Exhibit 10.62
WMECO FUNDING LLC,
as Note Issuer
and
WESTERN MASSACHUSETTS ELECTRIC COMPANY,
as Servicer
TRANSITION PROPERTY SERVICING AGREEMENT
Dated as of May 17, 2001
ARTICLE 1 DEFINITIONS
Section 1.01. Definitions
Section 1.02. Other Definitional Provisions
ARTICLE 2 APPOINTMENT AND AUTHORIZATION
Section 2.01. Appointment of Servicer; Acceptance of Appointment
Section 2.02. Authorization
Section 2.03. Dominion and Control Over the Transition Property
ARTICLE 3 BILLING SERVICES
Section 3.01. Duties of Servicer
Section 3.02. Servicing and Maintenance Standards
Section 3.03. Certificate of Compliance
Section 3.04. Annual Report by Independent Public Accountants
ARTICLE 4 SERVICES RELATED TO PERIODIC ADJUSTMENTS; REMITTANCES
Section 4.01. Periodic Adjustments
Section 4.02. Limitation of Liability
Section 4.03. Remittances
ARTICLE 5 THE TRANSITION PROPERTY
Section 5.01. Custody of Transition Property Records
Section 5.02. Duties of Servicer as Custodian
Section 5.03. Instructions; Authority to Act
Section 5.04. Effective Period and Termination
Section 5.05. Monitoring of Third-Party Suppliers
Section 5.06. Monitoring and Collecting Exit Charges
ARTICLE 6 THE SERVICER
Section 6.01. Representations and Warranties of Servicer
Section 6.02. Indemnities of Servicer
Section 6.03. Limitation on Liability of Servicer and Others
Section 6.04. Merger or Consolidation of, or Assumption of
the Obligations of, Servicer
Section 6.05. Western Massachusetts Electric Company Not to
Resign as Servicer
Section 6.06. Servicing Compensation
Section 6.07. Compliance with Applicable Law
</Table>
Section 6.08.Access to Certain Records and Information Regarding
Transition Property
Section 6.09. Appointments
Section 6.10. No Servicer Advances
Section 6.11. Maintenance of Operations
ARTICLE 7 DEFAULT
Section 7.01. Servicer Default
Section 7.02. Appointment of Successor
Section 7.03. Waiver of Past Defaults
Section 7.04. Notice of Servicer Default
ARTICLE 8 MISCELLANEOUS PROVISIONS
Section 8.01. Amendment
Section 8.02. Maintenance of Accounts and Records
Section 8.03. Notices
Section 8.04. Assignment
Section 8.05. Limitations on Rights of Third Parties
Section 8.06. Severability
Section 8.07. Separate Counterparts
Section 8.08. Headings
Section 8.09. Governing Law
Section 8.10. Assignment to Note Trustee
Section 8.11. Nonpetition Covenants
This TRANSITION PROPERTY SERVICING AGREEMENT, dated as of May 17, 2001, is
between WMECO Funding LLC, a Delaware limited liability company (together with
any successor thereto permitted under the Note Indenture, as hereinafter
defined, the "Note Issuer"), and Western Massachusetts Electric Company, a
Massachusetts corporation.
RECITALS
WHEREAS, pursuant to the Statute and the Financing Order, the Seller and
the Note Issuer are concurrently entering into the Sale Agreement pursuant to
which the Seller is selling to the Note Issuer the Transition Property
created pursuant to the Statute and the Financing Order.
WHEREAS, in connection with its ownership of the Transition Property and
in order to collect the RTC Charge, the Note Issuer desires to engage the
Servicer to carry out the functions described herein. The Servicer currently
performs similar functions for itself with respect to its own charges to its
customers and for others. In addition, the Note Issuer desires to engage the
Servicer to act on its behalf in obtaining Periodic Adjustments from the DTE.
The Servicer desires to perform all of these activities on behalf of the Note
Issuer.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.01. Definitions. Whenever used in this Agreement, the
following words and phrases shall have the following meanings:
"Advice Letter" means any filing made with the DTE by the Servicer on
behalf of the Note Issuer to set or adjust the RTC Charge, including the
Issuance Advice Letter, a Routine Anniversary True-Up Letter, a Routine True-Up
Letter or a Non-Routine True-Up Letter.
"Agreement" means this Transition Property Servicing Agreement, together
with all Exhibits, Schedules and Annexes hereto, as the same may be amended
and supplemented from time to time.
"Annual Accountant's Report" has the meaning set forth in Section 3.04.
"Applicable TPS" means, with respect to each Customer, the TPS, if any,
billing the RTC Charge to that Customer.
"Bills" means each of the regular monthly bills, summary bills and other
bills issued to Customers or TPSs by Western Massachusetts Electric Company on
its own behalf and in its capacity as Servicer.
"Certificate of Compliance" has the meaning set forth in Section 3.03.
"Closing Date" means May 17, 2001.
"Customers" means Seller's customers and ratepayers taking the delivery,
transmission, distribution, back-up, maintenance, emergency and any other
delivery or energy service provided by Seller to such customer within the
territory in which Seller serves customers, regardless of that customer's source
of electric power whether or not energy is purchased from WMECO or any TPS and
whether or not such distribution system is being operated by Seller or a
successor distribution company.
"Declaration of Trust" means the Declaration of Trust dated as of May 15,
2001 by The Bank of New York (Delaware), a Delaware banking corporation, as
Delaware Trustee, the Massachusetts Development Finance Agency and the
Massachusetts Health and Educational Facilities Authority, as the same may be
amended and supplemented from time to time.
"DTE" means the Massachusetts Department of Telecommunications and Energy
and any successor thereto.
"DTE Regulations" means all regulations, rules, tariffs and laws applicable
to public utilities or TPSs, as the case may be, and promulgated by, enforced by
or otherwise within the jurisdiction of the DTE.
"Expected Amortization Schedule" means Schedule 4.01(a) hereto.
"Financing Order" means the order of the DTE, DTE-00-40, issued on
February 7, 2001.
"Financing Order Anniversary Date" means February 7 of each year.
"Indemnified Person" has the meaning assigned to such term in Section 6.02.
"Insolvency Event" means, with respect to a specified Person, (a) the
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property in an
involuntary case under any applicable Federal or state bankruptcy, insolvency or
other similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official for
such Person or for any substantial part of its property, or ordering the
winding-up or liquidation of such Person's affairs, and such decree or order
shall remain unstayed and in effect for a period of 60 consecutive days; or (b)
the commencement by such Person of a voluntary case under any applicable Federal
or state bankruptcy, insolvency or other similar law now or hereafter in effect,
or the consent by such Person to the entry of an order for relief in an
involuntary case under any such law, or the consent by such Person to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for such Person or for any
substantial part of its property, or the making by such Person of any general
assignment for the benefit of creditors, or the failure by such Person generally
to pay its debts as such debts become due.
"Issuance Advice Letter" means the initial Issuance Advice Letter, dated
May 16, 2001, filed with the DTE pursuant to the Financing Order.
"Lien" means a security interest, lien, charge, pledge or encumbrance of
any kind.
"Losses" has the meaning assigned to that term in Section 6.02(b).
"Monthly Servicer Certificate" has the meaning assigned to that term in
Section 4.01(d)(2).
"Non-Routine Periodic Adjustment" has the meaning set forth in Section
4.01(c)(1).
"Non-Routine True-Up Letter" means a letter filed with the DTE in
accordance with the Financing Order with respect to any Non-Routine Periodic
Adjustment, pursuant to which the related Non-Routine Periodic Adjustment
will become effective within 60 days after filing of the Non-Routine True-Up
Letter, subject to the review and approval of the DTE.
"Note Indenture" means the Note Indenture dated as of May 17, 2001,
between the Note Issuer and the Note Trustee, as the same may be amended and
supplemented from time to time.
"Note Issuer" has the meaning set forth in the preamble to this
Agreement.
"Officer's Certificate" means a certificate of the Servicer signed by a
Responsible Officer.
"Opinion of Counsel" means one or more written opinions of counsel who may
be an employee of or counsel to the party providing such opinion(s) of counsel,
which counsel shall be reasonably acceptable to the party receiving such
opinion(s) of counsel.
"Periodic Adjustment" means each adjustment to the RTC Charge made pursuant
to the terms of the Financing Order and in accordance with Section 4.01 hereof.
"Principal Balance" means, as of any Payment Date, the sum of the
outstanding principal amount of the Notes.
"Projected Principal Balance" means, as of any Payment Date, the sum of
the projected outstanding principal amount of the Notes for such Payment Date
set forth in the Expected Amortization Schedule.
"Quarterly Servicer Certificate" has the meaning assigned to that term
in Section 4.01(d)(3).
"Remittance" means each remittance pursuant to Section 4.03 of RTC
Charge Payments by the Servicer to the Note Trustee.
"Remittance Date" means each Servicer Business Day on which a
Remittance is to be made by the Servicer pursuant to Section 4.03.
"Remittance Period" means the twelve-month period commencing on March 1 of
each year and ending on the last day of February of the succeeding year;
provided, however, that the initial Remittance Period shall commence on the
Closing Date and end on February 28, 2002.
"Required Debt Service" means, for any Remittance Period, the total dollar
amount calculated by the Servicer in accordance with Section 4.01(b)(1) as
necessary to be remitted to the Collection Account during such Remittance Period
(after giving effect to (a) the allocation and distribution of amounts on
deposit in the Reserve Subaccount at the time of calculation and which are
available for payments on the Notes, (b) any shortfalls in Required Debt Service
for any prior Remittance Period and (c) any Remittances based upon the RTC
Charge in effect in the prior Remittance Period that are expected to be realized
in such Remittance Period) in order to ensure that, as of the Payment Date
immediately following the end of such period, (i) all accrued and unpaid
interest on the Notes then due shall have been paid in full, (ii) the Principal
Balance of the Notes is equal to the Projected Principal Balance of the Notes
for that Payment Date, (iii) the balance on deposit in the Capital Subaccount
equals the aggregate Required Capital Level, (iv) the balance on deposit in the
Overcollateralization Subaccount equals the aggregate Required
Overcollateralization Level and (v) all other fees, expenses and indemnities due
and owing and required or allowed to be paid under Section 8.02 of the Note
Indenture as of such date shall have been paid in full; provided, however, that,
with respect to any Periodic Adjustment occurring after the last Scheduled
Maturity Date for any Notes, the Required Debt Service shall be calculated to
ensure that sufficient amounts will be collected to retire such Notes in full as
of the earlier of (x) the next Payment Date and (y) the Final Maturity Date for
such Notes.
"Responsible Officer" means the chief executive officer, the president, the
chairman or vice chairman of the board, any vice president, the treasurer, any
assistant treasurer, the clerk, any assistant clerk, the secretary, any
assistant secretary, the controller or the finance manager of the Servicer.
"Retirement of the Notes" means the day on which the final payment is
made to the Note Trustee in respect of the last outstanding Note.
"Routine Anniversary True-Up Letter" means a letter substantially in the
form of Exhibit B hereto filed with the DTE prior to the Financing Order
Anniversary Date in respect of an annual Periodic Adjustment. The Routine
Anniversary True-Up Letter will become effective on the first calendar day of
the next succeeding calendar month after filing, or such date as may be
specified in such Routine Anniversary True-Up Letter, so long as such effective
date is at least 15 days after the filing of such Routine Anniversary True-Up
Letter.
"Routine True-Up Letter" means letter filed with the DTE in respect of a
Periodic Adjustment, substantially in the form of Exhibit B hereto. The Routine
True-Up Letter will become effective on the first calendar day of the next
succeeding calendar month after filing, or such date as may be specified in such
Routine True-Up Letter, so long as such effective date is at least 15 days after
the filing of such Routine True-Up Letter.
"RTC Charge" means the portion (which may become all) of the Transition
Charge designated pursuant to the Financing Order as the RTC Charge, as the same
may be adjusted from time to time as provided in the Financing Order, and may in
the future include a pro rata component of any exit fee collected pursuant to
Section 1G(g) of Chapter 164 of the Massachusetts General Laws.
"RTC Charge Collections" means the RTC Charge Payments remitted to the
Collection Account.
