UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15d OF THE
SECURITIES EXCHANGE ACT OF 1934
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN
GENERAL INSTRUCTIONS I (1)(a) AND (b) OF FORM 10-K AND
IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED] For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from
___________ to ____________
Commission File Registrant; State of Incorporation; IRS Employer
Number Address and Telephone Number Identification No.
333-79619 WEST PENN FUNDING LLC 25-1843349
(Exact name of Registrant as specified in
its charter)
(Delaware)
2325B-2 Renaissance Drive
Las Vegas, NV 89119
(702) 895-6752
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10- K or any
amendment to this Form 10-K. [X]
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES [X] NO[ ]
The aggregate market value of the voting and non-voting common equity
held by non- affiliates of the Registrant: None.
DOCUMENTS INCORPORATED BY REFERENCE.
Not applicable.
<PAGE>
WEST PENN FUNDING LLC
FORM 10-K ANNUAL REPORT TO
THE SECURITIES AND EXCHANGE COMMISSION
FOR THE YEAR ENDED DECEMBER 31, 1999
TABLE OF CONTENTS
Page #
PART I
Item 1. Business..........................................................4
Item 2. Properties........................................................5
Item 3. Legal Proceedings.................................................5
Item 4. Submission of Matters to a Vote of Security Holders...............5
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters........................................................5
Item 6. Selected Financial Data...........................................5
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.........................................6
Item 7A. Quantitative and Qualitative Disclosures About Market Risk........7
Item 8 Financial Statements and Supplementary Data ......................7
Report of Independent Accountants..............................7
Statement of Income and Member's Equity........................7
Statement of Cash Flows........................................8
Balance Sheet..................................................9
Notes to Financial Statements.................................10
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure......................................13
PART III
Item 10. Directors and Executive Officers of the Registrant...............13
Item 11. Executive Compensation...........................................13
Item 12. Security Ownership of Certain Beneficial Owners and
Management....................................................14
Item 13. Certain Relationships and Related Transactions...................14
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K..14
Signatures.................................................15
Exhibit Index..............................................16
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Glossary of Terms and Abbreviations
CAPITAL SUBACCOUNT - An account held by the Trustee under the Indenture
which is funded by a contribution to West Penn Funding LLC by West Penn
Funding Corporation at the date of issuance of each series of transition
bonds.
COMPETITION ACT - The Pennsylvania Electricity Generation Customer Choice
and Competition Act, enacted in Pennsylvania in December 1996.
GENERAL SUBACCOUNT - An account held by the Trustee under the Indenture,
into which ITC remittances by the Servicer are deposited. The Trustee
allocates the funds from the General Subaccount to other subaccounts on the
quarterly payment dates.
INDENTURE - The Indenture entered into by West Penn Funding LLC and the
Trustee, providing for the issuance of transition bonds.
ITC - Intangible Transition Charge, which West Penn has been authorized
by the PUC to impose on customer bills and to collect through a nonbypassable
billing mechanism to recover Qualified Transition Expenses.
ITP - Intangible Transition Property, which is the property right created
under the Competition Act representing the irrevocable right of West Penn
Funding LLC to receive, through ITC, amounts sufficient to recover all
Qualified Transition Expenses.
OVERCOLLATERALIZATION SUBACCOUNT - An account held by the Trustee under
the Indenture, which is funded ratably from collections of ITC over the term
of each series of transition bonds.
PUC - The Pennsylvania Public Utility Commission.
QUALIFIED RATE ORDER - The final order issued by the PUC to West Penn in
November 1998, in connection with West Penn's restructuring filing under the
Competition Act, as supplemented by an August 1999 PUC order.
QUALIFIED TRANSITION EXPENSES - The transition or stranded costs of an
electric utility approved by the PUC for recovery through the issuance of
transition bonds; the costs of retiring existing debt or equity capital of the
electric utility or its holding company parent, including accrued interest and
acquisition or redemption premium, costs of defeasance, and other related
fees, costs and charges, through the issuance of transition bonds or the
assignment, sale or other transfer of ITP; and the costs incurred to issue,
service or refinance the transition bonds, including accrued interest and
acquisition or redemption premium, and other related fees, costs and charges
associated with the transition bonds, or to assign, sell or otherwise transfer
ITP.
RESERVE SUBACCOUNT - An account held by the Trustee under the Indenture,
which consists of remaining funds available after required allocations on the
quarterly payment dates.
SERVICER - West Penn acting in this capacity under the Servicing
Agreement. In this capacity, West Penn calculates, bills and collects ITC, and
maintains applicable accounting records, among other duties.
SERVICING AGREEMENT - The Intangible Transition Property Servicing
Agreement between West Penn, as Servicer, and West Penn Funding LLC, as
Issuer.
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TRUSTEE - Bankers Trust Company, a New York banking corporation, as
Trustee under the Indenture.
WEST PENN - West Penn Power Company, a Pennsylvania corporation.
WEST PENN FUNDING LLC
ITEM 1. BUSINESS
General
West Penn Funding LLC (the Company) is a Delaware limited liability
company, whose sole member is West Penn Funding Corporation. West Penn Funding
Corporation is a wholly owned subsidiary of West Penn. The Company was
organized in May 1999, for the sole purpose of purchasing and owning ITP,
issuing transition bonds (the Bonds), pledging its interest in ITP and other
collateral to the Trustee under an Indenture between the Company and the
Trustee to collateralize the Bonds, and performing activities that are
necessary to accomplish these purposes. The Company's organizational documents
require it to operate in a manner so that its assets would not be consolidated
with the bankruptcy estate of West Penn or West Penn Funding Corporation in
the event that West Penn or West Penn Funding Corporation becomes subject to a
bankruptcy proceeding.
The only material business conducted by the Company has been the
acquisition of ITP from West Penn Funding Corporation and the issuance in
November 1999 of $600 million of Bonds, Series 1999-A, Class A-1 through Class
A-4. The specific interest rate and maturity of each class of bonds is
specified in Note C of the Notes to Financial Statements. Each series of Bonds
have been registered in the name of Cede & Co., as nominee of the Depository
Trust Company. All of the Bonds were sold to a syndicate of underwriters
managed by Morgan Stanley Dean Witter.
The Company used the proceeds of the issuance of the Bonds to pay
expenses of issuance and to purchase the ITP from West Penn
Funding Corporation. West Penn arranged for the formation of West Penn Funding
Corporation as a bankruptcy remote special purpose entity for the purpose of
holding ITP before the issuance of the first series of the Bonds.
The Company has no employees. West Penn, as Servicer under the Servicing
Agreement, is required to manage, service, administer and make collections of
the ITP. The Servicing Agreement also requires West Penn, as Servicer, to file
adjustment requests on each calculation date, and the Competition Act and the
Qualified Rate Order require the PUC to act upon these requests within
specified time periods. These adjustment requests are based on actual ITC
collections and updated assumptions by the Servicer as to projected future
usage of electricity by customers, expected delinquencies and write-offs, and
future payments and expenses relating to the ITP and the Bonds. The Servicer
has not yet filed any such adjustment request.
Intangible Transition Property
The ITP represents the irrevocable right of West Penn, or its successor
or assignee, to collect a non-bypassable ITC from customers pursuant to the
Qualified Rate Order in accordance with the Competition Act. The Qualified
Rate Order authorized West Penn to securitize up to $670 million of its
stranded costs. West Penn, or any assignee of West Penn to whom ITP is sold,
may issue and sell, in reliance on the Qualified Rate Order, one or more
series of the Bonds, each series in one or more classes, secured by ITP. The
Company acquired the ITP and issued the Bonds in November 1999. The principal
amount of the Bonds, interest, fees, and
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funding of the Overcollateralization Subaccount will be recovered through ITC
payable by retail consumers of electricity within West Penn's service
territory who receive electric delivery service from West Penn.
ITEM 2. PROPERTIES
The Company has no physical property. Its primary asset is the ITP
described above in Item 1 ("Business - Intangible Transition Property").
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Omitted pursuant to Instruction I of Form 10-K.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
(a) Sales of Unregistered Securities. There is no established public
trading market for the Company's equity securities. West Penn Funding
Corporation, which is a wholly owned subsidiary of West Penn, owns all of the
Company's equity. On October 21, 1999, West Penn Funding Corporation
transferred $3 million to the Company as an initial capital contribution. Such
transaction was exempt from registration under the Securities Act of 1933, as
amended, pursuant to Section 4(2). The Company has made no other sales of
unregistered securities.
(b) Restriction on Dividends. The Company may not make any payments,
distributions or dividends to any member of the Company with respect to its
membership interest in the Company except in accordance with the Indenture.
(c) Bondholders. As of December 31, 1999 the sole holder of the Bonds was
Cede & Co., as nominee of the Depository Trust Company. The Bonds are not
registered on any national securities exchange and are not traded on any
established trading market.
ITEM 6. SELECTED FINANCIAL DATA
Omitted pursuant to Instruction I of Form 10-K.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following analysis of the results of operations and financial
condition of the Company is in an abbreviated format pursuant to Instruction I
of Form 10-K. Such analysis should be read in conjunction with the financial
statements attached hereto.
As discussed above under Item 1 "Business - General," the Company is a
Delaware limited liability company, whose sole member is West Penn Funding
Corporation, which is a wholly owned subsidiary of West Penn. As discussed in
Note C to Financial Statements, on November 16, 1999, the Company issued the
Bonds and transferred the proceeds in exchange for all rights, title and
interest in the ITP from West Penn Funding Corporation. As the Company was
formed for limited purposes, as discussed under Item 1 "Business - General,"
the income statement effects were limited primarily to revenue from
collections of ITC by the Servicer, interest income earned on the Capital
Subaccount maintained by the Trustee and on temporary investments, interest
expense on the Bonds, amortization of the ITP, servicing fees and other
administrative expenses.
From the period of inception, May 26, 1999, to December 31, 1999, the
income generated from the ITP was approximately $7,502,000. The Company also
earned approximately $6,000 in interest from the Capital Subaccount maintained
by the Trustee and temporary investments. Interest expense of approximately
$5,070,000 consists of interest on the Bonds, amortization of debt issuance
expenses and the discount on the Bonds. The Company also incurred servicing
fees of approximately $104,000 and other administrative fees of $1,000.
The principal amount of the Bonds, interest, fees, and funding of the
Overcollateralization Subaccount will be recovered through ITC payable by
retail consumers of electricity within West Penn's service territory who
receive electric delivery service from West Penn. As part of West Penn's
responsibility as Servicer under the Servicing Agreement, as discussed in Item
1 "Business - General," West Penn remitted to the Trustee $7,438,000 of ITC
collections for the period from November 16, 1999 to December 31, 1999. The
first quarterly payment of Bond principal, interest and all related expenses
will be made by the Trustee on March 27, 2000.
The Company currently anticipates that there will be sufficient revenue
to make interest payments due on the first quarterly payment date, March 27,
2000. However, due to the lag between amounts of ITC billed by West Penn to
its customers and amounts collected from those customers during the initial
period for the implementation of the ITC, after application of the amounts in
the Capital Subaccount, the Company anticipates a shortfall of approximately
$3,000,000 in the scheduled principal payment on that date (which shortfall
does not constitute an Event of Default under the Indenture.)
Under the Competition Act and the Qualified Rate Order, withdrawals from
the Capital Subaccount must be replenished by increases in the ITC. Under the
Servicing Agreement, West Penn, as Servicer, intends to file a request for an
adjustment to the ITC with the PUC on October 1, 2000 to produce additional
revenues sufficient to replenish the Capital Subaccount prior to the December
2001 quarterly payment date. The adjustment will go into effect on January 1,
2001.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
In our opinion, the financial statements listed in the index appearing under
Item 14(a)(1) present fairly, in all material respects, the financial position
of West Penn Funding LLC (the Company) at December 31, 1999, and the results
of its operations and its cash flows from May 26, 1999 (inception date)
through December 31, 1999 in conformity with accounting principles generally
accepted in the United States. 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 auditing standards generally
accepted in the United States, 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.
PricewaterhouseCoopers LLP
February 3, 2000
STATEMENT OF INCOME
FROM MAY 26, 1999 INCEPTION
TO DECEMBER 31, 1999
(Thousands of Dollars)
Revenues:
Intangible transition charges........................................ $ 7,502
Interest income...................................................... 6
Total Revenues..................................................... 7,508
Operating Expenses:
Amortization of intangible transition property....................... 2,323
Interest expense..................................................... 4,944
Amortization of debt issuance costs.................................. 126
Administrative and general expense................................... 105
Total operating expenses........................................... 7,498
---------
Operating income................................................... 10
Income tax expense..................................................... 4
--------
Net income............................................................. $ 6
========
________________________________________________________________________________
STATEMENT OF MEMBER'S EQUITY
Balance at May 26, 1999................................................ $ 0
Add:
Member's cash contribution........................................... 3,025
--------
3,025
Deduct:
Net income........................................................... 6
--------
Balance at December 31................................................. $ 3,031
========
See accompanying notes to financial statements.
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STATEMENT OF CASH FLOWS
FROM MAY 26, 1999 INCEPTION DATE
TO DECEMBER 31, 1999
(Thousands of Dollars)
Cash Flows from Operations:
Net income........................................................... $ 6
Amortization of intangible transition property....................... 2,323
Amortization of debt issuance expenses............................... 126
Changes in certain current assets and liabilities:
Accounts receivable from parent.................................... (7,474)
Interest and taxes accrued......................................... 4,948
Accounts payable to parent......................................... 633
______
562
______
Cash Flows from Investing:
Purchase of intangible transition property...........................(594,941)
_________
(594,941)
Cash Flows from Financing:
Proceeds from issuance of transition bonds........................... 595,363
Equity contribution from member...................................... 3,025
Change in restricted funds......................... ................. (3,006)
_________
595,382
Net Change in Cash and Temporary Cash Investments...................... 1,003
Cash and Temporary Cash Investments at May 26.......................... 0
Cash and Temporary Cash Investments at December 31..................... $ 1,003
Supplemental Cash Flow Information
Cash paid from inception:
Interest........................................................... $ 0
Income taxes....................................................... $ 0
See accompanying notes to financial statements.
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BALANCE SHEET
DECEMBER 31, 1999
(Thousands of Dollars)
ASSETS
Current Assets:
Cash and temporary cash investments................................. $ 1,003
Accounts receivable from parent..................................... 7,474
Restricted funds.................................................... 3,006
Intangible transition property...................................... 52,779
_________
64,262
Noncurrent Assets:
Intangible transition property...................................... 539,838
Unamortized debt issuance expense................................... 4,453
_________
544,291
Total................................................................. $608,553
LIABILITIES AND MEMBER'S EQUITY
Current Liabilities:
Long-term debt due within one year.................................. $ 49,734
Accounts payable to parent.......................................... 633
Federal and state income taxes accrued.............................. 4
Interest accrued.................................................... 4,944
_________
...................................................................... 55,315
Long-term debt, net of discount....................................... 550,207
_________
Member's Equity....................................................... 3,031
_________
Total................................................................. $608,553
========
See accompanying notes to financial statements.
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NOTES TO FINANCIAL STATEMENTS
(These notes are an integral part of the financial statements.)
NOTE A: NATURE OF OPERATIONS
West Penn Funding LLC (the Company), a limited liability company established
under the laws of the State of Delaware, was formed on May 26, 1999. West Penn
Funding Corporation is the sole member of the Company. West Penn Funding
Corporation is a wholly owned subsidiary of West Penn Power Company (West
Penn), an operating electric utility. West Penn is a wholly owned subsidiary
of Allegheny Energy, Inc., a public utility holding company.
The Company was organized for the sole purpose of purchasing and owning
Intangible Transition Property (ITP), issuing Transition Bonds (Bonds),
pledging its interest in ITP and other collateral to the bond trustee, and
performing activities that are necessary, suitable or convenient to accomplish
these purposes. ITP represents the irrevocable right of West Penn, or its
successor or assignee, to collect a non-bypassable Intangible Transition
Charge (ITC) from customers pursuant to a Qualified Rate Order (PUC Order)
issued on November 19, 1998, and supplemented by order dated August 12, 1999,
by the Pennsylvania Public Utility Commission (PUC) in accordance with the
Pennsylvania Electricity Generation Customer Choice Order and Competition Act
(applicable law) enacted in Pennsylvania in December 1996. The PUC Order
authorizes the ITC to be sufficient to recover the principal amount of Bonds
issued by the Company, plus an amount sufficient to provide for any credit
enhancement, to fund any reserves and to pay interest, redemption premiums,
servicing fees and other expenses relating to the Bonds.
West Penn transferred the ITP to West Penn Funding Corporation which sold the
ITP to West Penn Funding LLC.
The Company issued $600.0 million of Bonds in four different classes on
November 16, 1999 (see Note C for additional information). The proceeds were
used to fund the purchase of ITP. The ITP and restricted funds were used to
collateralize the Bonds. Under applicable law, the Bonds are recourse to the
Company and are collateralized on a pro rata basis by the ITP and the equity
and assets of the Company. The source of repayment is the ITC authorized
pursuant to the PUC Order, which charges are collected from West Penn
customers by West Penn, as servicer.
ITC collections are deposited by West Penn with the Company and used to pay
the expenses of the Company, to pay debt service on the Bonds and to fund
credit enhancement for the Bonds. The Company also pledged the capital
contributed by West Penn Funding Corporation to collateralize the debt service
requirements of the Bonds. The Bonds are non-recourse to West Penn Funding
Corporation, West Penn, and Allegheny Energy, Inc.
NOTE B: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates that affect the
reported amounts of assets, liabilities, revenues, expenses, and disclosures
of contingencies during the reporting period.
Actual results could differ from these estimates.
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Cash and Temporary Cash Investments
For purposes of the statement of cash flows, temporary cash investments with
original maturities of three months or less, generally in the form of
commercial paper, certificates of deposit, and repurchase agreements, are
considered to be the equivalent of cash.
Restricted Funds
Under the Indenture, the Company deposited an amount equal to 0.5% of the
initial principal amount of the Bonds into the "Capital Subaccount" with the
Bond Trustee (Bankers Trust Company, a New York banking corporation). West
Penn Funding Corporation contributed this amount to the Company. This account
is the last account drawn in the event that "General Subaccount" collections
are insufficient to make required allocations. If the "Capital Subaccount" is
used, it will be replenished from the ITC remittances to its original level
through the periodic reconciliation process. Accordingly, the "Capital
Subaccount" is classified as Restricted Funds on the Balance Sheet.
Revenue
The Company records intangible transition charges in the period ITC is billed
to customers by West Penn.
Amortization of Intangible Transition Property
The ITP is being amortized over the life of the Bonds, based on ITC revenues,
interest accruals and other fees.
Amortization of Debt Issuance Costs and Discount on Debt
The costs associated with the issuance of the Bonds have been capitalized and
are being amortized in interest expense over the life of the Bonds utilizing
the effective interest method.
Income Taxes
The Company joins with its Parents and affiliates in filing a consolidated
federal income tax return. The consolidated tax liability is allocated among
the participants generally in proportion to the taxable income of each
participant, except that no subsidiary pays tax in excess of its separate
return tax liability. For the Company, the difference between the effective
tax rate and the statutory tax rate of 35% is not significant.
Comprehensive Income
SFAS No. 130, "Reporting Comprehensive Income," effective for 1998,
establishes standards for reporting comprehensive income and its components
(revenues, expenses, gains, and losses) in the financial statements. The
Company does not have any elements of other comprehensive income to report in
accordance with SFAS No. 130.
NOTE C: LONG-TERM DEBT
In November 1999, the Company issued $600.0 million of Series 1999-A Bonds.
The Bonds consist of four classes. The Company used the proceeds from the
Bonds to purchase ITP from West Penn Funding Corporation. The ITP and other
assets of the Company collateralize the Bonds.
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Scheduled maturities and interest rates for the Bonds at December 31, 1999,
are:
Initial Class Expected Final Final
Class Bond Rate Principal Payment Date Maturity Date
Balance
($ Thousands)
A-1 6.320% $74,000 June 25, 2001 June 25, 2003
A-2 6.630% 172,000 December 26, 2003 December 26, 2005
A-3 6.810% 198,000 September 25, 2006 September 25, 2008
A-4 6.980% 156,000 June 25, 2008 December 26,2008
Total $600,000
Current Maturities (49,734)
Unamortized Discount (59)
Long-term Debt $550,207
========
The source of repayment is ITC. West Penn is collecting this non-bypassable
charge from its retail customers of electricity. The Servicer deposits
collections of the ITC monthly into a "General Subaccount" maintained by the
Trustee under the Indenture. Each quarter, such monies are used to make
principal and interest payments on the Bonds and pay fees, costs and charges
specified in the Indenture. The Trustee is required to make the first payment
on March 27, 2000. The Indenture also includes a "Reserve Subaccount" that is
maintained for the purpose of retaining any excess amount of ITC collections
and investment earnings not released to the Company. The Indenture also
provides for an "Overcollateralization Subaccount." The overcollateralization
for these securities will be funded over the life of the Series 1999-A Bonds
and is expected to reach 0.5% of the initial principal balance of this series
of transition bonds. Additionally, an amount equal to 0.5% of the initial
principal amount of the Bonds was deposited into the "Capital Subaccount"
under the Indenture on the date of issuance. If amounts available in the
"General Subaccount", "Reserve Subaccount", and the "Overcollateralization
Subaccount" are not sufficient on any payment date to make scheduled payments
specified in the Indenture, the Trustee will draw on amounts in the "Capital
Subaccount." On payment in full of the Bonds, any remaining amounts that
collateralize the Bonds will be released to the Company.
NOTE D: SIGNIFICANT AGREEMENTS AND RELATED PARTY TRANSACTIONS
Under the Servicing Agreement, West Penn is required to manage and administer
the ITP of the Company and to collect the ITC on behalf of the Company. The
Company will pay a maximum annual service fee of $1.25 million to West Penn.
For the period ended December 31, 1999, the Company recorded servicing fees of
$0.10 million.
Debt issuance costs of approximately $4.58 million were incurred and recorded
by the Company during 1999, including $0.53 million incurred by West Penn to
be reimbursed by the Company. The Company will reimburse West Penn for any
additional debt issuance costs it incurs for the transition bonds.
At December 31, 1999, the Balance Sheet includes a receivable from West Penn
of approximately $7.5 million for ITC collections. The Balance Sheet also
includes a payable to West Penn of approximately $0.63 million for servicing
fees and debt issuance costs.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Omitted pursuant to Instruction I of Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
Omitted pursuant to Instruction I of Form 10-K.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Omitted pursuant to Instruction I of Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Omitted pursuant to Instruction I of Form 10-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements--included in response to Item 8.
Report of Independent Accountants
Statement of Income and Member's Equity for the period May 26, 1999
(inception) to December 31, 1999
Statement of Cash Flows for the period May 26, 1999 (inception) to
December 31, 1999
Balance Sheet at December 31, 1999
2. Financial Statement Schedules.
None.
3. Exhibits.
See Exhibit Index which appears following the Signature page
to this report.
(b) Reports on Form 8-K:
The Company filed a Current Report on Form 8-K dated
November 12, 1999 relating to disclosure of the use of
Computational Materials by the underwriters in connection
with the offering of the Bonds.
The Company also filed a Current Report on Form 8-K dated
November 12, 1999 disclosing the opinion of Cravath, Swaine
& Moore relating to the legality of the Bonds.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
WEST PENN FUNDING LLC
-------------------------
(Registrant)
By /s/ Michael P. Morrell
-------------------------------
Michael P. Morrell, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
Title Date
By /s/ Michael P. Morrell
__________________________ President (Principal Executive March 27, 2000
Michael P. Morrell Officer)
By /s/ Keith L. Warchol Treasurer (Principal Financial March 27, 2000
__________________________ Officer and Principal Accounting
Keith L. Warchol Officer)
By /s/ Bruce M. Sedlock Director March 27, 2000
__________________________
Bruce M. Sedlock
By /s/ Terrence A. Burke Director March 27, 2000
__________________________
Terrence A. Burke
By /s/ Thomas C. Sheppard, Jr. Director March 27, 2000
__________________________
Thomas C. Sheppard, Jr.
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED
PURSUANT TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE
NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT.
No such annual report, proxy statement, form of proxy or other soliciting
material has been sent to security holders.
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INDEX TO EXHIBITS
The following Exhibits indicated by an asterisk preceding the Exhibit
number are filed herewith. The balance of the Exhibits have heretofore been
filed with the Commission and pursuant to Rule 12b-32 are incorporated herein
by reference.
Exhibits
Exhibit No. Description
3.1 Certificate of Formation of West Penn Funding LLC
(Exhibit 4.2 to Registration Statement No. 333-79619)
3.2 Limited Liability Company Agreement of West Penn Funding
LLC, dated May 26, 1999 (Exhibit 4.1.1 to Registration
Statement No. 333-79619)
*3.3 Assignment of Limited Liability Company Interest and
Amendment to Limited Liability Company Agreement of West
Penn Funding LLC, dated October 20, 1999
*3.4 Amended and Restated Limited Liability Company Agreement
of West Penn Funding LLC, dated November 3, 1999
*4.1 Indenture, dated as of November 16, 1999, between West
Penn Funding LLC and Bankers Trust Company
*4.2 Series Supplement, dated as of November 16, 1999,
between West Penn Funding LLC and Bankers Trust Company
4.3 Form of Transition Bonds (Exhibit 4.4 to Registration
Statement No. 333- 79619) *10.1 Intangible Transition
Property Transfer Agreement, dated November 16, 1999,
between West Penn Power Company and West Penn Funding
Corporation
*10.2 Intangible Transition Property Sale Agreement, dated
November 16, 1999, between West Penn Funding LLC and
West Penn Funding Corporation
*10.3 Intangible Transition Property Servicing Agreement,
dated November 16, 1999, between West Penn Funding LLC
and West Penn Power Company
*23 Consent of PricewaterhouseCoopers LLP
*27 Financial Data Schedule
*99 Monthly Servicer's Certificates
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EXHIBIT 3.3
ASSIGNMENT OF LIMITED LIABILITY COMPANY INTEREST
AND AMENDMENT TO
LIMITED LIABILITY COMPANY AGREEMENT
OF
WEST PENN FUNDING LLC
This Assignment of Limited Liability Company Interest and Amendment
to Limited Liability Company Agreement of West Penn Funding LLC, dated as of
October 20, 1999 (this "Assignment and Amendment Agreement"), is entered into
by and between Carol G. Russ, as the sole member of West Penn Funding LLC, and
West Penn Funding Corporation, a Delaware corporation.
W I T N E S S E T H :
WHEREAS, West Penn Funding LLC (the "Company") has been formed as a
limited liability company under the Delaware Limited Liability Company Act (6
Del.C. ss.18101, et seq.) (the "Act") pursuant to a Certificate of Formation
of the Company, as filed in the office of the Secretary of State of the State
of Delaware on May 26, 1999, and a Limited Liability Company Agreement of the
Company, dated as of May 26, 1999 (the "Agreement");
WHEREAS, Carol G. Russ is the sole member of the Company;
WHEREAS, Carol G. Russ desires to assign, transfer and convey all of
her limited liability company interest in the Company as a member of the
Company (the "Interest") to
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West Penn Funding Corporation, and Carol G. Russ desires to resign from the
Company as a member of the Company; WHEREAS, West Penn Funding Corporation
desires to purchase the Interest presently held by Carol G. Russ, and West
Penn Funding Corporation desires to be admitted to the Company as a substitute
member of the Company; and
WHEREAS, the undersigned, to accomplish the foregoing, desire to
amend the Agreement in the manner set forth herein.
NOW, THEREFORE, the undersigned, in consideration of the premises,
covenants and agreements contained herein, does hereby agree as follows:
1. Assignment. Notwithstanding any provision in the Agreement to the
contrary, for value received, the receipt and sufficiency of which are hereby
acknowledged, upon the execution of this Assignment and Amendment Agreement by
the parties hereto, Carol G. Russ does hereby assign, transfer and convey the
Interest to West Penn Funding Corporation.
2. Admission. Notwithstanding any provision in the Agreement to the
contrary, contemporaneously with the assignment described in paragraph 1 of
this Assignment and Amendment Agreement, West Penn Funding Corporation shall
be admitted to the Company as a substitute member of the Company.
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3. Resignation. Notwithstanding any provision in the Agreement to
the contrary, immediately following the admission of West Penn Funding
Corporation as a substitute member of the Company, Carol G. Russ shall and
does hereby resign from the Company as a member of the Company, and shall
thereupon cease to be a member of the Company, and shall thereupon cease to
have or exercise any right or power as a member of the Company.
4. Continuation of the Company. The parties hereto agree that the
assignment of the Interest, the admission of West Penn Funding Corporation as
a substitute member of the Company and the resignation of Carol G. Russ as a
member of the Company shall not dissolve the Company and that the business of
the Company shall continue.
5. Books and Records. The member of the Company shall take all
actions necessary under the Act and the Agreement, including causing the
amendment of the Agreement, to evidence the resignation of Carol G. Russ from
the Company as a member of the Company and the admission of West Penn Funding
Corporation to the Company as a member of the Company.
6. Future Cooperation. Each of the parties hereto agrees to
cooperate at all times from and after the date hereof with respect to all of
the matters described herein, and to execute such further assignments,
releases,
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assumptions, amendments of the Agreement, notifications and other documents as
may be reasonably requested for the purpose of giving effect to, or evidencing
or giving notice of, the transactions contemplated by this Assignment and
Amendment Agreement.
7. Contribution. West Penn Funding Corporation has paid $1 to Carol
G. Russ for the Interest.
8. Binding Effect. This Assignment and Amendment Agreement shall be
binding upon, and shall enure to the benefit of, the parties hereto and their
respective successors and assigns.
9. Execution in Counterparts. This Assignment and Amendment
Agreement may be executed in counterparts, each of which shall be deemed an
original, but all of which shall constitute one and the same instrument.
10. Agreement in Effect. Except as hereby amended, the Agreement
shall remain in full force and effect.
11. Governing Law. This Assignment and Amendment Agreement shall be
governed by, and interpreted in accordance with, the laws of the State of
Delaware, all rights and remedies being governed by such laws.
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IN WITNESS WHEREOF, the parties hereto have caused this Assignment
and Amendment Agreement to be duly executed as of the day and year first above
written.
--------------------------------
Carol G. Russ
WEST PENN FUNDING CORPORATION
By: ____________________________
Name:
Title:
21
EXHIBIT 3.4
EXECUTION COPY
AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
OF
WEST PENN FUNDING LLC
This Amended and Restated Limited Liability Company Agreement
(together with the schedules attached hereto, this "Agreement") of West Penn
Funding LLC (the "Company"), is entered into by WEST PENN FUNDING CORPORATION,
a Delaware corporation, as the sole equity member (the "Member"), and Mark A.
Ferrucci and Kim E. Lutthans, as the Special Members (as defined on Schedule A
hereto). Capitalized terms used and not otherwise defined herein have the
meanings set forth on Schedule A hereto.
The Member, by execution of this Agreement, (i) hereby continues the
Company as a limited liability company pursuant to and in accordance with the
Delaware Limited Liability Company Act (6 Del. C. ss. 18-101 et seq.), as
amended from time to time (the "Act"), and this Agreement, (ii) hereby amends
and restates in its entirety the Limited Liability Company Agreement of the
Company, dated as of May 26, 1999 (the "Initial LLC Agreement"), as amended by
the Assignment of Limited Liability Company Interest and Amendment to Limited
Liability Company Agreement dated as of October 20, 1999 (the "Assignment
Agreement"), and, together with Mark A. Ferrucci and Kim E. Lutthans, hereby
agrees as follows:
Section 1. Name.
The name of the limited liability company formed hereby is West Penn
Funding LLC.
Section 2. Principal Business Office.
The principal business office of the Company shall be located at
2325B-2 Renaissance Drive, Las Vegas, Nevada 89119 or such other location as
may hereafter be determined by the Member.
Section 3. Registered Office.
The address of the registered office of the Company in the State of
Delaware is c/o The Corporation Trust Company, Corporation Trust Center, 1209
Orange Street, in the City of Wilmington, County of New Castle, Delaware
19801.
Section 4. Registered Agent.
The name and address of the registered agent of the Company for
service of process on the Company in the State of Delaware is The Corporation
Trust Company, Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle, Delaware 19801.
Section 5. Members.
(a) The mailing address of the Member is set forth on Schedule B
attached hereto. The Member was admitted to the Company as a member of the
Company upon its execution of the Assignment Agreement heretofore.
(b) Subject to Section 9(j), the Member may act by written consent.
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(c) Upon the occurrence of any event that causes the Member to cease
to be a member of the Company (other than (i) upon an assignment by the Member
of all of its limited liability company interest in the Company and the
admission of the transferee pursuant to Sections 21 and 23, or (ii) the
resignation of the Member and the admission of an additional member of the
Company pursuant to Sections 22 and 23), each person acting as an Independent
Director pursuant to Section 10 shall, without any action of any Person and
simultaneously with the Member ceasing to be a member of the Company,
automatically be admitted to the Company as a Special Member and shall
continue the Company without dissolution. No Special Member may resign from
the Company or transfer its rights as Special Member unless (i) a successor
Special Member has been admitted to the Company as Special Member by executing
a counterpart to this Agreement, and (ii) such successor has also accepted its
appointment as Independent Director pursuant to Section 10; provided, however,
the Special Members shall automatically cease to be members of the Company
upon the admission to the Company of a substitute Member. Each Special Member
shall be a member of the Company that has no interest in the profits, losses
and capital of the Company and has no right to receive any distributions of
Company assets. Pursuant to Section 18-301 of the Act, a Special Member shall
not be required to make any capital contributions to the Company and shall not
receive a limited liability company interest in the Company. A Special Member,
in its capacity as Special Member, may not bind the Company. Except as
required by any mandatory provision of the Act, each Special Member, in its
capacity as Special Member, shall have no right to vote on, approve or
otherwise consent to any action by, or matter relating to, the Company,
including, without limitation, the merger, consolidation or conversion of the
Company. In order to implement the admission to the Company of each Special
Member, each person acting as an Independent Director pursuant to Section 10
shall execute a counterpart to this Agreement. Prior to its admission to the
Company as Special Member, each person acting as an Independent Director
pursuant to Section 10 shall not be a member of the Company.
Section 6. Certificates.
Howard L. Siegel, is hereby designated as an "authorized person"
within the meaning of the Act, and has executed, delivered and filed the
Certificate of Formation of the Company with the Secretary of State of the
State of Delaware. Upon the filing of the Certificate of Formation with the
Secretary of State of the State of Delaware, his powers as an "authorized
person" ceased, and Carol Russ, as the initial member under the Initial LLC
Agreement thereupon became the designated "authorized person" and after Carol
Russ's assignment of her membership interest in the Company to the Member
pursuant to the Assignment Agreement, the Member became and shall continue as
the designated "authorized person" within the meaning of the Act. The Member
or an Officer shall execute, deliver and file any other certificates (and any
amendments and/or restatements thereof) necessary for the Company to qualify
to do business in Nevada, New York and in any other jurisdiction in which the
Company may wish to conduct business.
The existence of the Company as a separate legal entity shall
continue until cancelation of the Certificate of Formation as provided in the
Act.
Section 7. Purposes. The purpose to be conducted or promoted by the
Company is to engage in the following activities:
(a)
(i) to acquire, own, hold, administer, service, or enter into
agreements for the servicing of, finance, manage, sell,
assign, pledge, collect amounts due on and otherwise deal
with the Intangible Transition Property and other
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<PAGE>
assets to be acquired pursuant to the Basic Documents and
any proceeds or rights associated therewith;
(ii) to issue, sell, authorize and deliver the Transition Bonds
and to enter into any agreement or document providing for
the authorization, issuance, sale and delivery of the
Transition Bonds;
(iii) to sell, exchange, pledge, encumber or otherwise dispose
of all or any part of the Intangible Transition Property
and its other assets and property and, in connection
therewith, to accept, collect, hold, sell, exchange or
otherwise dispose of evidences of indebtedness or other
property received pursuant thereto, including the
encumbrance of all of the Intangible Transition Property
and its other assets and property as collateral security
for the Transition Bonds;
(iv) to execute, deliver and perform the Basic Documents;
(v) to invest proceeds from the Intangible Transition Property
and its other assets and any capital and income of the
Company in accordance with the Basic Documents or as
otherwise determined by the Board and not inconsistent
with this Section 7 or the Basic Documents;
(vi) to acquire, own, hold, sell, transfer, service, convey,
safekeep, dispose of, pledge, assign, borrow money
against, finance, refinance or otherwise deal with,
publicly or privately and whether with unrelated third
parties or with affiliated entities; and
(vii) to engage in any lawful act or activity and to exercise
any powers permitted to limited liability companies
organized under the laws of the State of Delaware that are
related or incidental to and necessary, convenient or
advisable for the accomplishment of the above-mentioned
purposes (including the entering into of interest rate or
basis swap, cap, floor or collar agreements, currency
exchange agreements or similar hedging transactions and
referral, management, servicing and administration
agreements).
(b) The Company hereby authorizes and approves the issuance and
sale, from time to time, of the Transition Bonds and the registration of such
Transition Bonds under the Securities Act of 1933, as amended, and the filing
by Officers of the Company of any Registration Statement or other document as
the Officers may in their discretion deem necessary or advisable to accomplish
such registration. The Company, by or through the Member, or any Director or
Officer on behalf of the Company, may negotiate the terms of, enter into and
perform the Basic Documents (including negotiating and approving the price at
which the Transition Bonds are sold) and all documents, agreements,
certificates, or financing statements contemplated thereby or related thereto,
all without any further act, vote or approval of any other Person
notwithstanding any other provision of this Agreement, the Act or applicable
law, rule or regulation. The foregoing authorizations shall not be deemed a
restriction on the powers of the Member or any Director or Officer to enter
into other agreements on behalf of the Company.
(c) The Company hereby ratifies and approves all actions taken by
Carol G. Russ, in her prior capacities as sole member, principal and chief
executive officer, chief financial officer and chief accounting officer of the
Company, on behalf of the Company in connection with the
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<PAGE>
execution, delivery and filing with the Securities and Exchange Commission of
the Registration Statement on Form S-3 and Amendment No. 1 and Amendment No. 2
thereto.
(d) The Company hereby agrees that: (1) any Officer of the Company
acting in the State of Nevada be, and they hereby are, authorized for and on
behalf of the Company to designate that a bank account be established at PNC
Bank to act as depository for the funds of the Company for and during such
period as they may from time to time deem necessary or desirable in the
interests of the Company and to open or close out from time to time such
account so selected or reselected; (2) any Officer of the Company be, and they
hereby are, authorized and directed, in the name and on behalf of the Company,
to take any and all action that they may deem necessary or advisable in order
to establish such bank account from time to time for the efficient conduct of
the Company's business; (3) such bank account be used to initiate funds
transfers and that any Officer of the Company be, and they hereby are,
authorized to sign on such bank account any wire transfer documents necessary,
including those that will designate those Officers of the Company who may be
authorized to initiate wire transfers by phone from such bank account to West
Penn Power Company's bank account at PNC Bank and from such bank account to
West Penn Funding Corporation's bank account at PNC Bank, provided that the
Officer initiates said wire transfers in the State of Nevada; (4) any Officer
of the Company be, and they hereby are, authorized for and on behalf of the
Company to designate that a bank account be established at Nevada State Bank
to act as depository for the funds of the Company for and during such period
as they may from time to time deem necessary or desirable in the interests of
the Company and to open or close out from time to time such account so
selected or reselected; (5) any Officer of the Company be, and they hereby
are, authorized and directed, in the name and on behalf of the Company, to
take any and all action that they may deem necessary or advisable in order to
establish such account from time to time for the efficient conduct of the
Company's business; and (6) any Officer of the Company be, and they hereby
are, authorized to designate those Officers of the Company who may be
authorized from time to time to sign checks on such bank account.
Section 8. Powers.
Subject to Section 9(j), the Company, and the Board of Directors and
the Officers of the Company on behalf of the Company, (i) shall have and
exercise all powers necessary, convenient or incidental to accomplish its
purposes as set forth in Section 7 and (ii) shall have and exercise all of the
powers and rights conferred upon limited liability companies formed pursuant
to the Act.
Section 9. Management.
(a) Board of Directors. Subject to Section 9(j), the business and
affairs of the Company shall be managed by or under the direction of a Board
of one or more Directors designated by the Member. Subject to Section 10, the
Member may determine at any time in its sole and absolute discretion the
number of Directors to constitute the Board. The authorized number of
Directors may be increased or decreased by the Member at any time in its sole
and absolute discretion, upon notice to all Directors, and subject in all
cases to Section 10. The initial number of Directors shall be five, two of
which shall be Independent Directors pursuant to Section 10. Each Director
elected, designated or appointed by the Member shall hold office until a
successor is elected and qualified or until such Director's earlier death,
resignation, expulsion or removal. Each Director shall execute and deliver the
Management Agreement. Directors need not be a Member. The initial Directors
designated by the Member are listed on Schedule D hereto.
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(b) Powers. Subject to Section 9(j), the Board of Directors shall
have the power to do any and all acts necessary, convenient or incidental to
or for the furtherance of the purposes described herein, including all powers,
statutory or otherwise. Subject to Section 7, the Board of Directors has the
authority to bind the Company.
(c) Meeting of the Board of Directors. The Board of Directors of the
Company may hold meetings, both regular and special, within or outside the
State of Delaware. Regular meetings of the Board may be held without notice at
such time and at such place as shall from time to time be determined by the
Board. Special meetings of the Board may be called by the President on not
less than one day's notice to each Director by telephone, facsimile, mail,
telegram or any other means of communication, and special meetings shall be
called by the President or Secretary in like manner and with like notice upon
the written request of any one or more of the Directors.
(d) Quorum: Acts of the Board. At all meetings of the Board, a
majority of the Directors shall constitute a quorum for the transaction of
business and, except as otherwise provided in any other provision of this
Agreement, the act of a majority of the Directors present at any meeting at
which there is a quorum shall be the act of the Board. If a quorum shall not
be present at any meeting of the Board, the Directors present at such meeting
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present. Any action
required or permitted to be taken at any meeting of the Board or of any
committee thereof may be taken without a meeting if all members of the Board
or committee, as the case may be, consent thereto in writing, and the writing
or writings are filed with the minutes of proceedings of the Board or
committee, as the case may be.
(e) Electronic Communications. Members of the Board, or any
committee designated by the Board, may participate in meetings of the Board,
or any committee, by means of telephone conference or similar communications
equipment that allows all Persons participating in the meeting to hear each
other, and such participation in a meeting shall constitute presence in Person
at the meeting. If all the participants are participating by telephone
conference or similar communications equipment, the meeting shall be deemed to
be held at the principal place of business of the Company.
(f) Committees of Directors.
(i) The Board may, by resolution passed by a majority of the
whole Board, designate one or more committees, each
committee to consist of one or more of the Directors of
the Company. The Board may designate one or more Directors
as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the
committee.
(ii) In the absence or disqualification of a member of a
committee, the member or members thereof present at any
meeting and not disqualified from voting, whether or not
such members constitute a quorum, may unanimously appoint
another member of the Board to act at the meeting in the
place of any such absent or disqualified member.
(iii) Any such committee, to the extent provided in the
resolution of the Board, shall have and may exercise all
the powers and authority of the Board in the management of
the business and affairs of the Company. Such committee or
committees shall have such name or names as may be
determined from time to time by resolution adopted by the
Board. Each
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<PAGE>
committee shall keep regular minutes of its meetings and
report the same to the Board when required.
(g) Compensation of Directors; Expenses. The Board shall have the
authority to fix the compensation of Directors. The Directors may be paid
their expenses, if any, of attendance at meetings of the Board, which may be a
fixed sum for attendance at each meeting of the Board or a stated salary as
Director. No such payment shall preclude any Director from serving the Company
in any other capacity and receiving compensation therefor. Members of special
or standing committees may be allowed like compensation for attending
committee meetings.
(h) Removal of Directors. Unless otherwise restricted by law, any
Director or the entire Board of Directors may be removed or expelled, with or
without cause, at any time by the Member, and, subject to Section 10, any
vacancy caused by any such removal or expulsion may be filled by action of the
Member.
(i) Directors as Agents. To the extent of their powers set forth in
this Agreement and subject to Section 9(j), the Directors are agents of the
Company for the purpose of the Company's business, and the actions of the
Directors taken in accordance with such powers set forth in this Agreement
shall bind the Company. Notwithstanding the last sentence of Section 18-402 of
the Act, except as provided in this Agreement or in a resolution of the
Directors, a Director may not bind the Company.
(j) Limitations on the Company's Activities.
(i) This Section 9(j) is being adopted in order to comply with
certain provisions required in order to qualify the
Company as a "special purpose" entity.
(ii) The Member shall not, so long as any Obligation is
outstanding, amend, alter, change or repeal the definition
of "Independent Director" or Sections 7, 8, 9, 10, 16, 20,
21, 22, 23, 24, 25, 26 or 31 or Schedule A of this
Agreement without the unanimous written consent of the
Board (including all Independent Directors). Subject to
this Section 9(j), the Member reserves the right to amend,
alter, change or repeal any provisions contained in this
Agreement in accordance with Section 31.
(iii) Notwithstanding any other provision of this Agreement and
any provision of law that otherwise so empowers the
Company, the Member, the Board, any Officer or any other
Person, neither the Member nor the Board nor any Officer
nor any other Person shall be authorized or empowered, nor
shall they permit the Company, without the prior unanimous
written consent of the Member and the Board (including all
Independent Directors), to take any Material Action.
(iv) The Board and the Member shall cause the Company to do or
cause to be done all things necessary to preserve and keep
in full force and effect its existence, rights (charter
and statutory) and franchises; provided, however, that the
Company shall not be required to preserve any such right
or franchise if: (1) the Board shall determine that the
preservation thereof is no longer desirable for the
conduct of its business and that the loss thereof is not
disadvantageous in any material respect to the Company and
(2) the Rating Agency Condition is satisfied by all Rating
Agencies other than
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Moody's (and prior written notice shall be provided to
Moody's). The Board also shall cause the Company to:
(A) maintain its own separate books and records and bank
accounts;
(B) at all times hold itself out to the public and all other
Persons as a legal entity separate from the Member and any
other Person;
(C) have a Board of Directors separate from that of the Member
and any other Person;
(D) file its own tax returns, if any, as may be required under
applicable law, to the extent (1) not part of a
consolidated or combined group filing a consolidated or
combined return or returns or (2) not treated as a
division for tax purposes of another taxpayer, and pay any
taxes so required to be paid under applicable law;
(E) except as contemplated by the Basic Documents, not
commingle its assets with assets of any other Person;
(F) conduct its business in its own name and strictly comply
with all organizational formalities to maintain its
separate existence;
(G) maintain separate financial statements;
(H) pay its own liabilities only out of its own funds;
(I) maintain an arm's length relationship with its Affiliates
and the Member;
(J) pay the salaries of its own employees, if any;
(K) not hold out its credit or assets as being available to
satisfy the obligations of others;
(L) allocate fairly and reasonably any overhead for shared
office space;
(M) use separate stationery, invoices and checks;
(N) except as contemplated by the Basic Documents, not pledge
its assets for the benefit of any other Person;
(O) correct any known misunderstanding regarding its separate
identity;
(P) maintain adequate capital in light of its contemplated
business purpose, transactions and liabilities;
(Q) cause its Board of Directors to meet at least annually or
act pursuant to written consent and keep minutes of such
meetings and actions and observe all other Delaware
limited liability company formalities;
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(R) not acquire any securities of the Member; and
(S) cause the Directors, Officers, agents and other
representatives of the Company to act at all times with
respect to the Company consistently and in furtherance of
the foregoing and in the best interests of the Company.
Failure of the Company, or the Member or Board on
behalf of the Company, to comply with any of the foregoing
covenants or any other covenants contained in this
Agreement shall not affect the status of the Company as a
separate legal entity or the limited liability of the
Member or the Directors.
(v) So long as any Obligation is outstanding, the Board shall not
cause or permit the Company to:
(A) except as contemplated by the Basic Documents, guarantee
any obligation of any Person, including any Affiliate;
(B) engage, directly or indirectly, in any business other than
the actions required or permitted to be performed under
Section 7, the Basic Documents or this Section 9(j);
(C) incur, create or assume any indebtedness other than as
expressly permitted under the Basic Documents;
(D) make or permit to remain outstanding any loan or advance
to, or own or acquire any stock or securities of, any
Person, except that the Company may invest in those
investments permitted under the Basic Documents and may
make any advance required or expressly permitted to be
made pursuant to any provisions of the Basic Documents and
permit the same to remain outstanding in accordance with
such provisions;
(E) to the fullest extent permitted by law, engage in any
dissolution, liquidation, consolidation, merger, asset
sale or transfer of ownership interests other than such
activities as are expressly permitted pursuant to any
provision of the Basic Documents; or
(F) form, acquire or hold any subsidiary (whether corporate,
partnership, limited liability company or other).
Section 10. Independent Director.
As long as any Obligation is outstanding, the Member shall cause the
Company at all times to have at least two Independent Directors who will be
appointed by the Member. To the fullest extent permitted by law, including
Section 18-1101(c) of the Act, the Independent Directors shall consider only
the interests of the Company, including its respective creditors, in acting or
otherwise voting on the matters referred to in Section 9(j)(iii). No
resignation or removal of an Independent Director, and no appointment of a
successor Independent Director, shall be effective until such successor (i)
shall have accepted his or her appointment as an Independent Director by a
written instrument, which may be a counterpart signature page to the
Management Agreement, and (ii) shall have executed a counterpart to this
Agreement as
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required by Section 5(c). In the event of a vacancy in the position of
Independent Director, the Member shall, as soon as practicable, appoint a
successor Independent Director. All right, power and authority of the
Independent Directors shall be limited to the extent necessary to exercise
those rights and perform those duties specifically set forth in this
Agreement. Except as provided in the second sentence of this Section 10, in
exercising their rights and performing their duties under this Agreement, any
Independent Director shall have a fiduciary duty of loyalty and care similar
to that of a director of a business corporation organized under the General
Corporation Law of the State of Delaware. No Independent Director shall at any
time serve as trustee in bankruptcy for any Affiliate of the Company.
Section 11. Officers.
(a) Officers. The initial Officers of the Company shall be
designated by the Member. The additional or successor Officers of the Company
shall be chosen by the Board and shall consist of at least a President, a
Secretary and a Treasurer. The Board of Directors may also choose one or more
Vice Presidents, Assistant Secretaries and Assistant Treasurers. Any number of
offices may be held by the same person. The Board shall choose a President, a
Secretary and a Treasurer. The Board may appoint such other Officers and
agents as it shall deem necessary or advisable who shall hold their offices
for such terms and shall exercise such powers and perform such duties as shall
be determined from time to time by the Board. The salaries of all Officers and
agents of the Company shall be fixed by or in the manner prescribed by the
Board. The Officers of the Company shall hold office until their successors
are chosen and qualified. Any Officer may be removed at any time, with or
without cause, by the affirmative vote of a majority of the Board. Any vacancy
occurring in any office of the Company shall be filled by the Board. Upon the
effectiveness of this Agreement, the Officers of the Company designated by the
Member are listed on Schedule E hereto and any persons formerly appointed as
Officers of the Company shall automatically cease to be Officers of the
Company.
(b) President. The President shall be the chief executive officer of
the Company, shall preside at all meetings of the Board, shall be responsible
for the general and active management of the business of the Company and shall
see that all orders and resolutions of the Board are carried into effect. The
President or any other Officer authorized by the President or the Board shall
execute all bonds, mortgages and other contracts, except: (i) where required
or permitted by law or this Agreement to be otherwise signed and executed,
including Section 7(b); (ii) where signing and execution thereof shall be
expressly delegated by the Board to some other Officer or agent of the
Company, and (iii) as otherwise permitted in Section 11(c).
(c) Vice President. In the absence of the President or in the event
of the President's inability to act, the Vice President, if any (or in the
event there be more than one Vice President, the Vice Presidents in the order
designated by the Directors, or in the absence of any designation, then in the
order of their election), shall perform the duties of the President, and when
so acting, shall have all the powers of and be subject to all the restrictions
upon the President. The Vice Presidents, if any, shall perform such other
duties and have such other powers as the Board may from time to time
prescribe.
(d) Secretary and Assistant Secretary. The Secretary shall be
responsible for filing legal documents and maintaining records for the
Company. The Secretary shall attend all meetings of the Board and record all
the proceedings of the meetings of the Company and of the Board in a book to
be kept for that purpose and shall perform like duties for the standing
committees when required. The Secretary shall give, or shall cause to be
given, notice of all meetings of the Member, if any, and special meetings of
the Board, and shall perform such other duties as may be prescribed by the
Board or the President, under whose supervision the
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Secretary shall serve. The Assistant Secretary, or if there be more than one,
the Assistant Secretaries in the order determined by the Board (or if there be
no such determination, then in order of their election), shall, in the absence
of the Secretary or in the event of the Secretary's inability to act, perform
the duties and exercise the powers of the Secretary and shall perform such
other duties and have such other powers as the Board may from time to time
prescribe.
(e) Treasurer and Assistant Treasurer. The Treasurer shall have the
custody of the Company funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Company and
shall deposit all moneys and other valuable effects in the name and to the
credit of the Company in such depositories as may be designated by the Board.
The Treasurer shall disburse the funds of the Company as may be ordered by the
Board, taking proper vouchers for such disbursements, and shall render to the
President and to the Board, at its regular meetings or when the Board so
requires, an account of all of the Treasurer's transactions and of the
financial condition of the Company. The Assistant Treasurer, or if there shall
be more than one, the Assistant Treasurers in the order determined by the
Board (or if there be no such determination, then in the order of their
election), shall, in the absence of the Treasurer or in the event of the
Treasurer's inability to act, perform the duties and exercise the powers of
the Treasurer and shall perform such other duties and have such other powers
as the Board may from time to time prescribe.
(f) Officers as Agents. The Officers, to the extent of their powers
set forth in this Agreement or otherwise vested in them by action of the Board
not inconsistent with this Agreement, are agents of the Company for the
purpose of the Company's business and, subject to Section 9(j), the actions of
the Officers taken in accordance with such powers shall bind the Company.
(g) Duties of Board and Officers. Except to the extent otherwise
provided herein, each Director and Officer shall have a fiduciary duty of
loyalty and care similar to that of directors and officers of business
corporations organized under the General Corporation Law of the State of
Delaware.
Section 12. Limited Liability.
Except as otherwise expressly provided by the Act, the debts,
obligations and liabilities of the Company, whether arising in contract, tort
or otherwise, shall be the debts, obligations and liabilities solely of the
Company, and neither the Member nor the Special Members nor any Director shall
be obligated personally for any such debt, obligation or liability of the
Company solely by reason of being a Member, Special Member or Director of the
Company.
Section 13. Capital Contributions.
