register without the
presentation or surrender of this Certificate or the making of any notation
hereon, except that with respect to Certificates registered on the Record Date
in the name of the nominee of the Clearing Agency (initially, such nominee to be
Cede & Co.), payments will be made by wire transfer in immediately available
funds to the account designated by such nominee. Except as otherwise provided in
the Certificate Indenture and notwithstanding the above, the final distribution
on this Certificate will be made after due notice by the Certificate Trustee of
the pendency of such distribution and only upon presentation and surrender of
this Certificate at the office of the Paying Agent or the office or agency
maintained for that purpose by the Certificate Trustee in The City of New York.
Subject to and in accordance with the terms of the Certificate Indenture,
the Trust has represented and warranted under the Certificate Indenture that the
Trust constitutes a "special purpose trust" and a "financing entity" under
Section 1H(a) of the Statute, and that the Certificates constitute "electric
rate reduction bonds" under Section 1H(a) of the Statute and that the Holders
are entitled to the rights and benefits thereunder. Pursuant to Section 1H(b)(3)
of the
S-3
<PAGE> 4
Statute, The Commonwealth of Massachusetts, has pledged and agreed with the Note
Issuer, the Trust and the Holders (the "Commonwealth Pledge") as follows:
[T]he [C]ommonwealth [of Massachusetts] does hereby pledge and agree
with the owners of the transition property and holders of electric
rate reduction bonds that the [C]ommonwealth [of Massachusetts] shall
not (i) alter the provisions of this chapter which make the transition
charges imposed by the financing order irrevocable and binding or (ii)
limit or alter the reimbursable transition costs amounts, transition
property, financing orders, and all rights thereunder until the
electric rate reduction bonds, together with the interest thereon, are
fully met and discharged.
In addition, the Trust has pledged and agreed with the Note Issuer and the
Holders that it will not act in a manner inconsistent with the Commonwealth
Pledge and will not take any action that would impair any rights of the Note
Issuer or the Holders in the Notes, the Transition Property or the Certificates.
Reference is hereby made to the further provisions of this Certificate set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been executed by
an authorized officer of the Certificate Trustee, by manual signature, this
Certificate shall be entitled to any benefit under the Certificate Indenture or
any other Basic Document or be valid for any purpose.
THIS CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
DOMESTIC LAW OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAW.
Any reduction in the principal amount of any Certificate effected by any
distribution in respect of principal thereof shall be binding upon all Holders
of such Certificate and of any Certificate issued upon the registration or
transfer thereof or in lieu thereof, whether or not noted thereon.
It is expressly agreed and understood by the parties hereto that (a) this
Certificate is executed by The Bank of New York (Delaware) and authenticated and
delivered by The Bank of New York, not individually or personally but solely as
Delaware Trustee and Certificate Trustee, respectively, on behalf of the Trust
in the exercise of the powers and authority concerned and vested in them, (b)
the representations, undertakings and agreements herein made by the Delaware
Trustee and Certificate Trustee on behalf of the Trust are made and intended not
as personal representations, undertakings and agreements of either trustee, but
are made and intended for the purpose of binding only the Trust, (c) nothing
herein contained shall be construed as creating any liability on The Bank of New
York (Delaware) or The Bank of New
S-4
<PAGE> 5
York, individually or personally, to perform any covenant either expressed or
implied herein, except in their capacity as Delaware Trustee and Certificate
Trustee, respectively, all such liability being expressly waived by all Persons,
and (d) under no circumstances shall The Bank of New York (Delaware) or The Bank
of New York be personally liable for the payment of any indebtedness or expenses
of the Trust, or be personally liable for the breach or failure of any
obligation, representation, warranty or covenant made or undertaken by the Trust
under the Certificate Indenture.
S-5
<PAGE> 6
IN WITNESS WHEREOF, the Delaware Trustee on behalf of the Trust has caused
this Certificate to be duly executed.
MASSACHUSETTS RRB SPECIAL
PURPOSE TRUST BEC-1
By: THE BANK OF NEW YORK
(DELAWARE), not in its individual
capacity but solely as Delaware
Trustee
By:
-----------------------------------
Name:
Title:
S-6
<PAGE> 1
EXHIBIT 10.1
TRANSITION PROPERTY PURCHASE AND SALE AGREEMENT
between
BEC FUNDING LLC
Note Issuer
and
BOSTON EDISON COMPANY
Seller
Dated as of July ___, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I. DEFINITIONS....................................................................................1
Section 1.01. DEFINITIONS........................................................................1
ARTICLE II. CONVEYANCE OF TRANSITION PROPERTY.............................................................5
Section 2.01. CONVEYANCE OF TRANSITION PROPERTY..................................................5
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLER....................................................6
Section 3.01. ORGANIZATION AND GOOD STANDING.....................................................6
Section 3.02. DUE QUALIFICATION..................................................................6
Section 3.03. POWER AND AUTHORITY................................................................6
Section 3.04. BINDING OBLIGATION. ...............................................................7
Section 3.05. NO VIOLATION.......................................................................7
Section 3.06. NO PROCEEDINGS.....................................................................7
Section 3.07. APPROVALS..........................................................................7
Section 3.08. THE TRANSITION PROPERTY. ..........................................................8
Section 3.09. LIMITATIONS ON REPRESENTATIONS AND WARRANTIES......................................9
ARTICLE IV. COVENANTS OF THE SELLER.....................................................................10
Section 4.01. CORPORATE EXISTENCE...............................................................10
Section 4.02. NO LIENS..........................................................................10
Section 4.03. DELIVERY OF COLLECTIONS...........................................................10
Section 4.04. NOTICE OF LIENS...................................................................10
Section 4.05. COMPLIANCE WITH LAW...............................................................10
Section 4.06. COVENANTS RELATED TO NOTES AND TRANSITION PROPERTY................................10
Section 4.07. PROTECTION OF TITLE...............................................................11
Section 4.08. NONPETITION COVENANTS.............................................................12
Section 4.09. TAXES.............................................................................12
Section 4.10. ADDITIONAL SALES OF TRANSITION PROPERTY...........................................12
ARTICLE V. THE SELLER...................................................................................12
Section 5.01. LIABILITY OF SELLER; INDEMNITIES..................................................12
Section 5.02. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF,
SELLER...........................................................................................16
Section 5.03. LIMITATION ON LIABILITY OF SELLER AND OTHERS......................................16
ARTICLE VI. MISCELLANEOUS PROVISIONS....................................................................16
Section 6.01. AMENDMENT.........................................................................16
Section 6.02. NOTICES...........................................................................17
Section 6.03. ASSIGNMENT........................................................................17
Section 6.04. LIMITATIONS ON RIGHTS OF THIRD PARTIES............................................17
Section 6.05. SEVERABILITY......................................................................17
Section 6.06. SEPARATE COUNTERPARTS.............................................................18
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
Section 6.07. HEADINGS..........................................................................18
Section 6.08. GOVERNING LAW.....................................................................18
Section 6.09. ASSIGNMENT TO NOTE TRUSTEE........................................................18
Section 6.10. LIMITATION OF LIABILITY...........................................................18
</TABLE>
-ii-
<PAGE> 4
This TRANSITION PROPERTY PURCHASE AND SALE AGREEMENT, dated as of July ___,
1999, is between BEC Funding LLC, a Delaware limited liability company (the
"NOTE ISSUER"), and Boston Edison Company, a Massachusetts corporation (together
with its successors in interest to the extent permitted hereunder, the
"SELLER").
RECITALS
WHEREAS, the Note Issuer desires to purchase the Transition Property (as
defined herein) created pursuant to the Statute and the Financing Order (each as
defined herein); and
WHEREAS, the Seller is willing to sell the Transition Property to the Note
Issuer.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE I. DEFINITIONS
Section 1.01. DEFINITIONS. Whenever used in this Agreement, the following
words and phrases shall have the following meanings:
"ADMINISTRATION AGREEMENT" means the Administration Agreement dated as of
the date hereof between Boston Edison Company, as Administrator, and the Note
Issuer, as amended and supplemented from time to time.
"AGENCIES" means, collectively, the Massachusetts Development Finance
Agency and the Massachusetts Health and Educational Facilities Authority.
"AGREEMENT" means this Transition Property Purchase and Sale Agreement, as
amended and supplemented from time to time.
"BACK-UP SECURITY INTEREST" has the meaning specified in Section 2.01.
"BASIC DOCUMENTS" means, collectively, this Agreement, the Note Indenture,
the Certificate Indenture, the Servicing Agreement, the Administration
Agreement, the Note Purchase Agreement, the Underwriting Agreement and the Fee
and Indemnity Agreement.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a day on
which banking institutions or trust companies in New York, New York, Boston,
Massachusetts or Wilmington, Delaware are authorized or obligated by law,
regulation or executive order to remain closed.
"CERTIFICATE INDENTURE" means the Certificate Indenture dated as of July
___, 1999, between the Certificate Issuer and the Certificate Trustee, as
amended and supplemented from time to time.
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"CERTIFICATE TRUSTEE" means the Person acting as trustee under the
Certificate Indenture.
"CERTIFICATEHOLDERS" has the meaning specified in Section 1.01(a) of the
Certificate Indenture.
"CERTIFICATES" means the Massachusetts RRB Special Purpose Trust BEC-1 Rate
Reduction Certificates issued under the Certificate Indenture.
"CLOSING DATE" means July __, 1999.
"COLLECTION ACCOUNT" has the meaning specified in Section 8.02(a) of the
Note Indenture.
"CORPORATE TRUST OFFICE" has the meaning specified in Section 1.01(a) of
the Note Indenture.
"CUSTOMERS" means all classes of retail users of the Seller's distribution
system within its geographic service territory as in effect on July 1, 1997.
"DATE OF BREACH" means, with respect to the repurchase obligation specified
in Section 5.01(b), the date of breach of a representation or warranty that
triggers such repurchase obligation.
"DECLARATION OF TRUST" means the Declaration of Trust dated as of July ___,
1999, among the Agencies and the Delaware Trustee, as amended and supplemented
from time to time.
"DELAWARE TRUSTEE" means the Person acting as trustee under the Declaration
of Trust.
"DTE" means the Massachusetts Department of Telecommunications and Energy
and any successor thereto.
"DTE REGULATIONS" has the meaning specified in Section 1.01 of the
Servicing Agreement.
"DUFF & PHELPS" means Duff & Phelps Credit Rating Co. or its successor.
"FEE AND INDEMNITY AGREEMENT" means the fee and indemnity agreement dated
as of July ___, 1999 among the Note Issuer, the Delaware Trustee, the
Certificate Trustee, the Trust and the Agencies.
"FINANCING ORDER" means the order of the DTE, DTE-98-118, issued on April
2, 1999, as further clarified by the Order on the Massachusetts Development
Finance Agency's and
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Massachusetts Health and Educational Facilities Authority's Motion for
Clarification dated May 21, 1999.
"FITCH" means Fitch IBCA, Inc. or its successor.
"INDEMNIFIED PERSON" has the meaning specified in Section 5.01(h).
"ISSUANCE ADVICE LETTER" means the initial Issuance Advice Letter, dated
July ___, 1999, filed with the DTE by the Seller pursuant to the Financing
Order.
"LIEN" means a security interest, lien, charge, pledge or encumbrance of
any kind.
"LOSSES" has the meaning specified in Section 5.01(e).
"MOODY'S" means Moody's Investors Service, Inc. or its successor.
"NOTE INDENTURE" means the Note Indenture dated as of July __, 1999,
between the Note Issuer and the Note Trustee, as amended and supplemented from
time to time.
"NOTE ISSUER" has the meaning set forth in the preamble of this Agreement.
"NOTE PURCHASE AGREEMENT" means the Note Purchase Agreement dated as of the
date hereof between the Note Issuer and the Trust, as amended and supplemented
from time to time.
"NOTE REGISTER" has the meaning specified in Section 2.05 of the Note
Indenture.
"NOTE TRUSTEE" means the Person acting as trustee under the Note Indenture.
"NOTEHOLDER" or "HOLDER" means the Person in whose name a Note is
registered on the Note Register.
"NOTES" means the BEC Funding LLC Notes issued under the Note Indenture.
"OFFICER'S CERTIFICATE" means a certificate signed by the chairman of the
board, the chief executive officer, the president, the vice chairman of the
board, any vice president, the treasurer, any assistant treasurer, the clerk,
any assistant clerk, the controller or the finance manager of the Seller.
"OPINION OF COUNSEL" means one or more written opinions of counsel who may
be an employee of or counsel to the party providing such opinion of counsel,
which counsel shall be reasonably acceptable to the party receiving such opinion
of counsel.
"OUTSTANDING AMOUNT" has the meaning specified in Section 1.01(a) of the
Note Indenture.
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"OVERCOLLATERALIZATION SUBACCOUNT" has the meaning specified in Section
8.02(a) of the Note Indenture.
"PERSON" means any individual, corporation, limited liability company,
estate, partnership, joint venture, association, joint stock company, trust
(including any beneficiary thereof), unincorporated organization or government
or any agency or political subdivision thereof.
"RATING AGENCIES" means, collectively, S&P, Moody's, Fitch and Duff &
Phelps.
"REPURCHASE DATE" means the date that is five Business Days after the date
that is (i) if the terms of Section 5.01(b)(i)(A) and Section 5.01(b)(i)(B)(2)
are applicable, two Business Days after the Date of Breach if the Seller fails
to make the deposit required by Section 5.01(b)(i)(B)(2) or 90 days after the
Date of Breach if the Seller makes the deposit required by Section
5.01(b)(i)(B)(2); (ii) if the terms of Section 5.01(b)(ii) are applicable, 90
days after the Date of Breach; and (iii) if the terms of Section 5.01(b)(i)(A)
and Section 5.01(b)(i)(B)(1) are applicable, 90 days after the Date of Breach.
"REQUIRED OVERCOLLATERALIZATION LEVEL" has the meaning specified in Section
1.01(a) of the Note Indenture.
"REPURCHASE PRICE" has the meaning specified in Section 5.01(b)(i).
"RTC CHARGE" means the portion (which may become all) of the Seller's
Transition Charge designated pursuant to the Financing Order as the RTC Charge,
as the same may be adjusted from time to time as provided in the Financing
Order.
"RTC CHARGE COLLECTIONS" has the meaning specified in Section 1.01 of the
Servicing Agreement.
"SELLER" has the meaning set forth in the preamble of this Agreement.
"SERVICER DEFAULT" means an event specified in Section 7.01 of the
Servicing Agreement.
"SERVICING AGREEMENT" means the Transition Property Servicing Agreement
dated as of the date hereof between Boston Edison Company, as Servicer, and the
Note Issuer, as amended and supplemented from time to time.
"S&P" means Standard & Poor's Ratings Services, a division of The McGraw
Hill Companies, Inc. or its successor.
"STATUTE" means Chapter 164 of the Massachusetts Acts of 1997, entitled An
Act Relative to Restructuring the Electric Utility Industry in the Commonwealth,
Regulating the Provision of Electricity and Other Services, and Promoting
Enhanced Consumer Protections Therein.
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"TRANSITION CHARGE" means the "access charge" as defined in Boston Edison
Company's Restructuring Settlement Agreement, D.P.U. Docket Nos. 96-100 and
96-23 and subsequent filings with the DTE pursuant thereto.
"TRANSITION PROPERTY" means the transition property that exists under
paragraph 7 of the Financing Order.
"TRUST" or "CERTIFICATE ISSUER" means Massachusetts RRB Special Purpose
Trust BEC-1, a Delaware business trust.
"UNDERWRITING AGREEMENT" means the Underwriting Agreement dated as of July
___, 1999 among Boston Edison Company, the Note Issuer, the Certificate Issuer
and the underwriters named therein.
Section 1.02. OTHER DEFINITIONAL PROVISIONS.
(a) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(b) 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".
(c) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms.
ARTICLE II. CONVEYANCE OF TRANSITION PROPERTY
Section 2.01. CONVEYANCE OF TRANSITION PROPERTY. In consideration of the
Note Issuer's delivery to or upon the order of the Seller of $[__________], the
Seller does hereby irrevocably sell, transfer, assign, set over and otherwise
convey to the Note Issuer, WITHOUT RECOURSE OR WARRANTY, except as specifically
set forth herein, all right, title and interest of the Seller in and to the
Transition Property (such sale, transfer, assignment, setting over and
conveyance of the Transition Property includes, to the fullest extent permitted
by the Statute, the assignment of all revenues, collections, claims, payments,
money or proceeds of or arising from the RTC Charge pursuant to the Financing
Order). Such sale, transfer, assignment, setting over and conveyance is hereby
expressly stated to be a sale and, pursuant to Section 1H(f)(1) of Chapter 164
of the Massachusetts General Laws, shall be treated as an absolute transfer of
all of the Seller's right, title and interest in (as in a true sale), and not as
a pledge or other financing of, the Transition Property. If such sale, transfer,
assignment, setting over and conveyance is held by any court of competent
jurisdiction not to be a true sale as provided in Section 1H(f)(1) of
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Chapter 164 of the Massachusetts General Laws, then such sale, transfer,
assignment, setting over and conveyance shall be treated as the creation of a
security interest in the Transition Property and, without prejudice to its
position that it has absolutely transferred all of its rights in the Transition
Property to the Note Issuer, the Seller hereby grants a security interest in the
Transition Property to the Note Issuer (the "BACK-UP SECURITY INTEREST"). The
Seller and the Note Issuer agree that the Seller has no rights in the Transition
Property to which such a security interest could attach because it has sold all
rights in the Transition Property to the Note Issuer pursuant to Section
1H(f)(1) of Chapter 164 of the Massachusetts General Laws.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLER
Subject to Section 3.09 hereof, the Seller makes the following
representations and warranties, as of the Closing Date, on which the Note Issuer
has relied in acquiring the Transition Property.
Section 3.01. ORGANIZATION AND GOOD STANDING. The Seller is duly organized
and validly existing as a corporation in good standing under the laws of The
Commonwealth of Massachusetts, with the requisite corporate power and authority
to own its properties as such properties are currently owned and to conduct its
business as such business is now conducted by it, and has the requisite
corporate power and authority to own the Transition Property.
Section 3.02. DUE QUALIFICATION. The Seller is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions in which the ownership or
lease of property or the conduct of its business shall require such
qualifications, licenses or approvals (except where the failure to so qualify or
obtain such licenses and approvals would not be reasonably likely to have a
material adverse effect on the Seller's business, operations, assets, revenues
or properties).
Section 3.03. POWER AND AUTHORITY. The Seller has the requisite 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 all necessary corporate action on the part of the Seller.
Section 3.04. BINDING OBLIGATION. This Agreement constitutes a legal, valid
and binding obligation of the Seller enforceable against it in accordance with
its terms, subject to applicable insolvency, reorganization, moratorium,
fraudulent transfer and other laws relating to or affecting creditors' or
secured parties' rights generally from time to time in effect and to general
principles of equity (including concepts of materiality, reasonableness, good
faith and fair dealing), regardless of whether considered in a proceeding in
equity or at law.
Section 3.05. NO VIOLATION. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof do not:
(i) conflict with or 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 organization or by-laws of the Seller, or any material indenture,
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agreement or other instrument to which the Seller is a party or by which it is
bound; (ii) result in the creation or imposition of any Lien upon any of the
Seller's properties pursuant to the terms of any such indenture, agreement or
other instrument (other than any Lien that may be granted under the Basic
Documents or any Lien created pursuant to Section 1H(e) of Chapter 164 of the
Massachusetts General Laws); or (iii) violate any existing law or any existing
order, rule or regulation applicable to the Seller of any court or of any
federal or state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Seller or its properties.
Section 3.06. NO PROCEEDINGS. Except as set forth on Schedule 3.06, there
are no proceedings pending and, to the Seller's knowledge, there are no
proceedings threatened and, to the Seller's knowledge, there are no
investigations pending or threatened, before any court, federal or state
regulatory body, administrative agency or other governmental instrumentality
having jurisdiction over the Seller or its properties involving or relating to
the Seller or the Note Issuer or, to the Seller's knowledge, any other Person:
(i) asserting the invalidity of this Agreement, any of the other Basic
Documents, the Notes or the Certificates, (ii) seeking to prevent the issuance
of the Notes or the Certificates or the consummation of any of the transactions
contemplated by this Agreement or any of the other Basic Documents, (iii)
seeking any determination or ruling that might materially and adversely affect
the performance by the Seller of its obligations under, or the validity or
enforceability of, this Agreement, any of the other Basic Documents, the Notes
or the Certificates or (iv) seeking to adversely affect the federal or state
income tax classification of the Notes or the Certificates as debt.
Section 3.07. APPROVALS. No approval, authorization, consent, order or
other action of, or filing with, any court, federal or state regulatory body,
administrative agency or other governmental instrumentality is required in
connection with the execution and delivery by the Seller of this Agreement, the
performance by the Seller of the transactions contemplated hereby or the
fulfillment by the Seller of the terms hereof, except those that have been
obtained or made and those that the Seller, in its capacity as Servicer under
the Servicing Agreement, is required to make in the future pursuant to the
Servicing Agreement.
Section 3.08. THE TRANSITION PROPERTY.
(a) Title. It is the intention of the parties hereto that the transfer and
assignment herein contemplated constitute a sale of the Transition Property from
the Seller to the Note Issuer and that no interest in, or title to, the
Transition Property shall be part of the Seller's estate in the event of the
filing of a bankruptcy petition by or against the Seller under any bankruptcy
law. No portion of the Transition Property has been sold, transferred, assigned
or pledged by the Seller to any Person other than the Note Issuer. On the
Closing Date, immediately upon the sale hereunder, the Seller has transferred
the Transition Property to the Note Issuer, free and clear of all Liens, except
for any Lien created pursuant to Section 1H(e) of Chapter 164 of the
Massachusetts General Laws and any Lien that may be granted under the Basic
Documents.
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(b) TRANSFER FILINGS. On the Closing Date, immediately upon the sale
hereunder, the Transition Property has been validly transferred and sold to the
Note Issuer, the Note Issuer shall own all such Transition Property free and
clear of all Liens (except for any Lien created pursuant to Section 1H(e) of
Chapter 164 of the Massachusetts General Laws and any Lien that may be granted
under the Basic Documents) and all filings to be made by the Seller (including
filings with the DTE under the Statute) necessary in any jurisdiction to give
the Note Issuer an ownership interest (subject to any Lien created pursuant to
Section 1H(e) of Chapter 164 of the Massachusetts General Laws and any Lien that
may be granted under the Basic Documents) in the Transition Property have been
made. No further action is required to maintain such ownership interest (subject
to any Lien created pursuant to Section 1H(e) of Chapter 164 of the
Massachusetts General Laws and any Lien that may be granted under the Basic
Documents). Filings have also been made to the extent required by Massachusetts
General Laws Chapter 106, ss.ss. 9-403(2)-(3), 9-306, 9-402(7) and 9-103 to
perfect the Back-Up Security Interest granted by the Seller to the Note Issuer
(subject to any Lien created pursuant to Section 1H(e) of Chapter 164 of the
Massachusetts General Laws and any Lien that may be granted under the Basic
Documents).
(c) FINANCING ORDER AND ISSUANCE ADVICE LETTER; OTHER APPROVALS. On the
Closing Date, under the laws of The Commonwealth of Massachusetts and the United
States in effect on the Closing Date, (i) the Financing Order pursuant to which
the Transition Property has been created is in full force and effect; (ii) the
Certificateholders are entitled to the protections of the Statute and,
accordingly, the Financing Order is not revocable by the DTE; (iii) The
Commonwealth of Massachusetts may not alter the provisions of the Statute that
make the RTC Charge irrevocable and binding, limit or alter the Transition
Property or the Financing Order, and all rights thereunder, in a manner that
would substantially impair the rights of the Certificateholders, absent a
demonstration by The Commonwealth of Massachusetts that an impairment is
narrowly-tailored and is necessary to advance an important public interest, such
as a "great public calamity" until the Certificates, together with interest
thereon, are fully met and discharged; (iv) the DTE may not, either by
rescinding, altering or amending the Financing Order, in any way reduce or
impair the value of the Transition Property either directly or indirectly by
taking reimbursable transition costs amounts into account when setting other
rates for the Seller, in a manner that would substantially impair the rights of
Certificateholders, absent a demonstration by The Commonwealth of Massachusetts
that an impairment is narrowly-tailored and is necessary to advance an important
public interest, such as a "great public calamity", until the Certificates,
together with interest thereon, are fully met and discharged; (v) the process by
which the Financing Order was adopted and approved, and the Financing Order and
Issuance Advice Letter themselves, comply with all applicable laws, rules and
regulations; (vi) the Issuance Advice Letter has been filed in accordance with
the Financing Order; and (vii) no other approval, authorization, consent, order
or other action of, or filing with, any court, Federal or state regulatory body,
administrative agency or other governmental instrumentality is required in
connection with the creation of the Transition Property, except those that have
been obtained or made.
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(d) ASSUMPTIONS. On the Closing Date, based upon the information available
to the Seller on the Closing Date, the assumptions used in calculating the
initial RTC Charge are reasonable and are made in good faith. Notwithstanding
the foregoing, the Seller makes no representation or warranty that the
assumptions used in calculating such RTC Charge will in fact be realized.
(e) CREATION OF TRANSITION PROPERTY. Upon the effectiveness of the
Financing Order and the Issuance Advice Letter: (i) all of the Transition
Property constitutes an existing property right; (ii) the Transition Property
includes the right, title and interest in and to all revenues, collections,
claims, payments, money, or proceeds of or arising from the RTC Charge, as
adjusted from time to time pursuant to the Financing Order, and all rights to
obtain adjustments to the RTC Charge pursuant to the Financing Order; and (iii)
the owner of the Transition Property is legally entitled to collect payments in
respect of the RTC Charge in the aggregate sufficient to pay the interest on and
principal of the Notes, to pay the fees and expenses of servicing the Notes and
the Certificates, to replenish the Capital Subaccount to the Required Capital
Level and to fund the Overcollateralization Subaccount to the Required
Overcollateralization Level until the Notes and the Certificates are paid in
full. Notwithstanding the foregoing, the Seller makes no representation or
warranty that any amounts actually collected in respect of the RTC Charge will
in fact be sufficient to meet payment obligations with respect to the Notes and
the Certificates.
(f) PROSPECTUS. As of the date hereof, the information describing the
Seller in "The Seller and Servicer" section of the prospectus dated July ___,
1999 offering the Notes and the Certificates is correct in all material
respects.
Section 3.09. LIMITATIONS ON REPRESENTATIONS AND WARRANTIES. Without
prejudice to any of the other rights of the parties, the Seller will not be in
breach of any representation or warranty as a result of a change in law by means
of a legislative enactment, constitutional amendment or voter initiative.
Notwithstanding anything to the contrary in this Agreement, the Seller makes no
representation or warranty that any amounts actually collected in respect of the
RTC Charge will in fact be sufficient to meet payment obligations with respect
to the Notes and the Certificates or that the assumptions used in calculating
the RTC Charge will in fact be realized nor shall the Seller be obligated to
reduce, or accept a reduction of, any rates or charges to which it would
otherwise be entitled in respect of services rendered or to be rendered to
Customers in order to permit the payment of the RTC Charge.
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ARTICLE IV. COVENANTS OF THE SELLER
Section 4.01. CORPORATE EXISTENCE. So long as any of the Notes are
outstanding, the Seller (a) will keep in full force and effect its existence,
rights and franchises as a corporation under the laws of the jurisdiction of its
organization and (b) will obtain and preserve its qualification to do business,
in each case to the extent that in each such jurisdiction such existence or
qualification is or shall be necessary to protect the validity and
enforceability of this Agreement, the other Basic Documents to which the Seller
is a party and each other instrument or agreement necessary or appropriate to
the proper administration of this Agreement and the transactions contemplated
hereby.