"RTC Charge Payments" means the actual payments received by the Servicer,
directly or indirectly (including through a TPS), from or on behalf of
Customers, multiplied by the percentage of such collections which is calculated
in accordance with Annex II hereto to have been received in respect of the RTC
Charge.
"Sale Agreement" means the Transition Property Purchase and Sale Agreement
dated as of May 17, 2001, between Western Massachusetts Electric Company, as
Seller, and the Note Issuer, as the same may be amended and supplemented from
time to time.
"Seller" means Western Massachusetts Electric Company, a Massachusetts
corporation, and its permitted successors and assigns under the Sale Agreement.
"Servicer" means Western Massachusetts Electric Company, as the servicer of
the Transition Property, or each successor (in the same capacity)
pursuant to Sections 6.04 or 7.02.
"Servicer Business Day" means any Business Day on which the Servicer's
offices in The Commonwealth of Massachusetts and in the State of Connecticut
are open for business.
"Servicer Default" means an event specified in Section 7.01.
"Servicing Fee" has the meaning set forth in Section 6.06(a).
"Statute" means Chapter 164 of the Massachusetts Acts of 1997, entitled an
Act Relative to Restructuring the Electric Utility Industry in the Commonwealth,
Regulating the Provision of Electricity and Other Services, and Promoting
Enhanced Consumer Protections Therein.
"Termination Notice" has the meaning assigned to that term in Section
7.01(e).
"TPS" means a third party supplier of energy who has entered into a TPS
Service Agreement with the Servicer.
"TPS Service Agreement" means an agreement between a third party supplier
of energy and the Servicer pursuant to which such third party supplier of energy
bills and collects the RTC Charge to and from Customers in accordance with DTE
Regulations, the Financing Order and the guidelines described in Schedule A to
Annex I.
"Transition Charge" means the "Transition Charge" as defined in the Statute
and referred to as the Seller's "Transition Charge" in Western Massachusetts
Electric Company's, DTE Docket No. 97-120 and subsequent filings with the DTE
pursuant thereto.
"Transition Property" means the transition property that exists under Order
7 of the Financing Order and is sold by the Seller to the Note Issuer under the
Sale Agreement.
"Transition Property Records" has the meaning assigned to that term in
Section 5.01.
Section 1.02. Other Definitional Provisions.
(a) Capitalized terms used herein and not otherwise defined herein
have the meanings assigned to them in the Note Indenture.
(b) All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(c) The words "hereof," "herein," "hereunder" and words of similar
import, when used in this Agreement, shall refer to this Agreement as a whole
and not to any particular provision of this Agreement; Section, Schedule,
Exhibit and Annex references contained in this Agreement are references to
Sections, Schedules, Exhibits and Annexes in or to this Agreement unless
otherwise specified; and the term "including" shall mean "including without
limitation."
(d) The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the masculine
as well as to the feminine and neuter forms of such terms.
ARTICLE 2
APPOINTMENT AND AUTHORIZATION
Section 2.01. Appointment of Servicer; Acceptance of Appointment. Subject
to Section 6.05 and Article 7, the Note Issuer hereby appoints the Servicer, and
the Servicer hereby accepts such appointment, to perform the Servicer's
obligations pursuant to this Agreement on behalf of and for the benefit of the
Note Issuer or any assignee thereof in accordance with the terms of this
Agreement and applicable law. This appointment and the Servicer's acceptance
thereof may not be revoked except in accordance with the express terms of this
Agreement.
Section 2.02. Authorization. With respect to all or any portion of the
Transition Property, the Servicer shall be, and hereby is, authorized and
empowered by the Note Issuer to (a) execute and deliver, on behalf of itself
and/or the Note Issuer, as the case may be, any and all instruments, documents
or notices, and (b) on behalf of itself and/or the Note Issuer, as the case may
be, make any filing and participate in proceedings of any kind with any
governmental authorities, including with the DTE. The Note Issuer shall execute
and/or furnish the Servicer with such documents as have been prepared by the
Servicer for execution by the Note Issuer, and with such other documents as may
be in the Note Issuer's possession, as the Servicer may determine to be
necessary or appropriate to enable it to carry out its servicing and
administrative duties hereunder. Upon the Servicer's written request, the Note
Issuer shall furnish the Servicer with any powers of
attorney or other documents necessary or appropriate to enable the Servicer to
carry out its duties hereunder.
Section 2.03. Dominion and Control Over the Transition Property.
Notwithstanding any other provision herein, the Note Issuer shall have dominion
and control over the Transition Property, and the Servicer, in accordance with
the terms hereof, is acting solely as the servicing agent and custodian for the
Note Issuer with respect to the Transition Property and the Transition Property
Records. The Servicer shall not take any action that is not authorized by this
Agreement or that shall impair the rights of the Note Issuer or the Note Trustee
in the Transition Property, in each case unless such action is required by
applicable law.
ARTICLE 3
BILLING SERVICES
Section 3.01. Duties of Servicer. The Servicer, as agent for the Note
Issuer, shall have the following duties:
(a) Duties of Servicer Generally.
(1) General Duties. The Servicer's duties in general shall
include management, servicing and administration of the Transition Property;
obtaining meter reads, calculating electricity usage (including usage by
Customers of any TPS), billing, collection and posting of all payments in
respect of the Transition Property; responding to inquiries by Customers, the
DTE, or any federal, local or other state governmental authorities with
respect to the Transition Property; delivering Bills to Customers and TPSs,
investigating and handling delinquencies, processing and depositing
collections and making periodic remittances; furnishing periodic reports to
the Note Issuer, the Note Trustee, the Certificate Trustee and the Rating
Agencies; and taking all necessary action in connection with Periodic
Adjustments as set forth herein. Certain of the duties set forth above may
be performed by TPSs pursuant to TPS Service Agreements. Without limiting
the generality of this Section 3.01(a)(1), in furtherance of the foregoing,
the Servicer hereby agrees that it shall also have, and shall comply with,
the duties and responsibilities relating to data acquisition, usage and bill
calculation, billing, customer service functions, collection, payment
processing and remittance set forth in Annex I hereto.
(2) DTE Regulations Control. Notwithstanding anything
to the contrary in this Agreement, the duties of the Servicer set forth in this
Agreement shall be qualified in their entirety by any DTE Regulations as in
effect at the time such duties are to be performed.
(b) Reporting Functions.
(1) Notification of Laws and Regulations. The Servicer shall
promptly notify the Note Issuer, the Note Trustee, the Certificate Trustee
and the Rating Agencies in writing of any laws or DTE Regulations hereafter
promulgated that have a material adverse effect on the Servicer's ability to
perform its duties under this Agreement.
(2) Other Information. Upon the reasonable request of the
Note Issuer, the Note Trustee, the Certificate Trustee, or any Rating Agency,
the Servicer shall provide to such Note Issuer, Note Trustee, Certificate
Trustee, or the Rating Agencies, as the case may be, any public financial
information in respect of the Servicer, or any material information regarding
the Transition Property to the extent it is reasonably available to the
Servicer, as may be reasonably necessary and permitted by law for the Note
Issuer, the Note Trustee, the Certificate Trustee, or the Rating Agencies to
monitor the Servicer's performance hereunder.
(3) Preparation of Reports to be Filed with the SEC. The
Servicer shall prepare or cause to be prepared any reports required to be
filed by the Note Issuer or the Certificate Issuer under the securities laws,
including a copy of each Quarterly Servicer Certificate described in Section
4.01(d)(3), the annual Certificate of Compliance described in Section 3.03
and the Annual Accountant's Report described in Section 3.04.
Section 3.02. Servicing and Maintenance Standards. On behalf of the Note
Issuer, the Servicer shall (a) manage, service, administer and make collections
in respect of the Transition Property with reasonable care and in accordance
with applicable law, including all applicable DTE Regulations and guidelines,
using the same degree of care and diligence that the Servicer exercises with
respect to similar assets for its own account and, if applicable, for others;
(b) follow customary standards, policies and procedures for the industry in
performing its duties as Servicer; (c) use all reasonable efforts, consistent
with its customary servicing procedures, to bill and collect the RTC Charge; (d)
file all filings under the applicable Uniform Commercial Code or the Statute
necessary or desirable to maintain the
perfected ownership interest and security interest of the Note Issuer and the
Note Trustee in the Transition Property, (e) comply in all material respects
with all laws and regulations applicable to and binding on it relating to the
Transition Property, and (f) submit at least annually the Periodic Adjustments
pursuant to Section 4.01. The Servicer shall follow such customary and usual
practices and procedures as it shall deem necessary or advisable in its
servicing of all or any portion of the Transition Property, which, in the
Servicer's judgment, may include the taking of legal action, at the Note
Issuer's expense.
Section 3.03. Certificate of Compliance. The Servicer shall deliver to the
Note Issuer, the Note Trustee, the Certificate Trustee and the Rating Agencies
on or before March 31 of each year, commencing March 31, 2002 to and including
the March 31 succeeding the Retirement of the Notes, an Officer's Certificate
substantially in the form of Exhibit A hereto (a "Certificate of Compliance"),
stating that: (i) a review of the activities of the Servicer during the twelve
months ended the preceding December 31 (or, in the case of the first Certificate
of Compliance to be delivered on or before March 31, 2002, the period of time
from the date of this Agreement until December 31, 2001) and of its performance
under this Agreement has been made under such Responsible Officer's supervision,
and (ii) to such Responsible Officer's knowledge, based on such review, the
Servicer has fulfilled all of its obligations in all material respects under
this Agreement throughout such twelve months (or, in the case of the Certificate
of Compliance to be delivered on or before March 31, 2002, the period of time
from the date of this Agreement until December 31, 2001), or, if there has been
a default in the fulfillment of any such material obligation, specifying each
such material default known to such Responsible Officer and the nature and
status thereof.
Section 3.04. Annual Report by Independent Public Accountants.
(a) The Servicer, at the Note Issuer's expense, shall cause a firm
of independent certified public accountants (which may provide other services
to the Servicer) to prepare, and the Servicer shall deliver to the Note
Issuer, the Note Trustee, the Certificate Trustee and the Rating Agencies, a
report addressed to the Servicer (the "Annual Accountant's Report"),
which may be included as part of the Servicer's customary auditing activities,
for the information and use of the Note Issuer, the Note Trustee, the
Certificate Trustee and the Rating Agencies, on or before March 31 each year,
beginning March 31, 2002 to and including the March 31 succeeding the Retirement
of the Notes, to the effect that such firm has performed certain procedures,
agreed between the Servicer and such accountants, in connection with the
Servicer's compliance with its obligations under this Agreement during the
preceding twelve months ended December 31 (or, in the case of the first Annual
Accountant's Report to be delivered on or before March 31, 2002, the period of
time from the date of this Agreement until December 31, 2001), identifying the
results of such procedures and including any exceptions noted.
(b) The Annual Accountant's Report shall also indicate that the
accounting firm providing such report is independent of the Servicer within
the meaning of the Code of Professional Ethics of the American Institute of
Certified Public Accountants.
ARTICLE 4
SERVICES RELATED TO PERIODIC ADJUSTMENTS;
REMITTANCES
Section 4.01. Periodic Adjustments. From time to time, until the Retirement
of the Notes, the Servicer shall identify the need for Periodic Adjustments and
shall take all reasonable action to obtain and implement such Periodic
Adjustments, all in accordance with the following:
(a) Expected Amortization Schedule. The Expected Amortization
Schedule is attached hereto as Schedule 4.01(a).
(b) Routine Periodic Adjustments and Yearly Filings.
(1) Routine Anniversary Periodic Adjustments and Filings.
For the purpose of preparing a Routine Anniversary True-Up Letter, the
Servicer shall: (A) update the assumptions underlying the calculation of the
RTC Charge, including energy usage volume, the rate of charge-offs and
estimated expenses and fees of the Note Issuer and the Certificate Issuer to
the extent not fixed, in each case for the Remittance Period beginning on
March 1 of each year; (B) determine the Required Debt Service for such
Remittance Period based upon such updated assumptions; and (C) determine
the RTC Charge to be charged during such Remittance Period based upon such
Required Debt Service. The Servicer shall file a Routine Anniversary True-Up
Letter with the DTE prior to February 7 of each year and such Routine
Anniversary True-Up Letter shall reflect information updated in all respects as
of a date no earlier than December 31 of the calendar year preceding the
calendar year in which such Routine Anniversary True-Up Letter is filed.