The Member has contributed to the Company property of an agreed
value as listed on Schedule B attached hereto. In accordance with Section
5(c), the Special Members shall not be required to make any capital
contributions to the Company.
Section 14. Additional Contributions.
The Member is not required to make any additional capital
contribution to the Company. However, the Member may make additional capital
contributions to the Company at any time upon the written consent of such
Member. To the extent that the Member makes an additional capital contribution
to the Company, the Member shall revise Schedule B of this Agreement. The
provisions of this Agreement, including this Section 14, are intended to
benefit the Member and the Special Members and, to the fullest extent
permitted by law, shall not be construed as
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conferring any benefit upon any creditor of the Company (and no such creditor
of the Company shall be a third-party beneficiary of this Agreement) and the
Member and the Special Members shall not have any duty or obligation to any
creditor of the Company to make any contribution to the Company or to issue
any call for capital pursuant to this Agreement.
Section 15. Allocation of Profits and Losses.
The Company's profits and losses shall be allocated to the Member.
Section 16. Distributions.
Distributions shall be made to the Member at the times and in the
aggregate amounts determined by the Board. Notwithstanding any provision to
the contrary contained in this Agreement, the Company shall not be required to
make a distribution to the Member on account of its interest in the Company if
such distribution would violate Section 18-607 of the Act or any other
applicable law or any Basic Document.
Section 17. Books and Records.
The Board shall keep or cause to be kept complete and accurate books
of account and records with respect to the Company's business. The books of
the Company shall at all times be maintained by the Board. The Member and its
duly authorized representatives shall have the right to examine the Company
books, records and documents during normal business hours. The Company, and
the Board on behalf of the Company, shall not have the right to keep
confidential from the Member any information that the Board would otherwise be
permitted to keep confidential from the Member pursuant to Section 18-305(c)
of the Act. The Company's books of account shall be kept using the method of
accounting determined by the Member. The Company's independent auditor, if
any, shall be an independent public accounting firm selected by the Member.
Section 18. Reports.
(a) Within 60 days after the end of each fiscal quarter, the Board
shall cause to be prepared an unaudited report setting forth as of the end of
such fiscal quarter:
(i) unless such quarter is the last fiscal quarter, a balance
sheet of the Company; and
(ii) unless such quarter is the last fiscal quarter, an income
statement of the Company for such fiscal quarter.
(b) The Board shall use diligent efforts to cause to be prepared and
mailed to the Member, within 90 days after the end of each fiscal year, an
audited or unaudited report setting forth as of the end of such fiscal year:
(i) a balance sheet of the Company;
(ii) an income statement of the Company for such fiscal year;
and
(iii) a statement of the Member's capital account.
(c) The Board shall, after the end of each fiscal year, use
reasonable efforts to cause the Company's independent accountants, if any, to
prepare and transmit to the Member as
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promptly as possible any such tax information as may be reasonably necessary
to enable the Member to prepare its federal, state and local income tax
returns relating to such fiscal year.
Section 19. Other Business.
The Member, the Special Members and any Affiliate of the Member or
the Special Members may engage in or possess an interest in other business
ventures (unconnected with the Company) of every kind and description,
independently or with others. The Company shall not have any rights in or to
such independent ventures or the income or profits therefrom by virtue of this
Agreement.
Section 20. Exculpation and Indemnification.
(a) Neither the Member nor the Special Members nor any Officer,
Director, employee or agent of the Company nor any employee, representative,
agent or Affiliate of the Member or the Special Members (collectively, the
"Covered Persons") shall be liable to the Company or any other Person who has
an interest in or claim against the Company for any loss, damage or claim
incurred by reason of any act or omission performed or omitted by such Covered
Person in good faith on behalf of the Company and in a manner reasonably
believed to be within the scope of the authority conferred on such Covered
Person by this Agreement, except that a Covered Person shall be liable for any
such loss, damage or claim incurred by reason of such Covered Person's gross
negligence or willful misconduct.
(b) To the fullest extent permitted by applicable law, a Covered
Person shall be entitled to indemnification from the Company for any loss,
damage or claim incurred by such Covered Person by reason of any act or
omission performed or omitted by such Covered Person in good faith on behalf
of the Company and in a manner reasonably believed to be within the scope of
the authority conferred on such Covered Person by this Agreement, except that
no Covered Person shall be entitled to be indemnified in respect of any loss,
damage or claim incurred by such Covered Person by reason of such Covered
Person's gross negligence or willful misconduct with respect to such acts or
omissions; provided, however, that any indemnity under this Section 20 by the
Company shall be provided out of and to the extent of Company assets only, and
the Member and the Special Members shall not have personal liability on
account thereof; and provided further, that so long as any Obligation is
outstanding, no indemnity payment from funds of the Company (as distinct from
funds from other sources, such as insurance) of any indemnity under this
Section 20 shall be payable from amounts allocable to any other Person
pursuant to the Basic Documents, and, so long as any Obligation is
outstanding, all such indemnity payments under this Section 20 shall be
subordinated to any amounts payable to any other Person under the Basic
Documents.
(c) To the fullest extent permitted by applicable law, expenses
(including legal fees) incurred by a Covered Person defending any claim,
demand, action, suit or proceeding shall, from time to time, be advanced by
the Company prior to the final disposition of such claim, demand, action, suit
or proceeding upon receipt by the Company of an undertaking by or on behalf of
the Covered Person to repay such amount if it shall be determined that the
Covered Person is not entitled to be indemnified as authorized in this Section
20; provided, however, that any such advance shall be subordinated to any
amounts payable to any other Person under the Basic Documents.
(d) A Covered Person shall be fully protected in relying in good
faith upon the records of the Company and upon such information, opinions,
reports or statements presented to the Company by any Person as to matters the
Covered Person reasonably believes are within such other Person's professional
or expert competence and who has been selected with
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reasonable care by or on behalf of the Company, including information,
opinions, reports or statements as to the value and amount of the assets,
liabilities, or any other facts pertinent to the existence and amount of
assets from which distributions to the Member might properly be paid.
(e) To the extent that, at law or in equity, a Covered Person has
duties (including fiduciary duties) and liabilities relating thereto to the
Company or to any other Covered Person, a Covered Person acting under this
Agreement shall not be liable to the Company or to any other Covered Person
for its good faith reliance on the provisions of this Agreement or any
approval or authorization granted by the Company or any other Covered Person.
The provisions of this Agreement, to the extent that they restrict the duties
and liabilities of a Covered Person otherwise existing at law or in equity,
are agreed by the Member and the Special Members to replace such other duties
and liabilities of such Covered Person.
(f) The foregoing provisions of this Section 20 shall survive any
termination of this Agreement.
Section 21. Assignments.
Subject to Section 23, the Member may assign in whole or in part its
limited liability company interest in the Company. If the Member transfers all
of its limited liability company interest in the Company pursuant to this
Section 21, the transferee shall be admitted to the Company as a member of the
Company upon its execution of an instrument signifying its agreement to be
bound by the terms and conditions of this Agreement, which instrument may be a
counterpart signature page to this Agreement. Such admission shall be deemed
effective immediately prior to the transfer and, immediately following such
admission, the transferor Member shall cease to be a member of the Company.
Notwithstanding anything in this Agreement to the contrary, any successor to
the Member by merger or consolidation in compliance with the Basic Documents
shall, without further act, be the Member hereunder, and such merger or
consolidation shall not constitute an assignment for purposes of this
Agreement and the Company shall continue without dissolution.
Section 22. Resignation.
So long as any Obligation is outstanding, the Member may not resign,
except as permitted under the Basic Documents and if the Rating Agency
Condition is satisfied by all Rating Agencies other than Moody's (and prior
written notice of such action shall be provided to Moody's). If the Member is
permitted to resign pursuant to this Section 22, an additional member of the
Company shall be admitted to the Company, subject to Section 23, upon its
execution of an instrument signifying its agreement to be bound by the terms
and conditions of this Agreement, which instrument may be a counterpart
signature page to this Agreement. Such admission shall be deemed effective
immediately prior to the resignation and, immediately following such
admission, the resigning Member shall cease to be a member of the Company.
Section 23. Admission of Additional Members.
One or more additional members of the Company may be admitted to the
Company with the written consent of the Member; provided, however, that,
notwithstanding the foregoing, so long as any Obligation remains outstanding,
no additional Member may be admitted to the Company unless the Rating Agency
Condition is satisfied by all Rating Agencies other than Moody's (and prior
written notice of such action shall be provided to Moody's).
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Section 24. Dissolution.
(a) Subject to Section 9(j), the Company shall be dissolved, and its
affairs shall be wound up upon the first to occur of the following: (i) the
termination of the legal existence of the last remaining member of the Company
or the occurrence of any other event which terminates the continued membership
of the last remaining member of the Company in the Company unless the business
of the Company is continued in a manner permitted by this Agreement or the Act
or (ii) the entry of a decree of judicial dissolution under Section 18-802 of
the Act. Upon the occurrence of any event that causes the last remaining
member of the Company to cease to be a member of the Company, to the fullest
extent permitted by law, the personal representative of such member is hereby
authorized to, and shall, within 90 days after the occurrence of the event
that terminated the continued membership of such member in the Company, agree
in writing (i) to continue the Company and (ii) to the admission of the
personal representative or its nominee or designee, as the case may be, as a
substitute member of the Company, effective as of the occurrence of the event
that terminated the continued membership of the last remaining member of the
Company in the Company.
(b) Notwithstanding any other provision of this Agreement, the
Bankruptcy of the Member or a Special Member shall not cause the Member or
Special Member, respectively, to cease to be a member of the Company and upon
the occurrence of such an event, the business of the Company shall continue
without dissolution.
(c) In the event of dissolution, the Company shall conduct only such
activities as are necessary to wind up its affairs (including the sale of the
assets of the Company in an orderly manner), and the assets of the Company
shall be applied in the manner, and in the order of priority, set forth in
Section 18-804 of the Act.
(d) The Company shall terminate when (i) all of the assets of the
Company, after payment of or due provision for all debts, liabilities and
obligations of the Company shall have been distributed to the Member in the
manner provided for in this Agreement and (ii) the Certificate of Formation
shall have been canceled in the manner required by the Act.
Section 25. Waiver of Partition; Nature of Interest.
Except as otherwise expressly provided in this Agreement, to the
fullest extent permitted by law, each of the Member and the Special Members
hereby irrevocably waives any right or power that such Person might have to
cause the Company or any of its assets to be partitioned, to cause the
appointment of a receiver for all or any portion of the assets of the Company,
to compel any sale of all or any portion of the assets of the Company pursuant
to any applicable law or to file a complaint or to institute any proceeding at
law or in equity to cause the dissolution, liquidation, winding up or
termination of the Company. The Member shall not have any interest in any
specific assets of the Company, and the Member shall not have the status of a
creditor with respect to any distribution pursuant to Section 16 hereof. The
interest of the Member in the Company is personal property.
Section 26. Benefits of Agreement; No Third-Party Rights.
None of the provisions of this Agreement shall be for the benefit of
or enforceable by any creditor of the Company or by any creditor of the Member
or a Special Member. Nothing in this Agreement shall be deemed to create any
right in any Person (other than Covered Persons) not a party hereto, and this
Agreement shall not be construed in any respect to be a contract in whole or
in part for the benefit of any third Person (except as provided in Section
29).
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Section 27. Severability of Provisions.
Each provision of this Agreement shall be considered severable and
if for any reason any provision or provisions herein are determined to be
invalid, unenforceable or illegal under any existing or future law, such
invalidity, unenforceability or illegality shall not impair the operation of
or affect those portions of this Agreement which are valid, enforceable and
legal.
Section 28. Entire Agreement.
This Agreement constitutes the entire agreement of the parties with
respect to the subject matter hereof.
Section 29. Binding Agreement.
Notwithstanding any other provision of this Agreement, the Member
agrees that this Agreement, including, without limitation, Sections 7, 8, 9,
10, 20, 21, 22, 23, 24, 26, 29 and 31, constitutes a legal, valid and binding
agreement of the Member, and is enforceable against the Member by the
Independent Directors, in accordance with its terms. In addition, the
Independent Directors shall be intended beneficiaries of this Agreement.
Section 30. Governing Law.
This Agreement shall be governed by and construed under the laws of
the State of Delaware (without regard to conflict of laws principles), all
rights and remedies being governed by said laws.
Section 31. Amendments.
Subject to Section 9(j), this Agreement may be modified, altered,
supplemented or amended pursuant to a written agreement executed and delivered
by the Member. Notwithstanding anything to the contrary in this Agreement, so
long as any Obligation is outstanding, this Agreement may not be modified,
altered, supplemented or amended unless the Rating Agency Condition is
satisfied by all Rating Agencies other than Moody's (and prior written notice
of such action shall be provided to Moody's) except: (i) to cure any ambiguity
or (ii) to convert or supplement any provision in a manner consistent with the
intent of this Agreement and the other Basic Documents.
Section 32. Counterparts.
This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original of this Agreement and all of which
together shall constitute one and the same instrument.
Section 33. Notices.
Any notices required to be delivered hereunder shall be in writing
and personally delivered, mailed or sent by telecopy, electronic mail or other
similar form of rapid transmission, and shall be deemed to have been duly
given upon receipt (a) in the case of the Company, to the Company at its
address in Section 2, (b) in the case of the Member, to the Member at its
address as listed on Schedule B attached hereto and (c) in the case of either
of the foregoing, at such other address as may be designated by written notice
to the other party.
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Section 34. Effectiveness.
Pursuant to Section 18-201 (d) of the Act, this Agreement shall be
effective as of November 3, 1999.
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IN WITNESS WHEREOF, the undersigned, intending to be legally bound
hereby, has duly executed this Amended and Restated Limited Liability Company
Agreement as of the 3rd day of November, 1999.
MEMBER:
WEST PENN FUNDING CORPORATION
By: ________________________________
Name:
Title:
SPECIAL MEMBERS:
____________________________________
Name: Mark A. Ferrucci
____________________________________
Name: Kim E. Lutthans
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SCHEDULE A
Definitions
A. Definitions
When used in this Agreement, the following terms not otherwise
defined herein have the following meanings:
"Act" has the meaning set forth in the preamble to this Agreement.
"Administrative Services Agreement" means the Service Agreement to
be dated as of November 16, 1999, between the Company and Allegheny Energy
Service Corporation, as administrative agent, as the same may be amended or
supplemented from time to time.
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly Controlling or Controlled by or under direct or
indirect common Control with such Person.
"Agreement" means this Amended and Restated Limited Liability
Company Agreement of the Company, together with the schedules attached hereto,
as amended, restated or supplemented or otherwise modified from time to time.
"Bankruptcy" means, with respect to any Person, if such Person (i)
makes an assignment for the benefit of creditors, (ii) files a voluntary
petition in bankruptcy, (iii) is adjudged a bankrupt or insolvent, or has
entered against it an order for relief, in any bankruptcy or insolvency
proceedings, (iv) files a petition or answer seeking for itself any
reorganization, arrangement, composition, readjustment, liquidation or similar
relief under any statute, law or regulation, (v) files an answer or other
pleading admitting or failing to contest the material allegations of a
petition filed against it in any proceeding of this nature, (vi) seeks,
consents to or acquiesces in the appointment of a trustee, receiver or
liquidator of the Person or of all or any substantial part of its properties,
or (vii) if 120 days after the commencement of any proceeding against the
Person seeking reorganization, arrangement, composition, readjustment,
liquidation or similar relief under any statute, law or regulation, if the
proceeding has not been dismissed, or if within 90 days after the appointment
without such Person's consent or acquiescence of a trustee, receiver or
liquidator of such Person or of all or any substantial part of its properties,
the appointment is not vacated or stayed, or within 90 days after the
expiration of any such stay, the appointment is not vacated. The foregoing
definition of "Bankruptcy" is intended to replace and shall supersede and
replace the definition of"Bankruptcy" set forth in Sections 18-101(1) and
18-304 of the Act.
"Basic Documents" means this Agreement, the Certificate of
Formation, the Management Agreement, the Sale Agreement, the Bill of Sale, the
Servicing Agreement, the Indenture (including any Series Supplement), the
Administrative Services Agreement, the Transition Bonds, the Underwriting
Agreement and all documents and certificates contemplated thereby or delivered
in connection therewith.
"Bill of Sale" means the Bill of Sale to be dated as of November 16,
1999, between the Company and the Seller relating to the sale of the
Intangible Transition Property from the Seller to the Company.
"Board" or "Board of Directors" means the Board of Directors of the
Company.
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"Bond Trustee" means Bankers Trust Company, a New York banking
corporation, as bond trustee under the Indenture, or any successors to the
foregoing.
"Certificate of Formation" means the Certificate of Formation of the
Company filed with the Secretary of State of the State of Delaware on May 26,
1999, as amended or amended and restated from time to time.
"Class" means, with respect to any Series, any one of the classes of
Transition Bonds of that Series.
"Company" means West Penn Funding LLC, a Delaware limited liability
company.
"Control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a Person,
whether through the ownership of voting securities or general partnership or
managing member interests, by contract or otherwise. "Controlling" and
"Controlled" shall have correlative meanings. Without limiting the generality
of the foregoing, a Person shall be deemed to Control any other Person in
which it owns, directly or indirectly, a majority of the ownership interests.
"Covered Persons" has the meaning set forth in Section 20(a).
"Customers" means each person that (i) was a customer of West Penn
located within West Penn's retail electric service territory on January 1,
1997 or that became a customer of electric services within such territory
after January 1, 1997, (ii) is still located within such territory, and (iii)
is in a Rate Schedule that has been assigned stranded cost responsibility.
"Directors" means the Persons elected to the Board of Directors from
time to time by the Member, including the Independent Directors, in their
capacity as managers of the Company. A Director is hereby designated as a
"manager" of the Company within the meaning of Section 18-101(10) of the Act.
"Indenture" means the indenture to be dated as of November 16, 1999,
between the Company and the Bond Trustee, as the same may be amended and
supplemented from time to time, including by any Series Supplement.
"Independent Director" means a natural person who, for the five-year
period prior to his or her appointment as Independent Director has not been,
and during the continuation of his or her service as Independent Director is
not: (i) an employee, director, stockholder, partner or officer of the Company
or any of its Affiliates (other than his or her service as an Independent
Director of the Company); (ii) a customer or supplier of the Company or any of
its Affiliates; or (iii) any member of the immediate family of a person
described in (i) or (ii).
"Intangible Transition Charges" means the amounts authorized by the
PUC to be imposed on all Customer bills with respect to the Intangible
Transition Property and collected, through a non-bypassable mechanism, by West
Penn or its successor or by any other entity which provides electric service
to Customers, to recover Qualified Transition Expenses pursuant to the
Qualified Rate Order.
"Intangible Transition Property" means the irrevocable right of West
Penn or its successor or assignee to collect Intangible Transition Charges
from Customers to recover the Qualified Transition Expenses described in the
Qualified Rate Order, including all right, title and interest of West Penn or
its successor or assignee in such order and in all revenues, collections,
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claims, payments, money or proceeds of or arising from Intangible Transition
Charges pursuant to such order, and all proceeds of any of the foregoing.
"Management Agreement" means the agreement of the Directors in the
form attached hereto as Schedule C. The Management Agreement shall be deemed
incorporated into, and a part of, this Agreement.
"Material Action" means to consolidate or merge the Company with or
into any Person, or sell all or substantially all of the assets of the
Company, or to institute proceedings to have the Company be adjudicated
bankrupt or insolvent, or consent to the institution of bankruptcy or
insolvency proceedings against the Company or file a petition seeking, or
consent to, reorganization or relief with respect to the Company under any
applicable federal or state law relating to bankruptcy, or consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or
other similar official) of the Company or a substantial part of its property,
or make any assignment for the benefit of creditors of the Company, or admit
in writing the Company's inability to pay its debts generally as they become
due, or, to the fullest extent permitted by law, take action in furtherance of
any such action, or dissolve or liquidate the Company.
"Member" means West Penn Funding Corporation, as the member of the
Company, and includes any Person admitted as an additional member of the
Company or a substitute member of the Company pursuant to the provisions of
this Agreement, each in its capacity as a member of the Company; provided,
however, the term "Member" shall not include the Special Members.
"Obligations" shall mean the indebtedness, liabilities and
obligations of the Company under or in connection with this Agreement, the
other Basic Documents or any related document in effect as of any date of
determination.
"Officer" means an officer of the Company described in Section 11.
"Officer's Certificate" means a certificate signed by any Officer of
the Company who is authorized to act for the Company in matters relating to
the Company.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, limited liability partnership,
association, joint stock company, trust, unincorporated organization, or other
organization, whether or not a legal entity, and any governmental authority.
"PUC" means the Pennsylvania Public Utility Commission or any
successor.
"Qualified Rate Order" means the order of the PUC issued on November
19, 1998, as supplemented by a supplemental qualified rate order of the PUC
issued on August 12, 1999, adopted in accordance with the Statute, which,
among other things, creates the Intangible Transition Property and authorizes
the imposition and collection of the Intangible Transition Charges by West
Penn or its assignee.
"Qualified Transition Expenses" has the meaning assigned to that term
in the Qualified Rate Order.
"Rate Schedule" means each of the rate schedules into which
Customers are divided as of the date hereof, as such rate schedules may be
reconfigured from time to time.
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"Rating Agency" means any rating agency rating the Transition Bonds
of any Class or Series at the time of issuance thereof at the request of the
Company. 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 Company, notice of
which designation shall be given to the Bond Trustee under the Indenture and
the Servicer.
"Rating Agency Condition" means, with respect to any action, the
notification in writing by each Rating Agency to West Penn, the Seller, the
Servicer, the Bond Trustee and the Company that such action will not result in
a reduction or withdrawal of the then current rating by such Rating Agency of
any outstanding Series or Class of Transition Bonds issued by the Company.
"Sale Agreement" means the Intangible Transition Property Sale
Agreement to be dated as of November 16, 1999, between the Seller and the
Company, relating to the sale of Intangible Transition Property to the
Company, as the same may be amended or supplemented from time to time.
"Seller" means West Penn Funding Corporation and its successors in
interest to the extent permitted under the Sale Agreement.
"Series" means any series of Transition Bonds issued by the Company.
"Series Supplement" means an indenture supplemental to the Indenture
that authorizes a particular Series of Transition Bonds.
"Servicer" means West Penn, as the servicer of the Intangible
Transition Property, and each successor to West Penn (in the same capacity)
pursuant to Section 5.03 or 6.04 of the Servicing Agreement.
"Servicing Agreement" means the Servicing Agreement to be dated as
of November 16, 1999, between the Company and the Servicer, as the same may be
amended and supplemented from time to time.
"Special Member" means, upon such person's admission to the Company
as a member of the Company pursuant to Section 5(c), a person acting as
Independent Director, in such person's capacity as a member of the Company. A
Special Member shall only have the rights and duties expressly set forth in
this Agreement.
"Statute" means the Pennsylvania Electricity Generation Customer
Choice and Competition Act, Chapter 28 of Title 66 of the Pennsylvania
Consolidated Statutes, 66 Pa. C.S., ss.2801, et seq.
"Transition Bonds" means "transition bonds" (as defined in the
Statute) issued by the Company.
"Underwriting Agreement" means the Underwriting Agreement to be
dated as of November 3, 1999, among West Penn, the Seller, the Company and the
underwriters named therein.
"West Penn" means West Penn Power Company, a Pennsylvania
corporation.
42
<PAGE>
B. Rules of Construction
Definitions in this Agreement apply equally to both the singular and
plural forms of the defined terms. The words "include" and "including" shall
be deemed to be followed by the phrase "without limitation." The terms
"herein," "hereof" and "hereunder" and other words of similar import refer to
this Agreement as a whole and not to any particular Section, paragraph or
subdivision. The Section titles appear as a matter of convenience only and
shall not affect the interpretation of this Agreement. All Section, paragraph,
clause, Exhibit or Schedule references not attributed to a particular document
shall be references to such parts of this Agreement.
43
<PAGE>
SCHEDULE B
Member
Agreed Value of Membership
Name Mailing Address Capital Contribution Interest
- ---- --------------- -------------------- --------
West Penn 2325B Renaissance Dr.
Funding Las Vegas, Nevada 89119 $3,000,000 100%
Corporation
44
<PAGE>
SCHEDULE C
Management Agreement
November 3, 1999
Management Agreement --West Penn Funding LLC
For good and valuable consideration, each of the undersigned
Persons, who have been designated as directors of West Penn Funding LLC, a
Delaware limited liability company (the "Company"), in accordance with the
Amended and Restated Limited Liability Company Agreement of the Company, dated
as of November 3, 1999, as it may be amended or restated from time to time
(the "LLC Agreement"), hereby agree as follows:
1. Each of the undersigned accepts such Person's rights and
authority as a Director under the LLC Agreement and agrees to perform and
discharge such Person's duties and obligations as a Director under the LLC
Agreement, and further agrees that such rights, authorities, duties and
obligations under the LLC Agreement shall continue until such Person's
successor as a Director is designated or until such Person's resignation or
removal as a Director in accordance with the LLC Agreement. Each of the
undersigned agrees and acknowledges that it has been designated as a "manager"
of the Company within the meaning of the Delaware Limited Liability Company
Act.
2. So long as any Obligation is outstanding, each of the undersigned
agrees, solely in its capacity as a creditor of the Company on account of any
indemnification or other payment owing to the undersigned by the Company, not
to acquiesce, petition or otherwise invoke or cause the Company to invoke the
process of any court or governmental authority for the purpose of commencing
or sustaining a case against the Company 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
Company or any substantial part of the property of the Company, or ordering
the winding up or liquidation of the affairs of the Company.
3. THIS MANAGEMENT AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, AND ALL RIGHTS AND REMEDIES
SHALL BE GOVERNED BY SUCH LAWS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAWS.
Initially capitalized terms used and not otherwise defined herein
have the meanings set forth in the LLC Agreement.
This Management Agreement may be executed in any number of
counterparts, each of which shall be deemed an original of this Management
Agreement and all of which together shall constitute one and the same
instrument.
45
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Management
Agreement as of the day and year first above written.
_________________________________
Bruce M. Sedlock
_________________________________
Terence A. Burke
_________________________________
Thomas C. Sheppard, Jr.
_________________________________
Mark A. Ferrucci
_________________________________
Kim E. Lutthans
46
<PAGE>
SCHEDULE D
DIRECTORS
1. Bruce M. Sedlock
2. Terence A. Burke
3. Thomas C. Sheppard, Jr.
4. Mark A. Ferrucci
5. Kim E. Lutthans
47
<PAGE>
SCHEDULE E
OFFICERS TITLE
- -------- -----
Michael P. Morrell President
Anthony Wilson Vice President
Keith L. Warchol Treasurer
Eileen Beck Secretary
Robert W. Grier Vice President and Assistant
Treasurer
Kristine W. Eppes Vice President and Assistant
Secretary
Thomas C. Sheppard, Jr. Assistant Secretary
48
EXHIBIT 4.1
EXECUTION COPY
WEST PENN FUNDING LLC,
Issuer
and
BANKERS TRUST COMPANY,
Bond Trustee
------------------------------
INDENTURE
Dated as of November 16, 1999
------------------------------
Securing Transition Bonds
Issuable in Series
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.01. Definitions....................................................2
SECTION 1.02. Incorporation by Reference of Trust Indenture Act.............10
SECTION 1.03. Rules of Construction.........................................11
ARTICLE II
The Transition Bonds
SECTION 2.01. Form..........................................................11
SECTION 2.02. Execution, Authentication and Delivery........................12
SECTION 2.03. Denominations; Transition Bonds Issuable in Series............12
SECTION 2.04. Temporary Transition Bonds....................................13
SECTION 2.05. Registration; Registration of Transfer and Exchange...........13
SECTION 2.06. Mutilated, Destroyed, Lost or Stolen Transition Bonds.........14
SECTION 2.07. Persons Deemed Owner..........................................15
SECTION 2.08. Payment of Principal, Premium, if any, and Interest; Interest on
Overdue Principal and Premium, if any; Principal, Premium
and Interest Rights Preserved..........................15
SECTION 2.09. Cancelation...................................................16
SECTION 2.10. Authentication and Delivery of Transition Bonds...............17
SECTION 2.11. Book-Entry Transition Bonds...................................20
SECTION 2.12. Notices to Clearing Agency....................................21
SECTION 2.13. Definitive Transition Bonds...................................21
ARTICLE III
Covenants
SECTION 3.01. Payment of Principal, Premium, if any, 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.....................................................23
SECTION 3.05. Protection of Collateral......................................24
SECTION 3.06. Opinions as to Collateral.....................................24
SECTION 3.07. Performance of Obligations....................................24
SECTION 3.08. Negative Covenants............................................25
SECTION 3.09. Annual Statement as to Compliance.............................25
SECTION 3.10. Issuer May Consolidate, etc., Only on Certain Terms...........26
SECTION 3.11. Successor or Transferee.......................................26
SECTION 3.12. No Other Business.............................................27
SECTION 3.13. No Borrowing..................................................27
SECTION 3.14. Guarantees, Loans, Advances and Other Liabilities.............27
SECTION 3.15. Capital Expenditures..........................................27
SECTION 3.16. Restricted Payments...........................................27
SECTION 3.17. Notice of Events of Default...................................27
SECTION 3.18. Inspection....................................................27
SECTION 3.19. Adjusted Overcollateralization Schedules......................28
<PAGE>
SECTION 3.20. Transfer Agreement, Sale Agreement and Servicing Agreement
Covenants..............................................28
SECTION 3.21. Taxes.........................................................30
SECTION 3.22. Separate Entity...............................................30
ARTICLE IV
Satisfaction and Discharge; Defeasance
SECTION 4.01. Satisfaction and Discharge of Indenture; Defeasance...........30
SECTION 4.02. Conditions to Defeasance......................................31
SECTION 4.03. Application of Trust Money....................................32
SECTION 4.04. Repayment of Moneys Held by Paying Agent......................32
ARTICLE V
Remedies
SECTION 5.01. Events of Default.............................................33
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment............34
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement by Bond
Trustee................................................34
SECTION 5.04. Remedies; Priorities..........................................36
SECTION 5.05. Optional Preservation of the Collateral.......................37
SECTION 5.06. Limitation of Proceedings.....................................37
SECTION 5.07. Unconditional Rights of Transition Bondholders To Receive
Principal, Premium, if any, and Interest...............38
SECTION 5.08. Restoration of Rights and Remedies............................38
SECTION 5.09. Rights and Remedies Cumulative................................38
SECTION 5.10. Delay or Omission Not a Waiver................................38
SECTION 5.11. Control by Transition Bondholders.............................38
SECTION 5.12. Waiver of Past Defaults.......................................39
SECTION 5.13. Undertaking for Costs.........................................39
SECTION 5.14. Waiver of Stay or Extension Laws..............................39
SECTION 5.15. Action on Transition Bonds....................................40
ARTICLE VI
The Bond Trustee
SECTION 6.01. Duties and Liabilities of Bond Trustee........................40
SECTION 6.02. Rights of Bond Trustee........................................41
SECTION 6.03. Individual Rights of Bond Trustee.............................41
SECTION 6.04. Bond Trustee's Disclaimer.....................................41
SECTION 6.05. Notice of Defaults............................................42
SECTION 6.06. Reports by Bond Trustee to Holders............................42
SECTION 6.07. Compensation and Indemnity....................................42
SECTION 6.08. Replacement of Bond Trustee...................................43
SECTION 6.09. Successor Bond Trustee by Merger..............................44
SECTION 6.10. Appointment of Co-Trustee or Separate Trustee.................44
SECTION 6.11. Eligibility; Disqualification.................................45
SECTION 6.12. Preferential Collection of Claims Against Issuer..............45
<PAGE>
ARTICLE VII
Transition Bondholders' Lists and Reports
SECTION 7.01. Issuer To Furnish Bond Trustee Names and Addresses of Transition
Bondholders............................................45
SECTION 7.02. Preservation of Information; Communications to Transition
Bondholders............................................46
SECTION 7.03. Reports by Issuer.............................................46
SECTION 7.04. Reports by Bond Trustee.......................................46
SECTION 7.05. Provision of Servicer Reports.................................46
ARTICLE VIII
Accounts, Disbursements and Releases
SECTION 8.01. Collection of Money...........................................47
SECTION 8.02. Collection Account............................................47
SECTION 8.03. Release of Collateral.........................................49
SECTION 8.04. Opinion of Counsel............................................50
SECTION 8.05. Reports by Independent Accountants............................50
ARTICLE IX
Supplemental Indentures
SECTION 9.01. Supplemental Indentures Without Consent of Transition
Bondholders............................................51
SECTION 9.02. Supplemental Indentures with Consent of Transition
Bondholders............................................52
SECTION 9.03. Execution of Supplemental Indentures..........................53
SECTION 9.04. Effect of Supplemental Indenture..............................53
SECTION 9.05. Conformity with Trust Indenture Act...........................54
SECTION 9.06. Reference in Transition Bonds to Supplemental Indentures......54
ARTICLE X
Redemption of Transition Bonds
SECTION 10.01. Optional Redemption by Issuer................................54
SECTION 10.02. Form of Redemption Notice....................................54
SECTION 10.03. Payment of Redemption Price..................................55
ARTICLE XI
Miscellaneous
SECTION 11.01. Compliance Certificates and Opinions, etc....................55
SECTION 11.02. Form of Documents Delivered to Bond Trustee..................56
SECTION 11.03. Acts of Transition Bondholders...............................56
SECTION 11.04. Notices, etc., to Bond Trustee, Issuer and Rating Agencies...57
SECTION 11.05. Notices to Transition Bondholders; Waiver....................57
SECTION 11.06. Alternate Payment and Notice Provisions......................58
SECTION 11.07. Conflict with Trust Indenture Act............................58
SECTION 11.08. Effect of Headings and Table of Contents.....................58
SECTION 11.09. Successors and Assigns.......................................58
SECTION 11.10. Separability.................................................58
SECTION 11.11. Benefits of Indenture........................................58
SECTION 11.12. Legal Holidays...............................................58
<PAGE>
SECTION 11.13. GOVERNING LAW................................................58
SECTION 11.14. Counterparts.................................................59
SECTION 11.15. Issuer Obligation............................................59
SECTION 11.16. No Petition..................................................59
Exhibit A DTC Agreement
<PAGE>
INDENTURE dated as of November 16, 1999, between WEST PENN
FUNDING LLC, a Delaware limited liability company (the
"Issuer"), and BANKERS TRUST COMPANY, a New York banking
corporation, as trustee (the "Bond Trustee").
The Issuer has duly authorized the execution and delivery of this
Indenture to provide for one or more Series of Transition Bonds, issuable as
provided in this Indenture. Each such Series of Transition Bonds will be
issued only under a separate Series Supplement to this Indenture duly executed
and delivered by the Issuer and the Bond Trustee. The Issuer is entering into
this Indenture, and the Bond Trustee is accepting the trusts created hereby,
each for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged and each intending to be legally bound hereby.
GRANTING CLAUSE
The Issuer hereby Grants to the Bond Trustee as trustee for the
benefit of the Holders of the Transition Bonds from time to time issued and
outstanding, all of the Issuer's right, title and interest in and to (a) the
Intangible Transition Property transferred by the Seller to the Issuer from
time to time pursuant to the Sale Agreement and all proceeds thereof, (b) the
Transfer Agreement, (c) all Bills of Sale delivered by the Transferor pursuant
to the Transfer Agreement, (d) the Sale Agreement, (e) all Bills of Sale
delivered by the Seller pursuant to the Sale Agreement, (f) the Servicing
Agreement, (g) the Collection Account and all amounts on deposit therein from
time to time, (h) any Swap Agreements to which the Issuer is a party, (i) all
other property of whatever kind owned from time to time by the Issuer
including all accounts, accounts receivable and chattel paper, (j) all present
and future claims, demands, causes and choses in action in respect of any or
all of the foregoing and (k) all payments on or under and all proceeds of
every kind and nature whatsoever in respect of any or all of the foregoing,
including all proceeds of the conversion, voluntary or involuntary, into cash
or other liquid property, all cash proceeds, accounts, accounts receivable,
general intangibles, notes, drafts, acceptances, chattel paper, checks,
deposit accounts, insurance proceeds, condemnation awards, rights to payment
of any and every kind, and other forms of obligations and receivables,
instruments and other property which at any time constitute all or part of or
are included in the proceeds of any of the foregoing (collectively, the
"Collateral"); provided that cash or other property distributed to the Issuer
from the Collection Account in accordance with the provisions of this
Indenture will not be subject to the lien of this Indenture.
To have and to hold in trust to secure the payment of principal of
and premium, if any, and interest on, and any other amounts (including all
fees, expenses, counsel fees and other amounts due and owing to the Bond
Trustee) owing in respect of, the Transition Bonds equally and ratably without
prejudice, preference, priority or distinction, except as expressly provided
in this Indenture and to secure performance by the Issuer of all of the
Issuer's obligations under this Indenture with respect to the Transition
Bonds, all as provided in this Indenture.
The Bond Trustee, as trustee on behalf of the Holders of the
Transition Bonds, acknowledges such Grant, accepts the trusts hereunder in
accordance with the provisions hereof and agrees to perform its duties herein
required.
54
<PAGE>
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.01. Definitions. (a) Except as otherwise specified herein
or as the context may otherwise require, each of the following terms has the
respective meaning set forth below for all purposes of this Indenture.
"Act" has the meaning specified in Section 11.03(a).
"Adjustment Date" means, with respect to any Series of Transition
Bonds, the date or dates specified as such in the Series Supplement therefor.
"Administration Agreement" has the meaning specified in the
Servicing Agreement.
"Administrative Agent" means Allegheny Energy Service Corporation,
as administrative agent, under the Administration Agreement, and its permitted
successors and assigns thereunder.
"Affiliate" means, with respect to any specified Person, any other
Person controlling or controlled by or under common control with such
specified Person. For the purposes of this definition, "control" when used
with respect to any specified Person means the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Authorized Initial Denominations" means, with respect to any Series
of Transition Bonds, $1,000 and integral multiples thereof, or such other
denominations as may be specified in the Series Supplement therefor.
"Authorized Officer" means any officer who is authorized to act for
the Issuer and who is identified on the list of Authorized Officers delivered
on the Closing Date by the Issuer to the Bond Trustee as of the date hereof
(as such list may be modified or supplemented from time to time thereafter).
"Basic Documents" means this Indenture (including any Series
Supplement), the Certificate of Formation, the LLC Agreement, the Management
Agreement, the Transfer Agreement, the Sale Agreement, the Servicing
Agreement, the Bills of Sale, the Administration Agreement, the Underwriting
Agreement and all documents and certificates contemplated thereby or delivered
in connection therewith.
"Bills of Sale" means any bills of sale delivered by the Transferor
pursuant to the Transfer Agreement and any bills of sale delivered by the
Seller pursuant to the Sale Agreement.
"Bond Rate" means, with respect to any Series or Class, the rate at
which interest accrues on the principal balance of Transition Bonds of such
Series or Class, as specified in the Series Supplement therefor.
"Bond Trustee" means Bankers Trust Company, a New York banking
corporation, or any successor bond trustee under this Indenture, not in its
individual capacity but solely as bond trustee under this Indenture.
"Book-Entry Transition Bonds" means beneficial interests in the
Transition Bonds, ownership and transfers of which shall be made through book
entries by a Clearing Agency as described in Section 2.11.
55
<PAGE>
"Business Day" has the meaning specified in the Servicing Agreement.
"Calculated Overcollateralization Level" means, with respect to any
Series of Transition Bonds, the amount specified as such in the Series
Supplement therefor.
"Calculation Date" means, with respect to any Series of Transition
Bonds, such date or dates specified as such in the Series Supplement therefor.
"Capital Subaccount" has the meaning specified in Section 8.02(a).
"Certificate of Formation" means the certificate of formation of the
Issuer, which was filed with the Delaware Secretary of State on May 26, 1999.
"Class" means, with respect to any Series, any one of the classes of
Transition Bonds of that Series.
"Class Termination Date" means, with respect to any Class, the
termination date therefor, as specified in the Series Supplement therefor.
"Clearing Agency" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with
the Clearing Agency.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, and Treasury Regulations promulgated thereunder.
"Collateral" has the meaning specified in the granting clause of
this Indenture.
"Collection Account" has the meaning specified in Section 8.02(a).
"Collection Period" has the meaning specified in the Servicing
Agreement.
"Corporate Trust Office" means the principal office of the Bond
Trustee at which at any particular time its corporate trust business shall be
administered, which office at date of the execution of this Indenture is
located at Four Albany Street, 10th Floor, New York, NY 10006, Attention:
Corporate Trust and Agency Services, Structured Finance Group or at such other
address as the Bond Trustee may designate from time to time by notice to the
Transition Bondholders and the Issuer, or the principal corporate trust office
of any successor Bond Trustee (the address of which the successor Bond Trustee
will notify the Transition Bondholders and the Issuer).
"Covenant Defeasance Option" has the meaning specified in Section
4.01(b).
"Counterparty" means the counterparty with respect to any Swap
Agreement.
"Default" means any occurrence that is, or with notice or the lapse
of time or both would become, an Event of Default.
"Defeasance Subaccount" has the meaning specified in Section
8.02(a).
"Definitive Transition Bonds" has the meaning specified in Section
2.11.
"DTC Agreement" means the agreement between the Issuer, the Bond
Trustee and The Depository Trust Company, as the initial Clearing Agency,
dated as of the Closing Date,
56
<PAGE>
relating to the Transition Bonds, substantially in the form of Exhibit A
hereto, as the same may be amended and supplemented from time to time.
"Eligible Deposit Account" means either (a) a segregated account
with an Eligible Institution or (b) a segregated trust account with the
corporate trust department of a depository institution organized under the
laws of the United States of America or any State (or any domestic branch of a
foreign bank), having corporate trust powers and acting as trustee for funds
deposited in such account, so long as any of the securities of such depository
institution shall have a credit rating from each Rating Agency in one of its
generic rating categories which signifies investment grade.
"Eligible Guarantor Institution" means a firm or other entity
identified in Rule 17Ad-15 under the Exchange Act as "an eligible guarantor
institution," including (as such terms are defined therein) (i) a bank; (ii) a
broker, dealer, municipal securities broker or dealer or government securities
broker or dealer; (iii) a credit union; (iv) a national securities exchange,
registered securities association or clearing agency; or (v) a savings
association that is a participant in a securities transfer association.
"Eligible Institution" means (a) the corporate trust department of
the Bond Trustee or (b) a depository institution organized under the laws of
the United States of America or any State (or any domestic branch of a foreign
bank), which (i) has (A) a long-term unsecured debt rating of "AAA" by
Standard & Poor's and "Aa3" by Moody's and (B) a short-term rating of "A- 1+"
by Standard & Poor's and "P-1" by Moody's, or any other long-term, short-term
or certificate of deposit rating acceptable to the Rating Agencies and (ii)
whose deposits are insured by the FDIC.
"Eligible Investments" mean book-entry securities, negotiable
instruments or securities represented by instruments in bearer or registered
form which evidence:
(a)direct obligations of, or obligations fully and unconditionally
guaranteed as to timely payment by, the United States of America;
(b)demand deposits, time deposits, certificates of deposit or
bankers' acceptances of any Eligible Institution; provided, however, that
at the time of the investment or contractual commitment to invest therein
such Eligible Institution shall have the credit ratings set forth in
clause (i) of the Definition of Eligible Institution.
(c)commercial paper (other than commercial paper of the Seller or
the Servicer or any of their affiliates) having, at the time of the
investment or contractual commitment to invest therein, a rating from
each of the Rating Agencies in the highest rating category granted
thereby;
(d)investments in money market funds having a rating from each of
the Rating Agencies in the highest rating category granted thereby
(including funds for which the Bond Trustee or any of its Affiliates is
investment manager or advisor);
(e)repurchase obligations with respect to any security that is a
direct obligation of, or fully guaranteed by, the United States of
America or any agency or instrumentality thereof the obligations of which
are backed by the full faith and credit of the United States of America,
in either case entered into with an Eligible Institution; and
(f)any other investment permitted by each of the Rating Agencies;
in each case which mature no later than the Business Day prior to the next
Payment Date for that Series or Class.
"Event of Default" has the meaning specified in Section 5.01.
57
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Executive Officer" means, with respect to any corporation, the
Chief Executive Officer, Chief Operating Officer, Chief Financial Officer,
President, Executive Vice President, any Vice President, the Secretary or the
Treasurer of such corporation; and with respect to any partnership, any
general partner thereof.
"Expected Amortization Schedule" means, with respect to any Series
of Transition Bonds, the expected amortization schedule for principal thereof,
as specified in the Series Supplement therefor.
"Expected Final Payment Date" means, with respect to any Series or
Class of Transition Bonds, the expected final payment date therefor, as
specified in the Series Supplement therefor.
"FDIC" means the Federal Deposit Insurance Corporation or any
successor.
"Financing Issuance" means an issuance of a new Series of Transition
Bonds hereunder to provide funds to finance the purchase by the Issuer of
Intangible Transition Property.
"Fitch IBCA" has the meaning specified in the Servicing Agreement.
"General Subaccount" has the meaning specified in Section 8.02(a).
"Grant" means mortgage, pledge, bargain, sell, warrant, alienate,
remise, release, convey, assign, transfer, create, and grant a lien upon and a
security interest in and right of set-off against, deposit, set over and
confirm pursuant to this Indenture. A Grant of the Collateral or of any other
agreement or instrument shall include all rights, powers and options (but none
of the obligations) of the Granting party thereunder, including the immediate
and continuing right to claim for, collect, receive and give receipt for
principal, interest and other payments in respect of the Collateral and all
other moneys payable thereunder, to give and receive notices and other
communications, to make waivers or other agreements, to exercise all rights
and options, to bring Proceedings in the name of the Granting party or
otherwise and generally to do and receive anything that the Granting party is
or may be entitled to do or receive thereunder or with respect thereto.
"Holder" or "Transition Bondholder" means the Person in whose name a
Transition Bond is registered on the Transition Bond Register.
"Indemnity Amounts" means any amounts paid by the Transferor, the
Seller or the Servicer to the Bond Trustee, for itself or on behalf of the
Transition Bondholders, pursuant to Section 5.01(b), 5.0l(c), 5.01(d) and
5.01(e) of the Transfer Agreement, Section 5.01(b), Section 5.01(c) and
Section 5.01(d) of the Sale Agreement or Section 5.02(b) of the Servicing
Agreement or by the Issuer to the Bond Trustee pursuant to Section 6.07 of
this Indenture.
"Indenture" or "this Indenture" means this instrument as originally
executed and, as from time to time supplemented or amended by one or more
indentures supplemental hereto entered into pursuant to the applicable
provisions hereof, as so supplemented or amended, or both, and shall include
the forms and terms of the Transition Bonds established hereunder.
"Independent" means, when used with respect to any specified Person,
that the Person (a) is in fact independent of the Issuer, any other obligor
upon the Transition Bonds, the Transferor, the Seller and any Affiliate of any
of the foregoing Persons, (b) does not have any direct financial interest or
any material indirect financial interest in the Issuer, any such other
obligor, the Transferor, the Seller or any Affiliate of any of the foregoing
Persons and (c) is not connected with the Issuer, any such other obligor, the
Transferor, the Seller or any Affiliate of any
58
<PAGE>
of the foregoing Persons as an officer, employee, promoter, underwriter,
trustee, partner, director or person performing similar functions.
"Independent Certificate" means a certificate or opinion to be
delivered to the Bond Trustee under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 11.01, made
by an Independent appraiser or other expert appointed by an Issuer Order and
approved by the Bond Trustee in the exercise of reasonable care, and such
opinion or certificate shall state that the signer has read the definition of
"Independent" in this Indenture and that the signer is Independent within the
meaning thereof.
"Independent Directors" means the Persons acting as Independent
Directors of the Issuer pursuant to the LLC Agreement.
"Intangible Transition Charges Adjustment Process" means the process
by which Intangible Transition Charges are adjusted pursuant to the Servicing
Agreement and the Statute.
"Issuer" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor and, for purposes
of any provision contained herein and required by the TIA, each other obligor
on the Transition Bonds.
"Issuer Order" and "Issuer Request" means a written order or request
signed in the name of the Issuer by any one of its Authorized Officers and
delivered to the Bond Trustee.
"Legal Defeasance Option" has the meaning specified in Section
4.01(b).
"Lien" has the meaning specified in the Servicing Agreement.
"LLC Agreement" means the Amended and Restated Limited Liability
Company Agreement of the Issuer dated as of November 3, 1999, as amended and
supplemented from time to time.
"Management Agreement" has the meaning specified in the LLC
Agreement.
"Moody's" has the meaning specified in the Servicing Agreement.
"Officer's Certificate" means a certificate signed by any Authorized
Officer of the Issuer, under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.01, and delivered to
the Bond Trustee. Unless otherwise specified, any reference in this Indenture
to an Officer's Certificate shall be to an Officer's Certificate of any
Authorized Officer of the Issuer.
"Operating Expenses" means all fees, costs, expenses and indemnity
payments owed by the Issuer, including all amounts owed by the Issuer to the
Bond Trustee (including reasonable fees and expenses of agents and counsel)
and the Independent Directors, the Servicing Fee, the fees owed under the
Administration Agreement, and legal and accounting fees, costs and expenses of
the Issuer.
"Opinion of Counsel" means one or more written opinions of counsel
who may, except as otherwise expressly provided in this Indenture, be
employees of or counsel to the Issuer and who shall be reasonably satisfactory
to the Bond Trustee, and which opinion or opinions shall be addressed to the
Bond Trustee, as Bond Trustee, and shall comply with any applicable
requirements of Section 11.01, and shall be in a form reasonably satisfactory
to the Bond Trustee.
"Outstanding" means, as of the date of determination, all Transition
Bonds theretofore authenticated and delivered under this Indenture except:
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(i)Transition Bonds theretofore canceled by the Transition Bond
Registrar or delivered to the Transition Bond Registrar for cancelation;
(ii)Transition Bonds or portions thereof the payment for which money
in the necessary amount has been theretofore deposited with the Bond
Trustee or any Paying Agent in trust for the Holders of such Transition
Bonds; (provided, however, that if such Transition Bonds are to be
redeemed, notice of such redemption has been duly given pursuant to this
Indenture or provision therefor, satisfactory to the Bond Trustee, made);
and
(iii)Transition Bonds in exchange for or in lieu of other Transition
Bonds which have been authenticated and delivered pursuant to this
Indenture unless proof satisfactory to the Bond Trustee is presented that
any such Transition Bonds are held by a bona fide purchaser;
provided that in determining whether the Holders of the requisite Outstanding
Amount of the Transition Bonds or any Series or Class thereof have given any
request, demand, authorization, direction, notice, consent or waiver hereunder
or under any Basic Document, Transition Bonds owned by the Issuer, any other
obligor upon the Transition Bonds, the Transferor, the Seller or any Affiliate
of any of the foregoing Persons shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Bond Trustee shall be
protected in relying upon any such request, demand, authorization, direction,
notice, consent or waiver, only Transition Bonds that the Bond Trustee
actually knows to be so owned shall be so disregarded. Transition Bonds so
owned that have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the satisfaction of the Bond Trustee the pledgee's
right so to act with respect to such Transition Bonds and that the pledgee is
not the Issuer, any other obligor upon the Transition Bonds, the Transferor,
the Seller or any Affiliate of any of the foregoing Persons.
"Outstanding Amount" means the aggregate principal amount of all
Transition Bonds or, if the context requires, all Transition Bonds of a Series
or Class Outstanding at the date of determination.
"Overcollateralization" means, with respect to any Payment Date, an
amount that, if deposited to the Overcollateralization Subaccount, would cause
the balance in such subaccount to equal the Calculated Overcollateralization
Level for such Payment Date, without regard to investment earnings.
"Overcollateralization Amount" means, with respect to any Series of
Transition Bonds, the amount specified as such in the Series Supplement
therefor.
"Overcollateralization Subaccount" has the meaning specified in
Section 8.02(a).
"Paying Agent" means the Bond Trustee or any other Person that meets
the eligibility standards for the Bond Trustee specified in Section 6.11 and
is authorized by the Issuer to make the payments of principal of or premium,
if any, or interest on the Transition Bonds on behalf of the Issuer.
"Payment Date" means, with respect to any Series or Class, each date
or dates specified as Payment Dates for such Series or Class in the Series
Supplement therefor.
"Person" means any individual, corporation, estate, partnership,
joint venture, association, joint stock company, trust (including any
beneficiary thereof), business trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Predecessor Transition Bond" means, with respect to any particular
Transition Bond, every previous Transition Bond evidencing all or a portion of
the same debt as that evidenced by such particular Transition Bond; and, for
the purpose of this definition, any
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Transition Bond authenticated and delivered under Section 2.06 in lieu of a
mutilated, lost, destroyed or stolen Transition Bond shall be deemed to
evidence the same debt as the mutilated, lost, destroyed or stolen Transition
Bond.
"Proceeding" means any suit in equity, action at law or other
judicial or administrative proceeding.
"Projected Transition Bond Balance" means, as of any date, the sum
of the amounts provided for in the Expected Amortization Schedules for each
outstanding Series of Transition Bonds and such date.
"Rating Agency" means Moody's Investors Service Inc., Standard &
Poor's Rating Group and Fitch IBCA, Inc. If no such organization or successor
is any longer in existence, "Rating Agency" shall be a nationally recognized
statistical rating organization or other comparable Person designated by the
Issuer, notice of which designation shall be given to the Bond Trustee and the
Servicer.
"Rating Agency Condition" means, with respect to any action, the
notification in writing by each Rating Agency to the Transferor, the Seller,
the Servicer, the Bond Trustee and the Issuer that such action will not result
in a reduction or withdrawal of the then current rating by such Rating Agency
of any outstanding Series or Class of Transition Bonds.
"Record Date" means, with respect to any Payment Date for a Series,
the date set forth as such in the Series Supplement therefor.
"Redemption Date" means, with respect to any Series or Class, the
date for the redemption of the Transition Bonds of such Series or Class
pursuant to Section 10.01 or the Series Supplement for such Series or Class.
"Redemption Price" has the meaning specified in Section 10.01.
"Refunding Issuance" means issuance of a new Series of Transition
Bonds hereunder to pay the cost of refunding, through redemption or payment on
the Expected Final Payment Date for a Series or Class of Transition Bonds, all
or part of the Transition Bonds of such Series or Class to the extent
permitted by the terms thereof.
"Registered Holder" means, as of any date, the Person in whose name
a Transition Bond is registered on the Transition Bond Register on such date.
"Required Capital Amount" means, for each Outstanding Series of
Transition Bonds, the amount specified as such in the Series Supplement
therefor.
"Reserve Subaccount" has the meaning specified in Section 8.02(a).
"Responsible Officer" means, with respect to the Bond Trustee, any
officer within the Corporate Trust Office of the Bond Trustee, including any
Managing Director, Director, Vice President, Assistant Vice President,
Associate, or any other officer of the Bond Trustee customarily performing
functions similar to those performed by any of the above designated officers
and also, with respect to a particular matter, any other officer to whom such
matter is referred because of such officer's knowledge of and familiarity with
the particular subject.