Section 4.02. NO LIENS. Except for the conveyances hereunder or any Lien
under Section 1H(e) of Chapter 164 of the Massachusetts General Laws or for the
benefit of the Note Issuer, the Seller will not sell, pledge, assign or
transfer, or grant, create, or incur any Lien on, any of the Transition
Property, or any interest therein, and the Seller shall defend the right, title
and interest of the Note Issuer and the Note Trustee in, to and under the
Transition Property against all claims of third parties claiming through or
under the Seller. Boston Edison Company, in its capacity as Seller, will not at
any time assert any Lien against, or with respect to, any of the Transition
Property.
Section 4.03. DELIVERY OF COLLECTIONS. If the Seller receives any payments
in respect of the RTC Charge or the proceeds thereof when it is not acting as
the Servicer, the Seller agrees to pay to the Servicer all payments received by
it in respect thereof as soon as practicable after receipt thereof by it.
Section 4.04. NOTICE OF LIENS. The Seller shall notify the Note Issuer and
the Note Trustee promptly after becoming aware of any Lien on any of the
Transition Property, other than the conveyances hereunder, any Lien under the
Basic Documents or any Lien under Section 1H(e) of Chapter 164 of the
Massachusetts General Laws or for the benefit of the Note Issuer.
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
it, except to the extent that failure to so comply would not adversely affect
the Note Issuer's or the Note Trustee's interests in the Transition Property or
under any of the other Basic Documents to which the Seller is party or the
Seller's performance of its obligations hereunder or under any of the other
Basic Documents to which it is party.
Section 4.06. COVENANTS RELATED TO NOTES AND TRANSITION PROPERTY.
(a) So long as any of the Notes are outstanding, the Seller shall treat
the Notes as debt of the Note Issuer, other than for financial accounting or tax
reporting purposes.
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(b) So long as any of the Notes are outstanding, the Seller shall indicate
in its financial statements that it is not the owner of the Transition Property.
(c) So long as any of the Notes or Certificates are outstanding, the
Seller shall not own or purchase any Notes or Certificates.
(d) The Seller agrees that, upon the sale by the Seller of the Transition
Property to the Note Issuer pursuant to this Agreement, (i) to the fullest
extent permitted by law, including applicable DTE Regulations, the Note Issuer
shall have all of the rights originally held by the Seller with respect to the
Transition Property, including the right (subject to the terms of the Servicing
Agreement) to exercise any and all rights and remedies to collect any amounts
payable by any Customer in respect of the Transition Property, notwithstanding
any objection or direction to the contrary by the Seller and (ii) any payment by
any Customer to the Note Issuer shall discharge such Customer's obligations in
respect of the Transition Property to the extent of such payment,
notwithstanding any objection or direction to the contrary by the Seller.
(e) So long as any of the Notes are outstanding, (i) the Seller shall not
make any statement or reference in respect of the Transition Property that is
inconsistent with the ownership interest of the Note Issuer (other than for
financial accounting or tax reporting purposes), and (ii) the Seller shall not
take any action in respect of the Transition Property except solely in its
capacity as the Servicer thereof pursuant to the Servicing Agreement or as
otherwise contemplated by the Basic Documents.
Section 4.07. PROTECTION OF TITLE. The Seller shall execute and file such
filings, including filings with the DTE 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 ownership interest
of the Note Issuer in the Transition Property, including all filings required
under the Statute relating to the transfer of the ownership interest in the
Transition Property by the Seller to the Note Issuer. The Seller shall deliver
(or cause to be delivered) to the Note Issuer file-stamped copies of, or filing
receipts for, any document filed as provided above, as soon as available
following such filing. The Seller shall institute any action or proceeding
necessary to compel performance by the DTE or The Commonwealth of Massachusetts
of any of their obligations or duties under the Statute or the Financing Order,
and the Seller agrees to take such legal or administrative actions, including
defending against or instituting and pursuing legal actions and appearing or
testifying at hearings or similar proceedings, as may be reasonably necessary to
protect the Note Issuer and the Certificateholders from claims, state actions or
other actions or proceedings of third parties which, if successfully pursued,
would result in a breach of any representation set forth in Article III. The
costs of any such actions or proceedings will be payable by the Note Issuer.
Section 4.08. NONPETITION COVENANTS. Notwithstanding any prior termination
of this Agreement or the Note Indenture, but subject to the DTE's right to order
the sequestration and payment of revenues arising with respect to the Transition
Property notwithstanding any bankruptcy, reorganization or other insolvency
proceedings with respect to the Seller pursuant to
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Section 1H(d)(5) of the Statute, the Seller shall not, prior to the date which
is one year and one day after the termination of the Note Indenture, petition or
otherwise invoke or cause the Note Issuer to invoke the process of any court or
government authority for the purpose of commencing or sustaining a case against
the Note Issuer under any Federal or state bankruptcy, insolvency or similar
law, appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Note Issuer or any substantial
part of the property of the Note Issuer, or ordering the winding up or
liquidation of the affairs of the Note Issuer.
Section 4.09. TAXES. So long as any of the Notes are outstanding, the
Seller shall, and shall cause each of its subsidiaries to, pay all material
taxes, assessments and governmental charges imposed upon it or any of its
properties or assets or with respect to any of its franchises, business, income
or property before any penalty accrues thereon if the failure to pay any such
taxes, assessments and governmental charges would, after any applicable grace
periods, notices or other similar requirements, result in a lien on the
Transition Property; provided that no such tax need be paid if the Seller or one
of its subsidiaries is contesting the same in good faith by appropriate
proceedings promptly instituted and diligently conducted and if the Seller or
such subsidiary has established appropriate reserves as shall be required in
conformity with generally accepted accounting principles.
Section 4.10. ADDITIONAL SALES OF TRANSITION PROPERTY. So long as any of
the Notes are outstanding, the Seller shall not sell any transition property (as
defined in the Statute) to secure another issuance of electric rate reduction
bonds (as defined in the Statute) if it would cause the then existing ratings on
the Certificates from the Rating Agencies to be downgraded.
Section 4.11. ISSUANCE ADVICE LETTER. The Seller hereby agrees not to
withdraw the filing of the Issuance Advice Letter with the DTE.
ARTICLE V. THE SELLER
Section 5.01. LIABILITY OF SELLER; INDEMNITIES.
(a) The Seller shall be liable in accordance herewith only to the extent
of the obligations specifically undertaken by the Seller under this Agreement.
(b) (i) In the event of a breach by the Seller of any representation and
warranty specified in Sections 3.08(c) or 3.08(e) that has a material adverse
effect on the Certificateholders, the Seller shall repurchase the Transition
Property from the Note Issuer at a purchase price equal to the then outstanding
principal amount of the Notes and all accrued and unpaid interest thereon,
excluding any premium or penalty of any kind (the "REPURCHASE PRICE"), as of the
Repurchase Date; provided, however, that the Seller shall not be obligated to
repurchase the Transition Property if (A) within 90 days after the date of
occurrence thereof such breach is cured or the Seller takes remedial action such
that there is not and will not be a material adverse effect on the
Certificateholders as a result of such breach and (B) either (1) if the Seller
had, immediately prior to the breach, a long term debt rating of at least "A3"
by Moody's and "BBB"
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<PAGE> 16
by S&P or the equivalent of "BBB" by any other Rating Agency, and the Seller
enters into a binding agreement with the Note Issuer to pay any amounts
necessary so that all interest payments due on the Notes during such 90-day
period will be paid in full, or (2) if the Seller does not have such long term
debt ratings, the Seller deposits, within two Business Days after such breach,
an amount in escrow with the Note Trustee sufficient, taking into account
amounts on deposit in the Collection Account which will be available for such
purpose, to pay all interest payments which will become due on the Notes during
such 90-day period.
(ii) In the event of a breach by the Seller of any representation and
warranty specified in Sections 3.01, 3.03, 3.04, 3.05, 3.08(a) or 3.08(b) that
has a material adverse effect on the Certificateholders, if within 90 days after
the date of occurrence thereof such breach has not been cured or the Seller has
not taken remedial action such that there is not and will not be a material
adverse effect on the Certificateholders as a result of such breach, then the
Seller shall repurchase the Transition Property from the Note Issuer for the
Repurchase Price on the Repurchase Date.
(iii) Notwithstanding any other provision of this Agreement, upon the
payment by the Seller of the Repurchase Price pursuant to this Section 5.01(b),
neither the Note Issuer nor any other Person shall have any other claims, rights
or remedies against the Seller under, arising from or with respect to this
Agreement, except as set forth in Section 5.01(h).
(c) The Seller shall indemnify the Note Issuer, the Note Trustee (for the
benefit of the Noteholders) and the Certificate Trustee (for the benefit of the
Certificateholders) for, and defend and hold harmless each such Person from and
against, any and all taxes (other than taxes imposed on Noteholders or
Certificateholders solely as a result of their ownership of Notes or
Certificates, respectively) that may at any time be imposed on or asserted
against any such Person under existing law as of the Closing Date as a result of
the sale of the Transition Property to the Note Issuer, including any sales,
gross receipts, general corporation, tangible personal property, privilege or
license taxes.
(d) The Seller shall indemnify the Note Issuer, the Note Trustee (for the
benefit of the Noteholders) and the Certificate Trustee (for the benefit of the
Certificateholders) for, and defend and hold harmless each such Person from and
against, any and all taxes (other than taxes imposed on Noteholders or
Certificateholders solely as a result of their ownership of Notes or
Certificates, respectively) that may be imposed on or asserted against any such
Person under existing law as of the Closing Date as a result of the issuance and
sale by the Note Issuer of the Notes, the issuance and sale by the Trust of the
Certificates or the other transactions contemplated herein, including any sales,
gross receipts, general corporation, tangible personal property, privilege or
license taxes.
(e) The Seller shall indemnify the Note Issuer, the Note Trustee (for the
benefit of the Noteholders) and the Certificate Trustee (for the benefit of the
Certificateholders) for, and defend and hold harmless each such Person from and
against, any and all liabilities, obligations, losses, claims, damages,
payments, costs or expenses of any kind whatsoever (collectively, "LOSSES") that
may be imposed on, incurred by or asserted against each such Person as a result
of (i) the Seller's willful misconduct or gross negligence in the performance of
its duties or observance of its covenants under this Agreement, or (ii) the
Seller's breach in any material respect of any of its representations and
warranties contained in this Agreement (other than the representations and
warranties
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<PAGE> 17
specified in Sections 3.01, 3.03, 3.04, 3.05, 3.08(a), 3.08(b), 3.08(c) or
3.08(e), the breach of which are subject to the repurchase obligation set forth
in Section 5.01(b)); provided, however, that the Seller may, at its election and
in full satisfaction of its obligations under this Section 5.01(e), repurchase
the Transition Property at the Repurchase Price, in which case neither the Note
Issuer nor any other Person shall have any other claims, rights or remedies
against the Seller under, arising from or with respect to this Agreement, except
as set forth in Section 5.01(h).
(f) Indemnification under Sections 5.01(c), 5.01(d), 5.01(e) and 5.01(h)
shall include reasonable out-of-pocket fees and expenses of investigation and
litigation (including reasonable attorneys' fees and expenses), except as
otherwise provided in this Agreement.
(g) Without prejudice to any of the other rights of the parties, the
Seller will not be in breach of any representation or warranty as a result of a
change in law by means of a legislative enactment, constitutional amendment or
voter initiative. Notwithstanding anything to the contrary in this Agreement,
the Seller makes no representation or warranty that any amounts actually
collected in respect of the RTC Charge will in fact be sufficient to meet
payment obligations with respect to the Notes and the Certificates or that the
assumptions used in calculating the RTC Charge will in fact be realized nor
shall the Seller be obligated to reduce, or accept a reduction of, any rates or
charges to which it would otherwise be entitled in respect of services rendered
or to be rendered to customers in order to permit the payment of the RTC Charge.
(h) The Seller shall indemnify and hold harmless the Note Trustee (for
itself), the Delaware Trustee, the Certificate Trustee (for itself), the
Certificate Issuer, the Agencies and any of their respective affiliates,
officers, directors, employees and agents (each an "INDEMNIFIED PERSON") against
any and all Losses incurred by any of such Indemnified Persons as a result of
(i) the Seller's willful misconduct or gross negligence in the performance of
its duties or observance of its covenants under this Agreement or (ii) the
Seller's breach in any material respect of any of its representations and
warranties contained in this Agreement, except to the extent of Losses either
resulting from the willful misconduct or gross negligence of any Indemnified
Person or resulting from a breach of a representation or warranty made by any
Indemnified Person in any of the Basic Documents that gives rise to the Seller's
breach. The Seller shall not be required to indemnify an Indemnified Person for
any amount paid or payable by such Indemnified Person in the settlement of any
action, proceeding or investigation without the written consent of the Seller,
which consent shall not be unreasonably withheld. Promptly after receipt by an
Indemnified Person of notice of its involvement in any action, proceeding or
investigation, such Indemnified Person shall, if a claim for indemnification in
respect thereof is to be made against the Seller under this Section 5.01(h),
notify the Seller in writing of such involvement. Failure by an Indemnified
Person to so notify the Seller shall relieve the Seller from the obligation to
indemnify and hold harmless such Indemnified Person under this Section 5.01(h)
only to the extent that the Seller suffers actual prejudice as a result of such
failure. With respect to any action, proceeding or investigation brought by a
third party for which indemnification may be sought under this Section 5.01(h),
the Seller shall be entitled to assume the defense of any such action,
proceeding or investigation. Upon assumption by the Seller of the defense of any
such
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<PAGE> 18
action, proceeding or investigation, the Indemnified Person shall have the right
to participate in such action or proceeding and to retain its own counsel. The
Seller shall be entitled to appoint counsel of the Seller's choice at the
Seller's expense to represent the Indemnified Person in any action, proceeding
or investigation for which a claim of indemnification is made against the Seller
under this Section 5.01(h) (in which case the Seller shall not thereafter be
responsible for the fees and expenses of any separate counsel retained by the
Indemnified Person except as set forth below); provided, however, that such
counsel shall be reasonably satisfactory to the Indemnified Person.
Notwithstanding the Seller's election to appoint counsel to represent the
Indemnified Person in an action, proceeding or investigation, the Indemnified
Person shall have the right to employ separate counsel (including local
counsel), and the Seller shall bear the reasonable fees, costs and expenses of
such separate counsel if (i) the use of counsel chosen by the Seller to
represent the Indemnified Person would present such counsel with a conflict of
interest, (ii) the actual or potential defendants in, or targets of, any such
action include both the Indemnified Person and the Seller and the Indemnified
Person shall have reasonably concluded that there may be legal defenses
available to it that are different from or additional to those available to the
Seller, (iii) the Seller shall not have employed counsel reasonably satisfactory
to the Indemnified Person to represent the Indemnified Person within a
reasonable time after notice of the institution of such action or (iv) the
Seller shall authorize the Indemnified Person to employ separate counsel at the
expense of the Seller. Notwithstanding the foregoing, the Seller shall not be
obligated to pay for the fees, costs and expenses of more than one separate
counsel for the Indemnified Persons other than local counsel. The Seller will
not, without the prior written consent of the Indemnified Person, settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or proceeding in respect of which
indemnification may be sought under this Section 5.01(h) (whether or not the
Indemnified Person is an actual or potential party to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of the Indemnified Person from all liability arising out of such claim, action,
suit or proceeding.
(i) The remedies of the Note Issuer, the Note Trustee (for the benefit of
the Noteholders) and the Certificate Trustee (for the benefit of the
Certificateholders) provided in this Agreement are each such Person's sole and
exclusive remedies against the Seller for breach of its representations and
warranties in this Agreement.
Section 5.02. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS
OF, SELLER. Any Person (a) into which the Seller may be merged or consolidated,
(b) that may result from any merger or consolidation to which the Seller shall
be a party or (c) that may succeed to the properties and assets of the Seller
substantially as a whole, which Person in any of the foregoing cases executes an
agreement of assumption to perform every obligation of the Seller hereunder,
shall be the successor to the Seller under this Agreement without further act on
the part of any of the parties to this Agreement; provided, however, that (i) if
the Seller is the Servicer, no Servicer Default, and no event which, after
notice or lapse of time, or both, would become a Servicer Default shall have
occurred and be continuing, (ii) the Seller shall have delivered to the Note
Issuer and the Note Trustee an Officers' Certificate stating that such
consolidation, merger or succession and such agreement of assumption comply with
this Section and that all conditions
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<PAGE> 19
precedent, if any, provided for in this Agreement relating to such transaction
have been complied with, (iii) the Seller shall have delivered to the Note
Issuer and the Note Trustee an Opinion of Counsel either (A) stating that, in
the opinion of such counsel, all filings to be made by the Seller, including
filings with the DTE pursuant to the Statute, have been executed and filed that
are necessary to fully preserve and protect the interest of the Note Issuer in
the Transition Property and reciting the details of such filings, or (B) stating
that, in the opinion of such counsel, no such action shall be necessary to
preserve and protect such interests and (iv) the Rating Agencies shall have
received prior written notice of such transaction. When any Person acquires the
properties and assets of the Seller substantially as a whole and becomes the
successor to the Seller in accordance with the terms of this Section 5.02, then
upon satisfaction of all of the other conditions of this Section 5.02, the
Seller shall automatically and without further notice be released from all of
its obligations hereunder.
Section 5.03. LIMITATION ON LIABILITY OF SELLER AND OTHERS. The Seller and
any director, officer, 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.
ARTICLE VI. MISCELLANEOUS PROVISIONS
Section 6.01. AMENDMENT. This Agreement may be amended by the Seller and
the Note Issuer, with ten Business Days' prior written notice given to the
Rating Agencies and the prior written consent of the Note Trustee, but without
the consent of any of the Noteholders, to cure any ambiguity, to correct or
supplement any provisions in this Agreement or for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions in
this Agreement or of modifying in any manner the rights of the Noteholders;
provided, however, that such action shall not, as evidenced by an Officer's
Certificate delivered to the Note Issuer and the Note Trustee, adversely affect
in any material respect the interests of any Noteholder.
This Agreement may also be amended from time to time by the Seller and the
Note Issuer, with ten Business Days' prior written notice given to the Rating
Agencies and the prior written consent of the Note Trustee and the prior written
consent of the Holders of Notes evidencing not less than a majority of the
Outstanding Amount of the Notes affected thereby, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of modifying in any manner the rights of the Noteholders.
It shall not be necessary for the consent of Noteholders pursuant to this
Section to approve the particular form of any proposed amendment or consent, but
it shall be sufficient if such consent shall approve the substance thereof.
Prior to the execution of any amendment to this Agreement, the Note Trustee
shall be entitled to receive and rely upon an Opinion of Counsel stating that
the execution of such amendment is authorized or permitted by this Agreement.
The Note Trustee may, but shall not
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<PAGE> 20
be obligated to, enter into any such amendment which affects the Note Trustee's
own rights, duties or immunities under this Agreement or otherwise.
Section 6.02. NOTICES. All demands, notices and communications upon or to
the Seller, the Note Issuer, the Note Trustee, or the Rating Agencies under this
Agreement shall be in writing, personally delivered, mailed or sent by telecopy
or other similar form of rapid transmission, and shall be deemed to have been
duly given upon receipt (a) in the case of the Seller, to Boston Edison Company,
at 800 Boylston Street, Boston, MA 02199, Attention of __________, (b) in the
case of the Note Issuer, to BEC Funding LLC, 800 Boylston Street, 35th Floor,
Boston, MA 02199, Attention of Robert J. Weafer, Jr., (c) in the case of the
Note Trustee, to it 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 S&P, to Standard & Poor's, 55 Water
Street, 40th Floor, New York, New York 10041, Attention of Asset Backed
Surveillance Department, (f) in the case of Fitch, to Fitch IBCA, Inc., One
State Street Plaza, New York, NY 10004, Attention of ABS Surveillance, (g) in
the case of Duff & Phelps, to Duff & Phelps Credit Rating Co., 17 State Street,
12th Floor, New York, NY 10004, Attention of Asset-Backed Monitoring Group or
(h) as to each of the foregoing, at such other address as shall be designated by
written notice to the other parties.
Section 6.03. ASSIGNMENT. Notwithstanding anything to the contrary
contained herein, except as provided in Section 5.02, this Agreement may not be
assigned by the Seller.
Section 6.04. LIMITATIONS ON RIGHTS OF THIRD PARTIES. The provisions of
this Agreement are solely for the benefit of the Seller, the Note Issuer, the
Note Trustee and the other Persons expressly referred to herein, and such
Persons shall have the right to enforce the relevant provisions of this
Agreement. Nothing in this Agreement, whether express or implied, shall be
construed to give to any other Person any legal or equitable right, remedy or
claim in the Transition Property or under or in respect of this Agreement or any
covenants, conditions or provisions contained herein.
Section 6.05. SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 6.06. SEPARATE COUNTERPARTS. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
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.
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Section 6.08. GOVERNING LAW. This Agreement shall be construed in
accordance with the laws of The Commonwealth of Massachusetts, without reference
to its conflict of law provisions, and the obligations, rights and remedies of
the parties hereunder shall be determined in accordance with such laws.
Section 6.09. ASSIGNMENT TO NOTE TRUSTEE. The Seller hereby acknowledges
and consents to any mortgage, pledge, assignment and grant of a security
interest by the Note Issuer to the Note Trustee pursuant to the Note Indenture
for the benefit of the Noteholders of all right, title and interest of the Note
Issuer in, to and under the Transition Property and the proceeds thereof and the
assignment of any or all of the Note Issuer's rights and obligations hereunder
to the Note Trustee.
Section 6.10. LIMITATION OF LIABILITY. It is expressly understood and
agreed by the parties hereto that this Agreement is executed and delivered by
the Note Trustee, not individually or personally but solely as Note Trustee on
behalf of the Holders of the Notes, in the exercise of the powers and authority
conferred and vested in it.
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<PAGE> 22
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.
BEC FUNDING LLC,
Note Issuer
By:_______________________________
Name:
Title:
BOSTON EDISON COMPANY,
Seller
By:_____________________________
Name:
Title:
Acknowledged and Accepted:
BANK OF NEW YORK,
not in its individual capacity
but solely as Note Trustee
By:___________________________
Name:
Title:
S-1
<PAGE> 1
Exhibit 10.2
================================================================================
BEC FUNDING LLC,
as Note Issuer
and
BOSTON EDISON COMPANY,
as Servicer
-------------------------------------------------
TRANSITION PROPERTY SERVICING AGREEMENT
Dated as of July __, 1999
-------------------------------------------------
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I. DEFINITIONS.......................................................................................... 1
Section 1.01 Definitions.................................................................. 1
Section 1.02 Other Definitional Provisions................................................ 6
ARTICLE II. APPOINTMENT AND AUTHORIZATION....................................................................... 7
Section 2.01 Appointment of Servicer; Acceptance of Appointment........................... 7
Section 2.02 Authorization................................................................ 7
Section 2.03 Dominion and Control Over the Transition Property............................ 7
ARTICLE III. BILLING SERVICES................................................................................... 8
Section 3.01 Duties of Servicer........................................................... 8
Section 3.02 Servicing and Maintenance Standards.......................................... 9
Section 3.03 Certificate of Compliance.................................................... 9
Section 3.04 Annual Report by Independent Public Accountants.............................. 10
ARTICLE IV. SERVICES RELATED TO PERIODIC ADJUSTMENTS; REMITTANCES AND RECONCILIATIONS........................... 10
Section 4.01 Periodic Adjustments......................................................... 10
Section 4.02 Limitation of Liability...................................................... 12
Section 4.03 Remittances; Reconciliations................................................. 13
ARTICLE V. THE TRANSITION PROPERTY.............................................................................. 14
Section 5.01 Custody of Transition Property Records....................................... 14
Section 5.02 Duties of Servicer as Custodian.............................................. 14
Section 5.03 Instructions; Authority to Act............................................... 15
Section 5.04 Effective Period and Termination............................................. 15
Section 5.05 Monitoring of Third-Party Suppliers.......................................... 15
ARTICLE VI. THE SERVICER........................................................................................ 16
Section 6.01 Representations and Warranties of Servicer................................... 16
Section 6.02 Indemnities of Servicer...................................................... 17
Section 6.03 Limitation on Liability of Servicer and Others............................... 19
Section 6.04 Merger or Consolidation of, or Assumption of the Obligations of,
Servicer................................................................. 20
Section 6.05 Boston Edison Company Not to Resign as Servicer.............................. 20
Section 6.06 Servicing Compensation....................................................... 21
Section 6.07 Compliance with Applicable Law............................................... 21
Section 6.08 Access to Certain Records and Information Regarding Transition
Property................................................................ 21
</TABLE>
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<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 6.09 Appointments................................................................. 22
Section 6.10 No Servicer Advances......................................................... 22
Section 6.11 Maintenance of Operations.................................................... 22
ARTICLE VII. DEFAULT............................................................................................ 22
Section 7.01 Servicer Default............................................................. 22
Section 7.02 Appointment of Successor..................................................... 24
Section 7.03 Waiver of Past Defaults...................................................... 24
Section 7.04 Notice of Servicer Default................................................... 25
ARTICLE VIII. MISCELLANEOUS PROVISIONS.......................................................................... 25
Section 8.01 Amendment.................................................................... 25
Section 8.02 Protection of Title to Trust................................................. 26
Section 8.03 Notices...................................................................... 26
Section 8.04 Assignment................................................................... 26
Section 8.05 Limitations on Rights of Third Parties....................................... 26
Section 8.06 Severability................................................................. 27
Section 8.07 Separate Counterparts........................................................ 27
Section 8.08 Headings..................................................................... 27
Section 8.09 Governing Law................................................................ 27
Section 8.10 Assignment to Note Trustee................................................... 27
Section 8.11 Nonpetition Covenants........................................................ 27
Section 8.12 Limitation of Liability...................................................... 28
</TABLE>
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<PAGE> 4
EXHIBITS AND SCHEDULES
Exhibit A Form of Certificate of Compliance
Exhibit B Form of Routine True-Up Letter
Exhibit C Form of Monthly Servicer Certificate
Exhibit D Form of Semiannual Servicer Certificate
Exhibit E Form of Annual Reconciliation
Schedule 4.01(a) Expected Amortization Schedule
Schedule 6.01(f) Proceedings
ANNEXES
Annex I Servicing Procedures
Schedule A to Annex I Additional Servicing Procedures Applicable to TPSs
-iii-
<PAGE> 5
This TRANSITION PROPERTY SERVICING AGREEMENT, dated as of July __,
1999, is between BEC Funding LLC, a Delaware limited liability company (the
"Note Issuer"), and Boston Edison Company, a Massachusetts corporation.
RECITALS
WHEREAS, pursuant to the Statute and the Financing Order, the Seller
and the Note Issuer are concurrently entering into the Sale Agreement pursuant
to which the Seller is selling to the Note Issuer the Transition Property
created pursuant to the Statute and the Financing Order.
WHEREAS, in connection with its ownership of the Transition Property
and in order to collect the RTC Charge, the Note Issuer desires to engage the
Servicer to carry out the functions described herein. The Servicer currently
performs similar functions for itself with respect to its own charges to its
customers and for others. In addition, the Note Issuer desires to engage the
Servicer to act on its behalf in obtaining Periodic Adjustments from the DTE.
The Servicer desires to perform all of these activities on behalf of the Note
Issuer.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I. DEFINITIONS
Section 1.01 Definitions. Whenever used in this Agreement, the
following words and phrases shall have the following meanings:
"Advice Letter" means any filing made with the DTE by the Servicer on
behalf of the Note Issuer to set or adjust the RTC Charge, including the
Issuance Advice Letter, a Routine Anniversary True-Up Letter, a Routine True-Up
Letter or a Non-Routine True-Up Letter.
"Agreement" means this Transition Property Servicing Agreement,
together with all Exhibits, Schedules and Annexes hereto, as the same may be
amended and supplemented from time to time.
"Annual Accountant's Report" has the meaning set forth in Section 3.04.
