SERVICING AGREEMENT BONDABLE TRANSITION PROPERTY SERVICING AGREEMENT between JCP&L TRANSITION FUNDING II LLC Issuer and JERSEY CENTRAL POWER & LIGHT COMPANY Servicer Dated as of_______, 2006
Exhibit
10(b)
BONDABLE
TRANSITION PROPERTY SERVICING AGREEMENT
between
JCP&L
TRANSITION FUNDING II LLC
Issuer
Issuer
and
JERSEY
CENTRAL POWER & LIGHT COMPANY
Servicer
Servicer
Dated
as
of_______, 2006
TABLE
OF CONTENTS
ARTICLE
I
|
DEFINITIONS
|
1
|
Section
1.01
|
Definitions
|
1
|
Section
1.02
|
Other
Definitional Provisions
|
1
|
ARTICLE
II
|
APPOINTMENT
AND AUTHORIZATION OF SERVICER
|
2
|
Section
2.01
|
Appointment
of Servicer; Acceptance of Appointment
|
2
|
Section
2.02
|
Authorization
|
2
|
Section
2.03
|
Dominion
and Control Over Transferred Bondable Transition Property
|
2
|
ARTICLE
III
|
BILLING
SERVICES
|
3
|
Section
3.01
|
Duties
of Servicer
|
3
|
Section
3.02
|
Collection
and Allocation of the Transition Bond Charge.
|
4
|
Section
3.03
|
Payment
of TBC Collections
|
5
|
Section
3.04
|
Servicing
and Maintenance Standards
|
7
|
Section
3.05
|
Servicer’s
Certificates
|
7
|
Section
3.06
|
Annual
Statement as to Compliance
|
7
|
Section
3.07
|
Annual
Independent Registered Public Accountants’ Report
|
8
|
Section
3.08
|
Bondable
Transition Property Documentation
|
8
|
Section
3.09
|
Computer
Records; Audits of Documentation
|
9
|
Section
3.10
|
Defending
Transferred Bondable Transition Property Against Claims
|
9
|
ARTICLE
IV
|
SERVICES
RELATED TO TRANSITION BOND CHARGE ADJUSTMENTS
|
10
|
Section
4.01
|
Transition
Bond Charge Adjustments
|
10
|
ARTICLE
V
|
THE
SERVICER
|
10
|
Section
5.01
|
Representations
and Warranties of Servicer
|
10
|
Section
5.02
|
Indemnities
of Servicer; Release of Claims
|
12
|
Section
5.03
|
Merger
or Consolidation of, or Assumption of the Obligations of,
Servicer
|
14
|
Section
5.04
|
Assignment
of Servicer’s Obligations
|
15
|
Section
5.05
|
Limitation
on Liability of Servicer and Others
|
15
|
Section
5.06
|
JCP&L
Not to Resign as Servicer
|
16
|
Section
5.07
|
Quarterly
Servicing Fee
|
16
|
Section
5.08
|
Servicer
Expenses
|
16
|
Section
5.09
|
Subservicing.
|
16
|
Section
5.10
|
No
Servicer Advances
|
17
|
Section
5.11
|
Remittances.
|
17
|
Section
5.12
|
Protection
of Title
|
18
|
ARTICLE
VI
|
SERVICER
DEFAULT
|
18
|
Section
6.01
|
Servicer
Default
|
18
|
Section
6.02
|
Notice
of Servicer Default
|
20
|
Section
6.03
|
Waiver
of Past Defaults
|
20
|
i
Section
6.04
|
Appointment
of Successor
|
20
|
Section
6.05
|
Cooperation
With Successor
|
21
|
ARTICLE
VII
|
MISCELLANEOUS
PROVISIONS
|
21
|
Section
7.01
|
Amendment.
|
21
|
Section
7.02
|
Notices
|
22
|
Section
7.03
|
Limitations
on Rights of Others
|
23
|
Section
7.04
|
Severability.
|
23
|
Section
7.05
|
Separate
Counterparts
|
24
|
Section
7.06
|
Headings
|
24
|
Section
7.07
|
Governing
Law.
|
24
|
Section
7.08
|
Assignment
to the Trustee
|
24
|
Section
7.09
|
Nonpetition
Covenants
|
24
|
Section
7.10
|
Termination
|
25
|
ANNEX
1
Issuer
Annex
EXHIBIT
A Servicing
Procedures
ii
BONDABLE
TRANSITION PROPERTY SERVICING AGREEMENT, dated as of _______ 2006, by and
between JCP&L TRANSITION FUNDING II LLC, a Delaware limited liability
company, as Issuer (the “Issuer”), and JERSEY CENTRAL POWER & LIGHT COMPANY,
a New Jersey corporation, in its capacity as Servicer (the “Servicer”) of the
Bondable Transition Property hereunder.
W
I T N E
S S E T H:
WHEREAS
the Servicer is willing to service all Transferred Bondable Transition Property
purchased from the Seller by the Issuer;
WHEREAS,
the TBC Collections initially will be commingled with other funds collected
by
the Servicer;
WHEREAS,
certain parties may have an interest in such commingled collections, and such
parties have entered into an Intercreditor Agreement as of the date hereof
that
allows the Servicer to allocate the collected, commingled funds according to
each party’s interest; and
WHEREAS
the Issuer, in connection with its ownership of the Transferred Bondable
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 other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, and intending to be legally bound hereby,
the
parties hereto agree as follows:
ARTICLE
I
DEFINITIONS
Section
1.01 Definitions.
Capitalized terms used and not otherwise defined herein shall have the meanings
assigned to them in Appendix A of the Indenture dated as of_______ , 2006
between the Issuer and The Bank of New York, as Trustee (the
“Trustee”).
Section
1.02 Other
Definitional Provisions.
(a)
Non-capitalized
terms used herein that are defined in the Competition Act, as the context
requires, have the meanings assigned to such terms in the Competition Act,
but
without giving effect to amendments to the Competition Act after the date hereof
which have a material adverse effect on the Issuer or the Transition
Bondholders.
(b)
All
terms
defined in this Servicing Agreement have such defined meanings when used in
any
certificate or other document made or delivered pursuant hereto unless otherwise
defined therein.
(c)
The
words
“hereof”, “herein”, “hereunder” and words of similar import when used in this
Servicing Agreement shall refer to this Servicing Agreement as a whole
and
1
not
to
any particular provision of this Servicing Agreement; Article, Section, Annex,
Schedule and Exhibit references contained in this Servicing Agreement are
references to Articles, Sections, Annexes, Schedules and Exhibits in or to
this
Servicing Agreement unless otherwise specified; and the term “including” shall
mean “including without limitation”.
(d)
The
definitions contained in this Servicing Agreement are applicable to the singular
as well as the plural forms of such terms.
ARTICLE
II
APPOINTMENT
AND AUTHORIZATION OF SERVICER
Section
2.01 Appointment
of Servicer; Acceptance of Appointment.
The
Issuer hereby appoints the Servicer, and the Servicer hereby accepts such
appointment, to perform the Servicer’s obligations pursuant to this Servicing
Agreement on behalf of and for the benefit of the Issuer in accordance with
and
subject to the terms of this Servicing Agreement. This appointment and the
Servicer’s acceptance thereof may not be revoked except in accordance with the
express terms of this Servicing Agreement.
Section
2.02 Authorization.
With
respect to all or any portion of the Transferred Bondable Transition Property
and in connection with the performance of its duties hereunder, the Servicer
shall be, and hereby is, authorized and empowered by the Issuer to:
(a)
on
behalf
of itself, the Issuer, or both of them, as the case may be, execute and deliver
any and all instruments, documents or notices; and
(b)
on
behalf
of itself, the Issuer, or both of them, as the case may be, make any filing
and
participate in proceedings of any kind with any governmental authorities,
including with the BPU and the Securities and Exchange Commission
(“SEC”).
The
Issuer shall furnish the Servicer with such executed documents as have been
prepared by the Servicer for execution by the Issuer, and with such other
documents as may be in the Issuer’s possession, that are 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 Transferred Bondable Transition Property.
Notwithstanding
any other provision herein, the Servicer and the Issuer agree that the Issuer
shall have dominion and control over the Transferred Bondable Transition
Property, and the Servicer, in accordance with the terms hereof, is acting
solely as the servicing agent of the Issuer with respect to the Transferred
Bondable Transition Property. The Servicer hereby agrees that it shall not
take
any action hereunder that is not authorized by this Servicing Agreement, the
Competition Act or the Financing Order, that is not consistent with its
customary procedures and practices, or that shall impair the rights of the
Issuer with respect to the Transferred Bondable Transition Property, in each
case unless such action is required by law or court or regulatory
order.
2
ARTICLE
III
BILLING
SERVICES
Section
3.01 Duties
of Servicer.
The
Servicer, as agent for the Issuer (to the extent provided herein), shall have
the following duties:
(a)
Duties
of Servicer Generally.
The
Servicer will manage, service, administer and make collections in respect of
the
Transition Bond Charge. The Servicer’s duties will include:
(i) obtaining
meter reads, calculating and billing the Transition Bond Charge in accordance
with the Financing Order and collecting the Transition Bond Charge from
Customers and Third Parties, as applicable;
(ii) responding
to inquiries by Customers, Third Parties, the BPU, or any federal, local or
other state governmental authority with respect to the Transition Bond
Charge;
(iii) delivering
bills or arranging for the delivery of bills to Customers and Third Parties,
accounting for TBC Collections, investigating and resolving delinquencies (and
furnishing reports with respect to such delinquencies to the Issuer), processing
and depositing collections, making periodic remittances and furnishing periodic
reports to the Issuer, the Trustee and the Rating Agencies;
(iv) selling,
as the agent for the Issuer, as its interest may appear, defaulted or written
off accounts in accordance with the Servicer’s usual and customary practices for
accounts of its own electric service customers; and
(v) taking
action in connection with Transition Bond Charge Adjustments as set forth
herein.
Anything
to the contrary notwithstanding, the duties of the Servicer set forth in this
Servicing Agreement shall be qualified in their entirety by the Competition
Act
and any other applicable law effective in New Jersey, the Financing Order,
any
BPU Regulations and the federal securities laws and the rules and regulations
promulgated thereunder, including without limitation, Regulation AB, 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
procedures, duties and responsibilities set forth in Exhibit A hereto which,
among other things, relate to data acquisition, usage and xxxx calculation,
billing, customer service functions, collections, payment processing and
remittance.
