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EXHIBIT 10.2
SECURITIZATION PROPERTY SERVICING AGREEMENT
between
THE DETROIT EDISON SECURITIZATION FUNDING LLC
Issuer
and
THE DETROIT EDISON COMPANY
Servicer
Dated as of [ ]
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TABLE OF CONTENTS
PAGE
ARTICLE I
Definitions
SECTION 1.01. Definitions. ...............................................................................1
SECTION 1.02. Other Definitional Provisions...............................................................1
ARTICLE II
Appointment and Authorization
SECTION 2.01. Appointment of Servicer; Acceptance of Appointment..........................................2
SECTION 2.02. Authorization...............................................................................2
SECTION 2.03. Dominion and Control Over the Securitization Property.......................................2
ARTICLE III
Billing Services
SECTION 3.01. Duties of Servicer..........................................................................2
SECTION 3.02. Servicing and Maintenance Standards. .......................................................4
SECTION 3.03. Certificate of Compliance...................................................................4
SECTION 3.04. Annual Report by Independent Public Accountants.............................................4
SECTION 3.05. Opinions of Counsel. .......................................................................5
ARTICLE IV
Services Related To Periodic Adjustments Remittances and Reconciliations
SECTION 4.01. Periodic Adjustments........................................................................5
SECTION 4.02. Limitation of Liability.....................................................................7
SECTION 4.03. Remittances; Reconciliations................................................................8
ARTICLE V
The Securitization Property
SECTION 5.01. Custody of Securitization Property Records..................................................9
SECTION 5.02. Duties of Servicer as Custodian.............................................................9
SECTION 5.03. Instructions; Authority to Act.............................................................10
SECTION 5.04. Effective Period and Termination...........................................................10
ARTICLE VI
The Servicer
SECTION 6.01. Representations and Warranties of Servicer.................................................11
SECTION 6.02. Indemnities of Servicer; Release of Claims.................................................12
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SECTION 6.03. Merger or Consolidation of, or Assumption of the Obligations of, Servicer..................14
SECTION 6.04. Assignment of Servicer's Obligations.......................................................16
SECTION 6.05. Limitation on Liability of Servicer and Others.............................................16
SECTION 6.06. Detroit Edison Not To Resign as Servicer...................................................16
SECTION 6.07. Servicing Fee..............................................................................16
SECTION 6.08. Servicer Expenses..........................................................................16
SECTION 6.09. Subservicing...............................................................................17
SECTION 6.10. No Servicer Advances.......................................................................17
SECTION 6.11. Protection of Title........................................................................17
ARTICLE VII
Default
SECTION 7.01. Servicer Default...........................................................................17
SECTION 7.02. Notice of Servicer Default.................................................................19
SECTION 7.03. Waiver of Past Defaults....................................................................19
SECTION 7.04. Appointment of Successor...................................................................19
SECTION 7.05. Cooperation with Successor.................................................................20
ARTICLE VIII
Miscellaneous Provisions
SECTION 8.01. Amendment..................................................................................20
SECTION 8.02. Maintenance of Accounts and Records........................................................20
SECTION 8.03. Notices....................................................................................21
SECTION 8.04. Limitations on Rights of Others............................................................21
SECTION 8.05. Severability...............................................................................21
SECTION 8.06. Separate Counterparts......................................................................21
SECTION 8.07. Headings...................................................................................22
SECTION 8.08. GOVERNING LAW..............................................................................22
SECTION 8.09. Assignment to the Trustee..................................................................22
SECTION 8.10. Nonpetition Covenants......................................................................22
SECTION 8.11. Termination................................................................................22
SECTION 8.12. Intercreditor Agreement....................................................................22
EXHIBITS, ANNEXES AND APPENDICES
EXHIBIT A Form of Certificate of Compliance
EXHIBIT B Form of Routine True-Up Adjustment Request
EXHIBIT C Form of Monthly Servicer Certificate
EXHIBIT D Form of Semiannual Servicer Certificate
EXHIBIT E Form of Annual Reconciliation
EXHIBIT F Proceedings
ANNEX I Servicing Procedures
APPENDIX A Master Definitions
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This SECURITIZATION PROPERTY SERVICING AGREEMENT, dated as of [ ], is
between The Detroit Edison Securitization Funding LLC, a Michigan limited
liability company, as issuer (the "Issuer"), and The Detroit Edison Company, a
Michigan corporation ("Detroit Edison"), as the servicer of the Securitization
Property hereunder (the "Servicer").
W I T N E S S E T H:
WHEREAS the Servicer is willing to service the Securitization Property
purchased from the Seller by the Issuer; and
WHEREAS the Issuer, in connection with ownership of Securitization
Property, desires to engage the Servicer to carry out the functions described
herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and intending to be
legally bound hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS. Capitalized terms used but not otherwise
defined herein have the meanings assigned to them in Appendix A hereto.
SECTION 1.02. OTHER DEFINITIONAL PROVISIONS.