"Applicable TPS" means, with respect to each Customer, the TPS, if any,
billing the RTC Charge to that Customer.
"Bills" means each of the regular monthly bills, summary bills and
other bills issued to Customers or TPSs by Boston Edison Company on its own
behalf and in its capacity as Servicer.
"Certificate of Compliance" has the meaning set forth in Section 3.03.
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<PAGE> 6
"Closing Date" means July __, 1999.
"Customers" means all classes of retail users of the Seller's
distribution system within the its geographic service territory as in effect on
July 1, 1997.
"Declaration of Trust" means the Declaration of Trust dated as of July
__, 1999 by Bank of New York (Delaware), a Delaware banking corporation, as
Delaware Trustee, the Massachusetts Development Finance Agency and the
Massachusetts Health and Educational Facilities Authority, as the same may be
amended and supplemented from time to time.
"Deemed RTC Charge Payments" means the payments in respect of the RTC
Charge, which are deemed to have been received by the Servicer, directly or
indirectly (including through a TPS), from or on behalf of Customers, calculated
in accordance with Annex I hereto.
"DTE" means the Massachusetts Department of Telecommunications and
Energy and any successor thereto.
"DTE Regulations" means all regulations, rules, tariffs and laws
applicable to public utilities or TPSs, as the case may be, and promulgated by,
enforced by or otherwise within the jurisdiction of the DTE.
"Estimated RTC Charge Payments" means the estimated payments in respect
of the RTC Charge, which are deemed to have been received by the Servicer,
directly or indirectly (including through a TPS), from or on behalf of
Customers, calculated in accordance with Annex I hereto.
"Expected Amortization Schedule" means Schedule 4.01(a) hereto.
"Financing Order" means the order of the DTE, DTE-98-118, issued on
April 2, 1999, as further clarified by the Order on the Massachusetts
Development Finance Agency's and Massachusetts Health and Educational Facilities
Authority's Motion for Clarification dated May 21, 1999.
"Financing Order Anniversary Date" means April 2 of each year.
"Insolvency Event" means, with respect to a specified Person, (a) the
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property in an
involuntary case under any applicable Federal or state bankruptcy, insolvency or
other similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official for
such Person or for any substantial part of its property, or ordering the
winding-up or liquidation of such Person's affairs, and such decree or order
shall remain unstayed and in effect for a period of 60 consecutive days; or (b)
the commencement by such Person of a voluntary case under any applicable Federal
or state bankruptcy, insolvency or other similar law now or hereafter in effect,
or the consent by
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<PAGE> 7
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.
"Issuance Advice Letter" means the initial Issuance Advice Letter,
dated July __, 1999, filed with the DTE pursuant to the Financing Order.
"Lien" means a security interest, lien, charge, pledge or encumbrance
of any kind.
"Losses" has the meaning assigned to that term in Section 6.02(b).
"Monthly Servicer Certificate" has the meaning assigned to that term in
Section 4.01(d)(ii).
"Non-Routine Periodic Adjustment" has the meaning set forth in Section
4.01(c)(i).
"Non-Routine True-Up Letter" means an Advice Letter filed with the DTE
in accordance with the Financing Order with respect to any Non-Routine Periodic
Adjustment, pursuant to which the related Non-Routine Periodic Adjustment will
become effective within 60 days after filing of the Non-Routine True-Up Letter,
subject to the review and approval of the DTE.
"Note Indenture" means the Note Indenture dated as of July __, 1999,
between the Note Issuer and the Note Trustee, as the same may be amended and
supplemented from time to time.
"Note Issuer" has the meaning set forth in the preamble to this
Agreement.
"Officer's Certificate" means a certificate of the Servicer signed by a
Responsible Officer.
"Opinion of Counsel" means one or more written opinions of counsel who
may be an employee of or counsel to the party providing such opinion(s) of
counsel, which counsel shall be reasonably acceptable to the party receiving
such opinion(s) of counsel.
"Periodic Adjustment" means each adjustment to the RTC Charge made
pursuant to the terms of the Financing Order and in accordance with Section 4.01
hereof.
"Principal Balance" means, as of any Payment Date, the sum of the
outstanding principal amount of the Notes.
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<PAGE> 8
"Projected Principal Balance" means, as of any Payment Date, the sum of
the projected outstanding principal amount of the Notes for such Payment Date
set forth in the Expected Amortization Schedule.
"Reconciliation Period" means the twelve-month period commencing on
January 1 of each year and ending on December 31 of each year; provided,
however, that the initial Reconciliation Period shall commence on the Closing
Date and end on December 31, 1999.
"Remittance" means each remittance hereunder of Estimated RTC Charge
Payments by the Servicer to the Note Trustee.
"Remittance Date" means each Servicer Business Day on which a
Remittance is to be made by the Servicer pursuant to Section 4.03.
"Remittance Excess" means the amount, if any, calculated for a
particular Reconciliation Period, by which all RTC Charge Collections during
such Reconciliation Period exceed Deemed RTC Charge Payments during such
Reconciliation Period.
"Remittance Period" means the twelve-month period commencing on March 1
of each year and ending on the last day of February of each year; provided,
however, that the initial Remittance Period shall commence on the Closing Date
and end on February 29, 2000.
"Remittance Shortfall" means the amount, if any, calculated for a
particular Reconciliation Period, by which Deemed RTC Charge Payments during
such Reconciliation Period exceed RTC Charge Collections during such
Reconciliation Period.
"Required Debt Service" means, for any Remittance Period, the total
dollar amount calculated by the Servicer in accordance with Section 4.01(b)(i)
as necessary to be remitted to the Collection Account during such Remittance
Period (after giving effect to the allocation and distribution of amounts on
deposit in the Reserve Subaccount at the time of calculation and which are
available for payments on the Notes and including any shortfalls in Required
Debt Service for any prior Remittance Period and the required payment or credit
of any Remittance Excess or Remittance Shortfall and any Remittances based upon
the RTC Charge in effect in the prior Remittance Period that are expected to be
realized in such Remittance Period) in order to ensure that, as of the Payment
Date immediately following the end of such period, (i) all accrued and unpaid
interest on the Notes then due shall have been paid in full, (ii) the Principal
Balance of the Notes is equal to the Projected Principal Balance of the Notes
for that Payment Date, (iii) the balance on deposit in the Capital Subaccount
equals the aggregate Required Capital Level, (iv) the balance on deposit in the
Overcollateralization Subaccount equals the aggregate Required
Overcollateralization Level and (v) all other fees and expenses due and owing
and required or allowed to be paid under Section 8.02 of the Note Indenture as
of such date shall have been paid in full; provided, however, that, with respect
to any Periodic Adjustment occurring after the last Scheduled Maturity Date for
any Notes, the Required Debt Service shall be
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calculated to ensure that sufficient amounts will be collected to retire such
Notes in full as of the earlier of (x) the next Payment Date and (y) the Final
Maturity Date for such Notes.
"Responsible Officer" means the chief executive officer, the president,
the vice chairman of the board, any vice president, the treasurer, any assistant
treasurer, the clerk, any assistant clerk, the controller or the finance manager
of the Servicer.
"Retirement of the Notes" means the day on which the final payment is
made to the Note Trustee in respect of the last outstanding Note.
"Routine Anniversary True-Up Letter" means a Routine True-Up Letter
filed with the DTE prior to the Financing Order Anniversary Date in respect of
an annual Periodic Adjustment. The Routine Anniversary True-Up Letter will
become effective on the first calendar day of the next succeeding calendar month
after filing, or such date as may be specified in such Routine Anniversary
True-Up Letter, so long as such effective date is at least 15 days after the
filing of such Routine Anniversary True-Up Letter.
"Routine True-Up Letter" means an Advice Letter filed with the DTE in
respect of a Periodic Adjustment, substantially in the form of Exhibit B hereto.
The Routine True-Up Letter will become effective on the first calendar day of
the next succeeding calendar month after filing, or such date as may be
specified in such Routine True-Up Letter, so long as such effective date is at
least 15 days after the filing of such Routine True-Up Letter.
"RTC Charge" means the portion (which may become all) of the Seller's
Transition Charge designated pursuant to the Financing Order as the RTC Charge,
as the same may be adjusted from time to time as provided in the Financing
Order.
"RTC Charge Collections" means the Estimated RTC Charge Payments
remitted to the Collection Account.
"Sale Agreement" means the Transition Property Sale Agreement dated as
of July __, 1999, between Boston Edison Company, as Seller, and the Note Issuer,
as the same may be amended and supplemented from time to time.
"Seller" means Boston Edison Company, a Massachusetts corporation, and
its permitted successors and assigns under the Sale Agreement.
"Semiannual Servicer Certificate" has the meaning assigned to that term
in Section 4.01(d)(iii).
"Servicer" means Boston Edison Company, as the servicer of the
Transition Property, or each successor (in the same capacity) pursuant to
Section 6.04 or 7.02.
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"Servicer Business Day" means any Business Day on which the Servicer's
offices in The Commonwealth of Massachusetts are open for business.
"Servicer Default" means an event specified in Section 7.01.
"Servicing Fee" has the meaning set forth in Section 6.06(a).
"Statute" means Chapter 164 of the Massachusetts Acts of 1997, entitled
an Act Relative to Restructuring the Electric Utility Industry in the
Commonwealth, Regulating the Provision of Electricity and Other Services, and
Promoting Enhanced Consumer Protections Therein.
"Termination Notice" has the meaning assigned to that term in Section
7.01.
"TPS" means a third party supplier of energy who has entered into a TPS
Service Agreement with the Servicer.
"TPS Service Agreement" means an agreement between a third party
supplier of energy and the Servicer pursuant to which such third party supplier
of energy bills and collects the RTC Charge to and from Customers in accordance
with DTE Regulations, the Financing Order and the guidelines described in
Schedule A to Annex I.
"Transition Charge" means the "access charge" as defined in Boston
Edison Company's Restructuring Settlement Agreement, D.P.U. Docket Nos. 96-100
and 96-23 and subsequent filings with the DTE pursuant thereto.
"Transition Property" means the transition property that exists under
Order 7 of the Financing Order and is sold by the Seller to the Note Issuer
under the Sale Agreement.
"Transition Property Records" has the meaning assigned to that term in
Section 5.01.
"Weighted Average Days Outstanding" means the weighted average number
of days Boston Edison Company's monthly retail customer bills remain outstanding
during the calendar year immediately preceding the calculation thereof pursuant
to Section 4.01(b)(i). For all purposes of this Agreement, the calculation of
Weighted Average Days Outstanding pursuant to Section 4.01(b)(i) shall become
effective on March 16 of each year. The initial Weighted Average Days
Outstanding shall be 45 days until updated pursuant to Section 4.01(b)(i) of
this Agreement.
Section 1.02 Other Definitional Provisions.
(a) Capitalized terms used herein and not otherwise defined
herein have the meanings assigned to them in the Note Indenture.
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(b) All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein.
(c) The words "hereof," "herein," "hereunder" and words of
similar import, when used in this Agreement, shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement; Section, Schedule, Exhibit and Annex references contained in
this Agreement are references to Sections, Schedules, Exhibits and
Annexes in or to this Agreement unless otherwise specified; and the
term "including" shall mean "including without limitation."
(d) The definitions contained in this Agreement are applicable
to the singular as well as the plural forms of such terms and to the
masculine as well as to the feminine and neuter forms of such terms.
ARTICLE II. APPOINTMENT AND AUTHORIZATION
Section 2.01 Appointment of Servicer; Acceptance of Appointment.
Subject to Section 6.05 and Article 7, the Note Issuer hereby appoints the
Servicer, and the Servicer hereby accepts such appointment, to perform the
Servicer's obligations pursuant to this Agreement on behalf of and for the
benefit of the Note Issuer or any assignee thereof in accordance with the terms
of this Agreement and applicable law. This appointment and the Servicer's
acceptance thereof may not be revoked except in accordance with the express
terms of this Agreement.
Section 2.02 Authorization. With respect to all or any portion of the
Transition Property, the Servicer shall be, and hereby is, authorized and
empowered by the Note Issuer to (a) execute and deliver, on behalf of itself
and/or the Note Issuer, as the case may be, any and all instruments, documents
or notices, and (b) on behalf of itself and/or the Note Issuer, as the case may
be, make any filing and participate in proceedings of any kind with any
governmental authorities, including with the DTE. The Note Issuer shall execute
and/or furnish the Servicer with such documents as have been prepared by the
Servicer for execution by the Note Issuer, and with such other documents as may
be in the Note Issuer's possession, as the Servicer may determine to be
necessary or appropriate to enable it to carry out its servicing and
administrative duties hereunder. Upon the Servicer's written request, the Note
Issuer shall furnish the Servicer with any powers of attorney or other documents
necessary or appropriate to enable the Servicer to carry out its duties
hereunder.
Section 2.03 Dominion and Control Over the Transition Property.
Notwithstanding any other provision herein, the Note Issuer shall have dominion
and control over the Transition Property, and the Servicer, in accordance with
the terms hereof, is acting solely as the servicing agent and custodian for the
Note Issuer with respect to the Transition Property and the Transition Property
Records. The Servicer shall not take any action that is not authorized by this
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Agreement or that shall impair the rights of the Note Issuer in the Transition
Property, in each case unless such action is required by applicable law.
ARTICLE III. BILLING SERVICES
Section 3.01 Duties of Servicer. The Servicer, as agent for the Note
Issuer, shall have the following duties:
(a) Duties of Servicer Generally.
(i) General Duties. The Servicer's duties in general
shall include management, servicing and administration of the
Transition Property; obtaining meter reads, calculating
electricity usage (including usage by Customers of any TPS),
billing, collection and posting of all payments in respect of
the Transition Property; responding to inquiries by Customers,
the DTE, or any federal, local or other state governmental
authorities with respect to the Transition Property;
delivering Bills to Customers and TPSs, investigating and
handling delinquencies, processing and depositing collections
and making periodic remittances; furnishing periodic reports
to the Note Issuer, the Note Trustee, the Certificate Trustee
and the Rating Agencies; and taking all necessary action in
connection with Periodic Adjustments as set forth herein.
Certain of the duties set forth above may be performed by TPSs
pursuant to TPS Service Agreements. Without limiting the
generality of this Section 3.01(a)(i), 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, collection, payment
processing and remittance set forth in Annex I hereto.
(ii) DTE Regulations Control. Notwithstanding
anything to the contrary in this Agreement, the duties of the
Servicer set forth in this Agreement shall be qualified in
their entirety by any DTE Regulations as in effect at the time
such duties are to be performed.
(b) Reporting Functions.
(i) Annual Reconciliation Report. The Servicer shall
deliver annual written reconciliation reports substantially in
the form of Exhibit E hereto as required by Section 4.03(b)
hereof.
(ii) Notification of Laws and Regulations. The
Servicer shall promptly notify the Note Issuer, the Note
Trustee, the Certificate Trustee and the Rating Agencies in
writing of any laws or DTE Regulations hereafter promulgated
that
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have a material adverse effect on the Servicer's ability to
perform its duties under this Agreement.
(iii) Other Information. Upon the reasonable request
of the Note Issuer, the Note Trustee, the Certificate Trustee,
or any Rating Agency, the Servicer shall provide to such Note
Issuer, Note Trustee, Certificate Trustee, or the Rating
Agencies, as the case may be, any public financial information
in respect of the Servicer, or any material information
regarding the Transition Property to the extent it is
reasonably available to the Servicer, as may be reasonably
necessary and permitted by law for the Note Issuer, the Note
Trustee, the Certificate Trustee, or the Rating Agencies to
monitor the Servicer's performance hereunder.
(iv) Preparation of Reports to be Filed with the SEC.
The Servicer shall prepare any reports required to be filed by
the Note Issuer or the Certificate Issuer under the securities
laws, including a copy of each Semiannual Servicer Certificate
described in Section 4.01(d)(iii), the annual Certificate of
Compliance described in Section 3.03 and the Annual
Accountant's Report described in Section 3.04.
Section 3.02 Servicing and Maintenance Standards. On behalf of the Note
Issuer, the Servicer shall (a) manage, service, administer and make collections
in respect of the Transition Property with reasonable care and in accordance
with applicable law, including all applicable DTE Regulations and guidelines,
using the same degree of care and diligence that the Servicer exercises with
respect to similar assets for its own account and, if applicable, for others;
(b) follow customary standards, policies and procedures for the industry in
performing its duties as Servicer; (c) use all reasonable efforts, consistent
with its customary servicing procedures, to bill and collect the RTC Charge; and
(d) comply with all laws and regulations applicable to and binding on it
relating to the Transition Property. The Servicer shall follow such customary
and usual practices and procedures as it shall deem necessary or advisable in
its servicing of all or any portion of the Transition Property, which, in the
Servicer's judgment, may include the taking of legal action, at the Note
Issuer's expense.
Section 3.03 Certificate of Compliance. The Servicer shall deliver to
the Note Issuer, the Note Trustee, the Certificate Trustee and the Rating
Agencies on or before March 31 of each year, commencing March 31, 2000 to and
including the March 31 succeeding the Retirement of the Notes, an Officer's
Certificate substantially in the form of Exhibit A hereto (a "Certificate of
Compliance"), stating that: (i) a review of the activities of the Servicer
during the twelve months ended the preceding December 31 (or, in the case of the
first Certificate of Compliance to be delivered on or before March 31, 2000, the
period of time from the date of this Agreement until December 31, 1999) and of
its performance under this Agreement has been made under such Responsible
Officer's supervision, and (ii) to such Responsible Officer's knowledge, based
on such review, the Servicer has fulfilled all of its material obligations in
all material respects under this Agreement throughout such twelve months (or, in
the case of the Certificate of Compliance
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to be delivered on or before March 31, 2000, the period of time from the date of
this Agreement until December 31, 1999), or, if there has been a default in the
fulfillment of any such material obligation, specifying each such material
default known to such Responsible Officer and the nature and status thereof.
Section 3.04 Annual Report by Independent Public Accountants.
(a) The Servicer, at the Note Issuer's expense, shall cause a
firm of independent certified public accountants (which may provide
other services to the Servicer) to prepare, and the Servicer shall
deliver to the Note Issuer, the Note Trustee, the Certificate Trustee
and the Rating Agencies, a report addressed to the Servicer (the
"Annual Accountant's Report"), which may be included as part of the
Servicer's customary auditing activities, for the information and use
of the Note Issuer, the Note Trustee, the Certificate Trustee and the
Rating Agencies, on or before March 31 each year, beginning March 31,
2000 to and including the March 31 succeeding the Retirement of the
Notes, to the effect that such firm has performed certain procedures,
agreed between the Servicer and such accountants, in connection with
the Servicer's compliance with its obligations under this Agreement
during the preceding twelve months ended December 31 (or, in the case
of the first Annual Accountant's Report to be delivered on or before
March 31, 2000, the period of time from the date of this Agreement
until December 31, 1999), identifying the results of such procedures
and including any exceptions noted.
(b) The Annual Accountant's Report shall also indicate that
the accounting firm providing such report is independent of the
Servicer within the meaning of the Code of Professional Ethics of the
American Institute of Certified Public Accountants.
ARTICLE IV. SERVICES RELATED TO PERIODIC ADJUSTMENTS;
REMITTANCES AND RECONCILIATIONS
Section 4.01 Periodic Adjustments. From time to time, until the
Retirement of the Notes, the Servicer shall identify the need for Periodic
Adjustments and shall take all reasonable action to obtain and implement such
Periodic Adjustments, all in accordance with the following:
(a) Expected Amortization Schedule. The Expected
Amortization Schedule is attached hereto as Schedule 4.01(a).
(b) Routine Periodic Adjustments and Yearly Filings.
(i) Routine Anniversary Periodic Adjustments and
Filings. For the purpose of preparing a Routine Anniversary
True-Up Letter, no later than March 15 of each year, the
Servicer shall: (A) update the assumptions underlying the
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calculation of the RTC Charge, including energy usage volume,
the rate of charge-offs and estimated expenses and fees of the
Note Issuer and the Certificate Issuer to the extent not
fixed, in each case for the Remittance Period beginning on
March 1 of such year; (B) update the calculation of Weighted
Average Days Outstanding; (C) determine the Required Debt
Service for such Remittance Period based upon such updated
assumptions; and (D) determine the RTC Charge to be charged
during such Remittance Period based upon such Required Debt
Service. The Servicer shall file a Routine Anniversary True-Up
Letter with the DTE no later than March 15 of each year.
(ii) Routine Periodic Adjustments. The Servicer shall
file a Routine True-Up Letter at least 15 days before the end
of any calendar quarter or Payment Date at such times as it
may reasonably determine to meet the Required Debt Service for
the then current Remittance Period.
(c) Non-Routine Periodic Adjustments.
(i) Whenever the Servicer determines that the
existing model for calculating the RTC Charge should be
amended or revised, subject to the consent of the Note Issuer
under the conditions set forth in Section 3.18 of the Note
Indenture, the Servicer shall file a Non-Routine True-Up
Letter with the DTE designating the adjustments to such model
and any corresponding adjustments to the RTC Charge
(collectively, a "Non-Routine Periodic Adjustment"), subject
to the review and approval of the DTE pursuant to the
Financing Order.
(ii) The Servicer shall take all reasonable actions
and make all reasonable efforts to secure any Periodic
Adjustments and Non-Routine Periodic Adjustments.
(iii) The Servicer shall implement any resulting
adjustments to the model and any resulting revised RTC Charge
as of the effective date of the Non-Routine True-Up Letter.
(d) Reports.
(i) Notification of Advice Letter Filings and
Periodic Adjustments. Whenever the Servicer files an Advice
Letter with the DTE, the Servicer shall send a copy of such
filing to the Note Issuer, the Note Trustee, the Certificate
Trustee and the Rating Agencies concurrently therewith. If any
Periodic Adjustment requested in any such Advice Letter filing
does not become effective on the applicable date as provided
by the Financing Order, the Servicer shall notify the Note
Issuer, the Note Trustee, the Certificate Trustee and the
Rating
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Agencies by the end of the second Servicer Business Day after
such applicable date.
(ii) Monthly Servicer Certificate. So long as any
Notes are outstanding, not later than fifteen (15) days after
the end of each month, or if such day is not a Servicer
Business Day, the next succeeding Servicer Business Day,
commencing after the Certificates are issued, the Servicer
shall deliver a written report substantially in the form of
Exhibit C hereto (the "Monthly Servicer Certificate") to the
Note Issuer, the Note Trustee, the Certificate Trustee and the
Rating Agencies.
(iii) Semiannual Servicer Certificate. So long as any
Notes are outstanding, not later than the Servicer Business
Day immediately preceding each Payment Date, the Servicer
shall deliver a written report substantially in the form of
Exhibit D hereto (the "Semiannual Servicer Certificate") to
the Note Issuer, the Note Trustee, the Certificate Trustee and
the Rating Agencies.
(iv) TPS Reports. The Servicer shall provide to the
Rating Agencies, upon request, any publicly available reports
filed by the Servicer with the DTE (or otherwise made publicly
available by the Servicer) relating to TPSs and any other
non-confidential and non-proprietary information relating to
TPSs reasonably requested by the Rating Agencies.
Section 4.02 Limitation of Liability.
(a) The Note Issuer and the Servicer expressly agree and
acknowledge that:
(i) In connection with any Periodic Adjustment, the
Servicer is acting solely in its capacity as the servicing
agent hereunder.
(ii) Neither the Servicer nor the Note Issuer shall
be responsible in any manner for, and shall have no liability
whatsoever as a result of, any action, decision, ruling or
other determination made or not made, or any delay (other than
any delay resulting from the Servicer's failure to file the
applications required by Section 4.01 in a timely and correct
manner or other material breach by the Servicer of its duties
under this Agreement that materially and adversely affects the
Periodic Adjustment), by the DTE in any way related to the
Transition Property or in connection with any Periodic
Adjustment or Non-Routine Periodic Adjustment, the subject of
any filings under Section 4.01, any proposed Periodic
Adjustment or Non-Routine Periodic Adjustment, or the approval
of the RTC Charge and the adjustments thereto.
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(iii) The Servicer shall have no liability whatsoever
relating to the calculation of the RTC Charge and the
adjustments thereto (including any Non-Routine Periodic
Adjustment), including as a result of any inaccuracy of any of
the assumptions made in such calculation regarding expected
energy usage volume, the rate of charge-offs, estimated
expenses and fees of the Note Issuer and the Certificate
Issuer, so long as the Servicer has not acted in a grossly
negligent manner in connection therewith, nor shall the
Servicer have any liability whatsoever as a result of any
Person, including the Noteholders or the Certificateholders,
not receiving any payment, amount or return anticipated or
expected in respect of any Note or Certificate generally,
except only to the extent that the Servicer is liable under
Section 6.02 of this Agreement.
(b) Notwithstanding the foregoing, this Section 4.02 shall not
relieve the Servicer of any liability under Section 6.02 for any
misrepresentation by the Servicer under Section 6.01 or for any breach
by the Servicer of its other obligations under this Agreement.
Section 4.03 Remittances; Reconciliations.
(a) Subject to Section 4.03(b) below, on each Servicer
Business Day commencing 45 days after the date of this Agreement, the
Servicer shall cause to be made within two (2) Servicer Business Days a
wire transfer of immediately available funds to the General Subaccount
of the Collection Account in an amount equal to the Estimated RTC
Charge Payments (as calculated in accordance with Annex I hereto)
deemed to be received on such day and on any prior day that was not a
Servicer Business Day for which a Remittance has not previously been
made (taking into account the Weighted Average Days Outstanding in
effect from time to time). Prior to or simultaneous with each
Remittance to the General Subaccount of the Collection Account pursuant
to this Section, the Servicer shall provide written notice to the Note
Trustee of each such Remittance (including the exact dollar amount to
be remitted).
(b) On or before each March 31, the Servicer shall calculate
the amount of any Remittance Shortfall or Remittance Excess
attributable to the prior Reconciliation Period and (A) if a Remittance
Shortfall exists, the Servicer shall make a supplemental wire transfer
of immediately available funds to the General Subaccount of the
Collection Account not later than the fifth Servicer Business Day
following such calculation in the amount of such Remittance Shortfall,
or (B) if a Remittance Excess exists, the Servicer may elect to either
reduce the amount of Remittances to be made to the Note Issuer on
succeeding Servicer Business Days or receive a payment or payments on
succeeding Payment Dates from the Note Issuer equal to the amount of
such Remittance Excess until the balance of the Remittance Excess has
been reduced to zero. The Servicer shall deliver a written report
setting forth in reasonable detail the calculation of any Remittance
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Excess or Remittance Shortfall to the Note Issuer, the Note Trustee,
the Certificate Trustee and the Rating Agencies.
(c) The Servicer agrees and acknowledges that it will remit
Estimated RTC Charge Payments in accordance with this Section 4.03
without any surcharge, fee, offset, charge or other deduction except
(i) as set forth in Section 4.03(b) above and (ii) for late fees
permitted by Section 6.06.
ARTICLE V. THE TRANSITION PROPERTY
Section 5.01 Custody of Transition Property Records. To assure uniform
quality in servicing the Transition Property and to reduce administrative costs,
the Note Issuer hereby revocably appoints the Servicer, and the Servicer hereby
accepts such appointment, to act as the agent of the Note Issuer and the Note
Trustee as custodian of any and all documents and records that the Seller shall
keep on file, in accordance with its customary procedures, relating to the
Transition Property, including copies of the Financing Order and Advice Letters
relating thereto and all documents filed with the DTE in connection with any
Periodic Adjustment or Non-Routine Periodic Adjustment (collectively, the
"Transition Property Records"), which are hereby constructively delivered to the
Note Trustee, as pledgee of the Note Issuer with respect to all Transition
Property.
Section 5.02 Duties of Servicer as Custodian.