(2) Routine Periodic Adjustments. Beginning in the last year
the Notes are scheduled to be outstanding, the Servicer shall file a Routine
True-Up Letter at least 15 days before the end of each calendar quarter.
In addition, the Servicer shall file a Routine True-Up Letter at least 15 days
before the end of any calendar quarter or, beginning in the last year the Notes
are scheduled to be outstanding, at least 15 days before the end of any calendar
month, at each such time as the Servicer may reasonably determine is necessary
to meet the Required Debt Service for the then current Remittance Period.
(3) Servicer's Efforts. The Servicer shall take all reasonable
actions and make all reasonable efforts to secure any Periodic Adjustments.
(c) Non-Routine Periodic Adjustments.
(1) When Required. Whenever the Servicer determines that the
existing model for calculating the RTC Charge should be amended or revised,
subject to the consent of the Note Issuer under the conditions set forth in
Section 3.18 of the Note Indenture, the Servicer shall file a Non-Routine
True-Up Letter with the DTE designating the adjustments to such model and any
corresponding adjustments to the RTC Charge (collectively, a "Non-Routine
Periodic Adjustment"), subject to the review and approval of the DTE pursuant to
the Financing Order.
(2) Servicer's Efforts. The Servicer shall take all reasonable
actions and make all reasonable efforts to secure any Non-Routine Periodic
Adjustments.
(3) Implementation. The Servicer shall implement any resulting
adjustments to the model and any resulting revised RTC Charge as of the
effective date of the Non-Routine True-Up Letter.
(d) Reports.
(1) Notification of Advice Letter Filings and Periodic
Adjustments. Whenever the Servicer files an Advice Letter with the DTE, the
Servicer shall send a copy of such filing to the Note Issuer, the Note
Trustee, the Certificate Trustee and the Rating Agencies concurrently therewith.
If any Periodic Adjustment requested in any such Advice Letter filing does not
become effective on the applicable date as provided by the Financing Order, the
Servicer shall notify the Note Issuer, the Note Trustee, the Certificate Trustee
and the Rating Agencies by the end of the second Servicer Business Day after
such applicable date.
(2) Monthly Servicer Certificate. So long as any Notes are
outstanding, not later than fifteen (15) days after the end of each month after
the Certificates are issued (excluding May, 2001), or if such day is not a
Servicer Business Day, the next succeeding Servicer Business Day, the Servicer
shall deliver a written report substantially in the form of Exhibit C hereto
(the "Monthly Servicer Certificate") to the Note Issuer, the Note Trustee, the
Certificate Trustee and the Rating Agencies.
(3) Quarterly Servicer Certificate. So long as any Notes are
outstanding, not later than 11:00 a.m. (New York City time) on the Servicer
Business Day immediately preceding each Payment Date, the Servicer shall deliver
a written report substantially in the form of Exhibit D hereto (the "Quarterly
Servicer Certificate") to the Note Issuer, the Note Trustee, the Certificate
Trustee and the Rating Agencies.
(4) TPS Reports. The Servicer shall provide to the Rating
Agencies, upon request, any publicly available reports filed by the Servicer
with the DTE (or otherwise made publicly available by the Servicer) relating to
TPSs and any other non-confidential and non-proprietary information relating to
TPSs reasonably requested by the Rating Agencies.
Section 4.02. Limitation of Liability.
(a) Specific Limitations. The Note Issuer and the Servicer expressly
agree and acknowledge that:
(1) Capacity. In connection with any Periodic Adjustment, the
Servicer is acting solely in its capacity as the servicing agent hereunder.
(2) No Liability for Failure to File. Neither the Servicer
nor the Note Issuer shall be responsible in any manner for, and shall have no
liability whatsoever as a result of, any action, decision, ruling or other
determination made or not made, or any delay (other than any delay resulting
from the Servicer's failure to file for Periodic Adjustments or Non-Routine
Periodic Adjustments required by Section 4.01 in a timely and correct manner
or other material breach by the Servicer of its duties under this Agreement that
materially and adversely affects any Periodic Adjustments or Non-Routine
Periodic Adjustments), by the DTE (or, in connection with any Non-Routine
Periodic Adjustment, by the Rating Agencies) in any way related to the
Transition Property or in connection with any Periodic Adjustment or Non-
Routine Periodic Adjustment, the subject of any filings under Section 4.01, any
proposed Periodic Adjustment or Non-Routine Periodic Adjustment, or the approval
of the RTC Charge and the adjustments thereto.
(3) No Liability for Calculation. The Servicer shall have no
liability whatsoever relating to the calculation of the RTC Charge and the
adjustments thereto (including any Non-Routine Periodic Adjustment), including
as a result of any inaccuracy of any of the assumptions made in such calculation
regarding expected energy usage volume, the rate of charge-offs, estimated
expenses and fees of the Note Issuer and the Certificate Issuer, so long as the
Servicer has not acted in a negligent manner in connection therewith, nor shall
the Servicer have any liability whatsoever as a result of any Person, including
the Noteholders or the Certificateholders, not receiving any payment, amount or
return anticipated or expected in respect of any Note or Certificate generally,
except only to the extent that the Servicer is liable under Section 6.02 of this
Agreement.
(b) Liability for Misrepresentation and Breach. Notwithstanding
the foregoing, this Section 4.02 shall not relieve the Servicer of any liability
under Section 6.02 for any misrepresentation by the Servicer under Section 6.01
or for any breach by the Servicer of its obligations under this Agreement.
Section 4.03. Remittances.
(a) Remittance to General Subaccount. Pursuant to the remittance
methodology more fully described in Annex II hereto, starting with collections
that are received on the first Servicer Business Day that is at least 45 days
after the first day on which Western Massachusetts Electric Company imposes the
RRB Charge, the Servicer will remit to the Note Trustee, within two Servicer
Business Days after receipt, by wire transfer of immediately available funds to
the General Subaccount of the Collection Account, an amount equal to the RTC
Charge Payments (as calculated in accordance with Annex II hereto) received on
such day and on any prior day that was not a Servicer Business Day for which a
Remittance has not previously been made. Prior to or simultaneous with each
Remittance to the
General Subaccount of the Collection Account pursuant to this Section, the
Servicer shall provide written notice to the Note Trustee of each such
Remittance (including the exact dollar amount to be remitted).
(b) Frequency of Remittances. The Servicer may elect to make
Remittances less frequently than on a daily basis, and shall be permitted to do
so, but in any event shall make Remittances within one calendar month of
collection thereof, provided that the Servicer shall send written notice of such
election to the Note Issuer, the Note Trustee and the Certificate Trustee,
together with (i) an Officer's Certificate stating that no Servicer Default has
occurred and is continuing under this Servicing Agreement, (ii) evidence that
the Rating Agency Condition has been satisfied, (iii) either the Servicer's
commercial paper is rated P-1 by Moody's or the Servicer's long term unsecured
debt is rated A2 or better by Moody's, (iv) evidence of the delivery by the
Servicer to the Note Issuer or the Note Trustee, as applicable, of any credit
enhancement which may be required by the Rating Agencies in connection therewith
in form and substance satisfactory or to the Note Issuer and the Note Trustee,
as applicable, the cost of which credit enhancement shall be borne solely by the
Servicer, and (v) an executed copy of any appropriate amendment hereto or to the
Note Indenture or any other Basic Agreement as reasonably requested by the
Servicer, the Note Issuer or the Note Trustee in connection therewith.
(c) No Deduction. The Servicer agrees and acknowledges that it
will remit RTC Charge Payments in accordance with this Section 4.03 without
any surcharge, fee, offset, charge or other deduction except for late fees
permitted by Section 6.06.
ARTICLE 5
THE TRANSITION PROPERTY
Section 5.01. Custody of Transition Property Records. To assure
uniform quality in servicing the Transition Property and to reduce
administrative costs, the Note Issuer hereby revocably appoints the Servicer,
and the Servicer hereby accepts such appointment, to act as the agent of the
Note Issuer and the Note Trustee as custodian of any and all documents and
records that the Servicer shall keep on file, in accordance with its
customary procedures, relating to the Transition Property, including copies
of the Financing Order and Advice Letters relating thereto and all documents
filed with the DTE in connection with any Periodic Adjustment or Non-Routine
Periodic Adjustment and computational records relating thereto (collectively,
the "Transition Property Records"), which are hereby constructively delivered
to the Note Trustee, as pledgee of the Note Issuer with respect to all
Transition Property.
Section 5.02. Duties of Servicer as Custodian.
(a) Safekeeping. The Servicer shall hold the Transition Property
Records on behalf of the Note Issuer and the Note Trustee and maintain such
accurate and complete accounts, records and computer systems pertaining to the
Transition Property Records on behalf of the Note Issuer and the Note Trustee as
shall enable the Note Issuer to comply with this Agreement and the Note
Indenture. In performing its duties as custodian the Servicer shall act with
reasonable care, using that degree of care and diligence that the Servicer
exercises with respect to comparable assets that the Servicer services for
itself or, if applicable, for others. The Servicer shall promptly report to the
Note Issuer and the Note Trustee any failure on its part to hold the Transition
Property Records and maintain its accounts, records and computer systems as
herein provided and promptly take appropriate action to remedy any such failure.
Nothing herein shall be deemed to require an initial review or any periodic
review by the Note Issuer or the Note Trustee of the Transition Property
Records. The Servicer's duties to hold the Transition Property Records on behalf
of the Note Issuer set forth in this Section 5.02, to the extent such Transition
Property Records have not been previously transferred to a successor Servicer
pursuant to Article 7, shall terminate one year and one day after the earlier of
the date on which (i) the Servicer is succeeded by a successor Servicer in
accordance with Article 7 and (ii) no Notes are outstanding.
(b) Maintenance of and Access to Records. The Servicer shall
maintain at all times records and accounts that permit the Servicer to identify
RTC Charges billed. The Servicer shall maintain the Transition Property Records
in West Springfield, Massachusetts or at such other office in the United States
of America as shall be specified to the Note Issuer and the Note Trustee by
written notice at least 30 days prior to any change in location. The Servicer
shall make available for inspection to the Note Issuer and the Note Trustee or
their respective duly authorized representatives, attorneys or auditors the
Transition Property Records
at such times during normal business hours as the Note Issuer or the Note
Trustee shall reasonably request and which do not unreasonably interfere with
the Servicer's normal operations. Nothing in this Section 5.02(b) shall affect
the obligation of the Servicer to observe any applicable law (including any DTE
Regulations) prohibiting disclosure of information regarding the Customers, and
the failure of the Servicer to provide access to such information as a result of
such obligation shall not constitute a breach of this Section 5.02(b).
(c) Release of Documents. Upon instruction from the Note Trustee
in accordance with the Note Indenture, the Servicer shall release any Transition
Property Records to the Note Trustee, the Note Trustee's agent or the Note
Trustee's designee, as the case may be, at such place or places as the Note
Trustee may designate, as soon as practicable.
(d) Defending Transition Property Against Claims. The Servicer,
shall institute any action or proceeding necessary to compel performance by the
DTE or The Commonwealth of Massachusetts of any of their obligations or duties
under the Statute, the Financing Order or any Advice Letter, and the Servicer
agrees to take such legal or administrative actions, including defending against
or instituting and pursuing legal actions and appearing or testifying at
hearings or similar proceedings, as may be reasonably necessary to block or
overturn any attempts to cause a repeal of, modification of or supplement to the
Statute or the Financing Order or the rights of holders of Transition Property
by executive action, legislative enactment, voter initiative or constitutional
amendment that would be adverse to Certificateholders, Noteholders, the Note
Issuer, the Note Trustee, the Delaware Trustee or the Certificate Trustee. The
costs of any such action shall be payable from RTC Charge Collections as an
Operating Expense in accordance with the priorities set forth in Section 8.02(d)
of the Note Indenture. The Servicer's obligations pursuant to this Section 5.02
shall survive and continue notwithstanding the fact that the payment of
Operating Expenses pursuant to Section 8.02(d) of the Note Indenture may be
delayed (it being understood that the Servicer may be required to advance its
own funds to satisfy its obligations hereunder).
Section 5.03. Instructions; Authority to Act. For so long as any Notes
remain outstanding, the Servicer shall be deemed to have received proper
instructions with respect to the Transition Property Records upon its receipt
of written instructions signed by a Responsible Officer (as defined in the Note
Indenture) of the Note Trustee.