(a) "Agreement" means this Securitization Property Servicing
Agreement, together with all Exhibits, Schedules and Annexes hereto, as
the same may be amended, supplemented or otherwise modified from time
to time.
(b) Non-capitalized terms used herein which are defined in the
Statute, as the context requires, have the meanings assigned to such
terms in the Statute, but without giving effect to amendments to the
Statute after the date hereof which have a material adverse effect on
the Issuer or the Securitization Bondholders.
(c) All terms defined in this Agreement have the defined
meanings when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein.
(d) The words "hereof", "herein", "hereunder" and words of
similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement; Section, Annex, Schedule and Exhibit references contained in
this Agreement are references to Sections, Annexes, Schedules and
Exhibits in or to this Agreement unless otherwise specified; and the
term "including" shall mean "including without limitation".
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(e) The definitions contained in this Agreement are applicable
to the singular as well as the plural forms of such terms.
ARTICLE II
APPOINTMENT AND AUTHORIZATION
SECTION 2.01. APPOINTMENT OF SERVICER; ACCEPTANCE OF APPOINTMENT.
Subject to Section 6.06 and Article VII, the Issuer hereby appoints the
Servicer, and the Servicer hereby accepts such appointment, to perform the
Servicer's obligations pursuant to this Agreement on behalf of and for the
benefit of the Issuer 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
Securitization Property, the Servicer shall be, and hereby is, authorized and
empowered by the Issuer to:
(a) execute and deliver, on behalf of itself, the Issuer, or
both, as the case may be, any and all instruments, documents or
notices, and
(b) on behalf of itself, the Issuer, or both, as the case may
be, make any filing and participate in proceedings of any kind with any
governmental authorities, including with the MPSC.
The Issuer shall furnish the Servicer with such documents as have been
prepared by the Servicer for execution by the Issuer, and with such other
documents as may be in the Issuer's possession, as necessary or appropriate to
enable the Servicer to carry out its servicing and administrative duties
hereunder. Upon the written request of the Servicer, the Issuer shall furnish
the Servicer with any powers of attorney or other documents necessary or
appropriate to enable the Servicer to carry out its duties hereunder.
SECTION 2.03. DOMINION AND CONTROL OVER THE SECURITIZATION PROPERTY.
Notwithstanding any other provision herein, the Servicer and the Issuer agree
that the Issuer is the owner of the Securitization Property and shall have
dominion and control over the Securitization Property, and the Servicer, in
accordance with the terms hereof, is acting solely as the servicing agent of the
Issuer with respect to the Securitization Property. The Servicer hereby
recognizes the security interest of the Trustee in the Securitization Property
and agrees to hold the proceeds thereof in trust for the Issuer and the Trustee.
The Servicer hereby agrees that it shall not take any action that is not
authorized by this Agreement, the Statute or the Financing Order, that is not
consistent with its customary procedures and practices, or that shall impair the
rights of the Issuer with respect to the Securitization Property, in each case
unless such action is required by law or court or regulatory order.
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ARTICLE III
BILLING SERVICES
SECTION 3.01. DUTIES OF SERVICER. The Servicer, as agent for the
Issuer, shall have the following duties:
(a) Duties of Servicer Generally.
(i) General Duties. The Servicer's duties in general shall
include management, servicing and administration of the Securitization
Property; obtaining meter reads, calculating electricity usage,
billing, collection and posting of all payments in respect of the
Securitization Property; responding to inquiries by Customers, the
MPSC, or any federal, local or other state governmental authorities
with respect to the Securitization Property; delivering Bills or
arranging for delivery of Bills to Customers, accounting for the
billing and collection of the SB Charge, investigating and handling
delinquencies, processing and depositing collections and making
periodic remittances; furnishing periodic reports to the Issuer, the
Trustee and the Rating Agencies; and taking all necessary action in
connection with Periodic Adjustments as set forth herein. Without
limiting the generality of this Section 3.01(a)(i), in furtherance of
the foregoing, the Servicer hereby agrees that it shall also have, and
shall comply with, the duties and responsibilities relating to data
acquisition, usage and bill calculation, billing, customer service
functions, collection, payment processing and remittance set forth in
Annex I hereto.
(ii) MPSC 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 the Statute, the
Financing Order and any MPSC Regulations as in effect at the time such
duties are to be performed.
(b) Reporting Functions.
(i) Annual Reconciliation Report. The Servicer shall deliver
an annual written reconciliation report substantially in the form of
Exhibit E hereto as required by Section 4.03(b) hereof.
(ii) Notification of Laws and Regulations. The Servicer shall
immediately notify the Issuer, the Trustee and the Rating Agencies in
writing of any laws or MPSC Regulations hereafter promulgated that have
a material adverse effect on the Servicer's ability to perform its
duties under this Agreement.