(a) Safekeeping. The Servicer shall hold the Transition
Property Records on behalf of the Note Issuer and maintain such
accurate and complete accounts, records and computer systems pertaining
to the Transition Property Records on behalf of the Note Issuer and the
Note Trustee as shall enable the Note Issuer to comply with this
Agreement and the Note Indenture. In performing its duties as custodian
the Servicer shall act with reasonable care, using that degree of care
and diligence that the Servicer exercises with respect to comparable
assets that the Servicer services for itself or, if applicable, for
others. The Servicer shall promptly report to the Note Issuer and the
Note Trustee any failure on its part to hold the Transition Property
Records and maintain its accounts, records and computer systems as
herein provided and promptly take appropriate action to remedy any such
failure. Nothing herein shall be deemed to require an initial review or
any periodic review by the Note Issuer or the Note Trustee of the
Transition Property Records. The Servicer's duties to hold the
Transition Property Records on behalf of the Note Issuer set forth in
this Section 5.02, to the extent such Transition Property Records have
not been previously transferred to a successor Servicer pursuant to
Article VII, shall terminate one year and one day after the earlier of
the date on which (i) the Servicer is succeeded by a successor Servicer
in accordance with Article VII hereof and (ii) no Notes are
outstanding.
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(b) Maintenance of and Access to Records. The Servicer shall
maintain at all times records and accounts that permit the Servicer to
identify RTC Charges billed. The Servicer shall maintain the Transition
Property Records in Boston, Massachusetts or at such other office as
shall be specified to the Note Issuer and the Note Trustee by written
notice at least 30 days prior to any change in location. The Servicer
shall make available for inspection to the Note Issuer and the Note
Trustee or their respective duly authorized representatives, attorneys
or auditors the Transition Property Records at such times during normal
business hours as the Note Issuer or the Note Trustee shall reasonably
request and which do not unreasonably interfere with the Servicer's
normal operations. Nothing in this Section 5.02(b) shall affect the
obligation of the Servicer to observe any applicable law (including any
DTE Regulations) prohibiting disclosure of information regarding the
Customers, and the failure of the Servicer to provide access to such
information as a result of such obligation shall not constitute a
breach of this Section 5.02(b).
(c) Release of Documents. Upon instruction from the Note
Trustee in accordance with the Note Indenture, the Servicer shall
release any Transition Property Records to the Note Trustee, the Note
Trustee's agent or the Note Trustee's designee, as the case may be, at
such place or places as the Note Trustee may designate, as soon as
practicable.
(d) Defending Transition Property Against Claims. The Servicer
shall institute any action or proceeding necessary to compel
performance by the DTE or The Commonwealth of Massachusetts of any of
their obligations or duties under the Statute, the Financing Order or
any Advice Letter, and the Servicer agrees to take such legal or
administrative actions, including defending against or instituting and
pursuing legal actions and appearing or testifying at hearings or
similar proceedings, as may be reasonably necessary to block or
overturn any attempts to cause a repeal of, modification of or
supplement to the Statute or the Financing Order or the rights of
holders of Transition Property by legislative enactment, voter
initiative or constitutional amendment that would be adverse to
Certificateholders. The costs of any such action shall be payable from
RTC Charge Collections as an Operating Expense in accordance with the
priorities set forth in Section 8.02(d) of the Note Indenture.
Section 5.03 Instructions; Authority to Act. For so long as any Notes
remain outstanding, the Servicer shall be deemed to have received proper
instructions with respect to the Transition Property Records upon its receipt of
written instructions signed by a Responsible Officer (as defined in the Note
Indenture) of the Note Trustee.
Section 5.04 Effective Period and Termination. The Servicer's
appointment as custodian shall become effective as of the Closing Date and shall
continue in full force and effect until terminated pursuant to this Section
5.04. If any Servicer shall resign as Servicer in accordance with the provisions
of this Agreement or if all of the rights and obligations of any
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Servicer shall have been terminated under Section 7.01, the appointment of such
Servicer as custodian shall terminate upon appointment of a successor Servicer,
subject to the approval of the DTE, and acceptance by such successor Servicer of
such appointment.
Section 5.05 Monitoring of Third-Party Suppliers. From time to time,
until the Retirement of the Notes, the Servicer shall, using the same degree of
care and diligence that it exercises with respect to payments owed to it for its
own account, implement such procedures and policies as are necessary to properly
enforce the obligations of each TPS to remit RTC Charges, in accordance with the
terms and provisions of the Financing Order, the TPS Service Agreement and
Schedule A to Annex I hereto.
ARTICLE VI. THE SERVICER
Section 6.01 Representations and Warranties of Servicer. The Servicer
makes the following representations and warranties, as of the Closing Date, on
which the Note Issuer is deemed to have relied in entering into this Agreement
relating to the servicing of the Transition Property.
(a) Organization and Good Standing. The Servicer is duly
organized and validly existing as a corporation in good standing under
the laws of The Commonwealth of Massachusetts, with the requisite
corporate power and authority to own its properties as such properties
are currently owned and to conduct its business as such business is now
conducted by it, and has the requisite corporate power and authority to
service the Transition Property and to hold the Transition Property
Records as custodian.
(b) Due Qualification. The Servicer is duly qualified to do
business as a foreign corporation in good standing, and has obtained
all necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of property or the conduct of its business
(including the servicing of the Transition Property as required by this
Agreement) shall require such qualifications, licenses or approvals
(except where the failure to so qualify or obtain such licenses and
approvals would not be reasonably likely to have a material adverse
effect on the Servicer's business, operations, assets, revenues or
properties or adversely affect the servicing of the Transition
Property).
(c) Power and Authority. The Servicer has the requisite
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 all necessary corporate
action on the part of the Servicer.
(d) Binding Obligation. This Agreement constitutes a legal,
valid and binding obligation of the Servicer enforceable against it in
accordance with its terms, subject to applicable insolvency,
reorganization, moratorium, fraudulent transfer and other laws
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relating to or affecting creditors' rights generally from time to time
in effect and to general principles of equity (including concepts of
materiality, reasonableness, good faith and fair dealing), regardless
of whether considered in a proceeding in equity or at law.
(e) No Violation. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof
do not: (i) conflict with or 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 organization or by-laws of the
Servicer, or any material indenture, agreement or other instrument to
which the Servicer is a party or by which it is bound; (ii) result in
the creation or imposition of any Lien upon any of the Servicer's
properties pursuant to the terms of any such indenture, agreement or
other instrument; nor violate any existing law or any existing order,
rule or regulation applicable to the Servicer of any court or of any
federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Servicer or
its properties.
(f) No Proceedings. Except as set forth on Schedule 6.01(f),
there are no proceedings pending and, to the Servicer's knowledge,
there are no proceedings threatened and, to the Servicer's knowledge,
there are no investigations pending or threatened, before any court,
federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Servicer or
its properties involving or relating to the Servicer or the Note Issuer
or, to the Servicer's knowledge, any other Person: (i) asserting the
invalidity of this Agreement; (ii) seeking to prevent the consummation
of any of the transactions contemplated by this Agreement; or (iii)
seeking any determination or ruling that might materially and adversely
affect the performance by the Servicer of its obligations under, or the
validity or enforceability of, this Agreement.
(g) Approvals. No approval, authorization, consent, order or
other action of, or filing with, any court, federal or state regulatory
body, administrative agency or other governmental instrumentality is
required in connection with the execution and delivery by the Servicer
of this Agreement, the performance by the Servicer of the transactions
contemplated hereby or the fulfillment by the Servicer of the terms
hereof, except those that have been obtained or made and those that the
Servicer is required to make in the future pursuant to Article III or
IV hereof.
Section 6.02 Indemnities of Servicer.
(a) The Servicer shall be liable in accordance herewith only
to the extent of the obligations specifically undertaken by the
Servicer and as expressly provided under this Section 6.02.
(b) The Servicer shall indemnify the Note Issuer, the Note
Trustee (for the benefit of the Noteholders) and the Certificate
Trustee (for the benefit of the Certificateholders)
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for, and defend and hold harmless each such Person from and against,
any and all liabilities, obligations, losses, damages, payments,
claims, costs or expenses of any kind whatsoever (collectively,
"Losses") that may be imposed on, incurred by or asserted against any
such Person as a result of (i) the Servicer's willful misconduct or
gross negligence in the performance of its duties or observance of its
covenants under this Agreement (including the Servicer's willful
misconduct or gross negligence relating to the maintenance and custody
by the Servicer, as custodian, of the Transition Property Records) or
(ii) the Servicer's breach in any material respect of any of its
representations or warranties in this Agreement; provided, however,
that the Servicer shall not be liable for any Losses resulting from the
willful misconduct or gross negligence of any such indemnified person;
and, provided, further, that the Servicer shall not be liable for any
Losses, regardless of when incurred, after the Notes and the
Certificates have been paid in full.
(c) The Servicer shall indemnify and hold harmless the Note
Trustee (for itself), the Delaware Trustee, the Certificate Trustee
(for itself), the Certificate Issuer, the Agencies and any of their
respective affiliates, officers, directors, employees and agents (each
an "Indemnified Person") for, and defend and hold harmless each such
Person from and against, any and all Losses imposed on, incurred by or
asserted against any of such Indemnified Persons as a result of: (i)
the Servicer's willful misconduct or gross negligence in the
performance of its duties or observance of its covenants under this
Agreement (including the Servicer's willful misconduct or gross
negligence relating to the maintenance and custody by the Servicer, as
custodian, of the Transition Property Records) or (ii) the Servicer's
breach in any material respect of any of its representations or
warranties in this Agreement; provided, however, that the Servicer
shall not be liable for any Losses resulting from the willful
misconduct or gross negligence of any Indemnified Person or resulting
from a breach of a representation or warranty made by Indemnified
Person in any of the Basic Documents that gives rise to the Servicer's
breach. The Servicer shall not be required to indemnify an Indemnified
Person for any amount paid or payable by such Indemnified Person in the
settlement of any action, proceeding or investigation without the
written consent of the Servicer, which consent shall not be
unreasonably withheld. Promptly after receipt by an Indemnified Person
of notice of its involvement in any action, proceeding or
investigation, such Indemnified Person shall, if a claim for
indemnification in respect thereof is to be made against the Servicer
under this Section 6.02(c), notify the Servicer in writing of such
involvement. Failure by an Indemnified Person to so notify the Servicer
shall relieve the Servicer from the obligation to indemnify and hold
harmless such Indemnified Person under this Section 6.02(c) only to the
extent that the Servicer suffers actual prejudice as a result of such
failure. With respect to any action, proceeding or investigation
brought by a third party for which indemnification may be sought under
this Section 6.02(c), the Servicer shall be entitled to assume the
defense of any such action, proceeding or investigation. Upon
assumption by the Servicer of the defense of any such action,
proceeding or investigation, the Indemnified Person shall
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have the right to participate in such action or proceeding and to
retain its own counsel. The Servicer shall be entitled to appoint
counsel of the Servicer's choice at the Servicer's expense to represent
the Indemnified Person in any action, proceeding or investigation for
which a claim of indemnification is made against the Servicer under
this Section 6.02(c) (in which case the Servicer shall not thereafter
be responsible for the fees and expenses of any separate counsel
retained by the Indemnified Person except as set forth below);
provided, however, that such counsel shall be reasonably satisfactory
to the Indemnified Person. Notwithstanding the Servicer's election to
appoint counsel to represent the Indemnified Person in an action,
proceeding or investigation, the Indemnified Person shall have the
right to employ separate counsel (including local counsel), and the
Servicer shall bear the reasonable fees, costs and expenses of such
separate counsel if (i) the use of counsel chosen by the Servicer to
represent the Indemnified Person would present such counsel with a
conflict of interest, (ii) the actual or potential defendants in, or
targets of, any such action include both the Indemnified Person and the
Servicer and the Indemnified Person shall have reasonably concluded
that there may be legal defenses available to it that are different
from or additional to those available to the Servicer, (iii) the
Servicer shall not have employed counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person within a
reasonable time after notice of the institution of such action or (iv)
the Servicer shall authorize the Indemnified Person to employ separate
counsel at the expense of the Servicer. Notwithstanding the foregoing,
the Servicer shall not be obligated to pay for the fees, costs and
expenses of more than one separate counsel for the Indemnified Persons
other than local counsel. The Servicer will not, without the prior
written consent of the Indemnified Person, settle or compromise or
consent to the entry of any judgment with respect to any pending or
threatened claim, action, suit or proceeding in respect of which
indemnification may be sought under this Section 6.02(c) (whether or
not the Indemnified Person is an actual or potential party to such
claim or action) unless such settlement, compromise or consent includes
an unconditional release of the Indemnified Person from all liability
arising out of such claim, action, suit or proceeding.
(d) Indemnification under Sections 6.01(b) and 6.02(c) shall
include reasonable out-of-pocket fees and expenses of investigation and
litigation (including reasonable attorneys' fees and expenses), except
as otherwise provided in this Agreement. For purposes of Section
6.02(b) and 6.02(c), in the event of the termination of the rights and
obligations of Boston Edison Company (or any successor thereto pursuant
to Section 6.04) as Servicer pursuant to Section 7.01, or a resignation
by such Servicer pursuant to this Agreement, such Servicer shall be
deemed to be the Servicer pending appointment of a successor Servicer
pursuant to Section 7.02.
Section 6.03 Limitation on Liability of Servicer and Others. Neither
the Servicer nor any of the directors, officers, employees or agents of the
Servicer shall be liable to the Note Issuer or any other Person, except as
provided under this Agreement, for any action taken or for
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refraining from the taking of any action pursuant to this Agreement or for
errors in judgment; provided, however, that this provision shall not protect the
Servicer or any director, officer, employee or agent of the Servicer against any
liability that would otherwise be imposed by reason of willful misconduct or
gross negligence in the performance of duties under this Agreement. The Servicer
and any director, officer, employee or agent of the Servicer may rely in good
faith on the advice of counsel reasonably acceptable to the Note Trustee or on
any document of any kind, prima facie properly executed and submitted by any
Person, respecting any matters arising under this Agreement.
Except as provided in this Agreement, the Servicer shall not be under
any obligation to appear in, prosecute or defend any legal action relating to
the Transition Property.
Section 6.04 Merger or Consolidation of, or Assumption of the
Obligations of, Servicer. Any Person (a) into which the Servicer may be merged
or consolidated, (b) which may result from any merger or consolidation to which
the Servicer shall be a party or (c) which may succeed to the properties and
assets of the Servicer substantially as a whole, which Person in any of the
foregoing cases executes an agreement of assumption to perform every obligation
of the Servicer hereunder, shall be the successor to the Servicer under this
Agreement without further act on the part of any of the parties to this
Agreement; provided, however, that (i) immediately after giving effect to such
transaction, no Servicer Default and no event which, after notice or lapse of
time, or both, would become a Servicer Default shall have occurred and be
continuing, (ii) the Servicer shall have delivered to the Note Issuer and the
Note Trustee an Officers' Certificate stating that such consolidation, merger or
succession and such agreement of assumption comply with this Section and that
all conditions precedent provided for in this Agreement relating to such
transaction have been complied with, (iii) the Servicer shall have delivered to
the Note Issuer and the Note Trustee an Opinion of Counsel either (A) stating
that, in the opinion of such counsel, all statutory filings to be made by the
Servicer, including filings with the DTE pursuant to the Statute, have been
executed and filed that are necessary to preserve and protect fully the
interests of the Note Issuer in the Transition Property and reciting the details
of such filings or (B) stating that, in the opinion of such counsel, no such
action shall be necessary to preserve and protect such interests and (iv) the
Rating Agencies shall have received prior written notice of such transaction.
When any Person acquires the properties and assets of the Servicer substantially
as a whole and becomes the successor to the Servicer in accordance with the
terms of this Section 6.04, then upon satisfaction of all of the other
conditions of this Section 6.04, the Servicer shall automatically and without
further notice be released from all its obligations hereunder.
Section 6.05 Boston Edison Company Not to Resign as Servicer. Subject
to the provisions of Section 6.04, Boston Edison Company shall not resign from
the obligations and duties hereby imposed on it as Servicer under this Agreement
except upon either (a) a determination that the performance of its duties under
this Agreement shall no longer be permissible under applicable law or (b)
satisfaction of the following: (i) the Rating Agency Condition shall have been
satisfied (except that with respect to Moody's it shall be sufficient to provide
ten days prior notice) and (ii) the DTE shall have approved such resignation.
Notice of
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any such determination permitting the resignation of Boston Edison Company shall
be communicated to the Note Issuer, the Note Trustee, the Certificate Trustee
and the Rating Agencies at the earliest practicable time (and, if such
communication is not in writing, shall be confirmed in writing at the earliest
practicable time) and any such determination that the performance of Boston
Edison Company's duties under this Agreement shall no longer be permissible
under applicable law shall be evidenced by an Opinion of Counsel to such effect
delivered by Boston Edison Company to the Note Issuer, the Note Trustee and the
Certificate Trustee concurrently with or promptly after such notice. No such
resignation shall become effective until a successor Servicer shall have assumed
the responsibilities and obligations of Boston Edison Company in accordance with
Section 7.02.
Section 6.06 Servicing Compensation.
(a) In consideration for its services hereunder, until the
Retirement of the Notes, the Servicer shall receive an annual fee (the
"Servicing Fee") in an amount equal to (i) 0.05 percent of the initial
principal balance of the Notes for so long as Boston Edison Company or
any successor Servicer bills the RTC Charge concurrently with other
charges for services or (ii) up to 1.25 percent of the initial
principal balance of the Notes if the RTC Charge is being billed
separately to Customers (which amount shall be determined by a separate
agreement between the Note Issuer and the Servicer). The Servicing Fee
shall be payable semiannually on each Payment Date. The Servicer also
shall be entitled to retain as additional compensation (i) any interest
earnings on Estimated RTC Charge Payments deemed received by the
Servicer and invested by the Servicer pursuant to Section 6(c) of Annex
I hereto prior to remittance to the Collection Account and (ii) all
late payment charges, if any, collected from Customers or TPSs.
(b) The Servicing Fee set forth in Section 6.06(a) above and
expenses provided for in Section 6.06(c) below shall be paid to the
Servicer by the Note Trustee, on each Payment Date in accordance with
the priorities set forth in Section 8.02(d) of the Note Indenture, by
wire transfer of immediately available funds from the Collection
Account to an account designated by the Servicer. Any portion of the
Servicing Fee not paid on such date shall be added to the Servicing Fee
payable on the subsequent Payment Date.
(c) The Note Issuer shall pay all expenses incurred by the
Servicer in connection with its activities hereunder (including any
fees to and disbursements by accountants, counsel, or any other Person,
any taxes imposed on the Servicer (other than taxes based on the
Servicer's net income) and any expenses incurred in connection with
reports to Noteholders and Certificateholders).
Section 6.07 Compliance with Applicable Law. The Servicer covenants and
agrees, in servicing the Transition Property, to comply in all material respects
with all laws applicable to, and binding upon, the Servicer and relating to such
Transition Property the noncompliance with
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which would have a material adverse effect on the value of the Transition
Property; provided, however, that the foregoing is not intended to, and shall
not, impose any liability on the Servicer for noncompliance with any law that
the Servicer is contesting in good faith in accordance with its customary
standards and procedures.
Section 6.08 Access to Certain Records and Information Regarding
Transition Property. The Servicer shall provide to the Noteholders, the Note
Trustee and the Certificate Trustee access to the Transition Property Records in
such cases where the Noteholders, the Note Trustee and the Certificate Trustee
shall be required by applicable law to be provided access to such records.
Access shall be afforded without charge, but only upon reasonable request and
during normal business hours at the respective offices of the Servicer. Nothing
in this Section shall affect the obligation of the Servicer to observe any
applicable law (including any DTE Regulation) prohibiting disclosure of
information regarding the Customers, and the failure of the Servicer to provide
access to such information as a result of such obligation shall not constitute a
breach of this Section.
Section 6.09 Appointments. The Servicer may at any time appoint any
Person to perform all or any portion of its obligations as Servicer hereunder;
provided, however, that the Rating Agency Condition shall have been satisfied in
connection therewith; and, provided, further, that the Servicer shall remain
obligated and be liable under this Agreement for the servicing and administering
of the Transition Property in accordance with the provisions hereof without
diminution of such obligation and liability by virtue of the appointment of such
Person and to the same extent and under the same terms and conditions as if the
Servicer alone were servicing and administering the Transition Property; and,
provided, further, however, that nothing herein (including the Rating Agency
Condition) shall preclude the execution by the Servicer of a TPS Service
Agreement with any TPS pursuant to applicable DTE Regulations. Notwithstanding
anything to the contrary in this Agreement, the parties hereto acknowledge and
agree that the initial Servicer has appointed Cash Management Services to
process U.S. mail payments from Customers and that such appointment is hereby
permitted hereunder. The fees and expenses of any such Person shall be as agreed
between the Servicer and such Person from time to time and none of the Note
Issuer, the Note Trustee, the Noteholders or any other Person shall have any
responsibility therefor or right or claim thereto. Any such appointment shall
not constitute a Servicer resignation under Section 6.05.
Section 6.10 No Servicer Advances. Except with respect to Remittances
of Estimated RTC Charge Payments, the Servicer shall not make any advances of
interest on or principal of the Notes or the Certificates.
Section 6.11 Maintenance of Operations. The Servicer agrees to continue
to operate its distribution system to provide service to its customers so long
as it is acting as the Servicer under this Agreement.
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ARTICLE VII. DEFAULT
Section 7.01 Servicer Default. If any one of the following events (each
a "Servicer Default") shall occur and be continuing:
(a) any failure by the Servicer to remit to the Collection
Account on behalf of the Note Issuer any required Remittance that shall
continue unremedied for a period of five (5) Business Days after
written notice of such failure is received by the Servicer from the
Note Issuer or the Note Trustee; or
(b) any failure on the part of the Servicer duly to observe or
to perform in any material respect any other covenants or agreements of
the Servicer set forth in this Agreement, which failure shall (a)
materially and adversely affect the rights of the Noteholders and (ii)
continue unremedied for a period of 60 days after the date on which
written notice of such failure, requiring the same to be remedied,
shall have been given (A) to the Servicer by the Note Issuer or (B) to
the Servicer by the Note Trustee or by the Holders of Notes evidencing
not less than 25 percent of the Outstanding Amount of the Notes; or
(c) any representation or warranty made by the Servicer in
this Agreement shall prove to have been incorrect in any material
respect when made, which has a material adverse effect on the
Noteholders and which material adverse effect continues unremedied for
a period of 60 days after written notice of such failure is received by
the Servicer from the Note Issuer or the Note 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, either the Note Trustee, or the Holders of
Notes evidencing not less than 25 percent of the Outstanding Amount of
the Notes, by notice then given in writing to the Servicer (and to the
Note Trustee if given by the Noteholders) (a "Termination Notice") may
terminate all the rights and obligations (other than the obligations
set forth in Section 6.02 hereof) of the Servicer under this Agreement.
In addition, upon a Servicer Default described in Section 7.01(a), each
of the following shall be entitled to apply to the DTE for
sequestration and payment of revenues arising with respect to the
Transition Property: (1) the Certificateholders and the Certificate
Trustee as beneficiary of any statutory lien permitted by the Statute;
(2) the Note Issuer or its assignees; (3) the Certificate Issuer or (4)
pledgees or transferees, including transferees under Section 1H(f) of
the Statute, of the Transition Property. On or after the receipt by the
Servicer of a Termination Notice, and subject to the approval of the
DTE, all authority and power of the Servicer under this Agreement,
whether with respect to the Notes, the Transition Property, the RTC
Charge or otherwise, shall, without further action, pass to and be
vested in such successor Servicer as may be appointed under Section
7.02; and, without limitation, the Note
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Trustee is hereby authorized and empowered to execute and deliver, on
behalf of the predecessor Servicer, as attorney-in-fact or otherwise,
any and all documents and other instruments, and to do or accomplish
all other acts or things necessary or appropriate to effect the
purposes of such Termination Notice, whether to complete the transfer
of the Transition Property Records and related documents, or otherwise.
The predecessor Servicer shall cooperate with the successor Servicer,
the Note Issuer and the Note Trustee in effecting the termination of
the responsibilities and rights of the predecessor Servicer under this
Agreement, including the transfer to the successor Servicer for
administration by it of all cash amounts that shall at the time be held
by the predecessor Servicer for remittance, or shall thereafter be
received by it with respect to the Transition Property or the RTC
Charge. In case a successor Servicer is appointed as a result of a
Servicer Default, all reasonable costs and expenses (including
reasonable attorneys' fees and expenses) incurred in connection with
transferring the Transition Property Records to the successor Servicer
and amending this Agreement to reflect such succession as Servicer
pursuant to this Section shall be paid by the predecessor Servicer upon
presentation of reasonable documentation of such costs and expenses.
Section 7.02 Appointment of Successor.
(a) Upon the Servicer's receipt of a Termination Notice
pursuant to Section 7.01 or the Servicer's resignation or removal in
accordance with the terms of this Agreement, the predecessor Servicer
shall continue to perform its functions as Servicer under this
Agreement, and shall be entitled to receive the requisite portion of
the Servicing Fee and reimbursement of expenses as provided herein,
until a successor Servicer shall have assumed in writing the
obligations of the Servicer hereunder as described below. In the event
of the Servicer's termination hereunder, the Note Issuer shall appoint,
subject to the approval of the DTE, a successor Servicer with the Note
Trustee's prior written consent thereto (which consent shall not be
unreasonably withheld), and the successor Servicer shall accept its
appointment by a written assumption in form reasonably acceptable to
the Note Issuer and the Note Trustee. If within 30 days after the
delivery of the Termination Notice, the Note Issuer shall not have
obtained such a new Servicer, the Note Trustee may petition the DTE 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 DTE Regulations to perform the
duties of the Servicer, (ii) the Rating Agency Condition shall have
been satisfied and (iii) such Person enters into a servicing agreement
with the Note Issuer having substantially the same provisions as this
Agreement.
(b) Upon appointment, the successor Servicer shall be the
successor in all respects to the predecessor Servicer and shall be
subject to all the responsibilities, duties and liabilities arising
thereafter relating thereto placed on the predecessor Servicer and
shall be entitled to the Servicing Fee and all the rights granted to
the predecessor Servicer by the terms and provisions of this Agreement.
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Section 7.03 Waiver of Past Defaults. The Holders of Notes evidencing
not less than a majority of the Outstanding Amount of the Notes may, on behalf
of all Noteholders, waive in writing any default by the Servicer in the
performance of its obligations hereunder and its consequences, except a default
in making any required Remittances to the Collection Account in accordance with
this Agreement. Upon any such waiver of a past default, such default shall cease
to exist, and any Servicer Default arising therefrom shall be deemed to have
been remedied for every purpose of this Agreement. No such waiver shall extend
to any subsequent or other default or impair any right consequent thereto.
Section 7.04 Notice of Servicer Default. The Servicer shall deliver to
the Note Issuer, the Note Trustee, the Certificate Trustee and the Rating
Agencies, promptly after having obtained knowledge thereof, but in no event
later than five Business Days thereafter, written notice in an Officers'
Certificate of any event which with the giving of notice or lapse of time, or
both, would become a Servicer Default under Section 7.01(a) or (b).
ARTICLE VIII. MISCELLANEOUS PROVISIONS
Section 8.01 Amendment. This Agreement may be amended in writing by the
Servicer and the Note Issuer with ten Business Days' prior written notice given
to the Rating Agencies and the prior written consent of the Note Trustee (which
consent shall not be unreasonably withheld), but without the consent of any of
the Noteholders, to cure any ambiguity, to correct or supplement any provisions
in this Agreement or for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions in this Agreement or of
modifying in any manner the rights of the Noteholders; provided, however, that
such action shall not, as evidenced by an Officer's Certificate delivered to the
Note Issuer and the Note Trustee, adversely affect in any material respect the
interests of any Noteholder.