(b)
Notification
of Laws and Regulations.
The
Servicer shall immediately notify the Issuer, the Trustee and the Rating
Agencies in writing of any laws or BPU Regulations hereafter promulgated that
have or will reasonably be likely to have a material adverse effect on the
Servicer’s ability to perform its duties under this Servicing
Agreement.
3
(c)
Other
Information.
Upon the
reasonable request of the Issuer, the Trustee or any Rating Agency, the Servicer
shall provide to the Issuer, the Trustee or the Rating Agencies, as the case
may
be, any public financial information in respect of the Servicer, or any material
information regarding the Transferred Bondable Transition Property (or related
TBC Collections) to the extent it is reasonably available to the Servicer,
that
may be reasonably necessary and permitted by law for the Issuer, the Trustee
or
the Rating Agencies 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 to the Issuer and to the Trustee, within a reasonable
time after written request therefor, any information available to the Servicer
or reasonably obtainable by the Servicer that is necessary to calculate the
Transition Bond Charge.
(d)
Preparation
of Reports, Certifications, etc.
The
Servicer shall prepare, procure, deliver and/or file, or cause to be prepared,
procured, delivered or filed, any reports, attestations, exhibits,
certifications or other documents required to be delivered or filed with the
SEC
(and/or any other governmental or regulatory agency) by the Issuer under the
federal securities or other applicable laws or in accordance with the Basic
Documents, including, but without limiting the generality of foregoing, filing
with the SEC, if applicable, a copy or copies of (i) the certificates described
in Section 3.05 and Annex 1 hereof (under Form 10-D or any other applicable
form), (ii) the annual statements of compliance, attestation reports and other
certifications described in Section 3.06 hereof, and (iii) the Annual
Independent Certified Public Accountant’s Report (and any attestation required
under Regulation AB) described in Section 3.07 hereof. In addition, the
appropriate officer or officers of the Servicer shall sign the Issuer’s Form
10-K (and any other applicable SEC or other reports, attestations,
certifications and other documents), to the extent required by, and consistent
with, the federal securities laws and/or any other applicable law.
Section
3.02 Collection
and Allocation of the Transition Bond Charge.
(a)
The
Servicer shall use all reasonable efforts, consistent with its customary
servicing procedures, to collect all amounts owed in respect of the Transition
Bond Charge as and when the same shall become due and shall follow such
collection procedures as the Servicer follows with respect to collection
activities that the Servicer conducts for itself and others. The Servicer shall
not change the amount of or reschedule the due date of any scheduled payment
of
the Transition Bond Charge, except as contemplated in this Servicing Agreement
or as required by law or court order or BPU Regulations; 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 the Servicer
conducts for itself. The Servicer shall diligently enforce the obligations
of
any Third Parties providing billing and collection services with respect to
the
Transition Bond Charge.
(b)
As
specified in the Petition and the Financing Order, any amounts received by
the
Servicer from a Customer that represent a partial payment toward an outstanding
balance will be applied in the following manner:
(i) to
sales
taxes with respect to the partial payment (which the Servicer collects as
trustee for the State of New Jersey and not for its own account or for that
of
the Issuer);
4
(ii) pro
rata
to the Transition Bond Charge and the Servicer’s other charges and taxes, where
any of such charges are in arrears, based on their proportion to the Servicer’s
total charges in arrears for that period; and
(iii) pro
rata
to the Transition Bond Charge and the Servicer’s other charges and taxes, where
any of such charges are current charges, based on their proportion to the
Servicer’s total current charges assessed for that period.
JCP&L’s
other charges may include the Market Transition Charge, the MTC-Tax and all
other charges that JCP&L and any Third Party may be authorized to xxxx and
collect from Customers on account of the provision of electric service. If
there
is more than one series of transition bonds outstanding, whether they be
Transition Bonds issued by the Issuer, or transition bonds issued by JCP&L
Transition Funding LLC or any other issuer for which the Servicer is acting
as
servicer, the Servicer shall allocate partial payments among such series in
accordance with the Intercreditor Agreement.
Section
3.03 Payment
of TBC Collections.
(a)
With
the exception of the Quarterly Servicing Fee, which the Servicer is entitled
to
withhold from TBC Collections pursuant to Section 5.07 hereof, the Servicer
agrees to remit to the Trustee for deposit in the Collection Account TBC
Collections for each Billing Month based on its estimated system-wide write-off
percentage and the average number of days outstanding of bills, as in effect
from time to time as follows:
(i) on
each
Monthly Remittance Date, for so long as the Servicer has satisfied the
conditions of Section 5.11(b), the Servicer shall remit to the Trustee for
each
preceding Billing Month an amount equal to the amount of TBC Collections deemed
to have been received during the preceding calendar month, based on the
estimated system-wide write-off percentage and the average number of days
outstanding of bills then in effect; and
(ii) on
each
Daily Remittance Date, for so long as the Servicer has not satisfied the
conditions of Section 5.11(b), the Servicer shall remit to the Trustee an amount
equal to the amount of TBC Collections deemed to have been received during
the
Business Day which is two Business Days preceding such Daily Remittance Date,
including (for the first Daily Remittance Date following a period when the
Servicer had been remitting on a Monthly Remittance Date) any amounts on deposit
with the Servicer (for the Billing Month and any prior Billing Month) prior
to
such Daily Remittance Date during a period when the Servicer had been remitting
on a Monthly Remittance Date based on the estimated system-wide write-off
percentage and the average number of days outstanding of bills then in
effect.
(b)
On
or
before each Reconciliation Date, the Servicer will reconcile actual TBC
Collections with estimated TBC Collections previously made to the Trustee in
respect of (i) each Annual Reconciliation Date, each of the twelve Billing
Months beginning fifteen months before the month in which such Reconciliation
Date occurs (or from the first Series Issuance
5
Date,
if
less than fifteen months have elapsed), and (ii) each Monthly Reconciliation
Date, the Billing Month that is three months prior to the Billing Month in
which
such Reconciliation Date occurs. In the event that there is a payment shortfall
(i.e., the remittances of the estimated payments are less than the actual
payments arising from the transition bond charges) with respect to the
applicable Billing Months or Billing Month, as the case may be, the Servicer
shall pay the shortfall to the Trustee for deposit into the Collection Account
within two Business Days of that Reconciliation Date, or, if the Servicer remits
TBC Collections on each Monthly Remittance Date in accordance with Section
5.11(b), on the next Monthly Remittance Date. In the event that there is an
overpayment (i.e., the remittances of estimated payments exceed the amounts
that
should have been remitted based on the actual system-wide write-offs) for the
applicable Billing Months or Billing Month, as the case may be, the Servicer
may
either (A) reduce the amount that the Servicer is required to remit to the
Trustee for deposit in the Collection Account on the following Remittance Date
(and, if necessary, succeeding Remittance Dates) by the amount of the
overpayment or (B) direct the Trustee in writing to pay to the Servicer from
the
General Subaccount the amount of the overpayment, which upon payment shall
become the property of the Servicer.
(c)
In
the
event that the Servicer makes changes to its current computerized customer
information system that would allow the Servicer to track actual TBC Collections
and/or otherwise monitor payment and collection activity more efficiently or
accurately than is currently being done under this Servicing Agreement, the
Servicer may substitute actual remittance procedures for the estimated
remittance procedures described above and otherwise modify the remittance
procedures described above as may be appropriate in the interests of efficiency,
accuracy, cost and/or system capabilities. However, the Servicer may not make
any such modification or substitution that will materially and adversely affect
the Transition Bondholders. The Servicer must also give notice to the Rating
Agencies of any such computer system changes no later than sixty business days
after the date on which all customer accounts are first billed on the new
system.
(d)
The
Servicer and Issuer agree and acknowledge that, although the Servicer will
remit
estimated payments arising from the TBC Collections to the Trustee, the Servicer
is not obligated to make any payments on the Transition Bonds. The Servicer
agrees and acknowledges that it holds all TBC Collections collected by it for
the benefit of the Issuer and that all amounts will be remitted by the Servicer
in accordance with this Servicing Agreement without any surcharge, fee, offset,
charge or other deduction and without making any claim to reduce its obligation
to remit all TBC Collections collected by it, except (i) as set forth in clause
(b) above, (ii) with respect to the Quarterly Servicing Fee that it may withhold
pursuant to Section 5.07 hereof and (iii) with respect to late fees permitted
by
Section 5.07.
Section
3.04 Servicing
and Maintenance Standards.
The
Servicer shall, on behalf of the Issuer:
(a)
manage,
service, administer and make collections in respect of the Transferred Bondable
Transition Property with reasonable care and in material compliance with
applicable law and regulations, including all applicable BPU Regulations, 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;
6
(b)
follow
standards, policies and procedures in performing its duties as Servicer that
are
customary in the electric power distribution industry in New
Jersey;
(c)
use
all
reasonable efforts, consistent with its customary servicing procedures, to
enforce and maintain the rights of the Issuer and the Trustee in respect of
the
Transferred Bondable Transition Property; and
(d)
calculate
the Transition Bond Charge in compliance with the Competition Act, the Financing
Order and any applicable tariffs;
except
where the failure to comply with any of the foregoing would not have a material
adverse effect on the Issuer’s or the Trustee’s respective interests in the
Transferred Bondable Transition Property. The Servicer shall follow such
customary and usual practices and procedures as it shall deem necessary or
advisable in its servicing of the Transferred Bondable Transition Property,
which, in the Servicer’s judgment, may include the taking of legal action
pursuant to Section 3.10 or otherwise. Notwithstanding the foregoing, the
Servicer shall not change its customary and usual practices and procedures
in
any manner that would have a material adverse effect on the Issuer’s or the
Trustee’s respective interests in the Transferred Bondable Transition Property
unless it shall have provided the Rating Agencies with prior written
notice.
Section
3.05 Servicer’s
Certificates.
The
Servicer will provide to the Issuer and to the Trustee the statements specified
in Annex 1 at the times indicated therein.