"Retiring Bond Trustee" has the meaning specified in Section 6.08.
"Sale Agreement" means the Intangible Transition Property Sale
Agreement dated as of November 16, 1999, between the Issuer and the Seller, as
amended and supplemented from time to time.
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"Schedule Revision Date" means (i) the date on which a new Series of
Transition Bonds is issued or any outstanding Series of Transition Bonds is
redeemed or defeased, (ii) any Adjustment Date on which the Intangible
Transition Charges are changed or revised and (iii) any Payment Date on which
payments are not made in accordance with the Expected Amortization Schedule.
"Series" means any series of Transition Bonds issued and
authenticated pursuant to this Indenture.
"Series Issuance Date" means, with respect to any Series, the date
on which the Transition Bonds of such Series are to be originally issued in
accordance with Section 2.10 and the Series Supplement for such Series.
"Series Supplement" means an indenture supplemental to this
Indenture that authorizes a particular Series of Transition Bonds.
"Series Termination Date" means, with respect to any Series, the
termination date therefor, as specified in the Series Supplement for such
Series.
"Servicing Agreement" means the Servicing Agreement dated as of
November 16, 1999, between the Issuer and the Servicer, as amended and
supplemented from time to time.
"Servicing Fee" means, with respect to any Series of Transition
Bonds, the fee payable to the Servicer on each Payment Date for services
rendered, determined pursuant to Section 5.07 of the Servicing Agreement.
"Standard & Poor's" has the meaning specified in the Servicing
Agreement.
"State" means any one of the 50 states of the United States of
America or the District of Columbia.
"Successor Servicer" has the meaning specified in Section 3.20(h).
"Swap Agreement" means any ISDA Master Agreement, interest rate swap
agreement or agreement with respect to any hedge or similar transaction
entered into by the Issuer.
"Transfer Agreement" means the Intangible Transition Property
Transfer Agreement dated as of November 16, 1999, between the Transferor and
the Seller, as amended and supplemented from time to time.
"Transition Bond" means any of the transition bonds (as defined in
the Statute) issued and authenticated pursuant to this Indenture.
"Transition Bond Balance" means, as of any date, the aggregate
outstanding principal amount of all Series of Transition Bonds on such date.
"Transition Bond Owner" means, with respect to a Book-Entry
Transition Bond, the Person who is the beneficial owner of such Book-Entry
Transition Bond, as reflected on the books of the Clearing Agency, or on the
books of a Person maintaining an account with such Clearing Agency (directly
as a Clearing Agency Participant or as an indirect participant, in each case
in accordance with the rules of such Clearing Agency).
"Transition Bond Register" and "Transition Bond Registrar" have the
respective meanings specified in Section 2.05.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939
as in force on the date hereof, unless otherwise specifically provided.
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"UCC" has the meaning specified in the Servicing Agreement.
"Underwriting Agreement" means the Underwriting Agreement dated as
of November 3, 1999, among the Issuer, the Transferor, the Seller and the
underwriters named therein.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable at the issuer's option.
(b) Except as otherwise specified herein or as the context may
otherwise require, each of the following terms has the meaning set forth in
the Transfer Agreement for all purposes of this Indenture, and the definitions
of such terms are equally applicable both to the singular and plural forms of
such terms:
Term Section of Transfer Agreement
Initial Intangible Transition Property.................. Section 1.01(a)
Intangible Transition Charges........................... Section 1.01(a)
Intangible Transition Property.......................... Section 1.01(a)
ITC Collections......................................... Section 1.01(a)
PUC .................................................... Section 1.01(a)
Qualified Rate Order ................................... Section 1.01(a)
Seller ................................................. Section 1.01(a)
Servicer ............................................... Section 1.01(a)
Servicer Default ....................................... Section 1.01(a)
Statute ................................................ Section 1.01(a)
Subsequent Intangible Transition Property............... Section 1.01(a)
Transferor.............................................. Section 1.01(a)
Transferred Intangible Transition Property.............. Section 1.01(a)
SECTION 1.02. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. Each of the
following TIA terms used in this Indenture has the following meaning:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Transition Bonds.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Bond
Trustee.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by Commission rule
have the meaning assigned to them by such definitions.
SECTION 1.03. Rules of Construction. Unless the context otherwise
requires:
(i) a term has the meaning assigned to it;
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(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting
principles as in effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation;
(v) words in the singular include the plural and words in the plural
include the singular; and
(vi)the words "herein", "hereof", "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
ARTICLE II
The Transition Bonds
SECTION 2.01. Form. The Transition Bonds and the Bond Trustee's
certificate of authentication shall be in substantially the forms set forth in
Exhibit A to the applicable Series Supplement, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture or by the related Series Supplement and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may, consistently herewith, be determined by
the Authorized Officers of the Issuer executing such Transition Bonds, as
evidenced by their execution of such Transition Bonds. Any portion of the text
of any Transition Bond may be set forth on the reverse thereof, with an
appropriate reference thereto on the face of the Transition Bond. Each
Transition Bond shall be dated the date of its authentication.
The Transition Bonds shall be typewritten, printed, lithographed or
engraved or produced by any combination of these methods (with or without
steel engraved borders), all as determined by the Authorized Officers of the
Issuer executing such Transition Bonds, as evidenced by their execution of
such Transition Bonds.
Each Transition Bond shall bear upon its face the designation so
selected for the Series or Class to which it belongs. The terms of all
Transition Bonds of the same Series shall be the same, unless such Series is
comprised of one or more Classes, in which case the terms of all Transition
Bonds of the same Class shall be the same.
All Definitive Transition Bonds shall bear the legend set forth in
Exhibit A to the applicable Series Supplement.
SECTION 2.02. Execution, Authentication and Delivery. The Transition
Bonds shall be executed on behalf of the Issuer by an Authorized Officer of
the Issuer. The signature of any such Authorized Officer on the Transition
Bonds may be manual or facsimile.
Transition Bonds bearing the manual or facsimile signature of
individuals who were at any time Authorized Officers of the Issuer shall bind
the Issuer, notwithstanding that such individuals or any of them have ceased
to hold such offices prior to the authentication and delivery of such
Transition Bonds or did not hold such offices at the date of such Transition
Bonds.
At any time and from time to time after the execution and delivery
of this Indenture, the Issuer may deliver Transition Bonds executed on behalf
of the Issuer to the Bond Trustee pursuant to an Issuer Order for
authentication; and the Bond Trustee shall authenticate and deliver such
Transition Bond as in this Indenture provided and not otherwise.
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No Transition Bond shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose, unless there appears on
such Transition Bond a certificate of authentication substantially in the form
provided for herein executed by the Bond Trustee by the manual signature of
one of its authorized signatories, and such certificate upon any Transition
Bond shall be conclusive evidence, and the only evidence, that such Transition
Bond has been duly authenticated and delivered hereunder.
SECTION 2.03. Denominations; Transition Bonds Issuable in Series.
The Transition Bonds of each Series shall be issuable as registered Transition
Bonds in the Authorized Initial Denominations specified in the Series
Supplement therefor.
The Transition Bonds may, at the election of and as authorized by an
Authorized Officer of the Issuer, and set forth in a Series Supplement, be
issued in one or more Series (each comprised of one or more Classes), and
shall be designated generally as the "Transition Bonds" of the Issuer, with
such further particular designations added or incorporated in such title for
the Transition Bonds of any particular Series or Class as an Authorized
Officer of the Issuer may determine and be set forth in the Series Supplement
therefor.
Each Series of Transition Bonds shall be created by a Series
Supplement authorized by an Authorized Officer of the Issuer and establishing
the terms and provisions of such Series. The several Series and Classes
thereof may differ as between Series and Classes, in respect of any of the
following matters:
(i) designation of the Series and, if applicable, the Classes
thereof;
(ii) the aggregate principal amount of the Transition Bonds of the
Series and, if applicable, each Class thereof;
(iii) the Bond Rate of the Series and, if applicable, each Class
thereof or the formula, if any, used to calculate the applicable Bond
Rate or Bond Rates for the Series;
(iv) the Payment Dates for the Series;
(v) the Expected Final Payment Date of the Series, and, if
applicable, each Class thereof;
(vi) the Series Termination Date for the Series and, if applicable,
the Class Termination Dates for each Class thereof;
(vii) the Series Issuance Date for the Series;
(viii) the place or places for payments with respect to the Series;
(ix) the Authorized Initial Denominations for the Series;
(x) the provisions, if any, for redemption of the Series by the
Issuer;
(xi) the Expected Amortization Schedule for the Series;
(xii) the Overcollateralization Amount with respect to the Series and
the Calculated Overcollateralization Level for each Payment Date;
(xiii) the Required Capital Amount;
(xiv) the Calculation Dates and Adjustment Dates for the Series;
(xv) the credit enhancement applicable to the Series; and
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(xvi) any other terms of the Series or Class that are not
inconsistent with the provisions of this Indenture.
SECTION 2.04. Temporary Transition Bonds. Pending the preparation of
definitive Transition Bonds, or by agreement of the purchasers of all
Transition Bonds or, in the case of Transition Bonds held in a book-entry only
system by a Clearing Agency, the Issuer may execute, and upon receipt of an
Issuer Order the Bond Trustee shall authenticate and deliver, temporary
Transition Bonds which are printed, lithographed, typewritten, mimeographed or
otherwise produced, of the tenor of the definitive Transition Bonds in lieu of
which they are issued and with such variations not inconsistent with the terms
of this Indenture as the Authorized Officers of the Issuer executing such
Transition Bonds may determine, as evidenced by their execution of such
Transition Bonds.
If temporary Transition Bonds are issued, the Issuer will cause
definitive Transition Bonds to be prepared without unreasonable delay except
where temporary Transition Bonds are held by a Clearing Agency. After the
preparation of definitive Transition Bonds, the temporary Transition Bonds
shall be exchangeable for definitive Transition Bonds upon surrender of the
temporary Transition Bonds at the office or agency of the Issuer to be
maintained as provided in Section 3.02, without charge to the Holder. Upon
surrender for cancelation of any one or more temporary Transition Bonds, the
Issuer shall execute and the Bond Trustee shall authenticate and deliver in
exchange therefor a like initial principal amount of definitive Transition
Bonds in Authorized Initial Denominations. Until so exchanged, the temporary
Transition Bonds shall in all respects be entitled to the same benefits under
this Indenture as definitive Transition Bonds.
SECTION 2.05. Registration; Registration of Transfer and Exchange.
The Issuer shall cause to be kept a register (the "Transition Bond Register")
in which, subject to such reasonable regulations as it may prescribe, the
Issuer shall provide for the registration of Transition Bonds and the
registration of transfers of Transition Bonds. The Bond Trustee shall be
"Transition Bond Registrar" for the purpose of registering Transition Bonds
and transfers of Transition Bonds as herein provided. Upon any resignation of
any Transition Bond Registrar, the Issuer shall promptly appoint a successor
or, if it elects not to make such an appointment, assume the duties of
Transition Bond Registrar.
If a Person other than the Bond Trustee is appointed by the Issuer
as Transition Bond Registrar, the Issuer will give the Bond Trustee prompt
written notice of the appointment of such Transition Bond Registrar and of the
location, and any change in the location, of the Transition Bond Register, and
the Bond Trustee shall have the right to inspect the Transition Bond Register
at all reasonable times and to obtain copies thereof, and the Bond Trustee
shall have the right to rely upon a certificate executed on behalf of the
Transition Bond Registrar by an Authorized Officer thereof as to the names and
addresses of the Holders of the Transition Bonds and the principal amounts and
number of such Transition Bonds.
Upon surrender for registration of transfer of any Transition Bond
at the office or agency of the Issuer to be maintained as provided in Section
3.02, the Issuer shall execute, and the Bond Trustee shall authenticate and
the Transition Bondholder shall obtain from the Bond Trustee, in the name of
the designated transferee or transferees, one or more new Transition Bonds in
any Authorized Initial Denominations, of a like Series (and, if applicable,
Class) and aggregate initial principal amount.
At the option of the Holder, Transition Bonds may be exchanged for
other Transition Bonds of a like Series (and, if applicable, Class) and
aggregate initial principal amount in Authorized Initial Denominations, upon
surrender of the Transition Bonds to be exchanged at such office or agency.
Whenever any Transition Bonds are so surrendered for exchange, the Issuer
shall execute, and the Bond Trustee shall authenticate and the Transition
Bondholder shall
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obtain from the Bond Trustee, the Transition Bonds which the Transition
Bondholder making the exchange is entitled to receive.
All Transition Bonds issued upon any registration of transfer or
exchange of Transition Bonds shall be the valid obligations of the Issuer,
evidencing the same debt, and entitled to the same benefits under this
Indenture, as the Transition Bonds surrendered upon such registration of
transfer or exchange.
Every Transition Bond presented or surrendered for registration of
transfer or exchange shall be duly endorsed by, or be accompanied by a written
instrument of transfer in the form set forth in Exhibit A to the applicable
Series Supplement or such other form as is satisfactory to the Bond Trustee
duly executed by, the Holder thereof or such Holder's attorney duly authorized
in writing, with such signature guaranteed by an Eligible Guarantor
Institution in the form set forth in such Transition Bond.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Transition Bonds, but, other than in respect of
exchanges pursuant to Section 2.04 or 9.06 not involving any transfer, the
Issuer may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any registration of
transfer or exchange of Transition Bonds.
The preceding provisions of this Section notwithstanding, the Issuer
shall not be required to make, and the Transition Bond Registrar need not
register, transfers or exchanges of Transition Bonds selected for redemption
or transfers or exchanges of any Transition Bond for a period of 15 days
preceding the date on which final payment of principal is to be made with
respect to such Transition Bond.
SECTION 2.06. Mutilated, Destroyed, Lost or Stolen Transition Bonds.
If (i) any mutilated Transition Bond is surrendered to the Bond Trustee, or
the Bond Trustee receives evidence to its satisfaction of the destruction,
loss or theft of any Transition Bond, and (ii) there is delivered to the Bond
Trustee such security or indemnity as may be required by it to hold the Issuer
and the Bond Trustee harmless, then, in the absence of notice to the Issuer,
the Transition Bond Registrar or the Bond Trustee that such Transition Bond
has been acquired by a bona fide purchaser, the Issuer shall execute, and upon
the Issuer's request the Bond Trustee shall authenticate and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Transition Bond, a replacement Transition Bond of like Series (and, if
applicable, Class), tenor and initial principal amount in Authorized Initial
Denominations, bearing a number not contemporaneously outstanding; provided,
however, that if any such destroyed, lost or stolen Transition Bond, but not a
mutilated Transition Bond, shall have become or within seven days shall be due
and payable, or shall have been called for redemption, instead of issuing a
replacement Transition Bond, the Issuer may pay such destroyed, lost or stolen
Transition Bond when so due or payable or upon the Redemption Date without
surrender thereof. If, after the delivery of such replacement Transition Bond
or payment of a destroyed, lost or stolen Transition Bond pursuant to the
proviso to the preceding sentence, a bona fide purchaser of the original
Transition Bond in lieu of which such replacement Transition Bond was issued
presents for payment such original Transition Bond, the Issuer and the Bond
Trustee shall be entitled to recover such replacement Transition Bond (or such
payment) from the Person to whom it was delivered or any Person taking such
replacement Transition Bond from such Person to whom such replacement
Transition Bond was delivered or any assignee of such Person, except a bona
fide purchaser, and shall be entitled to recover upon the security or
indemnity provided therefor to the extent of any loss, damage, cost or expense
incurred by the Issuer or the Bond Trustee in connection therewith.
Upon the issuance of any replacement Transition Bond under this
Section, the Issuer may require the payment by the Holder of such Transition
Bond of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto and any other reasonable expenses
(including the fees and expenses of the Bond Trustee) connected therewith.
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Every replacement Transition Bond issued pursuant to this Section in
replacement of any mutilated, destroyed, lost or stolen Transition Bond shall
constitute an original additional contractual obligation of the Issuer,
whether or not the mutilated, destroyed, lost or stolen Transition Bond shall
be at any time enforceable by anyone, and shall be entitled to all the
benefits of this Indenture equally and proportionately with any and all other
Transition Bonds duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Transition
Bonds.
SECTION 2.07. Persons Deemed Owner. Prior to due presentment for
registration of transfer of any Transition Bond, the Issuer, the Bond Trustee
and any agent of the Issuer or the Bond Trustee may treat the Person in whose
name any Transition Bond is registered (as of the day of determination) as the
owner of such Transition Bond for the purpose of receiving payments of
principal of and premium, if any, and interest on such Transition Bond and for
all other purposes whatsoever, whether or not such Transition Bond be overdue,
and neither the Issuer, the Bond Trustee nor any agent of the Issuer or the
Bond Trustee shall be affected by notice to the contrary.
SECTION 2.08. Payment of Principal, Premium, if any, and Interest;
Interest on Overdue Principal and Premium, if any; Principal, Premium and
Interest Rights Preserved. (a) The Transition Bonds shall accrue interest as
provided in the form of Transition Bond attached to the Series Supplement for
such Transition Bonds, at the applicable Bond Rate specified therein, and such
interest shall be payable on each Payment Date as specified therein. Any
instalment of interest, principal or premium, if any, payable on any
Transition Bond which is punctually paid or duly provided for by the Issuer on
the applicable Payment Date shall be paid to the Person in whose name such
Transition Bond (or one or more Predecessor Transition Bonds) is registered on
the Record Date for such Payment Date, by check mailed first-class, postage
prepaid to such Person's address as it appears on the Transition Bond Register
on such Record Date or in such other manner as may be provided in the related
Series Supplement, except that with respect to Transition Bonds registered on
a Record Date in the name of the nominee of the Clearing Agency (initially,
such nominee to be Cede & Co.), payments will be made by wire transfer in
immediately available funds to the account designated by such nominee and
except for the final instalment of principal and premium, if any, payable with
respect to such Transition Bond on a Payment Date which shall be payable as
provided in clause (b) below. The funds represented by any such checks
returned undelivered shall be held in accordance with Section 3.03 hereof.
(b) The principal of each Transition Bond of each Series (and, if
applicable, Class) shall be payable in instalments on each Payment Date
specified in the Expected Amortization Schedule included in the form of
Transition Bond attached to the Series Supplement for such Transition Bonds,
but only to the extent that moneys are available for such payment pursuant to
Section 8.02. Failure to pay in accordance with such Expected Amortization
Schedule because moneys are not so available pursuant to Section 8.02 to make
such payments shall not constitute a Default or Event of Default under this
Indenture. Notwithstanding the foregoing, the entire unpaid principal amount
of the Transition Bonds of any Series or Class shall be due and payable, if
not previously paid (i) on the Series Termination Date (or, if applicable,
Class Termination Date) therefor, (ii) on the date on which the Transition
Bonds of all Series have been declared immediately due and payable in
accordance with Section 5.02 or (iii) on the Redemption Date, if any,
therefor. The Bond Trustee shall notify the Person in whose name a Transition
Bond is registered at the close of business on the Record Date second
preceding the Payment Date on which the Issuer expects that the final
instalment of principal of and premium, if any, and interest on such
Transition Bond will be paid. Such notice shall be mailed no later than five
days prior to such final Payment Date and shall specify that such final
instalment of principal and premium, if any, will be payable to the Person in
whose name a Transition Bond is registered at the close of business on the
Record Date immediately preceding such final Payment Date and only upon
presentation and surrender of such Transition Bond and shall specify the place
where such
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Transition Bond may be presented and surrendered for payment of such
instalment. Notices in connection with redemptions of Transition Bonds shall
be mailed to Transition Bondholders as provided in Section 10.03.
(c) If the Issuer defaults in a payment of interest on the
Transition Bonds of any Series, the Issuer shall pay defaulted interest (plus
interest on such defaulted interest at the applicable Bond Rate to the extent
lawful) in any lawful manner. The Issuer may pay such defaulted interest to
the Persons who are Transition Bondholders on a subsequent special record
date, which date shall be at least five Business Days prior to the payment
date. The Issuer shall fix or cause to be fixed any such special record date
and payment date, and, at least 15 days before any such special record date,
the Issuer shall mail to each affected Transition Bondholder a notice that
states the special record date, the payment date and the amount of defaulted
interest to be paid.
SECTION 2.09. Cancelation. All Transition Bonds surrendered for
payment, registration of transfer, exchange or redemption shall, if
surrendered to any Person other than the Bond Trustee, be delivered to the
Bond Trustee and shall be promptly canceled by the Bond Trustee. The Issuer
may at any time deliver to the Bond Trustee for cancelation any Transition
Bonds previously authenticated and delivered hereunder which the Issuer may
have acquired in any manner whatsoever, and all Transition Bonds so delivered
shall be promptly canceled by the Bond Trustee. No Transition Bonds shall be
authenticated in lieu of or in exchange for any Transition Bonds canceled as
provided in this Section, except as expressly permitted by this Indenture. All
canceled Transition Bonds may be held or disposed of by the Bond Trustee in
accordance with its standard retention or disposal policy as in effect at the
time unless the Issuer shall direct by an Issuer Order that they be destroyed
or returned to it; provided that such Issuer Order is timely and the
Transition Bonds have not been previously disposed of by the Bond Trustee.
SECTION 2.10. Authentication and Delivery of Transition Bonds. The
Issuer may issue Transition Bonds of a new Series from time to time as a
Financing Issuance or a Refunding Issuance.
Transition Bonds of a new Series may from time to time be executed
by the Issuer and delivered to the Bond Trustee for authentication and
thereupon the same shall be authenticated and delivered by the Bond Trustee
upon Issuer Request and upon delivery by the Issuer, at the Issuer's expense,
to the Bond Trustee of the following:
(1) Authentication Order. An Issuer Order authorizing and directing
the execution, authentication and delivery of the Transition Bonds by the
Bond Trustee and specifying the principal amount of Transition Bonds to
be authenticated.
(2) Authorizations. Either (i) a certificate of authentication or
other official document evidencing the due authorization, approval or
consent of any governmental body or bodies at the time having
jurisdiction, together with an Opinion of Counsel that the Bond Trustee
is entitled to rely on that the authorization, approval, or consent of no
other governmental body is required for the valid issuance,
authentication and delivery of such Transition Bonds, or (ii) an Opinion
of Counsel that no such authorization, approval, or consent of any
governmental body is required, except for, in the case of (i) and (ii),
such registrations as are required under the Blue Sky and securities laws
of any State.
(3) Authorizing Certificate. A certified resolution of the Issuer
authorizing the execution and delivery of the Series Supplement for the
Transition Bonds applied for and the execution, authentication and
delivery of such Transition Bonds.
(4) A Series Supplement for the Series of Transition Bonds applied
for, which shall set forth the provisions and form of the Transition
Bonds of such Series (and, if applicable, each Class thereof).
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(5) Certificates of the Issuer, the Transferor and the Seller. (a)
An Officer's Certificate from the Issuer, dated as of the Series Issuance
Date, stating: (i) that no Default has occurred and is continuing under
this Indenture and that the issuance of the Transition Bonds applied for
will not result in any Default; (ii) that the Issuer has appointed the
firm of independent certified public accountants as contemplated in
Section 8.05; (iii) that attached thereto are duly executed, true and
complete copies of the Transfer Agreement, the Sale Agreement and the
Servicing Agreement; (iv) that all filings with the PUC pursuant to the
Statute and all UCC financing statements with respect to the Collateral
which are required to be filed by the terms of the Transfer Agreement,
the Sale Agreement, the Servicing Agreement or this Indenture have been
filed as required; and (v) that all conditions precedent provided in the
Indenture relating to the authentication and delivery of the Transition
Bonds have been complied with.
(b) An Officer's Certificate from the Transferor, dated as of the
Series Issuance Date, to the effect that, in the case of the Intangible
Transition Property to be transferred to the Seller on such date immediately
prior to the conveyance thereof to the Seller pursuant to the Transfer
Agreement:
(i) the Transferor is the sole owner of such Intangible Transition
Property; such Intangible Transition Property has been validly
transferred and sold to the Seller free and clear of all Liens (other
than Liens created by the Issuer pursuant to this Indenture); the
Transferor has the corporate power and authority to own, sell and assign
such Intangible Transition Property to the Seller; and the Transferor has
duly authorized such sale and assignment to the Seller by all necessary
corporate action; and
(ii) the attached copy of the Qualified Rate Order creating such
Intangible Transition Property is true and correct and is in full force
and effect.
(c) An Officer's Certificate from the Seller, dated as of the Series
Issuance Date, to the effect that, in the case of the Intangible Transition
Property to be transferred to the Issuer on such date immediately prior to the
conveyance thereof to the Issuer pursuant to the Sale Agreement: the Seller is
the sole owner of such Intangible Transition Property; such Intangible
Transition Property has been validly transferred and sold to the Issuer free
and clear of all Liens (other than Liens created by the Issuer pursuant to
this Indenture); the Seller has the corporate power and authority to own, sell
and assign such Intangible Transition Property to the Issuer; and the Seller
has duly authorized such sale and assignment to the Issuer by all necessary
corporate action.
(6) Opinion of Counsel. An Opinion of Counsel, portions of which may
be delivered by counsel for the Issuer and portions of which may be delivered
by counsel for the Transferor, the Seller and the Servicer, dated as of the
Series Issuance Date, to the collective effect that:
(a) the Issuer has the power and authority to execute and deliver
the Series Supplement and this Indenture and to issue the Transition
Bonds applied for, each of the Series Supplement and this Indenture, and
the Transition Bonds applied for have been duly authorized and executed,
and the Issuer is duly organized and in good standing under the laws of
the jurisdiction of its organization;
(b) the Transition Bonds applied for, when authenticated in
accordance with the provisions of the Indenture and delivered, will
constitute valid and binding obligations of the Issuer entitled to the
benefits of the Indenture and the related Series Supplement;
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(c) the Indenture (including the related Series Supplement), the
Sale Agreement and the Servicing Agreement are valid and binding
agreements of the Issuer, enforceable in accordance with their respective
terms except as such enforceability may be subject to bankruptcy,
insolvency, reorganization and other similar laws affecting the rights of
creditors generally and general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at
law);
(d) the Transfer Agreement is a valid and binding agreement of the
Transferor, enforceable against the Transferor in accordance with its
terms except as such enforceability may be subject to bankruptcy,
insolvency, reorganization and other similar laws affecting the rights of
creditors generally and general principles of equity (regardless of
whether such enforcement is considered in a proceeding in equity or at
law);
(e) the Sale Agreement is a valid and binding agreement of the
Seller, enforceable against the Seller in accordance with its terms
except as such enforceability may be subject to bankruptcy, insolvency,
reorganization and other similar laws affecting the rights of creditors
generally and general principles of equity (regardless of whether such
enforcement is considered in a proceeding in equity or at law);
(f) the Servicing Agreement is a valid and binding agreement of the
Servicer, enforceable against the Servicer in accordance with its terms
except as such enforceability may be subject to bankruptcy, insolvency,
reorganization and other similar laws affecting the rights of creditors
generally and general principles of equity (regardless of whether such
enforcement is considered in a proceeding in equity or at law);
(g) all filings with the PUC pursuant to the Statute that are
necessary to transfer the Intangible Transition Property to the Seller
and subsequently from the Seller to the Issuer have been executed and
filed. Except for continuation filings with the PUC 12 years after the
dates of the Transfer Agreement and the Sale Agreement, all filings,
including filings with the PUC pursuant to the Statute, that are
necessary to fully preserve and protect the interests of the Seller and
the Issuer in the Transferred Intangible Transition Property have been
executed and filed.
(h)(I) to the extent that the provisions of Section 2812 of the
Statute apply to the grant of a security interest by the Issuer in the
Collateral pursuant to this Indenture, then upon the giving of value by
the Bond Trustee to the Issuer with respect to the Collateral, (A) this
Indenture creates in favor of the Bond Trustee a security interest in the
rights of the Issuer in the Collateral, (B) such security interest is
valid and enforceable against the Issuer and third parties (subject to
the rights of any third parties holding security interests in such
Collateral perfected in the manner described in Section 2812 of the
Statute), and has attached, (C) such security interest is perfected, and
(D) such perfected security interest is of first priority; and (II) to
the extent that the provisions of Section 2812 of the Statute do not
apply to the grant of a security interest by the Issuer in the Collateral
pursuant to this Indenture, then upon the giving of value by the Bond
Trustee to the Issuer with respect to the Collateral, (A) this Indenture
creates in favor of the Bond Trustee a security interest in the rights of
the Issuer in the Collateral, (B) such security interest is enforceable
against the Issuer and third parties with respect to such Collateral, (C)
such security interest is perfected, and (D) such perfected security
interest is of first priority;
(i) the Indenture has been duly qualified under the Trust Indenture
Act and either the Series Supplement for the Transition Bonds applied for
has been
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duly qualified under the Trust Indenture Act or no such qualification of
such Series Supplement is necessary;
(j) the 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;
(k) all instruments furnished to the Bond Trustee conform to the
requirements of this Indenture and constitute all the documents required
to be delivered hereunder for the Bond Trustee to authenticate and
deliver the Transition Bonds applied for, and all conditions precedent
provided for in this Indenture relating to the authentication and
delivery of the Transition Bonds have been complied with;
(l) either (A) the registration statement covering the Transition
Bonds is effective under the Securities Act of 1933 and, to the best of
such counsel's knowledge and information, no stop order suspending the
effectiveness of such registration statement has been issued under the
Securities Act of 1933 nor have proceedings therefor been instituted or
threatened by the Commission or (B) the Transition Bonds are exempt from
the registration requirements under the Securities Act of 1933;
(m) the Indenture (including the related Series Supplement) has been
duly authorized, executed and delivered by the Issuer; and
(n) the Transfer Agreement, the Sale Agreement and the Servicing
Agreement have been duly authorized, executed and delivered by the
Issuer, the Transferor, the Seller and the Servicer as applicable.
(7) Accountant's Certificate or Opinion. A certificate or opinion,
addressed to the Issuer and the Bond Trustee complying with the requirements
of Section 11.01 hereof, of a firm of Independent certified public accountants
of recognized national reputation to the effect that (a) such accountants are
Independent with respect to the Issuer within the meaning of the Indenture,
and are independent public accountants within the meaning of the standards of
The American Institute of Certified Public Accountants, and (b) with respect
to the Collateral, they have made such calculations as they deemed necessary
for the purpose and determined that, based on the assumptions used in
calculating the initial Intangible Transition Charges with respect to the
Transferred Intangible Transition Property or, if applicable, the most recent
revised Intangible Transition Charges with respect to the Transferred
Intangible Transition Property, and taking into account amounts on deposit in
the Reserve Subaccount, as of the Series Issuance Date for such Series (after
giving effect to the issuance of such Series and the application of the
proceeds therefrom) such Intangible Transition Charges are sufficient to (a)
pay Operating Expenses when incurred, (b) pay interest on each Series of
Transition Bonds at their respective Bond Rates when due, or, with respect to
Classes or Series for which a Swap Agreement is in effect and any payments due
thereunder from the applicable Counterparty are being received by the Issuer,
regular fixed payments due to the related Counterparties (not including any
breakage or termination payments), (c) pay principal of the Transition Bonds
of all Series in accordance with their respective Expected Amortization
Schedules, (d) replenish the Capital Subaccount up to the Required Capital
Amount as of each Payment Date and (e) fund the Calculated
Overcollateralization Level as of each Payment Date.
(8) Rating Agency Condition. The Bond Trustee shall receive written
notice reasonably satisfactory to it from each Rating Agency that the Rating
Agency Condition will be satisfied with respect to the issuance of such new
Series.
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(9) Bills of Sale. If the issuance of an additional Series of
Transition Bonds is a Financing Issuance, the Bill of Sale delivered to the
Issuer under the Sale Agreement and the Bill of Sale delivered to the Seller
under the Transfer Agreement, in each case with respect to the Intangible
Transition Property being purchased with the proceeds of such Financing
Issuance.
(10) Moneys for Refunding. If the issuance of a Series of Transition
Bonds is a Refunding Issuance, the amount of money necessary to pay the
outstanding principal balance of, and premium and interest on, the Transition
Bonds being refunded to either the Redemption Date for Transition Bonds being
refunded upon redemption, such money to be deposited into a separate account
with the Bond Trustee.
(11) Other Requirements. Such other documents, certificates,
agreements, instruments or opinions as the Bond Trustee may reasonably require.
SECTION 2.11. Book-Entry Transition Bonds. Unless otherwise
specified in the related Series Supplement, each Series of Transition Bonds,
upon original issuance, will be issued in the form of a typewritten Transition
Bond or Transition Bonds representing the Book-Entry Transition Bonds, to be
delivered to The Depository Trust Company, the initial Clearing Agency, by, or
on behalf of, the Issuer. Such Transition Bond shall initially be registered
on the Transition Bond Register in the name of Cede & Co., the nominee of the
initial Clearing Agency, and no Transition Bond Owner will receive a
definitive Transition Bond representing such Transition Bond Owner's interest
in such Transition Bond, except as provided in Section 2.13. Unless and until
definitive, fully registered Transition Bonds (the "Definitive Transition
Bonds") have been issued to Transition Bond Owners pursuant to Section 2.13:
(i)the provisions of this Section shall be in full force and effect;
(ii)the Transition Bond Registrar and the Bond Trustee shall be
entitled to deal with the Clearing Agency for all purposes of this
Indenture (including the payment of principal of and premium, if any, and
interest on the Transition Bonds and the giving of instructions or
directions hereunder) as the sole holder of the Transition Bonds, and
shall have no obligation to the Transition Bond Owners;
(iii)to the extent that the provisions of this Section conflict with
any other provisions of this Indenture, the provisions of this Section
shall control;
(iv)the rights of Transition Bond Owners shall be exercised only
through the Clearing Agency and shall be limited to those established by
law and agreements between such Transition Bond Owners and the Clearing
Agency or the Clearing Agency Participants. Pursuant to the DTC
Agreement, unless and until Definitive Transition Bonds are issued
pursuant to Section 2.13, the initial Clearing Agency will make book-
entry transfers among the Clearing Agency Participants and receive and
transmit payments of principal of and premium, if any, and interest on
the Transition Bonds to such Clearing Agency Participants; and
(v)whenever this Indenture requires or permits actions to be taken
based upon instructions or directions of Holders of Transition Bonds
evidencing a specified percentage of the Outstanding Amount of the
Transition Bonds or a Series or Class thereof, the Clearing Agency shall
be deemed to represent such percentage only to the extent that it has
received instructions to such effect from Transition Bond Owners or
Clearing Agency Participants owning or representing, respectively, such
required percentage of the beneficial interest in the Transition Bonds or
such Series or Class and has delivered such instructions to the Bond
Trustee.
SECTION 2.12. Notices to Clearing Agency. Whenever a notice or other
communication to the Transition Bondholders is required under this Indenture,
unless and until
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Definitive Transition Bonds shall have been issued to Transition Bond Owners
pursuant to Section 2.13, the Bond Trustee shall give all such notices and
communications specified herein to be given to Transition Bondholders to the
Clearing Agency, and shall have no obligation to the Transition Bond Owners.
SECTION 2.13. Definitive Transition Bonds. If (i) the Issuer advises
the Bond Trustee in writing that the Clearing Agency is no longer willing or
able to properly discharge its responsibilities as depository with respect to
any Series or Class of Transition Bonds and the Issuer is unable to locate a
qualified successor, (ii) the Issuer, at its option, advises the Bond Trustee
in writing that it elects to terminate the book-entry system through the
Clearing Agency with respect to any Series or Class of Transition Bonds or
(iii) after the occurrence of an Event of Default, Transition Bond Owners
representing beneficial interests aggregating at least a majority of the
Outstanding Amount of the Transition Bonds of all Series advise the Bond
Trustee through the Clearing Agency in writing that the continuation of a
book-entry system through the Clearing Agency is no longer in the best
interests of the Transition Bond Owners, then the Clearing Agency shall notify
all affected Transition Bond Owners and the Bond Trustee of the occurrence of
any such event and of the availability of Definitive Transition Bonds to
affected Transition Bond Owners requesting the same. Upon surrender to the
Bond Trustee of the typewritten Transition Bond or Transition Bonds
representing the Book-Entry Transition Bonds by the Clearing Agency,
accompanied by registration instructions, the Issuer shall execute and the
Bond Trustee shall authenticate the Definitive Transition Bonds in accordance
with the instructions of the Clearing Agency. None of the Issuer, the
Transition Bond Registrar or the Bond Trustee shall be liable for any delay in
delivery of such instructions and may conclusively rely on, and shall be
protected in relying on, such instructions. Upon the issuance of Definitive
Transition Bonds, the Bond Trustee shall recognize the Holders of the
Definitive Transition Bonds as Transition Bondholders.
ARTICLE III
Covenants
SECTION 3.01. Payment of Principal, Premium, if any, and Interest.
The Issuer will duly and punctually pay the principal of and premium, if any,
and interest on the Transition Bonds in accordance with the terms of the
Transition Bonds and this Indenture; provided that except on the Series
Termination Date, the Class Termination Date, or the Redemption Date for a
Series or Class of Transition Bonds or upon the acceleration of the Transition
Bonds following the occurrence of an Event of Default, the Issuer shall only
be obligated to pay the principal of such Transition Bonds on each Payment
Date therefor to the extent moneys are available for such payment pursuant to
Section 8.02. Amounts properly withheld under the Code by any Person from a
payment to any Transition Bondholder of interest or principal or premium, if
any, shall be considered as having been paid by the Issuer to such Transition
Bondholder for all purposes of this Indenture.
SECTION 3.02. Maintenance of Office or Agency. The Issuer will
maintain in the Borough of Manhattan, the City of New York, an office or
agency where Transition Bonds may be surrendered for registration of transfer
or exchange, and where notices and demands to or upon the Issuer in respect of
the Transition Bonds and this Indenture may be served. The Issuer hereby
initially appoints the Bond Trustee to serve as its agent for the foregoing
purposes. The Issuer will give prompt written notice to the Bond Trustee of
the location, and of any change in the location, of any such office or agency.
If at any time the Issuer shall fail to maintain any such office or agency or
shall fail to furnish the Bond Trustee with the address thereof, such
surrenders, notices and demands may be made or served at the Corporate Trust
Office, and the Issuer hereby appoints the Bond Trustee as its agent to
receive all such surrenders, notices and demands.
SECTION 3.03. Money for Payments To Be Held in Trust. As provided in
Section 8.02(a), all payments of principal of, or premium and interest on, the
Transition Bonds that are to be made from amounts withdrawn from the
Collection Account pursuant to
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Section 8.02(d), (e) or (f) or Section 4.03 shall be made on behalf of the
Issuer by the Bond Trustee or by another Paying Agent, and no amounts so
withdrawn from the Collection Account for payments of Transition Bonds shall
be paid over to the Issuer except as provided in this Section and in Section
8.02.
The Issuer will cause each Paying Agent other than the Bond Trustee
to execute and deliver to the Bond Trustee an instrument in which such Paying
Agent shall agree with the Bond Trustee (and if the Bond Trustee acts as
Paying Agent, it hereby so agrees), subject to the provisions of this Section,
that such Paying Agent will:
(i)hold all sums held by it for the payment of principal of, or
premium or interest on, the Transition Bonds in trust for the benefit of
the Persons entitled thereto until such sums shall be paid to such
Persons or otherwise disposed of as herein provided and pay such sums to
such Persons as herein provided;
(ii)give the Bond Trustee notice of any Default by the Issuer (or
any other obligor upon the Transition Bonds) of which the Paying Agent
has actual knowledge in the making of any payment required to be made
with respect to the Transition Bonds;
(iii)at any time during the continuance of any such Default, upon
the written request of the Bond Trustee, forthwith pay to the Bond
Trustee all sums so held in trust by such Paying Agent;
(iv)immediately resign as a Paying Agent and forthwith pay to the
Bond Trustee all sums held by the Paying Agent in trust for the payment
of Transition Bonds if at any time the Paying Agent ceases to meet the
standards required to be met by a Paying Agent at the time of its
appointment; and
(v) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Transition Bonds of any
applicable withholding taxes imposed thereon and with respect to any
applicable reporting requirements in connection therewith.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by
Issuer Order direct any Paying Agent to pay to the Bond Trustee all sums held
in trust by such Paying Agent, such sums to be held by the Bond Trustee upon
the same trusts as those upon which the sums were held by such Paying Agent;
and upon such payment by any Paying Agent to the Bond Trustee, such Paying
Agent shall be released from all further liability with respect to such money.
Subject to applicable laws with respect to escheat of funds, any
money held by the Bond Trustee or any Paying Agent in trust for the payment of
any amount of principal of, premium on, if any, or interest on any Transition
Bond and remaining unclaimed for two years after such amount has become due
and payable shall be discharged from such trust and be paid to the Issuer on
Issuer Request; and the Holder of such Transition Bond shall thereafter, as an
unsecured general creditor, look only to the Issuer for payment thereof (but
only to the extent of the amounts so paid to the Issuer), and all liability of
the Bond Trustee or such Paying Agent with respect to such trust money shall
thereupon cease; provided, however, that the Bond Trustee or such Paying
Agent, before being required to make any such repayment, may at the expense of
the Issuer cause to be published once, in a newspaper published in the English
language, customarily published on each Business Day and of general
circulation in the City of New York, notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such publication, any unclaimed balance of such money then
remaining will be repaid to the Issuer. The Bond Trustee may also adopt and
employ, at the expense of the Issuer, any other reasonable means of
notification of such repayment (including mailing notice of such repayment to
Holders whose Transition Bonds have been called but have not been surrendered
for redemption or whose right to or interest in moneys due and payable but not
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claimed is determinable from the records of the Bond Trustee or of any Paying
Agent, at the last address of record for each such Holder).
SECTION 3.04. Existence. Subject to Section 3.10, the Issuer will
keep in full effect its existence, rights and franchises as a limited
liability company under the laws of the State of Delaware (unless it becomes,
or any successor Issuer hereunder is or becomes, organized under the laws of
any other State or of the United States of America, in which case the Issuer
will keep in full effect its existence, rights and franchises under the laws
of such other jurisdiction) and will obtain and preserve its qualification to
do business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of this Indenture, the
Transition Bonds, the Collateral and each other instrument or agreement
included therein.
SECTION 3.05. Protection of Collateral. The Issuer will from time to
time execute and deliver all such supplements and amendments hereto and all
such filings (including filings with the PUC pursuant to the Statute),
financing statements, continuation statements, instruments of further
assurance and other instruments, and will take such other action necessary or
advisable to:
(i)maintain and preserve the lien and security interest (and the
priority thereof) of this Indenture or carry out more effectively the
purposes hereof;
(ii)perfect, publish notice of or protect the validity of any Grant
made or to be made by this Indenture;
(iii)enforce any of the Collateral;
(iv)preserve and defend title to the Collateral and the rights of
the Bond Trustee and the Transition Bondholders in the Collateral against
the claims of all Persons and parties; or
(v)pay any and all taxes levied or assessed up on all or any part of
the Collateral.
The Issuer hereby designates the Bond Trustee its agent and attorney-in-fact
to execute any filing with the PUC, financing statement, continuation
statement or other instrument required by the Bond Trustee pursuant to this
Section, it being understood that the Bond Trustee shall have no such
obligation.
SECTION 3.06. Opinions as to Collateral. (a) On or before July 1st
in each calendar year, beginning at least 3 months after the issuance of the
first Series of the Transition Bonds while any Series is outstanding, the
Issuer shall furnish to the Bond Trustee an Opinion of Counsel either stating
that, in the opinion of such counsel, such action has been taken with respect
to the recording, filing, re-recording and refiling of this Indenture, any
indentures supplemental hereto and any other requisite documents and, with
respect to the execution and filing of any filings with the PUC pursuant to
the Statute, financing statements and continuation statements as is necessary
to maintain the lien and security interest, and the first priority thereof,
created by this Indenture and reciting the details of such action or stating
that in the opinion of such counsel no such action is necessary to maintain
such lien and security interest, and the first priority thereof. Such Opinion
of Counsel shall also describe the recording, filing, re-recording and
refiling of this Indenture, any indentures supplemental hereto and any other
requisite documents, and the execution and filing of any filings with the PUC,
financing statements and continuation statements that will, in the opinion of
such counsel, be required to maintain the lien and security interest of this
Indenture until July 1 in the following calendar year.
(b) Prior to the effectiveness of any amendment to the Transfer
Agreement, the Sale Agreement or the Servicing Agreement, the Issuer shall
furnish to the Bond Trustee an Opinion of Counsel either (A) stating that, in
the opinion of such counsel, all filings, including filings with the PUC
pursuant to the Statute, have been executed and filed that are necessary fully
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to preserve and protect the interest of the Issuer and the Bond Trustee in the
Transferred Intangible Transition Property and the proceeds thereof, and
reciting the details of such filings or referring to prior Opinions of Counsel
in which such details are given, or (B) stating that, in the opinion of such
counsel, no such action shall be necessary to preserve and protect such
interest.
SECTION 3.07. Performance of Obligations. (a) The Issuer (i) will
diligently pursue any and all actions to enforce its rights under each
instrument or agreement included in the Collateral and (ii) will not take any
action and will use its best efforts not to permit any action to be taken by
others that would release any Person from any of such Person's covenants or
obligations under any such instrument or agreement or that would result in the
amendment, hypothecation, subordination, termination or discharge of, or
impair the validity or effectiveness of, any such instrument or agreement,
except, in each case, as expressly provided in this Indenture, the Transfer
Agreement, the Sale Agreement or the Servicing Agreement or such other
instrument or agreement.
(b) The Issuer may contract with other Persons to assist it in
performing its duties under this Indenture, and any performance of such duties
by a Person identified to the Bond Trustee in an Officer's Certificate of the
Issuer shall be deemed to be action taken by the Issuer. Initially, the Issuer
has contracted with the Servicer and the Administrative Agent to assist the
Issuer in performing its duties under this Indenture.
(c) The Issuer will punctually perform and observe all of its
obligations and agreements contained in the Sale Agreement, the Servicing
Agreement and in all other instruments and agreements included in the
Collateral.
(d) Without derogating from the absolute nature of the assignment
granted to the Bond Trustee under this Indenture or the rights of the Bond
Trustee hereunder, but subject to Section 3.20, the Issuer agrees that it will
not, without the prior written consent of the Bond Trustee or the Holders of
at least a majority in Outstanding Amount of the Transition Bonds of all
Series, amend, modify, waive, supplement, terminate or surrender, or agree to
any amendment, modification, supplement, termination, waiver or surrender of,
the terms of any Collateral or the Basic Documents. If any such amendment,
modification, supplement or waiver shall be so consented to by the Bond
Trustee or such Holders, the Issuer agrees to execute and deliver, in its own
name and at its own expense, such agreements, instruments, consents and other
documents as shall be necessary or appropriate in the circumstances. The
Issuer agrees that no such amendment, modification, supplement or waiver shall
adversely affect the rights of the Holders of the Transition Bonds outstanding
at the time of any such amendment, modification, supplement or waiver.
SECTION 3.08. Negative Covenants. The Issuer shall not:
(i)except as expressly permitted by this Indenture or the Sale
Agreement or the Servicing Agreement, sell, transfer, exchange or
otherwise dispose of any of the Collateral, unless directed to do so by
the Bond Trustee in accordance with Article V;
(ii)claim any credit on, or make any deduction from the principal or
premium, if any, or interest payable in respect of, the Transition Bonds
(other than amounts properly withheld from such payments under the Code)
or assert any claim against any present or former Transition Bondholder
by reason of the payment of taxes levied or assessed upon the Issuer or
any part of the Collateral;
(iii)(A) permit the validity or effectiveness of this Indenture to
be impaired, or permit the lien of this Indenture to be amended,
hypothecated, subordinated, terminated or discharged, or permit any
Person to be released from any covenants or obligations with respect to
the Transition Bonds under this Indenture except as may be expressly
permitted hereby, (B) permit any lien, charge, excise, claim, security
interest, mortgage or other encumbrance (other than the lien and security
interest created by this Indenture) to be
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created on or extend to or otherwise arise upon or burden the Collateral
or any part thereof or any interest therein or the proceeds thereof or
(C) permit the lien of this Indenture not to constitute a continuing
valid first priority security interest in the Collateral.
SECTION 3.09. Annual Statement as to Compliance. The Issuer will
deliver to the Bond Trustee, within 120 days after the end of each fiscal year
of the Issuer (commencing with December 31, 1999 - the end of the fiscal year
1999), an Officer's Certificate stating, as to the Authorized Officer signing
such Officer's Certificate, that
(i)a review of the activities of the Issuer during such year (or
relevant portion thereof) and of performance under this Indenture has
been made under such Authorized Officer's supervision; and
(ii)to the best of such Authorized Officer's knowledge, based on
such review, the Issuer has complied with all conditions and covenants
under this Indenture throughout such calendar year (or relevant portion
thereof), or, if there has been a default in complying with any such
condition or covenant, describing each such default and the nature and
status thereof.
SECTION 3.10. Issuer May Consolidate, etc., Only on Certain Terms.
The Issuer shall not consolidate or merge with or into any other Person or
sell substantially all of its assets to any other Person, unless:
(i)the Person (if other than the Issuer) formed by or surviving such
consolidation or merger or to whom substantially all of such assets are
sold shall be a Person organized and existing under the laws of the
United States of America or any State and shall expressly assume by an
indenture supplemental hereto, executed and delivered to the Bond
Trustee, in form satisfactory to the Bond Trustee, the due and punctual
payment of the principal of and premium, if any, and interest on all
Transition Bonds and the performance or observance of every agreement and
covenant of this Indenture on the part of the Issuer to be performed or
observed, all as provided herein and in the applicable Series Supplement
or Series Supplements;
(ii)the Person (if other than the Issuer) formed by or surviving
such consolidation or merger or to whom substantially all of such assets
are sold shall expressly assume all obligations and succeed to all rights
of the Issuer under the Transfer Agreement, the Sale Agreement and the
Servicing Agreement pursuant to an assignment and assumption agreement
executed and delivered to the Bond Trustee, in form satisfactory to the
Bond Trustee;
(iii)immediately after giving effect to such consolidation or merger
or sale, no Default or Event of Default shall have occurred and be
continuing;
(iv)the Rating Agency Condition shall have been satisfied with
respect to such consolidation or merger or sale by each Rating Agency
[except Moody's (and the Issuer shall have furnished Moody's with prior
written notice of such consolidation, merger or sale)];
(v)the Issuer shall have received an Opinion of Counsel (and shall
have delivered copies thereof to the Bond Trustee) to the effect that
such consolidation or merger or sale (a) will not have any material
adverse tax consequence to the Issuer or any Transition Bondholder, (b)
complies with this Indenture and all of the conditions precedent herein
relating to such transaction and (c) will result in the Bond Trustee
maintaining a continuing valid first priority security interest in the
Collateral;
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(vi)none of the Intangible Transition Property, the Qualified Rate
Order, the Transferor's, the Seller's, the Servicer's or the Issuer's
rights under the Statute or the Qualified Rate Order are impaired
thereby; and
(vii)any action as is necessary to maintain the lien and security
interest created by this Indenture shall have been taken.
SECTION 3.11. Successor or Transferee. (a) Upon any consolidation or
merger of the Issuer in accordance with Section 3.10, the Person formed by or
surviving such consolidation or merger (if other than the Issuer) shall
succeed to, and be substituted for, and may exercise every right and power of,
the Issuer under this Indenture with the same effect as if such Person had
been named as the Issuer herein.
(b) Except as set forth in Section 6.07, upon any sale, conveyance
or transfer by the Issuer of substantially all of its assets in a sale which
complies with Section 3.10, West Penn Funding LLC will be released from every
covenant and agreement of this Indenture to be observed or performed on the
part of the Issuer with respect to the Transition Bonds and from every
covenant and agreement of the Sale Agreement and the Servicing Agreement to be
observed or performed on the part of the Issuer immediately upon the delivery
of written notice to the Bond Trustee stating that West Penn Funding LLC is to
be so released.
SECTION 3.12. No Other Business. The Issuer shall not engage in any
business other than purchasing and owning Intangible Transition Property,
issuing Transition Bonds from time to time, pledging its interest in the
Collateral to the Bond Trustee under this Indenture in order to secure the
Transition Bonds and performing activities that are necessary, suitable or
convenient to accomplish these purposes or are incidental thereto.
SECTION 3.13. No Borrowing. The Issuer shall not issue, incur,
assume, guarantee or otherwise become liable, directly or indirectly, for any
indebtedness except for the Transition Bonds.
SECTION 3.14. Guarantees, Loans, Advances and Other Liabilities.
Except as contemplated by the Sale Agreement, the Servicing Agreement, this
Indenture or the LLC Agreement, the Issuer shall not make any loan or advance
or credit to, or guarantee (directly or indirectly or by an instrument having
the effect of assuring another's payment or performance on any obligation or
capability of so doing or otherwise), endorse or otherwise become contingently
liable, directly or indirectly, in connection with the obligations, stocks or
dividends of, or own, purchase, repurchase or acquire (or agree contingently
to do so) any stock, obligations, assets or securities of, or any other
interest in, or make any capital contribution to, any other Person, except
that the Issuer may invest funds in Eligible Investments.
SECTION 3.15. Capital Expenditures. The Issuer shall not make any
expenditure (by long-term or operating lease or otherwise) for capital assets
(either realty or personalty) other than Intangible Transition Property
purchased from the Seller pursuant to, and in accordance with, the Sale
Agreement.
SECTION 3.16. Restricted Payments. The Issuer shall not, directly or
indirectly, (i) pay any dividend or make any distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, to any owner of a beneficial interest in the Issuer or otherwise with
respect to any ownership or equity interest in, or ownership security of, the
Issuer, (ii) redeem, purchase, retire or otherwise acquire for value any such
ownership or equity interest or security or (iii) set aside or otherwise
segregate any amounts for any such purpose. The Issuer will not, directly or
indirectly, make payments to or distributions from the Collection Account
except in accordance with this Indenture and the Basic Documents.
SECTION 3.17. Notice of Events of Default. The Issuer agrees to
deliver to the Bond Trustee and the Rating Agencies written notice in the form
of an Officer's Certificate of any
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Default or Event of Default hereunder, its status and what action the Issuer
is taking or proposes to take with respect thereto within five days after the
occurrence thereof.
SECTION 3.18. Inspection. The Issuer agrees that, on reasonable
prior notice, it will permit any representative of the Bond Trustee, during
the Issuer's normal business hours, to examine all the books of account,
records, reports, and other papers of the Issuer, to make copies and extracts
therefrom, to cause such books to be audited annually by Independent certified
public accountants, and to discuss the Issuer's affairs, finances and accounts
with the Issuer's officers, employees, and Independent certified public
accountants, all at such reasonable times and as often as may be reasonably
requested. The Bond Trustee shall and shall cause its representatives to hold
in confidence all such information except to the extent disclosure may be
required by law (and all reasonable applications for confidential treatment
are unavailing) and except to the extent that the Bond Trustee may reasonably
determine that such disclosure is consistent with its obligations hereunder.