This Agreement may also be amended in writing from time to time by the
Servicer and the Note Issuer with ten Business Days' prior written notice given
to the Rating Agencies and the prior written consent of the Note Trustee (which
consent shall not be unreasonably withheld) and the prior written consent of the
Holders of Notes evidencing not less than a majority of the Outstanding Amount
of the Notes, for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Agreement or of modifying in
any manner the rights of the Noteholders; provided, however, that any amendment
of the provisions of Sections 4.01 or 4.03 of this Agreement shall satisfy the
Rating Agency Condition (except that with respect to Moody's it shall be
sufficient to provide ten days prior notice).
It shall not be necessary for the consent of Noteholders pursuant to
this Section to approve the particular form of any proposed amendment or
consent, but it shall be sufficient if such consent shall approve the substance
thereof.
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Prior to its consent to any amendment to this Agreement, the Note
Trustee shall be entitled to receive and conclusively rely upon an Opinion of
Counsel stating that such amendment is authorized or permitted by this
Agreement. The Note Trustee may, but shall not be obligated to, enter into any
such amendment which affects the Note Trustee's own rights, duties or immunities
under this Agreement or otherwise.
Section 8.02 Protection of Title to Trust.
(a) The Servicer shall maintain accounts and records as to the
Transition Property accurately and in accordance with its standard
accounting procedures and in sufficient detail to permit reconciliation
between RTC Charge Collections and Deemed RTC Charge Payments.
(b) The Servicer shall permit the Note Trustee and its agents
at any time during normal business hours, upon reasonable notice to the
Servicer and to the extent it does not unreasonably interfere with the
Servicer's normal operations, to inspect, audit and make copies of and
abstracts from the Servicer's records regarding the Transition Property
and the RTC Charge. Nothing in this Section 8.02(b) shall affect the
obligation of the Servicer to observe any applicable law (including any
DTE Regulation) prohibiting disclosure of information regarding the
Customers, and the failure of the Servicer to provide access to such
information as a result of such obligation shall not constitute a
breach of this Section 8.02(b).
Section 8.03 Notices. All demands, notices and communications upon or
to the Servicer, the Note Issuer, the Note Trustee, the Certificate Trustee or
the Rating Agencies under this Agreement shall be in writing and personally
delivered, sent by overnight mail or sent by telecopy or other similar form of
rapid transmission, and shall be deemed to have been duly given upon receipt (a)
in the case of the Servicer, to Boston Edison Company, at 800 Boylston Street,
Boston, MA 02199, Attention: [________]; (b) in the case of the Note Issuer, to
it at 800 Boylston Street, 35th Floor, Boston, MA 02199, Attention: Robert J.
Weafer, Jr.; (c) in the case of the Note Trustee, to it at the Corporate Trust
Office; (d) in the case of the Certificate Trustee, to it at [_______],
Attention: [_______]; (e) in the case of Moody's, to Moody's Investors Service,
Inc., ABS Monitoring Department, 99 Church Street, New York, New York 10007; (f)
in the case of Standard & Poor's, to Standard & Poor's Corporation, 55 Water
Street, 40th Floor, New York, New York 10041, Attention of Asset Backed
Surveillance Department; (g) in the case of Fitch, to Fitch IBCA, Inc., One
State Street Plaza, New York, NY 10004, Attention: Commercial Asset-Backed
Securities; (h) in the case of Duff & Phelps, to Duff & Phelps Credit Rating
Co., 17 State Street, 12th Floor, New York, NY 10004, Attention of Asset-Backed
Monitoring Group; or (i) as to each of the foregoing, at such other address as
shall be designated by written notice to the other parties.
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<PAGE> 31
Section 8.04 Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Section 6.04 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 8.05 Limitations on Rights of Third Parties. The provisions of
this Agreement are solely for the benefit of the Servicer, the Note Issuer, the
Note Trustee and the other Persons expressly referred to herein and such Persons
shall have the right to enforce the relevant provisions of this Agreement.
Nothing in this Agreement, whether express or implied, shall be construed to
give to any other Person any legal or equitable right, remedy or claim in the
Transition Property or under or in respect of this Agreement or any covenants,
conditions or provisions contained herein.
Section 8.06 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 8.07 Separate Counterparts. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
Section 8.08 Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
Section 8.09 Governing Law. This Agreement shall be construed in
accordance with the substantive laws of The Commonwealth of Massachusetts,
without giving effect to its conflict of law or other principles that would
cause the application of the laws of another jurisdiction, and the obligations,
rights and remedies of the parties hereunder shall be determined in accordance
with such laws.
Section 8.10 Assignment to Note Trustee. The Servicer hereby
acknowledges and consents to the collateral assignment of any or all of the Note
Issuer's rights and obligations hereunder to the Note Trustee for the benefit of
the holders of the Notes and to the further assignment of the Note Trustee's
rights and obligations under the Note Indenture to the Certificate Trustee for
the benefit of the holders of the Certificates.
Section 8.11 Nonpetition Covenants. Notwithstanding any prior
termination of this Agreement or the Note Indenture, but subject to the DTE's
right to order the sequestration and payment of revenues arising with respect to
the Transition Property notwithstanding any bankruptcy, reorganization or other
insolvency proceedings with respect to the debtor, pledgor or transferor of the
Transition Property pursuant to Sections 1H(d)(5) and 1H(e) of the Statute, the
Servicer shall not, prior to the date which is one year and one day after the
termination of the
-27-
<PAGE> 32
Note Indenture with respect to the Note Issuer, petition or otherwise invoke or
cause the Note Issuer or the Trust to invoke the process of any court or
governmental authority for the purpose of commencing or sustaining a case
against the Note Issuer or the Trust under any federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Note Issuer or
the Trust or any substantial part of the property of the Note Issuer or the
Trust, or ordering the winding up or liquidation of the affairs of the Note
Issuer or the Trust.
Section 8.12 Limitation of Liability of Note Trustee. Notwithstanding
anything contained herein to the contrary, this Agreement has been accepted by
The Bank of New York not in its individual capacity but solely as Note Trustee
on behalf of the Holders of the Notes, in the exercise of the powers and
authority conferred and vested in it, and in no event shall The Bank of New York
have any liability for the representations, warranties, covenants, agreements or
other obligations of the Note 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 Note Issuer.
-28-
<PAGE> 33
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.
BEC FUNDING LLC
By:_____________________________________
Name:
Title:
BOSTON EDISON COMPANY
By:_____________________________________
Name:
Title:
Acknowledged and Accepted:
BANK OF NEW YORK,
not in its individual capacity
but solely as Note Trustee
By:________________________________
Name:
Title:
S-1
<PAGE> 34
EXHIBIT A
CERTIFICATE OF COMPLIANCE
The undersigned hereby certifies that he/she is the duly elected and
acting [________] of Boston Edison Company, as servicer (the "Servicer"), under
the Transition Property Servicing Agreement dated as of July __, 1999 (the
"Servicing Agreement") between the Servicer and BEC Funding LLC (the "Note
Issuer"), and further certifies on behalf of the Servicer that:
1. A review of the activities of the Servicer and of its performance
under the Servicing Agreement during the [twelve] months ended December 31,
[___] has been made under the supervision of the undersigned pursuant to Section
3.03 of the Servicing Agreement; and
2. To the undersigned's knowledge, based on such review, the Servicer
has fulfilled all of its material obligations in all material respects under the
Servicing Agreement throughout the [twelve] months ended December 31, [___],
except for those material defaults in the fulfillment of material obligations
listed on Annex A hereto.
Executed as of this _______ day of ___________ .
[BOSTON EDISON COMPANY],
as Servicer
By:_______________________________________
Name:
Title:
<PAGE> 35
ANNEX A TO EXHIBIT A
LIST OF SERVICER DEFAULTS
The following material defaults known to the undersigned occurred
during the [year] ended December 31, _____:
<TABLE>
<CAPTION>
Nature of Default Status
----------------- ------
<S> <C>
</TABLE>
<PAGE> 36
EXHIBIT B
FORM OF ROUTINE TRUE-UP LETTER
[Date]
ADVICE ____________
DEPARTMENT OF TELECOMMUNICATIONS AND ENERGY (THE "DEPARTMENT") OF THE
COMMONWEALTH OF MASSACHUSETTS
SUBJECT: Periodic RTC Charge True-Up Mechanism Advice Filing
Pursuant to D.T.E. Docket No. 98-118 (the "Financing Order"), Boston Edison
Company ("Boston Edison") as servicer of the RRBs or any successor Servicer and
on behalf of the trustee as assignee of the special purpose entity (the "SPE")
may apply for adjustment to the RTC Charge on each anniversary of the date of
the Financing Order and at such additional intervals as may be provided for in
the Financing Order. Any capitalized terms not defined herein shall have the
meanings ascribed thereto in the Financing Order.
PURPOSE
This filing establishes the revised RTC Charge to be assessed and collected from
all classes of retail users of Boston Edison's distribution system within the
geographic service territory as in effect on July 1, 1997, whether or not energy
is purchased from Boston Edison or any TPS, and whether or not such distribution
system is being operated by Boston Edison or a successor distribution company.
The RTC Charge is a usage-based component of the transition charge on each
retail user's monthly bill and may include in the future a component of any exit
fee collected pursuant to G.L. c. 164, Section 1G(g) until the Total RRB Payment
Requirements are discharged in full. In the Financing Order, the Department
authorized Boston Edison to file Routine True-Up Letters prior to each
anniversary of the date of the Financing Order and at such additional intervals,
if necessary, as provided for in the Financing Order. Boston Edison, or a
successor Servicer, is authorized to file periodic RTC Charge adjustments to the
extent necessary to ensure the timely recovery of revenues sufficient to provide
for the payment of an amount equal to the sum of the Periodic RRB Payment
Requirements (as defined in the Financing Order) for the upcoming year, which
may include indemnity obligations of the SPE in the RRB transaction documents
for SPE officers and directors, trustee fees, liabilities of the special purpose
trust and liabilities to the underwriters related to the underwriting of the
RRBs. Routine True-Up Letter filings are those where Boston Edison uses the
methodology approved by the Department in the Financing Order to adjust upward
or downward the existing RTC Charge.
<PAGE> 37
Using the methodology approved by the Department in the Financing Order, this
filing modifies the variables used in the RTC Charge calculation and provides
the resulting modified RTC Charge. Table I shows the revised assumptions for
each of the variables used in calculating the RTC Charge for retail users. The
assumptions underlying the current RTC Charges were filed in an Issuance Advice
Letter, dated _____________.
Table I below shows the current assumptions for each of the variables used in
the RTC Charge calculation.
TABLE I
INPUT VALUES FOR RTC CHARGE
a) Most recent Payment Date for which payment data is available ("Measure
Date")
b) Last Payment Date related to this Remittance Period ("Target Date")
c) Annual ongoing transaction expenses to be paid through Target Date
d) Unpaid ongoing transaction expenses following payments on Measure Date
e) Required annual overcollateralization amount
f) Overcollateralization Subaccount deficiency following payments on
Measure Date
g) Capital Subaccount deficiency following payments on Measure Date
h) Expected annual RRB principal payments through Target Date
i) Unpaid RRB principal payments following payments on Measure Date
j) Interest payments on outstanding principal to be paid through Target
Date
k) Unpaid interest following payments on Measure Date
l) Total annual revenue requirement (sum of c. - k. above)
m) Amounts on deposit in Reserve Subaccount following payments on Measure
Date
n) Collections expected to be realized in this Remittance Period from
prior RTC Charge
o) Required Debt Service (l. - m. - n.)
p) KWh consumption on which RTC Charge is expected to be billed and
collected in this Remittance Period
q) Adjusted RTC Charge for retail users ((cent)/kWh) (o. / p.)
TABLE II
INPUT VALUES FOR WEIGHTED AVERAGE DAYS OUTSTANDING
a) Weighted Average Days Sales Outstanding (WAD)
b) WAD: Percent of billed amounts collected in current month:
c) WAD: Percent of billed amounts collected in second month:
d) WAD: Percent of billed amounts collected in third month:
e) WAD: Percent of billed amounts collected in fourth month:
f) WAD: Percent of billed amounts collected in fifth month:
g) Annual charge-offs for most recent Reconciliation Period:
<PAGE> 38
EFFECTIVE DATE
In accordance with the Financing Order, Routine True-Up Letters for annual RTC
Charge adjustments shall be filed prior to the anniversary of the Financing
Order or more frequently, if necessary, with the resulting changes to be
effective no sooner than 15 days after the filing of this Routine True-Up
Letter. No resolution by the Department is required. Therefore, these RTC
Charges shall be effective as of [ ].
NOTICE
Copies of this filing are being furnished to the parties on the attached service
list. Notice to the public is hereby given by filing and keeping this filing
open for public inspection at Boston Edison's corporate headquarters.
Executed as of this _____________ day of ___________.
[BOSTON EDISON COMPANY]
as Servicer
By:_________________________
Name:
Title:
<PAGE> 39
EXHIBIT C
FORM OF MONTHLY SERVICER CERTIFICATE
Pursuant to Section 4.01(d)(ii) of the Transition Property Servicing
Agreement dated as of [ ], 1999 between Boston Edison Company (the
"Servicer") and BEC Funding LLC, the Servicer does hereby certify as follows:
For the Monthly Period:_____________
1. BILLINGS:
a) Monthly kWh Consumption: 0.00
b) Applicable RTC Charge: 0.00
c) Total RTC Charge Amount Billed this Month: 0.00
2. REMITTANCES:
a) Total Amount Remitted this Month: 0.00
Executed as of this _____________ day of ___________.
[BOSTON EDISON COMPANY]
as Servicer
By:_________________________
Name:
Title:
<PAGE> 40
EXHIBIT D
FORM OF SEMIANNUAL SERVICER CERTIFICATE
Pursuant to Section 4.01(d)(iii) of the Transition Property Servicing
Agreement dated as of [_______], 1999 (the "Agreement") between Boston Edison
Company, as Servicer and BEC Funding LLC, as Note Issuer, the Servicer does
hereby certify as follows:
Capitalized terms used herein have their respective meanings as set
forth in the Agreement. References herein to certain sections and subsections
are references to the respective sections of the Agreement.
1. RTC CHARGE COLLECTIONS ALLOCABLE AND AGGREGATE AMOUNTS AVAILABLE FOR
THE CURRENT PAYMENT DATE:
<TABLE>
<S> <C>
i. Amount Remitted [Month] [Year] $0.00
ii. Amount Remitted [Month] [Year] 0.00
iii. Amount Remitted [Month] [Year] 0.00
iv. Amount Remitted [Month] [Year] 0.00
v. Amount Remitted [Month] [Year] 0.00
vi. Amount Remitted [Month] [Year] 0.00
vii. Amount Remitted [Month] [Year] 0.00
viii. Amount Remitted [Month] [Year] 0.00
ix. Amount Remitted [Month] [Year] 0.00
x. TOTAL AMOUNT REMITTED FOR THIS PERIOD (SUM OF i. THROUGH ix. ABOVE): 0.00
xi. Net Earnings on Collection Account: 0.00
xii. GENERAL SUBACCOUNT BALANCE (SUM OF x. AND xi. ABOVE): 0.00
xiii. Reserve Subaccount Balance 0.00
xiv. Overcollateralization Subaccount Balance 0.00
xv. Capital Subaccount Balance 0.00
xvi. COLLECTION ACCOUNT BALANCE (SUM OF xiii. THROUGH xv. ABOVE): 0.00
</TABLE>
2. OUTSTANDING PRINCIPAL BALANCE AS OF PRIOR PAYMENT DATE BY TRANCHE:
<TABLE>
<S> <C>
i. Class A-1 Principal Balance Outstanding Note/Cert: $0.00
ii. Class A-2 Principal Balance Outstanding Note/Cert: 0.00
iii. Class A-3 Principal Balance Outstanding Note/Cert: 0.00
iv. Class A-4 Principal Balance Outstanding Note/Cert: 0.00
v. Class A-5 Principal Balance Outstanding Note/Cert: 0.00
vi. TOTAL NOTE PRINCIPAL BALANCE: 0.00
</TABLE>
<PAGE> 41
3. REQUIRED FUNDING/PAYMENTS AS OF CURRENT PAYMENT DATE:
a) PROJECTED PRINCIPAL BALANCES AND PAYMENTS
<TABLE>
<CAPTION>
Projected Semi-Annual
Principal Balance Principal Due
<S> <C> <C> <C>
i. Class A-1 Note/Cert $0.00 $0.00
ii. Class A-2 Note/Cert 0.00 0.00
Iii Class A-3 Note/Cert 0.00 0.00
iv. Class A-4 Note/Cert 0.00 0.00
v. Class A-5 Note/Cert 0.00 0.00
vi. TOTAL PROJECTED PRINCIPAL AMOUNT: 0.00 0.00
</TABLE>
b) REQUIRED INTEREST PAYMENTS
<TABLE>
<CAPTION>
Note/Cert Days in Interest
Interest Rate Applicable Period Due
<S> <C> <C> <C> <C>
i. Class A-1 Note/Cert 0.00% 000 $0.00
ii. Class A-2 Note/Cert 0.00 000 0.00
iii. Class A-3 Note/Cert 0.00 000 0.00
iv. Class A-4 Note/Cert 0.00 000 0.00
v. Class A-5 Note/Cert 0.00 000 0.00
vi. TOTAL REQUIRED INTEREST AMOUNT: 0.00 000 0.00
</TABLE>
c) PROJECTED SUBACCOUNT PAYMENTS AND LEVELS
<TABLE>
<CAPTION>
Subaccount Projected Level Funding Required
<S> <C> <C> <C>
i. Capital Subaccount: $0.00 $0.00
ii. Overcollateralization Subaccount: 0.00 0.00
iii. TOTAL SUBACCOUNT PAYMENTS AND LEVELS: 0.00 0.00
</TABLE>
4. ALLOCATION OF REMITTANCES AS OF CURRENT PAYMENT DATE PURSUANT TO
SECTION 8.02(d) OF NOTE INDENTURE:
a) SEMIANNUAL EXPENSES
<TABLE>
<CAPTION>
Expense Amount
<S> <C> <C>
i. Note, Delaware and Certificate Trustee Fees: $0.00
ii. Semiannual Servicing Fee: 0.00
iii. Semiannual Administration Fee: 0.00
iv. Operating Expenses (subject to $100,000 cap): 0.00
v. TOTAL EXPENSES: 0.00
</TABLE>
<PAGE> 42
b) SEMIANNUAL INTEREST
<TABLE>
<CAPTION>
Per $1000 of Original
Aggregate Principal Amount
<S> <C> <C> <C>
i. Class A-1 Note/Cert $0.00 $0.00
ii. Class A-2 Note/Cert 0.00 0.00
Iii Class A-3 Note/Cert 0.00 0.00
iv. Class A-4 Note/Cert 0.00 0.00
v. Class A-5 Note/Cert 0.00 0.00
vi. TOTAL SEMIANNUAL INTEREST: 0.00 0.00
</TABLE>
c) SEMIANNUAL PRINCIPAL
<TABLE>
<CAPTION>
Per $1000 of Original
Aggregate Principal Amount
<S> <C> <C> <C>
i. Class A-1 Note/Cert $0.00 $0.00
ii. Class A-2 Note/Cert 0.00 0.00
Iii Class A-3 Note/Cert 0.00 0.00
iv. Class A-4 Note/Cert 0.00 0.00
v. Class A-5 Note/Cert 0.00 0.00
vi. TOTAL SEMIANNUAL PRINCIPAL: 0.00 0.00
</TABLE>
d) OTHER PAYMENTS
<TABLE>
<S> <C> <C>
i. Operating Expenses (in excess of $100,000): $0.00
ii. Funding of Capital Subaccount (to required amount): 0.00
iii. Funding of Overcollateralization Subaccount (to required level): 0.00
iv. Deposits to Reserve Subaccount: 0.00
v. Interest earnings on Capital Account Released to Note Issuer: 0.00
</TABLE>
5. OUTSTANDING PRINCIPAL BALANCE AND COLLECTION ACCOUNT BALANCE AS OF
CURRENT PAYMENT DATE (AFTER GIVING EFFECT TO PAYMENTS TO BE MADE ON
SUCH DISTRIBUTION DATE):
a) PRINCIPAL BALANCE OUTSTANDING:
<TABLE>
<S> <C> <C>
i. Class A-1 Principal Balance Outstanding Note/Cert: $0.00
ii. Class A-2 Principal Balance Outstanding Note/Cert: 0.00
iii. Class A-3 Principal Balance Outstanding Note/Cert: 0.00
iv. Class A-4 Principal Balance Outstanding Note/Cert: 0.00
v. Class A-5 Principal Balance Outstanding Note/Cert: 0.00
vi. TOTAL NOTE/CERT PRINCIPAL BALANCE: 0.00
</TABLE>
<PAGE> 43
b) COLLECTION ACCOUNT BALANCES OUTSTANDING:
<TABLE>
<S> <C> <C>
i. Capital Subaccount: $0.00
ii. Overcollateralization Subaccount: 0.00
iii. Reserve Subaccount: 0.00
iv. TOTAL SUBACCOUNT AMOUNT: 0.00
</TABLE>
6. SUB-ACCOUNT DRAWS AS OF CURRENT PAYMENT DATE (IF APPLICABLE, PURSUANT
TO SECTION 8.02(e) OF NOTE INDENTURE):
<TABLE>
<S> <C> <C>
i. Capital Subaccount: $0.00
ii. Overcollateralization Subaccount: 0.00
iii. Reserve Subaccount: 0.00
iv. TOTAL SUBACCOUNT DRAWS: 0.00
</TABLE>
7. SHORTFALLS IN INTEREST AND PRINCIPAL PAYMENTS AS OF CURRENT PAYMENT
DATE (IF APPLICABLE):
a) SEMIANNUAL INTEREST SHORTFALL
<TABLE>
<S> <C> <C>
i. Class A-1 Note/Cert $0.00
ii. Class A-2 Note/Cert 0.00
Iii Class A-3 Note/Cert 0.00
iv. Class A-4 Note/Cert 0.00
v. Class A-5 Note/Cert 0.00
vi. TOTAL SEMIANNUAL INTEREST SHORTFALL: 0.00
</TABLE>
b) SEMIANNUAL PRINCIPAL SHORTFALL
<TABLE>
<S> <C> <C>
i. Class A-1 Note/Cert $0.00
ii. Class A-2 Note/Cert 0.00
Iii Class A-3 Note/Cert 0.00
iv. Class A-4 Note/Cert 0.00
v. Class A-5 Note/Cert 0.00
vi. TOTAL SEMIANNUAL PRINCIPAL SHORTFALL: 0.00
</TABLE>
8. SHORTFALLS IN REQUIRED SUBACCOUNT LEVELS AS OF CURRENT DISTRIBUTION DATE:
<TABLE>
<S> <C> <C>
i. Capital Subaccount: $0.00
ii. Overcollateralization Subaccount: 0.00
iii. TOTAL SUBACCOUNT SHORTFALLS: 0.00
</TABLE>
<PAGE> 44
IN WITNESS WHEREOF, the undersigned has duly executed and delivered
this Semiannual Servicer Certificate this ___ day of ____, ____.
BOSTON EDISON COMPANY, as Servicer
By:__________________________________
Name:
Title:
<PAGE> 45
EXHIBIT E
FORM OF ANNUAL RECONCILIATION
Pursuant to Section 4.03(b) of the Transition Property Servicing
Agreement dated as of July __, 1999 between Boston Edison Company (the
"Servicer") and BEC Funding LLC, the Servicer does hereby certify as follows:
For the Reconciliation Period:_____________ to _____________
1. CALCULATION OF REMITTANCE SHORTFALL OR REMITTANCE EXCESS:
<TABLE>
<S> <C>
a) System wide Billed Revenues: $0.00
b) System wide Charge-Offs: 0.00
c) System wide Charge-Off % (b. / a.): 0.00%
d) RTC Charge-off adjustment factor: [67.00]%
e) "Charge-Off Percent" (c. x d.): 0.00%
f) "Estimated RTC Charge-Off Percent": 0.67%
g) kWh Consumption ([Jan. 1] - [Mar. 31]): 0.00
h) RTC Charge ([Jan. 1] - [Mar. 31]): $0.00
i) Billed RTC Charges ([Jan. 1] - [Mar. 31]) (g x h): $0.00
j) kWh Consumption ([Apr. 1] - [Dec. 31]): 0.00
k) RTC Charge ([Apr. 1] - [Dec. 31]): $0.00
l) Billed RTC Charges ([Apr. 1] - [Dec. 31]) (j x k): $0.00
m) Deemed RTC Charge Payments ([100% - e.] x [i. + l.]): $0.00
n) Estimated RTC Charge Payments ([100% - f.] x [i. + l.]): $0.00
o) Remittance Shortfall (m. - n., if positive) $0.00
p) Remittance Excess (n. - m., if positive): $0.00
</TABLE>
Executed as of this _____________ day of ___________.
[BOSTON EDISON COMPANY]
as Servicer
By:_________________________
Name:
Title:
<PAGE> 46
SCHEDULE 4.01(a)
Expected Amortization Schedule
Outstanding Principal Balance
<TABLE>
<CAPTION>
Payment Date Class[ ] Total
- ------------ -------- -----
<S> <C> <C>
</TABLE>
<PAGE> 47
SCHEDULE 6.01(f)
Proceedings
1. [Describe relevant proceedings]
<PAGE> 48
ANNEX I
SERVICING PROCEDURES
The Servicer agrees to comply with the following servicing procedures:
SECTION 1. DEFINITIONS
(a) Capitalized terms used herein and not otherwise defined herein
shall have the meanings set forth in the Agreement.
(b) Whenever used in this Annex I, the following words and phrases
shall have the following meanings:
"Billed RTC Charges" means the dollar amounts billed to Customers or
the Applicable TPS in respect of the RTC Charge, whether billed to Customers or
the Applicable TPS by the Servicer or to Customers by a TPS pursuant to a TPS
Service Agreement.
"Deemed Charge-Off Percent" means the Servicer's actual system wide
charge-off percentage, as adjusted for estimates of partially paid bills (which
are deemed to have paid the RTC Charge in full).
"Estimated Charge-Off Percent" means the Servicer's good faith estimate
of the Deemed Charge-Off Percent.
"Servicer Policies and Practices" means, with respect to the Servicer's
duties under this Annex I, the policies and practices of the Servicer applicable
to such duties that the Servicer follows with respect to comparable assets that
it services for itself or others, as in effect from time to time.
SECTION 2. DATA ACQUISITION
(a) Installation and Maintenance of Meters. Except to the extent that a
TPS is responsible for such services pursuant to a TPS Service Agreement, the
Servicer shall cause to be installed, replaced and maintained meters in
accordance with the Servicer Policies and Practices.
(b) Meter Reading. In accordance with the Servicer Policies and
Practices, the Servicer shall obtain usage measurements for each Customer;
provided, however, that the Servicer may determine any Customer's usage on the
basis of estimates in accordance with applicable DTE Regulations; and, provided,
further, that the Servicer may obtain usage measurements from the Applicable TPS
for Customers receiving meter reading services from such TPS if the applicable
TPS Service Agreement so provides.
1
<PAGE> 49
(c) Cost of Metering. The Note Issuer shall not be obligated to pay any
costs associated with the metering duties set forth in this Section 2, including
the costs of installing, replacing and maintaining meters, nor shall the Note
Issuer be entitled to any credit against the Servicing Fee for any cost savings
realized by the Servicer or any TPS 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 DTE Regulations) in
accordance with the Servicer Policies and Practices and shall determine
therefrom Billed RTC Charges; provided, however, that in the case of Customers
served by a TPS pursuant to a TPS Service Agreement, the Servicer may obtain
usage measurements from the Applicable TPS for Customers receiving meter reading
services from such TPS if the applicable TPS Service Agreement so provides and
shall determine therefrom Billed RTC Charges.
SECTION 4. BILLING
(a) The Servicer shall implement the RTC Charge as of the Closing Date
and shall thereafter bill each Customer or the Applicable TPS for each
Customer's Billed RTC Charges in accordance with the provisions of this Section
4.