Section
3.06 Annual
Statement as to Compliance.
The
Servicer shall deliver to the Issuer and the Trustee, on or before the earlier
of (a) March 31 of each year or (b) with respect to each calendar
year during which the Issuer’s annual report on Form 10-K is required to be
filed in accordance with the Exchange Act and the rules and regulations
thereunder, the date on which the annual report on Form 10-K is required to
be
filed in accordance with the Exchange Act and the rules and regulations
thereunder, (i) a Servicer Officers’ Certificate containing, and certifying as
to, the statements of compliance required by Item 1123 (or any successor or
similar items or rule) of Regulation AB, as then in effect and (ii) a Servicer
Officers’ Certificate containing, and certifying as to, the statements and
assessment of compliance required by Item 1122(a) (or any successor or similar
items or rule) of Regulation AB, as then in effect.
The
Servicer shall use commercially reasonable efforts to obtain from each other
party participating in the servicing function any additional certifications
as
to the statements and assessment required under Item 1122 or Item 1123 of
Regulation AB to the extent required in connection with the filing of the annual
report on Form 10-K; provided, however, that a failure to obtain such
certifications shall not be a breach of the Servicer’s duties
hereunder.
Section
3.07 Annual
Independent Registered Public Accountants’ Report.
(a)
The
Servicer shall cause a firm of Independent registered public accountants (which
may also provide other services to the Servicer or the Seller) to prepare,
and
the Servicer shall deliver to the Issuer, to the Trustee and to each Rating
Agency, on or before the earlier of (a) March 31 of each year or
(b) with respect to each calendar year during which the Issuer’s annual
report on Form 10-K is required to be filed in accordance with the Exchange
Act
and the rules and regulations thereunder, the date on which the annual report
on
Form 10-K
7
is
required to be filed in accordance with the Exchange Act and the rules and
regulations thereunder, 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 Servicing Agreement during the preceding calendar year (or, in the
case of the first Annual Accountant’s Report, the period of time from the
Initial Transfer Date until December 31, 2006), identifying the results of
such
procedures and including any exceptions noted. In the event such accounting
firm
requires the Trustee or the Issuer to agree or consent to the procedures
performed by such firm, the Issuer shall direct the Trustee in writing to so
agree, it being understood and agreed that the Trustee will deliver such letter
of agreement or consent in conclusive reliance upon the direction of the Issuer,
and the Trustee will not 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 in accordance with the
Rules of the Public Company Accounting Oversight Board and shall include the
attestation report required under Item 1122(b) of Regulation AB (or any
successor or similar items or rule), as then in effect.
Section
3.08 Bondable
Transition Property Documentation.
To
assure uniform quality in servicing the Transferred Bondable Transition Property
and to reduce administrative costs, the Servicer shall keep on file, in
accordance with its customary procedures, all Bondable Transition Property
Documentation, it being understood that the Servicer is acting solely as the
servicing agent and custodian for the Issuer with respect to the Bondable
Transition Property Documentation.
Section
3.09 Computer
Records; Audits of Documentation.
(a)
Safekeeping.
The
Servicer shall maintain accurate and complete accounts, records and computer
systems pertaining to the Transferred Bondable Transition Property and the
Bondable 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) the Transition Bond Charge and
the estimated TBC Collections from time to time remitted to the Trustee pursuant
to Section 3.03 and to enable the Issuer to comply with this Servicing Agreement
and the Indenture. The Servicer shall conduct, or cause to be conducted,
periodic audits of the Bondable Transition Property Documentation held by it
under this Servicing Agreement and of the related accounts, records and computer
systems, in such a manner as shall enable the Issuer and the 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 to the Trustee any failure
on
the Servicer’s part to hold the Bondable Transition Property Documentation and
maintain its accounts, records and computer systems as herein provided and
shall
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 Trustee of the Bondable Transition Property Documentation. The
Servicer’s duties to hold the Bondable Transition Property Documentation on
behalf of the Issuer set forth in this Section 3.09, to the extent such Bondable
Transition Property Documentation has not been previously transferred
to
8
a
Successor Servicer, shall terminate three years after the earlier of the date
on
which (i) the Servicer is succeeded by a Successor Servicer pursuant to the
provisions of this Servicing Agreement or (ii) no Transition Bonds of any Series
are Outstanding.
(b)
Maintenance
of and Access to Records.
The
Servicer shall maintain the Bondable Transition Property Documentation at 00
Xxxxx Xxxx Xxxxxx, Xxxxx, Xxxx 00000 or at such other office as shall be
specified to the Issuer and to the Trustee by written notice not later than
thirty days prior to any change in location. The Servicer shall permit the
Issuer and the Trustee or their respective duly authorized representatives,
attorneys, agents or auditors at any time during normal business hours to
inspect, audit and make copies of and abstracts from the Servicer’s records
regarding the Transferred Bondable Transition Property, the Transition Bond
Charge and the Bondable Transition Property Documentation. The failure of the
Servicer to provide access to such information as a result of an obligation
or
applicable law (including BPU Regulations) prohibiting disclosure of information
regarding customers shall not constitute a breach of this Section
3.09(b).
Section
3.10 Defending
Transferred Bondable Transition Property Against Claims.
The
Servicer shall institute and maintain any action or proceeding necessary to
compel performance by the BPU or the State of New Jersey of any of their
obligations or duties under the Competition Act or the Financing Order with
respect to the Transferred Bondable Transition Property, and the Servicer agrees
to take such legal or administrative actions, including defending against or
instituting and pursuing legal actions and appearing or testifying at hearings
or similar proceedings, as may be reasonably necessary to block or overturn
any
attempts to cause a repeal of, modification of or supplement to the Competition
Act, the Financing Order or the Restructuring Order (to the extent it affects
the rights of Transition Bondholders or the validity or value of the Transferred
Bondable Transition Property), as the case may be, the Bondable Transition
Property or the rights of the holders of Transferred Bondable Transition
Property if such repeal, modification or supplement would be adverse to the
Transition Bondholders. The costs of any such action reasonably allocated by
the
Servicer to the Transferred Bondable Transition Property shall be payable from
TBC Collections as an Operating Expense in accordance with the Indenture. The
Servicer’s obligations pursuant to this Section 3.10 shall survive and continue
notwithstanding the fact that the payment of Operating Expenses pursuant to
the
Indenture may be delayed (it being understood that the Servicer may be required
to advance its own funds to satisfy its obligations under this Section
3.10).
ARTICLE
IV
SERVICES
RELATED TO TRANSITION BOND CHARGE ADJUSTMENTS
Section
4.01 Transition
Bond Charge Adjustments.
The
Servicer shall perform the calculations and take the actions relating to
adjusting the Transition Bond Charge, as set forth in Section 5 of Annex 1,
at
the times indicated therein.
9
ARTICLE
V
THE
SERVICER
Section
5.01 Representations
and Warranties of Servicer.
The
Servicer makes the following representations and warranties as of the Transfer
Date, on which the Issuer has relied and will rely in acquiring Transferred
Bondable Transition Property and in entering into this Servicing Agreement.
These representations and warranties shall survive the execution and delivery
of
this Servicing Agreement, the sale, transfer, assignment and conveyance of
the
Transferred Bondable Transition Property to the Issuer pursuant to the Sale
Agreement and the pledge thereof to the 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 to execute, deliver and
carry
out the terms of this Servicing Agreement, and has the power, authority and
legal right to service the Transferred Bondable Transition Property.
(b)
Due
Qualification.
The
Servicer is duly qualified to do business as a foreign corporation in good
standing, and has obtained all necessary licenses and approvals, in all
jurisdictions in which the ownership or lease of property or the conduct of
its
business (including the servicing of the Transferred Bondable Transition
Property as required by this Servicing Agreement) requires such qualifications,
licenses or approvals (except where the failure to so qualify would not be
reasonably likely to have a material adverse effect on the Servicer’s business,
operations, assets, revenues, properties or prospects or on the transactions
contemplated by this Servicing Agreement).
(c)
Power
and Authority.
The
Servicer has the corporate power and authority to execute and deliver this
Servicing Agreement and to carry out its terms; and the execution, delivery
and
performance of this Servicing Agreement have been duly authorized by the
Servicer by all necessary corporate action.
(d)
Binding
Obligation.
This
Servicing Agreement constitutes a legal, valid and binding obligation of the
Servicer enforceable against the Servicer in accordance with its terms, subject
to bankruptcy, receivership, fraudulent transfer, insolvency, reorganization,
moratorium or other similar 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 Servicing Agreement and
the fulfillment of the terms hereof will not: conflict with, result in any
breach of any of the terms and provisions of, or constitute (with or without
notice or lapse of time or both) a default under, the articles of incorporation,
by-laws or other constituent documents of the Servicer, or any indenture,
material agreement or other material instrument to which the Servicer is a
party
or by which it is bound; or result in the creation or imposition of any Lien
upon any of its properties pursuant to the terms of any such indenture,
material
10
agreement
or other material instrument; or 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 BPU for adjusting the Transition Bond Charge pursuant
to
Section 4.01 and Annex 1, the filing of financing statements under the New
Jersey UCC and the Delaware UCC, and the filing of continuation filings under
the New Jersey UCC and the Delaware UCC, 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 Servicing
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)
Reports
and Certificates.
Each
report and certificate delivered in connection with any filing made with the
BPU
by the Servicer on behalf of the Issuer with respect to the Transition Bond
Charge or Transition Bond Charge 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, this
representation and warranty of the Servicer with respect thereto will be limited
to the representation and warranty that such assumptions, forecasts or other
predictions of future events are reasonable based upon historical performance
or
facts known to the Servicer on the date such report or certificate is
delivered.
(h)
No
Proceedings.
There
are no proceedings or investigations pending or, to the Servicer’s best
knowledge, threatened before any court, federal or state regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over the Servicer or its properties:
(i) seeking
to prevent the issuance of the Transition Bonds or the consummation of any
of
the transactions contemplated by this Servicing Agreement or any of the other
Basic Documents;
(ii) except
as
disclosed by the Servicer to the Issuer (or as disclosed in filings with the
Commission made by the Servicer), 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 Servicing Agreement or any of the other Basic Documents; or
(iii) relating
to the Servicer and which might materially and adversely affect the federal
or
State income tax attributes of the Transition Bonds.