Section 5.04. Effective Period and Termination. The Servicer's
appointment as custodian shall become effective as of the Closing Date and shall
continue in full force and effect until terminated pursuant to this Section
5.04. If any Servicer shall resign as Servicer in accordance with the provisions
of this Agreement or if all of the rights and obligations of any Servicer shall
have been terminated under Section 7.01, the appointment of such Servicer as
custodian shall terminate upon appointment of a successor Servicer, subject to
the approval of the DTE, and acceptance by such successor Servicer of such
appointment.
Section 5.05. Monitoring of Third-Party Suppliers. From time to time,
until the Retirement of the Notes, the Servicer shall, using the same degree of
care and diligence that it exercises with respect to payments owed to it for its
own account, implement such procedures and policies as are necessary to properly
enforce the obligations of each TPS to remit RTC Charges, in accordance with the
terms and provisions of the Financing Order, the TPS Service Agreement and
Schedule A to Annex I hereto.
Section 5.06. Monitoring and Collecting Exit Charges. The Servicer
shall, using the same degree of care and diligence that it exercises with
respect to payments owed to it for its own account, bill and collect any exit
charges to which it may be entitled pursuant to Section 1G(g) of Chapter 164 of
the Massachusetts General Laws, and shall remit that portion of the exit charges
representing (or allocable to) the RTC Charge together with the RTC Charge
Payments for a particular billing date.
ARTICLE 6
THE SERVICER
Section 6.01. Representations and Warranties of Servicer. The Servicer
makes the following representations and warranties, as of the Closing Date, on
which the Note Issuer is deemed to have relied in entering into this Agreement
relating to the servicing of the Transition Property.
(a) Organization and Good Standing. The Servicer is duly organized
and validly existing as a corporation in good standing under the laws of The
Commonwealth of Massachusetts, with the requisite corporate
power and authority to own its properties as such properties are currently owned
and to conduct its business as such business is now conducted by it, and has the
requisite corporate power and authority to service the Transition Property and
to hold the Transition Property Records as custodian.
(b) Due Qualification. The Servicer is duly qualified to do business
as a foreign corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or lease of
property or the conduct of its business (including the servicing of the
Transition Property as required by this Agreement) shall require such
qualifications, licenses or approvals (except where the failure to so qualify or
obtain such licenses and approvals would not be reasonably likely to have a
material adverse effect on the Servicer's business, operations, assets, revenues
or properties or adversely affect the servicing of the Transition Property).
(c) Power and Authority. The Servicer has the requisite corporate
power and authority to execute and deliver this Agreement and to carry out its
terms; and the execution, delivery and performance of this Agreement have been
duly authorized by all necessary corporate action on the part of the Servicer.
(d) Binding Obligation. This Agreement constitutes a legal, valid
and binding obligation of the Servicer enforceable against it in accordance with
its terms, subject to applicable insolvency, reorganization, moratorium,
fraudulent transfer and other laws relating to or affecting creditors' rights
generally from time to time in effect and to general principles of equity
(including concepts of materiality, reasonableness, good faith and fair
dealing), regardless of whether considered in a proceeding in equity or at law.
(e) No Violation. The consummation of the transactions contemplated
by this Agreement and the fulfillment of the terms hereof do not: (i) conflict
with or result in any breach of any of the terms and provisions of, nor
constitute (with or without notice or lapse of time) a default under, the
articles of organization or by-laws of the Servicer, or any material indenture,
agreement or other instrument to which the Servicer
is a party or by which it is bound; (ii) result in the creation or imposition of
any Lien upon any of the Servicer's properties pursuant to the terms of any such
indenture, agreement or other instrument; nor violate any existing law or any
existing order, rule or regulation applicable to the Servicer of any court or of
any federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Servicer or its
properties, so as to adversely affect the Servicer, the Noteholders or the
Certificateholders.
(f) No Proceedings. There are no proceedings pending and, to the
Servicer's knowledge, there are no proceedings threatened and, to the Servicer's
knowledge, there are no investigations pending or threatened, before any court,
federal or state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Servicer or its properties
involving or relating to the Servicer or the Note Issuer or, to the Servicer's
knowledge, any other Person: (i) asserting the invalidity of this Agreement;
(ii) seeking to prevent the consummation of any of the transactions contemplated
by this Agreement; or (iii) seeking any determination or ruling that might
materially and adversely affect the performance by the Servicer of its
obligations under, or the validity or enforceability of, this Agreement.
(g) Approvals. No approval, authorization, consent, order or other
action of, or filing with, any court, federal or state regulatory body,
administrative agency or other governmental instrumentality is required in
connection with the execution and delivery by the Servicer of this Agreement,
the performance by the Servicer of the transactions contemplated hereby or the
fulfillment by the Servicer of the terms hereof, except those that have been
obtained or made and those that the Servicer is required to make in the future
pursuant to Article 3 or 4 and post-closing filings in connection therewith.
Section 6.02. Indemnities of Servicer.
(a) The Servicer shall be liable in accordance herewith only to
the extent of the obligations specifically undertaken by the Servicer and as
expressly provided under this Section 6.02.
(b) The Servicer shall indemnify the Note Issuer, the Noteholders
and the Certificateholders (each an "Indemnified Person" for purposes of Section
6.02 (b) and (d)) for, and defend and hold harmless each such Person from and
against, any and all liabilities, obligations, losses, damages, payments,
claims, costs or expenses of any kind whatsoever (collectively, "Losses") that
may be imposed on, incurred by or asserted against any such Person as a result
of (i) the Servicer's willful misconduct or negligence in the performance of its
duties or observance of its covenants under this Agreement (including the
Servicer's willful misconduct or negligence relating to the maintenance and
custody by the Servicer, as custodian, of the Transition Property Records) or
(ii) the Servicer's breach in any material respect of any of its representations
or warranties in this Agreement; provided, however, that the Servicer shall not
be liable for any Losses resulting from the willful misconduct or gross
negligence of any such Indemnified Person; and, provided, further, that the
Noteholders and the Certificateholders shall be entitled to enforce their rights
and remedies against the Servicer under this Section 6.02(b) solely through a
cause of action brought for their benefit by the Note Trustee or the Certificate
Trustee, as the case may be; and, provided, further, that the Servicer shall not
be liable for any Losses, regardless of when incurred, after the Notes and the
Certificates have been paid in full, except as provided in Section 6.02(c).
(c) The Servicer shall indemnify and hold harmless the Note Trustee,
the Delaware Trustee, the Certificate Trustee, the Certificate Issuer, The
Commonwealth of Massachusetts, the Executive Office for Administration and
Finance of The Commonwealth of Massachusetts and the Agencies and any of their
respective affiliates, officials, officers, directors, employees, consultants,
counsel and agents (each an "Indemnified Person" for purposes of Section 6.02(c)
and (d)) for, and defend and hold harmless each such Person from and against,
any and all Losses imposed on, incurred by or asserted against any of such
Indemnified Persons as a result of: (i) the Servicer's willful misconduct or
negligence in the performance of its duties or observance of its covenants under
this Agreement (including the Servicer's willful misconduct or negligence
relating to the maintenance and custody by the Servicer, as custodian, of the
Transition Property Records) or (ii) the Servicer's breach in any material
respect of any of its representations or warranties in this Agreement; provided,
however, that the Servicer shall not be liable for any Losses resulting from the
willful misconduct or gross negligence of such 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.
(d) The Servicer shall not be required to indemnify an Indemnified
Person for any amount paid or payable by such Indemnified Person pursuant to
Section 6.02(b) or (c) in the settlement of any action, proceeding or
investigation without the written consent of the Servicer, which consent shall
not be unreasonably withheld. Promptly after receipt by an Indemnified Person of
notice of its involvement in any action, proceeding or investigation, such
Indemnified Person shall, if a claim for indemnification in respect thereof is
to be made against the Servicer under Section 6.02 (b) or (c), notify the
Servicer in writing of such involvement. Failure by an Indemnified Person to so
notify the Servicer shall relieve the Servicer from the obligation to indemnify
and hold harmless such Indemnified Person under Section 6.02(b) or (c), as
applicable, 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 Section
6.02(b) or (c), the Servicer shall be entitled to assume the defense of any such
action, proceeding or investigation. Upon assumption by the Servicer of the
defense of any such action, proceeding or investigation, the Indemnified Person
shall have the right to participate in such action or proceeding and to retain
its own counsel. The Servicer shall be entitled to appoint counsel of the
Servicer's choice at the Servicer's expense to represent the Indemnified Person
in any action, proceeding or investigation for which a claim of indemnification
is made against the Servicer under Section 6.02(b) or (c) (in which case the
Servicer shall not thereafter be responsible for the fees and expenses of any
separate counsel retained by the Indemnified Person except as set forth below);
provided, however, that such counsel shall be reasonably satisfactory to the
Indemnified Person. Notwithstanding the Servicer's election to appoint counsel
to represent the Indemnified Person in an action, proceeding or investigation,
the Indemnified Person shall have the right to employ separate counsel
(including local counsel), and the Servicer shall bear the reasonable fees,
costs and expenses of such separate counsel if (i) the use of counsel chosen by
the Servicer to represent the Indemnified Person would present such counsel with
a conflict of interest, (ii) the actual or potential defendants in, or targets
of, any such action include both the Indemnified Person and the Servicer and the
Indemnified Person shall
have reasonably concluded that there may be legal defenses available to it that
are different from or additional to those available to the Servicer, (iii) the
Servicer shall not have employed counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person within a reasonable time
after notice of the institution of such action or (iv) the Servicer shall
authorize the Indemnified Person to employ separate counsel at the expense of
the Servicer. Notwithstanding the foregoing, the Servicer shall not be obligated
to pay for the fees, costs and expenses of more than one separate counsel for
the Indemnified Persons (in addition to local counsel). The Servicer will not,
without the prior written consent of the Indemnified Person, settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or proceeding in respect of which
indemnification may be sought under Section 6.02(b) or (c), as applicable
(whether or not the Indemnified Person is an actual or potential party to such
claim or action) unless such settlement, compromise or consent includes an
unconditional release of the Indemnified Person from all liability arising out
of such claim, action, suit or proceeding.
(e) Indemnification under Section 6.02(b) and 6.02(c) shall include
reasonable fees and out-of-pocket expenses of investigation and litigation
(including reasonable attorneys' fees and expenses), except as otherwise
provided in this Agreement.
(f) For purposes of Section 6.02(b) and 6.02(c), in the event of the
termination of the rights and obligations of Western Massachusetts Electric
Company (or any successor thereto pursuant to Section 6.04) as Servicer pursuant
to Section 7.01, or a resignation by such Servicer pursuant to this Agreement,
such Servicer shall be deemed to be the Servicer pending appointment of a
successor Servicer pursuant to Section 7.02.
(g) The indemnities contained in this Section 6.02 survive the
resignation or termination of the Note Trustee, the Certificate Trustee or the
Delaware Trustee or the termination of this Agreement.
Section 6.03. Limitation on Liability of Servicer and Others. Except as
otherwise provided under this Agreement, neither the Servicer nor any of the
directors, officers, employees or agents of the Servicer shall be liable to the
Note Issuer or any other Person for any action taken or for
refraining from the taking of any action pursuant to this Agreement or for
errors in judgment; provided, however, that this provision shall not protect the
Servicer or any director, officer, employee or agent of the Servicer against any
liability that would otherwise be imposed by reason of willful misconduct or
negligence in the performance of duties under this Agreement. The Servicer and
any director, officer, employee or agent of the Servicer may rely in good faith
on the advice of counsel reasonably acceptable to the Note Trustee or on any
document of any kind, prima facie properly executed and submitted by any Person,
respecting any matters arising under this Agreement.
Except as provided in this Agreement, the Servicer shall not be under any
obligation to appear in, prosecute or defend any legal action relating to the
Transition Property.