SECTION 3.19. Adjusted Overcollateralization Schedules. Not later
than each Schedule Revision Date, the Issuer shall deliver to the Bond Trustee
a replacement Schedule A to the Series Supplement, adjusted to reflect the
event giving rise to such Schedule Revision Date and setting forth the
Calculated Overcollateralization Level for each Payment Date.
SECTION 3.20. Transfer Agreement, Sale Agreement and Servicing
Agreement Covenants. (a) The Issuer agrees to take all such lawful actions to
enforce its rights under the Transfer Agreement, the Sale Agreement and the
Servicing Agreement and to compel or secure the performance and observance by
the Transferor, the Seller and the Servicer, of each of their obligations to
the Issuer under or in connection with the Transfer Agreement, the Sale
Agreement and the Servicing Agreement, respectively, in accordance with the
terms thereof. So long as no Event of Default occurs and is continuing, but
subject to Section 3.20(f ), the Issuer may exercise any and all rights,
remedies, powers and privileges lawfully available to the Issuer under or in
connection with the Transfer Agreement, the Sale Agreement and the Servicing
Agreement.
(b) If an Event of Default occurs and is continuing, the Bond
Trustee may, and, at the direction (which direction shall be in writing or by
telephone (confirmed in writing promptly thereafter)) of the Holders of a
majority of the Outstanding Amount of the Transition Bonds of all Series
shall, exercise all right, remedies, powers, privileges and claims of the
Issuer against the Transferor, the Seller or the Servicer under or in
connection with the Transfer Agreement, the Sale Agreement and the Servicing
Agreement, respectively, including the right or power to take any action to
compel or secure performance or observance by the Transferor, the Seller or
the Servicer of each of their obligations to the Issuer thereunder and to give
any consent, request, notice, direction, approval, extension or waiver under
the Transfer Agreement, the Sale Agreement and the Servicing Agreement, and
any right of the Issuer to take such action shall be suspended.
(c) With the consent of the Bond Trustee, the Transfer Agreement,
the Sale Agreement and the Servicing Agreement may be amended, at any time and
from time to time, without the consent of the Transition Bondholders, provided
that (i) such amendment shall not, as evidenced by an Officer's Certificate,
adversely affect the interest of any Transition Bondholder or change the
Intangible Transition Charges Adjustment Process and (ii) the Rating Agency
Condition is satisfied in connection therewith by each Rating Agency other
than Moody's (and the Issuer shall have furnished Moody's with written notice
of such amendment prior to the effectiveness thereof).
(d) No amendment, modification, supplement, termination, waiver or
surrender of, the terms of the Transfer Agreement, the Sale Agreement or the
Servicing Agreement, or waiver of timely performance or observance by the
Transferor, the Servicer or the Seller under the Transfer Agreement, the Sale
Agreement or the Servicing Agreement, respectively, in each case in such a way
as would adversely affect the interests of Transition Bondholders is permitted
nor shall the Bond Trustee consent thereto. If the Issuer, the Transferor, the
Seller or the Servicer shall otherwise propose to amend, modify, waive,
supplement, terminate or surrender, or agree to any
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amendment, modification, supplement, termination, waiver or surrender of, the
terms of the Transfer Agreement, the Sale Agreement or the Servicing Agreement
or waive timely performance or observance by the Transferor, the Seller or the
Servicer under the Transfer Agreement, the Sale Agreement or Servicing
Agreement, respectively, the Issuer shall notify the Bond Trustee and the Bond
Trustee shall notify the Transition Bondholders thereof. The Bond Trustee
shall consent to such proposed amendment, modification, supplement or waiver
only with the consent of the Holders of at least a majority of the Outstanding
Amount of the Transition Bonds of each Series or Class. If any such amendment,
modification, supplement or waiver shall be so consented to by the Bond
Trustee or such Holders, the Issuer agrees to execute and deliver, in its own
name and at its own expense, such agreements, instruments, consents and other
documents as shall be necessary or appropriate in the circumstances.
(e) If the Issuer and the Transferor, the Seller or Servicer propose
to amend, modify, waive, supplement, terminate or surrender, or agree to any
amendment, modification, supplement, termination, waiver or surrender of, the
Intangible Transition Charges Adjustment Process, the Issuer shall notify the
Bond Trustee and the Bond Trustee shall notify Transition Bondholders of such
proposal and the Bond Trustee shall consent thereto only with the consent of
the Holder of each Outstanding Transition Bond of each Series or Class
affected thereby.
(f) Promptly following a default by any of the Transferor, the
Seller or Servicer under the Transfer Agreement, the Sale Agreement or the
Servicing Agreement, respectively, and at the Issuer's expense, the Issuer
agrees to take all such lawful actions as the Bond Trustee may request to
compel or secure the performance and observance by the Transferor, the Seller
or the Servicer, as applicable, of each of their obligations to the Issuer
under or in connection with the Transfer Agreement, the Sale Agreement or the
Servicing Agreement in accordance with the terms thereof, and to exercise any
and all rights, remedies, powers and privileges lawfully available to the
Issuer under or in connection with the Transfer Agreement, the Sale Agreement
or the Servicing Agreement to the extent and in the manner directed by the
Bond Trustee, including the transmission of notices of default on the part of
the Transferor, the Seller or the Servicer thereunder and the institution of
legal or administrative actions or proceedings to compel or secure performance
by the Transferor, the Seller or the Servicer of each of their obligations
under the Transfer Agreement, the Sale Agreement and the Servicing Agreement.
(g) If the Issuer shall have knowledge of the occurrence of a
Servicer Default under the Servicing Agreement, the Issuer shall promptly give
written notice thereof to the Bond Trustee and the Rating Agencies, and shall
specify in such notice the action, if any, the Issuer is taking with respect
to such default. If a Servicer Default shall arise from the failure of the
Servicer to perform any of its duties or obligations under the Servicing
Agreement with respect to the Intangible Transition Property or the Intangible
Transition Charges, the Issuer shall take all reasonable steps available to it
to remedy such failure. The Issuer shall not take any action to terminate the
Servicer's rights and powers under the Servicing Agreement following a
Servicer Default without the prior written consent of the Bond Trustee or of
the Holders of Transition Bonds evidencing not less than 25% of the
Outstanding Amount of the Transition Bonds of all Series and the consent, not
to be unreasonably withheld, of any Counterparties affected thereby.
(h) As promptly as possible after the giving of notice of
termination to the Servicer and the Rating Agencies of the Servicer's rights
and powers pursuant to Section 6.01 of the Servicing Agreement, the Bond
Trustee shall, together with such other Persons, if any, as are specified in
Section 6.01 of the Servicing Agreement, appoint a successor Servicer (the
"Successor Servicer"), and such Successor Servicer shall accept its
appointment by a written assumption in a form acceptable to the Issuer and the
Bond Trustee. A person shall qualify as a Successor Servicer only if such
Person satisfies the requirements of Section 6.04 of the Servicing Agreement.
If within 30 days after the delivery of the notice referred to above, a
Successor Servicer shall not have been appointed and accepted its appointment
as such, the Bond Trustee may petition the PUC or a court of competent
jurisdiction to appoint a Successor Servicer. In connection with any such
appointment, the Issuer may make such arrangements for the compensation of
such Successor Servicer as it and such Successor Servicer shall agree, subject
to the limitations set forth
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below and in the Servicing Agreement, and in accordance with Section 6.04 of
the Servicing Agreement, the Issuer shall enter into an agreement with such
Successor Servicer for the servicing of the Intangible Transition Property
(such agreement to be in form and substance satisfactory to the Bond Trustee).
(i) Upon termination of the Servicer's rights and powers pursuant to
the Servicing Agreement, the Bond Trustee shall promptly notify the Issuer,
the Transition Bondholders and the Rating Agencies. As soon as a Successor
Servicer is appointed, the Issuer shall notify the Bond Trustee, the
Transition Bondholders and the Rating Agencies of such appointment, specifying
in such notice the name and address of such Successor Servicer.
SECTION 3.21. Taxes. So long as any of the Transition Bonds are
outstanding, the Issuer shall pay all material taxes, including gross receipts
taxes, assessments and governmental charges imposed upon it or any of its
properties or assets or with respect to any of its franchises, business,
income or property before any penalty accrues thereon if the failure to pay
any such taxes, assessments and governmental charges would, after any
applicable grace periods, notices or other similar requirements, result in a
Lien on the Collateral.
SECTION 3.22. Separate Entity. The Issuer shall take all reasonable
steps to continue its identity as a separate legal entity and to make it
apparent to third persons that it is an entity with assets and liabilities
distinct from those of the Transferor and the Seller, other affiliates or any
other Person.
ARTICLE IV
Satisfaction and Discharge; Defeasance
SECTION 4.01. Satisfaction and Discharge of Indenture; Defeasance.
(a) The Transition Bonds of any Series, all moneys payable with respect
thereto and this Indenture as it applies to such Series shall cease to be of
further effect and the lien hereunder shall be released with respect to such
Series, interest shall cease to accrue on the Transition Bonds of such Series
and the Bond Trustee, on reasonable written demand of and at the expense of
the Issuer, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture with respect to the Transition Bonds of such
Series, when
(A) either
(1) all Transition Bonds of such Series theretofore
authenticated and delivered (other than (i) Transition Bonds that
have been destroyed, lost or stolen and that have been replaced or
paid as provided in Section 2.06 and (ii) Transition Bonds for whose
payment money has theretofore been deposited in trust or segregated
and held in trust by the Issuer and thereafter repaid to the Issuer
or discharged from such trust, as provided in Section 3.03) have
been delivered to the Bond Trustee for cancelation; or
(2) the Expected Final Payment Date or Redemption Date has
occurred with respect to all Transition Bonds of such Series not
theretofore delivered to the Bond Trustee for cancelation, and the
Issuer has irrevocably deposited or caused to be irrevocably
deposited with the Bond Trustee cash, in trust for such purpose, in
an amount sufficient to pay and discharge the entire indebtedness on
such Transition Bonds not theretofore delivered to the Bond Trustee
on the Expected Final Payment Date or Redemption Date, as
applicable, therefor;
(B) the Issuer has paid or caused to be paid all other sums payable
hereunder by the Issuer with respect to such Series; and
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(C) the Issuer has delivered to the Bond Trustee an Officer's
Certificate, an Opinion of Counsel and (if required by the TIA or the
Bond Trustee) an Independent Certificate from a firm of certified public
accountants, each meeting the applicable requirements of Section 11.01
and each stating that all conditions precedent herein provided for
relating to the satisfaction and discharge of this Indenture with respect
to Transition Bonds of such Series have been complied with.
(b) Subject to Sections 4.01(c) and 4.02, the Issuer at any time may
terminate (i) all its obligations under this Indenture with respect to the
Transition Bonds of any Series ("Legal Defeasance Option") or (ii) its
obligations under Sections 3.04, 3.05, 3.06, 3.07, 3.08, 3.09, 3.10, 3.12,
3.13, 3.14, 3.15, 3.16, 3.17, 3.18, 3.19 and 3.20 and the operation of Section
5.01(iv) ("Covenant Defeasance Option") with respect to any Series of
Transition Bonds. The Issuer may exercise the Legal Defeasance Option with
respect to any Series of Transition Bonds notwithstanding its prior exercise
of the Covenant Defeasance Option with respect to such Series.
If the Issuer exercises the Legal Defeasance Option with respect to
any Series, the maturity of the Transition Bonds of such Series may not be (a)
accelerated because of an Event of Default or (b) except as provided in
Section 4.02, redeemed. If the Issuer exercises the Covenant Defeasance Option
with respect to any Series, the maturity of the Transition Bonds of such
Series may not be accelerated because of an Event of Default specified in
Section 5.01(iv).
Upon satisfaction of the conditions set forth herein to the exercise
of the Legal Defeasance Option or the Covenant Defeasance Option with respect
to any Series of Transition Bonds, the Bond Trustee, on reasonable written
demand of and at the expense of the Issuer, shall execute proper instruments
acknowledging satisfaction and discharge of the obligations that are
terminated pursuant to such exercise.
(c) Notwithstanding Sections 4.01(a) and 4.01(b) above, (i) rights
of registration of transfer and exchange, (ii) rights of substitution of
mutilated, destroyed, lost or stolen Transition Bonds, (iii) rights of
Transition Bondholders to receive payments of principal, premium, if any, and
interest, but only from the amounts deposited with the Bond Trustee for such
payments, (iv) Sections 4.03 and 4.04, (v) the rights, obligations and
immunities of the Bond Trustee hereunder (including the rights of the Bond
Trustee under Section 6.07 and the obligations of the Bond Trustee under
Section 4.03) and (vi) the rights of Transition Bondholders under this
Indenture with respect to the property deposited with the Bond Trustee payable
to all or any of them, shall survive until the Transition Bonds of the Series
as to which this Indenture or certain obligations hereunder have be satisfied
and discharged pursuant to Section 4.01(a) or 4.01(b) and have been paid in
full. Thereafter, the obligations in Sections 6.07 and 4.04 with respect to
such Series shall survive.
SECTION 4.02. Conditions to Defeasance. The Issuer may exercise the
Legal Defeasance Option or the Covenant Defeasance Option with respect to any
Series of Transition Bonds only if:
(a)the Issuer irrevocably deposits or causes to be deposited in
trust with the Bond Trustee cash or U.S. Government Obligations for the
payment of principal of and premium, if any, and interest on such
Transition Bonds to the Expected Payment Date or Redemption Date
therefor, as applicable, such deposit to be made in the Defeasance
Subaccount for such Series of Transition Bonds;
(b)the Issuer delivers to the Bond Trustee a certificate from a
nationally recognized firm of Independent accountants expressing its
opinion that the payments of principal and interest when due and without
reinvestment on the deposited U.S. Government Obligations plus any
deposited cash without investment will provide cash at such times and in
such amounts (but, in the case of the Legal Defeasance Option only, not
more than such amounts) as will be sufficient to pay in respect of the
Transition Bonds of
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such Series (i) subject to clause (ii), principal in accordance with the
Expected Amortization Schedule therefor, (ii) if such Series is to be
redeemed, the Redemption Price therefor on the Redemption Date therefor
and (iii) interest when due;
(c)in the case of the Legal Defeasance Option, 95 days pass after
the deposit is made and during the 95-day period no Default specified in
Section 5.01(v) or (vi) occurs which is continuing at the end of the
period;
(d)no Default has occurred and is continuing on the day of such
deposit and after giving effect thereto;
(e)in the case of the Legal Defeasance Option, the Issuer delivers
to the Bond Trustee an Opinion of Counsel stating that (i) the Issuer has
received from, or there has been published by, the Internal Revenue
Service a ruling, or (ii) since the date of execution of this Indenture,
there has been a change in the applicable Federal income tax law, in
either case to the effect that, and based thereon such opinion shall
confirm that, the Holders of the Transition Bonds of such Series will not
recognize income, gain or loss for Federal income tax purposes as a
result of the exercise of such Legal Defeasance Option and will be
subject to Federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such Legal Defeasance
had not occurred;
(f)in the case of the Covenant Defeasance Option, the Issuer
delivers to the Bond Trustee an Opinion of Counsel to the effect that the
Holders of the Transition Bonds of such Series will not recognize income,
gain or loss for Federal income tax purposes as a result of the exercise
of such Covenant Defeasance Option and will be subject to Federal income
tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred;
and
(g)the Issuer delivers to the Bond Trustee an Officer's Certificate
and an Opinion of Counsel, each stating that all conditions precedent to
the satisfaction and discharge of the Transition Bonds of such Series to
the extent contemplated by this Article IV have been complied with.
Notwithstanding any other provision of this Section 4.02 to the
contrary, no delivery of cash or U.S. Government Obligations to the Bond
Trustee under this Section shall terminate any obligations of the Issuer under
this Indenture with respect of any Transition Bonds which are to be redeemed
prior to the Expected Final Payment Date therefor until such Transition Bonds
shall have been irrevocably called or designated for redemption on a date
thereafter on which such Transition Bonds may be redeemed in accordance with
the provisions of this Indenture and proper notice of such redemption shall
have been given in accordance with the provisions of this Indenture or the
Issuer shall have given the Bond Trustee, in form satisfactory to the Bond
Trustee, irrevocable instructions to give, in the manner and at the times
prescribed herein, notice of redemption of such Series.
SECTION 4.03. Application of Trust Money. All moneys or U.S.
Government Obligations deposited with the Bond Trustee pursuant to Section
4.01 or 4.02 hereof with respect to any Series of Transition Bonds shall be
held in trust in the Defeasance Subaccount for such Series and applied by it,
in accordance with the provisions of the Transition Bonds and this Indenture,
to the payment, either directly or through any Paying Agent, as the Bond
Trustee may determine, to the Holders of the particular Transition Bonds for
the payment or redemption of which such moneys have been deposited with the
Bond Trustee, of all sums due and to become due thereon for principal,
premium, if any, and interest. Such moneys will be segregated and held apart
solely for paying such Transition Bonds and such Transition Bonds shall not
entitled to any amounts on deposit in the Collection Account other than
amounts on deposit in the Defeasance Subaccount for such Transition Bonds.
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SECTION 4.04. Repayment of Moneys Held by Paying Agent. In
connection with the satisfaction and discharge of this Indenture or the
Covenant Defeasance Option or Legal Defeasance Option with respect to the
Transition Bonds of any Series, all moneys then held by any Paying Agent other
than the Bond Trustee under the provisions of this Indenture with respect to
such Transition Bonds shall, upon demand of the Issuer, be paid to the Bond
Trustee to be held and applied according to Section 3.03 and thereupon such
Paying Agent shall be released from all further liability with respect to such
moneys.
ARTICLE V
Remedies
SECTION 5.01. Events of Default. "Event of Default" wherever used
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or
governmental body):
(i)default in the payment of any interest on any Transition Bond
when the same becomes due and payable, and such default shall continue
for a period of five days;
(ii)default in the payment of the then unpaid principal of any
Transition Bond of any Series on the Series Termination Date for such
Series or, if applicable, any Class on the Class Termination Date for
such Class;
(iii)default in the payment of the Redemption Price for any
Transition Bond on the Redemption Date therefor;
(iv)default in the observance or performance of any covenant or
agreement of the Issuer made in this Indenture (other than a covenant or
agreement, a default in the observance or performance of which is
specifically dealt with in clause (i), (ii) or (iii) above), or any
representation or warranty of the Issuer made in this Indenture or in any
certificate or writing delivered pursuant hereto or in connection
herewith proves to have been incorrect in any material respect as of the
time when made, and such default shall continue or not be cured, for a
period of 30 days after there shall have been given, by registered or
certified mail, to the Issuer by the Bond Trustee or to the Issuer and
the Bond Trustee by the Holders of at least 25% of the Outstanding Amount
of the Transition Bonds of any Series, a written notice specifying such
default or incorrect representation or warranty and requiring it to be
remedied and stating that such notice is a "Notice of Default" hereunder;
(v)the filing of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Issuer or any substantial
part of the Collateral in an involuntary case under any applicable
Federal or state bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Issuer or for
any substantial part of the Collateral, or ordering the winding-up or
liquidation of the Issuer's affairs, and such decree or order shall
remain unstayed and in effect for a period of 90 consecutive days; or
(vi)the commencement by the Issuer of a voluntary case under any
applicable Federal or state bankruptcy, insolvency or other similar law
now or hereafter in effect, or the consent by the Issuer to the entry of
an order for relief in an involuntary case under any such law, or the
consent by the Issuer to the appointment or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of the Issuer or for any substantial part of the
Collateral, or the making by the Issuer of any general assignment for the
benefit of creditors, or the failure by the Issuer generally to pay
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its debts as such debts become due, or the taking of action by the Issuer
in furtherance of any of the foregoing.
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment. If
an Event of Default occurs and is continuing, then and in every such case
either the Bond Trustee or the Holders of Transition Bonds representing not
less than a majority of the Outstanding Amount of the Transition Bonds of all
Series may, but need not, declare all the Transition Bonds to be immediately
due and payable, by a notice in writing to the Issuer (and to the Bond Trustee
if given by Transition Bondholders), and upon any such declaration the unpaid
principal amount of the Transition Bonds of all Series, together with accrued
and unpaid interest thereon through the date of acceleration, shall become
immediately due and payable.
At any time after such declaration of acceleration of maturity has
been made and before a judgment or decree for payment of the money due has
been obtained by the Bond Trustee as hereinafter in this Article V provided,
the Holders of Transition Bonds representing a majority of the Outstanding
Amount of the Transition Bonds of all Series, by written notice to the Issuer
and the Bond Trustee, may rescind and annul such declaration and its
consequences if:
(i)the Issuer has paid or deposited with the Bond Trustee, for
deposit in the General Subaccount of the Collection Account, a sum
sufficient to pay
(A) all payments of principal of and premium, if any, and interest
on all Transition Bonds of all Series and all other amounts that would
then be due hereunder or upon such Transition Bonds if the Event of
Default giving rise to such acceleration had not occurred; and
(B) all sums paid or advanced by the Bond Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the Bond
Trustee and its agents and counsel; and
(ii)all Events of Default, other than the nonpayment of the
principal of the Transition Bonds of all Series that has become due
solely by such acceleration, have been cured or waived as provided in
Section 5.12.
No such rescission shall affect any subsequent Default or impair any
right consequent thereto.
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement
by Bond Trustee. (a) The Issuer covenants that if (i) Default is made in the
payment of any interest on any Transition Bond when such interest becomes due
and payable and such Default continues for a period of five days, (ii) Default
is made in the payment of the then unpaid principal of any Transition Bond on
the Series Termination Date or Class Termination Date, as applicable, therefor
or (iii) Default is made in the payment of the Redemption Price or for any
Transition Bond on the Redemption Date therefor, the Issuer will, upon demand
of the Bond Trustee, pay to it, for the benefit of the Holders of the
Transition Bonds of such Series, such amount as shall be sufficient to cover
the costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Bond Trustee and its agents and
counsel and the whole amount then due and payable on such Transition Bonds for
principal, premium, if any, and interest, with interest upon the overdue
principal and premium, if any, and, to the extent payment at such rate of
interest shall be legally enforceable, upon overdue instalments of interest,
at the respective Bond Rate of such Series or the applicable Class of such
Series.
(b) In case the Issuer shall fail forthwith to pay the amounts
specified in clause (a) above upon such demand, the Bond Trustee, in its own
name and as trustee of an express trust, may institute a Proceeding for the
collection of the sums so due and unpaid, and may prosecute such Proceeding to
judgment or final decree, and may enforce the same against the Issuer or other
obligor upon such Transition Bonds and collect in the manner provided by law
out
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of the property of the Issuer or other obligor upon such Transition Bonds,
wherever situated, the moneys adjudged or decreed to be payable.
(c) If an Event of Default occurs and is continuing, the Bond
Trustee may, as more particularly provided in Section 5.04, in its discretion,
proceed to protect and enforce its rights and the rights of the Transition
Bondholders, by such appropriate Proceedings as the Bond Trustee shall deem
most effective to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid
of the exercise of any power granted herein, or to enforce any other proper
remedy or legal or equitable right vested in the Bond Trustee by this
Indenture or by law including foreclosing or otherwise enforcing the lien on
the Intangible Transition Property securing the Transition Bonds or applying
to the PUC for sequestration of revenues arising with respect to such
Intangible Transition Property.
(d) In case there shall be pending, relative to the Issuer or any
other obligor upon the Transition Bonds or any Person having or claiming an
ownership interest in the Collateral, Proceedings under Title 11 of the United
States Code or any other applicable Federal or state bankruptcy, insolvency or
other similar law, or in case a receiver, assignee or trustee in bankruptcy or
reorganization, liquidator, sequestrator or similar official shall have been
appointed for or taken possession of the Issuer or its property or such other
obligor or Person, or in case of any other comparable judicial Proceedings
relative to the Issuer or other obligor upon the Transition Bonds, or to the
creditors or property of the Issuer or such other obligor, the Bond Trustee,
irrespective of whether the principal of any Transition Bonds shall then be
due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Bond Trustee shall have made any demand pursuant
to the provisions of this Section, shall be entitled and empowered, by
intervention in such Proceedings or otherwise:
(i)to file and prove a claim or claims for the whole amount of
principal, premium, if any, and interest owing and unpaid in respect of
the Transition Bonds and to file such other papers or documents as may be
necessary or advisable in order to have the claims of the Bond Trustee
(including any claim for reasonable compensation to the Bond Trustee and
each predecessor Bond Trustee, and their respective agents, attorneys and
counsel, and for reimbursement of all expenses and liabilities incurred,
and all advances made, by the Bond Trustee and each predecessor Bond
Trustee, except as a result of negligence or bad faith) and of the
Transition Bondholders allowed in such Proceedings;
(ii)unless prohibited by applicable law and regulations, to vote on
behalf of the Holders of Transition Bonds in any election of a trustee, a
standby trustee or Person performing similar functions in any such
Proceedings;
(iii)to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute all amounts received
with respect to the claims of the Transition Bondholders and of the Bond
Trustee on their behalf; and
(iv)to file such proofs of claim and other papers or documents as
may be necessary or advisable in order to have the claims of the Bond
Trustee or the Holders of Transition Bonds allowed in any judicial
proceedings relative to the Issuer, its creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Transition
Bondholders to make payments to the Bond Trustee, and, in the event that the
Bond Trustee shall consent to the making of payments directly to such
Transition Bondholders, to pay to the Bond Trustee such amounts as shall be
sufficient to cover reasonable compensation to the Bond Trustee, each
predecessor Bond Trustee and their respective agents, attorneys and counsel,
and all other expenses and liabilities incurred, and all advances made, by the
Bond Trustee and each predecessor Bond Trustee except as a result of
negligence or bad faith.
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(e) Nothing herein contained shall be deemed to authorize the Bond
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Transition Bondholder any plan of reorganization, arrangement, adjustment
or composition affecting the Transition Bonds or the rights of any Holder
thereof or to authorize the Bond Trustee to vote in respect of the claim of
any Transition Bondholder in any such proceeding except, as aforesaid, to vote
for the election of a trustee in bankruptcy or similar Person.
(f) All rights of action and of asserting claims under this
Indenture, or under any of the Transition Bonds, may be enforced by the Bond
Trustee without the possession of any of the Transition Bonds or the
production thereof in any trial or other Proceedings relative thereto, and any
such action or proceedings instituted by the Bond Trustee shall be brought in
its own name as trustee of an express trust, and any recovery of judgment,
subject to the payment of the expenses, disbursements and compensation of the
Bond Trustee, each predecessor Bond Trustee and their respective agents and
attorneys, shall be for the ratable benefit of the Holders of the Transition
Bonds.
(g) In any Proceedings brought by the Bond Trustee (and also any
Proceedings involving the interpretation of any provision of this Indenture to
which the Bond Trustee shall be a party), the Bond Trustee shall be held to
represent all the Holders of the Transition Bonds, and it shall not be
necessary to make any Transition Bondholder a party to any such Proceedings.
SECTION 5.04. Remedies; Priorities. (a) If an Event of Default
occurs and is continuing, the Bond Trustee may do one or more of the following
(subject to Section 5.05):
(i)institute Proceedings in its own name and as trustee of an
express trust for the collection of all amounts then payable on the
Transition Bonds or under this Indenture with respect thereto, whether by
declaration or otherwise, enforce any judgment obtained, and collect from
the Issuer and any other obligor upon such Transition Bonds moneys
adjudged due;
(ii)institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture with respect to the Collateral;
(iii)exercise any remedies of a secured party under the UCC or the
Statute or any other applicable law and take any other appropriate action
to protect and enforce the rights and remedies of the Bond Trustee and
the Holders of the Transition Bonds of such Series;
(iv)sell the Collateral or any portion thereof or rights or interest
therein, at one or more public or private sales called and conducted in
any manner permitted by law; and
(v)exercise all rights, remedies, powers, privileges and claims of
the Issuer against the Transferor, the Seller or the Servicer under or in
connection with the Transfer Agreement, the Sale Agreement or the
Servicing Agreement as provided in Section 3.20(b);
provided, however, that the Bond Trustee may not sell or otherwise liquidate
any portion of the Collateral following an Event of Default, other than an
Event of Default described in Section 5.01(i), (ii) or (iii), with respect to
any Series unless (A) the Holders of 100% of the Outstanding Amount of the
Transition Bonds of all Series consent thereto, (B) the proceeds of such sale
or liquidation distributable to the Transition Bondholders of all Series are
sufficient to discharge in full all amounts then due and unpaid upon such
Transition Bonds for principal, premium, if any, and interest or (C) the Bond
Trustee determines that the Collateral will not continue to provide sufficient
funds for all payments on the Transition Bonds of all Series as they would
have become due if the Transition Bonds had not been declared due and payable,
and the Bond Trustee obtains the consent of Holders of 66-2/3% of the
Outstanding Amount of the Transition Bonds of each Series. In determining such
sufficiency or insufficiency with respect to clause (B) and (C), the Bond
Trustee may, but need not, obtain and rely upon an opinion of an Independent
investment
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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 Bond 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
Transition Bonds have been declared to be due and payable under Section 5.02
following an Event of Default and such declaration and its consequences have
not been rescinded and annulled, the Bond Trustee may, but need not, elect, as
provided in Section 5.11(iii), to maintain possession of the Collateral and
not sell or liquidate the same. It is the desire of the parties hereto and the
Transition Bondholders that there be at all times sufficient funds for the
payment of principal of and premium, if any, and interest on the Transition
Bonds, and the Bond Trustee shall take such desire into account when
determining whether or not to maintain possession of the Collateral or sell or
liquidate the same. In determining whether to maintain possession of the
Collateral or sell or liquidate the same, the Bond Trustee may, but need not,
obtain and rely upon an opinion of an Independent investment banking or
accounting firm of national reputation as to the feasibility of such proposed
action and as to the sufficiency of the Collateral for such purpose.
SECTION 5.06. Limitation of Proceedings. No Holder of any Transition
Bond of any Series shall have any right to institute any Proceeding, judicial
or otherwise, or to avail itself of the remedies provided in Section
2812(d)(3)(v) of the Statute, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder,
unless:
(i)such Holder has previously given written notice to the Bond
Trustee of a continuing Event of Default;
(ii)the Holders of not less than 25% of the Outstanding Amount of
the Transition Bonds of each Series have made written request to the Bond
Trustee to institute such Proceeding in respect of such Event of Default
in its own name as Bond Trustee hereunder;
(iii)such Holder or Holders have offered to the Bond Trustee
security or indemnity reasonably satisfactory to the Bond Trustee against
the costs, expenses and liabilities to be incurred in complying with such
request;
(iv)the Bond Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute such Proceedings;
and
(v)no direction inconsistent with such written request has been
given to the Bond Trustee during such 60-day period by the Holders of a
majority of the Outstanding Amount of the Transition Bonds of all Series;
it being understood and intended that no one or more Holders of Transition
Bonds shall have any right in any manner whatever by virtue of, or by availing
of, any provision of this Indenture to affect, disturb or prejudice the rights
of any other Holders of Transition Bonds or to obtain or to seek to obtain
priority or preference over any other Holders or to enforce any right under
this Indenture, except in the manner herein provided.
In the event the Bond Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of
Transition Bonds, each representing less than a majority of the Outstanding
Amount of the Transition Bonds of all Series, the Bond Trustee in its sole
discretion may determine what action, if any, shall be taken, notwithstanding
any other provisions of this Indenture.
SECTION 5.07. Unconditional Rights of Transition Bondholders To
Receive Principal, Premium, if any, and Interest. Notwithstanding any other
provisions in this Indenture,
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the Holder of any Transition Bond shall have the right, which is absolute and
unconditional, (a) to receive payment of (i) the interest, if any, on such
Transition Bond on or after the due dates thereof expressed in such Transition
Bond or in this Indenture, (ii) the unpaid principal, if any, of such
Transition Bonds on or after the Series Termination Date or Class Termination
Date therefor or (iii) in the case of redemption, receive payment of the
unpaid principal, if any, of and premium, if any, and interest, if any, on
such Transition Bond on or after the Redemption Date therefor and (b) to
institute suit for the enforcement of any such payment, and such right shall
not be impaired without the consent of such Holder.
SECTION 5.08. Restoration of Rights and Remedies. If the Bond
Trustee or any Transition Bondholder has instituted any Proceeding to enforce
any right or remedy under this Indenture and such Proceeding has been
discontinued or abandoned for any reason or has been determined adversely to
the Bond Trustee or to such Transition Bondholder, then and in every such case
the Issuer, the Bond Trustee and the Transition Bondholders shall, subject to
any determination in such Proceeding, be restored severally and respectively
to their former positions hereunder, and thereafter all rights and remedies of
the Bond Trustee and the Transition Bondholders shall continue as though no
such Proceeding had been instituted.
SECTION 5.09. Rights and Remedies Cumulative. No right or remedy
herein conferred upon or reserved to the Bond Trustee or to the Transition
Bondholders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative
and in addition to every other right and remedy given hereunder or now or
hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent
the concurrent assertion or employment of any other appropriate right or
remedy.
SECTION 5.10. Delay or Omission Not a Waiver. No delay or omission
of the Bond Trustee or any Transition Bondholder to exercise any right or
remedy accruing upon any Default or Event of Default shall impair any such
right or remedy or constitute a waiver of any such Default or Event of Default
or an acquiescence therein. Every right and remedy given by this Article V or
by law to the Bond Trustee or to the Transition Bondholders may be exercised
from time to time, and as often as may be deemed expedient, by the Bond
Trustee or by the Transition Bondholders, as the case may be.
SECTION 5.11. Control by Transition Bondholders. The Holders of a
majority of the Outstanding Amount of the Transition Bonds of all Series (or,
if less than all Series or Classes are affected, the affected Series or Class
or Classes) shall have the right to direct the time, method and place of
conducting any Proceeding for any remedy available to the Bond Trustee with
respect to the Transition Bonds of such Series or Class or Classes or
exercising any trust or power conferred on the Bond Trustee with respect to
such Series or Class or Classes; provided that
(i)such direction shall not be in conflict with any rule of law or
with this Indenture;
(ii)subject to the express terms of Section 5.04, any direction to
the Bond Trustee to sell or liquidate the Collateral shall be by the
Holders of Transition Bonds representing not less than 100% of the
Outstanding Amount of the Transition Bonds of all Series;
(iii)if the conditions set forth in Section 5.05 have been satisfied
and the Bond Trustee elects to retain the Collateral pursuant to such
Section and not sell or liquidate the same, then any direction to the
Bond Trustee by Holders of Transition Bonds representing less than 100%
of the Outstanding Amount of the Transition Bonds of all Series to sell
or liquidate the Collateral shall be of no force and effect; and
(iv)the Bond Trustee may take any other action deemed proper by the
Bond Trustee that is not inconsistent with such direction;
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provided, however, that, subject to Section 6.01, the Bond Trustee need not
take any action that it determines might involve it in liability or might
materially adversely affect the rights of any Transition Bondholders not
consenting to such action.
SECTION 5.12. Waiver of Past Defaults. Prior to the declaration of
the acceleration of the maturity of the Transition Bonds of all Series as
provided in Section 5.02, the Holders of not less than a majority of the
Outstanding Amount of the Transition Bonds of all Series may waive any past
Default or Event of Default and its consequences except a Default (i) in
payment of principal of or premium, if any, or interest on any of the
Transition Bonds or (ii) in respect of a covenant or provision hereof which
cannot be modified or amended without the consent of the Holder of each
Transition Bond of all Series or Classes affected. In the case of any such
waiver, the Issuer, the Bond Trustee and the Holders of the Transition Bonds
shall be restored to their former positions and rights hereunder,
respectively; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereto.
Upon any such waiver, such Default shall cease to exist and be
deemed to have been cured and not to have occurred, and any Event of Default
arising therefrom shall be deemed to have been cured and not to have occurred,
for every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereto.
SECTION 5.13. Undertaking for Costs. All parties to this Indenture
agree, and each Holder of any Transition Bond by such Holder's acceptance
thereof shall be deemed to have agreed, that any court may in its discretion
require, in any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Bond Trustee for any action taken,
suffered or omitted by it as Bond Trustee, the filing by any party litigant in
such suit of an undertaking to pay the costs of such suit, and that such court
may in its discretion assess reasonable costs, including reasonable attorneys'
fees, against any party litigant in such suit, having due regard to the merits
and good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to (a) any suit instituted by the
Bond Trustee, (b) any suit instituted by any Transition Bondholder, or group
of Transition Bondholders, in each case holding in the aggregate more than 10%
of the Outstanding Amount of the Transition Bonds of a Series or (c) any suit
instituted by any Transition Bondholder for the enforcement of the payment of
(i) interest on any Transition Bond on or after the due dates expressed in
such Transition Bond and in this Indenture, (ii) the unpaid principal, if any,
of any Transition Bond on or after the Series Termination Date or Class
Termination Date, if applicable, therefor or (iii) in the case of redemption,
the unpaid principal of and premium, if any, and interest on any Transition
Bond on or after the Redemption Date therefor.
SECTION 5.14. Waiver of Stay or Extension Laws. The Issuer covenants
(to the extent that it may lawfully do so) that it will not at any time insist
upon, or plead or in any manner whatsoever, claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, that may affect the covenants or the performance of this
Indenture; and the Issuer (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that
it will not hinder, delay or impede the execution of any power herein granted
to the Bond Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.
SECTION 5.15. Action on Transition Bonds. The Bond Trustee's right
to seek and recover judgment on the Transition Bonds or under this Indenture
shall not be affected by the seeking, obtaining or application of any other
relief under or with respect to this Indenture. Neither the lien of this
Indenture nor any rights or remedies of the Bond Trustee or the Transition
Bondholders shall be impaired by the recovery of any judgment by the Bond
Trustee against the Issuer or by the levy of any execution under such judgment
upon any portion of the Collateral or upon any of the assets of the Issuer.
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ARTICLE VI
The Bond Trustee
SECTION 6.01. Duties and Liabilities of Bond Trustee. (a) If an
Event of Default has occurred and is continuing, the Bond Trustee shall
exercise the rights and powers vested in it by this Indenture and use the same
degree of care and skill in their exercise as a prudent Person would exercise
or use under the circumstances in the conduct of such Person's own affairs.
(b) Except during the continuance of an Event of Default:
(i)the Bond Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Bond Trustee; and
(ii)in the absence of bad faith on its part, the Bond Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions
furnished to the Bond Trustee and conforming to the requirements of this
Indenture.
(c) The Bond Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful
misconduct, except that:
(i)this paragraph does not limit the effect of paragraph (b) of this
Section;
(ii)the Bond Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer unless it is proved that the
Bond Trustee was negligent in ascertaining the pertinent facts; and
(iii)the Bond Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 5.11.
(d) Every provision of this Indenture that in any way relates to the
Bond Trustee is subject to paragraphs (a), (b) and (c) of this Section 6.01.
(e) The Bond Trustee shall not be liable for interest on any money
received by it except as provided in this Indenture or as the Bond Trustee may
agree in writing with the Issuer.
(f) Money held in trust by the Bond Trustee need not be segregated
from other funds except to the extent required by law or the terms of this
Indenture or the Transfer Agreement, the Sale Agreement or the Servicing
Agreement.
(g) No provision of this Indenture shall require the Bond Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that
repayments of such funds or adequate indemnity against such risk or liability
is not reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Bond Trustee shall
be subject to the provisions of this Section and to the provisions of the TIA.
(i) Under no circumstances shall the Bond Trustee be liable for any
indebtedness evidenced by or arising under the Transition Bonds or any Basic
Document.
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SECTION 6.02. Rights of Bond Trustee. (a) The Bond Trustee may rely
on any document believed by it to be genuine and to have been signed or
presented by the proper Person. The Bond Trustee need not investigate any fact
or matter stated in the document.
(b) Before the Bond Trustee acts or refrains from acting, it may
require an Officer's Certificate or an Opinion of Counsel. The Bond Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on an Officer's Certificate or an Opinion of Counsel.
(c) The Bond Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys or a custodian or nominee, and the Bond Trustee shall not
be responsible for any misconduct or negligence on the part of, or for the
supervision of, any such agent, attorney, custodian or nominee appointed with
due care by it hereunder.
(d) The Bond Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that the Bond Trustee's conduct does not
constitute wilful misconduct, negligence or bad faith.
(e) The Bond Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture
and the Transition Bonds shall be full and complete authorization and
protection from liability in respect to any action taken, omitted or suffered
by it hereunder in good faith and in accordance with the advice or opinion of
such counsel.
SECTION 6.03. Individual Rights of Bond Trustee. The Bond Trustee in
its individual or any other capacity may become the owner or pledgee of
Transition Bonds and may otherwise deal with the Issuer or its affiliates with
the same rights it would have if it were not Bond Trustee. Any Paying Agent,
Transition Bond Registrar, co-registrar or co-paying agent may do the same
with like rights. However, the Bond Trustee must comply with Sections 6.11 and
6.12.
SECTION 6.04. Bond Trustee's Disclaimer. The Bond Trustee shall not
be responsible for and makes no representation as to the validity or adequacy
of this Indenture or the Transition Bonds. The Bond Trustee shall not be
accountable for the Issuer's use of the proceeds from the Transition Bonds,
and the Bond Trustee shall not be responsible for any statement of the Issuer
in the Indenture or in any document issued in connection with the sale of the
Transition Bonds or in the Transition Bonds other than the Bond Trustee's
certificate of authentication. The Bond Trustee shall not be responsible for
the form, character, genuineness, sufficiency, value or validity of any of the
Collateral, or for or in respect of the validity or sufficiency of the
Transition Bonds (other than the certificate of authentication for the
Transition Bonds) or the Basic Documents and the Bond Trustee shall in no
event assume or incur any liability, duty or obligation to any Holder of a
Transition Bond, other than is expressly provided for in this Indenture. The
Bond Trustee shall not be liable for the default or misconduct of the Issuer,
the Transferor, the Seller or the Servicer under any Basic Document or
otherwise and the Bond Trustee shall have no obligation or liability to
perform the obligations of the Issuer.
SECTION 6.05. Notice of Defaults. If a Default occurs and is
continuing with respect to any Series and if it is known to a Responsible
Officer of the Bond Trustee, the Bond Trustee shall mail to each Holder of
Transition Bonds of all Series and to the Rating Agencies notice of the
Default within 90 days after it occurs. Except in the case of a Default in
payment of principal of or premium, if any, or interest on any Transition
Bond, the Bond Trustee may withhold the notice if and so long as a committee
of its Responsible Officers in good faith determines that withholding the
notice is in the interests of Transition Bondholders.
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SECTION 6.06. Reports by Bond Trustee to Holders. (a) So
long as the Bond Trustee is the Transition Bond Registrar, the Bond Trustee
shall deliver to each Holder of Transition Bonds such information as may be
required to enable such Holder to prepare its Federal and state income tax
returns.
(b) With respect to each Series of Transition Bonds, on or prior to
each Payment Date therefor, the Bond Trustee will deliver a statement prepared
by the Servicer to each Holder of Transition Bonds which will include (to the
extent applicable) the following information (and any other information so
specified in the Series Supplement for such Series) as to the Transition Bonds
of such Series with respect to such Payment Date or the period since the
previous Payment Date, as applicable:
(i)the amount paid to Holders of such Transition Bonds in respect of
principal, such amount to be expressed as a dollar amount per thousand;
(ii)the amount paid to Holders of such Transition Bonds in respect
of interest, such amount to be expressed as a dollar amount per thousand;
(iii)the Transition Bond Balance and the Projected Transition Bond
Balance, in each case for such Series and as of the most recent Payment
Date;
(iv)the amount on deposit in the Overcollateralization Subaccount
and the Calculated Overcollateralization Level, in each case for all
Series and as of the most recent Payment Date;
(v)the amount on deposit in the Capital Subaccount and the Required
Capital Amount, in each case as of the most recent Payment Date; and
(vi)the amount, if any, on deposit in the Reserve Subaccount as of
the most recent Payment Date.
(c) The Bond Trustee's responsibility for disbursing the information
described in subsection (b) above to Holders of Transition Bonds is limited to
the availability, timeliness and accuracy of the information provided by the
Servicer pursuant to Section 3.04 and Annex 1 of the Servicing Agreement.
SECTION 6.07. Compensation and Indemnity. The Issuer shall pay to
the Bond Trustee from time to time reasonable compensation for its services.
The Bond Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Issuer shall reimburse the
Bond Trustee for all reasonable out-of-pocket expenses, disbursements and
advances incurred or made by it, including costs of collection, in addition to
the compensation for its services. Such expenses shall include the reasonable
compensation and expenses, disbursements and advances of the Bond Trustee's
agents, counsel, accountants and experts. The Issuer shall indemnify and hold
harmless the Bond Trustee and its officers, directors, employees and agents
from and against any and all costs, damages, expenses, losses, liabilities or
other amounts whatsoever (including reasonable counsel fees and expenses)
incurred by the Bond Trustee in connection with the administration of this
trust, the enforcement of this trust and all of the Bond Trustee's rights,
powers and duties under this Indenture and the other Basic Documents to which
the Bond Trustee is a party and the performance by the Bond Trustee of the
duties and obligations of the Bond Trustee under or pursuant to this Indenture
and the other Basic Documents to which the Bond Trustee is a party. The Bond
Trustee shall notify the Issuer as soon as is reasonably practicable of any
claim for which it may seek indemnity. Failure by the Bond Trustee to so
notify the Issuer shall not relieve the Issuer of its obligations hereunder.
The Issuer shall defend the claim and the Bond Trustee may have separate
counsel and the Issuer shall pay the fees and expenses of such counsel. The
Issuer need not reimburse any expense or indemnify against any loss, liability
or expense incurred by the Bond Trustee (i) through the Bond Trustee's own
wilful misconduct, negligence or bad faith or (ii) to the extent the Bond
Trustee was
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reimbursed for or indemnified against any such loss, liability or expense by
the Transferor pursuant to the Transfer Agreement, the Seller pursuant to the
Sale Agreement or by the Servicer pursuant to the Servicing Agreement.
The Issuer's payment obligations to the Bond Trustee pursuant to
this Section shall survive the discharge of this Indenture or the earlier
resignation or removal of the Bond Trustee. When the Bond Trustee incurs
expenses after the occurrence of a Default specified in Section 5.01(v) or
(vi) with respect to the Issuer, the expenses are intended to constitute
expenses of administration under Title 11 of the United States Code or any
other applicable Federal or state bankruptcy, insolvency or similar law.
SECTION 6.08. Replacement of Bond Trustee. The Bond Trustee may
resign at any time upon 30 days' prior written notice by so notifying the
Issuer. The Holders of a majority in Outstanding Amount of the Transition
Bonds of all Series may remove the Bond Trustee by so notifying the Issuer and
the Bond Trustee and may appoint a successor Bond Trustee. The Issuer shall
remove the Bond Trustee if:
(i)the Bond Trustee fails to comply with Section 6.11;
(ii)the Bond Trustee is adjudged a bankrupt or insolvent;
(iii)a receiver or other public officer takes charge of the Bond
Trustee or its property; or
(iv)the Bond Trustee otherwise becomes incapable of acting.
If the Bond Trustee resigns or is removed or if a vacancy exists in
the office of Bond Trustee for any reason (the Bond Trustee in such event
being referred to herein as the "Retiring Bond Trustee"), the Issuer shall
promptly appoint a successor Bond Trustee.
A successor Bond Trustee shall deliver a written acceptance of its
appointment to the Retiring Bond Trustee and to the Issuer. Thereupon the
resignation or removal of the Retiring Bond Trustee shall become effective,
and the successor Bond Trustee shall have all the rights, powers and duties of
the Bond Trustee under this Indenture. The successor Bond Trustee shall mail a
notice of its succession to Transition Bondholders. The Retiring Bond Trustee
shall promptly transfer all property held by it as Bond Trustee to the
successor Bond Trustee.
If a successor Bond Trustee does not take office within 60 days
after the Retiring Bond Trustee resigns or is removed, the Retiring Bond
Trustee, the Issuer or the Holders of a majority in Outstanding Amount of the
Transition Bonds of all Series may petition any court of competent
jurisdiction for the appointment of a successor Bond Trustee.
If the Bond Trustee fails to comply with Section 6.11, any
Transition Bondholder may petition any court of competent jurisdiction for the
removal of the Bond Trustee and the appointment of a successor Bond Trustee.
The Issuer shall promptly furnish written notification of the
appointment of any successor Bond Trustee pursuant to this Section 6.08 to
each of the Rating Agencies.
Notwithstanding the replacement of the Bond Trustee pursuant to this
Section 6.08, the Issuer's obligations under Section 6.07 shall continue for
the benefit of the Retiring Bond Trustee.
SECTION 6.09. Successor Bond Trustee by Merger. If the Bond Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation or banking
association shall, without any further act, be the successor Bond
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Trustee. The Issuer shall promptly furnish written notification of any such
successor Bond Trustee to each of the Rating Agencies.
In case at the time such successor or successors by merger,
conversion consolidation or transfer shall succeed to the trusts created by
this Indenture any of the Transition Bonds shall have been authenticated but
not delivered, any such successor to the Bond Trustee may adopt the
certificate of authentication of any Retiring Bond Trustee, and deliver such
Transition Bonds so authenticated; and in case at that time any of the
Transition Bonds shall not have been authenticated, any successor to the Bond
Trustee may authenticate such Transition Bonds either in the name of any
Retiring Bond Trustee hereunder or in the name of the successor to the Bond
Trustee; and in all such cases such certificates shall have the full force
which it is anywhere in the Transition Bonds or in this Indenture provided
that the certificate of the Bond Trustee shall have.
SECTION 6.10. Appointment of Co-Trustee or Separate Trustee. (a)
Notwithstanding any other provisions of this Indenture, at any time, for the
purpose of meeting any legal requirement of any jurisdiction in which any part
of the Collateral may at the time be located, the Bond Trustee shall have the
power and may execute and deliver all instruments to appoint one or more
Persons to act as a co-trustee or co-trustees, or separate trustee or separate
trustees, of all or any part of the Collateral, and to vest in such Person or
Persons, in such capacity and for the benefit of the Transition Bondholders,
such title to the Collateral, or any part hereof, and, subject to the other
provisions of this Section, such powers, duties, obligations, rights and
trusts as the Bond Trustee may consider necessary or desirable. No co-trustee
or separate trustee hereunder shall be required to meet the terms of
eligibility as a successor trustee under Section 6.11 and no notice to
Transition Bondholders of the appointment of any co-trustee or separate
trustee shall be required under Section 6.08 hereof.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i)all rights, powers, duties and obligations conferred or imposed
upon the Bond Trustee shall be conferred or imposed upon and exercised or
performed by the Bond Trustee and such separate trustee or co-trustee
jointly (it being understood that such separate trustee or co-trustee is
not authorized to act separately without the Bond Trustee joining in such
act), except to the extent that under any law of any jurisdiction in
which any particular act or acts are to be performed the Bond Trustee
shall be incompetent or unqualified to perform such act or acts, in which
event such rights, powers, duties and obligations (including the holding
of title to the Collateral or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by such separate
trustee or co-trustee, but solely at the direction of the Bond Trustee;
(ii)no trustee hereunder shall be personally liable by reason of any
act or omission of any other trustee hereunder; and
(iii)the Bond Trustee may at any time accept the resignation of or
remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Bond Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Indenture
and the conditions of this Article VI. Each separate trustee and co-trustee,
upon its acceptance of the trusts conferred, shall be vested with the estates
or property specified in its instrument of appointment, either jointly with
the Bond Trustee or separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every provision of this
Indenture relating to the conduct of, affecting the liability of, or affording
protection to, the Bond Trustee. Every such instrument shall be filed with the
Bond Trustee.
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(d) Any separate trustee or co-trustee may at any time constitute
the Bond Trustee, its agent or attorney-in-fact with full power and authority,
to the extent not prohibited by law, to do any lawful act under or in respect
of this Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all of
its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Bond Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
SECTION 6.11. Eligibility; Disqualification. The Bond Trustee shall
at all times satisfy the requirements of TIA ss. 310(a). The Bond Trustee
shall have a combined capital and surplus of at least $50,000,000 as set forth
in its most recent published annual report of condition and it shall have a
long term debt rating of "Baa3" or better by Moody's and "BBB-" by Fitch IBCA
(if currently rated by Fitch IBCA). The Bond Trustee shall comply with TIA ss.
310(b), including the optional provision permitted by the second sentence of
TIA ss. 310(b)(9); provided, however, that there shall be excluded from the
operation of TIA ss. 310(b)(1) any indenture or indentures under which other
securities of the Issuer are outstanding if the requirements for such
exclusion set forth in TIA ss. 310(b)(1) are met.
SECTION 6.12. Preferential Collection of Claims Against Issuer. The
Bond Trustee shall comply with TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Bond Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated.
ARTICLE VII
Transition Bondholders' Lists and Reports
SECTION 7.01. Issuer To Furnish Bond Trustee Names and Addresses of
Transition Bondholders. The Issuer will furnish or cause to be furnished to
the Bond Trustee (a) not more than five days after the earlier of (i) each
Record Date with respect to each Series and (ii) three months after the last
Record Date with respect to each Series, a list, in such form as the Bond
Trustee may reasonably require, of the names and addresses of the Holders of
Transition Bonds of such Series as of such Record Date, (b) at such other
times as the Bond Trustee may request in writing, within 30 days after receipt
by the Issuer of any such request, a list of similar form and content as of a
date not more than 10 days prior to the time such list is furnished; provided,
however, that so long as the Bond Trustee is the Transition Bond Registrar, no
such list shall be required to be furnished.
SECTION 7.02. Preservation of Information; Communications to
Transition Bondholders. (a) The Bond Trustee shall preserve, in as current a
form as is reasonably practicable, the names and addresses of the Holders of
Transition Bonds contained in the most recent list furnished to the Bond
Trustee as provided in Section 7.01 and the names and addresses of Holders of
Transition Bonds received by the Bond Trustee in its capacity as Transition
Bond Registrar. The Bond Trustee may destroy any list furnished to it as
provided in such Section 7.01 upon receipt of a new list so furnished.
(b) Transition Bondholders may communicate pursuant to TIA ss.
312(b) with other Transition Bondholders with respect to their rights under
this Indenture or under the Transition Bonds.
(c) The Issuer, the Bond Trustee and the Transition Bond Registrar
shall have the protection of TIA ss. 312(c).
SECTION 7.03. Reports by Issuer. (a) The Issuer shall:
(i) file with the Bond Trustee, within 15 days after the Issuer is
required to file the same with the Commission, copies of the annual
reports and of the information,
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documents and other reports (or copies of such portions of any of the
foregoing as the Commission may from time to time by rules and
regulations prescribe) which the Issuer may be required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act;
(ii)file with the Bond Trustee and the Commission in accordance with
rules and regulations prescribed from time to time by the Commission such
additional information, documents and reports with respect to compliance
by the Issuer with the conditions and covenants of this Indenture as may
be required from time to time by such rules and regulations; and
(iii)supply to the Bond Trustee (and the Bond Trustee shall transmit
by mail to all Transition Bondholders described in TIA ss. 313(c)) such
summaries of any information, documents and reports required to be filed
by the Issuer pursuant to clauses (i) and (ii) of this Section 7.03(a) as
may be required by rules and regulations prescribed from time to time by
the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the
Issuer shall end on December 31 of each year.