Section
5.02 Indemnities
of Servicer; Release of Claims.
(a)
The
Servicer shall be liable as such in accordance herewith only to the extent
of
the obligations specifically undertaken by the Servicer under this Servicing
Agreement.
11
(b)
The
Servicer shall indemnify the Issuer and the Trustee (for itself and on behalf
of
the Transition Bondholders) and each of their respective trustees, members,
managers, 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 willful misconduct, bad faith or gross negligence in the performance
of its duties or observance of its covenants under this Servicing Agreement
or
the Servicer’s reckless disregard of its obligations and duties under this
Servicing Agreement;
(ii) the
Servicer’s breach of any of its representations or warranties in this Servicing
Agreement; and
(iii) litigation
and related expenses relating to its status and obligations as Servicer (other
than any proceedings the Servicer is required to institute under this Servicing
Agreement);
provided,
however, that the Servicer shall not be liable for any Losses resulting from
the
willful misconduct or gross negligence of any person indemnified pursuant to
this Section 5.02 (each, an “Indemnified Person”) or resulting from a breach of
a representation or warranty made by such Indemnified Person in any of the
Basic
Documents that gives rise to the Servicer’s breach.
Promptly
after receipt by an Indemnified Person of notice of its involvement in any
action, proceeding or investigation, such Indemnified Person shall, if a claim
for indemnification in respect thereof is to be made against the Servicer under
this Section 5.02, notify the Servicer in writing of such involvement. Failure
by an Indemnified Person to so notify the Servicer shall relieve the Servicer
from the obligation to indemnify and hold harmless such Indemnified Person
under
this Section 5.02 only to the extent that the Servicer suffers actual prejudice
as a result of such failure. With respect to any action, proceeding or
investigation brought by a third party for which indemnification may be sought
under this Section 5.02, the Servicer shall be entitled to assume the defense
of
any such action, proceeding or investigation unless (x) such action, proceeding
or investigation exposes the Indemnified Person to a risk of criminal liability
or forfeiture, (y) the Servicer and such Indemnified Person have a conflict
of
interest in their respective defenses of such action, proceeding or
investigation or (z) there exists at the time the Servicer would assume such
defense an ongoing Servicer Default. Upon assumption by the Servicer of the
defense of any such action, proceeding or investigation, the Indemnified Person
shall have the right to participate in such action or proceeding and to retain
its own counsel (including local counsel), and the Servicer shall bear the
reasonable fees, costs and expenses of such separate counsel. The Indemnified
Person shall not settle or compromise or consent to the entry of any judgment
with respect to any pending or threatened claim, action, suit or proceeding
in
respect of which indemnification may be sought under this Section 5.02 (whether
or not the Servicer is an actual or potential party to such claim or action)
unless the Servicer agrees in writing to such settlement, compromise or consent
and such settlement, compromise or consent includes an unconditional release
of
the Servicer from all liability arising out of such claim, action, suit or
proceeding.
12
(c)
The
Servicer’s indemnification obligations under Section 5.02(b) for events
occurring prior to the removal or resignation of the Trustee or the termination
of this Servicing Agreement shall survive the resignation or removal of the
Trustee or the termination of this Servicing Agreement and shall include
reasonable costs, fees and expenses of investigation and litigation (including
the Issuer’s and the Trustee’s reasonable attorneys’ fees and
expenses).
(d)
Except
to
the extent expressly provided for in the Basic Documents (including the
Servicer’s claims with respect to the Quarterly Servicing Fees and the Seller’s
claim for payment of the purchase price of the Transferred Bondable Transition
Property), the Servicer hereby releases and discharges the Issuer (including
its
Member, Managers, officers, employees and agents, if any) and the Trustee
(including its respective officers, directors, employees and agents)
(collectively, the “Released Parties”) from any and all actions, claims and
demands whatsoever, which the Servicer shall or may have against any such person
relating to the Transferred Bondable Transition Property or the Servicer’s
activities with respect thereto other than any actions, claims and demands
arising out of the willful misconduct, bad faith or gross negligence of the
Released Parties.
Section
5.03 Merger
or Consolidation of, or Assumption of the Obligations of,
Servicer.
Any
Person or Persons:
(a)
into
which the Servicer may be merged or consolidated and which succeeds to all
or a
significant 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 all or a significant 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 all or a significant part of the electric distribution
business of the Servicer,
(d)
which
may, in a transaction or a series of related transactions, succeed to the
properties and assets of the Servicer substantially as a whole and which, in
a
transaction or a series of related transactions, succeeds to all or a
significant part of the electric distribution business of the Servicer, or
(e)
which
may
otherwise succeed to all or a significant part of the electric distribution
business of the Servicer,
which
Person or Persons in any of the foregoing cases executes or execute an agreement
of assumption to perform every obligation of the Servicer under this Servicing
Agreement, shall be the successor or successors to the Servicer hereunder
without the execution or filing of any document or any further act by any of
the
parties to this Servicing Agreement; provided, however, that:
(i) immediately
after giving effect to such transaction, no representation or warranty made
pursuant to Section 5.01 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;
13
(ii) the
Servicer shall have delivered to the Issuer, the Trustee and the Rating Agencies
a Servicer Officers’ Certificate and an Opinion of Counsel each stating that
such consolidation, merger or succession and such agreement of assumption comply
with this Section 5.03 and that all conditions precedent, if any, provided
for
in this Servicing Agreement relating to such transaction have been complied
with;
(iii) the
Servicer shall have delivered to the Issuer, the Trustee and the Rating Agencies
an Opinion of Counsel either:
(A)
|
stating
that, in the opinion of such counsel, all filings to be made by the
Servicer, including New Jersey UCC filings and Delaware UCC filings,
that
are necessary fully to preserve and protect the interests of the
Trustee
in the Transferred Bondable Transition Property have been executed
and
filed and reciting the details of such filings,
or
|
(B)
|
stating
that, in the opinion of such counsel, no such action is necessary
to
preserve and protect such
interests;
|
(iv) the
Rating Agencies shall have received prior written notice of such transaction,
and the then current ratings on any of the Outstanding Transition Bonds will
not
be withdrawn or downgraded by the Rating Agencies; and
(v) the
Servicer shall have delivered to the Issuer, the Trustee and the Rating Agencies
an opinion of independent tax counsel (as selected by, and in form and substance
reasonably satisfactory to, the Servicer, and which may be based on a ruling
from the Internal Revenue Service) to the effect that, for federal income tax
purposes, such consolidation or merger will not result in a material adverse
federal income tax consequence to the Servicer, the Issuer, the Trustee or
the
then existing Transition Bondholders.
The
Servicer shall not consummate any transaction referred to in clauses (a), (b),
(c), (d) or (e) above except upon execution of the above described agreement
of
assumption and compliance with subclauses (i), (ii), (iii), (iv) and (v) above.
When any Person or Persons acquires or acquire the properties and assets of
the
Servicer substantially as a whole and becomes or become the successor or
successors to the Servicer in accordance with the terms of this Section 5.03,
then upon the satisfaction of all of the other conditions of this Section 5.03,
the Servicer shall automatically and without further notice be released from
its
obligations hereunder.
Section
5.04 Assignment
of Servicer’s Obligations.
Subject
to the provisions of Section 5.06, the Servicer may assign any or all of its
obligations hereunder to any successor if either (i) prior written notice has
been provided to the Rating Agencies and the then current ratings on any of
the
Outstanding Transition Bonds will not be withdrawn or downgraded by the Rating
Agencies and any other conditions specified in the Financing Order have been
satisfied or (ii) the Servicer is replaced by a successor pursuant to Section
5.03 hereof.
14
Section
5.05 Limitation
on Liability of Servicer and Others.
The
Servicer, in such capacity, shall not be liable to the Issuer, the Trustee,
or
the Transition Bondholders except as provided under this Servicing Agreement,
for any action taken or for refraining from the taking of any action pursuant
to
this Servicing Agreement or for good faith errors in judgment; provided,
however, that this provision shall not protect the Servicer against any
liability that would otherwise be imposed by reason of willful misconduct,
bad
faith or gross negligence in the performance of its duties or by reason of
reckless disregard of its obligations and duties under this Servicing Agreement.
The Servicer and any director, officer, employee or agent of the Servicer may
rely in good faith on the advice of counsel reasonably acceptable to the Trustee
or on any document of any kind, prima facie properly executed and submitted
by
any Person, respecting any matters arising under this Servicing
Agreement.
Except
as
provided in this Servicing Agreement, the Servicer, in such capacity, 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 Transferred Bondable Transition
Property in accordance with this Servicing Agreement or related to its
indemnification obligations, and that in its reasonable opinion may cause it
to
incur any expense or liability.
Section
5.06 JCP&L
Not to Resign as Servicer.
Subject
to the provisions of Sections 5.03 and 5.04, JCP&L shall not resign
from the obligations and duties imposed on it as Servicer under this Servicing
Agreement except upon a determination that the performance of its duties under
this Servicing Agreement shall no longer be permissible under applicable law.
Any such resignation shall not be effective until approved by the BPU. Notice
of
any such determination permitting the resignation of JCP&L shall be
communicated to the Issuer, the Trustee and each Rating Agency at the earliest
practicable time (and, if such communication is not in writing, shall be
confirmed in writing at the earliest practicable time), and any such
determination shall be evidenced by an Opinion of Counsel to such effect
delivered to the Issuer and the Trustee concurrently with or promptly after
such
notice. No such resignation shall be permitted if such resignation will result
in the reduction or withdrawal of the then current ratings on any Outstanding
Transition Bond. No such resignation shall become effective until a Successor
Servicer has assumed the servicing obligations and duties hereunder of the
Servicer in accordance with Section 6.04.
Section
5.07 Quarterly
Servicing Fee.