Section 6.04. Merger or Consolidation of, or Assumption of the Obligations
of, Servicer. Any Person (a) into which the Servicer may be merged or
consolidated, (b) which may result from any merger or consolidation to which the
Servicer shall be a party or (c) which may succeed to the properties and assets
of the Servicer substantially as a whole, which Person in any of the foregoing
cases executes an agreement of assumption to perform every obligation of the
Servicer hereunder, shall be the successor to the Servicer under this Agreement
without further act on the part of any of the parties to this Agreement;
provided, however, that (i) immediately after giving effect to such transaction,
no Servicer Default and no event which, after notice or lapse of time, or both,
would become a Servicer Default shall have occurred and be continuing, (ii) the
Servicer shall have delivered to the Note Issuer and the Note Trustee an
Officers' Certificate stating that such consolidation, merger or succession and
such agreement of assumption comply with this Section and that all conditions
precedent provided for in this Agreement relating to such transaction have been
complied with, (iii) the Servicer shall have delivered to the Note Issuer and
the Note Trustee an Opinion of Counsel stating that, in the opinion of such
counsel (A) such consolidation, merger or succession and such agreement of
assumption comply with this Section and that all conditions precedent provided
for in this Agreement relating to such transaction have been complied with and
(B) either (1) all statutory filings to be made by the Servicer, including
filings
with the DTE pursuant to the Statute and filings under the applicable UCC, have
been executed and filed that are necessary to preserve and protect fully the
interests of the Note Issuer and the Note Trustee in the Transition Property and
reciting the details of such filings or (2) no such action shall be necessary to
preserve and protect such interests and (iv) the Rating Agencies shall have
received prior written notice of such transaction. When any Person acquires the
properties and assets of the Servicer substantially as a whole and becomes the
successor to the Servicer in accordance with the terms of this Section 6.04,
then upon satisfaction of all of the other conditions of this Section 6.04, the
Servicer shall automatically and without further notice be released from all its
obligations hereunder.
Section 6.05. Western Massachusetts Electric Company Not to Resign as
Servicer. Subject to the provisions of Section 6.04, Western Massachusetts
Electric Company shall not resign from the obligations and duties hereby imposed
on it as Servicer under this Agreement except upon either (a) a determination
that the performance of its duties under this Agreement shall no longer be
permissible under applicable law or (b) satisfaction of the following: (i) the
Rating Agency Condition shall have been satisfied (except that with respect to
Moody's it shall be sufficient to provide ten days prior notice) and (ii) the
DTE shall have approved such resignation. Notice of any such determination
permitting the resignation of Western Massachusetts Electric Company shall be
communicated to the Note Issuer, the Note Trustee, the Certificate Trustee and
the Rating Agencies at the earliest practicable time (and, if such communication
is not in writing, shall be confirmed in writing at the earliest practicable
time) and any such determination that the performance of Western Massachusetts
Electric Company's duties under this Agreement shall no longer be permissible
under applicable law shall be evidenced by an Opinion of Counsel to such effect
delivered by Western Massachusetts Electric Company to the Note Issuer, the Note
Trustee and the Certificate Trustee concurrently with or promptly after such
notice. No such resignation shall become effective until a successor Servicer
shall have assumed the responsibilities and obligations of Western Massachusetts
Electric Company in accordance with Section 7.02.
Section 6.06. Servicing Compensation.
(a) In consideration for its services hereunder, until the Retirement
of the Notes, the Servicer shall receive an annual fee (the
"Servicing Fee") in an amount equal to (i) five one-hundredth of one percent
(0.05%) of the initial principal balance of the Notes for so long as the
Servicer is Western Massachusetts Electric Company or any successor Servicer
that bills the RTC Charge concurrently with other charges for services or (ii)
up to one and one-quarter percent (1.25%) of the initial principal balance of
the Notes for so long as the Servicer is a successor Servicer that bills the RTC
Charge separately to Customers (which amount shall be determined by a separate
agreement between the Note Issuer and the Servicer). The Servicing Fee shall be
payable in quarterly installments on each Payment Date. The Servicer also shall
be entitled to retain as additional compensation (i) any interest earnings on
RTC Charge Payments received by the Servicer and invested by the Servicer
pursuant to Section 6(c) of Annex I hereto prior to remittance to the Collection
Account and (ii) all late payment charges, if any, collected from Customers or
TPSs.
(b) The Servicing Fee set forth in Section 6.06(a) and expenses
provided for in Section 6.06(c) shall be paid to the Servicer by the Note
Trustee, on each Payment Date in accordance with the priorities set forth in
Section 8.02(d) of the Note Indenture, by wire transfer of immediately available
funds from the Collection Account to an account designated by the Servicer. Any
portion of the Servicing Fee not paid on such date shall be added to the
Servicing Fee payable on the subsequent Payment Date.
(c) The Note Issuer shall pay all expenses incurred by the Servicer in
connection with its activities hereunder (including any reasonable fees to and
disbursements by accountants, counsel, or any other Person, any taxes imposed on
the Servicer (other than taxes based on the Servicer's net income) and any
expenses incurred in connection with reports to Noteholders and
Certificateholders, subject to the priorities set forth in Section 8.02(d) of
the Note Indenture).
Section 6.07. Compliance with Applicable Law. The Servicer covenants
and agrees, in servicing the Transition Property, to comply in all material
respects with all laws applicable to, and binding upon, the Servicer and
relating to such Transition Property the noncompliance with which would have
a material adverse effect on the value of the Transition Property; provided,
however, that the foregoing is not intended to, and shall not, impose any
liability on the Servicer for noncompliance with any law that the Servicer is
contesting in good faith in accordance with its customary standards and
procedures.
Section 6.08. Access to Certain Records and Information Regarding
Transition Property. The Servicer shall provide to the Noteholders, the Note
Issuer, the Note Trustee and the Certificate Trustee access to the Transition
Property Records in such cases where the Noteholders, the Note Issuer, the Note
Trustee and the Certificate Trustee shall be required by applicable law to be
provided access to such records. Access shall be afforded without charge, but
only upon reasonable request and during normal business hours at the respective
offices of the Servicer. Nothing in this Section shall affect the obligation of
the Servicer to observe any applicable law (including any DTE Regulation)
prohibiting disclosure of information regarding the Customers, and the failure
of the Servicer to provide access to such information as a result of such
obligation shall not constitute a breach of this Section.
Section 6.09. Appointments.
(a) The Servicer may at any time appoint any Person to perform all or
any portion of its obligations as Servicer hereunder; provided, however, that
the Rating Agency Condition shall have been satisfied in connection therewith
(except that with respect to Moody's it shall be sufficient to provide ten days
prior notice); and, provided, further, that the Servicer shall remain obligated
and be liable under this Agreement for the servicing and administering of the
Transition Property in accordance with the provisions hereof without diminution
of such obligation and liability by virtue of the appointment of such Person and
to the same extent and under the same terms and conditions as if the Servicer
alone were servicing and administering the Transition Property; and, provided,
further, however, that nothing herein (including the Rating Agency Condition)
shall preclude the execution by the Servicer of a TPS Service Agreement with any
TPS pursuant to applicable DTE Regulations. The fees and expenses of any such
Person shall be as agreed between the Servicer and such Person from time to time
and none of the Note Issuer, the Note Trustee, the Noteholders or any other
Person shall have any responsibility therefor or right or claim thereto. Any
such appointment shall not constitute a Servicer resignation under Section 6.05.
(b) The Servicer has no employees. Therefore, in carrying out the
foregoing duties or any of its other obligations under this Agreement, the
Servicer may enter into transactions with or otherwise deal with any of its
Affiliates to obtain the services of employees of such Affiliates as is its
current practice; provided, however, that the terms of any such transactions or
dealings shall be no less favorable to the Note Issuer than would be available
from unaffiliated parties or that would be available if the Servicer were to
hire its own employees to perform such services.
Section 6.10. No Servicer Advances. The Servicer shall not make any
advances of interest on or principal of the Notes or the Certificates.
Section 6.11. Maintenance of Operations. The Servicer agrees to continue to
operate its distribution system to provide service to its customers so long as
it is acting as the Servicer under this Agreement.
ARTICLE 7
DEFAULT
Section 7.01. Servicer Default. If any one of the following events (each a
"Servicer Default") shall occur and be continuing:
(a) any failure by the Servicer to remit to the Collection Account
on behalf of the Note Issuer any required Remittance that shall continue
unremedied for a period of five (5) Business Days after written notice of
such failure is received by the Servicer from the Note Issuer or the Note
Trustee; or
(b) any failure on the part of the Servicer duly to observe or to
perform in any material respect any other covenants or agreements of the
Servicer set forth in this Agreement, which failure shall (a) materially and
adversely affect the rights of the Noteholders or Certificateholders and (ii)
continue unremedied for a period of 60 days after the date on which written
notice of such failure, requiring the same to be remedied, shall have been
given (A) to the Servicer by the Note Issuer or (B) to the Servicer by the
Note Trustee or by the Holders of Notes evidencing not less than 25 percent
of the Outstanding Amount of the Notes; or
(c) any representation or warranty made by the Servicer in this
Agreement shall prove to have been incorrect in any material respect when
made, which has a material adverse effect on the Noteholders or
Certificateholders and which material adverse effect continues unremedied for
a period of 60 days after written notice of such failure is received by the
Servicer from the Note Issuer or the Note Trustee; or
(d) an Insolvency Event occurs with respect to the Servicer; then,
and in each and every case, so long as the Servicer Default shall not have been
remedied, either the Note Trustee, or the Holders of Notes evidencing not less
than 25 percent of the Outstanding Amount of the Notes, by notice then given in
writing to the Servicer (and to the Note Trustee if given by the Noteholders) (a
"Termination Notice") may terminate all the rights and obligations (other than
the obligations set forth in Section 6.02) of the Servicer under this Agreement.
In addition, upon a Servicer Default described in Section 7.01(a), each of the
following shall be entitled to apply to the DTE for sequestration and payment of
revenues arising with respect to the Transition Property: (1) the Note Trustee
or the Noteholders; (2) the Certificate Trustee or the Certificateholders; (3)
the Delaware Trustee; (4) the Note Issuer or its assignees; or (5) pledgees or
transferees of the Transition Property, including transferees under Section
1H(f) of Chapter 164 of the Massachusetts General Laws and beneficiaries of the
statutory lien pursuant to Section 1H(e) of Chapter 164 of the Massachusetts
General Laws. On or after the receipt by the Servicer of a Termination Notice,
and subject to the approval of the DTE, all authority and power of the Servicer
under this Agreement, whether with respect to the Notes, the Transition
Property, the RTC Charge or otherwise, shall, without further action, pass to
and be vested in such successor Servicer as may be appointed under Section 7.02;
and, without limitation, the Note Trustee is hereby authorized and empowered to
execute and deliver, on behalf of the predecessor Servicer, as attorney-in-fact
or otherwise, any and all documents and other instruments, and to do or
accomplish all other acts or things necessary or appropriate to effect the
purposes of such Termination Notice, whether to complete the transfer of the
Transition Property Records and related documents, or otherwise. The predecessor
Servicer shall cooperate with the successor Servicer, the Note Issuer and the
Note Trustee in effecting the termination of the responsibilities and rights of
the predecessor Servicer under this Agreement, including the transfer to the
successor Servicer for administration by it of all cash amounts that shall at
the time be held by the predecessor Servicer for remittance, or shall thereafter
be received by it with respect to the Transition Property or the RTC Charge. In
case a successor Servicer is appointed as a result of a Servicer Default, all
reasonable costs and expenses (including reasonable attorneys' fees and
expenses) incurred in connection with transferring
the Transition Property Records to the successor Servicer and amending this
Agreement to reflect such succession as Servicer pursuant to this Section shall
be paid by the predecessor Servicer upon presentation of reasonable
documentation of such costs and expenses. All other reasonable costs and
expenses incurred in transferring servicing responsibilities to a successor
servicer shall constitute Operating Expenses of the Note Issuer. Section 7.02.
Appointment of Successor.