SECTION 7.04. Reports by Bond Trustee. If required by TIA ss.
313(a), within 60 days after January 1st of each year, commencing with the
year after the issuance of the Transition Bonds of any Series, the Bond
Trustee shall mail to each Holder of Transition Bonds of such Series as
required by TIA ss. 313(c) a brief report dated as of such date that complies
with TIA ss. 313(a). The Bond Trustee also shall comply with TIA ss. 313(b);
provided, however, that the initial report so issued shall be delivered not
more than 12 months after the initial issuance of each Series.
A copy of each report at the time of its mailing to Transition
Bondholders shall be filed by the Bond Trustee with the Commission and each
stock exchange, if any, on which the Transition Bonds are listed. The Issuer
shall notify the Bond Trustee in writing if and when the Transition Bonds are
listed on any stock exchange.
SECTION 7.05. Provision of Servicer Reports. Upon the written
request of any Transition Bondholder to the Bond Trustee addressed to the
Corporate Trust Office, the Bond Trustee shall provide such Transition
Bondholder with a copy of the Officer's Certificate referred to in Section
3.05 of the Servicing Agreement and the Annual Accountant's Report referred to
in Section 3.06 of the Servicing Agreement.
ARTICLE VIII
Accounts, Disbursements and Releases
SECTION 8.01. Collection of Money. Except as otherwise expressly
provided herein, the Bond Trustee may demand payment or delivery of, and shall
receive and collect, directly and without intervention or assistance of any
fiscal agent or other intermediary, all money and other property payable to or
receivable by the Bond Trustee pursuant to this Indenture. The Bond Trustee
shall apply all such money received by it as provided in this Indenture.
Except as otherwise expressly provided in this Indenture, if any default
occurs in the making of any payment or performance under any agreement or
instrument that is part of the Collateral, the Bond Trustee may take such
action as may be appropriate to enforce such payment or performance, including
the institution and prosecution of appropriate Proceedings. Any such action
shall be without prejudice to any right to claim a Default or Event of Default
under this Indenture and any right to proceed thereafter as provided in
Article V.
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SECTION 8.02. Collection Account. (a) On or prior to the Series
Issuance Date for the first Series issued hereunder, the Issuer shall open, at
the Bond Trustee's Corporate Trust Office, or at another Eligible Institution,
one or more non-interest bearing segregated trust accounts in the Bond
Trustee's name (collectively, the "Collection Account"). The Collection
Account will initially be divided into subaccounts, which need not be separate
bank accounts: a general subaccount (the "General Subaccount"), an
Overcollateralization subaccount (the "Overcollateralization Subaccount"), a
capital subaccount (the "Capital Subaccount") and a reserve subaccount (the
"Reserve Subaccount"). Prior to depositing funds or U.S. Government
Obligations in the Collection Account pursuant to Sections 4.01 or 4.02, the
Issuer shall establish defeasance subaccounts (each a "Defeasance Subaccount")
for each Series for which funds shall be deposited, as subaccounts of the
Collection Account. All amounts in the Collection Account not allocated to any
other subaccount shall be allocated to the General Subaccount. All references
to the Collection Account shall be deemed to include reference to all
subaccounts contained therein. Withdrawals from and deposits to each of the
foregoing subaccounts of the Collection Account shall be made as set forth in
Sections 4.01, 4.02, 4.03 and 8.02(c) and (d). The Collection Account shall at
all times be maintained in an Eligible Deposit Account and only the Bond
Trustee shall have access to the Collection Account for the purpose of making
deposits in and withdrawals from the Collection Account in accordance with
this Indenture. Funds in the Collection Account shall not be commingled with
any other moneys. All moneys deposited from time to time in the Collection
Account, all deposits therein pursuant to this Indenture, and all investments
made in Eligible Investments with such moneys, including all income or other
gain from such investments, shall be held by the Bond Trustee in the
Collection Account as part of the Collateral as herein provided. The Bond
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.
(b) So long as no Default or Event of Default has occurred and is
continuing, all or a portion of the funds in the Collection Account shall be
invested in Eligible Investments and reinvested by the Bond Trustee upon
Issuer Order; provided, however, that (i) such Eligible Investments shall not
mature later than the Business Day prior to the next Payment Date for such
Series or Class, (ii) such Eligible Investments shall not be sold, liquidated
or otherwise disposed of at a loss prior to the maturity thereof, and (iii) no
funds in the Defeasance Subaccount for any Series of Transition Bonds shall be
invested in Eligible Investments or otherwise, except that U.S. Government
Obligations deposited by the Issuer with the Bond Trustee pursuant to Sections
4.01 or 4.02 shall remain as such. All income or other gain from investments
of moneys deposited in the Collection Account shall be deposited by the Bond
Trustee in the Collection Account, and any loss resulting from such
investments shall be charged to the Collection Account. The Issuer will not
direct the Bond Trustee to make any investment of any funds or to sell any
investment held in the Collection Account unless the security interest granted
and perfected in such account will continue to be perfected in such investment
or the proceeds of such sale, in either case without any further action by any
Person, and, in connection with any direction to the Bond Trustee to make any
such investment or sale, if requested by the Bond Trustee, the Issuer shall
deliver to the Bond Trustee an Opinion of Counsel, acceptable to the Bond
Trustee, to such effect. Subject to Section 6.01(c), the Bond Trustee shall
not in any way be held liable for the selection of Eligible Investments or for
investment losses incurred thereon except for losses attributable to the Bond
Trustee's failure to make payments on such Eligible Investments issued by the
Bond Trustee, in its commercial capacity as principal obligor and not as Bond
Trustee, in accordance with their terms. The Bond Trustee shall have no
liability in respect of losses incurred as a result of the liquidation of any
Eligible Investment prior to its stated maturity or the failure of the Issuer
to provide timely written investment direction. The Bond Trustee shall have no
obligation to invest or reinvest any amounts held hereunder in the absence of
written investment direction pursuant to an Issuer Order, however, if (i) the
Issuer shall have failed to give investment directions for any funds on
deposit in the Collection Account to the Bond Trustee by 11:00 a.m. Eastern
Time (or such other time as may be agreed by the Issuer and Bond Trustee) on
any Business Day; or (ii) a Default or Event of Default shall have occurred
and be continuing but the Transition Bonds shall not have been declared due
and payable pursuant to Section 5.02; then the Bond Trustee shall, to the
fullest extent practicable, invest and reinvest funds in the Collection
Account in one or more Eligible Investments.
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(c) ITC Collections and investment earnings remitted by the Servicer
to the Bond Trustee and Indemnity Amounts remitted to the Bond Trustee by the
Transferor, the Seller or the Servicer or otherwise received by the Bond
Trustee or the Issuer shall be deposited in the General Subaccount.
(d) The Bond Trustee shall apply amounts on deposit in the General
Subaccount of the Collection Account to pay the monthly fees owed by the
Issuer to the Administrative Agent under the Administration Agreement on or
before the 20th day of the month following receipt of a statement from the
Administrative Agent showing the amount due. In addition, based on the
statements prepared by the Servicer pursuant to Section 4 of Annex 1 to the
Servicing Agreement, on each Payment Date, the Bond Trustee shall by 12:00
noon (New York City time) apply all amounts on deposit (after payment of the
fees paid to the Administrative Agent in accordance with the preceding
sentence) in the General Subaccount of the Collection Account (including any
Indemnity Amounts) and any investment earnings on each of the subaccounts of
the Collection Account in the following priority:
(i)all amounts owed to the Bond Trustee (including legal fees and
expenses and Indemnity Amounts owing to the Bond Trustee) shall be paid
to the Bond Trustee so long as no Event of Default would result from the
payment of or failure to pay such amounts;
(ii)all amounts owed to the Independent Directors will be paid to
the Independent Directors so long as no Event of Default would result
from the payment of or failure to pay such amounts;
(iii)the Servicing Fee and all unpaid Servicing Fees from prior
Payment Dates shall be paid to the Servicer;
(iv)so long as no Event of Default has occurred and is continuing or
would be caused by such payment, all Operating Expenses-other than (i),
(ii) and (iii) above and other than the fees paid to the Administrative
Agent pursuant to the first sentence of this Section 8.02(d) shall be
paid to the Persons entitled thereto, provided that the amount paid on
any Payment Date pursuant to this clause (iv) may not exceed $100,000 in
the aggregate for all Series;
(v)interest due and payable on the Transition Bonds, together with
any overdue interest at the applicable Bond Rate and, to the extent
permitted by law, interest thereon, will be paid to the Transition
Bondholders;
(vi)any principal of any Series or Class of Transition Bonds payable
as a result of acceleration pursuant to Section 5.02, any principal of
any Series or Class of Transition Bonds payable on a Series Termination
Date or Class Termination Date, as applicable, and any principal of and
premium on a Series or Class of Transition Bonds payable on a Redemption
Date shall be paid to the Transition Bondholders;
(vii)an amount up to the principal amount of the Transition Bonds
that is scheduled to be paid by such Payment Date in accordance with the
Expected Amortization Schedule shall be paid to the Transition
Bondholders in respect of principal on the Transition Bonds;
(viii)all unpaid Operating Expenses shall be paid to the Persons
entitled thereto;
(ix)an amount, if any, necessary to fund the balance of the Capital
Subaccount up to the Required Capital Amount shall be transferred to the
Capital Subaccount;
(x)Overcollateralization with respect to all Series of Transition
Bonds for such Payment Date shall be transferred to the
Overcollateralization Subaccount;
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(xi)provided that no Event of Default has occurred and is
continuing, an amount up to the amount of net investment earnings on
amounts in the Capital Subaccount since the previous Payment Date will be
released to the Issuer, free from the lien of this Indenture;
(xii)the balance, if any, will be allocated to the Reserve
Subaccount; and
(xiii)following repayment of all outstanding Series of Transition
Bonds, the balance, if any, will be released to the Issuer, free from the
lien of this Indenture.
If, on any Payment Date funds on deposit in the General Subaccount
are insufficient to make the payments or transfers contemplated by clauses (i)
through (x) above, the Bond Trustee will draw from amounts on deposit in the
following subaccounts up to the amount of such shortfall, in order to make
such payments and transfers: from the Reserve Subaccount, then from the
Overcollateralization Subaccount and finally from the Capital Subaccount;
provided that amounts on deposit in the Overcollateralization Subaccount and
the Capital Subaccount shall only be used for the payments contemplated by
clauses (i) though (viii) above.
All payments to the Transition Bondholders of a Series pursuant to
clauses (v) or (vi) of the first paragraph of Section 8.02(d) shall be made
pro rata based on the respective principal amounts of Transition Bonds of such
Series held by such Holders, unless, in the case of a Series comprised of two
or more Classes, the Series Supplement for such Series provides otherwise. All
payments to Transition Bondholders of a Class pursuant to clause (v) or (vi)
of the first paragraph of Section 8.02(d) shall be made pro rata based on the
respective principal amounts of Transition Bonds of such Class held by such
Holders.
SECTION 8.03. Release of Collateral. (a) All money and other
property withdrawn from the Collection Account by the Bond Trustee for payment
to the Issuer as provided in this Indenture in accordance with Section 8.02
hereof shall be deemed released from the Indenture when so withdrawn and
applied in accordance with the provisions of Article VIII, without further
notice to, or release or consent by, the Bond Trustee.
(b) So long as the Issuer is not in default hereunder, the Issuer,
through the Servicer, may collect, liquidate, sell or otherwise dispose of the
Transferred Intangible Transition Property, at any time and from time to time,
without any notice to, or release or consent by, the Bond Trustee, but only as
and to the extent permitted by the Basic Documents; provided, however, that
any and all proceeds of such dispositions shall become Collateral and be
deposited to the General Subaccount immediately upon receipt thereof by the
Issuer or any other Person, including the Servicer.
(c) Other than as provided for in clauses (a) and (b) above, the
Bond Trustee shall release property from the lien of this Indenture only upon
receipt of an Issuer Request accompanied by an Officer's Certificate, an
Opinion of Counsel and Independent Certificates in accordance with TIA ss.ss.
314(c) and 314(d)(1) meeting the applicable requirements of Section 11.01 or
an Opinion of Counsel in lieu of such Independent Certificates to the effect
that the TIA does not require any such Independent Certificate.
(d) Subject to the payment of its fees and expenses pursuant to
Section 6.07, the Bond Trustee may, and when required by the provisions of
this Indenture shall, execute instruments to release property from the lien of
this Indenture, or convey the Bond Trustee's interest in the same, in a manner
and under circumstances that are not inconsistent with the provisions of this
Indenture. No party relying upon an instrument executed by the Bond Trustee as
provided in this Article VIII shall be bound to ascertain the Bond Trustee's
authority, inquire into the satisfaction of any conditions precedent or see to
the application of any moneys.
(e) Subject to Section 8.03(c), the Bond Trustee shall, at such time
as there are no Transition Bonds Outstanding and all sums due the Bond Trustee
pursuant to Section 6.07 have
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been paid, release any remaining portion of the Collateral that secured the
Transition Bonds from the lien of this Indenture and release to the Issuer or
any other Person entitled thereto any funds then on deposit in the Collection
Account.
SECTION 8.04. Opinion of Counsel. The Bond Trustee shall receive at
least five Business Days notice when requested by the Issuer to take any
action pursuant to Section 8.03, accompanied by copies of any instruments
involved, and the Bond Trustee shall also require, as a condition to such
action, an Opinion of Counsel, in form and substance satisfactory to the Bond
Trustee, stating the legal effect of any such action, outlining the steps
required to complete the same, and concluding that all conditions precedent to
the taking of such action have been complied with and such action will not
materially and adversely impair the security for the Transition Bonds or the
rights of the Transition Bondholders in contravention of the provisions of
this Indenture; provided, however, that such Opinion of Counsel shall not be
required to express an opinion as to the fair value of the Collateral. Counsel
rendering any such opinion may rely, without independent investigation, on the
accuracy and validity of any certificate or other instrument delivered to the
Bond Trustee in connection with any such action.
SECTION 8.05. Reports by Independent Accountants. The Issuer shall
appoint a firm of Independent certified public accountants of recognized
national reputation for purposes of preparing and delivering the reports or
certificates of such accountants required by this Indenture and the related
Series Supplements. Upon any resignation by such firm the Issuer shall
promptly appoint a successor thereto that shall also be a firm of Independent
certified public accountants of recognized national reputation. If the Issuer
shall fail to appoint a successor to a firm of Independent certified public
accountants that has resigned within 15 days after such resignation, the Bond
Trustee shall promptly notify the Issuer of such failure in writing. If the
Issuer shall not have appointed a successor within 10 days thereafter the Bond
Trustee shall promptly appoint a successor firm of Independent certified
public accountants of recognized national reputation. The fees of such firm of
Independent certified public accountants and its successor shall be payable by
the Issuer.
ARTICLE IX
Supplemental Indentures
SECTION 9.01. Supplemental Indentures Without Consent of Transition
Bondholders. (a) Without the consent of the Holders of any Transition Bonds
but with prior notice to the Rating Agencies, the Issuer and the Bond Trustee,
when authorized by an Issuer Order, at any time and from time to time, may
enter into one or more indentures supplemental hereto (which shall conform to
the provisions of the Trust Indenture Act as in force at the date of the
execution thereof), in form satisfactory to the Bond Trustee, for any of the
following purposes:
(i)to correct or amplify the description of the Collateral, or to
better assure, convey and confirm unto the Bond Trustee the Collateral,
or to subject to the lien of this Indenture additional property;
(ii)to evidence the succession, in compliance with the applicable
provisions hereof, of another person to the Issuer, and the assumption by
any such successor of the covenants of the Issuer herein and in the
Transition Bonds contained;
(iii)to add to the covenants of the Issuer, for the benefit of the
Holders of the Transition Bonds, or to surrender any right or power
herein conferred upon the Issuer;
(iv)to convey, transfer, assign, mortgage or pledge any property to
or with the Bond Trustee;
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(v)to cure any ambiguity, to correct or supplement any provision
herein or in any supplemental indenture which may be inconsistent with
any other provision herein or in any supplemental indenture or to make
any other provisions with respect to matters or questions arising under
this Indenture or in any supplemental indenture; provided, however, that
(i) such action shall not, as evidenced by an Opinion of Counsel,
adversely affect in any material respect the interests of any Transition
Bondholder and (ii) the Rating Agency Condition shall have been satisfied
with respect thereto by all Rating Agencies other than Moody's (and prior
written notice of such action shall be provided to Moody's);
(vi)to evidence and provide for the acceptance of the appointment
hereunder by a successor bond trustee with respect to the Transition
Bonds and to add to or change any of the provisions of this Indenture as
shall be necessary to facilitate the administration of the trusts
hereunder by more than one bond trustee, pursuant to the requirements of
Article VI;
(vii)to modify, eliminate or add to the provisions of this Indenture
to such extent as shall be necessary to effect the qualification of this
Indenture under the TIA or under any similar Federal statute hereafter
enacted and to add to this Indenture such other provisions as may be
expressly required by the TIA;
(viii)to set forth the terms of any Series that has not theretofore
been authorized by a Series Supplement; or
(ix)to provide for any hedge or swap transactions with respect to
any floating rate Series or Class of Transition Bonds or any Series or
Class specific credit enhancement; provided, however, that (i) such
action shall not, as evidenced by an opinion of counsel, adversely affect
in any material respect the interests of any Transition Bondholder and
(ii) the Rating Agency Condition shall have been satisfied with respect
thereto by all Rating Agencies other than Moody's (and prior written
notice of such action shall be provided to Moody's).
The Bond Trustee is hereby authorized to join in the execution of
any such supplemental indenture and to make any further appropriate agreements
and stipulations that may be therein contained.
(b) The Issuer and the Bond Trustee, when authorized by an Issuer
Order, may, also without the consent of any of the Holders of the Transition
Bonds, enter into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to, or changing in any manner or eliminating
any of the provisions of, this Indenture or of modifying in any manner the
rights of the Holders of the Transition Bonds under this Indenture; provided,
however, that (i) such action shall not, as evidenced by an Opinion of
Counsel, adversely affect the interests of any Transition Bondholder and (ii)
the Rating Agency Condition shall have been satisfied with respect thereto by
all Rating Agencies other than Moody's (and prior written notice of such
action shall be provided to Moody's).
SECTION 9.02. Supplemental Indentures with Consent of Transition
Bondholders. The Issuer and the Bond Trustee, when authorized by an Issuer
Order, also may, with prior notice to the Rating Agencies and with the consent
of the Holders of not less than a majority of the Outstanding Amount of the
Transition Bonds of each Series or Class to be affected, by Act of such
Holders delivered to the Issuer and the Bond Trustee, enter into an indenture
or indentures supplemental hereto for the purpose of adding any provisions to,
or changing in any manner or eliminating any of the provisions of, this
Indenture or of modifying in any manner the rights of the Holders of the
Transition Bonds under this Indenture; provided, however, that no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Transition Bond of each Series or Class affected thereby:
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(i)change the date of payment of any instalment of principal of or
premium, if any, or interest on any Transition Bond, or reduce the
principal amount thereof, the interest rate thereon or the redemption
price or the premium, if any, with respect thereto, change the provisions
of this Indenture and the related applicable Series Supplement relating
to the application of collections on, or the proceeds of the sale of, the
Collateral to payment of principal of or premium, if any, or interest on
the Transition Bonds, or change any place of payment where, or the coin
or currency in which, any Transition Bond or the interest thereon is
payable;
(ii)impair the right to institute suit for the enforcement of the
provisions of this Indenture requiring the application of funds available
therefor, as provided in Article V, to the payment of any such amount due
on the Transition Bonds on or after the respective due dates thereof (or,
in the case of redemption, on or after the Redemption Date);
(iii)reduce the percentage of the Outstanding Amount of the
Transition Bonds or of a Series or Class thereof, the consent of the
Holders of which is required for any such supplemental indenture, or the
consent of the Holders of which is required for any waiver of compliance
with certain provisions of this Indenture or certain defaults hereunder
and their consequences provided for in this Indenture or modify or alter
the provisions of the proviso to the definition of the term
"Outstanding";
(iv)reduce the percentage of the Outstanding Amount of the
Transition Bonds required to direct the Bond Trustee to direct the Issuer
to sell or liquidate the Collateral pursuant to Section 5.04;
(v)modify any provision of this Section except to increase any
percentage specified herein or to provide that certain additional
provisions of this Indenture or the Basic Documents cannot be modified or
waived without the consent of the Holder of each Outstanding Transition
Bond affected thereby;
(vi)modify any of the provisions of this Indenture in such manner as
to affect the amount of any payment of interest, principal or premium, if
any, payable on any Transition Bond on any Payment Date or to affect the
rights of the Holders of Transition Bonds to the benefit of any
provisions for the mandatory redemption of the Transition Bonds contained
herein or change the Redemption Dates, Expected Amortization Schedules or
Series Termination Dates or Class Termination Dates of any Transition
Bonds;
(vii)decrease the Overcollateralization Amount or Required Capital
Amount with respect to any Series or the Calculated Overcollateralization
Level with respect to any Payment Date;
(viii)modify or alter the provisions of this Indenture regarding the
voting of Transition Bonds held by the Issuer, the Transferor, the
Seller, an Affiliate of any of them or any obligor on the Transition
Bonds;
(ix)decrease the percentage of the aggregate principal amount of
Transition Bonds required to amend the sections of this Indenture which
specify the applicable percentage of the aggregate principal amount of
the Transition Bonds necessary to amend this Indenture or certain other
related agreements; or
(x)permit the creation of any lien ranking prior to or on a parity
with the lien of this Indenture with respect to any part of the
Collateral or, except as otherwise permitted or contemplated herein,
terminate the lien of this Indenture on any property at any time subject
hereto or deprive the Holder of any Transition Bond of the security
provided by the lien of this Indenture.
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It shall not be necessary for any Act of Transition Bondholders
under this Section to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such Act shall approve the substance
thereof.
Promptly after the execution by the Issuer and the Bond Trustee of
any supplemental indenture pursuant to this Section, the Bond Trustee shall
mail to the Holders of the Transition Bonds to which such amendment or
supplemental indenture relates, a notice prepared by the Issuer setting forth
in general terms the substance of such supplemental indenture. Any failure of
the Bond Trustee to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such supplemental
indenture.
SECTION 9.03. Execution of Supplemental Indentures. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modifications thereby of the trusts
created by this Indenture, the Bond Trustee shall be entitled to receive, and
subject to Sections 6.01 and 6.02, shall be fully protected in relying upon,
an Opinion of Counsel stating that the execution of such supplemental
indenture is authorized or permitted by this Indenture. The Bond Trustee may,
but shall not be obligated to, enter into any such supplemental indenture that
affects the Bond Trustee's own rights, duties, liabilities or immunities under
this Indenture or otherwise.
SECTION 9.04. Effect of Supplemental Indenture. Upon the execution
of any supplemental indenture pursuant to the provisions hereof, this
Indenture shall be and be deemed to be modified and amended in accordance
therewith with respect to each Series or Class of Transition Bonds affected
thereby, and the respective rights, limitations of rights, obligations,
duties, liabilities and immunities under this Indenture of the Bond Trustee,
the Issuer and the Holders of the Transition Bonds shall thereafter be
determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments, and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.
SECTION 9.05. Conformity with Trust Indenture Act. Every amendment
of this Indenture and every supplemental indenture executed pursuant to this
Article IX shall conform to the requirements of the TIA as then in effect so
long as this Indenture shall then be qualified under the TIA.
SECTION 9.06. Reference in Transition Bonds to Supplemental
Indentures. Transition Bonds authenticated and delivered after the execution
of any supplemental indenture pursuant to this Article IX may, and if required
by the Bond Trustee shall, bear a notation in form approved by the Bond
Trustee as to any matter provided for in such supplemental indenture. If the
Issuer or the Bond Trustee shall so determine, new Transition Bonds so
modified as to conform, in the opinion of the Bond Trustee and the Issuer, to
any such supplemental indenture may be prepared and executed by the Issuer and
authenticated and delivered by the Bond Trustee in exchange for Outstanding
Transition Bonds.
ARTICLE X
Redemption of Transition Bonds
SECTION 10.01. Optional Redemption by Issuer. The Issuer may, at its
option, redeem the Transition Bonds of a Series, in whole or from time to time
in part, as permitted by the related Series Supplement on any Redemption Date
at a price specified in such Series Supplement (such price being called the
"Redemption Price") plus interest accrued on the Transition Bonds to be
redeemed to such Redemption Date. If the Issuer shall elect to redeem the
Transition Bonds of a Series pursuant to this Section 10.01, it shall furnish
written notice of such election to the Bond Trustee not later than 25 days
prior to the Redemption Date for such redemption and shall deposit with the
Bond Trustee the Redemption Price of the Transition Bonds to be redeemed plus
interest
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accrued thereon to such Redemption Date on or prior to such Redemption Date
whereupon all such Transition Bonds shall be due and payable on such
Redemption Date upon the furnishing of a notice complying with Section 10.02
hereof to each Holder of the Transition Bonds of such Series pursuant to this
Section 10.01.
SECTION 10.02. Form of Redemption Notice. Unless otherwise specified
in the Series Supplement relating to a Series of Transition Bonds, notice of
redemption under Section 10.01 hereof shall be given by the Bond Trustee by
first-class mail, postage prepaid, mailed not less than five days nor more
than 45 days prior to the applicable Redemption Date to each Holder of
Transition Bonds to be redeemed, as of the close of business on the Record
Date preceding the applicable Redemption Date at such Holder's address
appearing in the Transition Bond Register.
All notices of redemption shall state:
(1) the Redemption Date;
(2) the amount of such Transition Bonds to be redeemed;
(3) the Redemption Price; and
(4) the place where such Transition Bonds are to be surrendered for
payment of the Redemption Price and accrued interest (which shall be the
office or agency of the Issuer to be maintained as provided in Section
3.02 hereof).
Notice of redemption of the Transition Bonds to be redeemed shall be
given by the Bond Trustee in the name and at the expense of the Issuer.
Failure to give notice of redemption, or any defect therein, to any Holder of
any Transition Bond selected for redemption shall not impair or affect the
validity of the redemption of any other Transition Bond. Any notice of
optional redemption may be conditioned upon the deposit of sufficient moneys
to pay the Redemption Price and accrued interest with the Bond Trustee before
the date fixed for redemption and such notice shall be of no effect unless
such moneys are so deposited.
SECTION 10.03. Payment of Redemption Price. If (a) unconditional
notice of redemption has been duly mailed or duly waived by the Holders of all
Transition Bonds called for redemption or (b) conditional notice of redemption
has been so mailed or waived and the redemption moneys have been duly
deposited with the Bond Trustee, then in either case the Transition Bonds
called for redemption shall be payable on the applicable Redemption Date at
the applicable Redemption Price. No further interest will accrue on the
principal amount of any Transition Bonds called for redemption after the
Redemption Date for such redemption if payment of the Redemption Price thereof
has been duly provided for, and the Holder of such Transition Bonds will have
no rights with respect thereto, except to receive payment of the Redemption
Price thereof and unpaid interest accrued to the Redemption Date. Payment of
the Redemption Price together with accrued interest shall be made by the Bond
Trustee to or upon the order of the Holders of the Transition Bonds called for
redemption upon surrender of such Transition Bonds, and the Transition Bonds
so redeemed shall cease to be of further effect and the Lien hereunder shall
be released with respect to such Transition Bonds.
ARTICLE XI
Miscellaneous
SECTION 11.01. Compliance Certificates and Opinions, etc. Upon any
application or request by the Issuer to the Bond Trustee to take any action
under any provision of this Indenture, the Issuer shall furnish to the Bond
Trustee (i) an Officer's Certificate stating that all conditions precedent, if
any, provided for in this Indenture relating to the proposed action have
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been complied with, (ii) an Opinion of Counsel stating that in the opinion of
such counsel all such conditions precedent, if any, have been complied with
and (iii) (if required by the TIA) an Independent Certificate from a firm of
certified public accountants meeting the applicable requirements of this
Section, except that, in the case of any such application or request as to
which the furnishing of such documents is specifically required by any
provision of this Indenture, no additional certificate or opinion need be
furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(a) statement that each signatory of such certificate or opinion has
read or has caused to be read such covenant or condition and the definitions
herein relating thereto;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of each such signatory, such
signatory has made such examination or investigation as is necessary to enable
such signatory to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such
signatory, such condition or covenant has been complied with.
SECTION 11.02. Form of Documents Delivered to Bond Trustee. In any
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may
certify or give an opinion with respect to some matters and one or more other
such Persons as to other matters, and any such Person may certify or give an
opinion as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer
may be based, insofar as it relates to legal matters, upon a certificate or
opinion of, or representations by, counsel, unless such officer knows, or in
the exercise of reasonable care should know, that the certificate or opinion
or representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate of an Authorized Officer
or Opinion of Counsel may be based, insofar as it relates to factual matters,
upon a certificate or opinion of, or representations by, an officer or
officers of the Servicer, the Transferor, the Seller or the Issuer, stating
that the information with respect to such factual matters is in the possession
of the Servicer, the Transferor, the Seller or the Issuer, unless such
Authorized Officer or counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect
to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Bond Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application
or at the effective date of such certificate or report (as the case may be),
of the facts and opinions stated in such document shall in such case be
conditions precedent to the right of the Issuer to have such application
granted or to the sufficiency of such certificate or report. The foregoing
shall not, however, be construed to affect the Bond Trustee's right to rely
upon the truth and accuracy of any statement or opinion contained in any such
document as provided in Article VI.
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SECTION 11.03. Acts of Transition Bondholders. (a) Any request,
demand, authorization, direction, notice, consent, waiver or other action
provided by this Indenture to be given or taken by Transition Bondholders may
be embodied in and evidenced by one or more instruments of substantially
similar tenor signed by such Transition Bondholders in person or by agents
duly appointed in writing; and except as herein otherwise expressly provided
such action shall become effective when such instrument or instruments are
delivered to the Bond Trustee, and, where it is hereby expressly required, to
the Issuer. Such instrument or instruments (and the action embodied therein
and evidenced thereby) are herein sometimes referred to as the "Act" of the
Transition Bondholders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent
shall be sufficient for any purpose of this Indenture and (subject to Section
6.01) conclusive in favor of the Bond Trustee and the Issuer, if made in the
manner provided in this Section.
(b) The fact and date of the execution by any person of any such
instrument or writing may be proved in any manner that the Bond Trustee deems
sufficient.
(c) The ownership of Transition Bonds shall be proved by the
Transition Bond Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Transition Bonds shall bind the
Holder of every Transition Bond issued upon the registration thereof or in
exchange therefor or in lieu thereof, in respect of anything done, omitted or
suffered to be done by the Bond Trustee or the Issuer in reliance thereon,
whether or not notation of such action is made upon such Transition Bond.
SECTION 11.04. Notices, etc., to Bond Trustee, Issuer and Rating
Agencies. Any request, demand, authorization, direction, notice, consent,
waiver or Act of Transition Bondholders or other documents provided or
permitted by this Indenture to be made upon, given or furnished to or filed
with:
(a)the Bond Trustee by any Transition Bondholder or by the Issuer
shall be sufficient for every purpose hereunder if made, given, furnished
or filed in writing, delivered personally, via facsimile transmission, by
reputable overnight courier or by first-class mail, postage prepaid, to
the Bond Trustee at its Corporate Trust Office, or
(b)the Issuer by the Bond Trustee or by any Transition Bondholder
shall be sufficient for every purpose hereunder if in writing, delivered
personally, via facsimile transmission, by reputable overnight courier or
by first-class mail, postage prepaid, to the Issuer addressed to: West
Penn Funding LLC, 2325B-2 Renaissance Drive, Las Vegas, Nevada 89119,
Attention: Secretary, or at any other address previously furnished in
writing to the Bond Trustee by the Issuer. The Issuer shall promptly
transmit any notice received by it from the Transition Bondholders to the
Bond Trustee.
Notices required to be given to the Rating Agencies by the Issuer or
the Bond Trustee shall be in writing, delivered personally, via facsimile
transmission, by reputable overnight courier or by first-class mail, postage
prepaid, to (i) in the case of Fitch IBCA, at the following address: Fitch
IBCA, Inc., 1 State Street Plaza, New York, New York 10004, Attention: ABS
Surveillance, (ii) in the case of Moody's, at the following address: Moody's
Investors Service, Inc., Attention: ABS Monitoring Department, 99 Church
Street, New York, New York 10007 and (iii) in the case of Standard & Poor's,
at the following address: Standard & Poor's Corporation, 26 Broadway (15th
Floor), New York, New York 10004, Attention: Asset Backed Surveillance
Department.
SECTION 11.05. Notices to Transition Bondholders; Waiver. Where this
Indenture provides for notice to Transition Bondholders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly
provided) if in writing and delivered by first- class mail, postage prepaid,
to each Transition Bondholder affected by such event, at their address
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as it appears on the Transition Bond Register, not later than the latest date,
and not earlier than the earliest date, prescribed for the giving of such
notice. In any case where notice to Transition Bondholders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed
to any particular Transition Bondholder shall affect the sufficiency of such
notice with respect to other Transition Bondholders, and any notice that is
mailed in the manner herein provided shall conclusively be presumed to have
been duly given.
Where this Indenture provides for notice in any manner, such notice
may be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Transition Bondholders shall be filed with the
Bond Trustee but such filing shall not be a condition precedent to the
validity of any action taken in reliance upon such a waiver.
In case it shall be impractical to deliver notice in accordance with
the first paragraph of this Section 11.05 to the Holders of Transition Bonds
when such notice is required to be given pursuant to any provision of this
Indenture, then any manner of giving such notice as shall be satisfactory to
the Bond Trustee shall be deemed to be a sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies,
failure to give such notice shall not affect any other rights or obligations
created hereunder, and shall not under any circumstance constitute a Default
or Event of Default.
SECTION 11.06. Alternate Payment and Notice Provisions.
Notwithstanding any provision of this Indenture or any of the Transition Bonds
to the contrary, the Issuer may enter into any agreement with any Holder of a
Transition Bond providing for a method of payment, or notice by the Bond
Trustee or any Paying Agent to such Holder, that is different from the methods
provided for in this Indenture for such payments or notices. The Issuer will
furnish to the Bond Trustee a copy of each such agreement and the Bond Trustee
will cause payments to be made and notices to be given in accordance with such
agreements.
SECTION 11.07. Conflict with Trust Indenture Act. If any provision
hereof limits, qualifies or conflicts with another provision hereof that is
required to be included in this Indenture by any of the provisions of the TIA,
such required provision shall control.
The provisions of TIA ss.ss. 310 through 317 that impose duties on
any person (including the provisions automatically deemed included herein
unless expressly excluded by this Indenture) are a part of and govern this
Indenture, whether or not physically contained herein.
SECTION 11.08. Effect of Headings and Table of Contents. The Article
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.
SECTION 11.09. Successors and Assigns. All covenants and agreements
in this Indenture and the Transition Bonds by the Issuer shall bind its
successors and permitted assigns, whether so expressed or not.
All agreements of the Bond Trustee in this Indenture shall bind its
successors.
SECTION 11.10. Separability. In case any provision in this Indenture
or in the Transition Bonds shall be invalid, illegal or unenforceable, the
validity, legality, and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
SECTION 11.11. Benefits of Indenture. Nothing in this Indenture or
in the Transition Bonds, express or implied, shall give to any Person, other
than the parties hereto and their successors hereunder, and the Transition
Bondholders, and any other party secured hereunder, and any other Person with
an ownership interest in any part of the Collateral, any benefit or any legal
or equitable right, remedy or claim under this Indenture.
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SECTION 11.12. Legal Holidays. In any case where the date on which
any payment is due shall not be a Business Day, then (notwithstanding any
other provision of the Transition Bonds or this Indenture) payment need not be
made on such date, but may be made on the next succeeding Business Day with
the same force and effect as if made on the date on which nominally due, and
no interest shall accrue for the period from and after any such nominal date.
SECTION 11.13. GOVERNING LAW. THIS INDENTURE SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, 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, PROVIDED THAT THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA SHALL GOVERN
THE CREATION, ATTACHMENT, PERFECTION AND ENFORCEMENT OF THE SECURITY INTEREST
HEREUNDER IN THE INTANGIBLE TRANSITION PROPERTY UNDER THE STATUTE.
SECTION 11.14. Counterparts. This Indenture may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
SECTION 11.15. Issuer Obligation. No recourse may be taken, directly
or indirectly, with respect to the obligations of the Issuer or the Bond
Trustee on the Transition Bonds or under this Indenture or any certificate or
other writing delivered in connection herewith or therewith, against (i) any
owner of a beneficial interest in the Issuer or (ii) any partner, owner,
beneficiary, agent, officer, director, employee or agent of the Bond Trustee,
any holder of a beneficial interest in the Issuer or the Bond Trustee or of
any successor or assign of the Bond Trustee, except as any such Person may
have expressly agreed (it being understood that none of the Bond Trustee's
obligations are in its individual capacity).
SECTION 11.16. No Petition. The Bond Trustee, by entering into this
Indenture, and each Transition Bondholder, by accepting a Transition Bond,
hereby covenant and agree that they will not at any time institute against the
Issuer, or join in any institution against the Issuer of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any United States Federal or state bankruptcy or similar law
in connection with any obligations relating to the Transition Bonds, this
Indenture or any of the Basic Documents.
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IN WITNESS WHEREOF, the Issuer and the Bond Trustee have caused this
Indenture to be duly executed by their respective officers, thereunto duly
authorized and duly attested, all as of the day and year first above written.
WEST PENN FUNDING LLC,
by
Name:
Title:
BANKERS TRUST COMPANY, as Bond
Trustee,
by
Name:
Title:
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EXHIBIT 4.2
=============================================================================
WEST PENN FUNDING LLC,
Issuer
and
BANKERS TRUST COMPANY,
Bond Trustee
------------------------------
SERIES SUPPLEMENT
Dated as of November 16, 1999
------------------------------
=============================================================================
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TABLE OF CONTENTS
Page
SECTION 1. Definitions................................................... 2
SECTION 2. Designation; Series Issuance Dates............................ 4
SECTION 3. Initial Principal Amount; Bond Rate; Expected
Final Payment Date; Series or Class
Termination Date...................................... 4
SECTION 4. Payment Dates; Expected Amortization Schedule
for Principal; Interest; Overcollateralization
Amount; Required Capital Amount....................... 5
SECTION 5. Authorized Initial Denominations.............................. 7
SECTION 6. Redemption.................................................... 7
SECTION 7. Credit Enhancement............................................ 7
SECTION 8. Delivery and Payment for the Series 1999-A
Transition Bonds; Form of the Series 1999-A
Transition Bonds...................................... 7
SECTION 9. Confirmation of Indenture..................................... 7
SECTION 10. Counterparts.................................................. 7
SECTION 11. Governing Law................................................. 7
SECTION 12. Issuer Obligation............................................. 8
Schedule A Calculated Overcollateralization Level
Schedule B Expected Amortization Schedule
Exhibit A Form of Transition Bonds
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SERIES SUPPLEMENT dated as of November 16, 1999
(this "Supplement"), by and between WEST PENN
FUNDING LLC, a Delaware limited liability company
(the "Issuer"), and BANKERS TRUST COMPANY, a New
York banking corporation (the "Bond Trustee"), as
Bond Trustee under the Indenture dated as of
November 16, 1999, between the Issuer and the Bond
Trustee (the "Indenture").
PRELIMINARY STATEMENT
Section 9.01 of the Indenture provides, among other things, that the
Issuer and the Bond Trustee may at any time and from time to time enter into
one or more indentures supplemental to the Indenture for the purposes of
authorizing the issuance by the Issuer of a Series of Transition Bonds and
specifying the terms thereof. The Issuer has duly authorized the execution and
delivery of this Supplement and the creation of a Series of Transition Bonds
with an initial aggregate principal amount of $600,000,000 to be known as the
Issuer's Transition Bonds, Series 1999-A (the "Series 1999-A Transition
Bonds"). All acts and all things necessary to make the Series 1999-A
Transition Bonds, when duly executed by the Issuer and authenticated by the
Bond Trustee as provided in the Indenture and this Supplement and issued by
the Issuer, the valid, binding and legal obligations of the Issuer and to make
this Supplement a valid and enforceable supplement to the Indenture have been
done, performed and fulfilled and the execution and delivery hereof have been
in all respects duly and lawfully authorized. The Issuer and the Bond Trustee
are executing and delivering this Supplement in order to provide for the
Series 1999-A Transition Bonds.
In order to secure the payment of principal of and interest on the
Series 1999-A Transition Bonds issued and to be issued under the Indenture
and/or any Series Supplement, the Issuer hereby Grants to the Bond Trustee as
trustee for the benefit of the Holders of the Transition Bonds from time to
time issued and outstanding, all of the Issuer's right, title and interest in
and to (a) the Intangible Transition Property transferred by the Seller to the
Issuer from time to time pursuant to the Sale Agreement and all proceeds
thereof, (b) the Transfer Agreement, (c) all Bills of Sale delivered by the
Transferor pursuant to the Transfer Agreement, (d) the Sale Agreement, (e) all
Bills of Sale delivered by the Seller pursuant to the Sale Agreement, (f) the
Servicing Agreement, (g) the Collection Account and all amounts on deposit
therein from time to time, (h) all
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Swap Agreements with respect to the Series 1999-A Transition Bonds, (i) all
other property of whatever kind owned from time to time by the Issuer
including all accounts, accounts receivable and chattel paper, (j) all present
and future claims, demands, causes and choses in action in respect of any or
all of the foregoing and (k) all payments on or under and all proceeds of
every kind and nature whatsoever in respect of any or all of the foregoing,
including all proceeds of the conversion, voluntary or involuntary, into cash
or other liquid property, all cash proceeds, accounts, accounts receivable,
general intangibles, notes, drafts, acceptances, chattel paper, checks,
deposit accounts, insurance proceeds, condemnation awards, rights to payment
of any and every kind, and other forms of obligations and receivables,
instruments and other property which at any time constitute all or part of or
are included in the proceeds of any of the foregoing (collectively, the
"Collateral"); provided that cash or other property distributed to the Issuer
from the Collection Account in accordance with the provisions of the Indenture
will not be subject to the lien of the Indenture.
To have and to hold in trust to secure the payment of principal of
and premium, if any, and interest on, and any other amounts (including all
fees, expenses, counsel fees and other amounts due and owing to the Bond
Trustee) owing in respect of, the Transition Bonds equally and ratably without
prejudice, preference, priority or distinction, except as expressly provided
in the Indenture or any Series Supplement and to secure performance by the
Issuer of all of the Issuer's obligations under the Indenture and all Series
Supplements with respect to the Transition Bonds, all as provided in the
Indenture.
The Bond Trustee, as trustee on behalf of the Holders of the
Transition Bonds, acknowledges such Grant, accepts the trusts hereunder in
accordance with the provisions hereof and agrees to perform its duties
required in the Indenture and this Supplement.
SECTION 1. Definitions. (a) Article One of the Indenture provides
that the meanings of certain defined terms used in the Indenture shall, when
applied to the Transition Bonds of a particular Series, be as defined in
Article One but with such additional provisions as are specified in the
related Series Supplement. With respect to the Series 1999-A Transition Bonds,
the following definitions shall apply:
"Adjustment Date" has the meaning set forth in Section 9 of this
Supplement.
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"Authorized Initial Denominations" shall mean $1,000 and integral
multiples thereof.
"Bond Rate" has the meaning set forth in Section 3 of this
Supplement.
"Calculated Overcollateralization Level" means, with respect to any
Payment Date, the amount set forth as such in Schedule A hereto, as such
Schedule has been adjusted in accordance with Section 4(d)(ii) hereof.
"Calculation Date" shall mean: with respect to each annual
Adjustment Date, the preceding October 1st; with respect to the January 1,
2008 quarterly Adjustment Date, December 15, 2007; with respect to the April
1, 2008 quarterly Adjustment Date, March 15, 2008; and with respect to each
monthly Adjustment Date, the day that is 15 calendar days prior to such
Adjustment Date.
"Class Termination Date" means, with respect to any Class of the
Series 1999-A Transition Bonds, the termination date therefor, as specified in
Section 3 of this Supplement.
"Expected Amortization Schedule" means Schedule B to this
Supplement.
"Expected Final Payment Date" means, with respect to any Class of
the Series 1999-A Transition Bonds, the expected final payment date therefor,
as specified in Section 3 of this Supplement.
"Interest Accrual Period" means, with respect to any Payment Date,
the period from and including the preceding Payment Date (or, in the case of
the first Payment Date, from and including the Series Issuance Date) to and
excluding such Payment Date.
"Overcollateralization Amount" has the meaning set forth in Section
4(d)(i) of this Supplement.
"Payment Date" has the meaning set forth in Section 4(a) of this
Supplement.
"Record Date" shall mean, with respect to any Payment Date, the
close of business on the Business Day prior to such Payment Date.
"Required Capital Amount" has the meaning set forth in Section 4(e)
of this Supplement.
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"Series Issuance Date" has the meaning set forth in Section 2(b) of
this Supplement.
"Series Termination Date" has the meaning set forth in Section 3 of
this Supplement.
(b) All terms used in this Supplement that are defined in the
Indenture, either directly or by reference therein, have the meanings assigned
to them therein, except to the extent such terms are defined or modified in
this Supplement or the context clearly requires otherwise.
SECTION 2. Designation; Series Issuance Dates. (a) Designation. The
Series 1999-A Transition Bonds shall be designated generally as the Issuer's
Transition Bonds, Series 1999-A and further denominated as Classes A-1 through
A-4.
(b) Series Issuance Date. The Series 1999-A Transition Bonds that
are authenticated and delivered by the Bond Trustee to or upon the order of
the Issuer on November 16, 1999 (the "Series Issuance Date") shall have as
their date of authentication November 16, 1999. Each other Series 1999-A
Transition Bond shall be dated the date of its authentication.
SECTION 3. Initial Principal Amount; Bond Rate; Expected Final
Payment Date; Series or Class Termination Date. The Transition Bonds of each
Class of the Series 1999-A Transition Bonds shall have the initial principal
amounts, bear interest at the rates per annum and shall have Expected Final
Payment Dates and Class Termination Dates as set forth below:
Initial
Principal Bond Expected Final Class
Class Amount Rate Payment Date Termination Date
A-1 $74,000,000 6.320% 6/25/01 6/25/03
A-2 $172,000,000 6.630% 12/26/03 12/26/05
A-3 $198,000,000 6.810% 9/25/06 9/25/08
A-4 $156,000,000 6.980% 6/25/08 12/26/08
The Bond Rate shall be computed on the basis of a 360-day
year of four 90-day periods.
SECTION 4. Payment Dates; Expected Amortization Schedule for
Principal; Interest; Overcollateralization Amount; Required Capital Amount.
(a) Payment Dates. The Payment Dates for each Class of the Series 1999-A
Transition
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Bonds are March 25th, June 25th, September 25th and December 26th of each year
or, if any such date is not a Business Day, the next succeeding Business Day,
commencing on March 27, 2000 and continuing until the earlier of repayment of
such Class in full and the applicable Class Termination Date.
(b) Expected Amortization Schedule for Principal. Unless an Event of
Default shall have occurred and be continuing and the unpaid principal amount
of all Series of Transition Bonds has been declared to be due and payable
together with accrued and unpaid interest thereon, on each Payment Date, the
Bond Trustee shall distribute to the Series 1999-A Transition Bondholders of
record as of the related Record Date amounts payable in respect of the Series
1999-A Transition Bonds pursuant to Section 8.02(d) of the Indenture as
principal, in accordance with the Expected Amortization Schedule. To the
extent that more than one Class of the Series 1999-A Transition Bonds is to
receive payments of principal in accordance with the Expected Amortization
Schedule on any Payment Date, such amounts will be allocated in a sequential
manner, to the extent funds are available, as follows: (i) to the holders of
the Series 1999-A Transition Bonds, Class A-1, until this Class is retired in
full; (ii) to the holders of the Series 1999-A Transition Bonds, Class A-2,
until this Class is retired in full; (iii) to the holders of the Series 1999-A
Transition Bonds, Class A-3, until this Class is retired in full; and (iv) to
the holders of the Series 1999-A Transition Bonds, Class A-4, until this Class
if retired in full; provided, however, that other than in the event of a
redemption or an acceleration upon an Event of Default in no event shall a
principal payment pursuant to this Section 4(b) on any Class on a Payment Date
be greater than the amount that reduces the Outstanding Amount of such Class
of Series 1999-A Transition Bonds to the amount specified in the Expected
Amortization Schedule which is attached as Schedule B hereto for such Class
and Payment Date. If an Event of Default shall have occurred and be continuing
and the unpaid principal amount of all Series of Transition Bonds has been
declared to be due and payable together with accrued and unpaid interest
thereon, principal payments on each Class of Series 1999-A Transition Bonds
will be made on a pro rata basis based on the respective Class Principal
Balances for each such Class as of the prior Payment Date. Not later than each
Schedule Revision Date, the Issuer shall deliver to the Bond Trustee a
replacement Schedule B hereto, adjusted to reflect the event giving rise to
such Schedule Revision Date and setting forth the Expected Amortization
Schedule for each Payment Date; provided, however, that no such replacement
schedule shall be required if the event
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giving rise to such Schedule Revision Date is a redemption of the Series
1999-A Transition Bonds in whole.
(c) Interest. Interest will be payable on each Class of the Series
1999-A Transition Bonds on each Payment Date in an amount equal to one-quarter
of the product of (i) the applicable Bond Rate and (ii) the Outstanding Amount
of the related Class of Transition Bonds as of the close of business on the
preceding Payment Date after giving effect to all payments of principal made
to the holders of the related Class of Series 1999-A Transition Bonds on such
preceding Payment Date; and provided, further, that with respect to the
initial Payment Date or, if no payment has yet been made, interest on the
outstanding principal balance will accrue from and including the Series
Issuance Date to, but excluding, the following Payment Date.
(d) Overcollateralization Amount. (i) The Overcollateralization
Amount for the Series 1999-A Transition Bonds shall be $3,000,000.
(ii) Not later than each Schedule Revision Date, the Issuer shall
deliver to the Bond Trustee a replacement Schedule A hereto, adjusted to
reflect the event giving rise to such Schedule Revision Date and setting forth
the Calculated Overcollateralization Level for each Payment Date; provided,
however, that no such replacement schedule shall be required if the event
giving rise to such Schedule Revision Date is a redemption of the Series
1999-A Transition Bonds in whole.
(e) Required Capital Amount. The Required Capital Amount for the
Series 1999-A Transition Bonds shall be equal to 0.50% of the initial
principal amount thereof, or $3,000,000.
SECTION 5. Authorized Initial Denominations. The Series 1999-A
Transition Bonds shall be issuable in the Authorized Initial Denominations.
SECTION 6. Redemption. (a) Mandatory Redemption. The Series 1999-A
Transition Bonds shall not be subject to mandatory redemption.
(b) Optional Redemption. The Series 1999-A Transition Bonds shall
not be subject to optional redemption by the Issuer except that the Series
1999-A Transition Bonds may be redeemed in whole at a Redemption Price equal
to the principal amount thereof plus interest at the applicable Bond Rate
accrued to the Redemption Date on any Payment Date on which the Outstanding
Amount thereof (after giving effect
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to payments that would otherwise be made on such Payment Date) has been
reduced to less than or equal to 5% of the initial principal balance thereof.
SECTION 7. Credit Enhancement. No credit enhancement (other than the
Overcollateralization Amount and the Required Capital Amount) is provided for
the Series 1999-A Transition Bonds.
SECTION 8. Delivery and Payment for the Series 1999-A Transition
Bonds; Form of the Series 1999-A Transition Bonds. The Bond Trustee shall
deliver the Series 1999-A Transition Bonds to the Issuer when authenticated in
accordance with Section 2.02 of the Indenture. The Series 1999-A Transition
Bonds of each Class shall be in the form of Exhibits A-1 through A-4 hereto.
SECTION 9. Adjustment Dates. The following table summarizes the
adjustment frequency of the Intangible Transition Charges with respect to the
Series 1999-A Transition Bonds:
Adjustment Date
Annual Adjustments............................. 1/1/01 - 1/1/07
Quarterly Adjustments.......................... 1/1/08 and 4/1/08
Monthly Adjustments............................ 7/1/08 - 11/1/08
The first annual adjustment will become effective on January 1, 2001. No
adjustment will be made on January 1, 2000.
SECTION 10. Confirmation of Indenture. As supplemented by this
Supplement, the Indenture is in all respects ratified and confirmed and the
Indenture, as so supplemented by this Supplement, shall be read, taken, and
construed as one and the same instrument.
SECTION 11. Counterparts. This Supplement may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all of such counterparts shall together constitute but one and
the same instrument.
SECTION 12. Governing Law. This Supplement shall be construed in
accordance with the laws of the State of New York without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
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parties hereunder shall be determined in accordance with such laws.
SECTION 13. Issuer Obligation. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer or the Bond Trustee
on the Transition Bonds or under this Supplement or any certificate or other
writing delivered in connection herewith or therewith, against (i) any owner
of a beneficial interest in the Issuer or (ii) any partner, owner,
beneficiary, agent, officer, director or employee of the Bond Trustee, any
holder of a beneficial interest in the Issuer or the Bond Trustee or of any
successor or assign of the Bond Trustee, except as any such Person may have
expressly agreed (it being understood that none of the Bond Trustee's
obligations are in its individual capacity).
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IN WITNESS WHEREOF, the Issuer and the Bond Trustee have caused this
Supplement to be duly executed by their respective officers thereunto duly
authorized as of the first day of the month and year first above written.