The
Issuer agrees to pay the Servicer the Quarterly Servicing Fee with respect
to
all Series of Transition Bonds. On each Monthly Remittance Date that coincides
with a Payment Date, the Servicer shall be entitled to withhold the amount
of
the Quarterly Servicing Fee from TBC Collections as compensation under this
Servicing Agreement unless the Trustee has notified the Servicer in writing
that
the Issuer does not hold sufficient funds to pay amounts owed in such month
to
the Trustee. For so long as JCP&L is the Servicer, the Quarterly Servicing
Fee shall be $[ ]. The Servicer shall be entitled to retain as additional
compensation net investment income on TBC Collections related to the Transferred
Bondable Transition Property received by the Servicer during any Collection
Period prior to remittance to the Collection Account and the late fees, if
any,
paid by Customers to the Servicer. The Issuer and the Servicer agree and
acknowledge that the foregoing fees constitute a fair and reasonable price
for
the obligations to be performed by the Servicer. In no event shall the Trustee
be liable for any Quarterly Servicing Fee.
15
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 the Transition
Bondholders and shall not be entitled to any additional payment or reimbursement
therefor.
Section
5.09 Subservicing.The
Servicer may at any time appoint a subservicer to perform all or any portion
of
its obligations as Servicer hereunder; provided, however, that written notice
has been given to the Rating Agencies and the Trustee and the then current
ratings on any Outstanding Transition Bonds will not be withdrawn or downgraded
by the Rating Agencies; and provided, further, that the Servicer shall remain
obligated and be liable to the Issuer, the Trustee and the Transition
Bondholders for the servicing and administering of the Transferred Bondable
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 Transferred Bondable
Transition Property. The fees and expenses of the subservicer shall be as agreed
between the Servicer and its subservicer from time to time, and none of the
Issuer, the Trustee or the Transition Bondholders shall have any responsibility
therefor. Any such appointment shall not constitute a Servicer resignation
under
Section 5.06.
Section
5.10 No
Servicer Advances.
The
Servicer shall not make any advances of interest on or principal of the
Transition Bonds.
Section
5.11 Remittances.
(a)
The
Servicer shall remit TBC Collections (from whatever source) in accordance with
Section 3.03(a)(ii), and all proceeds of other Collateral of the Issuer, if
any, received by the Servicer, to the Trustee for deposit pursuant to the
Indenture, not later than each Daily Remittance Date. The Servicer shall
promptly remit any Indemnity Amounts paid or received by it immediately to
the
Trustee for deposit pursuant to the Indenture.
(b)
Notwithstanding
the foregoing clause (a), as long as
(i) JCP&L
or any successor to JCP&L’s electric distribution business remains the
Servicer,
(ii) no
Servicer Default has occurred and is continuing,
(iii)
(A) JCP&L,
or any Successor Servicer to JCP&L’s electric distribution business,
maintains a short-term rating of ‘A-1’ or better by S&P, ‘P-1’ or better
byMoody’s, and ‘F-1’ or better by Fitch,
or
(B)
any
additional conditions or limitations imposed by the Rating Agencies are complied
with and each
16
Rating
Agency has notified the Servicer, the Issuer and the Trustee that the monthly
remittance will not result in a downgrade or withdrawal of the then current
ratings of any Outstanding Transition Bonds (except that with regard to Xxxxx’x
and Fitch it will be sufficient to provide ten days notice of any such
action),
(iv) the
BPU
has approved Servicer remittances on a monthly basis and
(v) the
Servicer has delivered to the Rating Agencies an Opinion of Counsel addressing
certain “true sale” and “non-consolidation” issues in form and substance
reasonably satisfactory to such Rating Agencies,
the
Servicer need not make the daily remittances required by clause (a), but in
lieu
thereof, shall remit all TBC Collections (from whatever source) in accordance
with Section 3.03(a)(i), and all proceeds of other Collateral of the Issuer,
if
any, received by the Servicer during any Collection Period to the Trustee for
deposit pursuant to the Indenture, not later than the corresponding Monthly
Remittance Date.
Section
5.12 Protection
of Title.The
Servicer shall execute and file such filings 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 Trustee in the
Transferred Bondable Transition Property and other Collateral, including all
filings required under the New Jersey UCC and the Delaware UCC relating to
the
transfer of ownership of or a security interest in the Transferred Bondable
Transition Property by the Seller to the Issuer or the security interest granted
by the Issuer to the Trustee in the Transferred Bondable Transition Property
and
other Collateral. The Servicer shall deliver (or cause to be delivered) to
the
Issuer and the Trustee file-stamped copies of, or filing receipts for, any
document filed as provided above, as soon as available following such
filing.
ARTICLE
VI
SERVICER
DEFAULT
Section
6.01 Servicer
Default.
If
any
one of the following events (a “Servicer Default”) occurs and is
continuing:
(a)
any
failure by the Servicer to remit to the Trustee, on behalf of the Issuer, any
required remittance that continues unremedied for a period of five Business
Days
after the date it is required to be paid; or
(b)
any
failure by the Servicer duly to observe or perform in any material respect
any
other covenant or agreement of the Servicer set forth in this Servicing
Agreement or any other Basic Document to which the Servicer, as such, is a
party, which failure:
17
(i) materially
and adversely affects the Transferred Bondable Transition Property or the rights
of the Transition Bondholders; and
(ii) continues
unremedied for a period of sixty days after the date on which written notice
of
such failure has been given to the Servicer by the Issuer, the Trustee or the
Holders of not less than twenty-five percent of the Outstanding principal
balance of the Transition Bonds of all Series and Classes, acting together
as a
single class, or after discovery of such failure by an officer of the Servicer,
as the case may be; or
(c)
any
representation or warranty made by the Servicer in this Servicing Agreement
proves 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 sixty days after the date on which written
notice thereof has been given to the Servicer by the Issuer, the Trustee or
the
Holders of not less than twenty-five percent of the Outstanding principal
balance of the Transition Bonds of all Series and Classes, acting together
as a
single class, or after discovery of such failure by an officer of the Servicer,
as the case may be; 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 Trustee, with the written consent of the Holders of a majority
of
the Outstanding principal balance of the Transition Bonds of all Series and
Classes, voting together as a single class, 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, the obligation under Section 6.04 to continue performing its
functions as Servicer until a Successor Servicer is appointed and the right
to
receive the requisite portion of the Quarterly Servicing Fees) of the Servicer
under this Servicing Agreement. In addition, upon a Servicer Default because
of
a failure to make required remittances, the Issuer and the Trustee shall each
be
entitled to apply to the BPU or any court of competent jurisdiction for
sequestration and payment to the Trustee of revenues arising with respect to
the
Transferred Bondable Transition Property.
On
or
after the receipt by the Servicer of a Termination Notice, all authority and
power of the Servicer under this Servicing Agreement, whether with respect
to
the Transferred Bondable Transition Property, the related Transition Bond Charge
or otherwise, shall, upon appointment of a Successor Servicer pursuant to
Section 6.04, without further action, pass to and be vested in such Successor
Servicer and, without limitation, the 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
Bondable Transition Property Documentation and related documents, or otherwise.
The predecessor Servicer shall cooperate with the Successor Servicer, the
Trustee and the Issuer in effecting the termination of the responsibilities
and
rights of the predecessor Servicer under this Servicing Agreement, including
the
transfer to the Successor Servicer for administration by it of all cash amounts
that shall at the time be held by the predecessor Servicer for remittance,
or
shall thereafter be received by it with respect to the
18
Transferred
Bondable Transition Property or the related Transition Bond Charge. As soon
as
practicable after receipt by the Servicer of such Termination Notice, the
Servicer shall deliver the Bondable Transition Property Documentation to the
Successor Servicer. All reasonable costs and expenses (including attorneys’ fees
and expenses) incurred in connection with transferring the Bondable Transition
Property Documentation to the Successor Servicer and amending this Servicing
Agreement to reflect such succession as Servicer pursuant to this Section 6.01
shall be paid by the predecessor Servicer upon presentation of reasonable
documentation of such costs and expenses. Termination of JCP&L as Servicer
shall not terminate JCP&L’s rights or obligations under the Sale
Agreement.
Section
6.02 Notice
of Servicer Default.
The
Servicer shall deliver to the Issuer, the Trustee and each Rating Agency
promptly after having obtained knowledge thereof, but in no event later than
five Business Days thereafter, written notice in a Servicer Officers’
Certificate of any event or circumstance which, with the giving of notice or
the
passage of time or both, would become a Servicer Default under Section 6.01.
If
any Outstanding Transition Bonds are listed on the Luxembourg Stock Exchange,
such notice shall also be given by publication in a daily newspaper in
Luxembourg, if the rules of the Luxembourg Stock Exchange so require.
Section
6.03 Waiver
of Past Defaults.
The
Trustee, with the written consent of the Holders of not less than a majority
of
the Outstanding principal balance of the Transition Bonds of all Series and
Classes, voting together as a single class, 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 Trustee
of TBC Collections in accordance with Section 3.03. 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 Servicing 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 Servicing Agreement,
the predecessor Servicer shall continue to perform its functions as Servicer
under this Servicing Agreement and shall be entitled to receive the requisite
portion of the Quarterly Servicing Fees, until a Successor Servicer has assumed
in writing the obligations of the Servicer hereunder as described below. In
the
event of the Servicer’s removal or resignation hereunder, the Trustee, as
assignee of the Issuer, may, at the sole expense of the Issuer, appoint a
Successor Servicer, with the consent of the Holders of not less than a majority
of the Outstanding principal balance of the Transition Bonds of all Series
and
Classes, voting together as a single class, and the Successor Servicer shall
accept its appointment by a written assumption in form acceptable to the Issuer
and the Trustee. If, within thirty days after the delivery of the Termination
Notice, a new Servicer has not been appointed and accepted such appointment,
the
Trustee, at the sole expense of the Issuer, may petition the BPU or a court
of
competent jurisdiction to appoint a Successor Servicer under this Servicing
Agreement. A Person shall qualify as a Successor Servicer only if:
19
(i) such
Person is permitted to perform the duties of the Servicer pursuant to the
Competition Act, the BPU Regulations, the Financing Order and this Servicing
Agreement;
(ii) prior
notice has been given to the Rating Agencies and the then current ratings on
any
Outstanding Transition Bonds shall not be withdrawn or downgraded by the Rating
Agencies; and
(iii) such
Person enters into a servicing agreement with the Issuer having substantially
the same provisions as this Servicing Agreement.