(a) Upon the Servicer's receipt of a Termination Notice pursuant
to Section 7.01 or the Servicer's resignation or removal in accordance with the
terms of this Agreement, the predecessor Servicer shall continue to perform its
functions as Servicer under this Agreement, and shall be entitled to receive the
requisite portion of the Servicing Fee and reimbursement of expenses as provided
herein, until a successor Servicer shall have assumed in writing the obligations
of the Servicer hereunder as described below. In the event of the Servicer's
termination hereunder, the Note Issuer shall appoint, subject to the approval of
the DTE, a successor Servicer with the Note Trustee's prior written consent
thereto (which consent shall not be unreasonably withheld), and the successor
Servicer shall accept its appointment by a written assumption in form reasonably
acceptable to the Note Issuer and the Note Trustee. If within 30 days after the
delivery of the Termination Notice, the Note Issuer shall not have obtained such
a new Servicer, the Note Trustee may appoint (subject to the approval of the
DTE) or petition the DTE or a court of competent jurisdiction to appoint a
successor Servicer under this Agreement. A Person shall qualify as a successor
Servicer only if (i) such Person is permitted under DTE Regulations to perform
the duties of the Servicer, (ii) the Rating Agency Condition shall have been
satisfied and (iii) such Person assumes in writing the obligations of the
Servicer hereunder or enters into a servicing agreement with the Note Issuer
having substantially the same provisions as this Agreement.
(b) Upon appointment, the successor Servicer shall be the successor
in all respects to the predecessor Servicer and shall be subject to all the
responsibilities, duties and liabilities arising thereafter relating thereto
placed on the predecessor Servicer and shall be entitled to the Servicing Fee
and all the rights granted to the predecessor Servicer by the terms and
provisions of this Agreement.
Section 7.03. Waiver of Past Defaults. The Holders of Notes
evidencing not less than a majority of the Outstanding Amount of the Notes may,
on behalf of all Noteholders, waive in writing any default by the Servicer in
the performance of its obligations hereunder and its consequences, except a
default in making any required Remittances to the Collection Account in
accordance with this Agreement. Upon any such waiver of a past default, such
default shall cease to exist, and any Servicer Default arising therefrom shall
be deemed to have been remedied for every purpose of this Agreement. No such
waiver shall extend to any subsequent or other default or impair any right
consequent thereto.
Section 7.04. Notice of Servicer Default. The Servicer shall deliver to the
Note Issuer, the Note Trustee, the Certificate Trustee, the Certificate Issuer,
the Agencies and the Rating Agencies, promptly after any of its Responsible
Officers having obtained actual knowledge thereof, but in no event later than
five Business Days thereafter, written notice in an Officers' Certificate of any
event which with the giving of notice or lapse of time, or both, would become a
Servicer Default under Section 7.01(a) or (b).
ARTICLE 8
MISCELLANEOUS PROVISIONS
Section 8.01. Amendment.
(a) This Agreement may be amended in writing by the Servicer and
the Note Issuer with ten Business Days' prior written notice given to the Rating
Agencies and the prior written consent of the Note Trustee (which consent shall
not be unreasonably withheld), but without the consent of any of the Noteholders
or any of the Certificateholders (notwithstanding any provision of any other
document that would otherwise require such consent as a precondition of Note
Trustee consent), to cure any ambiguity, to correct or supplement any provisions
in this Agreement or for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions in this Agreement or of
modifying in any manner the rights of the Noteholders; provided, however, that
such action shall not, as evidenced by an Officer's Certificate delivered to the
Note Issuer and the Note
Trustee, adversely affect in any material respect the interests of any
Noteholder or any Certificateholder.
(b) This Agreement may also be amended in writing from time to time by
the Servicer and the Note Issuer with ten Business Days' prior written notice
given to the Rating Agencies and the prior written consent of the Note Trustee
(which consent shall not be unreasonably withheld) and the prior written consent
of the Holders of Notes evidencing not less than a majority of the Outstanding
Amount of the Notes, for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement or of
modifying in any manner the rights of the Noteholders; provided, however, that
any amendment of the provisions of Sections 4.01 or 4.03 shall satisfy the
Rating Agency Condition.
(c) If the written consent of Noteholders is required in connection
with an amendment hereof, approval by Noteholders of the substance of any
proposed amendment or consent shall constitute sufficient consent of the
Noteholders pursuant to this Section, and it shall not be necessary that
Noteholders approve of the particular form of any amendment or consent.
(d) Promptly after the execution thereof, the Note Issuer shall
provide each of the Rating Agencies with a copy of any amendment to this
Agreement.
(e) Prior to its consent to any amendment to this Agreement, the Note
Trustee shall be entitled to receive and conclusively rely upon an Opinion of
Counsel stating that such amendment is authorized or permitted by this
Agreement. The Note Trustee may, but shall not be obligated to, enter into any
such amendment which affects the Note Trustee's own rights, duties or immunities
under this Agreement or otherwise.
Section 8.02. Maintenance of Accounts and Records.
(a) The Servicer shall maintain accounts and records as to the
Transition Property accurately and in accordance with its standard accounting
procedures.
(b) The Servicer shall permit the Note Issuer and the Note Trustee and
its agents at any time during normal business hours, upon reasonable notice to
the Servicer and to the extent it does not unreasonably interfere with the
Servicer's normal operations, to inspect, audit and make copies of and abstracts
from the Servicer's records regarding the Transition Property and the RTC
Charge. Nothing in this Section 8.02(b) shall affect the obligation of the
Servicer to observe any applicable law (including any DTE
Regulation) prohibiting disclosure of information regarding the Customers, and
the failure of the Servicer to provide access to such information as a result of
such obligation shall not constitute a breach of this Section 8.02(b).
Section 8.03. Notices. Unless otherwise specifically provided herein, all
notices, directions, consents and waivers required under the terms and
provisions of this Agreement shall be in English and in writing, and any such
notice, direction, consent or waiver may be given by United States mail, courier
service, facsimile transmission or electronic mail (confirmed by telephone,
United States mail or courier service in the case of notice by facsimile
transmission or electronic mail) or any other customary means of communication,
and any such notice, direction, consent or waiver shall be effective when
delivered, or if mailed, three days after deposit in the United States mail with
proper postage for ordinary mail prepaid:
(a) if to the Servicer, to
Western Massachusetts Electric Company
174 Brush Hill Avenue
West Springfield, MA 01089
Facsimile: (860) 665-5457
Telephone: (860) 665-3258
Email: shoopra@nu.com
with a copy to:
Western Massachusetts Electric Company
c/o Northeast Utilities Service Company
if by U.S. Mail:
P.O. Box 270
Hartford, CT 06141-0270
if by courier:
107 Selden Street
Berlin, CT 06037
Attention: Assistant Treasurer-Finance
Facsimile: (860) 665-5457
Telephone: (860) 665-3258
Email: shoopra@nu.com
(b) if to the Note Issuer, to
WMECO Funding LLC
c/o Western Massachusetts Electric Company
174 Brush Hill Avenue
West Springfield, MA 01089
Facsimile: (860) 665-5457
Telephone: (860) 665-3258
Email: shoopra@nu.com
with a copy to:
Western Massachusetts Electric Company
c/o Northeast Utilities Service Company
107 Selden Street
Berlin, CT 06037
Attention: Assistant Treasurer-Finance
Facsimile: 860-665-5457
Telephone: 860-665-3258
Email: shoopra@nu.com
(c) if to the Note Trustee or the Certificate Trustee, to
The Bank of New York, as trustee
101 Barclay Street
Floor 12 East
New York, NY 10286
Attention: ABS Unit
Facsimile: (212) 815-5563
Telephone: (212) 815-5368
(d) if to Moody's, to
Moody's Investors Service, Inc.
99 Church Street
New York, NY 10007
Attention: ABS Monitoring Department
Facsimile: (212) 553-0573
Telephone: (212) 553-3686
(e) if to S&P, to
Standard & Poor's
55 Water Street, 41st Floor
New York, NY 10041
Attention: Asset Backed Surveillance Department
Facsimile: (212) 438-2664
Telephone: (212) 438-2000
(f) if to Fitch, to
Fitch, Inc.
One State Street Plaza
New York, NY 10004
Attention: ABS Surveillance
Facsimile: (212) 514-9879
Telephone: (212) 908-0500
Email: surv@fitchratings.com
(g) if to the Agencies, to
Massachusetts Development Finance Agency
75 Federal Street
Boston, MA 02110
Attention: General Counsel
Facsimile: (617) 727-8741
Telephone: (617) 451-2477
and
Massachusetts Health and Educational Facilities Authority
99 Summer Street, 10th Floor
Boston, MA 02110
Attention: General Counsel
Facsimile: (617) 737-8366
Telephone: (617) 737-8377
(h) if to the Certificate Issuer, to:
The Bank of New York (Delaware), as Delaware Trustee for
Massachusetts RRB Special Purpose Trust WMECO-1
700 White Clay Center
Route 273
Newark, Delaware 19711
Attention: Compliance
Facsimile: (302) 283-8298
Telephone: (302) 451-2500
with a copy to:
The Bank of New York
101 Barclay Street
Floor 12 East
New York, NY 10286
Attention: ABS Unit
Facsimile: (212) 815-5563
Telephone: (212) 815-5368
(with copies to the Agencies at the addresses listed herein)
(i) as to each of the foregoing, at such other address as shall be
designated by written notice to the other parties.
Section 8.04. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Section 6.04 and as provided in the
provisions of this Agreement concerning the resignation of the Servicer, this
Agreement may not be assigned by the Servicer.
Section 8.05. Limitations on Rights of Third Parties. The provisions
of this Agreement are solely for the benefit of the Servicer, the Note Issuer,
the Noteholders, the Certificateholders, the Note Trustee, the Certificate
Trustee, the Delaware Trustee, the Agencies, the Certificate Issuer and the
other Persons expressly referred to herein and such Persons shall have the right
to enforce the relevant provisions of this Agreement, except that the
Noteholders and the Certificateholders shall be entitled to enforce their rights
against the Servicer under this Agreement solely through a cause of action
brought for their benefit by the Note Trustee or the Certificate Trustee, as the
case may be. Nothing in this Agreement, whether express or implied, shall be
construed to give to any other Person any legal or equitable right, remedy or
claim in the Transition Property or under or in respect of this Agreement or any
covenants, conditions or provisions
contained herein.
Section 8.06. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 8.07. Separate Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
Section 8.08. Headings. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
Section 8.09. Governing Law. This Agreement shall be construed in
accordance with the substantive laws of The Commonwealth of Massachusetts,
without giving effect to its conflict of law or other principles that would
cause the application of the laws of another jurisdiction, and the obligations,
rights and remedies of the parties hereunder shall be determined in accordance
with such laws.
Section 8.10. Assignment to Note Trustee. The Servicer hereby acknowledges
and consents to the collateral assignment or pledge of, or grant of a security
interest in, any or all of the Note Issuer's rights and obligations hereunder to
the Note Trustee for the benefit of the holders of the Notes and to the further
assignment of the Note Trustee's rights and obligations under the Note Indenture
to the Certificate Trustee for the benefit of the holders of the Certificates.
Section 8.11. Nonpetition Covenants. Notwithstanding any prior termination
of this Agreement or the Note Indenture, but subject to the DTE's right to order
the sequestration and payment of revenues arising with respect to the Transition
Property notwithstanding any bankruptcy, reorganization or other insolvency
proceedings with respect to the debtor, pledgor or transferor of the Transition
Property pursuant to Sections 1H(d)(5) and 1H(e) of Chapter 164 of the
Massachusetts General Laws, the Servicer shall not, prior to the date which is
one year and one day after the termination of the Note Indenture with respect to
the Note Issuer, petition or otherwise invoke
or cause the Note Issuer or the Trust to invoke the process of any court or
governmental authority for the purpose of commencing or sustaining a case
against the Note Issuer or the Trust under any federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Note Issuer or
the Trust or any substantial part of the property of the Note Issuer or the
Trust, or ordering the winding up or liquidation of the affairs of the Note
Issuer or the Trust.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this Transition Property
Servicing Agreement to be duly executed under seal by their respective officers
as of the day and year first above written.
WMECO FUNDING LLC,
Note Issuer
By: /s/ Randy A. Shoop
------------------------------------------
Name: Randy A. Shoop
Title: President
WESTERN MASSACHUSETTS ELECTRIC COMPANY,
Servicer
By: /s/ Randy A. Shoop
------------------------------------------
Name: Randy A. Shoop
Title: Assistant Treasurer-Finance
EXHIBIT A
CERTIFICATE OF COMPLIANCE
The undersigned hereby certifies that he/she is the duly elected and acting
[________] of Western Massachusetts Electric Company, as servicer (the
"Servicer") under the Transition Property Servicing Agreement, dated as of May
17, 2001 (the "Servicing Agreement"), between the Servicer and WMECO Funding LLC
(the "Note Issuer"), and further certifies on behalf of the Servicer that:
1. A review of the activities of the Servicer and of its performance under
the Servicing Agreement during the [_____________] months ended December 31,
20[_] has been made under the supervision of the undersigned pursuant to Section
3.03 of the Servicing Agreement; and
2. To the undersigned's knowledge, based on such review, the Servicer has
fulfilled all of its material obligations in all material respects under the
Servicing Agreement throughout the [__________________] months ended December
31, 20[_], except as listed on Annex A hereto.