WEST PENN FUNDING LLC, as
Issuer,
by
------------------------------
Name:
Title:
BANKERS TRUST COMPANY, not in
its individual capacity but
solely as Bond Trustee on
behalf of the Transition
Bondholders,
by
------------------------------
Name:
Title:
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<PAGE>
SCHEDULE A
Calculated Overcollateralization Level
Payment Date Required
Overcollateralization
Level
Series Issuance Date............................... $0
March 2000......................................... $88,235
June 2000.......................................... $176,471
September 2000..................................... $264,706
December 2000...................................... $352,941
March 2001......................................... $441,176
June 2001.......................................... $529,412
September 2001..................................... $617,647
December 2001...................................... $705,882
March 2002......................................... $794,118
June 2002.......................................... $882,353
September 2002..................................... $970,588
December 2002...................................... $1,058,824
March 2003......................................... $1,147,059
June 2003.......................................... $1,235,294
September 2003..................................... $1,323,529
December 2003...................................... $1,411,765
March 2004......................................... $1,500,000
June 2004.......................................... $1,588,235
September 2004..................................... $1,676,471
December 2004...................................... $1,764,706
March 2005......................................... $1,852,941
June 2005.......................................... $1,941,176
September 2005..................................... $2,029,412
December 2005...................................... $2,117,647
March 2006......................................... $2,205,882
June 2006.......................................... $2,294,118
September 2006..................................... $2,382,353
December 2006...................................... $2,470,588
March 2007......................................... $2,558,824
June 2007.......................................... $2,647,059
September 2007..................................... $2,735,294
December 2007...................................... $2,823,529
March 2008......................................... $2,911,765
June 2008.......................................... $3,000,000
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<PAGE>
SCHEDULE B
<TABLE>
<CAPTION>
Expected Amortization Schedule
Outstanding Principal Balance
Payment Date Class A-1 Class A-2 Class A-3 Class A-4 Series 1999-A
<S> <C> <C> <C> <C> <C>
Series Issuance Date...... 74,000,000 172,000,000 198,000,000 156,000,000 600,000,000
March 2000................ 63,866,686 172,000,000 198,000,000 156,000,000 589,866,686
June 2000................. 49,756,496 172,000,000 198,000,000 156,000,000 575,756,496
September 2000............ 37,210,889 172,000,000 198,000,000 156,000,000 563,210,889
December 2000............. 24,266,031 172,000,000 198,000,000 156,000,000 550,266,031
March 2001................ 9,087,974 172,000,000 198,000,000 156,000,000 535,087,974
June 2001................. 0 166,261,921 198,000,000 156,000,000 520,261,921
September 2001............ 0 152,818,273 198,000,000 156,000,000 506,818,273
December 2001............. 0 138,982,948 198,000,000 156,000,000 492,982,948
March 2002................ 0 121,490,770 198,000,000 156,000,000 475,490,770
June 2002................. 0 103,087,396 198,000,000 156,000,000 457,087,396
September 2002............ 0 86,123,520 198,000,000 156,000,000 440,123,520
December 2002............. 0 68,687,742 198,000,000 156,000,000 422,687,742
March 2003................ 0 48,809,480 198,000,000 156,000,000 402,809,480
June 2003................. 0 29,309,616 198,000,000 156,000,000 383,309,616
September 2003............ 0 11,246,517 198,000,000 156,000,000 365,246,517
December 2003............. 0 0 190,691,490 156,000,000 346,691,490
March 2004................ 0 0 170,806,179 156,000,000 326,806,179
June 2004................. 0 0 151,946,383 156,000,000 307,946,384
September 2004............ 0 0 134,695,542 156,000,000 290,695,542
December 2004............. 0 0 116,977,092 156,000,000 272,977,092
March 2005................ 0 0 97,605,392 156,000,000 253,605,392
June 2005................. 0 0 79,063,216 156,000,000 235,063,216
September 2005............ 0 0 61,740,430 156,000,000 218,740,430
December 2005............. 0 0 43,958,451 156,000,000 199,958,451
March 2006................ 0 0 24,201,841 156,000,000 180,201,841
June 2006................. 0 0 4,881,586 156,000,000 160,881,586
September 2006............ 0 0 0 142,748,288 142,748,288
December 2006............. 0 0 0 124,155,582 124,155,582
March 2007................ 0 0 0 103,518,119 103,518,119
June 2007................. 0 0 0 83,186,786 83,186,786
September 2007............ 0 0 0 63,966,594 63,966,594
December 2007............. 0 0 0 44,251,656 44,251,656
March 2008................ 0 0 0 22,231,888 22,231,888
June 2008................. 0 0 0 0 0
</TABLE>
125
EXHIBIT 10.1
EXECUTION COPY
- -------------------------------------------------------------------------------
INTANGIBLE TRANSITION PROPERTY
TRANSFER AGREEMENT
between
WEST PENN FUNDING CORPORATION
Seller
and
WEST PENN POWER COMPANY
Transferor
Dated as of November 16, 1999
- -------------------------------------------------------------------------------
126
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
Definitions
SECTION 1.01. Definitions....................................................2
SECTION 1.02. Other Definitional Provisions..................................8
ARTICLE II
Conveyance of Intangible Transition Property
SECTION 2.01. Conveyance of Initial Intangible
Transition Property............................8
SECTION 2.02. Conveyance of Subsequent Intangible
Transition Property............................9
SECTION 2.03. Conditions to Conveyance of Intangible
Transition Property...........................10
ARTICLE III
Representations and Warranties of Transferor
SECTION 3.01. Organization and Good Standing................................13
SECTION 3.02. Due Qualification.............................................13
SECTION 3.03. Power and Authority...........................................14
SECTION 3.04. Binding Obligation............................................14
SECTION 3.05. No Violation..................................................14
SECTION 3.06. No Proceedings................................................15
SECTION 3.07. Approvals.....................................................16
SECTION 3.08. The Intangible Transition
Property......................................16
SECTION 3.09. Representations and Warranties of Seller......................21
ARTICLE IV
Covenants of the Transferor
SECTION 4.01. Corporate Existence...........................................22
SECTION 4.02. No Liens or Conveyances.......................................22
SECTION 4.03. Delivery of Collections.......................................23
SECTION 4.04. Notice of Liens...............................................23
SECTION 4.05. Compliance with Law...........................................23
SECTION 4.06. Covenants Related to Intangible
Transition Property...........................24
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<PAGE>
SECTION 4.07. Notice of Indemnification Events..............................25
SECTION 4.08. Protection of Title...........................................26
SECTION 4.09. Taxes.........................................................27
ARTICLE V
The Transferor
SECTION 5.01. Liability of Transferor; Indemnities..........................27
SECTION 5.02. Merger or Consolidation of, or Assumption
of the Obligations of, Transferor.............30
SECTION 5.03. Limitation on Liability of
Transferor and Others.........................32
SECTION 5.04. Opinions of Counsel...........................................33
ARTICLE VI
Miscellaneous Provisions
SECTION 6.01. Amendment.....................................................34
SECTION 6.02. Notices.......................................................35
SECTION 6.03. Assignment....................................................36
SECTION 6.04. Limitations on Rights of Others...............................36
SECTION 6.05. Severability..................................................36
SECTION 6.06. Separate Counterparts.........................................36
SECTION 6.07. Headings......................................................37
SECTION 6.08. Governing Law.................................................37
SECTION 6.09. Assignment to Issuer and to Bond Trustee......................37
SECTION 6.10. Nonpetition Covenant..........................................38
SECTION 6.11. Perfection....................................................38
SECTION 6.12. Limitation of Liability.......................................39
Exhibit A Bill of Sale
Exhibit B Form of Opinion of Counsel Regarding Transfer
of Transferred Intangible Transition Property
128
<PAGE>
INTANGIBLE TRANSITION PROPERTY TRANSFER AGREEMENT
dated as of November 16, 1999, between WEST PENN FUNDING
CORPORATION, a Delaware corporation (the "Seller"), and
WEST PENN POWER COMPANY, a Pennsylvania corporation, and
its successors in interest to the extent permitted
hereunder, as Transferor (the "Transferor").
WHEREAS the Transferor desires to contribute from time to time
Intangible Transition Property created pursuant to the Statute and the
Qualified Rate Order in exchange for all of the outstanding capital stock of
the Seller;
WHEREAS the Seller is willing to acquire the Intangible Transition
Property;
WHEREAS the Seller intends to sell the Transferred Intangible
Transition Property to the Issuer and the Issuer intends to purchase the
Transferred Intangible Transition Property from the Seller pursuant to the
Sale Agreement;
WHEREAS the Issuer, in order to finance the purchase of the
Transferred Intangible Transition Property, will from time to time issue
Transition Bonds under the Indenture;
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<PAGE>
WHEREAS the Issuer, to secure its obligations under all
Transition Bonds and the Indenture, will pledge its right, title and interest
in the Transferred Intangible Transition Property to the Bond Trustee for the
benefit of the Transition Bondholders; and
WHEREAS the Seller has determined that the transactions
contemplated by the Basic Documents are in the best interest of the Seller and
its creditors and represent a prudent and advisable course of action that does
not impair the rights and interests of the Seller's creditors.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained and intending to be legally bound hereby,
the parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definitions. (a) Whenever used in this Agreement, each
of the following words and phrases shall have the following meaning: "Addition
Notice" means, with respect to the transfer of Subsequent Intangible
Transition Property to the Seller pursuant to Section 2.02, notice, which
shall be given by the Transferor to the Seller and the Rating Agencies not
later than 10 days prior to the related Subsequent Contribution Date,
specifying the Subsequent
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<PAGE>
Contribution Date for such Subsequent Intangible Transition Property.
"Agreement" means this Intangible Transition Property Transfer
Agreement, as the same may be amended and supplemented from time to time.
"Bill of Sale" means a bill of sale substantially in the form of
Exhibit A hereto.
"Business Day" has the meaning specified in the Servicing Agreement.
"Competitive Transition Charges" has the meaning specified in the
Servicing Agreement.
"Corporate Trust Office" means Four Albany Street, New York, NY
10006, Attention: Corporate Trust and Agency Services, Structural Finance
Group, or the principal corporate trust office of any successor Bond Trustee
(the address of which the successor Bond Trustee will notify the Transition
Bondholders and the Issuer).
"Customers" has the meaning specified in the Servicing Agreement.
"Fitch IBCA" has the meaning specified in the Servicing Agreement.
"Indemnification Event" has the meaning specified in Section
5.01(d).
"Indenture" means the Indenture dated as of November 16, 1999,
between the Issuer and the Bond Trustee,
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<PAGE>
as the same may be amended and supplemented from time to time.
"Initial Contribution Date" means November 16, 1999.
"Initial Intangible Transition Property" means the Intangible
Transition Property, as identified in the related Bill of Sale, contributed to
the Seller on the Initial Contribution Date pursuant to such Bill of Sale in
connection with the issuance of the Series 1999-A Transition Bonds.
"Intangible Transition Charges" has the meaning specified in the
Servicing Agreement.
"Intangible Transition Property" has the meaning specified in the
Servicing Agreement.
"ITC Collections" has the meaning specified in the Servicing
Agreement.
"Lien" has the meaning specified in the Servicing Agreement.
"Losses" has the meaning specified in the Servicing Agreement.
"Moody's" has the meaning specified in the Servicing Agreement.
"Officers' Certificate" means a certificate signed by (a) the
chairman of the board, the president, the vice chairman of the board, the
executive vice president or any vice president and (b) a treasurer, assistant
treasurer,
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<PAGE>
secretary or assistant secretary, in each case of the Transferor or the
Servicer, as appropriate.
"Opinion of Counsel" means one or more written opinions of counsel
who may be an employee of or counsel to the Transferor or the Servicer, which
counsel shall be reasonably acceptable to the Bond Trustee, the Seller, the
Issuer or the Rating Agencies, as applicable, and which shall be in form
reasonably satisfactory to the Bond Trustee, the Seller, if applicable.
"PUC" has the meaning specified in the Servicing Agreement.
"PUC Regulations" has the meaning specified in the Servicing
Agreement.
"Qualified Rate Order" has the meaning specified in the Servicing
Agreement.
"Qualified Transition Expenses" has the meaning specified in the
Servicing Agreement.
"Rate Schedule" has the meaning specified in the Servicing
Agreement.
"Retained Intangible Transition Property" means Intangible
Transition Property other than the Transferred Intangible Transition Property.
"Seller" has the meaning specified in the heading of this Agreement.
"Serviced Intangible Transition Property" has the meaning specified
in the Servicing Agreement.
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<PAGE>
"Servicer" means West Penn, as the servicer of the Intangible
Transition Property, and each successor to West Penn (in the same capacity)
pursuant to Section 5.03 or 6.04 of the Servicing Agreement.
"Servicer Default" means an event specified in Section 6.01 of the
Servicing Agreement.
Servicing Agreement" means the Servicing Agreement dated as of
November 16, 1999, between the Issuer and the Servicer, as the same may be
amended and supplemented from time to time.
"Standard & Poor's" has the meaning specified in the Servicing
Agreement.
"Statute" has the meaning specified in the Servicing Agreement.
"Subsequent Contribution Date" means any date on which Subsequent
Intangible Transition Property is to be transferred to the Seller pursuant to
Section 2.02.
"Subsequent Intangible Transition Property" means Intangible
Transition Property, as identified in the related Bill of Sale, contributed to
the Seller on any Subsequent Contribution Date in connection with the issuance
of a Series of Transition Bonds.
"Third Party" has the meaning specified in the Servicing Agreement.
"Transferor" has the meaning specified in the heading of this
Agreement.
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<PAGE>
"Transferred Intangible Transition Property" means, collectively,
the Initial Intangible Transition Property and any Subsequent Intangible
Transition Property.
"UCC" has the meaning specified in the Servicing Agreement.
"West Penn" has the meaning specified in the Servicing Agreement.
(b) Except as otherwise specified herein or as the context may
otherwise require, each of the following terms has the meaning set forth in
the Indenture for all purposes of this Agreement, and the definitions of such
terms are equally applicable both to the singular and plural forms of such
terms:
Term Section of the Indenture
Adjustment Date.............................. 1.01(a)
Affiliate.................................... 1.01(a)
Basic Documents.............................. 1.01(a)
Bond Trustee................................. 1.01(a)
Capital Subaccount........................... 1.01(a)
Collateral................................... 1.01(a)
Collection Account........................... 1.01(a)
General Subaccount........................... 1.01(a)
Holders or Transition
Bondholders . . . . . . . . . ............. 1.01(a)
Operating Expenses........................... 1.01(a)
Overcollateralization Amount................. 1.01(a)
Payment Date................................. 1.01(a)
Person....................................... 1.01(a)
Rating Agency................................ 1.01(a)
Rating Agency Condition...................... 1.01(a)
Reserve Subaccount........................... 1.01(a)
Series........................................ 1.01(a)
Servicing Fee................................. 1.01(a)
Transition Bonds.............................. 1.01(a)
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<PAGE>
SECTION 1.02. Other Definitional Provisions. (a) The words "hereof",
"herein", "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision
of this Agreement; Section, Schedule and Exhibit references contained in this
Agreement are references to Sections, Schedules and Exhibits in or to this
Agreement unless otherwise specified; and the term "including" shall mean
"including without limitation".
(b) The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such terms.
ARTICLE II
Conveyance of Intangible Transition Property
SECTION 2.01. Conveyance of Initial Intangible Transition Property.
(a) Subject to the conditions specified in Section 2.03, the Transferor,
pursuant to a Bill of Sale, will irrevocably contribute, sell, transfer,
assign, set over and otherwise convey to the Seller, without recourse (subject
to the obligations herein), all right, title and interest of the Transferor in
and to the Initial Intangible Transition Property (such contribution, sale,
transfer, assignment, set over and conveyance of the Initial Intangible
Transition Property will include, to the fullest
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extent permitted by the Statute, the assignment of all revenues, collections,
claims, rights, payments, money or proceeds of or arising from the Intangible
Transition Charges related to the Initial Intangible Transition Property, as
the same may be adjusted from time to time). Such contribution, sale,
transfer, assignment, set over and conveyance will be expressly stated to be a
sale and, pursuant to Section 2812(e) of the Statute, shall be treated as an
absolute transfer of all of the Transferor's right, title and interest (as in
a true sale), and not as a pledge or other financing, of the Initial
Intangible Transition Property. The preceding sentence is the statement
referred to in Section 2812(e) of the Statute. The Transferor agrees and
confirms that after giving effect to the sale contemplated by such Bill of
Sale it has no rights in the Initial Intangible Transition Property to which a
security interest of creditors of the Transferor could attach because it has
sold all rights in the Initial Intangible Transition Property to the Seller
pursuant to Section 2812(e) of the Statute.
(b) Subject to the conditions specified in Section 2.03, the Seller,
pursuant to a Bill of Sale, will acquire the Initial Intangible Transition
Property from the Transferor.
SECTION 2.02. Conveyance of Subsequent Intangible Transition
Property. The Transferor may from time to time
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offer to contribute or sell additional Intangible Transition Property to the
Seller, subject to the conditions specified in Section 2.03. If any such offer
is accepted by the Seller, such Subsequent Intangible Transition Property
shall be contributed or sold to the Seller effective on the Subsequent
Contribution Date specified in the related Addition Notice, subject to the
satisfaction or waiver of the conditions specified in Section 2.03.
SECTION 2.03. Conditions to Conveyance of Intangible Transition
Property. The Transferor shall be permitted to contribute or sell Intangible
Transition Property to the Seller only upon the satisfaction or waiver of each
of the following conditions:
(i) on or prior to the Initial Contribution Date or Subsequent
Contribution Date, as applicable, the Transferor shall have delivered to
the Seller a duly executed Bill of Sale identifying the Intangible
Transition Property to be conveyed on that date;
(ii) as of the Initial Contribution Date or the Subsequent
Contribution Date, as applicable, the Transferor was not insolvent and
will not have been made insolvent by such sale and the Transferor is not
aware of any pending insolvency with respect to itself;
(iii) as of the Initial Contribution Date or the Subsequent
Contribution Date, as applicable, no breach by the Transferor of its
representations, warranties or
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covenants in this Agreement shall exist; and no Servicer Default shall
have occurred and be continuing;
(iv) as of the Initial Contribution Date or the Subsequent
Contribution Date, as applicable, (A) the Issuer shall have sufficient
funds available to pay the purchase price for the Transferred Intangible
Transition Property to be conveyed on such date and (B) all conditions to
the issuance of one or more Series of Transition Bonds intended to
provide such funds set forth in the Indenture shall have been satisfied
or waived;
(v) on or prior to the Initial Contribution Date or Subsequent
Contribution Date, as applicable, the Transferor shall have taken all
action required to transfer to the Seller ownership of the Transferred
Intangible Transition Property to be conveyed on such date, free and
clear of all Liens other than Liens created by the Issuer pursuant to the
Indenture; the Seller shall have taken any action required for the Seller
to transfer to the Issuer ownership of the Transferred Intangible
Transition Property to be conveyed on such date, free and clear of all
Liens other than Liens created by the Issuer pursuant to the Indenture;
and the Issuer or the Servicer, on behalf of the Issuer, shall have taken
any action required for the Issuer to grant the Bond Trustee a first
priority
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perfected security interest in the Collateral and maintain such security
interest as of such date; (vi) in the case of a sale of Subsequent
Intangible Transition Property only, on or prior to such Subsequent
Contribution Date, the Transferor shall have provided the Seller, the
Issuer and the Rating Agencies with a timely Addition Notice;
(vii) the Transferor shall have delivered to the Rating Agencies,
the Seller and the Issuer (A) an Opinion of Counsel with respect to the
transfer of the Transferred Intangible Transition Property then being
conveyed to the Seller substantially in the form of Exhibit B hereto and
(B) the Opinion of Counsel required by Section 5.04(a); and
(viii) the Transferor shall have delivered to the Bond Trustee, the
Seller and the Issuer an Officers' Certificate confirming the
satisfaction of each condition precedent specified in this Section 2.03.
ARTICLE III
Representations and Warranties of Transferor
As of the Initial Contribution Date and as of any Subsequent
Contribution Date, as applicable, the Transferor makes the following
representations and warranties on which the Seller has relied and will rely in
acquiring Transferred Intangible Transition Property. The Transferor agrees
and
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acknowledges that the following representations and warranties are also for
the benefit of the Issuer, as assignee of the Seller pursuant to the Sale
Agreement, and the Bond Trustee, as collateral assignee of the Issuer pursuant
to the Indenture. The representations and warranties shall survive the sale of
Transferred Intangible Transition Property to the Seller, the sale of the
Transferred Intangible Transition Property from the Seller to the Issuer
pursuant to the Sale Agreement and the pledge thereof to the Bond Trustee
pursuant to the Indenture.
SECTION 3.01. Organization and Good Standing. The Transferor is a
corporation duly organized and in good standing under the laws of the
Commonwealth of Pennsylvania, with corporate power and authority to own its
properties and conduct its business as currently owned or conducted.
SECTION 3.02. Due Qualification. The Transferor is duly qualified to
do business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions in which the ownership
or lease of property or the conduct of its business shall require such
qualifications, licenses or approvals (except where the failure to so qualify
would not be reasonably likely to have a material adverse effect on the
Transferor's business, operations, assets, revenues, properties or prospects).
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SECTION 3.03. Power and Authority. The Transferor has the corporate
power and authority to execute and deliver this Agreement and to carry out its
terms; the Transferor has full corporate power and authority to own the
Intangible Transition Property and contribute, sell and assign the Initial
Intangible Transition Property, in the case of the Initial Contribution Date,
and the Subsequent Intangible Transition Property, in the case of each
Subsequent Contribution Date, as applicable, and the Transferor has duly
authorized such contribution, sale and assignment to the Seller by all
necessary corporate action; and the execution, delivery and performance of
this Agreement has been duly authorized by the Transferor by all necessary
corporate action.
SECTION 3.04. Binding Obligation. This Agreement constitutes a
legal, valid and binding obligation of the Transferor enforceable against the
Transferor in accordance with its terms subject to bankruptcy, receivership,
insolvency, fraudulent transfer, reorganization, moratorium or other laws
affecting creditors' rights generally from time to time in effect and to
general principles of equity (regardless of whether considered in a proceeding
in equity or at law).
SECTION 3.05. No Violation. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof do not
conflict with, result
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in any breach of any of the terms and provisions of, nor constitute (with or
without notice or lapse of time) a default under, the articles of
incorporation or by-laws of the Transferor, or any indenture, agreement or
other instrument to which the Transferor is a party or by which it shall be
bound; nor result in the creation or imposition of any Lien upon any of its
properties pursuant to the terms of any such indenture, agreement or other
instrument; nor violate any law or any order, rule or regulation applicable to
the Transferor of any court or of any Federal or state regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Transferor or its properties.
SECTION 3.06. No Proceedings. There are no proceedings or
investigations pending or, to the Transferor's best knowledge, threatened,
before any court, Federal or state regulatory body, administrative agency or
other governmental instrumentality having jurisdiction over the Transferor or
its properties (i) asserting the invalidity of the Basic Documents or the
Transition Bonds, (ii) seeking to prevent the issuance of the Transition Bonds
or the consummation of any of the transactions contemplated by the Basic
Documents or the Transition Bonds or (iii) except as disclosed by the
Transferor to the Seller, seeking any determination or ruling that could
reasonably be expected to materially and adversely affect the performance
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by the Transferor of its obligations under, or the validity or enforceability
of, the Basic Documents or the Transition Bonds.
SECTION 3.07. Approvals. Except for UCC continuation filings, no
approval, authorization, consent, order or other action of, or filing with,
any court, Federal or state regulatory body, administrative agency or other
governmental instrumentality is required in connection with the execution and
delivery by the Transferor of this Agreement, the performance by the
Transferor of the transactions contemplated hereby or the fulfillment by the
Transferor of the terms hereof, except those that have been obtained or made.
SECTION 3.08. The Intangible Transition Property. (a) Information.
All information provided by the Transferor to the Seller with respect to the
Transferred Intangible Transition Property is correct in all material
respects.
(b) Effect of Transfer. The transfers and assignments herein
contemplated constitute sales of the Initial Intangible Transition Property or
the Subsequent Intangible Transition Property, as the case may be, from the
Transferor to the Seller and the beneficial interest in and title to the
Transferred Intangible Transition Property would not be part of the debtor's
estate in the event of the
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filing of a bankruptcy petition by or against the Transferor under any
bankruptcy law.
(c) Transfer Filings. The Transferor is the sole owner of the
Intangible Transition Property being sold to the Seller on the Initial
Contribution Date or Subsequent Contribution Date, as applicable; the
Transferred Intangible Transition Property has been validly transferred and
sold to the Seller free and clear of all Liens other than Liens contemplated
hereby. All filings, including filings with the PUC under the Statute,
necessary in any jurisdiction to give the Seller a valid ownership interest in
the Transferred Intangible Transition Property, free and clear of all Liens of
the Transferor or anyone claiming through the Transferor, and to give the
Seller a first priority perfected security interest in the Transferred
Intangible Transition Property have been made, other than any such filings
(except for filings with the PUC under the Statute and UCC filings with the
Secretary of State of the Commonwealth of Pennsylvania and the States of
Delaware and Nevada) the absence of which would not have an adverse impact on
(i) the ability of the Servicer to collect Intangible Transition Charges with
respect to the Serviced Intangible Transition Property or (ii) the rights of
the Seller with respect to the Transferred Intangible Transition Property.
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(d) Irrevocable; Process Valid; No Litigation; Etc. (i) The
Qualified Rate Order has been issued by the PUC in accordance with the
Statute, such order and the process by which it was issued comply with all
applicable laws, rules and regulations, and such order is in full force and
effect. (ii) As of the date of issuance of any Series of Transition Bonds,
such Transition Bonds are entitled to the protections provided by the Statute
and, accordingly, the provisions of the Qualified Rate Order relating to
Intangible Transition Property and Intangible Transition Charges are not
revocable by the PUC. (iii) (a) Under the Statute, neither the Commonwealth of
Pennsylvania nor the PUC may limit, alter or in any way impair or reduce the
value of Intangible Transition Property or Intangible Transition Charges
approved by the Qualified Rate Order or any rights thereunder, except such a
limitation or alteration may be made by the Commonwealth of Pennsylvania or
the PUC if adequate compensation is made by law for the full protection of the
Intangible Transition Charges and of Transition Bondholders; and (b) under the
Contract Clauses of the Constitutions of the Commonwealth of Pennsylvania and
the United States, the Commonwealth of Pennsylvania and the PUC cannot take
any action that substantially impairs the rights of the Transition Bondholders
unless such action is a reasonable exercise of the Commonwealth of
Pennsylvania's sovereign powers and appropriate to further a legitimate
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public purpose, and, under the Takings Clauses of the Pennsylvania and United
States Constitutions, in the event such action constitutes a permanent
appropriation of the property interest of Transition Bondholders in the
Intangible Transition Property and deprives the Transition Bondholders of
their reasonable expectations arising from their investments in Transition
Bonds, unless just compensation, as determined by a court of competent
jurisdiction, is provided to Transition Bondholders. (iv) There is no order by
any court providing for the revocation, alteration, limitation or other
impairment of the Statute, Qualified Rate Order, Intangible Transition
Property or the Intangible Transition Charges or any rights arising under any
of them or which seeks to enjoin the performance of any obligations under the
Qualified Rate Order. (v) No other approval, authorization, consent, order or
other action of, or filing with, any court, Federal or state regulatory body,
administrative agency or other governmental instrumentality is required in
connection with the creation of the Intangible Transition Property, except
those that have been obtained or made. (vi) Except as disclosed by the
Transferor to the Seller, there are no proceedings or investigations pending,
or to the Transferor's best knowledge, threatened before any court, Federal or
state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over
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the Transferor or its properties challenging the Qualified Rate Order or the
Statute. (vii) No failure on the Initial Contribution Date or any Subsequent
Contribution Date or any time thereafter to satisfy any condition imposed by
the Statute with respect to the recovery of stranded costs will adversely
affect the creation or sale hereunder of Intangible Transition Property or the
right to collect Intangible Transition Charges.
(e) Assumptions. The assumptions used in calculating Intangible
Transition Charges are reasonable and made in good faith.
(f) Creation of Intangible Transition Property. (i) The Intangible
Transition Property other than the Retained Intangible Transition Property
constitutes a current property right, (ii) the Intangible Transition Property
includes, without limitation, (A) the irrevocable right of the Seller and the
Issuer, as assignee of the Seller, to receive through Intangible Transition
Charges an amount sufficient to recover all of the Transferor's Qualified
Transition Expenses described in the Qualified Rate Order in an amount equal
to the aggregate principal amount of Transition Bonds plus an amount
sufficient to provide for any credit enhancement (including the
Overcollateralization Amount relating to each Series of Transition Bonds), to
fund any reserves, and to pay interest, premium, if any, servicing fees and
other expenses
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relating to the Transition Bonds, and (B) all right, title and interest of the
Transferor or its assignee applicable to the Transition Bonds in the Qualified
Rate Order and in all revenues, collections, claims, payments, money or
proceeds of or arising from the Intangible Transition Charges applicable to
the Transition Bonds set forth in the Qualified Rate Order to the extent that
in accordance with the Statute, the Qualified Rate Order and the rates and
charges authorized under the Qualified Rate Order are declared to be
irrevocable and (iii) the Qualified Rate Order, including the right to collect
Intangible Transition Charges, have been declared to be irrevocable by the
PUC.
(g) Solvency. After giving effect to the sale of any Transferred
Intangible Transition Property hereunder, the Transferor (i) is solvent and
expects to remain solvent, (ii) is adequately capitalized to conduct its
business and affairs considering its size and the nature of its business and
intended purposes, (iii) is not engaged in nor does it expect to engage in a
business for which its remaining property represents an unreasonably small
capital, (iv) believes that it will be able to pay its debts as they come due
and that such belief is reasonable and (v) is able to pay its debts as they
mature and does not intend to incur, or believe that it will incur,
indebtedness that it will not be able to repay at its maturity.
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SECTION 3.09. Representations and Warranties of Seller. The
representations and warranties made by the Seller under the Sale Agreement are
true and correct in all material respects.
ARTICLE IV
Covenants of the Transferor
SECTION 4.01. Corporate Existence. Subject to Section 5.02, so long
as any of the Transition Bonds are outstanding, the Transferor will keep in
full force and effect its corporate existence and remain in good standing, in
each case under the laws of the jurisdiction of its incorporation, and will
obtain and preserve its qualification to do business in each jurisdiction in
which such qualification is or shall be necessary to protect the validity and
enforceability of this Agreement and each other instrument or agreement to
which the Transferor is a party necessary to the proper administration of this
Agreement and the transactions contemplated hereby.
SECTION 4.02. No Liens or Conveyances. Except for the conveyances
hereunder, the Transferor will not sell, pledge, assign or transfer to any
other Person, or grant, create, incur, assume or suffer to exist any Lien on,
any of the Intangible Transition Property, whether now existing or hereafter
created, or any interest therein. The Transferor shall not at any time assert
any Lien against or with
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respect to any Serviced Intangible Transition Property, and shall defend the
right, title and interest of the Seller, the Issuer, as assignee of the
Seller, and the Bond Trustee, as collateral assignee of the Issuer, in, to and
under the Intangible Transition Property, whether now existing or hereafter
created, against all claims of third parties claiming through or under the
Transferor.
SECTION 4.03. Delivery of Collections. If the Transferor receives
collections in respect of the Intangible Transition Charges, other than
Intangible Transition Charges relating to Retained Intangible Transition
Property, or the proceeds thereof, the Transferor agrees to pay the Servicer
all payments received by the Transferor in respect thereof as soon as
practicable after receipt thereof by the Transferor, but in no event later
than two Business Days after such receipt.
SECTION 4.04. Notice of Liens. The Transferor shall notify the
Issuer and the Bond Trustee promptly after becoming aware of any Lien on any
Intangible Transition Property other than the conveyances hereunder, under the
Sale Agreement or under the Indenture.
SECTION 4.05. Compliance with Law. The Transferor hereby agrees to
comply with its organizational or governing documents and all laws, treaties,
rules, regulations and determinations of any governmental instrumentality
applicable to the Transferor, except to the
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extent that failure to so comply would not adversely affect the Seller's, the
Issuer's or the Bond Trustee's interests in the Intangible Transition Property
or under any of the Basic Documents or the Transferor's performance of its
obligations hereunder or under any of the other Basic Documents to which it is
a party.
SECTION 4.06. Covenants Related to Intangible Transition Property.
(a) So long as any of the Transition Bonds are outstanding, the Transferor
shall treat the Transition Bonds as debt of the Seller for Federal income tax
purposes.
(b) So long as any of the Transition Bonds are outstanding, the
Transferor shall (i) clearly disclose in its financial statements that it is
not the owner of the Serviced Intangible Transition Property and that the
assets of the Issuer are not available to pay creditors of the Transferor or
any of its Affiliates and (ii) clearly disclose the effects of all
transactions among the Transferor, the Seller and the Issuer in accordance
with generally accepted accounting principles.
(c) The Transferor agrees that upon the sale by the Transferor of
the Transferred Intangible Transition Property to the Seller pursuant to a
Bill of Sale, (i) to the fullest extent permitted by law, including applicable
PUC Regulations, the Seller shall have all of the rights originally held by
the Transferor with respect to the
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Transferred Intangible Transition Property (other than the rights of an
electric distribution company set forth in Section 2807 of the Statute),
including the right to collect any amounts payable by any Customer or Third
Party in respect of such Transferred Intangible Transition Property,
notwithstanding any objection or direction to the contrary by the Transferor
and (ii) any payment by any Customer or Third Party to the Seller shall
discharge such Customer's or such Third Party's obligations in respect of such
Transferred Intangible Transition Property to the extent of such payment,
notwithstanding any objection or direction to the contrary by the Transferor.
(d) So long as any of the Transition Bonds are outstanding, (i) the
Transferor shall not make any statement or reference in respect of the
Transferred Intangible Transition Property that is inconsistent with the
ownership thereof by the Seller or, after the sale of the Transferred
Intangible Transition Property by the Seller to the Issuer, the Issuer and
(ii) the Transferor shall not take any action in respect of the Serviced
Intangible Transition Property except solely in its capacity as the Servicer
thereof pursuant to the Servicing Agreement or as otherwise contemplated by
the Basic Documents.
SECTION 4.07. Notice of Indemnification Events. The Transferor shall
deliver to the Seller, the Issuer and the Bond Trustee promptly after having
obtained knowledge
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thereof, written notice in an Officers' Certificate of any Indemnification
Event or any event which, with the giving of notice or the passage of time,
would become an Indemnification Event.
SECTION 4.08. Protection of Title. The Transferor shall execute and
file such filings, including filings with the PUC pursuant to the Statute, and
cause to be executed and filed such filings, all in such manner and in such
places as may be required by law fully to preserve, maintain, and protect the
interests of the Seller in the Transferred Intangible Transition Property,
including all filings required under the Statute relating to the transfer of
the ownership or security interest in the Transferred Intangible Transition
Property by the Transferor to the Seller. The Transferor shall deliver (or
cause to be delivered) to the Seller file-stamped copies of, or filing
receipts for, any document filed as provided above, as soon as available
following such filing. The Transferor agrees to take such legal or
administrative actions, including defending against or instituting and
pursuing legal actions and appearing or testifying at hearings or similar
proceedings, as may be reasonably necessary (i) to protect the Seller, the
Issuer and the Transition Bondholders from claims, state actions or other
actions or proceedings of third parties which, if successfully pursued, would
result in a breach of any representation or warranty set forth in
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Article III or (ii) to block or overturn any attempts to cause a repeal of,
modification of or supplement to the Statute or the Qualified Rate Order or
the rights of holders of Intangible Transition Property by legislative
enactment or constitutional amendment that would be adverse to the holders of
Intangible Transition Property.
SECTION 4.09. Taxes. So long as any of the Transition Bonds are
outstanding, the Transferor shall, and shall cause each of its subsidiaries
to, pay all material taxes, including assessments and governmental charges
imposed upon it or any of its properties or assets or with respect to any of
its franchises, business, income or property before any penalty accrues
thereon if the failure to pay any such taxes, assessments and governmental
charges would, after any applicable grace periods, notices or other similar
requirements, result in a lien on the Intangible Transition Property; provided
that no such tax need be paid if the Transferor or one of its subsidiaries is
contesting the same in good faith by appropriate proceedings promptly
instituted and diligently conducted and if the Transferor or such subsidiary
has established appropriate reserves as shall be required in conformity with
generally accepted accounting principles.
ARTICLE V
The Transferor
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SECTION 5.01. Liability of Transferor; Indemnities. (a) The
Transferor shall be liable in accordance herewith only to the extent of the
obligations specifically undertaken by the Transferor under this Agreement.
(b) The Transferor shall indemnify the Seller, the Issuer and the
Bond Trustee, for itself and on behalf of the Transition Bondholders, and each
of their respective members, managers, officers, directors and agents for, and
defend and hold harmless each such Person from and against, any and all taxes
(other than any taxes imposed on Transition Bondholders solely as a result of
their ownership of Transition Bonds) that may at any time be imposed on or
asserted against any such Person as a result of the acquisition or holding of
the Transferred Intangible Transition Property by the Seller or the Issuer or
the issuance and sale by the Issuer of the Transition Bonds, including any
sales, gross receipts, general corporation, tangible personal property,
privilege or license taxes.
(c) The Transferor shall indemnify the Seller, the Issuer and the
Bond Trustee, on behalf of the Transition Bondholders, each of their
respective members, managers, officers, directors, and agents, and defend and
hold harmless each such Person from and against, any and all amounts of
principal of and interest on the Transition Bonds not paid when due or when
scheduled to be paid in accordance
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with their terms and the amount of any deposits to the Issuer required to have
been made in accordance with the terms of the Basic Documents which are not
made when so required, in either case as a result of the Transferor's breach
of any of its representations, warranties or covenants contained in this
Agreement.
(d) The Transferor shall indemnify the Seller, the Issuer and the
Bond Trustee, on behalf of the Transition Bondholders, each of their
respective members, managers, officers, directors, and agents, and defend and
hold harmless each such Person from and against, any and all Losses that may
be imposed on, incurred by or asserted against any such Person as a result of
(x) the Transferor's wilful misconduct, bad faith or gross negligence in the
performance of its duties or observance of its covenants under this Agreement,
(y) the Transferor's reckless disre gard of its obligations and duties under
this Agreement or (z) the Transferor's breach of any of its representations or
warranties contained in this Agreement (any event described in any of the
foregoing clauses (x), (y) or (z), an "Indemnification Event"). Amounts on
deposit in the Reserve Subaccount, the Overcollateralization Subaccount and
the Capital Subaccount shall not be available to satisfy any Losses for which
indemnification is provided in this Agreement.
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(e) The Transferor shall indemnify the Bond Trustee and its
officers, directors and agents for, and defend and hold harmless each such
Person from and against, any and all Losses that may be imposed upon, incurred
by or asserted against any such Person as a result of the acceptance or
performance of the trusts and duties contained herein and in the Indenture,
except to the extent that any such Loss shall be due to the wilful
misfeasance, bad faith or gross negligence of the Bond Trustee. Such amounts
shall be deposited into the Collection Account and distributed in accordance
with the Indenture.
(f) The Transferor's indemnification obligations under Section
5.01(b),(c), (d) and (e) for events occurring prior to the removal or
resignation of the Bond Trustee or the termination of this Agreement shall
survive the resignation or removal of the Bond Trustee or the termination of
this Agreement and shall include reasonable fees and expenses of investigation
and litigation (including the Bond Trustee's reasonable attorney's fees and
expenses).
SECTION 5.02. Merger or Consolidation of, or Assumption of the
Obligations of, Transferor. Any Person (a) into which the Transferor may be
merged or consolidated and which succeeds to the major part of the electric
distribution business of the Transferor, (b) which results from the division
of the Transferor into two or more Persons and which succeeds to the major
part of the electric
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distribution business of the Transferor, (c) which may result from any merger
or consolidation to which the Transferor shall be a party and which succeeds
to the major part of the electric distribution business of the Transferor, (d)
which may succeed to the properties and assets of the Transferor substantially
as a whole and which succeeds to the major part of the electric distribution
business of the Transferor or (e) which may otherwise succeed to the major
part of the electric distribution business of the Transferor, which Person in
any of the foregoing cases executes an agreement of assumption to perform
every obligation of the Transferor under this Agreement, shall be the
successor to the Transferor hereunder without the execution or filing of any
document or any further act by any of the parties to this Agreement; provided,
however, that (i) immediately after giving effect to such transaction, no
representation or warranty made pursuant to Article III shall have been
breached and no Servicer Default, and no event that, after notice or lapse of
time, or both, would become a Servicer Default, shall have occurred and be
continuing, (ii) the Transferor shall have delivered to the Seller, the Issuer
and the Bond Trustee an Officers' Certificate and an Opinion of Counsel each
stating that such consolidation, merger or succession and such agreement of
assumption comply with this Section and that all conditions precedent, if any,
provided for in
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this Agreement relating to such transaction have been complied with, (iii) the
Rating Agencies shall have received prior written notice of such transaction
and (iv) the Transferor shall have delivered to the Seller, the Issuer and the
Bond Trustee an Opinion of Counsel either (A) stating that, in the opinion of
such counsel, all filings, including filings with the PUC pursuant to the
Statute, have been executed and filed that are necessary fully to preserve and
protect the interest of the Seller in the Transferred Intangible Transition
Property and reciting the details of such filings or (B) stating that, in the
opinion of such counsel, no such action shall be necessary to preserve and
protect such interests. Notwithstanding anything herein to the contrary, the
execution of the above described agreement of assumption and compliance with
clauses (i), (ii), (iii) and (iv) above shall be conditions precedent to the
consummation of any transaction referred to in clauses (a), (b), (c), (d) or
(e) above.
SECTION 5.03. Limitation on Liability of Transferor and Others. The
Transferor and any director or officer or employee or agent of the Transferor
may rely in good faith on the advice of counsel or on any document of any
kind, prima facie properly executed and submitted by any Person, respecting
any matters arising hereunder. Subject to Section 4.08, the Transferor shall
not be under any obligation to appear in, prosecute or defend any legal
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action that is not incidental to its obligations under this Agreement, and
that in its opinion may involve it in any expense or liability.
SECTION 5.04. Opinions of Counsel. The Transferor shall deliver to
the Seller, the Issuer and the Bond Trustee: (a) promptly after the execution
and delivery of this Agreement and of each amendment hereto or to the
Servicing Agreement and on each Subsequent Contribution Date, an Opinion of
Counsel either (i) to the effect that, in the opinion of such counsel, all
filings, including filings with the PUC pursuant to the Statute, that are
necessary to fully preserve and protect the interests of the Seller in the
Intangible Transition Property have been executed and filed, and reciting the
details of such filings or referring to prior Opinions of Counsel in which
such details are given, or (ii) to the effect that, in the opinion of such
counsel, no such action shall be necessary to preserve and protect such
interest; and (b) within 90 days after the beginning of each calendar year
beginning with the first calendar year beginning more than three months after
the Initial Contribution Date, an Opinion of Counsel, dated as of a date
during such 90-day period, either (i) to the effect that, in the opinion of
such counsel, all filings with the PUC pursuant to the Statute, have been
executed and filed that are necessary to preserve fully and protect fully the
interest of the Seller in the
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Intangible Transition Property, and reciting the details of such filings or
referring to prior Opinions of Counsel in which such details are given, or
(ii) to the effect that, in the opinion of such counsel, no such action shall
be necessary to preserve and protect such interest. Each Opinion of Counsel
referred to in clause (a) or (b) above shall specify any action necessary (as
of the date of such opinion) to be taken in the following year to preserve and
protect such interest.
ARTICLE VI
Miscellaneous Provisions
SECTION 6.01. Amendment. This Agreement may be amended by the Seller
and the Transferor, with the prior written consent of the Issuer and the Bond
Trustee. The Seller shall furnish to each of the Rating Agencies (i) prior to
the execution of any such amendment or consent, written notification of the
substance thereof and (ii) promptly after the execution of any such amendment
or consent, a copy thereof.
Prior to the execution of any amendment to this Agreement, the
Seller, the Issuer and the Bond Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement and the Opinion of Counsel referred
to in Section 5.04(a). The Seller, the Issuer and
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the Bond Trustee may, but shall not be obligated to, enter into any such
amendment which affects their own rights, duties, indemnities or immunities
under this Agreement or otherwise.
SECTION 6.02. Notices. All demands, notices and communications upon
or to the Transferor, the Seller, the Issuer, the Bond Trustee or the Rating
Agencies under this Agreement shall be in writing, delivered personally, via
facsimile, reputable overnight courier or by certified mail, return-receipt
requested, and shall be deemed to have been duly given upon receipt (a) in the
case of the Transferor, to West Penn Power Company, 800 Cabin Hill Drive,
Greensburg, PA 15601, Attention of President, (b) in the case of the Seller,
to West Penn Funding Corporation, 2325B Renaissance Drive, Las Vegas, Nevada
89119, Attention of President, (c) in the case of the Issuer, to West Penn
Funding LLC, 2325B-2 Renaissance Drive, Las Vegas, Nevada 89119, Attention of
President, (d) in the case of the Bond Trustee, at the Corporate Trust Office,
(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, 26 Broadway (15th Floor),
New York, New York 10004, Attention of Asset Backed Surveillance Department,
and (g) in the case of Fitch IBCA, to Fitch IBCA, Inc., One State Street
Plaza, New York, New York 10004, Attention of
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ABS Surveillance; or, as to each of the foregoing, at such other address as
shall be designated by written notice to the other parties.
SECTION 6.03. Assignment. Notwithstanding anything to
the contrary contained herein, except as pro vided in Section 5.02, this
Agreement may not be assigned by the Transferor. SECTION 6.04. Limitations on
Rights of Others. The provisions of this Agreement are solely for the benefit
of the Transferor, the Seller, the Issuer and the Bond Trustee, on behalf of
itself and the Transition Bondholders, and nothing in this Agreement, whether
express or implied, shall be construed to give to any other Person any legal
or equitable right, remedy or claim in the Collateral or under or in respect
of this Agreement or any covenants, conditions or provisions contained herein.
SECTION 6.05. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
SECTION 6.06. Separate Counterparts. This Agreement may be executed
by the parties hereto in separate
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counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.
SECTION 6.07. Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 6.08. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of New York, 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 Issuer and to Bond Trustee. (a) The
Transferor hereby acknowledges and consent to the sale, transfer, assignment
and conveyance of all right, title and interest of the Seller in, to and under
the Transferred Intangible Transition Property and the proceeds thereof and
the assignment of any or all of the Seller's rights hereunder to the Issuer
pursuant to the Sale Agreement.
(b) The Transferor hereby acknowledges and consents to the mortgage,
pledge, assignment and grant of a security interest by the Issuer (as assignee
of the Seller) to the Bond Trustee pursuant to the Indenture for the benefit
of the Transition Bondholders of all right, title
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and interest of the Issuer in, to and under the Transferred Intangible
Transition Property and the proceeds thereof and the assignment of any or all
of the Issuer's rights under the Sale Agreement to the Bond Trustee.
SECTION 6.10. Nonpetition Covenant. Notwithstanding any prior
termination of this Agreement or the Indenture, but subject to the PUC's
rights to order the sequestration and payment of revenues arising with respect
to the Intangible Transition Property notwithstanding any bankruptcy,
reorganization or other insolvency proceedings with respect to the debtor,
pledgor or transferor of the Intangible Transition Property pursuant to
Section 2812(d)(3)(v) of the Statute, the Transferor shall not, prior to the
date which is one year and one day after the termination of the Indenture,
petition or otherwise invoke or cause the Seller or the Issuer to invoke the
process of any court or government authority for the purpose of commencing or
sustaining a case against the Seller or the Issuer under any Federal or state
bankruptcy, insolvency or similar law or appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the
Seller or the Issuer or any substantial part of the property of the Seller or
the Issuer, or ordering the winding up or liquidation of the affairs of the
Seller or the Issuer.
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SECTION 6.11. Perfection. In accordance with Section 2812(e) of the
Statute, upon the execution and delivery of this Agreement and the related
Bill of Sale, the transfer of the Initial Intangible Transition Property will
be perfected as against all third persons, including any judicial lien
creditors, and upon the execution and delivery of a Bill of Sale and, if
applicable, a supplement to this Agreement, a transfer of Subsequent
Intangible Transition Property will be perfected against all third persons,
including any judicial lien creditors.
SECTION 6.12. Limitation of Liability. It is expressly understood
and agreed by the parties hereto that this Agreement is executed and delivered
by Bankers Trust Company, not individually or personally but solely as Bond
Trustee for the benefit of the Transition Bondholders, in the exercise of the
powers and authority conferred and vested in it, and nothing herein contained
shall be construed as creating any liability on Bankers Trust Company,
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 Agreement and by any Person
claiming by, through or under such parties; provided, however, that this
provision shall not protect Bankers Trust Company against any liability that
would otherwise be imposed by reason of willful misconduct, bad faith or gross
negligence
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in the performance of duties or by reason of reckless disregard of obligations
or duties under this Agreement.
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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.
WEST PENN FUNDING CORPORATION,
Seller,
by
_______________________________
Title:
WEST PENN POWER COMPANY,
Transferor,
by
_______________________________
Title:
Acknowledged and Accepted:
WEST PENN FUNDING LLC, as
Issuer of the Transition
Bonds,
by
____________________
Title:
BANKERS TRUST COMPANY, not in
its individual capacity but
solely as Bond Trustee on
behalf of the Transition
Bondholders,
by
____________________
Title:
169
EXHIBIT 10.2
===========================================================================
INTANGIBLE TRANSITION PROPERTY
SALE AGREEMENT
between
WEST PENN FUNDING LLC
Issuer
and
WEST PENN FUNDING CORPORATION
Seller
Dated as of November 16, 1999
===========================================================================
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TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions
SECTION 1.01. Definitions........................................... 2
SECTION 1.02. Other Definitional Provisions......................... 7
ARTICLE II
Conveyance of Intangible Transition Property
SECTION 2.01. Conveyance of Initial Intangible Transition
Property.................................. 8
SECTION 2.02. Conveyance of Subsequent Intangible
Transition Property....................... 9
SECTION 2.03. Conditions to Conveyance of Intangible
Transition Property....................... 10
ARTICLE III
Representations and Warranties of Seller
SECTION 3.01. Organization and Good Standing........................ 12
SECTION 3.02. Due Qualification..................................... 13
SECTION 3.03. Power and Authority................................... 13
SECTION 3.04. Binding Obligation.................................... 13
SECTION 3.05. No Violation.......................................... 14
SECTION 3.06. No Proceedings........................................ 14
SECTION 3.07. Approvals............................................. 15
SECTION 3.08. The Intangible Transition
Property.................................. 15
ARTICLE IV
Covenants of the Seller
SECTION 4.01. Corporate Existence................................... 17
SECTION 4.02. No Liens or Conveyances............................... 18
SECTION 4.03. Delivery of Collections............................... 18
SECTION 4.04. Notice of Liens....................................... 19
SECTION 4.05. Compliance with Law................................... 19
SECTION 4.06. Covenants Related to Intangible Transition
Property.................................. 19
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Contents, p. ii
Page
----
SECTION 4.07. Notice of Indemnification Events...................... 21
SECTION 4.08. Protection of Title................................... 21
SECTION 4.09. Taxes................................................. 22
ARTICLE V
The Seller
SECTION 5.01. Liability of Seller; Indemnities...................... 23
SECTION 5.02. Merger or Consolidation of, or Assumption
of the Obligations of, Seller............. 25
SECTION 5.03. Limitation on Liability of Seller and
Others .................................. 26
SECTION 5.04. Opinions of Counsel................................... 27
ARTICLE VI
Miscellaneous Provisions
SECTION 6.01. Amendment............................................. 28
SECTION 6.02. Notices............................................... 29
SECTION 6.03. Assignment............................................ 30
SECTION 6.04. Limitations on Rights of Others....................... 30
SECTION 6.05. Severability.......................................... 30
SECTION 6.06. Separate Counterparts................................. 30
SECTION 6.07. Headings.............................................. 31
SECTION 6.08. Governing Law......................................... 31
SECTION 6.09. Assignment to Bond Trustee............................ 31
SECTION 6.10. Nonpetition Covenant.................................. 31
SECTION 6.11. Perfection............................................ 32
SECTION 6.12. Limitation of Liability............................... 33
Exhibit A Bill of Sale
Exhibit B Form of Opinion Regarding The Transferred
Intangible Transition Property
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INTANGIBLE TRANSITION PROPERTY SALE AGREEMENT
dated as of November 16, 1999, between WEST PENN
FUNDING LLC, a Delaware limited liability company (the
"Issuer"), and WEST PENN FUNDING CORPORATION, a
Delaware corporation, and its successors in interest to
the extent permitted hereunder, as Seller (the
"Seller").
WHEREAS the Seller received a contribution from the Transferor of
Intangible Transition Property created pursuant to the Statute and the
Qualified Rate Order in exchange for all of the outstanding capital stock
of the Seller;
WHEREAS the Issuer desires to purchase from time to time
Intangible Transition Property;
WHEREAS the Seller is willing to sell Intangible Transition
Property to the Issuer;
WHEREAS the Issuer, in order to finance the purchase of the
Transferred Intangible Transition Property, will from time to time issue
Transition Bonds under the Indenture;
WHEREAS the Issuer, to secure its obligations under all
Transition Bonds and the Indenture, will pledge its right, title and
interest in the Transferred Intangible
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2
Transition Property to the Bond Trustee for the benefit of the Transition
Bondholders; and
WHEREAS the Issuer has determined that the transactions
contemplated by the Basic Documents are in the best interest of the Issuer
and its creditors and represent a prudent and advisable course of action
that does not impair the rights and interests of the Issuer's creditors.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained and intending to be legally bound hereby, the
parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definitions. (a) Whenever used in this Agreement,
each of the following words and phrases shall have the following meaning:
"Addition Notice" means, with respect to the transfer of
Subsequent Intangible Transition Property to the Issuer pursuant to Section
2.02, notice, which shall be given by the Seller to the Issuer and the
Rating Agencies not later than 10 days prior to the related Subsequent
Transfer Date, specifying the Subsequent Transfer Date for such Subsequent
Intangible Transition Property.
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"Agreement" means this Intangible Transition Property Sale
Agreement, as the same may be amended and supplemented from time to time.
"Bill of Sale" means a bill of sale substantially in the form of
Exhibit A hereto.
"Business Day" has the meaning specified in the Servicing
Agreement.
"Competitive Transition Charges" has the meaning specified in the
Servicing Agreement.
"Corporate Trust Office" means Four Albany Street, 10th Floor,
New York, NY 10006, Attention: Corporate Trust and Agency Services,
Structured Finance Group, or the principal corporate trust office of any
successor Bond Trustee (the address of which the successor Bond Trustee
will notify the Transition Bondholders and the Issuer).
"Customers" has the meaning specified in the Servicing Agreement.
"Fitch IBCA" has the meaning specified in the Servicing
Agreement.
"Indemnification Event" has the meaning specified in Section
5.01(c).
"Indenture" means the Indenture dated as of November 16, 1999,
between the Issuer and the Bond Trustee, as the same may be amended and
supplemented from time to time.
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"Initial Intangible Transition Property" means the Intangible
Transition Property, as identified in the related Bill of Sale, sold to the
Issuer on the Initial Transfer Date pursuant to such Bill of Sale in
connection with the issuance of the Series 1999-A Transition Bonds.
"Initial Transfer Date" means November 16, 1999.
"Intangible Transition Charges" has the meaning specified in the
Servicing Agreement.
"Intangible Transition Property" has the meaning specified in the
Servicing Agreement.
"ITC Collections" has the meaning specified in the Servicing
Agreement.