(b)
Upon
appointment, the Successor Servicer shall be the successor in all respects
to
the predecessor Servicer under this Servicing Agreement 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
Quarterly Servicing Fee and all the rights granted to the predecessor Servicer
by the terms and provisions of this Servicing Agreement.
(c)
The
Successor Servicer may resign only if it is prohibited from serving as such
by
applicable law.
(d)
A
Successor Servicer may bring an action against a particular Customer for
nonpayment of the Transition Bond Charge, or terminate service for failure
to
pay the Transition Bond Charge, only if such Successor Servicer is the electric
public utility with respect to that Customer.
(e)
All
expenses incurred by the Trustee in connection with the appointment of a
Successor Servicer shall be reimbursed to the Trustee, pursuant to Section
8.02(d) of the Indenture.
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.
(a)
Upon
five
Business Days’ prior written notice to the Rating Agencies, this Servicing
Agreement may be amended by the Servicer and the Issuer with the written consent
of the Trustee upon receipt of an Issuer Order, but without the consent of
the
Transition Bondholders, to:
(i) cure
any
ambiguity;
20
(ii) correct
or supplement any provision in this Servicing Agreement;
(iii) add
any
provisions to or change in any manner or eliminate any of the provisions of
this
Servicing Agreement; or
(iv) modify
in
any manner the rights of the Transition Bondholders;
provided,
that such action will not, as certified in a Servicer Officers’ Certificate of
the Servicer delivered to the Issuer and to the Trustee and the Managers,
adversely affect in any material respect the interest of any Holder of
Transition Bonds then Outstanding.
(b)
This
Servicing Agreement may be amended by the Servicer and the Issuer with five
Business Days’ prior written notice to the Rating Agencies and with the written
consent of the Trustee and the consent of the Holders of not less than a
majority of the Outstanding principal balance of the Transition Bonds of all
Series and Classes affected thereby, voting together as a single class, for
the
purpose of adding any provisions to or changing in any manner or eliminating
any
of the provisions of this Servicing Agreement or of modifying in any manner
the
rights of the Transition Bondholders; provided, however, no amendment adopted
in
this manner may increase or decrease, or accelerate or delay the timing or
collection of the Transition Bond Charge, or reduce the percentage of Transition
Bondholders required to consent to amendments.
No
amendment of the provisions of this Servicing Agreement relating to the
Servicer’s remittance and Transition Bond Charge Adjustment obligations will be
permitted absent confirmation from the Rating Agencies that such amendment
will
not result in a reduction or withdrawal of the then existing ratings of any
Outstanding Transition Bonds by the Rating Agencies (except that with regard
to
Moody’s and Fitch it will be sufficient to provide ten days’ prior notice of the
amendment).
(c)
The
Issuer may also amend the servicing procedures provided in this Servicing
Agreement solely to address changes to the Servicer’s method of calculating
payments of the Transition Bond Charge received as a result of changes to the
Servicer’s current computerized information system, if the amendment does not
have a material adverse effect on the Holders of Transition Bonds then
Outstanding, with prior written notice to the Trustee and the Rating Agencies,
but without the consent of the Trustee, any Rating Agency or any Transition
Bondholder. These changes may include changes that would replace remittances
calculated by estimation procedures with remittances of TBC Collections actually
received.
Prior
to
the execution of any amendment to this Servicing Agreement, the Issuer and
the
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
Servicing Agreement and the Opinion of Counsel referred to in Section 3.06(b)
of
the Indenture. The Issuer and the Trustee may, but shall not be obligated to,
enter into any such amendment which affects their own rights, duties or
immunities under this Servicing Agreement or otherwise.
21
Section
7.02 Notices.
Unless
otherwise specifically provided herein, all notices, directions, consents and
waivers required under the terms and provisions of this Servicing Agreement
shall be in English and in writing, and any such notice, direction, consent
or
waiver may be given by United States first-class mail, reputable overnight
courier service, facsimile transmission or electronic mail (confirmed by
telephone, United States first-class mail or reputable overnight courier service
in the case of notice by facsimile transmission or electronic mail) or any
other
customary means of communication, and any such notice, direction, consent or
waiver shall be effective when delivered or transmitted, or if mailed, five
days
after deposit in the United States first-class mail with proper postage for
first-class mail prepaid:
(a)
in
the
case of the Servicer, at Jersey Central Power & Light Company, 00 Xxxxx Xxxx
Xxxxxx, Xxxxx, Xxxx 00000;
(b)
in
the
case of the Issuer, at JCP&L Transition Funding II LLC, 000 Xxxxx Xxxx,
Xxxxx 000, Xxxxxxxxxx, Xxxxxxxx 00000, with a copy to JCP&L Transition
Funding II LLC c/o FirstEnergy Service Company, 00 Xxxxx Xxxx Xxxxxx, Xxxxx,
Xxxx 00000;
(c)
in
the
case of the Trustee, at its Corporate Trust Office;
(d)
in
the
case of Moody’s, at Xxxxx’x Investors Service, Inc., ABS Monitoring Department,
00 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000;
(e)
in
the
case of S&P, at Standard & Poor’s, Structured Finance, ABS Surveillance
Corp., 00 Xxxxx Xxxxxx, 00xx
Xxxxx,
Xxx Xxxx, Xxx Xxxx 00000-0000, Fax: 000-000-0000; and
(f)
in
the
case of Fitch, at Fitch, Inc., Xxx Xxxxx Xxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention: 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 Limitations
on Rights of Others.
The
provisions of this Servicing Agreement are solely for the benefit of the
Servicer, the Issuer and the Trustee, on behalf of itself and the Transition
Bondholders, and nothing in this Servicing 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
Servicing Agreement or any covenants, conditions or provisions contained
herein.
Section
7.04 Severability.
Any
provision of this Servicing 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
7.05 Separate
Counterparts.
This
Servicing Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall
22
be
an
original, but all such counterparts shall together constitute but one and the
same instrument.
Section
7.06 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
7.07 Governing
Law. THIS
SERVICING AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW JERSEY, 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
7.08 Assignment
to the Trustee.
(a) The
Servicer hereby acknowledges and consents to any pledge, assignment and grant
of
a security interest by the Issuer to the Trustee pursuant to the Indenture
of
all right, title and interest of the Issuer in, to and under the Transferred
Bondable Transition Property and other Collateral owned by the Issuer and the
proceeds thereof and the assignment of any or all of the Issuer’s rights
hereunder to the Trustee.
(b) In
no
event shall the 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 hereto, as to all
of
which recourse shall be had solely to the assets of the Issuer.
(c) The
Trustee, in acting hereunder, is entitled to all rights, benefits, protections,
immunities and indemnities accorded to it under the Indenture.
Section
7.09 Nonpetition
Covenants.
Notwithstanding any prior termination of this Servicing Agreement or the
Indenture, the Servicer hereby covenants and agrees that it shall not, prior
to
the date which is one year and one day after the satisfaction and discharge
of
the Indenture, including, without limitation, any amounts owed to third-party
credit enhancers, and any amounts owed by the Issuer under Interest Rate Swap
Agreements, acquiesce, petition or otherwise invoke or cause the Issuer to
invoke the process of any court or government authority for the purpose of
commencing or sustaining a case against the Issuer under any federal or State
bankruptcy, insolvency or similar law or appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the
Issuer or any substantial part of the property of the Issuer, or ordering the
winding up or liquidation of the affairs of the Issuer.
Section
7.10 Termination.
This
Servicing Agreement shall terminate upon satisfaction and discharge of the
Indenture.
23
IN
WITNESS WHEREOF, the parties hereto have caused this Servicing Agreement to
be
duly executed and delivered by their respective duly authorized officers as
of
the date and year first above written.
JCP&L
TRANSITION FUNDING II LLC,
as
Issuer
|
||
By:
|
||
Name:
|
||
Title:
|
||
JERSEY CENTRAL POWER & LIGHT COMPANY, as
Servicer
|
||
By:
|
||
Name:
|
||
Title:
|
Acknowledged
and Accepted:
The
Bank
of New York,
as
Trustee
By:
__________________________
Name:
Title:
24
ANNEX
1
TO
SERVICING
AGREEMENT
The
Servicer agrees to comply with the following with respect to JCP&L
Transition Funding II LLC, as Issuer:
Section
1. Definitions.
Capitalized
terms used herein and not otherwise defined shall have the meanings set forth
in
Appendix A to the Indenture dated as of_______ , 2006 between the Issuer and
The
Bank of New York, as Trustee.
Section
2. Trustee
and Servicer Payment Date Statements. At
least
one Business Day before each date on which distributions to the Trustee and
Servicer are to be made pursuant to Sections 8.02(d) and (e) of the Indenture,
the Servicer shall provide the Trustee with a statement setting forth the
amounts to be distributed to each of the Trustee and Servicer pursuant to such
Sections.
Section
3. Payment
Date Statements.
At least
one Business Day before each Payment Date, the Servicer shall provide to the
Issuer, the Trustee, each Rating Agency and, for so long as any Transition
Bonds
are listed on the Luxembourg Stock Exchange, any listing agent in Luxembourg,
a
statement indicating:
1.
|
the
amount to be paid to Transition Bondholders of each Series and Class
in
respect of principal on such Payment Date in accordance with Section
8.02
of the Indenture and each Series Supplement
thereto;
|
2.
|
the
amount to be paid to Transition Bondholders of each Series and Class
in
respect of interest on such Payment Date in accordance with Section
8.02
of the Indenture and each Series Supplement
thereto;
|
3.
|
the
Transition Bond Balance and the Projected Transition Bond Balance
and the
transition bond balance for each Series and Class as of that Payment
Date
(in each case, after giving effect to the payments on such Payment
Date);
|
4.
|
the
amount on deposit in the Overcollateralization Subaccount for each
Series
and the Scheduled Overcollateralization Level for each Series, as
of that
Payment Date (after giving effect to the transfers to be made from
or into
the Overcollateralization Subaccount on such Payment
Date);
|
5.
|
the
amount on deposit in the Capital Subaccount for each Series as of
that
Payment Date (after giving effect to the transfers to be made from
or into
the Capital Subaccount on such Payment
Date);
|
A-1
6.
|
the
amount, if any, on deposit in the Reserve Subaccount as of that Payment
Date (after giving effect to the transfers to be made from or into
the
Reserve Subaccount on such Payment
Date);
|
7.
|
the
amounts to be paid to each Swap Counterparty (on a gross and a net
basis,
separately stated) under the related Interest Rate Swap Agreement
on or
before such Payment Date;
|
8.
|
the
amounts paid to the Trustee since the preceding Payment Date pursuant
to
Section 8.02(d) of the Indenture;
|
9.
|
the
amounts paid to or withheld by the Servicer since the preceding Payment
Date pursuant to Section 8.02(e) of the Indenture;
and
|
10.
|
the
amount of any other transfers and payments to be made on such Payment
Date
pursuant to Sections 8.02(d), (e), (f), (g) and (i) of the
Indenture.
|
Section
4. Remittance
Date Statements.