Executed as of this _______ day of ________________, 20__.
WESTERN MASSACHUSETTS ELECTRIC COMPANY,
Servicer
By:
------------------------------------------
Name:
Title:
ANNEX A TO EXHIBIT A
LIST OF SERVICER DEFAULTS
Nature of Default Status
EXHIBIT B
FORM OF ROUTINE TRUE-UP ADVICE LETTER
[Date]
ADVICE
------------------
DEPARTMENT OF TELECOMMUNICATIONS AND ENERGY (THE "DEPARTMENT") OF THE
COMMONWEALTH OF MASSACHUSETTS
SUBJECT: Periodic RTC Charge True-Up Mechanism Advice Filing
Pursuant to D.T.E. Docket No. 00-40 (the "Financing Order"), Western
Massachusetts Electric Company ("WMECO"), as servicer of the RRBs or any
successor Servicer and on behalf of the trustee for the SPE Debt Securities as
assignee of the special purpose entity (the "SPE"), shall apply for adjustment
to the RTC Charge no later than 15 days prior to each anniversary of the date of
the Financing Order and at such additional intervals as may be provided for in
the Financing Order. Any capitalized terms not defined herein shall have the
meanings ascribed thereto in the Financing Order.
PURPOSE
This filing establishes the revised RTC Charge to be assessed and collected from
all Seller customers and ratepayers taking the delivery, transmission,
distribution, back-up, maintenance, emergency and any other delivery or
energy service provided by Seller to such customer within the territory in which
Seller serves customers, regardless of that customer's source of electric power,
whether or not energy is purchased from WMECO or any TPS, and whether or not
such distribution system is being operated by WMECO or a successor distribution
company ("Retail Customers"). The RTC Charge is a usage-based component of the
transition charge on each Retail Customer's monthly bill and may include in the
future a component of any exit fee collected pursuant to M.G.L. c. 164, Section
1G(g), until the Total RRB Payment Requirements are discharged in full. In the
Financing Order, the Department authorized WMECO to file Routine True-Up Letters
prior to each anniversary of the date of the Financing Order and at such
additional intervals, if necessary, as provided for in the Financing Order.
WMECO, or a successor Servicer, is authorized to file periodic RTC Charge
adjustments to the extent necessary to ensure the timely recovery of revenues
sufficient to provide for the payment of an amount equal to the sum of the
Periodic RRB Payment Requirements (as defined in the Financing Order) for the
upcoming year, which may include indemnity obligations of the SPE in the RRB
transaction documents for SPE officers and directors, trustee fees, liabilities
of the special purpose trust and liabilities to the underwriters related to the
underwriting of the RRBs. Routine True-Up Letter filings are those in which
WMECO uses the methodology approved by the Department in the Financing Order to
adjust upward or downward the existing RTC Charge.
Using the methodology approved by the Department in the Financing Order, this
filing modifies the variables used in the RTC Charge calculation and provides
the resulting modified RTC Charge. Table I shows the revised assumptions for
each of the variables used in calculating the RTC Charge for Retail Customers.
The assumptions underlying the current RTC Charges were filed in an [Issuance]
Advice Letter, dated __________ __, 200_.
Table I below shows the current assumptions for each of the variables used in
the RTC Charge calculation.
TABLE I
INPUT VALUES FOR RTC CHARGE
Period from ____________ to _____________
Forecasted retail kWh sales for the period:
Forecasted percent of Retail Customers' billed amounts charged-off:
Percent of Retail Customers' billed amounts charged-off:
Weighted average days sales outstanding:
(calculated as follows)
Percent of billed amounts collected in current month:
Percent of billed amounts collected in second month after billing:
Percent of billed amounts collected in third month after billing:
Percent of billed amounts collected in fourth month after billing:
Percent of billed amounts collected in fifth month after billing:
Forecasted ongoing interest and transaction expenses (including any already
accrued but unpaid for the period):
Current Overcollateralization Subaccount balance:
Scheduled Overcollateralization Subaccount
balance at the end of the period:
Current Capital Subaccount balance:
Initial Capital Subaccount balance:
Current RRB outstanding balance:
Scheduled RRB outstanding balance at the end of the period:
Current Reserve Subaccount balance:
The adjusted RTC Charge calculated for Retail _________cents/kWh
Customers is as follows:
EFFECTIVE DATE
In accordance with the Financing Order, Routine True-Up Letters for annual RTC
Charge adjustments shall be filed prior to the anniversary of the Financing
Order, or more frequently if necessary, with the resulting changes to be
effective on the first day of the succeeding calendar month, or such date as may
be specified in the Routine True-Up Letter, as long as such effective date is at
least 15 days after the filing of such Routine True-Up Letter. No approval by
the Department is required. Therefore, these RTC Charges shall be effective as
of _______________.
NOTICE
Copies of this filing are being furnished to the parties on the attached service
list. Notice to the public is hereby given by filing and keeping this filing
open for public inspection at WMECO's corporate headquarters.
EXHIBIT C
FORM OF MONTHLY SERVICER CERTIFICATE
Pursuant to Section 4.01(d)(2) of the Transition Property Servicing
Agreement, dated as of May 17, 2001 (the "Agreement"), between Western
Massachusetts Electric Company, as servicer (the "Servicer") and WMECO Funding
LLC, the Servicer does hereby certify as follows:
Capitalized terms used herein have their respective meanings as set forth
in the Agreement.
For the Monthly Period:_____________
1. Billings:
a) Monthly kWh Consumption:
b) Applicable RTC Charge:
c) Total RTC Charge Amount Billed this Month:
d) Cumulative RTC Charge Amount Billed this
Remittance Period:
2. Remittances:
a) Total Amount Remitted this Month:
b) Cumulative Amount Remitted this Remittance Period:
c) "RTC %" (calculated in accordance with Annex II to the Agreement) for
this Monthly Period:
3. Draws on Subaccounts:
a) Reserve Subaccount Draw Amount this Month:
b) Cumulative Reserve Subaccount Draw Amount this Remittance Period
(net of funding):
c) Overcollateralization Subaccount Draw Amount this Month:
d) Cumulative Overcollateralization Subaccount Draw Amount this Remittance
Period (net of funding):
e) Capital Subaccount Draw Amount this Month:
f) Cumulative Capital Subaccount Draw Amount this Remittance Period
(net of funding):
4. Balances in Collection Account and Subaccounts:
a) Balance in Collection Account
b) Balance in Overcollateralization Subaccount
c) Required Overcollateralization Level
d) Balance in Reserve Subaccount
e) Balance in Capital Subaccount
f) Required Capital Level
Executed as of this _____________ day of ___________.
WESTERN MASSACHUSETTS ELECTRIC COMPANY,
Servicer
By:
------------------------------------------
Name:
Title:
EXHIBIT D
FORM OF QUARTERLY SERVICER CERTIFICATE
Pursuant to Section 4.01(d)(3) of the Transition Property Servicing
Agreement, dated as of May __, 2001 (the "Agreement"), between Western
Massachusetts Electric Company, as Servicer and WMECO Funding LLC, the Servicer
does hereby certify, for the Current Payment Date, as follows:
Capitalized terms used herein have their respective meanings as set forth
in the Agreement. References herein to certain sections and subsections are
references to the respective sections of the Agreement.
1. RTC Charge Collections and Aggregate Amounts Available for
the Current Payment Date:
i. Amount Remitted [Month] [Year]
ii. Amount Remitted [Month] [Year]
iii Amount Remitted [Month] [Year]
iv. Amount Remitted [Month] [Year]
v. Amount Remitted [Month] [Year]
vi. Amount Remitted [Month] [Year]
vii Amount Remitted [Month] [Year]
viii Amount Remitted [Month] [Year]
ix. Total Amount Remitted for this Period (sum of i. through viii. above):
x. Net Earnings on Collection Account:
xi. Expenses Paid to Date:
xii. General Subaccount Balance (sum of ix. and x. above minus xi.):
xiii.Reserve Subaccount Balance
xiv. Overcollateralization Subaccount Balance
xv. Capital Subaccount Balance
xvi. Collection Account Balance (sum of xii. through xv. above):
2. Outstanding Principal Balance as of Prior Payment
Date by Tranche:
i. Class A-1 Principal Balance Outstanding Note/Certificate:
ii. Total Note/Certificate Principal Balance:
3. Required Funding/Payments as of Current Payment Date
a) Projected Principal Balances and Payments
Projected Quarterly
Principal Principal
Balance Due
i. Class A-1
Note/Certificate
ii. Total Projected
Principal Amount:
b) Required Interest Payments
Note/Cert Days in Interest
Interest Applicable Due
Rate Period
i. Class A-1
Note/Certificate
ii. Total Required
Interest Amount:
c) Projected Subaccount Payments and Levels
Subaccount Projected Funding
Level Required
i. Capital
Subaccount:
ii. Overcollateraliza-
tion Subaccount:
ii Total Subaccount
i. Payments and
Levels:
4. Allocation of Remittances as of Current Payment Date Pursuant
to Section 8.02(d) of Note Indenture:
a) Quarterly Expenses
Net Expense Amount (Payable on Current Payment Date)
i. Note, Delaware and Certificate Trustee
Fees and Expenses:
ii. Quarterly Servicing Fee:
iii.Quarterly Administration Fee:
iv. Operating Expenses (subject to $100,000 cap):
v. Total Expenses:
b) Quarterly Interest
Per $1000 of Aggregate
Original Principal
Amount
i. Class A-1
Note/Certificate
ii. Total Quarterly
Interest:
c) Quarterly Principal
Per $1000 of Aggregate
Original Principal
Amount
i. Class A-1
Note/Certificate
ii. Total Quarterly
Principal:
d) Other Payments
i. Operating Expenses (in
excess of $100,000):
ii. Funding of Capital
Subaccount (to required
amount):
iii.Funding of
Overcollateralization
Subaccount (to required level):
iv. Deposits to Reserve Subaccount:
v. Interest earnings on
Capital Account Released
to Note Issuer:
e) Aggregate Payments Pursuant
to Section 8.02(d)(i) of Note Indenture
i. To Note Trustee,
Certificate Trustee and
Delaware Trustee:
ii To Agencies and
Certificate Issuer:
5. Outstanding Principal Balance and Collection Account Balance as of Current
Payment Date (after giving effect to payments to be made on such
distribution date):
a) Principal Balance Outstanding:
i. Class A-1 Principal Balance Outstanding
Note/Certificate:
ii. Total Note/Certificate Principal
Balance:
b) Collection Account Balances Outstanding:
i. Capital Subaccount:
ii. Overcollateralization Subaccount:
iii.Reserve Subaccount:
iv. Total Subaccount Amount:
6. Subaccount Draws as of Current Payment Date (if applicable, pursuant to
Section 8.02(e) of Note Indenture):
i. Capital Subaccount:
ii. Overcollateralization Subaccount:
iii.Reserve Subaccount:
iv. Total Subaccount Draws:
7. Shortfalls in Interest and Principal Payments as of Current Payment Date
(if applicable):
a) Quarterly Interest Shortfall
i. Class A-1 Note/Certificate
ii. Total Quarterly Interest Shortfall:
b) Quarterly Principal Shortfall
i. Class A-1 Note/Certificate
ii. Total Quarterly Principal Shortfall:
8. Shortfalls in Required Subaccount Levels as of Current Distribution Date:
i. Capital Subaccount
ii. Overcollateralization Subaccount:
iii.Total Subaccount Shortfalls:
IN WITNESS WHEREOF, the undersigned has duly executed and delivered this
Quarterly Servicer Certificate under seal this _______ day of _____________,
20__.