"Lien" has the meaning specified in the Servicing Agreement.
"Losses" has the meaning specified in the Servicing Agreement.
"Moody's" has the meaning specified in the Servicing Agreement.
"Officers' Certificate" means a certificate signed by (a) the
chairman of the board, the president, the vice chairman of the board, the
executive vice president or any vice president and (b) a treasurer,
assistant treasurer, secretary or assistant secretary, in each case of the
Seller or the Servicer, as appropriate.
"Opinion of Counsel" means one or more written opinions of
counsel who may be an employee of or counsel to
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the Seller or the Servicer, which counsel shall be reasonably acceptable to
the Bond Trustee, the Issuer or the Rating Agencies, as applicable, and
which shall be in form reasonably satisfactory to the Bond Trustee, if
applicable.
"PUC" has the meaning specified in the Servicing Agreement.
"PUC Regulations" has the meaning specified in the Servicing
Agreement.
"Qualified Rate Order" has the meaning specified in the Servicing
Agreement.
"Qualified Transition Expenses" has the meaning specified in the
Servicing Agreement.
"Rate Schedule" has the meaning specified in the Servicing
Agreement.
"Servicer" means West Penn, as the servicer of the Intangible
Transition Property, and each successor to West Penn (in the same capacity)
pursuant to Section 5.03 or 6.04 of the Servicing Agreement.
"Servicer Default" means an event specified in Section 6.01 of
the Servicing Agreement.
"Servicing Agreement" means the Servicing Agreement dated as of
November 16, 1999, between the Issuer and the Servicer, as the same may be
amended and supplemented from time to time.
"Standard & Poor's" has the meaning specified in the Servicing
Agreement.
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"Statute" has the meaning specified in the Servicing Agreement.
"Subsequent Intangible Transition Property" means Intangible
Transition Property, as identified in the related Bill of Sale, sold to the
Issuer on any Subsequent Transfer Date in connection with the issuance of a
Series of Transition Bonds.
"Subsequent Transfer Date" means any date on which Subsequent
Intangible Transition Property is to be transferred to the Issuer pursuant
to Section 2.02.
"Third Party" has the meaning specified in the Servicing
Agreement.
"Transfer Agreement" has the meaning specified in the Servicing
Agreement.
"Transferred Intangible Transition Property" means, collectively,
the Initial Intangible Transition Property and any Subsequent Intangible
Transition Property.
"UCC" has the meaning specified in the Servicing Agreement.
"West Penn" has the meaning specified in the Servicing Agreement.
(b) Except as otherwise specified herein or as the context may
otherwise require, each of the following terms has the meaning set forth in
the Indenture for all purposes of this Agreement, and the definitions of
such
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terms are equally applicable both to the singular and plural forms of such
terms:
Term Section of the Indenture
Adjustment Date....................................... 1.01(a)
Affiliate............................................. 1.01(a)
Basic Documents....................................... 1.01(a)
Bond Trustee.......................................... 1.01(a)
Capital Subaccount.................................... 1.01(a)
Collateral............................................ 1.01(a)
Collection Account.................................... 1.01(a)
General Subaccount.................................... 1.01(a)
Holders or Transition
Bondholders......................................... 1.01(a)
Operating Expenses.................................... 1.01(a)
Overcollateralization Amount.......................... 1.01(a)
Person................................................ 1.01(a)
Rating Agency......................................... 1.01(a)
Rating Agency Condition............................... 1.01(a)
Reserve Subaccount.................................... 1.01(a)
Series...................................................... 1.01(a)
Servicing Fee............................................... 1.01(a)
Transition Bonds............................................ 1.01(a)
SECTION 1.02. Other Definitional Provisions. (a) The words
"hereof", "herein", "hereunder" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement; Section, Schedule and Exhibit
references contained in this Agreement are references to Sections,
Schedules and Exhibits in or to this Agreement unless otherwise specified;
and the term "including" shall mean "including without limitation".
(b) The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the masculine
as well as to the feminine and neuter genders of such terms.
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ARTICLE II
Conveyance of Intangible Transition Property
SECTION 2.01. Conveyance of Initial Intangible Transition
Property. (a) In consideration of the Issuer's delivery to or upon the
order of the Seller of $596,941,173.80, subject to the conditions specified
in Section 2.03, the Seller, pursuant to a Bill of Sale, will irrevocably
sell, transfer, assign, set over and otherwise convey to the Issuer,
without recourse (subject to the obligations herein), all right, title and
interest of the Seller in and to the Initial Intangible Transition Property
(such sale, transfer, assignment, set over and conveyance of the Initial
Intangible Transition Property will include, to the fullest extent
permitted by the Statute, the assignment of all revenues, collections,
claims, rights, payments, money or proceeds of or arising from the
Intangible Transition Charges related to the Initial Intangible Transition
Property, as the same may be adjusted from time to time). Such sale,
transfer, assignment, set over and conveyance will be expressly stated to
be a sale and, pursuant to the Statute, shall be treated as an absolute
transfer of all of the Seller's right, title and interest (as in a true
sale), and not as a pledge or other financing, of the Initial Intangible
Transition Property. The preceding sentence is the statement referred to in
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Section 2812(e) of the Statute. The Seller agrees and confirms that after
giving effect to the sale contemplated by such Bill of Sale it has no
rights in the Initial Intangible Transition Property to which a security
interest of creditors of the Seller could attach because it has sold all
rights in the Initial Intangible Transition Property to the Issuer pursuant
to the Statute.
(b) Subject to the conditions specified in Section 2.03, the
Issuer, pursuant to a Bill of Sale, will purchase the Initial Intangible
Transition Property from the Seller for the consideration set forth in
paragraph (a) above.
(c) The Seller and the Issuer each acknowledge and agree that the
purchase price for the Initial Intangible Transition Property sold pursuant
to the Bill of Sale is equal to its fair market value at the time of sale.
SECTION 2.02. Conveyance of Subsequent Intangible Transition
Property. The Seller may from time to time offer to sell additional
Intangible Transition Property to the Issuer, subject to the conditions
specified in Section 2.03. If any such offer is accepted by the Issuer,
such Subsequent Intangible Transition Property shall be sold to the Issuer
effective on the Subsequent Transfer Date specified in the related Addition
Notice, subject to the satisfaction or waiver of the conditions specified
in Section 2.03.
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SECTION 2.03. Conditions to Conveyance of Intangible Transition
Property. The Seller shall be permitted to sell Intangible Transition
Property to the Issuer only upon the satisfaction or waiver of each of the
following conditions:
(i) on or prior to the Initial Transfer Date or Subsequent
Transfer Date, as applicable, the Seller shall have delivered to
the Issuer a duly executed Bill of Sale identifying the
Intangible Transition Property to be conveyed on that date;
(ii) as of the Initial Transfer Date or the Subsequent
Transfer Date, as applicable, the Seller was not insolvent and
will not have been made insolvent by such sale and the Seller is
not aware of any pending insolvency with respect to itself;
(iii) as of the Initial Transfer Date or the Subsequent
Transfer Date, as applicable, no breach by the Seller of its
representations, warranties or covenants in this Agreement shall
exist; no Servicer Default shall have occurred and be continuing;
and no breach by the Transferor of its representations and
warranties in the Transfer Agreement shall exist;
(iv) as of the Initial Transfer Date or the Subsequent
Transfer Date, as applicable, (A) the Issuer shall have
sufficient funds available to pay the purchase price for the
Transferred Intangible
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Transition Property to be conveyed on such date and (B) all
conditions to the issuance of one or more Series of Transition
Bonds intended to provide such funds set forth in the Indenture
shall have been satisfied or waived;
(v) on or prior to the Initial Transfer Date or Subsequent
Transfer Date, as applicable, the Seller shall have taken all
action required to transfer to the Issuer ownership of the
Transferred Intangible Transition Property to be conveyed on such
date, free and clear of all Liens other than Liens created by the
Issuer pursuant to the Indenture; and the Issuer or the Servicer,
on behalf of the Issuer, shall have taken any action required for
the Issuer to grant the Bond Trustee a first priority perfected
security interest in the Collateral and maintain such security
interest as of such date;
(vi) in the case of a sale of Subsequent Intangible
Transition Property only, on or prior to such Subsequent Transfer
Date, the Seller shall have provided the Issuer and the Rating
Agencies with a timely Addition Notice;
(vii) the Seller shall have delivered to the Rating Agencies
and the Issuer (A) an Opinion of Counsel with respect to the
transfer of the Transferred Intangible Transition Property then
being conveyed to the Issuer
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substantially in the form of Exhibit B hereto and (B) the Opinion
of Counsel required by Section 5.04(a); and
(viii) the Seller shall have delivered to the Bond Trustee
and the Issuer an Officers' Certificate confirming the
satisfaction of each condition precedent specified in this
Section 2.03.
ARTICLE III
Representations and Warranties of Seller
As of the Initial Transfer Date and as of any Subsequent Transfer
Date, as applicable, the Seller makes the following representations and
warranties on which the Issuer has relied and will rely in acquiring
Transferred Intangible Transition Property. The Seller agrees and
acknowledges that the following representations and warranties are also for
the benefit of the Bond Trustee, as collateral assignee of the Issuer
pursuant to the Indenture. The representations and warranties shall survive
the sale of Transferred Intangible Transition Property to the Issuer and
the pledge thereof to the Bond Trustee pursuant to the Indenture.
SECTION 3.01. Organization and Good Standing. The Seller is a
corporation duly organized and in good standing under the laws of the State
of Delaware, with corporate power and authority to own its properties and
conduct its business as currently owned or conducted.
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SECTION 3.02. Due Qualification. The Seller is duly qualified to
do business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of property or the conduct of its business shall require
such qualifications, licenses or approvals (except where the failure to so
qualify would not be reasonably likely to have a material adverse effect on
the Seller's business, operations, assets, revenues, properties or
prospects).
SECTION 3.03. Power and Authority. The Seller has the corporate
power and authority to execute and deliver this Agreement and to carry out
its terms; the Seller has full corporate power and authority to own the
Intangible Transition Property and sell and assign the Initial Intangible
Transition Property, in the case of the Initial Transfer Date, and the
Subsequent Intangible Transition Property, in the case of each Subsequent
Transfer Date, as applicable, and the Seller has duly authorized such sale
and assignment to the Issuer by all necessary corporate action; and the
execution, delivery and performance of this Agreement has been duly
authorized by the Seller by all necessary corporate action.
SECTION 3.04. Binding Obligation. This Agreement constitutes a
legal, valid and binding obligation of the Seller enforceable against the
Seller in accordance with its
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terms subject to bankruptcy, receivership, insolvency, fraudulent transfer,
reorganization, moratorium or other laws affecting creditors' rights
generally from time to time in effect and to general principles of equity
(regardless of whether considered in a proceeding in equity or at law).
SECTION 3.05. No Violation. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof do
not conflict with, result in any breach of any of the terms and provisions
of, nor constitute (with or without notice or lapse of time) a default
under, the articles of incorporation or by-laws of the Seller, or any
indenture, agreement or other instrument to which the Seller is a party or
by which it shall be bound; nor result in the creation or imposition of any
Lien upon any of its properties pursuant to the terms of any such
indenture, agreement or other instrument; nor violate any law or any order,
rule or regulation applicable to the Seller of any court or of any Federal
or state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Seller or its properties.
SECTION 3.06. No Proceedings. There are no proceedings or
investigations pending or, to the Seller's best knowledge, threatened,
before any court, Federal or state regulatory body, administrative agency
or other governmental instrumentality having jurisdiction over the
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Seller or its properties (i) asserting the invalidity of the Basic
Documents or the Transition Bonds, (ii) seeking to prevent the issuance of
the Transition Bonds or the consummation of any of the transactions
contemplated by the Basic Documents or the Transition Bonds or (iii) except
as disclosed by the Seller to the Issuer, seeking any determination or
ruling that could reasonably be expected to materially and adversely affect
the performance by the Seller of its obligations under, or the validity or
enforceability of, the Basic Documents or the Transition Bonds.
SECTION 3.07. Approvals. Except for UCC continuation filings, no
approval, authorization, consent, order or other action of, or filing with,
any court, Federal or state regulatory body, administrative agency or other
governmental instrumentality is required in connection with the execution
and delivery by the Seller of this Agreement, the performance by the Seller
of the transactions contemplated hereby or the fulfillment by the Seller of
the terms hereof, except those that have been obtained or made.
SECTION 3.08. The Intangible Transition Property. (a)
Information. All information provided by the Seller to the Issuer with
respect to the Transferred Intangible Transition Property is correct in all
material respects.
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(b) Effect of Transfer. The transfers and assignments herein
contemplated constitute sales of the Initial Intangible Transition Property
or the Subsequent Intangible Transition Property, as the case may be, from
the Seller to the Issuer and the beneficial interest in and title to the
Transferred Intangible Transition Property would not be part of the
debtor's estate in the event of the filing of a bankruptcy petition by or
against the Seller under any bankruptcy law.
(c) Transfer Filings. The Seller is the sole owner of the
Intangible Transition Property being sold to the Issuer on the Initial
Transfer Date or Subsequent Transfer Date, as applicable; the Transferred
Intangible Transition Property has been validly transferred and sold to the
Issuer free and clear of all Liens other than Liens created by the Issuer
pursuant to the Indenture. All filings, including filings with the PUC
under the Statute, necessary in any jurisdiction to give the Issuer a valid
ownership interest in the Transferred Intangible Transition Property, free
and clear of all Liens of the Seller or anyone claiming through the Seller,
and to give the Bond Trustee a first priority perfected security interest
in the Transferred Intangible Transition Property have been made, other
than any such filings (except for filings with the PUC under the Statute
and UCC filings with the Secretary of State of the State of Delaware) the
absence of which would
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not have an adverse impact on (i) the ability of the Servicer to collect
Intangible Transition Charges with respect to the Serviced Intangible
Transition Property or (ii) the rights of the Issuer or the Bond Trustee
with respect to the Transferred Intangible Transition Property.
(d) Solvency. After giving effect to the sale of any Transferred
Intangible Transition Property hereunder, the Seller (i) is solvent and
expects to remain solvent, (ii) is adequately capitalized to conduct its
business and affairs considering its size and the nature of its business
and intended purposes, (iii) is not engaged in nor does it expect to engage
in a business for which its remaining property represents an unreasonably
small capital, (iv) believes that it will be able to pay its debts as they
come due and that such belief is reasonable and (v) is able to pay its
debts as they mature and does not intend to incur, or believe that it will
incur, indebtedness that it will not be able to repay at its maturity.
ARTICLE IV
Covenants of the Seller
SECTION 4.01. Corporate Existence. Subject to Section 5.02, so
long as any of the Transition Bonds are outstanding, the Seller will keep
in full force and effect its corporate existence and remain in good
standing, in each case under the laws of the jurisdiction of its
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incorporation, and will obtain and preserve its qualification to do
business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of this Agreement and
each other instrument or agreement to which the Seller is a party necessary
to the proper administration of this Agreement and the transactions
contemplated hereby.
SECTION 4.02. No Liens or Conveyances. Except for the conveyances
hereunder, the Seller will not sell, pledge, assign or transfer to any
other Person, or grant, create, incur, assume or suffer to exist any Lien
on, any of the Intangible Transition Property, whether now existing or
hereafter created, or any interest therein. The Seller shall not at any
time assert any Lien against or with respect to any Serviced Intangible
Transition Property, and shall defend the right, title and interest of the
Issuer and the Bond Trustee, as collateral assignee of the Issuer, in, to
and under the Intangible Transition Property, whether now existing or
hereafter created, against all claims of third parties claiming through or
under the Seller.
SECTION 4.03. Delivery of Collections. If the Seller receives
collections in respect of the Intangible Transition Charges or the proceeds
thereof, the Seller agrees to pay the Servicer all payments received by the
Seller in respect thereof as soon as practicable after
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receipt thereof by the Seller, but in no event later than two Business Days
after such receipt.
SECTION 4.04. Notice of Liens. The Seller shall notify the Issuer
and the Bond Trustee promptly after becoming aware of any Lien on any
Intangible Transition Property other than the conveyances hereunder, under
the Transfer Agreement or under the Indenture.
SECTION 4.05. Compliance with Law. The Seller hereby agrees to
comply with its organizational or governing documents and all laws,
treaties, rules, regulations and determinations of any governmental
instrumentality applicable to the Seller, except to the extent that failure
to so comply would not adversely affect the Issuer's or the Bond Trustee's
interests in the Intangible Transition Property or under any of the Basic
Documents or the Seller's performance of its obligations hereunder or under
any of the other Basic Documents to which it is a party.
SECTION 4.06. Covenants Related to Intangible Transition
Property. (a) So long as any of the Transition Bonds are outstanding, the
Seller shall treat the Transition Bonds as debt of the Seller for Federal
income tax purposes.
(b) So long as any of the Transition Bonds are outstanding, the
Seller shall (i) clearly disclose in its financial statements that it is
not the owner of the Transferred Intangible Transition Property and that
the assets of the Issuer are not available to pay creditors of
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the Seller or any of its Affiliates and (ii) clearly disclose the effects
of all transactions between the Seller and the Issuer in accordance with
generally accepted accounting principles.
(c) The Seller agrees that upon the sale by the Seller of the
Transferred Intangible Transition Property to the Issuer pursuant to a Bill
of Sale, (i) to the fullest extent permitted by law, including applicable
PUC Regulations, the Issuer shall have all of the rights originally held by
the Seller with respect to the Transferred Intangible Transition Property,
including the right to collect any amounts payable by any Customer or Third
Party in respect of such Transferred Intangible Transition Property,
notwithstanding any objection or direction to the contrary by the Seller
and (ii) any payment by any Customer or Third Party to the Issuer shall
discharge such Customer's or such Third Party's obligations in respect of
such Transferred Intangible Transition Property to the extent of such
payment, notwithstanding any objection or direction to the contrary by the
Seller.
(d) So long as any of the Transition Bonds are outstanding, the
Seller shall not make any statement or reference in respect of the
Transferred Intangible Transition Property that is inconsistent with the
ownership thereof by the Issuer.
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SECTION 4.07. Notice of Indemnification Events. The Seller shall
deliver to the Issuer and the Bond Trustee promptly after having obtained
knowledge thereof, written notice in an Officers' Certificate of any
Indemnification Event or any event which, with the giving of notice or the
passage of time, would become an Indemnification Event.
SECTION 4.08. Protection of Title. The Seller shall execute and
file such filings, including filings with the PUC pursuant to the Statute,
and cause to be executed and filed such filings, all in such manner and in
such places as may be required by law fully to preserve, maintain, and
protect the interests of the Issuer in the Transferred Intangible
Transition Property, including all filings required under the Statute
relating to the transfer of the ownership or security interest in the
Transferred Intangible Transition Property by the Seller to the Issuer. The
Seller shall deliver (or cause to be delivered) to the Issuer file-stamped
copies of, or filing receipts for, any document filed as provided above, as
soon as available following such filing. The Seller agrees to take such
legal or administrative actions, including defending against or instituting
and pursuing legal actions and appearing or testifying at hearings or
similar proceedings, as may be reasonably necessary (i) to protect the
Issuer and the Transition Bondholders from claims, state actions or other
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actions or proceedings of third parties which, if successfully pursued,
would result in a breach of any representation or warranty set forth in
Article III or (ii) to block or overturn any attempts to cause a repeal of,
modification of or supplement to the Statute or the Qualified Rate Order or
the rights of holders of Intangible Transition Property by legislative
enactment or constitutional amendment that would be adverse to the holders
of Intangible Transition Property.
SECTION 4.09. Taxes. So long as any of the Transition Bonds are
outstanding, the Seller shall, and shall cause each of its subsidiaries to,
pay all material taxes, including assessments and governmental charges
imposed upon it or any of its properties or assets or with respect to any
of its franchises, business, income or property before any penalty accrues
thereon if the failure to pay any such taxes, assessments and governmental
charges would, after any applicable grace periods, notices or other similar
requirements, result in a lien on the Intangible Transition Property;
provided that no such tax need be paid if the Seller or one of its
subsidiaries is contesting the same in good faith by appropriate
proceedings promptly instituted and diligently conducted and if the Seller
or such subsidiary has established appropriate reserves as shall be
required in conformity with generally accepted accounting principles.
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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) The Seller shall indemnify the Issuer and the Bond Trustee,
for itself and on behalf of the Transition Bondholders, and each of their
respective members, managers, officers, directors and agents for, and
defend and hold harmless each such Person from and against, any and all
taxes (other than any taxes imposed on Transition Bondholders solely as a
result of their ownership of Transition Bonds) that may at any time be
imposed on or asserted against any such Person as a result of the
acquisition or holding of the Transferred Intangible Transition Property by
the Issuer or the issuance and sale by the Issuer of the Transition Bonds,
including any sales, gross receipts, general corporation, tangible personal
property, privilege or license taxes.
(c) The Seller shall indemnify the Issuer and the Bond Trustee,
on behalf of the Transition Bondholders, each of their respective members,
managers, officers, directors, and agents, and defend and hold harmless
each such Person from and against, any and all Losses that may be imposed
on,
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incurred by or asserted against any such Person as a result of (x) the
Seller's wilful misconduct, bad faith or gross negligence in the
performance of its duties or observance of its covenants under this
Agreement, (y) the Seller's reckless disregard of its obligations and
duties under this Agreement or (z) the Seller's breach of any of its
representations or warranties contained in this Agreement (any event
described in any of the foregoing clauses (x), (y) or (z), an
"Indemnification Event"). Amounts on deposit in the Reserve Subaccount, the
Overcollateralization Subaccount and the Capital Subaccount shall not be
available to satisfy any Losses for which indemnification is provided in
this Agreement.
(d) The Seller shall indemnify the Bond Trustee and its officers,
directors and agents for, and defend and hold harmless each such Person
from and against, any and all Losses that may be imposed upon, incurred by
or asserted against any such Person as a result of the acceptance or
performance of the trusts and duties contained herein and in the Indenture,
except to the extent that any such Loss shall be due to the wilful
misfeasance, bad faith or gross negligence of the Bond Trustee. Such
amounts shall be deposited into the Collection Account and distributed in
accordance with the Indenture.
(e) The Seller's indemnification obligations under Section
5.01(b),(c) and (d) for events occurring prior
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to the removal or resignation of the Bond Trustee or the termination of
this Agreement shall survive the resignation or removal of the Bond Trustee
or the termination of this Agreement and shall include reasonable fees and
expenses of investigation and litigation (including the Bond Trustee's
reasonable attorney's fees and expenses).
SECTION 5.02. Merger or Consolidation of, or Assumption of the
Obligations of, Seller. Any Person (a) into which the Seller may be merged
or consolidated, (b) which results from the division of the Seller into two
or more Persons, (c) which may result from any merger or consolidation to
which the Seller shall be a party, or (d) which may succeed to the
properties and assets of the Seller substantially as a whole, which Person
in any of the foregoing cases executes an agreement of assumption to
perform every obligation of the Seller under this Agreement, shall be the
successor to the Seller hereunder without the execution or filing of any
document or any further act by any of the parties to this Agreement;
provided, however, that (i) immediately after giving effect to such
transaction, no representation or warranty made pursuant to Article III
shall have been breached and no Servicer Default, and no event that, after
notice or lapse of time, or both, would become a Servicer Default, shall
have occurred and be continuing, (ii) the Seller shall have delivered to
the Issuer and the Bond Trustee an Officers'
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Certificate and an Opinion of Counsel each stating that such consolidation,
merger or succession and such agreement of assumption comply with this
Section and that all conditions precedent, if any, provided for in this
Agreement relating to such transaction have been complied with, (iii) the
Rating Agencies shall have received prior written notice of such
transaction and (iv) the Seller shall have delivered to the Issuer and the
Bond Trustee an Opinion of Counsel either (A) stating that, in the opinion
of such counsel, all filings, including filings with the PUC pursuant to
the Statute, have been executed and filed that are necessary fully to
preserve and protect the interest of the Issuer in the Transferred
Intangible Transition Property and reciting the details of such filings or
(B) stating that, in the opinion of such counsel, no such action shall be
necessary to preserve and protect such interests. Notwithstanding anything
herein to the contrary, the execution of the above described agreement of
assumption and compliance with clauses (i), (ii), (iii) and (iv) above
shall be conditions precedent to the consummation of any transaction
referred to in clauses (a), (b), (c) or (d) above.
SECTION 5.03. Limitation on Liability of Seller and Others. The
Seller and any director or officer or employee or agent of the Seller may
rely in good faith on the advice of counsel or on any document of any kind,
prima facie properly executed and submitted by any Person,
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respecting any matters arising hereunder. Subject to Section 4.08, the
Seller shall not be under any obligation to appear in, prosecute or defend
any legal action that is not incidental to its obligations under this
Agreement, and that in its opinion may involve it in any expense or
liability.
SECTION 5.04. Opinions of Counsel. The Seller shall deliver to
the Issuer and the Bond Trustee: (a) promptly after the execution and
delivery of this Agreement and of each amendment hereto or to the Servicing
Agreement and on each Subsequent Transfer Date, an Opinion of Counsel
either (i) to the effect that, in the opinion of such counsel, all filings,
including filings with the PUC pursuant to the Statute, that are necessary
to fully preserve and protect the interests of the Issuer in the Intangible
Transition Property have been executed and filed, and reciting the details
of such filings or referring to prior Opinions of Counsel in which such
details are given, or (ii) to the effect that, in the opinion of such
counsel, no such action shall be necessary to preserve and protect such
interest; and (b) within 90 days after the beginning of each calendar year
beginning with the first calendar year beginning more than three months
after the Initial Transfer Date, an Opinion of Counsel, dated as of a date
during such 90-day period, either (i) to the effect that, in the opinion of
such counsel, all filings with the PUC pursuant to the
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Statute, have been executed and filed that are necessary to preserve fully
and protect fully the interest of the Issuer in the Intangible Transition
Property, and reciting the details of such filings or referring to prior
Opinions of Counsel in which such details are given, or (ii) to the effect
that, in the opinion of such counsel, no such action shall be necessary to
preserve and protect such interest. Each Opinion of Counsel referred to in
clause (a) or (b) above shall specify any action necessary (as of the date
of such opinion) to be taken in the following year to preserve and protect
such interest.
ARTICLE VI
Miscellaneous Provisions
SECTION 6.01. Amendment. This Agreement may be amended by the
Seller and the Issuer, with the prior written consent of the Bond Trustee.
The Issuer shall furnish to each of the Rating Agencies (i) prior to the
execution of any such amendment or consent, written notification of the
substance thereof and (ii) promptly after the execution of any such
amendment or consent, a copy thereof.
Prior to the execution of any amendment to this Agreement, the
Issuer and the Bond Trustee shall be entitled to receive and rely upon an
Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement and the Opinion of Counsel
referred to in
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Section 5.04(a). The Issuer and the Bond Trustee may, but shall not be
obligated to, enter into any such amendment which affects their own rights,
duties or immunities under this Agreement or otherwise.
SECTION 6.02. Notices. All demands, notices and communications
upon or to the Seller, the Issuer, the Bond Trustee or the Rating Agencies
under this Agreement shall be in writing, delivered personally, via
facsimile, reputable overnight courier or by certified mail, return-receipt
requested, and shall be deemed to have been duly given upon receipt (a) in
the case of the Seller, to West Penn Funding Corporation, 2325B Renaissance
Drive, Las Vegas, Nevada 89119, Attention of President, (b) in the case of
the Issuer, to West Penn Funding LLC, 2325B-2 Renaissance Drive, Las Vegas,
Nevada 89119, Attention of President, (c) in the case of the Bond Trustee,
at the Corporate Trust Office, (d) in the case of Moody's, to Moody's
Investors Service, Inc., ABS Monitoring Department, 99 Church Street, New
York, New York 10007, (e) in the case of Standard & Poor's, to Standard &
Poor's Corporation, 26 Broadway (15th Floor), New York, New York 10004,
Attention of Asset Backed Surveillance Department, and (f) in the case of
Fitch IBCA, to Fitch IBCA, Inc., One State Street Plaza, New York, New York
10004, Attention of ABS Surveillance; or, 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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SECTION 6.03. Assignment. Notwithstanding anything to the
contrary contained herein, except as pro vided in Section 5.02, this
Agreement may not be assigned by the Seller. SECTION 6.04. Limitations on
Rights of Others. The provisions of this Agreement are solely for the
benefit of the Seller, the Issuer and the Bond Trustee, on behalf of itself
and the Transition Bondholders, and nothing in this Agreement, whether
express or implied, shall be construed to give to any other Person any
legal or equitable right, remedy or claim in the Collateral or under or in
respect of this Agreement or any covenants, conditions or provisions
contained herein.
SECTION 6.05. Severability. Any provision of this Agreement that
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
SECTION 6.06. Separate Counterparts. This Agreement may be
executed by the parties hereto in separate 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.
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SECTION 6.07. Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define
or limit any of the terms or provisions hereof. SECTION 6.08. Governing
Law. This Agreement shall be construed in accordance with the laws of the
State of New York, without reference to its conflict of law provisions, and
the obligations, rights and remedies of the parties hereunder shall be
determined in accordance with such laws.
SECTION 6.09. Assignment to Bond Trustee. The Seller hereby
acknowledges and consents to the mortgage, pledge, assignment and grant of
a security interest by the Issuer to the Bond Trustee pursuant to the
Indenture for the benefit of the Transition Bondholders of all right, title
and interest of the Issuer in, to and under the Transferred Intangible
Transition Property and the proceeds thereof and the assignment of any or
all of the Issuer's rights hereunder to the Bond Trustee. In no event shall
Bankers Trust Company have any liability for the representations,
warranties, covenants, agreements or other obligations of the Issuer,
hereunder or in any of the certificates, notices or agreements delivered
pursuant hereto, as to all of which recourse shall be had solely to the
assets of the Issuer.
SECTION 6.10. Nonpetition Covenant. Notwithstanding any prior
termination of this Agreement or
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the Indenture, but subject to the PUC's rights to order the sequestration
and payment of revenues arising with respect to the Intangible Transition
Property notwithstanding any bankruptcy, reorganization or other insolvency
proceedings with respect to the debtor, pledgor or transferor of the
Intangible Transition Property pursuant to Section 2812(d)(3)(v) of the
Statute, the Seller shall not, prior to the date which is one year and one
day after the termination of the Indenture, petition or otherwise invoke
or, to the fullest extent permitted by law, cause the Issuer to invoke the
process of any court or government authority for the purpose of commencing
or sustaining a case against the Issuer under any Federal or state
bankruptcy, insolvency or similar law or appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the
Issuer or any substantial part of the property of the Issuer, or ordering
the winding up or liquidation of the affairs of the Issuer.
SECTION 6.11. Perfection. In accordance with Section 2812(e) of
the Statute, upon the execution and delivery of this Agreement and the
related Bill of Sale, the transfer of the Initial Intangible Transition
Property will be perfected as against all third persons, including any
judicial lien creditors, and upon the execution and delivery of a Bill of
Sale and, if applicable, a supplement to this Agreement, a transfer of
Subsequent Intangible Transition
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Property will be perfected against all third persons, including any
judicial lien creditors.
SECTION 6.12. Limitation of Liability. It is expressly understood
and agreed by the parties hereto that this Agreement is executed and
delivered by Bankers Trust Company, not individually or personally but
solely as Bond Trustee for the benefit of the Transition Bondholders, in
the exercise of the powers and authority conferred and vested in it, and
nothing herein contained shall be construed as creating any liability on
Bankers Trust Company, 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 Agreement
and by any Person claiming by, through or under such parties; provided,
however, that this provision shall not protect Bankers Trust Company
against any liability that would otherwise be imposed by reason of willful
misconduct, bad faith or gross negligence in the performance of duties or
by reason of reckless disregard of obligations or duties under this
Agreement.
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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.
WEST PENN FUNDING LLC, Issuer,
by
-------------------------
Title:
WEST PENN FUNDING
CORPORATION, Seller,
by
-------------------------
Title:
Acknowledged and Accepted:
BANKERS TRUST COMPANY, not
in its individual capacity
but solely as Bond Trustee
on behalf of the Transition
Bondholders,
by
------------------------
Title:
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EXHIBIT 10.3
EXECUTION COPY
===============================================================================
SERVICING AGREEMENT
between
WEST PENN FUNDING LLC
and
WEST PENN POWER COMPANY
Servicer
Dated as of November 16, 1999
===============================================================================
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Contents, p. i
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions
SECTION 1.01. Definitions........................................... 2
SECTION 1.02. Other Definitional Provisions........................... 11
ARTICLE II
Appointment and Authorization of Servicer
SECTION 2.01. Appointment of Servicer; Acceptance of
Appointment...................................... 12
SECTION 2.02. Authorization........................................... 12
SECTION 2.03. Dominion and Control over Serviced
Intangible Transition Property....................... 13
ARTICLE III
Billing Services
SECTION 3.01. Duties of Servicer...................................... 13
SECTION 3.02. Collection of Intangible Transition
Charges.......................................... 16
SECTION 3.03. Servicing and Maintenance Standards..................... 18
SECTION 3.04. Servicer's Certificates................................. 19
SECTION 3.05. Annual Statement as to Compliance;
Notice of Default................................ 19
SECTION 3.06. Annual Independent Certified Public
Accountants' Report.............................. 20
SECTION 3.07. Intangible Transition Property
Documentation.................................... 21
SECTION 3.08. Computer Records; Audits of
Documentation.................................... 21
SECTION 3.09. Defending Intangible Transition Property
Against Claims................................... 23
SECTION 3.10. Opinions of Counsel ................................... 24
ARTICLE IV
Services Related to Intangible
Transition Charges Adjustments
SECTION 4.01. Intangible Transition Charges
Adjustments...................................... 25
208
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Contents, p. ii
Page
----
ARTICLE V
The Servicer
SECTION 5.01. Representations and Warranties of
Servicer......................................... 26
SECTION 5.02. Indemnities of Servicer; Release of
Claims........................................... 30
SECTION 5.03. Merger or Consolidation of, or
Assumption of the Obligations of,
Servicer......................................... 32
SECTION 5.04. Assignment of Servicer's Obligations.................... 34
SECTION 5.05. Limitation on Liability of Servicer and
Others........................................... 34
SECTION 5.06. West Penn Not To Resign as Servicer..................... 35
SECTION 5.07. Servicing Fee........................................... 36
SECTION 5.08. Servicer Expenses....................................... 37
SECTION 5.09. Appointments............................................ 37
SECTION 5.10. Remittances............................................. 38
SECTION 5.11. Servicer Advances....................................... 39
SECTION 5.12. Protection of Title..................................... 39
ARTICLE VI
Servicer Default
SECTION 6.01. Servicer Default........................................ 40
SECTION 6.02. Notice of Servicer Default.............................. 43
SECTION 6.03. Waiver of Past Defaults................................. 43
SECTION 6.04. Appointment of Successor................................ 44
ARTICLE VII
Miscellaneous Provisions
SECTION 7.01. Amendment............................................... 46
SECTION 7.02. Notices................................................. 47
SECTION 7.03. Assignment.............................................. 47
SECTION 7.04. Limitations on Rights of Others......................... 48
SECTION 7.05. Severability............................................ 48
SECTION 7.06. Separate Counterparts................................... 48
SECTION 7.07. Headings................................................ 49
SECTION 7.08. Governing Law........................................... 49
SECTION 7.09. Assignment to Bond Trustee.............................. 49
SECTION 7.10. Nonpetition Covenants................................... 50
SECTION 7.11. Termination............................................. 51
SECTION 7.12. Limitation of Liability................................. 51
209
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Contents, p. iii
EXHIBIT A Servicing Procedures
ANNEX 1 ITC Adjustment Process and Reports - West
Penn Funding LLC
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SERVICING AGREEMENT dated as of November 16, 1999,
between WEST PENN FUNDING LLC, a Delaware limited
liability company (the "Issuer"), and WEST PENN POWER
COMPANY, a Pennsylvania corporation, as the servicer of
the Intangible Transition Property (together with each
successor to WEST PENN POWER COMPANY (in the same
capacity) pursuant to Section 5.03 or 6.02, the
"Servicer").
WHEREAS the Servicer is willing to service the Intangible
Transition Property purchased from the Seller by the Issuer; and WHEREAS
the Issuer, in connection with ownership of Serviced Intangible Transition
Property, desires to engage the Servicer to carry out the functions
described herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained and intending to be legally bound hereby, the
parties hereto agree as follows:
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ARTICLE I
Definitions
SECTION 1.01. Definitions. Whenever used in this Agreement, each
of the following words and phrases shall have the following meaning:
"Administration Agreement" means the Service Agreement dated as
of November 16, 1999, between the Issuer and Allegheny Energy Service
Corporation, as administrative agent, as the same may be amended and
supplemented from time to time.
"Administrative Fees" means the fees owed to Allegheny Energy
Service Corporation, as administrative agent, under the Administration
Agreement.
"Agreement" means this Servicing Agreement, as the same may be
amended and supplemented from time to time.
"Annual Accountant's Report" has the meaning specified in Section
3.06(a).
"Basic Documents" has the meaning set forth in the Indenture.
"Bond Trustee" means Bankers Trust Company, a New York banking
corporation, as bond trustee under the Indenture, or any successors to the
foregoing.
"Business Day" means any day other than a Satur day, Sunday or a
day on which banking institutions in the City of New York, the City of
Greensburg, Pennsylvania or
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the State of Delaware are required by law or executive order
to remain closed.
"Class" means, with respect to any Series, any one of the classes
of Transition Bonds of that Series.
"Collateral" means, with respect to the Issuer, all property of
the Issuer pledged by it to secure Transition Bonds issued by the Issuer as
provided in the Indenture.
"Collection Period" means the monthly period represented by each
of West Penn's 12 revenue months each year.
"Competitive Transition Charges" means the competitive transition
charges that West Penn may impose on Customers as set forth in Appendix A
to the Joint Petition for Approval of Full Settlement of West Penn Power
Company's Restructuring Plan and Related Court Proceedings and approved in
the Final Order issued on November 19, 1998 by the PUC with respect to West
Penn's restructuring plan.
"Customers" means each person that (i) was a customer of West
Penn located within West Penn's retail electric service territory on
January 1, 1997 or that became a customer of electric services within such
territory after January 1, 1997, (ii) is still located within such
territory, and (iii) is in a Rate Schedule that has been assigned stranded
cost responsibility.
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"Fitch IBCA" means Fitch IBCA, Inc. or its successor.
"Formation Document" means the Amended and Restated Limited
Liability Company Agreement of the Issuer dated as of November 3, 1999,
between the Seller and the Special Members named therein, as the same may
be amended and supplemented from time to time.
"Holder" or "Transition Bondholder" means the Person in whose
name a Transition Bond of any Series or Class is registered as provided in
the Indenture therefor.
"Indenture" means the indenture dated as of November 16, 1999,
between the Issuer and the Bond Trustee, as the same may be amended and
supplemented from time to time, including by any Series Supplement.
"Independent Directors" means the persons acting as Independent
Directors of the Issuer pursuant to the Formation Document.
"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
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property, or ordering the winding-up or liquidation of such Person's
affairs, and such decree or order shall remain unstayed and in effect for a
period of 90 consecutive days or (b) the commencement by such Person of a
voluntary case under any applicable Federal or state bankruptcy, insolvency
or other similar law now or hereafter in effect, or the consent by such
Person to the entry of an order for relief in an involuntary case under any
such law, or the consent by such Person to the appointment of or taking
possession by a receiver, liquidator, assignee, custodian, trustee, seques
trator or similar official for such Person or for any sub stantial part of
its property, or the making by such Person of any general assignment for
the benefit of creditors, or the failure by such Person generally to pay
its debts as such debts become due, or the taking of action by such Person
in furtherance of any of the foregoing.
"Intangible Transition Charges" means the amounts authorized by
the PUC to be imposed on all Customer bills with respect to the Intangible
Transition Property and collected, through a non-bypassable mechanism, by
West Penn or its successor or by any other entity which provides electric
service to Customers, to recover Qualified Transition Expenses pursuant to
the Qualified Rate Order.
"Intangible Transition Charges Adjustment" means
each adjustment to Intangible Transition Charges related to the
Serviced Intangible Transition Property made in
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accordance with Section 4.01 and Annex 1 hereto or in connection with the
redemption by the Issuer of Transition Bonds.
"Intangible Transition Property" means the irrevocable right of
West Penn or its successor or assignee to collect Intangible Transition
Charges from Customers to recover the Qualified Transition Expenses
described in the Qualified Rate Order, including all right, title and
interest of West Penn or its successor or assignee in such order and in all
revenues, collections, claims, payments, money or proceeds of or arising
from Intangible Transition Charges pursuant to such order, and all proceeds
of any of the foregoing.
"Intangible Transition Property Documentation" has the meaning
assigned to that term in Section 3.07.
"Issuer" means West Penn Funding LLC until a successor replaces
it and, thereafter, such successor.
"ITC Collections" means amounts collected in respect of
Intangible Transition Charges or the Intangible Transition Property.
"Lien" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind.
"Losses" means collectively, any and all liabilities,
obligations, losses, damages, payments, costs or expenses of any kind
whatsoever.
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"Moody's" means Moody's Investors Service Inc., or its successor.
"Officers' Certificate" means a certificate signed by (a) the chairman of
the board, the president, the vice chairman of the board, the executive
vice president or any vice president and (b) a treasurer, assistant
treasurer, secretary or assistant secretary, in each case of the Servicer.
"Operating Expenses" means, with respect to the Issuer, all fees,
costs, expenses and indemnity payments owed by the Issuer, including all
amounts owed by the Issuer to the Bond Trustee and the Independent
Directors, the Servicing Fee payable in respect of Transition Bonds issued
by the Issuer, the Administrative Fees, legal fees and expenses of the
Servicer and legal and accounting fees, costs and expenses of the Issuer
and the Bond Trustee.
"Opinion of Counsel" means one or more written opinions of
counsel who may be an employee of or counsel to West Penn or the Servicer,
which counsel shall be reasonably acceptable to the Bond Trustee, the
Issuer or the Rating Agencies, as applicable, and shall be in form
reasonably satisfactory to the Bond Trustee, if applicable.
"Payment Date" means each March 25, June 25, September 25 and
December 26, commencing on March 27, 2000, or if any such date is not a
Business Day, the next succeeding Business Day.
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"Person" means any individual, corporation, estate, partnership,
joint venture, association, joint stock company, trust (including any
beneficiary thereof), business trust, unincorporated organization or
government or any agency or political subdivision thereof.
"PUC" means the Pennsylvania Public Utility Commission or any
successor.
"PUC Regulations" means any regulations promulgated or adopted by
the PUC.
"Qualified Rate Order" means the order of the PUC issued on
November 19, 1998, as supplemented by a supplemental qualified rate order
of the PUC issued on August 12, 1999, adopted in accordance with the
Statute, which, among other things, creates the Intangible Transition
Property and authorizes the imposition and collection of the Intangible
Transition Charges by West Penn or its assignee.
"Qualified Transition Expenses" has the meaning assigned to that
term in the Qualified Rate Order.
"Rate Schedule" means each of the rate schedules into which
Customers are divided as of the date hereof, as such rate schedules may be
reconfigured from time to time.
"Rating Agency" means any rating agency rating the Transition
Bonds of any Class or Series at the time of issuance thereof at the request
of the Issuer. If no such organization or successor is any longer in
existence, "Rating Agency" shall be a nationally recognized statistical
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rating organization or other comparable Person designated by the Issuer,
notice of which designation shall be given to the Bond Trustee under the
Indenture and the Servicer.
"Rating Agency Condition" means, with respect to any action, the
notification in writing by each Rating Agency to the Transferor, the
Seller, the Servicer, the Bond Trustee and the Issuer that such action will
not result in a reduction or withdrawal of the then current rating by such
Rating Agency of any outstanding Series or Class of Transition Bonds issued
by the Issuer.
"Released Parties" has the meaning specified in Section 5.02(f).
"Remittance Date" means each date on which ITC Collections are to
be remitted by the Servicer to the Bond Trustee pursuant to Section 5.10.
"Sale Agreement" means the Intangible Transition Property Sale
Agreement dated as of November 16, 1999, between the Seller and the Issuer,
relating to the sale of Intangible Transition Property to the Issuer, as
the same may be amended and supplemented from time to time.
"Seller" means West Penn Funding Corporation and its successors
in interest to the extent permitted under the Sale Agreement.
"Series" means any series of Transition Bonds issued by the
Issuer.
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"Series Supplement" means an indenture supplemental to the
Indenture that authorizes a particular Series of Transition Bonds.
"Serviced Intangible Transition Property" means, collectively,
all Intangible Transition Property sold, conveyed, assigned or otherwise
transferred to the Issuer by the Seller.
"Servicer Default" means an event specified in Section 6.01.
"Servicing Fee" means, with respect to any Series of Transition
Bonds, the fee payable to the Servicer on each Payment Date for services
rendered, determined pursuant to Section 5.07.
"Standard & Poor's means Standard & Poor's Rating Group, or its
successor. "Statute" means the Pennsylvania Electricity Generation Customer
Choice and Competition Act, Chapter 28 of Title 66 of the Pennsylvania
Consolidated Statutes, 66 Pa. C.S.,ss.2801, et seq.
"Termination Notice" has the meaning specified in Section 6.01.
"Third Party" means any third party, including any electric
generation supplier, providing billing or metering services, licensed by
the PUC pursuant to relevant provisions of the Statute and any PUC order.
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"Transfer Agreement" means the Intangible Transition Property
Transfer Agreement dated as of November 16, 1999, between the Transferor
and the Seller relating to the transfer of Intangible Transition Property
to the Seller, as the same may be amended and supplemented from time to
time.
"Transfer Date" means each date on which the Seller sells,
conveys, or otherwise transfers any Intangible Transition Property to the
Issuer.
"Transferor" means West Penn Power Company, as transferor under
the Transfer Agreement, and its successors in interest to the extent
permitted hereunder.
"Transition Bonds" means "transition bonds" (as defined in the
Statute) issued by the Issuer.
"UCC" means, unless the context otherwise requires, the Uniform
Commercial Code, as in effect in the relevant jurisdiction, as amended from
time to time.
"West Penn" means West Penn Power Company, a Pennsylvania
corporation. SECTION 1.02. Other Definitional Provisions. (a) The words
"hereof", "herein", "hereunder" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement; Section, Annex, Schedule and
Exhibit references contained in this Agreement are references to Sections,
Annexes, Schedules and Exhibits in
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or to this Agreement unless otherwise specified; and the term "including"
shall mean "including without limitation".
(b) The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the masculine
as well as to the feminine and neuter genders of such terms.
ARTICLE II
Appointment and Authorization of Servicer
SECTION 2.01. Appointment of Servicer; Acceptance of Appointment.
Subject to Section 5.04 and Article VI, the 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 Issuer in accordance with the terms of this Agreement. This
appointment and the Servicer's acceptance thereof may not be revoked except
in accordance with the express terms of this Agreement.
SECTION 2.02. Authorization. With respect to all or any portion
of the Serviced Intangible Transition Property, the Servicer shall be, and
hereby is, authorized and empowered by the Issuer to (a) execute and
deliver, on behalf of itself or the Issuer, as the case may be, any and all
instruments, documents or notices, and (b) on behalf of itself or the
Issuer, as the case may be, make any filing and participate in proceedings
of any kind with any governmental authorities, including with the PUC. The
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Issuer shall furnish the Servicer with such documents as have been prepared
by the Servicer for execution by the Issuer, and with the other documents
as may be in the Issuer's possession, as necessary or appropriate to enable
the Servicer to carry out its servicing and administrative duties
hereunder. Upon the written request of the Servicer, the Issuer shall
furnish the Servicer with any powers of attorney or other documents
necessary or appropriate to enable the Servicer to carry out its duties
hereunder.
SECTION 2.03. Dominion and Control over Serviced Intangible
Transition Property. Notwithstanding any other provision herein, the
Servicer and the Issuer agree that the Issuer shall have dominion and
control over its respective Serviced Intangible Transition Property. The
Servicer hereby agrees that it shall not take any action that is not
authorized by this Agreement, that is not consistent with its customary
procedures and practices, or that shall impair the rights of the Issuer in
its respective Serviced Intangible Transition Property, in each case unless
such action is required by law or court or regulatory order.
ARTICLE III
Billing Services
SECTION 3.01. Duties of Servicer. The Servicer shall have the
following duties:
(a) Duties of Servicer Generally. The Servicer will manage,
service, administer and make collections
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in respect of the Serviced Intangible Transition Property. The
Servicer's duties will include (i) calculating and billing the
Intangible Transition Charges and collecting (from Customers and
Third Parties, as applicable) and posting all ITC Collections;
(ii) responding to inquiries by Customers, Third Parties, the
PUC, or any Federal, local or other state governmental
authorities with respect to the Serviced Intangible Transition
Property and Intangible Transition Charges; (iii) accounting for
ITC Collections, investigating delinquencies, processing and
depositing collections and making periodic remittances,
furnishing periodic reports to the Issuer, the Bond Trustee and
the Rating Agencies; (iv) selling defaulted or written off
accounts in accordance with the Servicer's usual and customary
practices; and (v) taking action in connection with Intangible
Transition Charge Adjustments as set forth herein. Anything to
the contrary notwithstanding, the duties of the Servicer set
forth in this Agreement shall be qualified in their entirety by
any PUC Regulations as in effect at the time such duties are to
be performed. Without limiting the generality of this Section
3.01(a), in furtherance of the foregoing, the Servicer hereby
agrees that it shall also have, and shall comply with, the duties
and responsibilities
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relating to data acquisition, usage and bill calculation,
billing, customer service functions, collections, payment
processing and remittance set forth in Exhibit A hereto.
(b) Notification of Laws and Regulations. The Servicer shall
immediately notify the Issuer, the Bond Trustee and the Rating
Agencies in writing of any laws or PUC Regulations hereafter
promulgated that have a material adverse effect on the Servicer's
ability to perform its duties under this Agreement.
(c) Other Information. Upon the reasonable request of the
Issuer, the Bond Trustee or any Rating Agency, the Servicer shall
provide to the Issuer, the Bond Trustee or such Rating Agency, as
the case may be, any public financial information in respect of
the Servicer, or any material information regarding the
Intangible Transition Property to the extent it is reasonably
available to the Servicer, as may be reasonably necessary and
permitted by law for the Issuer, the Bond Trustee or such Rating
Agency to monitor the performance by the Servicer hereunder. In
addition, so long as any of the Transition Bonds of any Series
are outstanding, the Servicer shall provide the Issuer and the
Bond Trustee, within a reasonable time after written request
therefor, any information available to the Servicer or reasonably
obtainable by
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it that is necessary to calculate the Intangible Transition
Charges applicable to each Rate Schedule.
SECTION 3.02. Collection of Intangible Transition Charges. (a)
The Servicer shall use all reasonable efforts consistent with its customary
servicing procedures to collect all amounts owed in respect of Intangible
Transition Charges as and when the same shall become due and shall follow
such collection procedures as it follows with respect to collection
activities that the Servicer conducts for itself or others. The Servicer
shall not change the amount of or reschedule the due date of any scheduled
payment of Intangible Transition Charges, except as contemplated in this
Agreement or as required by law or court or PUC order; provided, however,
that the Servicer may take any of the foregoing actions to the extent that
such action would be in accordance with customary billing and collection
practices of the Servicer with respect to billing and collection activities
that it conducts for itself.
(b) Any amounts received by the Servicer from a Customer that
represent a partial payment toward an outstanding balance will be applied
first to state sales tax charges, then Intangible Transition Charges, then
to Competitive Transition Charges, then to transmission and distribution
charges and finally to electric generation charges. Notwithstanding the
foregoing, when West Penn is providing billing for its transmission and
distribution
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charges which is separate from billing for generation, any amounts received
from Customers remitting partial payments will be applied in the following
priority: (i) to the outstanding balance before direct access to electric
generation from electric generation suppliers or the installment amount for
a payment agreement on such balance; (ii) to the balance due for state
sales tax charges; (iii) to the balance due or the installment amount for a
payment agreement for Intangible Transition Charges; (iv) to the balance
due or the installment amount for a payment agreement for Competitive
Transition Charges; (v) to the balance due or the installment amount for a
payment agreement for fixed and variable utility distribution service
charges; (vi) to the current state sales tax charges; (vii) to the current
Intangible Transition Charges; and (viii) to the current Competitive
Transition Charges; (ix) to the current fixed and variable utility
distribution service charges; (x) to the balance due for prior charges for
energy and capacity (if West Penn is the provider of last resort); (xi) to
the current charges for energy and capacity charges (if West Penn is the
provider of last resort); and (xii) to the non-basic service charges.
(c) Notwithstanding anything contained herein to the contrary,
the Servicer will collect sales tax related to Intangible Transition
Charges and report and remit the amount so collected to the appropriate
state tax agency.
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Collection and remission of sales tax is not a final determination by the
Servicer or the Issuer of sales tax liability associated with Intangible
Transition Charges. The Servicer will cooperate with any Person who seeks a
refund of sales tax collected by the Servicer and remitted to the
appropriate government agency.
SECTION 3.03. Servicing and Maintenance Standards. The Servicer
shall, on behalf of the Issuer, (a) manage, service, administer and make
collections in respect of the Serviced Intangible Transition Property with
reasonable care and in material compliance with applicable law, including
all applicable PUC Regulations and guidelines, using the same degree of
care and diligence that the Servicer exercises with respect to billing and
collection activities that the Servicer conducts for itself and others; (b)
follow standards, policies and procedures in performing its duties as
Servicer that are customary in the Servicer's industry; (c) use all
reasonable efforts, consistent with its customary servicing procedures, to
enforce and maintain rights in respect of the Intangible Transition
Property; and (d) calculate Intangible Transition Charges in compliance
with the Statute, the Qualified Rate Order and any applicable tariffs,
except where the failure to comply with any of the foregoing would not
adversely affect the Issuer's or the Bond Trustee's interest in the
Serviced Intangible Transition Property. The Servicer shall
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follow such customary and usual practices and procedures as it shall deem
necessary or advisable in its servicing of all or any portion of the
Serviced Intangible Transition Property, which, in the Servicer's judgment,
may include the taking of legal action pursuant to Section 3.09 hereof or
otherwise.
SECTION 3.04. Servicer's Certificates. (a) The Servicer will
provide to the Issuer, the Bond Trustee and each of the Rating Agencies the
statements and certificates specified in Annex 1 hereto.
SECTION 3.05. Annual Statement as to Compliance; Notice of
Default. (a) The Servicer shall deliver to the Issuer, the Bond Trustee and
each Rating Agency, on or before March 31 of each year beginning March 31,
2000, an Officers' Certificate, stating that (i) a review of the activities
of the Servicer during the preceding calendar year (or relevant portion
thereof) and of its performance under this Agreement has been made under
such officers' supervision and (ii) to the best of such officers'
knowledge, based on such review, the Servicer has fulfilled all its
obligations under this Agreement throughout such period or, if there has
been a default in the fulfillment of any such obligation, describing each
such default.