(b) Frequency of Bills; Billing Practices. In accordance with the
Servicer Policies and Practices, the Servicer shall generate and issue a Bill to
each Customer, or, in the case of a Customer who is being billed by a TPS, to
the Applicable TPS, with respect to such Customer's Billed RTC Charges. In the
event that the Servicer makes any material modification to the Servicer Policies
and Practices, it shall notify the Note Issuer, the Note Trustee, the
Certificate Trustee and the Rating Agencies as soon as practicable, and in no
event later than 60 Servicer Business Days after such modification goes into
effect; provided, however, that the Servicer may not make any modification that
will materially adversely affect the Certificateholders.
(c) Format.
(i) [Each Bill to a Customer shall contain or be deemed to
contain a Transition Charge that shall include the RTC Charge owed by such
Customer for the applicable billing period.]
(ii) [Each Bill shall contain a statement (as a footnote) to
the effect that all or a portion of the Transition Charge is owned by the Note
Issuer and not the Seller.]
(iii) The Servicer shall conform to such requirements in
respect of the format, structure and text of Bills delivered to Customers and
TPSs as applicable DTE Regulations shall
2
<PAGE> 50
from time to time prescribe. To the extent that Bill format, structure and text
are not prescribed by applicable law or by applicable DTE Regulations, the
Servicer shall, subject to clauses (i) and (ii) of this subsection (c),
determine the format, structure and text of all Bills in accordance with its
reasonable business judgment, the Servicer Policies and Practices and historical
practice.
(d) Delivery. Except as provided in the next sentence, 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 or (ii) by
any other means, whether electronic or otherwise, that the Servicer may from
time to time use in accordance with the Servicer Policies and Practices. In the
case of Customers that have elected to be billed by a TPS, the Servicer shall
deliver all Bills to the Applicable TPSs by such means as are mutually agreed
upon by the Servicer and the Applicable TPS in the TPS Service Agreement and
which are consistent with DTE Regulations. The Servicer or a TPS, as applicable,
shall pay from its own funds all costs of issuance and delivery of all Bills
that it renders, including printing and postage costs as the same may increase
or decrease from time to time.
SECTION 5. CUSTOMER SERVICE FUNCTIONS
The Servicer or a TPS to extent provided in the applicable TPS Service
Agreement shall handle all Customer inquiries and other Customer service matters
according to the Servicer Policies and Practices.
SECTION 6. COLLECTIONS; PAYMENT PROCESSING; REMITTANCE
(a) Collection Efforts, Policies, Procedures.
(i) The Servicer shall collect Billed RTC Charges from
Customers and TPSs as and when the same become due in accordance with such
collection procedures as it follows with respect to comparable assets that it
services for itself or others, including the following:
(A) The Servicer shall prepare and deliver overdue
notices to Customers and TPSs in accordance with applicable DTE Regulations and
the Servicer Policies and Practices.
(B) The Servicer shall deliver past-due and shut-off
notices in accordance with applicable DTE Regulations and the Servicer Policies
and Practices.
(C) The Servicer shall adhere to and carry out
disconnection policies and termination of billing by a TPS pursuant to a TPS
Service Agreement in accordance with Sections 116, 124-124I of the Statute or
successor provisions, applicable DTE Regulations and the Servicer Policies and
Practices.
3
<PAGE> 51
(D) The Servicer may employ the assistance of
collection agents in accordance with applicable DTE Regulations and the Servicer
Policies and Practices.
(E) The Servicer shall apply Customer and TPS
deposits to the payment of delinquent accounts in accordance with applicable DTE
Regulations and the Servicer Polices and Practices.
(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
Policies and Practices and (B) would comply in all material respects with
applicable law.
(iii) The Servicer shall accept payment from Customers in
respect of Billed RTC Charges in such forms and methods and at such times and
places in accordance with the Servicer Policies and Practices. The Servicer
shall accept payment from TPSs in respect of Billed RTC Charges in such forms
and methods and at such times and places as the Servicer and each TPS shall
mutually agree in accordance with the applicable TPS Service Agreement and
applicable DTE Regulations.
(b) Payment Processing, Allocation, Priority of Payments. The Servicer
shall post all payments received to Customer or TPS accounts as promptly as
practicable, and, in any event, substantially all payments shall be posted no
later than two Servicer Business Days after receipt.
(c) Investment of Estimated RTC Charge Payments Received. Prior to
remittance on the applicable Remittance Date, the Servicer may invest Estimated
RTC Charge Payments 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. The Servicer shall be entitled to retain
as additional compensation any interest earnings on Estimated RTC Charge
Payments invested by it.
(d) Calculation of Estimated RTC Charge Payments and Deemed RTC Charge
Payments; Remittances. In accordance with Section 4.03(a) of the Agreement, the
Servicer shall remit to the Note Trustee for deposit in the Collection Account
an amount equal to the product of the Billed RTC Charges for a particular
billing date multiplied by one hundred percent less the Estimated Charge-Off
Percent. Such product shall constitute the amount of Estimated RTC Charge
Payments. Pursuant to Section 4.03(b) of the Agreement, on or before March 31 of
each year, the Servicer shall calculate the amount of Deemed RTC Charge Payments
by multiplying the Billed RTC Charges by one hundred percent less the Deemed
Charge-Off Percent.
(e) Remittances.
4
<PAGE> 52
(i) The Note Issuer shall cause to be established the
Collection Account in the name of the Note Trustee in accordance with Section
8.02 of the Note Indenture.
(ii) The Servicer shall make or cause to be made Remittances
to the Collection Account in accordance with Section 4.03 of the Agreement.
(iii) Any change of account or change of institution affecting
the Collection Account shall not take effect until the Note Issuer has provided
at least fifteen (15) Servicer Business Days written notice thereof to the
Servicer.
SECTION 7. TPSs
In the event a TPS performs services pursuant to a TPS Service
Agreement, the Servicer shall comply with the procedures set forth in Schedule A
to this Annex I.
5
<PAGE> 53
SCHEDULE A
TO ANNEX I
Additional Servicing Procedures Applicable to TPSs
1. Establishing TPS Relationship
In addition to any actions required by the DTE or by applicable law,
for each TPS that is responsible for collecting Billed RTC Charges, the Servicer
shall take the following steps:
(a) Maintain adequate records of the payment arrangement
applicable to such TPS;
(b) Maintain copies of all Customer requests to convert to billing
by a TPS;
(c) Verify with the DTE that each TPS is licensed to supply
electricity in Massachusetts;
(d) Obtain information from the TPS including, but not limited to:
name, contact, address, telephone facsimile transmission
number and internet address;
(e) Maintain and update records of Customers to permit prompt
reversion to dual-billing;
(f) Maintain estimates of one month's maximum Estimated RTC Charge
Payments for each TPS required to post a bond, letter of
credit or cash deposit pursuant to the applicable TPS Service
Agreement; and
(g) Comply with credit conditions set out in the Financing Order
and applicable TPS Service Agreement.
2. Monitoring TPS Obligations
(a) The Servicer shall require each TPS to pay all undisputed and
all disputed Billed RTC Charges or make a financial
arrangement for such payment according to the applicable TPS
Service Agreement; and
(b) For all TPSs subject to any remittance option where such TPS
is liable for all amounts billed in respect of Customers
served thereby regardless of the amounts received therefrom,
the Servicer shall monitor payment compliance and take all
actions permitted by the DTE and the Financing Order in the
event of a default in payment.
3. Enforcing TPS Obligations
The Servicer shall promptly take all actions specified by the Financing
Order with respect to amounts not remitted to the Servicer in accordance with
the payment terms specified by the Financing Order, in addition to any other
remedies available at law.
6
<PAGE> 1
Exhibit 10.3
================================================================================
BEC FUNDING LLC,
AS NOTE ISSUER
AND
MASSACHUSETTS RRB SPECIAL PURPOSE TRUST BEC-1,
AS CERTIFICATE ISSUER
-------------------------------
NOTE PURCHASE AGREEMENT
DATED AS OF [ ], 1999
-------------------------------
================================================================================
<PAGE> 2
NOTE PURCHASE AGREEMENT (this "Agreement") dated as of [ ], 1999,
between BEC FUNDING LLC, a Delaware limited liability company (the "Note
Issuer"), and MASSACHUSETTS RRB SPECIAL PURPOSE TRUST BEC-1, a Delaware business
trust (the "Certificate Issuer ") formed under the Declaration of Trust.
RECITALS
A. Capitalized terms used herein without definition shall have the
meanings ascribed to them in that certain Note Indenture (the "Note Indenture"),
dated as of [ ], 1999, between Note Issuer and The Bank of New York, a
[ ], as trustee (the "Note Trustee"), which is incorporated herein
by this reference.
B. On the Issuance Date, and on the terms set forth herein, the Note
Issuer has agreed to sell to the Certificate Issuer and the Certificate Issuer
has agreed to purchase from the Note Issuer $[ ] in principal amount
of BEC Funding LLC Notes (the "Notes"), issued pursuant to the Note Indenture.
AGREEMENT
NOW, THEREFORE, on the terms and conditions set forth below and for good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the Note Issuer and the Certificate Issuer agree as follows:
1. SALE OF NOTES
a. Authorization of Notes.
----------------------
On or before the Issuance Date, the Note Issuer shall have caused to be
authorized pursuant to the Note Indenture the issuance of the Notes in such
classes and principal amounts as set forth in Schedule 1(a) attached hereto and
incorporated herein by this reference.
b. Issuance and Purchase.
---------------------
On the basis of the representations, warranties and covenants contained in
this Agreement and in the Note Indenture (collectively, the "Note Purchase
Documents"), and subject to the terms and conditions of the Note Purchase
Documents, the Note Issuer agrees to issue and sell to the Certificate Issuer,
and the Certificate Issuer agrees to purchase from the Note Issuer, the Notes
set forth in Schedule 1(a) hereto. The purchase price of each class of Notes is
set forth in Schedule 1(a) attached hereto, and the aggregate purchase price of
the Notes shall be an amount equal to the proceeds net of underwriting discounts
and commissions to the Certificate Issuer set forth in Schedule I to the
Underwriting Agreement dated as of [ ], 1999 (the "Underwriting Agreement"),
among Boston Edison Company, the Note Issuer, the Certificate Issuer and the
underwriters named therein, for whom Lehman Brothers Inc. and Goldman, Sachs &
Co. are acting as representatives.
<PAGE> 3
c. Delivery.
--------
Delivery of, and payment of the purchase price for the Notes shall be made
by federal wire transfer of immediately available funds as early as possible
after 9:00 a.m. (E.S.T.) on the Issuance Date to an account designated by the
Note Issuer not later than the Business Day prior to the Issuance Date.
2. CONDITIONS PRECEDENT
The obligations of the Certificate Issuer to purchase the Notes under this
Agreement are subject to the satisfaction of each of the following conditions:
a. All the representations and warranties of the Note Issuer contained
in this Agreement shall be true and correct in all material respects on the
Issuance Date with the same force and effect as if made on and as of the
Issuance Date.
b. Neither the Notes nor the Certificates shall have received a lower
rating by any Rating Agency than that on which the Notes or the Certificates,
respectively, were marketed.
c. The Certificate Trustee, on behalf of the Certificate Issuer, shall
have received on the Issuance Date an Officer's Certificate dated the Issuance
Date confirming the matters set forth in Sections 2(a) and 2(b).
d. The Certificate Trustee, on behalf of the Certificate Issuer, shall
have received a copy of the executed Note Indenture (certified by an Authorized
Officer of the Note Issuer) which shall have been entered into by the Note
Issuer and the Note Trustee.
e. The Note Issuer shall not have failed on or prior to the Issuance
Date to perform or comply in any material respect with any of the agreements
herein contained and required to be performed or complied with by the Note
Issuer on or prior to the Issuance Date.
3. REPRESENTATIONS AND WARRANTIES
To induce the Certificate Issuer to enter into this Agreement and to
purchase the Notes, the Note Issuer represents and warrants to the Certificate
Issuer on the date of this Agreement that the following statements are true and
correct:
a. The Note Issuer has been duly formed and is validly existing and in
good standing as a limited liability company under the laws of the State of
Delaware and has the limited liability power and authority to carry on its
business as described in the Registration Statement covering the Notes (the
"Registration Statement") and to own its properties, and is registered to
transact business in The Commonwealth of Massachusetts.
b. This Agreement has been duly authorized, executed and delivered by
the Note Issuer.
c. The Note Indenture has been duly authorized by the Note Issuer and,
on the Issuance Date, will have been validly executed and delivered by the Note
Issuer. When the Note
2
<PAGE> 4
Indenture has been duly executed and delivered by the Note Issuer, the Note
Indenture will be a valid and binding agreement of the Note Issuer, enforceable
against the Note Issuer in accordance with its terms except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency, moratorium,
reorganization, fraudulent transfer and other laws relating to or affecting
creditors' rights generally and (ii) the availability of equitable remedies may
be limited by equitable principles of general applicability. On the Issuance
Date, the Note Indenture will conform in all material respects to the
requirements of the Trust Indenture Act, and the rules and regulations of the
Commission applicable to an indenture which is qualified thereunder.
d. The Notes have been duly authorized and, on the Issuance Date, will
have been validly executed and delivered by the Note Issuer. When the Notes have
been issued, executed and authenticated in accordance with the provisions of the
Note Indenture and delivered to and paid for by the Certificate Issuer in
accordance with the terms of this Agreement, the Notes will be entitled to the
benefits of the Note Indenture and will be valid and binding obligations of the
Note Issuer, enforceable in accordance with their terms except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency, moratorium,
reorganization, fraudulent transfer and other laws relating to or affecting
creditors' rights generally and (ii) the availability of equitable remedies may
be limited by equitable principles of general applicability.
e. No Default or Event of Default under the Note Indenture would occur
as a result of the sale of the Notes pursuant to the terms hereof.
f. The execution, delivery and performance of this Agreement and the
other Basic Documents by the Note Issuer, compliance by the Note Issuer with all
provisions hereof and thereof and the consummation of the transactions
contemplated hereby and thereby will not (i) require any consent, approval,
authorization or other order of, or qualification with, any court or
governmental body or agency (except such as has been obtained or may be required
under the laws of The Commonwealth of Massachusetts, the Statute, the Securities
Act, or the securities or blue sky laws of the various states), (ii) conflict
with or constitute a material breach of any of the terms or provisions of, or a
default under, the limited liability company agreement of the Note Issuer, (iii)
violate or conflict in any material respect with any applicable law or any rule,
regulation, judgment, order or decree of any court or any governmental body or
agency having jurisdiction over the Note Issuer or its property, (iv) result in
the imposition or creation of a lien under, any agreement or instrument to which
the Note Issuer is a party or by which the Note Issuer or its respective
property is bound, except as may be created or imposed under the Basic Documents
and any statutory lien under Section 1H(e) of the Statute.
g. To the best knowledge of the Note Issuer, there are no legal or
governmental proceedings pending or threatened to which the Note Issuer is or
reasonably could be a party or to which any of its property is or reasonably
could be subject, which might result, singly or in the aggregate, in a material
adverse effect on the enforceability of the Notes.
h. The Note Issuer is not and, after giving effect to the offering and
sale of the Notes and the application of the net proceeds thereof as described
in the Registration Statement, will not be, an "investment company," as such
term is defined in the Investment Company Act of 1940, as amended.
3
<PAGE> 5
i. The Note Issuer is not and, after giving effect to the offering and
sale of the Notes and the application of the net proceeds thereof as described
in the Registration Statement, will not be, a "holding company," as such term is
defined in the Public Utilities Holding Company Act of 1935, as amended.
j. The Note Issuer has not taken any action that might cause this
Agreement or the issuance or sale of the Notes to violate Regulation T (12
C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R.
Part 224) of the Board of Governors of the Federal Reserve System.
k. Since the date as of which information is given in the Registration
Statement and other than as set forth in the Registration Statement (exclusive
of any amendments or supplements thereto subsequent to the date of this
Agreement), (i) there has not occurred any material adverse change in the
assets, business, management or operations of the Note Issuer and (ii) other
than the Notes and as contemplated by the Basic Documents, the Note Issuer has
not incurred any material liability or obligation, direct or contingent.
4. COVENANTS
The Note Issuer covenants and agrees that, until payment in full of the
Notes, unless the Delaware Trustee, on behalf of the Certificate Issuer, shall
otherwise give prior written consent, the Note Issuer shall perform all
covenants in this Section 4.
a. To advise the Delaware Trustee, as the representative of the
Certificate Issuer, the Agencies and the Certificate Trustee promptly and, if
requested by the Delaware Trustee, on behalf of the Certificate Issuer, the
Agencies or the Certificate Trustee, confirm such advice in writing, of the
issuance by the Commission or any state securities commission of any stop order
or an order suspending the qualification or exemption from qualification of any
Note or Certificate for offering or sale in any jurisdiction in which the
Certificates have been offered or the initiation of any proceeding by the
Commission, any state securities commission or any other federal or state
regulatory authority for such purpose. The Note Issuer shall use its best
efforts to prevent the issuance of any stop order or order suspending the
qualification or exemption of any Note or Certificate under the Securities Act,
or any state securities or blue sky laws and, if at any time the Commission or
any state securities commission or other federal or state regulatory authority
shall issue a stop order or an order suspending the qualification or exemption
of any Note or Certificate under the Securities Act or any state securities or
blue sky laws, the Note Issuer shall use its reasonable efforts to obtain the
withdrawal or lifting of such order at the earliest possible time.
b. To the extent permitted by applicable law, not to claim voluntarily
the benefit of any usury laws against the holders of any Notes. To the extent
permitted by applicable law, to resist actively any attempts to claim the
benefit of any usury laws against the holders of any Notes.
c. To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by it prior to the
Issuance Date and to satisfy all conditions precedent to the delivery of the
Notes.
4
<PAGE> 6
d. At the written request of the Delaware Trustee on behalf of the
Certificate Issuer, the Agencies, or the Certificate Trustee, to provide, or
cause to be provided, to the Delaware Trustee as the representative of the
Certificate Issuer, the Agencies or the Certificate Trustee, as applicable, a
copy of any requested certificate, notice, opinion or other document delivered
by the Note Issuer to the Note Trustee pursuant to the terms of the Note
Indenture.
5. MISCELLANEOUS
a. Fees
----
The Note Issuer agrees to reimburse the Certificate Issuer, the Certificate
Trustee, the Delaware Trustee and the Agencies and their respective officers,
directors and each person, if any, who controls the Certificate Issuer, the
Certificate Trustee, the Delaware Trustee or the Agencies within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act for any and
all fees and expenses (including without limitation the reasonable fees and
expenses of counsel) reasonably incurred by them in connection with enforcing
their rights under this Agreement (including, without limitation, their
respective rights under this Section 5(a)); PROVIDED, HOWEVER, that the Note
Issuer's obligations pursuant to this Section 5(a) shall be treated as Operating
Expenses under the Note Indenture and shall be payable only to the extent that
funds are available for such Operating Expenses in the priority set forth in
Section 8.02(d) of the Note Indenture.
b. Effective Date of Agreement
---------------------------
This Agreement shall become effective upon the execution and delivery of
this Agreement by the parties hereto.
c. Survival of Representations and Agreements
------------------------------------------
All agreements, representations and warranties made herein shall survive
the execution and delivery of this Agreement and the purchase of the Notes
hereunder. Notwithstanding anything in this Agreement or implied by law to the
contrary, the agreements of the Note Issuer set forth in Section 5(a), except as
otherwise expressly provided therein, shall survive the payment of the Notes and
the termination of this Agreement.
d. Notice
------
Unless otherwise specifically provided herein, all notices, directions,
consents and waivers required under the terms and provisions of this Note
Purchase Agreement shall be in English and in writing, and any such notice,
direction, consent or waiver may be given by United States mail, courier
service, facsimile transmission or electronic mail (confirmed by telephone,
United States mail or courier service in the case of notice by facsimile
transmission or electronic mail) or any other customary means of communication,
and any such notice, direction, consent or waiver shall be effective when
delivered, or if mailed, three days after deposit in the United States mail with
proper postage for ordinary mail prepaid,
5
<PAGE> 7
if to the Agencies, to:
Massachusetts Development Finance Agency
75 Federal Street
Boston, Massachusetts 02110
Attention: General Counsel
Facsimile: (617) 727-8741
Telephone: (617) 451-2477
and
Massachusetts Health and Educational Facilities Authority
99 Summer Street
10th Floor
Boston, Massachusetts 02110
Attention: General Counsel
Facsimile: (617) 737-8366
Telephone: (617) 737-8377
if to the Certificate Issuer, to:
The Bank of New York (Delaware), as Delaware Trustee for the
Massachusetts RRB Special Purpose Trust BEC-1
c/o The Bank of New York
101 Barclay Street
Floor 12 East
New York, New York 10286
Attention: Asset Backed Finance Unit
Facsimile: (212) 815-5544
Telephone: (212) 815-5286
(with copies to the Agencies at the addresses listed herein)
if to the Certificate Trustee, to:
The Bank of New York
101 Barclay Street
Floor 12 East
New York, New York 10286
Attention: Asset Backed Finance Unit
Facsimile: (212) 815-5544
Telephone: (212) 815-5286
6
<PAGE> 8
if to the Delaware Trustee, to:
The Bank of New York (Delaware)
c/o The Bank of New York
101 Barclay Street
Floor 12 East
New York, New York 10286
Attention: Asset Backed Finance Unit
Facsimile: (212) 815-5544
Telephone: (212) 815-5286
if to the Note Issuer, to:
BEC Funding LLC
800 Boylston Street, 35th Floor
Boston, Massachusetts 02199
Attention: President
Facsimile: (617) 424-2605
Telephone: (617) 369-6000
if to the Note Trustee, to:
The Bank of New York
101 Barclay Street
Floor 12 East
New York, New York 10286
Attention: Asset Backed Finance Unit
Facsimile: (212) 815-5544
Telephone: (212) 815-5286
e. Parties
-------
Except as otherwise provided, this Agreement has been and is made solely
for the benefit of the Note Issuer, the Note Trustee, the Certificate Issuer,
the Certificate Trustee, the Delaware Trustee, the Agencies, the directors and
officers of the Certificate Issuer, the Certificate Trustee, the Delaware
Trustee and the Agencies, any controlling persons referred to herein, the
directors, officers and any manager of the Note Issuer (not in their individual
capacities but in their respective capacities as directors, officers or manager
of the Note Issuer) and their respective successors and assigns, all as and to
the extent provided in this Agreement, all of which Persons shall have rights of
enforcement with respect hereto, and no other Person shall acquire or have any
right under or by virtue of this Agreement, except as contemplated by the
Certificate Indenture and the other Basic Documents. The term "successors and
assigns" shall not include a purchaser of any of the Notes from the Certificate
Issuer merely because of such purchase.
7
<PAGE> 9
f. Governing Law
-------------
This Agreement shall be governed by, and shall be construed and enforced in
accordance with, the internal laws of The Commonwealth of Massachusetts, without
regard to its conflict of laws principles.
g. Severability
------------
If any provision of this Agreement shall be prohibited or invalid under
applicable law, the Agreement shall be ineffective only to such extent, without
invalidating the remainder of the Agreement.
h. Further Assurances
------------------
The Note Issuer agrees to execute and deliver such instruments and take
such actions as the Delaware Trustee on behalf of the Certificate Issuer, the
Agencies or the Certificate Trustee may, from time to time, reasonably request
in order to effectuate the purpose and to carry out the terms of this Agreement.
i. Headings
--------
Section and subsection headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.
j. Counterparts
------------
This Agreement may be signed in various counterparts which together shall
constitute one and the same instrument.
k. Limitation of Liability.
-----------------------
It is expressly understood and agreed by the parties hereto that (a) this
Agreement is executed and delivered by The Bank of New York (Delaware), not
individually or personally but solely as Delaware Trustee on behalf of the
Certificate Issuer, in the exercise of the powers and authority conferred and
vested in it, (b) any representations, undertakings and agreements herein made
by the Delaware Trustee on behalf of the Certificate Issuer are made and
intended not as personal representations, undertakings and agreements by The
Bank of New York (Delaware) but are made and intended for the purpose of binding
only the Certificate Issuer, (c) nothing herein contained shall be construed as
creating any liability on The Bank of New York (Delaware), individually or
personally, to perform any covenant either expressed or implied contained
herein, except in its capacity as Delaware Trustee, all such liability, if any,
being expressly waived by the parties who are signatories to this Agreement and
by any Person claiming by, through or under such parties and (d) under no
circumstances shall The Bank of New York (Delaware) be personally liable for the
payment of any indebtedness or expense of the Certificate Issuer or be
personally liable for the breach or failure of any obligation,
8
<PAGE> 10
representation, warranty or covenant made or undertaken by the Certificate
Issuer under this Agreement; PROVIDED, HOWEVER, that this provision shall not
protect The Bank of New York (Delaware) against any liability that would
otherwise be imposed by reason of willful misconduct, bad faith or gross
negligence in the performance of its obligations and duties under this
Agreement.
9
<PAGE> 11
IN WITNESS WHEREOF, the Note Issuer and the Certificate Issuer have caused
this Note Purchase Agreement to be duly executed by their respective officer or
trustee, all as of the day and year first above written.
BEC FUNDING LLC,
a Delaware limited liability company
By:
-----------------------------------
Name:
Title:
MASSACHUSETTS RRB SPECIAL
PURPOSE TRUST BEC-1, a business trust
organized under the laws of the State of
Delaware
By: THE BANK OF NEW YORK
(DELAWARE), not in its individual
capacity, but solely as Delaware Trustee
By:
-----------------------------------
Name:
Title:
S-1
<PAGE> 12
SCHEDULE 1(a)
NOTES
CLASS OF NOTES PRINCIPAL AMOUNT PURCHASE PRICE (%)
-------------- ---------------- -----------------
A-1 $ %
....
Total:
<PAGE> 1
EXHIBIT 10.4
ADMINISTRATION AGREEMENT
This Administration Agreement, dated as of July __, 1999, is made by and
between BEC Funding LLC, a Delaware limited liability company (the "Note
Issuer"), and Boston Edison Company, a Massachusetts corporation, as
Administrator (the "Administrator").
RECITALS
A. WHEREAS, the Note Issuer is issuing the Notes pursuant to the Note
Indenture dated as of July __, 1999 (as amended, modified or supplemented from
time to time in accordance with the provisions thereof, the "Note Indenture";
capitalized terms used herein and not defined herein shall have the meanings
assigned such terms in the Note Indenture), between the Note Issuer and The Bank
of New York, as Note Trustee (in such capacity, the "Note Trustee").
B. WHEREAS, the Note Issuer has entered into certain agreements in
connection with the issuance of the Notes, including (i) a Transition Property
Purchase and Sale Agreement dated as of July __, 1999 (the "Sale Agreement"),
between the Note Issuer and Boston Edison Company, as Seller (in such capacity,
the "Seller"), (ii) a Transition Property Servicing Agreement dated as of July
__, 1999 (the "Servicing Agreement"), between the Note Issuer and Boston Edison
Company, as Servicer (in such capacity, the "Servicer"), (iii) an Underwriting
Agreement dated as of __, 1999 (the "Underwriting Agreement"), between the Note
Issuer, Boston Edison Company, the Trust, and the Underwriters named therein,
(iv) the Note Indenture, (v) a Note Purchase Agreement dated as of __, 1999 (the
"Note Purchase Agreement") between the Note Issuer and The Bank of New York, as
Certificate Trustee (in such capacity, the "Certificate Trustee") and (vi) a Fee
and Indemnity Agreement dated as of __, 1999 (the "Fee Agreement") among the
Delaware Trustee, the Massachusetts Development Finance Agency, the
Massachusetts Health and Educational Facilities Authority, the Certificate
Trustee, the Note Issuer, and Massachusetts RRB Special Purpose Trust BEC-1 (the
"Trust") (the Sale Agreement, the Servicing Agreement, the Underwriting
Agreement, the Note Indenture, the Note Purchase Agreement and the Fee
Agreement, all as amended or modified from time to time, are hereinafter
referred to collectively as the "Related Agreements");
C. WHEREAS, pursuant to the Related Agreements, the Note Issuer is
required to perform certain duties in connection with the Notes and the
collateral therefor pledged pursuant to the Note Indenture (the "Collateral")
and to maintain its existence and comply with applicable laws;
D. WHEREAS, the Note Issuer has no employees, other than its officers,
and does not intend to hire any additional employees, and consequently desires
to have the Administrator perform certain duties of the Note Issuer referred to
in the preceding clause, and to provide such additional services consistent with
the terms of this Agreement and the Related Agreements as the Note Issuer may
from time to time request; and
<PAGE> 2
E. WHEREAS, the Administrator has the capacity to provide the services
and the facilities required hereby and is willing to perform such services and
provide such facilities for the Note Issuer on the terms set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties agree as follows:
ARTICLE I.