At least
one Business Day before each Remittance Date, and in the case of Daily
Remittances, on the last Remittance Date of such month, the Servicer shall
prepare and furnish to the Issuer and the Trustee a statement setting forth
the
aggregate amount remitted or to be remitted by the Servicer to the Trustee
(net
of any payments owed to the Servicer in accordance with Section 3.03(b) of
the
Servicing Agreement) for deposit on such Remittance Date pursuant to the
Indenture.
Section
5. Transition
Bond Charge Adjustments.
(a)
|
Prior
to each Calculation Date, the Servicer shall calculate
|
(i)
|
the
Transition Bond Balance as of such Calculation Date (a written copy
of
which shall be delivered by the Servicer to the Trustee within five
Business Days following such Calculation Date)
and
|
(ii)
|
the
revised Transition Bond Charge with respect to the Transferred Bondable
Transition Property in respect of each Adjustment Date such that
the
Servicer projects that TBC Collections therefrom allocable to the
Issuer
will be sufficient so that:
|
(A)
|
the
Transition Bond Balance on the Payment Date immediately preceding
the next
Adjustment Date will equal the Projected Transition Bond Balance
as of
such date or, if earlier with respect to any Series or Class of Transition
Bonds, as of the Payment Date immediately preceding the Expected
Final
Payment Date therefor;
|
(B)
|
the
amount on deposit in the Overcollateralization Subaccount on the
Payment
Date immediately preceding the next Adjustment Date will equal the
Scheduled
|
A-2
|
Overcollateralization
Level for such date or,
if earlier with respect to any Series or Class of Transition Bonds,
as of
the Payment Date immediately preceding the Expected Final Payment
Date
therefor;
|
(C)
|
the
amount on deposit in the Capital Subaccount on the Payment Date
immediately preceding the next Adjustment Date will equal its required
level for such date or, if earlier with respect to any Series or
Class of
Transition Bonds, as of the Payment Date immediately preceding the
Expected Final Payment Date therefor;
|
(D)
|
the
amount on deposit in the Reserve Subaccount on the Payment Date
immediately preceding the next Adjustment Date, will equal zero;
and
|
(E)
|
the
TBC Collections will provide for (i) amortization of the remaining
outstanding principal balance of each Series in accordance with the
Expected Amortization Schedule therefor, (ii) payment of interest
on each
Series when due and payment of any amounts (other than termination
or
breakage amounts) under each Interest Rate Swap Agreement, (iii)
payment
of all Operating Expenses of the Issuer when due in accordance with
the
Indenture and (iv) deposits to the Overcollateralization Subaccount
such
that the balance therein will equal the Scheduled Overcollateralization
Level on each Payment Date.
|
(b)
|
On
each Calculation Date, the Servicer shall file an Adjustment Request
with
the BPU. This filing shall include the data specified in the Petition
and
the Financing Order.
|
(c)
|
On
each Adjustment Date, the Servicer shall
|
(i)
|
take
all reasonable actions and make all reasonable efforts to effectuate
all
adjustments to the Transition Bond Charge either approved by the
BPU or
effective on an interim basis pending final approval
and
|
(ii)
|
promptly
send to the Trustee copies of all material notices and documents
relating
to such adjustments.
|
(d)
|
On
each Adjustment Date, the Servicer shall provide Moody’s with a schedule
indicating any changes to the Transition Bond Charge.
|
(e)
|
If
deemed appropriate by the Servicer to protect Transition Bondholders
and
to remedy a significant and
recurring
|
A-3
|
variance
between actual and expected TBC Collections, as authorized by the
Financing Order, the Servicer shall make “non-routine” adjustments to the
Transition Bond Charge and the MTC-Tax (as defined in the Financing
Order)
to accommodate material changes to the methodology described in
Attachment
E-3 to Revised Exhibit E-Supplement of the Petition. Such filings
shall be
made at least thirty days prior to the proposed effective date
of the
proposed adjustments. The Servicer shall provide notice of such
non-routine adjustment and resulting change to the Transition Bond
Charge
to Fitch.
|
A-4
EXHIBIT
A
SERVICING
PROCEDURES
The
Servicer agrees to comply with the following servicing procedures (and to
consider and use the criteria specified in Item 1122(d) of Regulation AB (or
any
successor regulation), in effect from time to time, to assess its compliance
with applicable servicing criteria.
Section
1. Definitions.
(a)
|
Capitalized
terms used herein and not otherwise defined shall have the meanings
set
forth in Appendix A to the Indenture dated as of_______ , 2006 between
the
Issuer and The Bank of New York, as
Trustee.
|
(b)
|
Whenever
used in this Exhibit A, the following words and phrases shall have
the
following meanings:
|
Adjustment
Request
has,
with respect to the Issuer, the meaning given to such term in Appendix
A.
Applicable
MDMA
means,
with respect to each Customer, the meter data management agent or Third Party,
if any, providing meter reading services for that Customer's
account.
Applicable
Third Party
means,
with respect to each Customer, the Third Party, if any, providing billing or
metering services to that Customer.
Billed
Transition Bond Charges
means
the amounts billed to Customers pursuant to the Transition Bond Charge, whether
billed directly to such Customers by the Servicer or indirectly through a Third
Party pursuant to Consolidated Third Party Billing.
Bills
means
each of the regular monthly bills, the summary bills, the opening bills and
the
Closing Bills issued to Customers or Third Parties by JCP&L.
Budget
Payment Plan
means a
levelized payment plan offered by JCP&L, which, if elected by a Customer,
provides for level monthly Xxxx charges to such Customer. For residential
Customers, this charge is calculated by calculating actual electricity charges
for the previous year and dividing this amount by twelve. The number which
results from this calculation is charged to the residential Customer each month.
In the twelfth month, JCP&L bills the residential Customer for actual use in
that month, adjusted for any excess or deficit the Customer has paid JCP&L
over the prior eleven months. If the Customer owes JCP&L $4 or more over the
normal budget amount, that Customer has the option of repaying the full amount
in the twelfth month, or
spreading
the amount of this deficit in equal installments over the first four months
of
the Customer's next budget year. The procedure is similar for small industrial
and commercial Customers.
Closing
Xxxx
means
the final xxxx issued to a Customer at the time service is
terminated.
Consolidated
Third Party Billing
means
the billing option available to Customers served by a Third Party pursuant
to
which such Third Party will be responsible for billing and collecting all
charges to Customers electing such billing option, including the Transition
Bond
Charge, and will become obligated to the Servicer for the Billed Transition
Bond
Charges, all in accordance with applicable BPU Regulations and the Financing
Order.
Net
Write-Off Percent
means
the number (expressed as a percent) equal to
(i)
|
the
amount by which Write-Offs attributable to a particular billing period
exceed Write-Off recoveries attributable to such billing period,
divided
by
|
(ii)
|
the
total billed revenue attributable to such billing period.
|
Servicer
Policies and Practices
means,
with respect to the Servicer’s duties under this Exhibit A, the policies and
practices of the Servicer applicable to such duties that the Servicer follows
with respect to comparable assets that it services for itself.
Transition
Bond Charge Effective Date
means
the date on which the initial Transition Bond Charge goes into effect pursuant
to the Financing Order.
Variables
includes
the following variables used in calculating Adjustment Requests:
(i)
|
the
estimated Net Write-Off Percent;
and
|
(ii)
|
the
projected billed consumption to which the Transition Bond Charge
applies.
|
Write-Offs
means
arrears that remain unpaid by Customers generally as of ninety days after the
issuance of the Closing Bills containing such charges, unless payment
arrangements are made and are being kept.
Section
2. Data
Acquisition.
(a)
|
Installation
and Maintenance of Meters.
Except to the extent that a Third Party is responsible for such services,
the Servicer shall use its best efforts to cause to be installed,
replaced
and maintained meters in such
places
|
Exhibit
A-2
|
and
in such condition as will enable the Servicer to obtain usage measurements
for each Customer approximately every thirty days or as provided
in the
applicable tariff.
|
(b)
|
Meter
Reading.
At
least once each calendar month, the Servicer shall obtain usage
measurements from the Applicable MDMA for each Customer; provided,
however, that the Servicer may determine any Customer’s usage on the basis
of estimates in accordance with applicable BPU
Regulations.
|
(c)
|
Cost
of Metering.
The Issuer shall not be obligated to pay any costs associated with
the
metering duties set forth in this Section 2, including, but not limited
to, the costs of installing, replacing and maintaining meters, nor
shall
the Issuer be entitled to any credit against the Servicing Fee for
any
cost savings realized by the Servicer or any Third Party as a result
of
new metering and/or billing
technologies.
|
Section
3. Usage
and Xxxx Calculation.
The
Servicer shall obtain a calculation of each Customer’s usage (which may be based
on data obtained from such Customer’s meter read or on usage estimates
determined in accordance with applicable BPU Regulations) at least once each
calendar month and shall determine therefrom each Customer’s individual charge
relating to the Transition Bond Charge to be included on such Customer’s Xxxx
pursuant to the Financing Order and BPU Regulations.
Section
4. Billing.
The
Servicer shall implement the Transition Bond Charge as of the Transition Bond
Charge Effective Date and shall thereafter xxxx each Customer or the Applicable
Third Party for the respective Customer’s outstanding current and past due
charges relating to the Transition Bond Charge, accruing until all payments
of
principal and interest on each Series of Transition Bonds and all other costs
and expenses related to such Series have been paid in accordance with the
Indenture, all in accordance with the following:
(a)
|
Frequency
of Bills; Billing Practices.