WESTERN MASSACHUSETTS ELECTRIC COMPANY,
Servicer
By:
------------------------------------------
Name:
Title:
SCHEDULE 4.01(a)
Expected Amortization Schedule
Payment Outstanding Payment Outstanding
Date Principal Date Principal
Amount Amount
Closing 155,000,000 9/1/2007 89,888,002
12/1/2001 152,317,336 12/1/2007 86,731,394
3/1/2002 149,568,944 3/1/2008 83,261,952
6/1/2002 147,184,844 6/1/2008 79,875,484
9/1/2002 144,980,067 9/1/2008 76,552,625
12/1/2002 142,742,170 12/1/2008 73,176,352
3/1/2003 140,219,779 3/1/2009 69,496,635
6/1/2003 137,769,289 6/1/2009 65,893,553
9/1/2003 135,383,097 9/1/2009 62,343,137
12/1/2003 132,959,538 12/1/2009 58,735,305
3/1/2004 130,247,945 3/1/2010 54,814,526
6/1/2004 127,628,222 6/1/2010 50,970,210
9/1/2004 125,078,425 9/1/2010 47,178,396
12/1/2004 122,488,629 12/1/2010 43,325,013
3/1/2005 119,611,970 3/1/2011 39,154,564
6/1/2005 116,822,982 6/1/2011 35,056,795
9/1/2005 114,098,464 9/1/2011 31,007,335
12/1/2005 111,330,951 12/1/2011 26,891,856
3/1/2006 108,267,623 3/1/2012 22,451,624
6/1/2006 105,293,016 6/1/2012 18,078,675
9/1/2006 102,383,760 9/1/2012 13,750,638
12/1/2006 99,428,304 12/1/2012 9,351,812
3/1/2007 96,167,724 3/1/2013 4,636,241
6/1/2007 92,994,977 6/1/2013 0
ANNEX I
SERVICING PROCEDURES
The Servicer agrees to comply with the following servicing procedures:
SECTION 1. DEFINITIONS
(a) Capitalized terms used herein and not otherwise defined herein
shall have the meanings set forth in the Agreement.
(b) Whenever used in this Annex I, the following words and phrases
shall have the following meanings:
"Billed RTC Charges" means the dollar amounts billed to Customers or the
Applicable TPS in respect of the RTC Charge, whether billed to Customers or
the Applicable TPS by the Servicer or to Customers by a TPS pursuant to a TPS
Service Agreement.
"Servicer Policies and Practices" means, with respect to the Servicer's
duties under this Annex I, the policies and practices of the Servicer applicable
to such duties that the Servicer follows with respect to comparable assets that
it services for itself or others, as in effect from time to time and in
accordance with DTE Regulations. The Servicer shall provide ten days' prior
written notice to the Rating Agencies of any amendment to the Servicer Policies
and Practices that would adversely affect in any material respect the
Noteholders or Certificateholders.
SECTION 2. DATA ACQUISITION
(a) Installation and Maintenance of Meters. Except to the extent that
a TPS is responsible for such services pursuant to a TPS Service Agreement,
the Servicer shall cause to be installed, replaced and maintained meters in
accordance with the Servicer Policies and Practices.
(b) Meter Reading. In accordance with the Servicer Policies and
Practices, the Servicer shall obtain usage measurements for each Customer;
provided, however, that the Servicer may determine any Customer's usage on
the basis of estimates in accordance with applicable DTE Regulations; and,
provided, further, that the Servicer may obtain usage measurements from the
Applicable TPS for Customers receiving meter reading services from such
TPS if the applicable TPS Service Agreement so provides.
(c) Cost of Metering. The Note Issuer shall not be obligated to pay
any costs associated with the metering duties set forth in this Section 2,
including the costs of installing, replacing and maintaining meters, nor
shall the Note Issuer be entitled to any credit against the Servicing Fee for
any cost savings realized by the Servicer or any TPS as a result of new
metering and/or billing technologies.
SECTION 3. USAGE AND BILL CALCULATION
The Servicer shall obtain a calculation of each Customer's usage (which
may be based on data obtained from such Customer's meter read or on usage
estimates determined in accordance with applicable DTE Regulations) in
accordance with the Servicer Policies and Practices and shall determine
therefrom Billed RTC Charges; provided, however, that in the case of
Customers served by a TPS pursuant to a TPS Service Agreement, the Servicer
may obtain usage measurements from the Applicable TPS for Customers receiving
meter reading services from such TPS if the applicable TPS Service Agreement
so provides and shall determine therefrom Billed RTC Charges.
SECTION 4. BILLING
(a) The Servicer shall implement the RTC Charge as of the Closing Date
and shall thereafter bill each Customer or the Applicable TPS for each
Customer's Billed RTC Charges in accordance with the provisions of this
Section 4.
(b) Frequency of Bills; Billing Practices. In accordance with the
Servicer Policies and Practices, the Servicer shall generate and issue a Bill
to each Customer, or, in the case of a Customer who is being billed by a TPS,
to the Applicable TPS, with respect to such Customer's Billed RTC Charges.
In the event that the Servicer makes any material modification to the
Servicer Policies and Practices, it shall notify the Note Issuer, the Note
Trustee, the Certificate Trustee and the Rating Agencies as soon as
practicable, and in no event later than 60 Servicer Business Days after such
modification goes into effect; provided, however, that the Servicer may not
make any modification that will materially adversely affect the
Certificateholders.
(c) Format.
(i) Each Bill to a Customer shall contain a Transition Charge that
shall include the RTC Charge owed by such Customer for the applicable
billing period.
(ii) Each Bill in which the Transition Charge is listed as a line
item shall contain a statement (as a footnote) to the effect that all or a
portion of the Transition Charge is owned by the Note Issuer and not the
Seller.
(iii)The Servicer shall conform to such requirements in respect of the
format, structure and text of Bills delivered to Customers and TPSs as
applicable DTE Regulations shall from time to time prescribe. To the extent that
Bill format, structure and text are not prescribed by applicable law or by
applicable DTE Regulations, the Servicer shall, subject to clauses (i) and (ii)
of this subsection (c), determine the format, structure and text of all Bills in
accordance with its reasonable business judgment, the Servicer Policies and
Practices and historical practice.
(d) Delivery. Except as provided in the next sentence, the Servicer
shall deliver all Bills to Customers (i) by United States mail in such class
or classes as are consistent with the Servicer Policies and Practices or (ii)
by any other means, whether electronic or otherwise, that the Servicer may
from time to time use in accordance with the Servicer Policies and Practices.
In the case of Customers that have elected to be billed by a TPS, the
Servicer shall deliver all Bills to the Applicable TPSs by such means as are
mutually agreed upon by the Servicer and the Applicable TPS in the TPS
Service Agreement and which are consistent with DTE Regulations. The
Servicer or a TPS, as applicable, shall pay from its own funds all costs of
issuance and delivery of all Bills that it renders, including printing and
postage costs as the same may increase or decrease from time to time.
SECTION 5. CUSTOMER SERVICE FUNCTIONS
The Servicer or a TPS to the extent provided in the applicable TPS Service
Agreement shall handle all Customer inquiries and other Customer service matters
according to the Servicer Policies and Practices.
SECTION 6. COLLECTIONS; PAYMENT PROCESSING; REMITTANCE
(a) Collection Efforts, Policies, Procedures.
(i) The Servicer shall collect Billed RTC Charges from Customers
and TPSs as and when the same become due in accordance with such collection
procedures as it follows with respect to comparable assets that it services
for itself or others, including the following:
(A) The Servicer shall prepare and deliver overdue notices to
Customers and TPSs in accordance with applicable DTE Regulations and the
Servicer Policies and Practices.
(B) The Servicer shall deliver past-due and shut-off notices in
accordance with applicable DTE Regulations and the Servicer Policies and
Practices.
(C) The Servicer shall adhere to and carry out disconnection
policies and termination of billing by a TPS pursuant to a TPS Service
Agreement in accordance with Massachusetts General Laws Chapter 164, 116,
124-124I or successor provisions, applicable DTE Regulations and the Servicer
Policies and Practices.
(D) The Servicer may employ the assistance of collection agents in
accordance with applicable DTE Regulations and the Servicer Policies and
Practices.
(E) The Servicer shall apply Customer and TPS deposits to the
payment of delinquent accounts in accordance with applicable DTE Regulations
and the Servicer Polices and Practices.
(ii) The Servicer shall not waive any late payment charge or any
other fee or charge relating to delinquent payments, if any, or waive, vary
or modify any terms of payment of any amounts payable by a Customer, in each
case unless such waiver or action: (A) would be in accordance with the
Servicer Policies and Practices, (B) would not materially adversely affect
the Certificateholders and (C) would comply in all material respects with
applicable law.
(iii) The Servicer shall accept payment from Customers in
respect of Billed RTC Charges in such forms and methods and at such times and
places in accordance with the Servicer Policies and Practices. The Servicer
shall accept payment from TPSs in respect of Billed RTC Charges in such forms
and methods and at such times and places as the Servicer and each TPS shall
mutually agree in accordance with the applicable TPS Service Agreement and
applicable DTE Regulations.
(b) Payment Processing, Allocation, Priority of Payments. The Servicer
shall post all payments received to Customer or TPS accounts as promptly as
practicable, and, in any event, substantially all payments shall be posted no
later than one Servicer Business Day after receipt.
(c) Investment of RTC Charge Payments Received. Prior to remittance on
the applicable Remittance Date, the Servicer may invest RTC Charge Payments
at its own risk and for its own benefit, and such investments and funds shall
not be required to be segregated from the other investments and funds of the
Servicer. The Servicer shall be entitled to retain as additional
compensation any interest earnings on RTC Charge Payments invested by it.
(d) Calculation of RTC Charge Payments; Remittances. In accordance
with Section 4.03(a) of the Agreement, the Servicer shall remit to the Note
Trustee for deposit in the Collection Account an amount equal to the RTC
Charge Payments calculated in accordance with the methodology described in
Annex II attached to the Agreement.
(e) Remittances.
(i) The Note Issuer shall cause to be established the Collection
Account in the name of the Note Trustee in accordance with Section 8.02 of
the Note Indenture.
(ii) The Servicer shall make or cause to be made Remittances to the
Collection Account in accordance with Section 4.03 of the Agreement.
(iii)Any change of account or change of institution affecting the
Collection Account shall not take effect until the Note Issuer has provided at
least fifteen (15) Servicer Business Days written notice thereof to the
Servicer.
SECTION 7. TPSs
In the event a TPS performs services pursuant to a TPS Service Agreement,
the Servicer shall comply with the procedures set forth in Schedule A to this
Annex I.
SCHEDULE A
TO ANNEX I
Additional Servicing Procedures Applicable to TPSs
1. Establishing TPS Relationship
In addition to any actions required by the DTE or by applicable law, for
each TPS that is responsible for collecting Billed RTC Charges, the Servicer
shall take the following steps:
(a) Maintain adequate records of the payment arrangement applicable to
such TPS;
(b) Maintain copies of all Customer requests to convert to billing by a
TPS;
(c) Verify with the DTE that each TPS is licensed to supply electricity
in Massachusetts;
(d) Obtain information from the TPS including, but not limited to:
name, contact, address, telephone facsimile transmission number and
internet address;
(e) Maintain and update records of Customers to permit prompt reversion
to dual-billing;
(f) Maintain estimates of one month's maximum RTC Charge Payments for
each TPS required to post a bond, letter of credit or cash deposit
pursuant to the applicable TPS Service Agreement; and
(g) Comply with credit conditions set out in the Financing Order and
applicable TPS Service Agreement.
2. Monitoring TPS Obligations
(a) The Servicer shall require each TPS to pay all undisputed and all
disputed Billed RTC Charges or make a financial arrangement for such
payment according to the applicable TPS Service Agreement; and
(b) For all TPSs subject to any remittance option where such TPS is
liable for all amounts billed in respect of Customers served thereby
regardless of the amounts received therefrom, the Servicer shall monitor
payment compliance and take all actions permitted by the DTE and the
Financing Order in the event of a default in payment.
3. Enforcing TPS Obligations
The Servicer shall promptly take all actions specified by the Financing
Order with respect to amounts not remitted to the Servicer in accordance with
the payment terms specified by the Financing Order, in addition to any other
remedies available at law.
ANNEX II
REMITTANCE METHODOLOGY