Duties of Administrator
-----------------------
Section 1.01 APPOINTMENT OF ADMINISTRATOR: ACCEPTANCE OF APPOINTMENT. The
Note Issuer hereby appoints the Administrator, and the Administrator hereby
accepts such appointment, to perform the Administrator's obligations pursuant to
this Agreement on behalf of and for the benefit of the Note Issuer in accordance
with the terms of this Agreement and applicable law.
Section 1.02 DUTIES WITH RESPECT TO THE RELATED AGREEMENTS (a) The
Administrator agrees to perform all its duties as Administrator hereunder in
accordance with the terms of this Agreement and applicable law. In addition, the
Administrator shall consult with the Note Issuer regarding the Note Issuer's
duties under the Related Agreements. Unless otherwise notified in writing by the
Note Issuer, the Administrator shall prepare for execution by the Note Issuer,
or shall cause the preparation by other appropriate Persons of all such
documents, reports, filings, instruments, certificates and opinions as it shall
be the duty of the Note Issuer to prepare, file or deliver pursuant to any
Related Agreement. In furtherance of the foregoing, the Administrator shall take
all appropriate action that it is the duty of the Note Issuer to take pursuant
to the Note Indenture including, without limitation, such of the foregoing as
are required with respect to the following matters under the Note Indenture
(references are to sections of the Note Indenture):
(1) the preparation of or obtaining of the documents and instruments
required for authentication of the Notes, if any, and delivery of the same
to the Note Trustee (Section 2.03);
(2) the duty to keep the Note Register and to give the Note Trustee
notice of any appointment of a new Note Registrar and the location, or
change in location, of the Note Register (Section 2.05);
(3) the fixing or causing to be fixed of any special record date and
the notification of each affected Noteholder with respect to special record
dates, payment
-2-
<PAGE> 3
dates, and the amount of defaulted interest (plus interest on such
defaulted interest) to be paid, if any (Section 2.08(c));
(4) the preparation, obtaining or filing of the instruments, opinions
and certificates and other documents required for the release of collateral
(Section 2.11);
(5) the duty to cause newly appointed Paying Agents, if any, to
deliver to the Note Trustee the instrument specified in the Note Indenture
regarding funds held in trust (Section 3.03);
(6) the direction to Paying Agents to pay to the Note Trustee all
sums held in trust by such Paying Agents (Section 3.03);
(7) the preparation and filing of all documents and instruments
necessary to maintain the Note Issuer's existence, rights and franchises as
a limited liability company under the laws of the State of Delaware (unless
the Note Issuer becomes, or any successor Note Issuer under the Note
Indenture is or becomes, organized under the laws of any other State or of
the United States of America, in which case the Administrator will prepare
and file all documents and instruments necessary to maintain such Note
Issuer's existence, rights and franchises under the laws of such other
jurisdiction) (Section 3.04);
(8) the obtaining and preservation of the Note Issuer's qualification
to do business in each jurisdiction in which such qualification is or shall
be necessary to protect the validity and enforceability of the Note
Indenture, the Notes, the Collateral and each other instrument or agreement
included in the Collateral (Section 3.04);
(9) the preparation of all supplements and amendments to the Note
Indenture, filings with the DTE pursuant to the Statute, financing
statements, continuation statements, instruments of further assurance and
other instruments, in accordance with Section 3.05 of the Note Indenture,
necessary to protect the Collateral (Section 3.05);
(10) the obtaining of the Opinions of Counsel and the delivery of such
Opinions of Counsel, in accordance with Section 3.06 of the Note Indenture,
as to the Collateral, and the annual delivery of the Officer's Certificate
and certain other statements, in accordance with Section 3.09 of the Note
Indenture, as to compliance with the Note Indenture (Section 3.06 and
3.09);
(11) the identification to the Note Trustee in an Officer's
Certificate of any Person with whom the Note Issuer has contracted to
perform its duties under the Note Indenture (Section 3.07(b));
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(12) the preparation and filing of all documents required under the
Statute relating to the transfer of the ownership or security interest in
the Transition Property (Section 3.07(i));
(13) the annual preparation and delivery of an Officer's Certificate
to the Note Trustee, the Certificate Trustee, the Agencies and the Rating
Agencies as to compliance with conditions and covenants under the Note
Indenture (Section 3.09);
(14) the preparation and obtaining of documents and instruments
required for the release of the Note Issuer from its obligations under the
Note Indenture (Section 3.11(b));
(15) the delivery of notice to the Note Trustee and the Rating
Agencies of each Event of Default and each default by the Servicer or
Seller of its obligations under the Servicing Agreement or the Sale
Agreement, respectively (Sections 3.07(d) and 3.9);
(16) the preparation of an Officer's Certificate and Independent
Certificate relating to (i) the satisfaction and discharge of the Note
Indenture under Section 4.01 of the Note Indenture or (ii) the exercise of
the Legal Defeasance Option or the Covenant Defeasance Option under Section
4.02 of the Note Indenture (Sections 4.01 and 4.02);
(17) the furnishing to the Note Trustee of (i) each Record Date with
respect to each Series and (ii) the names and addresses of Noteholders
during any period when the Note Trustee is not the Note Registrar (Section
7.01);
(18) to the extent not required to be performed by the Servicer, the
preparation and, after execution by the Note Issuer or the Delaware Trustee
(as the case may be), the filing with the SEC and the Note Trustee of the
annual reports and of the information, documents and other reports,
including filings on behalf of the Trust, required to be filed on a
periodic basis with, and summaries thereof as may be required by rules and
regulations prescribed by, the Commission and the transmission of such
summaries, as necessary, to the Noteholders (Sections 3.07(h) and 7.03);
(19) the notification of the Note Trustee if and when the Notes are
listed on any stock exchange (Section 7.04);
(20) the opening of one or more segregated trust accounts in the Note
Trustee's name, the preparation of Issuer Orders, and the obtaining of
Opinions of Counsel and the taking of all other actions necessary with
respect to investment and reinvestment of funds in the Collection Account
(Section 8.02 and 8.03);
(21) the preparation of Issuer Requests and Officers' Certificates and
the obtaining of an Opinion of Counsel and Independent Certificates, if
necessary, for the release of the Collateral (Section 8.04 and 8.05);
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(22) the preparation of Issuer Orders and the obtaining of Officers'
Certificates with respect to the execution of supplemental indentures
(Sections 9.01 and 9.02);
(23) the preparation of new Notes conforming to any supplemental
indenture (Section 9.04);
(24) the notification of the Note Trustee of any redemption of the
Notes (Sections 10.01 and 10.04);
(25) the preparation of all Officer's Certificates and Independent
Certificates with respect to any requests by the Note Issuer to the Note
Trustee to take any action under the Note Indenture (Section 11.01(a));
(26) the preparation and delivery of Officers' Certificates for the
release of property from the lien of the Note Indenture (Section 11.01(b));
(27) the notification of the Note Trustee of any notice received by
the Note Issuer from the Noteholders (Section 11.04); and
(28) the recording of the Note Indenture, if applicable, and the
obtaining of an Opinion of Counsel in connection therewith (Section 11.14).
(b) The Administrator shall also take all appropriate action that it
is the duty of the Note Issuer to take pursuant to the Underwriting Agreement
including, without limitation, the following matters (references are to sections
of the Underwriting Agreement):
(1) to the extent not already delivered, the delivery to the
Representatives and counsel for the Underwriters under the Underwriting
Agreement (the "Underwriters"), of copies of the Registration Statement (as
defined in the Underwriting Agreement) (Section 5(a)(iii));
(2) so long as delivery of a prospectus by an Underwriter or dealer
may be required by the Act, the delivery to the Representatives and counsel
for the Underwriters of as many copies of any Preliminary Final Prospectus
and the Final Prospectus and any supplement thereto as the Representatives
may reasonably request (Section 5(a)(iii));
(3) to the extent not required to be performed by the Servicer, the
preparation and, after execution by the Note Issuer, the filing with the
SEC of reports on Form SR as required by Rule 463 under the Act, and the
delivery of such reports on Form SR, as filed with the Commission, to the
Representatives (Section 5(a)(iii));
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(4) the preparation and, after execution by the Note Issuer, the
filing of all documents and instruments necessary to qualify the
Certificates for sale under the laws of such jurisdictions as the
Representatives may designate, and the maintenance of such qualifications
in effect so long as required for the distribution of the Certificates,
subject to the qualifications, limitations and exceptions set forth in the
Underwriting Agreement (Section 5(a)(iv));
(5) the arrangement for the determination of the legality of the
Certificates for purchase by institutional investors (Section 5(a)(iv));
(6) to the extent not already performed by the Servicer, the delivery
to the Representatives of the annual statements of compliance and the
annual independent auditor's servicing reports furnished to the Note Issuer
or the Note Trustee pursuant to the Servicing Agreement or the Note
Indenture (Section 5(a)(vi));
(7) so long as any of the Certificates are outstanding, and to the
extent not already performed by the Servicer, the delivery to the
Representatives of (i) a copy of any filings with the DTE pursuant to the
Financing Order including, but not limited to, any Issuance Advice Letters
and (ii) from time to time, any information concerning the Note Issuer to
the extent readily available, that the Representatives may reasonably
request (Section 5(a)(vii)); and
(8) to the extent, if any, that any rating necessary to satisfy the
condition set forth in Section 6(r) of the Underwriting Agreement is
conditioned upon the furnishing of documents or the taking of other actions
by the Note Issuer on or after the Closing Date (as defined in the
Underwriting Agreement), the delivery of such documents and the taking of
such actions (Section 5(a)(viii)).
Section 1.03 ADDITIONAL DUTIES. (a) In addition to the duties of the
Administrator set forth above, the Administrator shall perform such calculations
and shall prepare for execution by the Note Issuer or shall cause the
preparation by other appropriate persons of all such documents, reports,
filings, instruments, certificates and opinions as it shall be the duty of the
Note Issuer to prepare, file or deliver pursuant to the Related Agreements, and
at the request of the Note Issuer shall take all appropriate action that it is
the duty of the Note Issuer to take pursuant to the Related Agreements. Subject
to Section 5.01 of this Agreement, and in accordance with the directions of the
Note Issuer, the Administrator shall administer, perform or supervise the
performance of such other activities in connection with the Collateral and the
Related Agreements as are not covered by any of the foregoing provisions and as
are expressly requested by the Note Issuer and are reasonably within the
capability of the Administrator.
(b) In carrying out the foregoing duties or any of its other
obligations under this Agreement, the Administrator may enter into transactions
with or otherwise deal with any of its Affiliates; PROVIDED, HOWEVER, that the
terms of any such transactions or dealings shall be, in the
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Administrator's reasonable opinion, no less favorable to the Note Issuer than
would be available from unaffiliated parties.
Section 1.04 NON-MINISTERIAL MATTERS. (a) With respect to matters that in
the reasonable judgment of the Administrator are non-ministerial, the
Administrator shall not take any action unless the Administrator shall have
notified the Note Issuer of the proposed action and the Note Issuer shall have
consented. For the purpose of the preceding sentence, "non-ministerial matters"
shall include, without limitation:
(1) the amendment of, or any supplement to, the Note Indenture;
(2) the initiation of any claim or lawsuit by the Note Issuer and the
compromise of any action, claim or lawsuit brought by or against the Note
Issuer (other than in connection with the collection of the RTC Charge);
(3) the amendment, change or modification of the Related Agreements;
(4) the appointment of successor Note Registrars, successor Paying
Agents and successor Note Trustees pursuant to the Note Indenture or the
appointment of successor Administrators or successor Servicers, or the
consent to the assignment by the Note Registrar, Paying Agent or Note
Trustee of its obligations under the Note Indenture; and
(5) the removal of the Note Trustee.
(b) Notwithstanding anything to the contrary in this Agreement, the
Administrator shall not be obligated to, and hereby agrees that it shall not,
take any action that the Note Issuer directs the Administrator not to take on
its behalf.
Section 1.05 RECORDS. The Administrator shall maintain appropriate books of
account and records relating to services performed hereunder, which books of
account and records shall be accessible for inspection by the Note Issuer and
the Note Trustee at any time during normal business hours.
ARTICLE II.
Facilities
----------
Section 2.01 FACILITIES. During the term of this Agreement, the
Administrator shall make available to or provide the Note Issuer with such
facilities as are necessary to conduct the business of the Note Issuer and to
comply with the terms of the Related Agreements. Such facilities shall include
office space to serve as the principal place of business of the Note Issuer.
Initially such office space will be located at 800 Boylston Street, Floor 35,
Boston, Massachusetts 02199. All facilities provided to the Note Issuer
hereunder shall be provided without warranty of any kind.
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ARTICLE III.
Compensation
------------
Section 3.01 COMPENSATION. As compensation for the performance of the
Administrator's obligations under this Agreement, including the provision of
facilities pursuant to Section 2.01, the Administrator shall be entitled to a
fee of $37,500 for each semi-annual period, payable on the Payment Date as
defined in Section 1.01(a) of the Note Indenture. In addition, the Note Issuer
shall reimburse the Administrator for all filing fees and expenses, legal fees,
fees of outside auditors and other out-of-pocket expenses incurred by the
Administrator in the course of performing its duties hereunder. The
Administrator's compensation and other expenses payable hereunder shall be paid
from the Collection Account pursuant to Section 8.02(d) of the Note Indenture,
and the Administrator shall have no recourse against the Note Issuer for payment
of such amounts other than in accordance with Section 8.02 of the Note
Indenture.
ARTICLE IV.
Additional Information
----------------------
Section 4.01 ADDITIONAL INFORMATION TO BE FURNISHED TO NOTE ISSUER. The
Administrator shall furnish to the Note Issuer from time to time such additional
information regarding the Collateral as the Note Issuer shall reasonably
request.
ARTICLE V.
Miscellaneous Provisions
------------------------
Section 5.01 INDEPENDENCE OF ADMINISTRATOR. For all purposes of this
Agreement, the Administrator shall be an independent contractor and shall not be
subject to the supervision of the Note Issuer with respect to the manner in
which it accomplishes the performance of its obligations hereunder. Unless
expressly authorized by the Note Issuer, the Administrator shall have no
authority to act for or represent the Note Issuer in any way and shall not
otherwise be deemed an agent of the Note Issuer.
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<PAGE> 9
Section 5.02 NO JOINT VENTURE. Nothing contained in this Agreement shall
(a) constitute the Administrator and the Note Issuer as members of any
partnership, joint venture, association, syndicate, unincorporated business or
other separate entity, (b) be construed to impose any liability as such on any
of them or (c) be deemed to confer on any of them any express, implied or
apparent authority to incur any obligation or liability on behalf of the others.
Section 5.03 OTHER ACTIVITIES OF ADMINISTRATOR. Nothing herein shall
prevent the Administrator or its Affiliates from engaging in other businesses
or, in its sole discretion, from acting in a similar capacity as an
administrator for any other person or entity even though such person or entity
may engage in business activities similar to those of the Note Issuer.
Section 5.04 TERM OF AGREEMENT: RESIGNATION AND REMOVAL OF ADMINISTRATOR.
(a) This Agreement shall continue in force for one year and one day after the
retirement of all Notes issued pursuant to the Note Indenture.
(b) Subject to Sections 5.04(e) and 5.04(f), the Administrator may resign
its duties hereunder by providing the Note Issuer with at least 60 days prior
written notice.
(c) Subject to Sections 5.04(e) and 5.04(f), the Note Issuer may remove the
Administrator without cause by providing the Administrator with at least 60 days
prior written notice.
(d) Subject to Sections 5.04(e) and 5.04(f), at the sole option of the Note
Issuer, the Administrator may be removed immediately upon written notice of
termination from the Note Issuer to the Administrator if any of the following
events shall occur:
(1) the Administrator shall default in the performance of any of its
duties under this Agreement and, after notice of such default, shall not
cure such default within ten days (or, if such default is curable but
cannot be cured in such time, shall not give within ten days such assurance
of cure as shall be reasonably satisfactory to the Note Issuer);
(2) a court having jurisdiction in the premises shall enter a decree
or order for relief, and such decree or order shall not have been vacated
within 60 days, in respect of the Administrator in any involuntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect or appoint a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official for the Administrator or any
substantial part of its property or order the winding-up or liquidation of
its affairs; or
(3) the Administrator shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, shall consent to the entry of an order for relief in an involuntary
case under any such law, or shall consent to the appointment of a receiver,
liquidator, assignee, trustee, custodian, sequestrator or similar official
for the Administrator or any substantial part of its property, shall
consent to
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the taking of possession by any such official of any substantial part of
its property, shall make any general assignment for the benefit of
creditors or shall fail generally to pay its debts as they become due.
The Administrator agrees that if any of the events specified in clause
(2) or (3) of this Section shall occur, it shall give written notice thereof to
the Note Issuer and the Note Trustee within seven days after the happening of
such event.
(e) No resignation or removal of the Administrator pursuant to this Section
5.04 shall be effective until (1) a successor Administrator shall have been
appointed by the Note Issuer and (2) such successor Administrator shall have
agreed in writing to be bound by the terms of this Agreement in the same manner
as the Administrator is bound hereunder.
(f) The appointment of any successor Administrator shall be effective only
after satisfaction of the Rating Agency Condition with respect to the proposed
appointment.
Section 5.05 ACTION UPON TERMINATION, RESIGNATION OR REMOVAL. Promptly upon
the effective date of termination of this Agreement pursuant to Section 5.04(a)
or the resignation or removal of the Administrator pursuant to Sections 5.04(b)
or 5.04(c), respectively, the Administrator shall be entitled to be paid all
fees accruing to it and expenses accrued by it in the performance of its duties
hereunder through the date of such termination, resignation or removal, to the
extent permitted under Article III. The Administrator shall forthwith upon such
termination pursuant to Section 5.04(a) deliver to the Note Issuer all property
and documents of or relating to the Collateral then in the custody of the
Administrator. In the event of the resignation or removal of the Administrator
pursuant to Sections 5.04(b) or 5.04(c), respectively, the Administrator shall
cooperate with the Note Issuer and take all reasonable steps requested to assist
the Note Issuer in making an orderly transfer of the duties of the
Administrator.
Section 5.06 NOTICES. Any notice, report or other communication given
hereunder shall be in writing and addressed as follows:
(a) if to the Note Issuer, to
BEC Funding LLC
800 Boylston Street, 35th Floor
Boston, MA 02199
Attention: President
Facsimile: (617) 424-2605
Telephone: (617) 369-6000
(b) if to the Administrator, to
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Boston Edison Company
800 Boylston Street
Boston, MA 02199
Attention: Manager, Corporate Finance
Facsimile: (617) 424-3204
Telephone: (617) 424-2000
(c) if to the Note Trustee, to
The Bank of New York
One Wall Street
New York, NY 10286
Attention: Melissa Beneduce
Facsimile: (212) 635-7141
Telephone: (212) 635-7115
or to such other address as any party shall have provided to the other parties
in writing. Any notice required to be in writing hereunder shall be deemed given
if such notice is mailed by certified mail, postage prepaid, telecopied or
hand-delivered to the address of such party as provided above, except that
notices to the Note Trustee are effective only upon receipt.
Section 5.07 AMENDMENTS. This Agreement may be amended in writing by the
Administrator and the Note Issuer with the written consent of the Note Trustee,
but without the consent of any of the Noteholders or Certificateholders, to cure
any ambiguity, to correct or supplement any provisions in this Agreement or for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions in this Agreement or of modifying in any manner the rights
of the Noteholders or the Certificateholders; PROVIDED, HOWEVER, that such
action shall not, as evidenced by an Officer's Certificate delivered to the Note
Trustee, adversely affect in any material respect the interests of any
Noteholder or Certificateholder.
This Agreement may also be amended in writing from time to time by the
Administrator and the Note Issuer with the written consent of the Note Trustee
and the written consent of the Holders of Notes evidencing not less than a
majority of the Outstanding Amount of the Notes of all Series, for the purpose
of adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement or of modifying in any manner the rights of the
Noteholders or the Certificateholders; PROVIDED, HOWEVER, that no such amendment
shall increase or reduce in any manner the amount of, or accelerate or delay the
timing of, RTC Charge Collections without the consent of the Holders of all the
outstanding Notes.
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<PAGE> 12
Promptly after the execution of any such amendment and the requisite
consents, the Administrator shall furnish written notification of the substance
of such amendment to the Note Trustee and each of the Rating Agencies.
Approval by Noteholders of the substance of any proposed amendment or
consent shall constitute sufficient consent of the Noteholders pursuant to this
Section, and it shall not be necessary that Noteholders approve of the
particular form of any amendment or consent.
Prior to its consent to any amendment to this Agreement, the Note Trustee
shall be entitled to receive and rely upon an Opinion of Counsel stating that
such amendment is authorized or permitted by this Agreement. The Note Trustee
may, but shall not be obligated to, enter into any such amendment which affects
the Note Trustee's own rights, duties or immunities under this Agreement or
otherwise.
Section 5.08 SUCCESSORS AND ASSIGNS. This Agreement may not be assigned by
the Administrator unless such assignment is previously consented to in writing
by the Note Issuer and the Note Trustee and is subject to the satisfaction of
the Rating Agency Condition in respect thereof. An assignment with such consent
and satisfaction, if accepted by the assignee, shall bind the assignee hereunder
in the same manner as the Administrator is bound hereunder. Notwithstanding the
foregoing, this Agreement may be assigned by the Administrator without the
consent of the Note Issuer and the Note Trustee to a corporation or other
organization that is a successor (by merger, consolidation or purchase of
assets) to the Administrator, provided that such successor organization executes
and delivers to the Note Issuer and the Note Trustee an agreement in which such
corporation or other organization agrees to be bound hereunder by the terms of
said assignment in the same manner as the Administrator is bound hereunder and
the Rating Agency Condition is satisfied. Subject to the foregoing, this
Agreement shall bind any successors or assigns of the parties hereto.
Section 5.09 LIMITATIONS ON RIGHTS OF OTHERS. The provisions of this
Agreement are solely for the benefit of the Administrator, the Note Issuer, the
Trust, the Note Trustee (for its own benefit and for the benefit of the
Noteholders), the Certificate Trustee (for its own benefit and for the benefit
of the Certificateholders), the Delaware Trustee and the Agencies, and nothing
in this Agreement, whether express or implied, shall be construed to give to any
other Person any legal or equitable right, remedy or claim in the Transition
Property or under or in respect of this Agreement or any covenants, conditions
or provisions contained herein, except for the indemnities specifically provided
in Section 5.2. The Persons listed in this section as having the benefit of this
Agreement shall have rights of enforcement with respect this Agreement.
Section 5.10 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS, 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.
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<PAGE> 13
Section 5.11 HEADINGS. The section headings hereof have been inserted for
convenience of reference only and shall not be construed to affect the meaning,
construction or effect of this Agreement.
Section 5.12 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which when so executed shall together constitute but one and the same
agreement.
Section 5.13 SEVERABILITY. Any provision of this Agreement 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.
Section 5.14 NONPETITION COVENANTS. Notwithstanding any prior termination
of this Agreement or the Note Indenture, but subject to the DTE's right to order
the sequestration and payment of revenues arising with respect to the Transition
Property notwithstanding any bankruptcy, reorganization or other insolvency
proceedings with respect to the Seller of the Transition Property pursuant to
Section 1H(d)(5) of the Statute, the Administrator shall not, prior to the date
which is one year and one day after the termination of the Note Indenture with
respect to the Note Issuer, petition or otherwise invoke or cause the Note
Issuer or the Trust to invoke the process of any court or government authority
for the purpose of commencing or sustaining a case against the Note Issuer or
the Trust under any Federal or state bankruptcy, insolvency or similar law or
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official of the Note Issuer or the Trust or any substantial part
of the property of the Note Issuer or the Trust, or ordering the winding up or
liquidation of the affairs of the Note Issuer or the Trust.
Section 5.15 LIMITATION OF LIABILITY OF NOTE TRUSTEE. Notwithstanding
anything contained herein to the contrary, this Agreement has been accepted by
The Bank of New York, not in its individual capacity but solely as Note Trustee
on behalf of the holders of the Notes, in the exercise of the powers and
authority contained and vested in it, and in no event shall The Bank of New York
have any liability for the representations, warranties, covenants, agreements or
other obligations of the Note 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 Note Issuer.
Section 5.16 INDEMNIFICATION. The Administrator shall indemnify the Note
Issuer, the Note Trustee (for its own benefit and the benefit of the
Noteholders), the Delaware Trustee, the Certificate Trustee (for its own benefit
and the benefit of the Certificateholders), the Trust, the Agencies, and their
respective officers, directors, managers, employees and agents for, and defend
and hold harmless each such Person from and against, any and all liabilities,
obligations, suits, claims, losses, damages, payments, costs or expenses of any
kind whatsoever that may be imposed on, incurred by or asserted against any such
Person as a result of the Administrator's willful
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misconduct or gross negligence in the performance of its duties or observance of
its covenants under this Agreement.
Section 5.17 LIMITATION ON LIABILITY OF ADMINISTRATOR. Notwithstanding any
of the other provisions of this Agreement including those in Section 5.16, in no
event shall the Administrator be liable under or with respect to this Agreement
for any amount in excess of the compensation received from the Note Issuer
pursuant to Section 3.01.
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IN WITNESS WHEREOF, the parties have caused this Administration Agreement
to be duly executed and delivered under seal as of the day and year first above
written.
BEC FUNDING LLC, as Note Issuer
By:
-----------------------------------
Name:
Title:
BOSTON EDISON COMPANY, as Administrator
By:
-----------------------------------
Name:
Title:
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EXHIBIT 10.5
BEC FUNDING LLC,
AS NOTE ISSUER
THE BANK OF NEW YORK,
IN ITS SEPARATE CAPACITY AS CERTIFICATE TRUSTEE
THE BANK OF NEW YORK (DELAWARE),
IN ITS SEPARATE CAPACITY AS DELAWARE TRUSTEE,
MASSACHUSETTS RRB SPECIAL PURPOSE TRUST BEC-1,
AS CERTIFICATE ISSUER
AND
MASSACHUSETTS DEVELOPMENT FINANCE AGENCY
ACTING JOINTLY WITH
MASSACHUSETTS HEALTH AND EDUCATIONAL FACILITIES AUTHORITY
AS SETTLORS
--------------------------------------------------
FEE AND INDEMNITY AGREEMENT
DATED AS OF [ ], 1999
--------------------------------------------------
<PAGE> 2
FEE AND INDEMNITY AGREEMENT dated as of [ ], 1999 (as amended or
restated from time to time, the "Agreement"), among THE BANK OF NEW YORK
(DELAWARE), in its separate capacity as Delaware Trustee (the "Delaware
Trustee") under the Declaration of Trust (the "Declaration of Trust"), dated as
of [ ], 1999, the Massachusetts Development Finance Agency and the
Massachusetts Health and Educational Facilities Authority (collectively herein,
the "Agencies"), acting jointly pursuant to Chapter 164 of the Massachusetts
Acts of 1997 (the "Statute") as Settlors under the Declaration of Trust,
MASSACHUSETTS RRB SPECIAL PURPOSE TRUST BEC-1, as Certificate Issuer (the
"Certificate Issuer" or the "Trust"), THE BANK OF NEW YORK, in its separate
capacity as Certificate Trustee (the "Certificate Trustee") under the
Certificate Indenture (the "Certificate Indenture") of even date herewith, and
BEC Funding LLC, as Note Issuer (the "Note Issuer") under the Note Indenture
(the "Note Indenture") of even date herewith. All capitalized terms used herein
and not otherwise defined herein shall have the meanings attributed to them in
the Certificate Indenture.