In
accordance with the Servicer’s then-existing Servicer Policies and
Practices, as such Servicer Policies and Practices may be modified
from
time to time, the Servicer shall generate and issue a Xxxx to each
Customer, or, in the case of a Customer who has elected Consolidated
Third
Party Billing, to an Applicable Third Party, for such Customer’s
respective Transition Bond Charge as a general practice once approximately
every thirty days or such other time period as allowed by the BPU,
at the
same time, with the same frequency and on the same Xxxx as that containing
the
|
Exhibit
A-3
|
Servicer’s
own charges to such Customer or Third Party, as the case may be.
In the
event that the Servicer makes any material modification to these
practices, it shall notify the Issuer, the Trustee and the Rating
Agencies
as soon as practicable, and in no event later than sixty Business
Days
after such modification goes into effect; provided, however,
that
|
(i)
|
the
Servicer may not make any modification that will materially adversely
affect the Transition Bondholders
and
|
(ii)
|
the
Rating Agencies shall receive prior notice of any modification that
would
change the frequency with which Bills are issued or would change
any
tariff charged.
|
(b)
|
Format.
|
(i)
|
Each
Xxxx to a Customer shall contain the charge corresponding to the
Transition Bond Charge owed by such Customer for the billing period.
The
Customer’s Xxxx will contain in text or in a footnote, text substantially
to the effect that a portion of the monthly charge representing that
Bondable Transition Property is being collected on behalf of the
Issuer as
owner of the Bondable Transition
Property.
|
(ii)
|
In
the case of each Customer that has elected Consolidated Third Party
Billing, the Servicer shall deliver to the Applicable Third Party
itemized
charges for such Customer including the amount of such Customer’s
Transition Bond Charge to be remitted by the Servicer to the
Issuer.
|
(iii)
|
The
Servicer shall conform to such requirements in respect of the format,
structure and text of Bills delivered to Customers and Third Parties
as
applicable BPU Regulations shall from time to time prescribe. To
the
extent that Xxxx format, structure and text are not prescribed by
the
Competition Act, other applicable law or BPU Regulations, the Servicer
shall, subject to clauses (i) and (ii) above, determine the format,
structure and text of all Bills in accordance with its reasonable
business
judgment, its Servicer Policies and Practices with respect to its
own
charges and prevailing industry
standards.
|
(c)
|
Delivery.
The Servicer shall deliver all Bills to Customers
|
(i)
|
by
United States mail in such class or classes as are consistent with
the
Servicer Policies and Practices followed by the Servicer with respect
to
its own charges or
|
Exhibit
A-4
(ii)
|
by
any other means, whether electronic or otherwise, that the Servicer
may
from time to time use to present its own charges to its
Customers.
|
In
the
case of Customers that have elected Consolidated Third Party Billing, the
Servicer shall deliver all Bills to the Applicable Third Parties by such means
as are prescribed by applicable BPU Regulations, or, if not prescribed by
applicable BPU Regulations, by such means as are mutually agreed upon by the
Servicer and the Applicable Third Party and are consistent with BPU Regulations.
The Servicer or a Third Party, as applicable, shall pay from its own funds
all
costs of issuance and delivery of all Bills, including but not limited to
printing and postage costs as the same may increase or decrease from time to
time.
Section
5. Customer
Service Functions.
The
Servicer shall handle all Customer inquiries and other Customer service matters
according to the same procedures it uses to service Customers with respect
to
its own charges.
Section
6. Collections;
Payment Processing; Remittance.
(a)
|
Collection
Efforts; Policies; Procedures.
|
(i)
|
The
Servicer shall use reasonable efforts to collect all Billed Transition
Bond Charges from Customers and Third Parties as and when the same
become
due and shall follow such collection procedures as it follows with
respect
to comparable assets that it services for itself or others, including,
as
follows:
|
(A)
|
The
Servicer shall prepare and deliver overdue notices to Customers and
Third
Parties in accordance with applicable BPU Regulations and the Servicer
Policies and Practices.
|
(B)
|
The
Servicer shall apply late payment charges to outstanding Customer
and
Third Party balances in accordance with applicable BPU Regulations.
All
late payment charges collected shall be payable to and retained by
the
Servicer as a component of its compensation under the Servicing Agreement,
and the Issuer shall not have any right to share in the
same.
|
(C)
|
The
Servicer shall deliver verbal and written final call notices in accordance
with applicable BPU Regulations and Servicer Policies and
Practices.
|
(D)
|
The
Servicer shall adhere to and carry out disconnection policies in
accordance with the Competition Act,
other
|
Exhibit
A-5
|
applicable
law and BPU Regulations and Servicer Policies and
Practices.
|
(E)
|
The
Servicer may employ the assistance of collections agents in accordance
with applicable BPU Regulations and Servicer Policies and
Practices.
|
(F)
|
The
Servicer shall apply Customer and Third Party deposits, Customers’ letters
of credit and Customer posted surety bonds to the payment of delinquent
accounts in accordance with applicable BPU Regulations and Servicer
Policies and Practices and according to the priorities set forth
in
Sections 6(b)(ii), (iii) and (iv) of this Exhibit
A.
|
(G)
|
The
Servicer shall promptly take all necessary action in accordance with
applicable BPU Regulations to terminate billing of Transition Bond
Charges
by Third Parties whose payments are twenty-two or more days delinquent,
or
as the then current BPU Regulations and any billing services agreements
allow, and to resume, prospectively, to collect the Billed Transition
Bond
Charges directly from the applicable Customers. At such time, the
Servicer
will apply the Third Party’s security deposit to satisfy charges billed
previously by the Third Party which remain outstanding, including
outstanding Transition Bond
Charges.
|
(ii)
|
The
Servicer shall not waive any late payment charge or any other fee
or
charge relating to delinquent payments, if any, or waive, vary or
modify
any terms of payment of any amounts payable by a Customer, in each
case
unless such waiver or action:
|
(A)
|
would
be in accordance with the Servicer’s customary practices or those of any
Successor Servicer with respect to comparable assets that it services
for
itself and for others;
|
(B)
|
would
not materially adversely affect the rights of the Transition Bondholders;
and
|
(C)
|
would
comply with applicable law;
|
provided,
however, that notwithstanding anything in the Servicing Agreement or this
Exhibit A to the contrary, the Servicer is authorized to write off any Billed
Transition Bond Charges in accordance with its Servicer Policies and
Practices.
(iii)
|
The
Servicer shall accept payment from Customers in respect of Billed
Transition Bond Charges in such forms and methods and at
|
Exhibit
A-6
|
such
times and places as it accepts for payment of its own charges. The
Servicer shall accept payment from Third Parties in respect of Billed
Transition Bond Charges in such forms and methods and at such times
and
places as the Servicer and each Third Party shall mutually agree
in
accordance with applicable BPU
Regulations.
|
(b)
|
Payment
Processing; Allocation; Priority of Payments.
|
(i)
|
The
Servicer shall post all payments received to Customer accounts as
promptly
as practicable, and, in any event, substantially all payments shall
be
posted no later than two Business Days after
receipt.
|
(ii)
|
Subject
to clause (iii) below, the Servicer shall apply payments received
to each
Customer’s or Third Party’s account in proportion to the charges contained
on the outstanding Xxxx to such Customer or Third
Party.
|
(iii)
|
Any
amounts collected by the Servicer that represent partial payments
of the
total Xxxx to a Customer or Third Party shall be allocated in accordance
with the priorities set forth in Section 3.02(b) of the Servicing
Agreement.
|
(iv)
|
The
Servicer shall hold all over-payments for the benefit of the Issuer
and
shall apply such funds to future Xxxx charges in accordance with
clauses
(ii) and (iii) above as such charges become
due.
|
(v)
|
For
Customers on a Budget Payment Plan, the Servicer shall treat TBC
Collections received from such Customers as if such Customers had
been
billed for the Transition Bond Charge in the absence of the Budget
Payment
Plan. Partial payment of a Budget Payment Plan payment shall be allocated
according to clause (iii) above, and overpayment of a Budget Payment
Plan
payment shall be allocated according to clause (iv)
above.
|
(c)
|
Accounts;
Records.
|
(i)
|
The
Servicer shall maintain accounts and records as to the Transferred
Bondable Transition Property accurately and in accordance with its
standard accounting procedures and in sufficient detail to permit
reconciliation between payments or recoveries with respect to the
Transferred Bondable Transition Property and the amounts from time
to time
remitted to the Collection Account in respect of the Transferred
Bondable
Transition Property.
|
Exhibit
A-7
(ii)
|
The
Servicer shall maintain accounts and records as to Third Parties
performing Consolidated Third Party Billing for Customers accurately
and
in accordance with its standard accounting procedures and in sufficient
detail to permit reconciliation between payments or recoveries with
respect to the Transferred Bondable Transition Property and amounts
owed
by such Customers in respect of the Transition Bond
Charge.
|
(d)
|
Investment
of TBC Collections.
Prior to remittance on the applicable Remittance Date, the Servicer
may
invest TBC Collections received at its own risk and for its own benefit,
and such investments and funds shall not be required to be segregated
from
the other investments and funds of the
Servicer.
|
(e)
|
Calculation
of Collections; Determination of Aggregate Remittance
Amount.
|
(i)
|
On
or before each Remittance Date, the Servicer shall calculate the
total TBC
Collections received by the Servicer from or on behalf of Customers
during
prior Collection Periods in respect of all previously Billed Transition
Bond Charges.
|
(ii)
|
In
accordance with Section 4.01 of the Servicing Agreement and Annex
1, the
Servicer shall update the Variables and shall prepare Adjustment
Requests
to reflect the updated Variables when required to do so pursuant
to Annex
1.
|
(f)
|
Remittances.
|
(i)
|
The
Servicer shall make remittances to the Issuer in accordance with
Section
5.11 of the Servicing Agreement.
|
(ii)
|
In
the event of any change of account or change of institution affecting
the
remittances, the Issuer shall provide written notice thereof to the
Servicer by the earlier of
|
(A)
|
five
Business Days from the effective date of such change,
or
|
(B)
|
five
Business Days prior to the next applicable Remittance
Date.
|
Exhibit
A-8