(b) The Servicer shall deliver to the Issuer, the Bond Trustee
and each Rating Agency, promptly after having obtained knowledge thereof,
but in no event later than five
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Business Days thereafter, written notice in an Officers' Certificate of any
event which with the giving of notice or lapse of time, or both, would
become a Servicer Default under Section 6.01.
SECTION 3.06. Annual Independent Certified Public Accountants'
Report. (a) The Servicer shall cause a firm of independent certified public
accountants (which may also provide other services to the Servicer, West
Penn or the Seller) to prepare, and the Servicer shall deliver to the
Issuer, the Bond Trustee and each Rating Agency, on or before March 31 of
each year, beginning March 31, 2000 to and including the March 31
succeeding the retirement of all Transition Bonds, a report addressed to
the Servicer (the "Annual Accountant's Report"), which may be included as
part of the Servicer's customary auditing activities, to the effect that
such firm has performed certain procedures in connection with the
Servicer's compliance with its obligations under this Agreement during the
preceding calendar year ended December 31 (or, in the case of the first
Annual Accountant's Report, the period of time from the first Transfer Date
until December 31, 1999), identifying the results of such procedures and
including any exceptions noted. In the event such accounting firm requires
the Bond Trustee or the Issuer to agree or consent to the procedures
performed by such firm, the Issuer shall direct the Bond Trustee in writing
to so agree; it being
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understood and agreed that the Bond Trustee will deliver such letter of
agreement or consent in conclusive reliance upon the direction of the
Issuer, and neither the Bond Trustee nor the Issuer will make any
independent inquiry or investigation as to, and shall have no obligation or
liability in respect of, the sufficiency, validity or correctness of such
procedures.
(b) The Annual Accountant's Report shall also indicate that the
accounting firm providing such report is independent of the Servicer within
the meaning of the Code of Professional Ethics of the American Institute of
Certified Public Accountants.
SECTION 3.07. Intangible Transition Property Documentation. To
assure uniform quality in servicing the Serviced Intangible Transition
Property and to reduce administrative costs, the Servicer shall keep on
file, in accordance with its customary procedures, all documents relating
to the Intangible Transition Property, including copies of the Qualified
Rate Order and all documents filed with the PUC in connection with any
Intangible Transition Charges Adjustment (collectively, the "Intangible
Transition Property Documentation").
SECTION 3.08. Computer Records; Audits of Documentation. (a)
Safekeeping. The Servicer shall maintain accurate and complete accounts,
records and computer systems pertaining to the Intangible Transition
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Property and the Intangible Transition Property Documentation in accordance
with its standard accounting procedures and in sufficient detail to permit
reconciliation between payments or recoveries on (or with respect to)
Intangible Transition Charges and the ITC Collections from time to time
remitted to the Bond Trustee pursuant to Section 5.10 and to enable the
Issuer to comply with this Agreement and the Indenture. The Servicer shall
conduct, or cause to be conducted, periodic audits of the Intangible
Transition Property Documentation held by it under this Agreement and of
the related accounts, records and computer systems, in such a manner as
shall enable the Issuer and the Bond Trustee, as pledgee of the Issuer, to
verify the accuracy of the Servicer's record keeping. The Servicer shall
promptly report to the Issuer and the Bond Trustee any failure on the
Servicer's part to hold the Intangible Transition Property Documentation
and maintain its accounts, records and computer systems as herein provided
and promptly take appropriate action to remedy any such failure. Nothing
herein shall be deemed to require an initial review or any periodic review
by the Issuer or the Bond Trustee of the Intangible Transition Property
Documentation.
(b) Maintenance of and Access to Records. The Servicer shall
maintain the Intangible Transition Property Documentation at 800 Cabin Hill
Drive, Greensburg, Pennsylvania or at such other office as shall be
specified
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to the Issuer and the Bond Trustee by written notice not later than 30 days
prior to any change in location. The Servicer shall permit the Issuer and
the Bond Trustee or their respective duly authorized representatives,
attorneys, agents or auditors at any time during normal business hours as
the Issuer or Bond Trustee shall reasonably request to inspect, audit and
make copies of and abstracts from the Servicer's records regarding the
Intangible Transition Property and Intangible Transition Charges and the
Intangible Transition Property Documentation. The failure of the Servicer
to provide access to such information as a result of an obligation or
applicable law (including PUC Regulations) prohibiting disclosure of
information regarding customers shall not constitute a breach of this
Section 3.08(b).
SECTION 3.09. Defending Intangible Transition Property Against
Claims. The Servicer shall institute any action or proceeding necessary to
compel performance by the PUC or the Commonwealth of Pennsylvania of any of
their obligations or duties under the Statute or the Qualified Rate Order
with respect to the Intangible Transition Property. The costs of any such
action shall be payable from ITC Collections as an Operating Expense in
accordance with the priorities set forth in Section 8.02(d) of the
Indenture at the time such costs are incurred. The Servicer's obligations
pursuant to this Section 3.09 shall
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survive and continue notwithstanding the fact that the payment of Operating
Expenses pursuant to the priorities set forth in Section 8.02(d) of the
Indenture may be delayed (it being understood that the Servicer may be
required to advance its own funds to satisfy its obligations hereunder).
SECTION 3.10. Opinions of Counsel. The Servicer shall deliver to
the Issuer and the Bond Trustee:
(a) promptly after the execution and delivery of this
Agreement and of each amendment hereto, promptly after the
execution of each Sale Agreement and of each amendment thereto
and on each Transfer Date, an Opinion of Counsel either (i) to
the effect that, in the opinion of such counsel, all filings,
including filings with the PUC pursuant to the Statute, that are
necessary to fully preserve and protect the interests of the Bond
Trustee in the Serviced Intangible Transition Property have been
executed and filed, and reciting the details of such filings or
referring to prior Opinions of Counsel in which such details are
given, or (ii) to the effect that, in the opinion of such
counsel, no such action shall be necessary to preserve and
protect such interest; and
(b) within 90 days after the beginning of each calendar year
beginning with the first calendar year beginning more than three
months after the first Transfer Date, an Opinion of Counsel,
dated as of a
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date during such 90-day period, either (i) to the effect that, in
the opinion of such counsel, all filings with the PUC pursuant to
the Statute, have been executed and filed that are necessary to
preserve fully and protect fully the interest of the Bond Trustee
in the Serviced Intangible Transition Property, and reciting the
details of such filings or referring to prior Opinions of Counsel
in which such details are given, or (ii) to the effect that, in
the opinion of such counsel, no such action shall be necessary to
preserve and protect such interest.
Each Opinion of Counsel referred to in clause (a) or (b) above
shall specify any action necessary (as of the date of such opinion) to be
taken in the following year to preserve and protect such interest.
ARTICLE IV
Services Related to Intangible
Transition Charges Adjustments
SECTION 4.01. Intangible Transition Charges Adjustments. The
Servicer shall perform the calculations and take the actions relating to
revising the Intangible Transition Charges, in each case set forth in Annex
1 to this Agreement.
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ARTICLE V
The Servicer
SECTION 5.01. Representations and Warranties of Servicer. The
Servicer makes the following representations and warranties as of each
Transfer Date, on which the Issuer has relied and will rely in acquiring
Serviced Intangible Transition Property. The representations and warranties
shall survive the sale of any of the Serviced Intangible Transition
Property to the Issuer and the pledge thereof to the Bond Trustee pursuant
to the Indenture.
(a) Organization and Good Standing. The Servicer is a
corporation duly organized and in good standing under the laws of
the state of its incorporation, with the corporate power and
authority to own its properties and to conduct its business as
such properties are currently owned and such business is
presently conducted, and has the power, authority and legal right
to service the Serviced Intangible Transition Property.
(b) Due Qualification. The Servicer is duly qualified to do
business as a foreign corporation in good standing, and has
obtained all necessary licenses and approvals in, all
jurisdictions in which the owner ship or lease of property or the
conduct of its busi ness (including the servicing of the Serviced
Intangible Transition Property as required by this Agreement)
requires such qualifications, licenses or
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approvals (except where the failure to so qualify would not be
reasonably likely to have a material adverse effect on the
Servicer's business, operations, assets, revenues, properties or
prospects or adversely affect the servicing of the Serviced
Intangible Transition Property).
(c) Power and Authority. The Servicer has the corporate
power and authority to execute and deliver this Agreement and to
carry out its terms; and the execution, delivery and performance
of this Agreement have been duly authorized by the Servicer by
all necessary corporate action.
(d) Binding Obligation. This Agreement consti tutes a legal,
valid and binding obligation of the Servicer enforceable against
the Servicer in accordance with its terms subject to bankruptcy,
receivership, insolvency, fraudulent transfer, reorganization,
moratorium or other laws affecting creditors' rights generally
from time to time in effect and to general principles of equity
(regardless of whether considered in a proceeding in equity or at
law).
(e) No Violation. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms
hereof shall not conflict with, result in any breach of any of
the terms and provisions of, nor constitute (with or without
notice
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or lapse of time) a default under, the articles of incorporation
or by-laws of the Servicer, or any indenture, agreement or other
instrument to which the Servicer is a party or by which it shall
be bound; nor result in the creation or imposition of any Lien
upon any of its properties pursuant to the terms of any such
indenture, agreement or other instrument; nor violate any law or
any order, rule or regulation applicable to the Servicer of any
court or of any Federal or state regulatory body, administrative
agency or other governmental instrumentality having jurisdiction
over the Servicer or its properties.
(f) Approvals. Except for filings with the PUC for revised
Intangible Transition Charges pursuant to Section 4.01 and Annex
1 hereto and UCC continuation filings, no approval,
authorization, consent, order or other action of, or filing with,
any court, Federal or state regulatory body, administrative
agency or other governmental instrumentality is required in
connection with the execution and delivery by the Servicer of
this Agreement, the performance by the Servicer of the
transactions contemplated hereby or the fulfillment by the
Servicer of the terms hereof, except those that have been
obtained or made.
(g) No Proceedings. There are no proceedings or
investigations pending or, to the Servicer's best
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knowledge, threatened before any court, Federal or state
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Servicer or its
properties: (i) except as disclosed by the Servicer to the
Issuer, seeking any determination or ruling that might materially
and adversely affect the performance by the Servicer of its
obligations under, or the validity or enforceability against the
Servicer of this Agreement or (ii) relating to the Servicer and
which might adversely affect the Federal or state income tax
attributes of the Transition Bonds.
(h) Reports and Certificates. Each report and certificate
delivered in connection with any filing made to the PUC by the
Servicer on behalf of the Issuer with respect to Intangible
Transition Charges or Intangible Transition Charges Adjustments
will constitute a representation and warranty by the Servicer
that each such report or certificate, as the case may be, is true
and correct in all material respects; provided, however, that to
the extent any such report or certificate is based in part upon
or contains assumptions, forecasts or other predictions of future
events, the representation and warranty of the Servicer with
respect thereto will be limited to the representation and
warranty that such assumptions,
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forecasts or other predictions of future events are reasonable
based upon historical performance.
SECTION 5.02. Indemnities of Servicer; Release of Claims. (a) The
Servicer shall be liable in accordance herewith only to the extent of the
obligations specifically undertaken by the Servicer under this Agreement.
(b) The Servicer shall indemnify the Issuer and the Bond Trustee,
for itself and on behalf of the Transition Bondholders for which it acts as
Bond Trustee, and each of their respective managers, members, officers,
directors, employees and agents for, and defend and hold harmless each such
Person from and against, any and all Losses that may be imposed upon,
incurred by or asserted against any such Person as a result of (i) the
Servicer's wilful misfeasance, bad faith or gross negligence in the
performance of its duties or observance of its covenants under this
Agreement or the Servicer's reckless disregard of its obligations and
duties under this Agreement or (ii) the Servicer's breach of any of its
representations or warranties in this Agreement.
(c) If any action, claim, demand or proceeding (including any
governmental investigation) shall be brought or asserted against a party
(the "indemnified party") entitled to any indemnification provided for
under this Section 5.02, such indemnified party shall promptly notify the
Servicer in writing; provided, however, that failure to give such
notification shall not affect the indemnification
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provided hereunder except to the extent the Servicer shall have been
actually prejudiced as a result of such failure.
(d) The Servicer shall indemnify the Bond Trustee and its
officers, directors and agents for, and defend and hold harmless each such
Person from and against, any and all Losses that may be imposed upon,
incurred by or asserted against any such Person as a result of the
acceptance or performance of the trusts and duties contained herein and in
the other Basic Documents to which the Bond Trustee is a party, except to
the extent that any such Loss shall be due to the wilful misfeasance, bad
faith or gross negligence of the Bond Trustee. Such amounts shall be
deposited and distributed in accordance with the Indenture.
(e) The Servicer's indemnification obligations under Section
5.02(b) and (d) for events occurring prior to the removal or resignation of
the Bond Trustee or the termination of this Agreement with respect to the
Issuer shall survive the resignation or removal of the Bond Trustee or the
termination of this Agreement with respect to the Issuer and shall include
reasonable costs, fees and expenses of investigation and litigation
(including the Issuer's and the Bond Trustee's reasonable attorneys' fees
and expenses).
(f) Except to the extent expressly provided for in this Agreement
or the other Basic Documents (including the Servicer's claims with respect
to the Servicing Fees), the Servicer hereby releases and discharges the
Issuer
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(including its managers, members, officers, directors and agents, if any)
and the Bond Trustee (including its officers, directors and agents)
(collectively, the "Released Parties") from any and all actions, claims and
demands whatsoever, which the Servicer, in its capacity as Servicer, shall
or may have against any such Person relating to the Serviced Intangible
Transition Property or the Servicer's activities with respect thereto other
than any actions, claims and demands arising out of the wilful misconduct,
bad faith or gross negligence of the Released Parties.
SECTION 5.03. Merger or Consolidation of, or Assumption of the
Obligations of, Servicer. Any Person (a) into which the Servicer may be
merged or consolidated and which succeeds to the major part of the electric
distribution business of the Servicer, (b) which results from the division
of the Servicer into two or more Persons and which succeeds to the major
part of the electric distribution business of the Servicer, (c) which may
result from any merger or consolidation to which the Servicer shall be a
party and which succeeds to the major part of the electric distribution
business of the Servicer, (d) which may succeed to the properties and
assets of the Servicer substantially as a whole and which succeeds to the
major part of the electric distribution business of the Servicer or (e)
which may otherwise succeed to the major part of the electric distribution
business of the Servicer, which Person
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in any of the foregoing cases executes an agreement of assumption to
perform every obligation of the Servicer hereunder, shall be the successor
to the Servicer under this Agreement without further act on the part of any
of the parties to this Agreement; provided, however, that (i) immediately
after giving effect to such transaction, no representation and warranty
made pursuant to Section 5.01 shall have been breached and no Servicer
Default, and no event which, after notice or lapse of time, or both, would
become a Servicer Default, shall have occurred and be continuing, (ii) the
Servicer shall have delivered to the Issuer and the Bond Trustee an
Officers' Certificate and an Opinion of Counsel stating that such
consolidation, merger or succession and such agreement of assumption comply
with this Section 5.03 and that all conditions precedent provided for in
this Agreement relating to such transaction have been complied with, (iii)
the Rating Agencies shall have received prior written notice of such
transaction, (iv) the Servicer shall have delivered to the Issuer, the Bond
Trustee and the Rating Agency an Opinion of Counsel either (A) stating
that, in the opinion of such counsel, all filings, including filings with
the PUC pursuant to the Statute, have been executed and filed that are
necessary to preserve fully and protect fully the interests of the Issuer
in the Serviced Intangible Transition Property and reciting the details of
such filings or (B) stating that, in the opinion of such
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counsel, no such action shall be necessary to preserve and protect such
interests. Notwithstanding anything herein to the contrary, the execution
of the above referenced agreement of assumption and compliance with clauses
(i), (ii), (iii) and (iv) above shall be conditions precedent to the
consummation of the transactions referred to in clause (a), (b), (c), (d)
or (e) above.
SECTION 5.04. Assignment of Servicer's Obligations. Subject to
the satisfaction of the conditions set forth in Section 5.03, pursuant to
paragraph 13 of the Qualified Rate Order in which the PUC authorizes West
Penn to contract with an alternative party to perform West Penn's
obligations contemplated in the Qualified Rate Order, the Servicer may
assign its obligations hereunder to any electric distribution company (as
such term is defined in the Statute) which succeeds to the major part of
West Penn's electric distribution business.
SECTION 5.05. Limitation on Liability of Servicer and Others. The
Servicer shall not be liable to the Issuer, the Bond Trustee, the holders
of the Transition Bonds or any other Person, except as provided under this
Agreement, for any action taken or for refraining from the taking of any
action pursuant to this Agreement or for errors in judgment; provided,
however, that this provision shall not protect the Servicer against any
liability that would otherwise be imposed by reason of wilful misfeasance,
bad faith or gross
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negligence in the performance of its duties or by reason of reckless
disregard of obligations and duties under this Agreement. The Servicer and
any director or officer or employee or agent of the Servicer may rely in
good faith on the advice of counsel reasonably acceptable to the Bond
Trustee or on any document of any kind, prima facie properly executed and
submitted by any Person, respecting any matters arising under this
Agreement.
Except as provided in this Agreement, the Servicer shall not be
under any obligation to appear in, prosecute or defend any legal action
that is not incidental to its duties to service the Serviced Intangible
Transition Property in accordance with this Agreement or related to its
obligation to pay indemnification, and that in its reasonable opinion may
cause it to incur any expense or liability.
SECTION 5.06. West Penn Not To Resign as Servicer. Subject to the
provisions of Sections 5.03 and 5.04, West Penn shall not resign from the
obligations and duties hereby imposed on it as Servicer under this
Agreement except upon a determination that the performance of its duties
under this Agreement shall no longer be permissible under applicable law.
Notice of any such determination permitting the resignation of West Penn
shall be communicated to the Issuer, the Bond Trustee and each Rating
Agency at the earliest practicable time (and, if such communication is not
in writing, shall be confirmed in
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writing at the earliest practicable time), and any such determination shall
be evidenced by an Opinion of Counsel to such effect delivered to the
Issuer and the Bond Trustee concurrently with or promptly after such
notice. No such resignation shall become effective until a successor
Servicer shall have assumed the servicing obligations and duties hereunder
of West Penn in accordance with Section 6.04.
SECTION 5.07. Servicing Fee. The Issuer agrees to pay the
Servicer, solely to the extent amounts are available therefor in accordance
with the Indenture, the Servicing Fee with respect to all Series of
Transition Bonds issued by the Issuer. The Servicing Fee with respect to a
Series for a Payment Date shall be as follows: so long as West Penn acts as
the Servicer, the Servicing Fee will be $312,500 per quarter or, if less,
the maximum amount approved by the PUC; if a successor Servicer is
appointed, the Servicing Fee will be based on an amount approved by the
PUC, but not in excess of a per annum rate equal to 1.5% of the outstanding
principal balance of the Transition Bonds. The Servicer will be entitled to
retain as additional compensation net investment income on ITC Collections
related to Serviced Intangible Transition Property received by the Servicer
prior to each Remittance Date and the late fees, if any, paid by Customers
to the Servicer. The
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foregoing fees constitute a fair and reasonable price for
the obligations to be performed by the Servicer.
SECTION 5.08. Servicer Expenses. Except as otherwise expressly
provided herein, the Servicer shall be required to pay all expenses
incurred by it in connection with its activities hereunder, including fees
and disbursements of independent accountants and counsel, taxes imposed on
the Servicer and expenses incurred in connection with reports to Transition
Bondholders.
SECTION 5.09. Appointments. The Servicer may at any time appoint
a subservicer to perform all or any portion of its obligations as Servicer
hereunder; provided, however, that the Rating Agency Condition shall have
been satisfied in connection therewith with respect to all Rating Agencies
other than Moody's (and the Servicer shall have furnished Moody's with
written notice of such appointment prior to its effectiveness); provided
further that the Servicer shall remain obligated and be liable to the
Issuer for the servicing and administering of the Serviced Intangible
Transition Property in accordance with the provisions hereof without
diminution of such obligation and liability by virtue of the appointment of
such subservicer and to the same extent and under the same terms and
conditions as if the Servicer alone were servicing and administering the
Serviced Intangible Transition Property. The fees and expenses of the
subservicer shall be as agreed between the
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Servicer and its subservicer from time to time, and none of the Issuer (or
its members or managers), the Bond Trustee or any Transition Bondholder
shall have any responsibility therefor.
SECTION 5.10. Remittances. (a) Subject to Section 5.07, the
Servicer shall remit all ITC Collections (from whatever source) and all
proceeds of other Collateral of such Issuer, if any, received by the
Servicer to the Bond Trustee under the Indenture, for deposit pursuant to
the Indenture, not later than the second Business Day after receipt
thereof.
(b) Notwithstanding the foregoing clause (a), (i) as long as West
Penn or any successor to West Penn's electric distribution business remains
the Servicer, (ii) no Servicer Default has occurred and is continuing and
(iii) (A) West Penn or such successor maintains a short-term rating of
"A-1" or better by Standard & Poor's, "P-1" or better by Moody's and, if
rated by Fitch IBCA, "F-1" by Fitch IBCA (and for five Business Days
following a reduction in any such rating) or (B) the Rating Agency
Condition shall have been satisfied with respect to all Rating Agencies
other than Moody's (to which prior written notice will be sent) (and any
conditions or limitations imposed by such Rating Agencies in connection
therewith are complied with), the Servicer need not make the daily
remittances required by such clause (a), but in lieu thereof, shall remit
all ITC
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Collections (from whatever source) and all proceeds of other Collateral of
such Issuer, if any, received by the Servicer during any Collection Period
to the Bond Trustee, for deposit pursuant to the Indenture, not later than
the Business Day immediately preceding the 25th day of each month.
SECTION 5.11. Servicer Advances. The Servicer shall make advances
of interest or principal on the Transition Bonds of any Series in the
manner and to the extent, if any, specified in any Annex to this Agreement
entered into in connection with the issuance of such Transition Bonds.
SECTION 5.12. Protection of Title. The Servicer shall execute and
file such filings, including filings with the PUC pursuant to the Statute,
and cause to be executed and filed such filings, all in such manner and in
such places as may be required by law fully to preserve, maintain, and
protect the interests of the Issuer in the Serviced Intangible Transition
Property, including all filings required under the Statute relating to the
transfer of the ownership or security interest in the Serviced Intangible
Transition Property by the Seller to the Issuer or any security interest
granted by the Issuer in the Serviced Intangible Transition Property. The
Servicer shall deliver (or cause to be delivered) to the Issuer file-
stamped copies of, or filing receipts for, any document
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filed as provided above, as soon as available following such
filing.
ARTICLE VI
Servicer Default
SECTION 6.01. Servicer Default. If any one of the following
events (a "Servicer Default") shall occur and be continuing:
(a) any failure by the Servicer to remit to the Bond Trustee
on behalf of the Issuer any required remittance that shall
continue unremedied for a period of three Business Days after
written notice of such failure is received by the Servicer from
the Issuer or Bond Trustee; or
(b) any failure by the Servicer or, so long as the
Transferor and the Servicer are the same Person, the Transferor,
as applicable, duly to observe or perform in any material respect
any other covenant or agreement of the Servicer or the
Transferor, as the case may be, set forth in this Agreement or
any other Basic Document to which it is a party, which failure
shall (i) materially and adversely affect the Intangible
Transition Property and (ii) continue unremedied for a period of
60 days after written notice of such failure shall have been
given to the Servicer or the Transferor, as the case may be, by
the Issuer or the Bond Trustee or after discovery of such failure
by an
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officer of the Servicer or the Transferor, as the case may be; or
(c) any representation or warranty made by the Servicer in
this Agreement shall prove to have been incorrect when made,
which has a material adverse effect on the Issuer or the
Transition Bondholders and which material adverse effect
continues unremedied for a period of 60 days after the date on
which written notice thereof shall have been given to the
Servicer by the Issuer or the Bond Trustee; or
(d) an Insolvency Event occurs with respect to the Servicer;
then, and in each and every case, so long as the Servicer Default shall not
have been remedied, the Bond Trustee, as assignee of the Issuer, with the
consent of Holders of a majority of the outstanding principal amount of the
Transition Bonds of all Series, by notice then given in writing to the
Servicer (a "Termination Notice") may terminate all the rights and
obligations (other than the indemnification obligations set forth in
Section 5.02 hereof and the obligation under Section 6.02 to continue
performing its functions as Servicer until a successor Servicer is
appointed) of the Servicer under this Agreement. In addition, upon a
Servicer Default described in Section 6.01(a), each of the following shall
be entitled to apply to the PUC for sequestration and payment of revenues
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arising with respect to the Serviced Intangible Transition Property: (i)
the Issuer or its assignees or (ii) pledgees or transferees, including
transferees under the Statute, of the Serviced Intangible Transition
Property. On or after the receipt by the Servicer of a Termination Notice,
all authority and power of the Servicer under this Agreement with respect
to the Issuer, whether with respect to the Serviced Intangible Transition
Property, the related Intangible Transition Charges or otherwise, shall,
upon appointment of a successor Servicer pursuant to Section 6.02, without
further action, pass to and be vested in such successor Servicer and,
without limitation, the Bond Trustee is hereby authorized and empowered to
execute and deliver, on behalf of the predecessor Servicer, as attorney-
in-fact or otherwise, any and all documents and other instruments, and to
do or accomplish all other acts or things necessary or appropriate to
effect the purposes of such Termination Notice, whether to complete the
transfer of the Intangible Transition Property Documentation and related
documents, or otherwise. The predecessor Servicer shall cooperate with the
successor Servicer, the Bond Trustee and the Issuer in effecting the
termination of the responsibilities and rights of the predecessor Servicer
under this Agreement, including the transfer to the successor Servicer for
administration by it of all cash amounts that shall at the time be held by
the predecessor
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Servicer for remittance, or shall thereafter be received by it with respect
to the Serviced Intangible Transition Property or the related Intangible
Transition Charges. As soon as practicable after receipt by the Servicer of
such Termination Notice, the Servicer shall deliver the Intangible
Transition Property Documentation to the successor Servicer. All reasonable
costs and expenses (including attorneys fees and expenses) incurred in
connection with transferring the Intangible Transition Property
Documentation to the successor Servicer and amending this Agreement to
reflect such succession as Servicer pursuant to this Section shall be paid
by the predecessor Servicer upon presentation of reasonable documentation
of such costs and expenses. Termination of West Penn as Servicer shall not
terminate West Penn's rights or obligations as Transferor under the
Transfer Agreement.
SECTION 6.02. Notice of Servicer Default. The Servicer shall
deliver to the Issuer, the Bond Trustee and each Rating Agency promptly
after having obtained knowledge thereof, but in no event later than five
Business Days thereafter, written notice in an Officers' Certificate of any
event or circumstance (such as a breach of any representation or warranty
made by the Servicer in this Agreement) which, with the giving of notice or
the passage of time, would become a Servicer Default under Section 6.01.
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SECTION 6.03. Waiver of Past Defaults. The Bond Trustee, with the
consent of Holders of the majority of the outstanding principal amount of
the Transition Bonds of all Series, may waive in writing any default by the
Servicer in the performance of its obligations hereunder and its
consequences, except a default in making any required remittances to the
Bond Trustee of ITC Collections from Serviced Intangible Transition
Property in accordance with Section 5.10 of this Agreement. Upon any such
waiver of a past default, such default shall cease to exist, and any
Servicer Default arising therefrom shall be deemed to have been remedied
for every purpose of this Agreement. No such waiver shall extend to any
subsequent or other default or impair any right consequent thereto.
SECTION 6.04. Appointment of Successor. (a) Upon the Servicer's
receipt of a Termination Notice, pursuant to Section 6.01 or the Servicer's
resignation in accordance with the terms of this Agreement, the predecessor
Servicer shall continue to perform its functions as Servicer under this
Agreement and shall be entitled to receive the requisite portion of the
Servicing Fees, until a successor Servicer shall have assumed in writing
the obligations of the Servicer hereunder as described below. In the event
of the Servicer's termination hereunder, the Bond Trustee, as assignee of
the Issuer, with the consent of Holders of a majority of the outstanding
principal amount of the
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Transition Bonds, shall appoint a successor Servicer, and the successor
Servicer shall accept its appointment by a written assumption in form
acceptable to the Issuer and the Bond Trustee. If, within 30 days after the
delivery of the Termination Notice, a new Servicer shall not have been
appointed and accepted such appointment, the Bond Trustee may petition the
PUC or a court of competent jurisdiction to appoint a successor Servicer
under this Agreement. A Person shall qualify as a successor Servicer only
if (i) such Person is permitted under PUC Regulations to perform the duties
of the Servicer pursuant to the Statute, the Qualified Rate Order and this
Agreement, (ii) the Rating Agency Condition shall have been satisfied with
respect to all Rating Agencies other than Moody's (and Moody's shall have
been furnished with written notice of such appointment prior to its
effectiveness) and (iii) such Person enters into a servicing agreement with
the 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 Fees and all the rights granted to the prede cessor
Servicer by the terms and provisions of this Agreement.
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(c) The successor Servicer may not resign unless it is prohibited
from serving as such by law.
SECTION 6.05. Cooperation with Successor. The Servicer covenants
and agrees with the Issuer that it will, on an ongoing basis, cooperate
with the successor Servicer and provide whatever information is, and take
whatever actions are, reasonably necessary to assist the successor Servicer
in performing its obligations hereunder.
ARTICLE VII
Miscellaneous Provisions
SECTION 7.01. Amendment. This Agreement may be amended by the
Servicer and the Issuer, with the prior written consent of the Bond Trustee
and the satisfaction of the Rating Agency Condition (other than with
respect to Moody's); provided that the Issuer shall furnish to Moody's
prior to the execution of any such amendment or consent, written
notification of the substance thereof. Promptly after the execution of any
such amendment or consent, the Issuer shall deliver a copy thereof to each
of the Rating Agencies.
Prior to the execution of any amendment to this Agreement, the
Issuer and the Bond Trustee shall be entitled to receive and rely upon an
Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement and the Opinion of Counsel
referred to in Section 3.10. The Issuer and the Bond Trustee may, but
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shall not be obligated to, enter into any such amendment which affects
their own rights, duties or immunities under this Agreement or otherwise.
SECTION 7.02. Notices. All demands, notices and communications
upon or to the Servicer, the Issuer, the Bond Trustee or the Rating
Agencies under this Agreement shall be in writing, delivered personally,
via facsimile, reputable overnight courier or by first class mail, postage
prepaid, and shall be deemed to have been duly given upon receipt (a) in
the case of the Servicer, to West Penn Power Company, 800 Cabin Hill Drive,
Greensburg, Pennsylvania 15601, Attention of President, (b) in the case of
the Issuer or the Bond Trustee, at the address provided for notices or
communications to such Person in the Indenture, (c) in the case of Moody's,
to Moody's Investors Service, Inc., ABS Monitoring Department, 99 Church
Street, New York, New York 10007, (d) in the case of Standard & Poor's, to
Standard & Poor's Corporation, 26 Broadway (15th Floor), New York, New York
10004, Attention of Asset Backed Surveillance Department, and (e) in the
case of Fitch IBCA, to Fitch IBCA, Inc., One State Street Plaza, New York,
New York 10004, Attention of ABS Surveillance; or, as to each of the
foregoing, at such other address as shall be designated by written notice
to the other parties.
SECTION 7.03. Assignment. Notwithstanding anything to the
contrary contained herein, except as pro-
<PAGE>
vided in Sections 5.03 and 5.04 and as provided in the provisions of this
Agreement concerning the resignation of the Servicer, this Agreement may not
be assigned by the Servicer.
SECTION 7.04. Limitations on Rights of Others. The provisions of
this Agreement are solely for the benefit of the Servicer, the Issuer
(including its managers and members) and the Bond Trustee, on behalf of
itself and the Transition Bondholders, and nothing in this Agreement,
whether express or implied, shall be construed to give to any other Person
any legal or equitable right, remedy or claim in any Collateral or under or
in respect of this Agreement or any covenants, conditions or provisions
contained herein.
SECTION 7.05. Severability. Any provision of this Agreement that
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
SECTION 7.06. Separate Counterparts. This Agreement may be
executed by the parties hereto in separate counterparts, each of which when
so executed and delivered
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shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
SECTION 7.07. Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define
or limit any of the terms or provisions hereof. SECTION 7.08. Governing
Law. This Agreement shall be construed in accordance with the laws of the
State of New York, without reference to its conflict of law provisions, and
the obligations, rights and remedies of the parties hereunder shall be
determined in accordance with such laws.
SECTION 7.09. Assignment to Bond Trustee. The Servicer hereby
acknowledges and consents to the mortgage, pledge, assignment and grant of
a security interest by the Issuer to the Bond Trustee pursuant to the
Indenture for the benefit of the Transition Bondholders of all right, title
and interest of the Issuer in, to and under the Serviced Intangible
Transition Property owned by the Issuer and the proceeds thereof and the
assignment of any or all of the Issuer's rights hereunder to the Bond
Trustee. In no event shall the Bond Trustee have any liability for the
representations, warranties, covenants, agreements or other obligations of
the Issuer, hereunder or in any of the certificates, notices or agreements
delivered pursuant
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hereto, as to all of which recourse shall be had solely to
the assets of the Issuer.
SECTION 7.10. Nonpetition Covenants. Notwithstanding any prior
termination of this Agreement or the Indenture, but subject to the PUC's
rights to order the sequestration and payment of revenues arising with
respect to the Serviced Intangible Transition Property notwithstanding any
bankruptcy, reorganization or other insolvency proceedings with respect to
the debtor, pledgor or transferor of the Serviced Intangible Transition
Property pursuant to Section 2812(d)(3)(v) of the Statute, the Servicer
shall not, prior to the date which is one year and one day after the
termination of the Indenture, petition or otherwise invoke or, to the
fullest extent permitted by law, cause the Issuer to invoke the process of
any court or government authority for the purpose of commencing or
sustaining a case against the Issuer under the Federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Issuer or
any substantial part of the property of the Issuer, or ordering the winding
up or liquidation of the affairs of the Issuer.
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SECTION 7.11. Termination. This Agreement shall terminate when
all Transition Bonds issued by the Issuer have been retired, redeemed or
defeased in full.
SECTION 7.12. Limitation of Liability. It is expressly understood
and agreed by the parties hereto that this Agreement is executed and
delivered by Bankers Trust Company, not individually or personally but
solely as Bond Trustee for the benefit of the Transition Bondholders, in
the exercise of the powers and authority conferred and vested in it, and
nothing herein contained shall be construed as creating any liability on
Bankers Trust Company, 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 Agreement
and by any Person claiming by, through or under such parties; provided,
however, that this provision shall not protect Bankers Trust Company
against any liability that would otherwise be imposed by reason of willful
misconduct, bad faith or gross negligence in the performance of duties or
by reason of reckless disregard of obligations or duties under this
Agreement.
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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.
WEST PENN FUNDING LLC,
by
------------------------------
Title:
WEST PENN POWER COMPANY, Servicer,
by
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Title:
Acknowledged and Accepted:
BANKERS TRUST COMPANY, not in its
individual capacity but solely as Bond
Trustee on behalf of the Holders of
Transition Bonds issued by the Issuer,
by
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Title:
262
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ANNEX 1
to
SERVICING AGREEMENT
The Servicer agrees to comply with the following with respect to West Penn
Funding LLC (the "Issuer"):
SECTION 1. Definitions. (a) Capitalized terms used herein and not
otherwise defined shall have the meanings set forth in the Servicing
Agreement dated as of November 16, 1999 (the "Servicing Agreement"),
between the Issuer and West Penn Power Company, as Servicer.
(b) Whenever used in this Annex 1, the following words and
phrases shall have the following meanings:
"Adjustment Date" means, with respect to any Series of Transition
Bonds, such date or dates specified as such in the Series Supplement
therefor.
"Adjustment Request" means an application filed by the Servicer
with the PUC for revised Intangible Transition Charges pursuant to Section
5(b) of this Annex.
"Available Reserve Amount" means, as of any date, the amount on
deposit in the Reserve Subaccount.
"Bond Trustee" has the meaning specified in the Indenture.
"Calculation Date" means, with respect to any Series of
Transition Bonds, such date or dates specified as such in the Series
Supplement therefor.
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"Calculated Overcollateralization Level" means, with respect to
any Series of Transition Bonds, the amount specified as such in the Series
Supplement therefor.
"Capital Subaccount" has the meaning set forth in the Indenture.
"Class" has the meaning specified in the Indenture.
"Expected Amortization Percentage" means, with respect to any
Regulatory Year, the percentage equivalent of a fraction, the numerator of
which is the aggregate amount of Transition Bonds of all Series to be
amortized during such Regulatory Year as set forth in Expected Amortization
Schedules therefor and the denominator of which is the Projected Transition
Bond Balance on the first day of such Regulatory Year.
"Expected Amortization Schedule" means, with respect to any
Series of Transition Bonds, the expected amortization schedule for
principal thereof, as specified in the Series Supplement therefor.
"Expected Final Payment Date" means, with respect to any Series
or Class of Transition Bonds, the expected final payment date therefor, as
specified in the Series Supplement therefor.
"Holder" or "Transition Bondholder" has the meaning set forth in
the Indenture.
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"Indenture" means the Indenture dated as of November 16, 1999,
between the Issuer and the Bond Trustee, as amended and supplemented from
time to time, including any Series Supplement.
"Overcollateralization Subaccount" has the meaning set forth in
the Indenture.
"Payment Date" has the meaning specified in the Indenture and the
applicable Series Supplement.
"Projected Transition Bond Balance" has the meaning specified in
the Indenture.
"Regulatory Period" means with respect to any Series (i) the
period from the Series Issuance Date therefor through and including the
first Adjustment Date (the "Initial Regulatory Period") and (ii) following
the Initial Regulatory Period until December 1, 2008, each period from and
including each Adjustment Date through but excluding the following
Adjustment Date.
"Required Capital Amount" means, with respect to any Series of
Transition Bonds, the amount specified as such in the Series Supplement
therefor.
"Reserve Subaccount" has the meaning set forth in the Indenture.
"Sale Agreement" has the meaning set forth in the Indenture.
"Schedule Revision Date" has the meaning set forth in the
Indenture.
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"Series" has the meaning specified in the Indenture.
"Series Issuance Date" has the meaning specified in the Indenture
and the applicable Series Supplement.
"Series Supplement" has the meaning specified in the Indenture.
"Transferred Intangible Transition Property" has the meaning
specified in the Sale Agreement.
"Transition Bonds" has the meaning specified in the Indenture.
"Transition Bond Balance" has the meaning specified in the
Indenture.
SECTION 2. Adjustment Date Statements. For each Adjustment Date,
the Servicer will provide to the Issuer and the Bond Trustee a statement
indicating (i) the Transition Bond Balance and the Projected Transition
Bond Balance for each Series as of the immediately preceding Payment Date,
(ii) the amount on deposit in the Overcollateralization Subaccount and the
Calculated Overcollateralization Level as of the immediately preceding
Payment Date, (iii) the amount on deposit in the Capital Subaccount and the
Required Capital Amount as of the immediately preceding Payment Date, (iv)
the Projected Transition Bond Balance for each Payment Date prior to the
next Adjustment Date and the Servicer's projection of the Transition Bond
Balance as of each Payment Date prior to the next Adjustment Date, (v) the
Calculated
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Overcollateralization Level for each Payment Date prior to the next
Adjustment Date and the Servicer's projection of the amount on deposit in
the Overcollateralization Subaccount as of each Payment Date prior to the
next Adjustment Date, (vi) the Required Capital Amount for each Payment
Date prior to the next Adjustment Date and the Servicer's projections of
the amount on deposit in the Capital Subaccount as of each Payment Date
prior to the next Adjustment Date and (vii) the projected ITC Collections
from the Payment Date immediately preceding the Adjustment Date through the
next Adjustment Date.
SECTION 3. Remittance Date Statements. On or before each
Remittance Date, the Servicer will prepare and furnish to the Issuer and
the Bond Trustee a statement setting forth the aggregate amount remitted or
to be remitted by the Servicer to the Bond Trustee for deposit on such
Remittance Date pursuant to Section 5.10 of the Servicing Agreement and the
Indenture.
SECTION 4. Payment Date Statements. At least three Business Days
before each Payment Date for each Series of Transition Bonds, the Servicer
will prepare and furnish to the Issuer and the Bond Trustee a statement
setting forth the amounts to be paid to Holders of Transition Bonds of such
Series pursuant to Section 8.02(d) of the Indenture, as well as all other
amounts to be paid pursuant to Section 8.02(d) of the Indenture.
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SECTION 5. Intangible Transition Charges Adjustments. (a) Prior
to each Calculation Date, the Servicer shall calculate (i) the Transition
Bond Balance as of the Payment Date immediately preceding such Calculation
Date (a written copy of which shall be delivered by the Servicer to the
Bond Trustee within five days following such Calculation Date) and (ii) the
revised Intangible Transition Charges with respect to the Transferred
Intangible Transition Property for the then-current Regulatory Period and
any subsequent Regulatory Periods until a Payment Date occurs, such that
the Servicer projects that ITC Collections will be sufficient so that (w)
the outstanding principal balance of each outstanding Series will equal the
amount provided for in the Expected Amortization Schedule therefor, (x) the
amount on deposit in the Overcollateralization Subaccount will equal the
Calculated Overcollateralization Level, (y) the amount on deposit in the
Capital Subaccount will equal the Required Capital Amount and (z) the
amount on deposit in the Reserve Subaccount will equal zero, in each case
by the Payment Date immediately preceding the next Adjustment Date or,
during the period when Adjustment Dates occur monthly, the 25th day of the
calendar month in which the next Adjustment Date occurs, in each case
taking into account the Available Reserve Amount.
(b) In order to obtain approval of each annual adjustment as
expeditiously as possible, on October 1 of
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each year the Servicer will file an Adjustment Request with the PUC which
will include a schedule of actual ITC Collections for the nine months ended
August 31, together with an estimate of ITC Collections for the three
months ending on the immediately following November 30, and the estimated
Intangible Transition Charges for the following year. On December 15, the
Servicer will file with the PUC a schedule of actual ITC Collections as of
November 30, replacing the estimates submitted on October 1, and the actual
Intangible Transition Charges for the following year. Interim adjustments
beginning twelve months before the Expected Final Payment Date of the last
Series or Class of the Transition Bonds will not reflect updated
assumptions of projected future usage of electricity by customers, expected
delinquencies and write-offs and future expenses relating to Intangible
Transition Property and the Transition Bonds. Beginning twelve months
before the Expected Final Payment Date of the last Series or Class of the
Transition Bonds, the PUC will permit each Adjustment Request to become
effective within 15 days after filing. The adjustment process will continue
until the earlier of the final payment of all Series of Transition Bonds
and December 31, 2008.
(c) The Servicer shall (i) take all reasonable actions and make
all reasonable efforts in order to effectuate such revision to such
Intangible Transition Charges and (ii) promptly send to the Bond Trustee
copies of
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all material notices and documents relating to such .
SECTION 6. Servicer Advances. The Servicer shall not make any
advances of interest or principal on the Transition Bonds of any Series.
SECTION 7. Schedule Revision Date Schedules. Prior to each
Schedule Revision Date, the Servicer shall deliver to the Issuer
replacement Schedules A and replacement Schedules B to each Series
Supplement to which such Schedule Revision Date applies, adjusted to
reflect the event giving rise to such Schedule Revision Date and setting
forth the Calculated Overcollateralization Level and the Expected
Amortization Schedule for each Payment Date applicable thereto; provided,
however, that no such replacement Schedule A or Schedule B shall be
required with respect to a Series if the event giving rise to such Schedule
Revision Date is a redemption of the Transition Bonds of such Series in
whole.
270
TYPE: EX-23
SEQUENCE: 2
DESCRIPTION: CONSENT OF INDEPENDENT ACCOUNTANTS
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-3 (No. 333-79619) of West Penn Funding LLC of our report
dated February 3, 2000 relating to the financial statements, which appear in
this Form 10-K.
PricewaterhouseCoopers LLP
March 29, 2000
271
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
OTHER STOCKHOLDER'S EQUITY IN THIS CASE REPRESENTS MEMBER'S EQUITY. TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY IN THIS CASE REPRESENTS TOTAL LIABILITIES
AND MEMBER'S EQUITY.
</LEGEND>
<CIK> 0001087288
<NAME> WEST PENN FUNDING LLC
<MULTIPLIER> 1,000
<CURRENCY> DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 2
<CASH> 1,003
<SECURITIES> 0
<RECEIVABLES> 7,474
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 64,262
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 608,553
<CURRENT-LIABILITIES> 55,315
<BONDS> 550,207
0
0
<COMMON> 0
<OTHER-SE> 3,025
<TOTAL-LIABILITY-AND-EQUITY> 608,553
<SALES> 7,502
<TOTAL-REVENUES> 7,508
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,944
<INCOME-PRETAX> 10
<INCOME-TAX> 4
<INCOME-CONTINUING> 6
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
TYPE: EX-99
SEQUENCE: 4
DESCRIPTION: MONTHLY SERVICER'S CERTIFICATES
Monthly Servicer's Certificate
West Penn Funding LLC
$600,000,000 Transition Bonds, Series 1999-A
Pursuant to Section 3.04 of the Servicing Agreement dated as of November 16,
1999 (the "Servicing Agreement") between West Penn Power Company, as Servicer,
and West Penn Funding LLC, as Issuer, the Servicer does hereby certify as
follows:
Capitalized terms used in the Monthly Servicer's Certificate (the "Monthly
Certificate") have their respective meanings as set forth in the Servicing
Agreement. References herein to certain sections and subsections are
references to the respective sections of the Servicing Agreement.
Billing Period: November 1999
1. Current Monthly Billing Period November 1999
CUSTOMER CLASS 1 of 3: RESIDENTIAL
2. Rate Schedule #10 kWh Billed 26,656,035
3. Rate Schedule #10 Weighted Average 0.0053
ITC Charge
Billed ITC Revenues
4. Rate Schedule #10 Billed ITC $142,138
Revenues
ITC Collections
5. Rate Schedule #10 ITC Collections $22,481
6. Total Residential Net Write-offs 1.260%
as % of Billed Revenues RP-68
CUSTOMER CLASS 2 OF 3: COMMERCIAL
7. Rate Schedule #20 kWh Billed 11,694,175
8. Rate Schedule #20 Weighted Average 0.0046
ITC Charge
9. Rate Schedule #22 kWh Billed 259,726
10. Rate Schedule #22 Weighted Average 0.0052
ITC Charge
11. Rate Schedule #23 kWh Billed 10,775
12. Rate Schedule #23 Weighted Average 0.0016
ITC Charge
13. Rate Schedule #24 kWh Billed 53
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14. Rate Schedule #24 Weighted Average 0.0059
ITC Charge
Billed ITC Revenues
15. Rate Schedule #20 Billed ITC $54,255
Revenues
16. Rate Schedule #22 Billed ITC $1,360
Revenues
17. Rate Schedule #23 Billed ITC $18
Revenues
18. Rate Schedule #24 Billed ITC $0
Revenues _______
19. Total Commercial Billed ITC
Revenues $55,633
ITC Collections
20. Rate Schedule #20 ITC Collections $2,531
21. Rate Schedule #22 ITC Collections $40
22. Rate Schedule #23 ITC Collections $0
23. Rate Schedule #24 ITC Collections $0
24. Total Commercial ITC Collections ______
$2,571
25. Total Commercial Net Write-offs as 0.160%
a % of Billed Revenues RP-68
CUSTOMER CLASS 3 OF 3: INDUSTRIAL
26. Rate Schedule #30 kWh Billed 40,826,193
27. Rate Schedule #30 Weighted Average 0.0055
ITC Charge
28. Rate Schedule #40 kWh Billed 71,265,789
29. Rate Schedule #40 Weighted Average 0.0042
ITC Charge
30. Rate Schedule #41 kWh Billed 1,965,000
31. Rate Schedule #41 Weighted Average 0.0040
ITC Charge
32. Rate Schedule #44 kWh Billed 3,008,305
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33. Rate Schedule #44 Weighted Average 0.0033
ITC Charge
34. Rate Schedule #46 kWh Billed 30,514,513
35. Rate Schedule #46 Weighted Average 0.0030
ITC Charge
36. Rate Schedule #86 kWh Billed 145
37. Rate Schedule #86 Weighted Average 0.1097
ITC Charge
38. Street Lighting Rate Schedules 2,308,501
39. Street Lighting Weighted Average 0.0030
ITC Charge
Billed ITC Revenues
40. Rate Schedule #30 Billed ITC $223,795
Revenues
41. Rate Schedule #40 Billed ITC $296,456
Revenues
42. Rate Schedule #41 Billed ITC $7,908
Revenues
43. Rate Schedule #44 Billed ITC $9,984
Revenues
44. Rate Schedule #46 Billed ITC $90,193
Revenues
45. Rate Schedule #86 Billed ITC $16
Revenues
46. Street Lighting Rate Schedules $6,870
Billed ITC Revenues ________
47. Total Industrial Billed ITC $635,202
Revenues
ITC Collections
48. Rate Schedule #30 ITC Collections $2,897
49. Rate Schedule #40 ITC Collections $0
50. Rate Schedule #41 ITC Collections $0
51. Rate Schedule #44 ITC Collections $0
52. Rate Schedule #46 ITC Collections $0
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53. Rate Schedule #86 ITC Collections $0
54. Street Lighting Rate Schedules ITC $29
Collections ______
55. Total Industrial ITC Collections $2,926
56. Total Industrial Net Write-offs as 0.040%
a % of Billed Revenues RP-68
AGGREGATE ITC COLLECTIONS
Aggregate ITC Remittances for November $27,978
1999 Billing Period
Aggregate ITC Remittances for December
1999 Billing Period
Aggregate ITC Remittances for January
2000 Billing Period
Aggregate ITC Remittances for
February 2000 Billing Period ________
Aggregate ITC Remittances to Date $27,978
276
<PAGE>
Monthly Servicer's Certificate
West Penn Funding LLC
$600,000,000 Transition Bonds, Series 1999-A
Pursuant to Section 3.04 of the Servicing Agreement dated as of November 16,
1999 (the "Servicing Agreement") between West Penn Power Company, as Servicer,
and West Penn Funding LLC, as Issuer, the Servicer does hereby certify as
follows:
Capitalized terms used in the Monthly Servicer's Certificate (the "Monthly
Certificate") have their respective meanings as set forth in the Servicing
Agreement. References herein to certain sections and subsections are
references to the respective sections of the Servicing Agreement.
Billing Period: December 1999
1. Current Monthly Billing Period December 1999
CUSTOMER CLASS 1 of 3: RESIDENTIAL
2. Rate Schedule #10 kWh Billed 417,169,970
3. Rate Schedule #10 Weighted Average 0.0055
ITC Charge
Billed ITC Revenues
4. Rate Schedule #10 Billed ITC $2,298,492
Revenues
ITC Collections
5. Rate Schedule #10 ITC Collections $1,004,390
6. Total Residential Net Write-offs 1.760%
as % of Billed Revenues RP-68
CUSTOMER CLASS 2 OF 3: COMMERCIAL
7. Rate Schedule #20 kWh Billed 152,114,268
8. Rate Schedule #20 Weighted Average 0.0056
ITC Charge
9. Rate Schedule #22 kWh Billed 3,977,941
10. Rate Schedule #22 Weighted Average 0.0057
ITC Charge
11. Rate Schedule #23 kWh Billed 24,843
12. Rate Schedule #23 Weighted Average 0.0041
ITC Charge
13. Rate Schedule #24 kWh Billed 2,853
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14. Rate Schedule #24 Weighted Average 0.0053
ITC Charge
Billed ITC Revenues
15. Rate Schedule #20 Billed ITC $845,652
Revenues
16. Rate Schedule #22 Billed ITC $22,635
Revenues
17. Rate Schedule #23 Billed ITC $102
Revenues
18. Rate Schedule #24 Billed ITC $15
Revenues ________
19. Total Commercial Billed ITC $868,403
Revenues
ITC Collections
20. Rate Schedule #20 ITC Collections $388,206
21. Rate Schedule #22 ITC Collections $9,060
22. Rate Schedule #23 ITC Collections $90
23. Rate Schedule #24 ITC Collections $12
--------
24. Total Commercial ITC Collections $397,367
25. Total Commercial Net Write-offs as
a % of Billed Revenues RP-68 0.510%
CUSTOMER CLASS 3 OF 3: INDUSTRIAL
26. Rate Schedule #30 kWh Billed 307,764,376
27. Rate Schedule #30 Weighted Average 0.0055
ITC Charge
28. Rate Schedule #40 kWh Billed 250,616,312
29. Rate Schedule #40 Weighted Average 0.0041
ITC Charge
30. Rate Schedule #41 kWh Billed 1,260,00
31. Rate Schedule #41 Weighted Average 0.0032
ITC Charge
32. Rate Schedule #44 kWh Billed 6,020,465
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33. Rate Schedule #44 Weighted Average 0.0033
ITC Charge
34. Rate Schedule #46 kWh Billed 166,230,798
35. Rate Schedule #46 Weighted Average 0.0041
ITC Charge
36. Rate Schedule #86 kWh Billed 0
37. Rate Schedule #86 Weighted Average 0.0000
ITC Charge
38. Street Lighting Rate Schedules 6,236,826
39. Street Lighting Weighted Average 0.0030
ITC Charge
Billed ITC Revenues
40. Rate Schedule #30 Billed ITC $1,679,306
Revenues
41. Rate Schedule #40 Billed ITC $1,039,180
Revenues
42. Rate Schedule #41 Billed ITC $4,024
Revenues
43. Rate Schedule #44 Billed ITC $19,946
Revenues
44. Rate Schedule #46 Billed ITC $677,409
Revenues
45. Rate Schedule #86 Billed ITC $62
Revenues
46. Street Lighting Rate Schedules $18,572
Billed ITC Revenues __________
47. Total Industrial Billed ITC
Revenues $3,438,499
ITC Collections
48. Rate Schedule #30 ITC Collections $624,366
49. Rate Schedule #40 ITC Collections $388,652
50. Rate Schedule #41 ITC Collections $7,911
51. Rate Schedule #44 ITC Collections $9,988
52. Rate Schedule #46 ITC Collections $90,229
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53. Rate Schedule #86 ITC Collections $16
54. Street Lighting Rate Schedules ITC $7,528
Collections __________
55. Total Industrial ITC Collections $1,128,689
56. Total Industrial Net Write-offs as 0.010%
a % of Billed Revenues RP-68
AGGREGATE ITC COLLECTIONS
Aggregate ITC Remittances for November $27,978
1999 Billing Period
Aggregate ITC Remittances for December $2,530,446
1999 Billing Period
Aggregate ITC Remittances for January
2000 Billing Period
Aggregate ITC Remittances for
February 2000 Billing Period ___________
Aggregate ITC Remittances to Date $2,558,424
280
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