Section 1. Payment of Fees and Expenses of Certificate Trustee;
Authorized Agents.
(a) Subject to Section 4 hereof, the Note Issuer hereby covenants and
agrees to pay to the Certificate Trustee (or any successor trustee) from time to
time reasonable compensation for its services under the Certificate Indenture
and to reimburse it for its expenses (including, without limitation, reasonable
legal fees and expenses) incurred in connection therewith, it being understood
that the Certificate Trustee shall have no recourse against the Agencies or
against the Notes or the payments thereon and proceeds thereof, for payment of
such amounts. The Certificate Trustee shall have a lien against the transition
property Transition Property to secure payment of such amounts to the extent
provided in the Statute or the financing order issued pursuant thereto. The Note
Issuer's obligations to make payments of such amounts to the Certificate Trustee
shall be subject to the priorities set forth in Section 8.02 of the Note
Indenture.
(b) Subject to Section 4 hereof, the Note Issuer further covenants and
agrees to pay, or cause to be paid, from time to time to each Authorized Agent
reasonable compensation for its services and to reimburse it for its expenses
incurred in connection with such service, it being understood that no Authorized
Agent shall have any recourse against the Agencies or against the Trust Property
Notes or the payments thereon and proceeds thereof, for payment of such amounts.
The appointment of any Authorized Agent shall be subject to the approval of the
Agencies and the Note Issuer.
(c) In addition, subject to Section 4 hereof, the Note Issuer covenants
and agrees to reimburse the Certificate Trustee for any tax incurred other than
through gross negligence, bad faith or willful misconduct on the part of the
Certificate Trustee, arising out of or in connection with the acceptance or
administration of the Trust Property under the Certificate Indenture (other than
any tax attributable to the Certificate Trustee's compensation for serving as
such), including any costs and expenses incurred in contesting the imposition of
any such tax.
(d) Notwithstanding anything herein to the contrary, if the Certificate
Trustee shall have entered into a fee agreement in writing with the Certificate
Issuer with respect to the Certificate Trustee's compensation for services under
the Certificate Indenture, the terms of such
<PAGE> 3
fee agreement shall control and the provisions of this Agreement shall not
entitle the Certificate Trustee to greater compensation than that due and owing
pursuant to such fee agreement.
Section 2. Payment of Fees and Expenses of Delaware Trustee.
(a) The Note Issuer covenants and agrees to pay to the Delaware Trustee
(or any successor trustee) from time to time reasonable compensation for its
services under the Declaration of Trust and the Certificate Indenture and to
reimburse it for its reasonable expenses (including, without limitation,
reasonable legal fees and expenses) incurred in connection therewith, it being
understood that the Delaware Trustee shall have no recourse against the Agencies
or against the Notes or the payments thereon and proceeds thereof, for payment
of such amounts. The Delaware Trustee shall have a lien against the transition
property Transition Property to secure payment of such amounts to the extent
provided in the Statute or the financing order issued pursuant thereto. The Note
Issuer's obligations to make payments of such amounts to the Delaware Trustee
shall be subject to the priorities set forth in Section 8.02 of the Note
Indenture.
(b) In addition, subject to Section 4 hereof, the Note Issuer covenants
and agrees to reimburse the Delaware Trustee for any tax incurred other than
through gross negligence, bad faith or willful misconduct on the part of the
Delaware Trustee, arising out of or in connection with the acceptance or
administration of the Trust Property under the Declaration of Trust (other than
any tax attributable to the Delaware Trustee's compensation for serving as
such), including any costs and expenses incurred in contesting the imposition of
any such tax.
(c) Notwithstanding anything herein to the contrary, if the Delaware
Trustee shall have entered into a fee agreement in writing with the Certificate
Issuer with respect to its compensation for services under the Declaration of
Trust and the Certificate Indenture, the terms of such other fee agreement shall
control and the provisions of this Agreement shall not entitle the Delaware
Trustee to greater compensation than that due and owing pursuant to such fee
agreement.
Section 3. Indemnity and Contribution.
(a) The Note Issuer hereby covenants and agrees to indemnify, defend
and hold harmless the Delaware Trustee, the Certificate Trustee for itself and
for the benefit of the Certificate holders, the Note Trustee for itself and for
the benefit of the Note holders, the Trust, the Agencies and any of their
respective affiliates, officers, directors, employees and agents (the
"Indemnified Persons") from and against any and all losses, claims, actions,
suits, taxes, damages, expenses (including, without limitation, legal fees and
expenses) and liabilities (including liabilities under state or federal
securities laws) of any kind and nature whatsoever (collectively, "Expenses"),
to the extent that such Expenses arise out of or are imposed upon or asserted
against such Indemnified Persons with respect to the creation, operation or
termination of the Certificate Issuer, the execution, delivery or performance of
the Declaration of Trust or the Certificate Indenture, as the case may be, or
the transactions contemplated thereby, the failure of the Note Issuer or any
other person (other than the person being indemnified) to perform its
obligations hereunder or under any of the Basic Documents, or otherwise in
connection with the Basic Documents or the transactions contemplated thereby;
provided, however, that the Note Issuer is not required to indemnify any
Indemnified Person for any Expenses that result from the
2
<PAGE> 4
willful misconduct or gross negligence of such Indemnified Person. For purposes
of this indemnification, the references to the "Agencies" shall include the
Department of Administration and Finance of The Commonwealth of Massachusetts.
The obligations of the Note Issuer to indemnify the Indemnified Persons as
provided herein shall survive the termination of the Declaration of Trust, the
termination, satisfaction or discharge of the Certificate Indenture and the
resignation or removal of the Delaware Trustee or the Certificate Trustee. The
Indemnified Persons are entitled to the benefit of this Agreement and shall have
the right to enforce the provisions hereof. The Indemnified Persons shall have a
lien against the Transition Property to secure payment of such Expenses to the
extent provided in the Statute or the financing order issued pursuant thereto.
The Note Issuer's obligations to make payments of such Expenses shall be subject
to the priorities set forth in Section 8.02 of the Note Indenture.
(b) If the indemnity provided in paragraph (a) of this Section 3 is
unavailable to or insufficient to hold harmless an Indemnified Person for any
reason, the Note Issuer, on the one hand, and such Indemnified Person, on the
other hand, agree to contribute to the aggregate Expenses to which the Note
Issuer, on the one hand, and such Indemnified Person, on the other hand, may be
subject in such proportion as is appropriate to reflect the relative benefits
received by the Note Issuer, on the one hand, and such Indemnified Person, on
the other hand, respectively, from the offering of the Certificates and the
Notes; provided, however, that in no case shall any Indemnified Person be
responsible for any amount in excess of the fees or other amounts received by
such Indemnified Person in connection with the Basic Documents and the issuance
of the Notes and the Certificates. If the allocation provided by the immediately
preceding sentence is unavailable for any reason, the Note Issuer, on the one
hand, and the Indemnified Person, on the other hand, shall contribute in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Note Issuer, on the one hand, and such Indemnified
Person, on the other hand, respectively, in connection with the actions or
omissions giving rise to such Expenses as well as any other relevant equitable
considerations; provided, however, that in no case shall any Indemnified Person
be responsible for any amount in excess of the fees or other amounts received by
such Indemnified Person in connection with the Basic Documents and the issuance
of the Notes and the Certificates. The Note Issuer and the Indemnified Persons
agree that it would not be just and equitable if contribution were determined by
pro rata allocation or any other method of allocation which does not take
account of the equitable considerations referred to above.
Section 4. Payment. All amounts owed by the Note Issuer to the
Certificate Trustee, the Delaware Trustee, the Trust, any Authorized Agent or
the Agencies under the Declaration of Trust or the Certificate Indenture, as the
case may be, shall be paid to the Certificate Trustee, the Delaware Trustee, the
Trust, any Authorized Agent or the Agencies, as appropriate, pursuant to the
Declaration of Trust or the Certificate Indenture, as the case may be, or, if a
fee agreement or fee schedule has been provided to the Note Issuer, payment
shall be made in accordance with said agreement or schedule, or if not otherwise
provided, such amount shall be paid directly to the Indemnified Person
Certificate Trustee, the Delaware Trustee, the Trust, any Authorized Agent or
the Agencies, as appropriate,, until the Note Issuer is otherwise notified by
the Certificate Trustee, the Delaware Trustee, the Trust, such Authorized Agent
or such Agency; provided, however, that notwithstanding anything to the contrary
in this Agreement or in any fee agreement or fee schedule, not later than 30
days following the selection of a successor Delaware Trustee pursuant to the
provisions of Section 4.7 of the Declaration of Trust, the Note Issuer shall pay
to the
3
<PAGE> 5
appropriate parties all amounts described in this Section 4 which have accrued
through the date of selection of such successor Delaware Trustee; and, provided,
further, that notwithstanding anything to the contrary in this Agreement or in
any fee agreement or fee schedule, each of the parties to this Agreement agrees
that the Note Issuer's obligations to make payments to it shall be subject to
the priorities set forth in Section 8.02 of the Note Indenture and the Note
Issuer shall have no obligation to make any payment except to the extent
consistent with Section 8.02 of the Note Indenture. The Note Issuer hereby
irrevocably directs the Note Trustee to pay such amounts from monies on deposit
in the Collection Account as provided pursuant to Section 8.02(d) of the Note
Indenture.
Section 5. Notices. Unless otherwise specifically provided herein, all
notices, directions, consents and waivers required under the terms and
provisions of this Agreement shall be in English and in writing, and any such
notice, direction, consent or waiver may be given by United States mail, courier
service, telegram, telex, telemessage, telecopy, telefax, cable or facsimile
(confirmed by telephone or in writing in the case of notice by telegram, telex,
telemessage, telecopy, telefax, cable or facsimile) or any other customary means
of communication, and any such notice, direction, consent or waiver shall be
effective when delivered,
if to the Agencies, to:
Massachusetts Development Finance Agency
75 Federal Street
Boston, MA 02110
Attention: General Counsel
Facsimile: (617) 727-8741
Telephone: (617) 451-2477
and
Massachusetts Health and Educational Facilities Authority
99 Summer Street
10th Floor
Boston, MA 02110
Attention: General Counsel
Facsimile: (617) 737-8366
Telephone: (617) 737-8377
4
<PAGE> 6
if to the Certificate Issuer (or the Trust), to:
The Bank of New York (Delaware), as Delaware Trustee for the
Massachusetts RRB Special Purpose Trust BEC-1
c/o The Bank of New York
101 Barclay Street
Floor 12 East
New York, NY 10286
Attention: Asset Backed Finance Unit
Facsimile: (212) 815-5544
Telephone: (212) 815-5286
with copies to:
Massachusetts Development Finance Agency
75 Federal Street
Boston, MA 02110
Attention: General Counsel
Facsimile: (617) 727-8741
Telephone: (617) 451-2477
and
Massachusetts Health and Educational Facilities Authority
99 Summer Street
10th Floor
Boston, MA 02110
Attention: General Counsel
Facsimile: (617) 737-8366
Telephone: (617) 737-8377
if to the Delaware Trustee, to:
The Bank of New York (Delaware)
c/o The Bank of New York
101 Barclay Street
Floor 12 East
New York, NY 10286
Attention: Asset Backed Finance Unit
Facsimile: (212) 815-5544
Telephone: (212) 815-5286
5
<PAGE> 7
if to the Certificate Trustee, to:
The Bank of New York
101 Barclay Street
Floor 12 East
New York, NY 10286
Attention: Asset Backed Finance Unit
Facsimile: (212) 815-5544
Telephone: (212) 815-5286
if to the Note Issuer, to:
BEC Funding LLC
800 Boylston Street, 35th Floor
Boston, Massachusetts 02199
Attention: Treasurer
Facsimile: (617) 424-2605
Telephone: (617) 369-6000
if to the Note Trustee, to:
The Bank of New York
101 Barclay Street
Floor 12 East
New York, NY 10286
Attention: Asset Backed Finance Unit
Facsimile: (212) 815-5544
Telephone: (212) 815-5286
Section 6. Survival of Agreements. This Agreement shall terminate upon
the termination of the Certificate Issuer and the payment and discharge of all
Certificates; provided, however, that the agreements of the Note Issuer set
forth in Sections 3 and 7 hereof shall survive the termination of this Agreement
or the resignation or removal of the Delaware Trustee, the Certificate Trustee
or the Note Trustee.
Section 7. Nonpetition Covenant. Notwithstanding any prior termination
of this Agreement, but subject to the Massachusetts Department of Transportation
and Energy's right to order the sequestration and payment of revenues arising
with respect to the Transition Property notwithstanding any bankruptcy,
reorganization or other insolvency proceedings with respect to the debtor,
pledgor or transferor of the Transition Property pursuant to the Statute, the
Agencies, the Certificate Issuer, the Delaware Trustee and the Certificate
Trustee agree that they shall not, prior to the date which is one year and one
day after the termination of the Note Indenture with respect to the Note Issuer,
acquiesce, petition or otherwise invoke or cause the Note Issuer to invoke the
process of any court or government authority for the purpose of commencing or
sustaining a case against the Note Issuer under any federal or state bankruptcy,
insolvency or similar law, appointing a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other
6
<PAGE> 8
similar official of the Note Issuer or any substantial part of the property of
the Note Issuer, or ordering the winding up of the affairs of or the liquidation
of the Note Issuer.
Section 8. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
Section 9. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS, WITHOUT REFERENCE
TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF
THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 10. Non-Consolidation. The parties hereby acknowledge and agree
that the Note Issuer and Boston Edison Company shall not be substantively
consolidated, and that Boston Edison Company shall have no liability or
obligation of any kind with respect to this Agreement; provided, however, that
this provision shall not be interpreted to relieve Boston Edison Company of its
obligations to indemnify the Note Issuer pursuant to any other Basic Document,
including without limitation with respect to amounts paid by the Note Issuer to
persons indemnified by it under this Agreement, to the extent the Note Issuer
would otherwise be entitled to indemnification with respect to such amounts
under such other Basic Document.
[SIGNATURE PAGES FOLLOW]
7
<PAGE> 9
IN WITNESS WHEREOF, the Agencies, the Delaware Trustee, the Certificate
Trustee and the Note Issuer have caused this Agreement to be duly executed by
duly authorized officers, all as of the day and year first above written.
MASSACHUSETTS DEVELOPMENT FINANCE AGENCY,
as a Settlor
By: ________________________________________
Name:
Title:
MASSACHUSETTS HEALTH AND EDUCATIONAL
FACILITIES AUTHORITY, as a Settlor
By: ________________________________________
Name:
Title:
THE BANK OF NEW YORK (DELAWARE),
in its separate capacity as Delaware Trustee
By: ________________________________________
Name:
Title:
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
S-1
<PAGE> 10
THE BANK OF NEW YORK,
in its separate capacity as
Certificate Trustee
By: ________________________________________
Name:
Title:
BEC FUNDING LLC,
as Note Issuer
By: ________________________________________
Name:
Title:
MASSACHUSETTS RRB SPECIAL PURPOSE TRUST
BEC-1
By: THE BANK OF NEW YORK (DELAWARE),
as Delaware Trustee
By: ________________________________________
Name:
Title:
S-2
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to this inclusion in this registration statement of BEC
Funding LLC (BEC) on Pre-Effective Amendment No. 2 to Form S-3 (File No.
333-74671) of our report dated June 7, 1999, on our audit of the financial
statements of BEC as of April 30, 1999 and for the period from January 29, 1999
(date of inception) to April 30, 1999. We also consent to the reference to us
under the heading "Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
July 14, 1999
<PAGE> 1
Exhibit 25.1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST
INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A
TRUSTEE PURSUANT TO SECTION 305(b)(2)____
-----------------------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(Jurisdiction of incorporation (I.R.S. Employer
if not a U.S. national bank) Identification No.)
One Wall Street, New York, New York 10286
(Address of principal executive offices) (Zip code)
Cheryl Laser
The Bank of New York
101 Barclay Street
Floor 12 East
New York, New York 10286
212-815-5286
(Name, address, and telephone number of agent for service)
-----------------------------------
BEC FUNDING LLC
(Exact name of obligor as specified in its charter)
Delaware 04-3454484
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
800 Boylston Street, 35th Floor
Boston, Massachusetts 02199
(Address of principal executive offices) (Zip code)
-----------------------------------
NOTES
(Title of the indenture securities)
<PAGE> 2
ITEM 1. GENERAL INFORMATION.*
Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
<TABLE>
<S> <C>
Superintendent of Banks of the 2 Rector Street, New York, N.Y. 10006
State of New York and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045
Federal Deposit Insurance Corporation 550 17th Street, N.W., Washington D.C. 20429
New York Clearing House Association New York, N.Y. 10005
</TABLE>
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None. (See Note on page 2.)
ITEM 16. LIST OF EXHIBITS.
Exhibits identified in parentheses below, on file with the Commission,
are incorporated herein by reference as an exhibit hereto, pursuant to Rule
7a-29 under the Trust Indenture Act of 1939 (the "Act") and Rule 24 of the
Commission's Rules of Practice.
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains
the authority to commence business and a grant of powers to
exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to
Form T-1 filed with Registration Statement No. 33-6215, Exhibits
la and lb to Form T-1 filed with Registration Statement No.
33-21672 and Exhibit 1 to Form T-1 filed with Registration
Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form
T-1 filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
- ---------------------
* Pursuant to General Instruction B, the Trustee has responded only to Items
1, 2 and 16 of this form since to the best of the knowledge of the Trustee
the obligor is not in default under any indenture under which the Trustee
is a trustee.
<PAGE> 3
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or
examining authority.
NOTE
Inasmuch as this Form T-1 is being filed prior to the ascertainment by
the Trustee of all facts on which to base a responsive answer to Item 2, the
answer to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 14th day of July, 1999.
THE BANK OF NEW YORK
By: /s/ Cheryl Laser
----------------------------
Cheryl Laser
Assistant Vice President
2
<PAGE> 4
EXHIBIT 7
(Page 1 of 3)
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries, a member of the Federal Reserve
System, at the close of business June 30, 1998, published in accordance with a
call made by the Federal Reserve Bank of this District pursuant to the
provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
- ------ --------------
<S> <C> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin............................. $ 7,301,241
Interest-bearing balances...................................................... 1,385,944
Securities:
Held-to-maturity securities.................................................... 1,000,737
Available-for-sale securities.................................................. 4,240,655
Federal funds sold and Securities purchased under
agreements to resell........................................................... 971,453
Loans and lease financing receivables:
Loans and leases, net of unearned income ................. 38,788,269
LESS: Allowance for loan and lease losses ................ 632,875
LESS: Allocated transfer risk reserve .................... 0
Loans and leases, net of unearned income,
allowance, and reserve..................................................... 38,155,394
Assets held in trading accounts..................................................... 1,307,562
Premises and fixed assets (including capitalized leases)............................ 670,445
Other real estate owned............................................................. 13,598
Investments in unconsolidated subsidiaries and
associated companies........................................................... 215,024
Customers' liability to this bank on acceptances
outstanding.................................................................... 974,237
Intangible assets................................................................... 1,102,625
Other assets........................................................................ 1,944,777
-----------
Total assets........................................................................ $59,283,692
===========
</TABLE>
<PAGE> 5
EXHIBIT 7
(Page 2 of 3)
<TABLE>
<CAPTION>
Dollar Amounts
LIABILITIES in Thousands
- ----------- --------------
<S> <C> <C>
Deposits:
In domestic offices............................................................ $26,930,258
Noninterest-bearing....................................... 11,579,390
Interest-bearing.......................................... 15,350,868
In foreign offices, Edge and Agreement
subsidiaries, and IBFs..................................................... 16,117,854
Noninterest-bearing....................................... 187,464
Interest-bearing.......................................... 15,930,390
Federal funds purchased and Securities sold under
agreements to repurchase....................................................... 2,170,238
Demand notes issued to the U.S. Treasury............................................ 300,000
Trading liabilities................................................................. 1,310,867
Other borrowed money:
With remaining maturity of one year or less.................................... 2,549,479
With remaining maturity of more than one year
through three years........................................................ 0
With remaining maturity of more than three years............................... 46,654
Bank's liability on acceptances executed and outstanding............................ 983,398
Subordinated notes and debentures................................................... 1,314,000
Other liabilities................................................................... 2,295,520
-----------
Total liabilities................................................................... $54,018,268
===========
EQUITY CAPITAL
- --------------
Common stock........................................................................ 1,135,284
Surplus............................................................................. 731,319
Undivided profits and capital reserves.............................................. 3,385,227
Net unrealized holding gains (losses) on available-for-sale securities.............. 51,233
Cumulative foreign currency translation adjustments................................. (37,639)
Total equity capital................................................................ 5,265,424
-----------
Total liabilities and equity capital................................................ $59,283,692
===========
</TABLE>
<PAGE> 6
EXHIBIT 7
(Page 3 of 3)
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
J. Carter Bacot )
Thomas A. Renyi ) Directors
Alan R. Griffith )
<PAGE> 1
Exhibit 25.2
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------------------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST
INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A
TRUSTEE PURSUANT TO SECTION 305(b)(2)____
--------------------------------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(Jurisdiction of incorporation (I.R.S. Employer
if not a U.S. national bank) Identification No.)
One Wall Street, New York, New York 10286
(Address of principal executive offices) (Zip code)
Cheryl Laser
The Bank of New York
101 Barclay Street
Floor 12 East
New York, New York 10286
212-815-5286
(Name, address, and telephone number of agent for service)
--------------------------------------------
MASSACHUSETTS RRB SPECIAL PURPOSE TRUST BEC-1
(Exact name of obligor as specified in its charter)
Delaware To be applied for
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
The Bank of New York (Delaware)
White Clay Center
Route 273, Newark, Delaware 19711
(Address of principal executive offices) (Zip code)
RATE REDUCTION CERTIFICATES
(Title of the indenture securities)
<PAGE> 2
ITEM 1. GENERAL INFORMATION.*
Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
<TABLE>
<S> <C>
Superintendent of Banks of the 2 Rector Street, New York, N.Y. 10006
State of New York and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045
Federal Deposit Insurance Corporation 550 17th Street, N.W., Washington D.C. 20429
New York Clearing House Association New York, N.Y. 10005
</TABLE>
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None. (See Note on page 2.)
ITEM 16. LIST OF EXHIBITS.
Exhibits identified in parentheses below, on file with the Commission,
are incorporated herein by reference as an exhibit hereto, pursuant to Rule
7a-29 under the Trust Indenture Act of 1939 (the "Act") and Rule 24 of the
Commission's Rules of Practice.
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains
the authority to commence business and a grant of powers to
exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to
Form T-1 filed with Registration Statement No. 33-6215, Exhibits
la and lb to Form T-1 filed with Registration Statement No.
33-21672 and Exhibit 1 to Form T-1 filed with Registration
Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form
T-1 filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
- ---------------------
* Pursuant to General Instruction B, the Trustee has responded only to Items
1, 2 and 16 of this form since to the best of the knowledge of the Trustee
the obligor is not in default under any indenture under which the Trustee
is a trustee.
<PAGE> 3
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or
examining authority.
NOTE
Inasmuch as this Form T-1 is being filed prior to the ascertainment by
the Trustee of all facts on which to base a responsive answer to Item 2, the
answer to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 14th day of July, 1999.
THE BANK OF NEW YORK
By: /s/ Cheryl Laser
----------------------------
Cheryl Laser
Assistant Vice President
2
<PAGE> 4
EXHIBIT 7
(Page 1 of 3)
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries, a member of the Federal Reserve
System, at the close of business June 30, 1998, published in accordance with a
call made by the Federal Reserve Bank of this District pursuant to the
provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
- ------ --------------
<S> <C> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin............................. $ 7,301,241
Interest-bearing balances...................................................... 1,385,944
Securities:
Held-to-maturity securities.................................................... 1,000,737
Available-for-sale securities.................................................. 4,240,655
Federal funds sold and Securities purchased under
agreements to resell........................................................... 971,453
Loans and lease financing receivables:
Loans and leases, net of unearned income ................. 38,788,269
LESS: Allowance for loan and lease losses ................ 632,875
LESS: Allocated transfer risk reserve .................... 0
Loans and leases, net of unearned income,
allowance, and reserve..................................................... 38,155,394
Assets held in trading accounts..................................................... 1,307,562
Premises and fixed assets (including capitalized leases)............................ 670,445
Other real estate owned............................................................. 13,598
Investments in unconsolidated subsidiaries and
associated companies........................................................... 215,024
Customers' liability to this bank on acceptances
outstanding.................................................................... 974,237
Intangible assets................................................................... 1,102,625
Other assets........................................................................ 1,944,777
-----------
Total assets........................................................................ $59,283,692
===========
</TABLE>
<PAGE> 5
EXHIBIT 7
(Page 2 of 3)
<TABLE>
<CAPTION>
Dollar Amounts
LIABILITIES in Thousands
- ----------- --------------
<S> <C> <C>
Deposits:
In domestic offices............................................................ $26,930,258
Noninterest-bearing....................................... 11,579,390
Interest-bearing.......................................... 15,350,868
In foreign offices, Edge and Agreement
subsidiaries, and IBFs..................................................... 16,117,854
Noninterest-bearing....................................... 187,464
Interest-bearing.......................................... 15,930,390
Federal funds purchased and Securities sold under
agreements to repurchase....................................................... 2,170,238
Demand notes issued to the U.S. Treasury............................................ 300,000
Trading liabilities................................................................. 1,310,867
Other borrowed money:
With remaining maturity of one year or less.................................... 2,549,479
With remaining maturity of more than one year
through three years........................................................ 0
With remaining maturity of more than three years............................... 46,654
Bank's liability on acceptances executed and outstanding............................ 983,398
Subordinated notes and debentures................................................... 1,314,000
Other liabilities................................................................... 2,295,520
-----------
Total liabilities................................................................... $54,018,268
===========
EQUITY CAPITAL
- --------------
Common stock........................................................................ 1,135,284
Surplus............................................................................. 731,319
Undivided profits and capital reserves.............................................. 3,385,227
Net unrealized holding gains (losses) on available-for-sale securities.............. 51,233
Cumulative foreign currency translation adjustments................................. (37,639)
Total equity capital................................................................ 5,265,424
-----------
Total liabilities and equity capital................................................ $59,283,692
===========
</TABLE>
<PAGE> 6
EXHIBIT 7
(Page 3 of 3)
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
J. Carter Bacot )
Thomas A. Renyi ) Directors
Alan R. Griffith )
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
BALANCE SHEET OF THE NOTE ISSUER AT APRIL 30, 1999, AND THE RELATED STATEMENTS
OF OPERATIONS, CHANGES IN MEMBER'S EQUITY AND CASH FLOW FOR THE PERIOD FROM
JANUARY 29, 1999 (DATE OF INCEPTION) TO APRIL 30, 1999, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-29-1999
<PERIOD-END> APR-30-1999
<CASH> 651
<SECURITIES> 0
<RECEIVABLES> 1,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,224,720
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,224,720
<CURRENT-LIABILITIES> 1,223,801
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 919
<TOTAL-LIABILITY-AND-EQUITY> 1,224,720
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 71
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (81)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (81)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