(iii) Other Information. Upon the reasonable request of the
Issuer, the Trustee, or any Rating Agency, the Servicer shall provide
to such Issuer, 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 Securitization Property to the
extent it is reasonably available to the Servicer, as may be reasonably
necessary and permitted by law for the Issuer, the Trustee, or the
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Rating Agencies to monitor the Servicer's performance hereunder. In
addition, so long as any of the Securitization Bonds of any Series are
outstanding, the Servicer shall provide to the Issuer and to the
Trustee, within a reasonable time after written request therefor, any
information available to the Servicer or reasonably obtainable by it
that is necessary to calculate the SB Charge.
SECTION 3.02. SERVICING AND MAINTENANCE STANDARDS. On behalf of the
Issuer, the Servicer shall (a) manage, service, administer and make collections
in respect of the Securitization Property with reasonable care and in accordance
with applicable law and regulations, including all MPSC 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 SB
Charge; (d) file Michigan UCC continuation statements to maintain the perfected
security interest of the Trustee in the Securitization Property and use all
reasonable efforts to otherwise enforce and maintain the Trustee's rights in
respect of the Securitization Property and (e) comply in all material respects
with all laws and regulations applicable to and binding on it relating to the
Securitization Property. The Servicer shall follow such customary and usual
practices and procedures as it shall deem necessary or advisable in its
servicing of all or any portion of the Securitization Property, which, in the
Servicer's judgment, may include the taking of legal action, at the Issuer's
expense.
SECTION 3.03. CERTIFICATE OF COMPLIANCE. The Servicer shall deliver to
the Issuer, the 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 Securitization Bonds, 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 Authorized Officer's supervision, and
(ii) to such Authorized Officer's knowledge, based on such review, the Servicer
has fulfilled all of its material obligations in all material respects under
this Agreement throughout such twelve months (or, in the case of the Certificate
of Compliance 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 Authorized Officer and the nature and status
thereof.
SECTION 3.04. ANNUAL REPORT BY INDEPENDENT PUBLIC ACCOUNTANTS.
(a) The Servicer 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 Issuer, the 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 Issuer, the Trustee and the Rating Agencies, on or before March
31 each year, beginning March 31,
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2002 to and including the March 31 succeeding the Retirement of the
Securitization Bonds, 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.
SECTION 3.05. OPINIONS OF COUNSEL. The Servicer shall deliver to the
Issuer and to the Trustee:
(a) promptly after the execution and delivery of this
Agreement and of the Sale Agreement and of each amendment hereto or
thereto, and on each Transfer Date, an Opinion of Counsel either:
(i) to the effect that, in the opinion of such
counsel, all Michigan UCC filings that are necessary to
perfect the interests of the Trustee in the Securitization
Property, to the extent perfection can be achieved by filing
under the Michigan UCC and the Statute, have been executed and
filed, and reciting the details of such filings or referring
to prior Opinions of Counsel in which such details are given,
or
(ii) to the effect that, in the opinion of such
counsel, no such action is necessary to perfect such interest;
and
(b) within 90 days after the beginning of each calendar year
beginning with the first calendar year beginning more than three full
calendar months after the Initial Transfer Date, an Opinion of Counsel,
dated as of a date during such 90-day period, either:
(i) to the effect that, in the opinion of such
counsel, all Michigan UCC filings have been executed and filed
that are necessary to perfect the interest of the Trustee in
the Securitization Property, to the extent perfection can be
achieved by filing under the Michigan UCC and the Statute, and
reciting the details of such filings or referring to prior
Opinions of Counsel in which such details are given, or
(ii) to the effect that, in the opinion of such
counsel, no such action is necessary to perfect such interest.
Each Opinion of Counsel referred to in clause (a) or (b) above shall specify any
action necessary (as of the date of such opinion) to be taken in the following
year to preserve and protect such interest.
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ARTICLE IV
SERVICES RELATED TO PERIODIC ADJUSTMENTS
REMITTANCES AND RECONCILIATIONS
SECTION 4.01. PERIODIC ADJUSTMENTS. From time to time, until the
Retirement of the Securitization Bonds, 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 to the Series Supplement.
(b) Routine True-Up Adjustments.
(i) With respect to each Series, the Servicer shall
file a Routine True-Up Adjustment Request with the MPSC in
accordance with the 45-day schedule and the methodology
approved by the Financing Order to ensure the expected
recovery of sufficient amounts to timely provide all payments
of debt service and other required amounts and charges in
connection with the Securitization Bonds. For the purpose of
preparing a Routine True-Up Adjustment Request pursuant to
this Section 4.01(b)(i), the Servicer shall: (A) update the
assumptions underlying the calculation of the SB Charge,
including energy usage volume, the rate of charge-offs and
estimated expenses and fees of the Issuer to the extent not
fixed, in each case for the Remittance Period beginning on [ ]
of such year; (B) update the calculation of Weighted Average
Days Outstanding; (C) determine the Required Debt Service for
such Remittance Period based upon such updated assumptions;
and (D) determine the SB Charge to be charged during such
Remittance Period based upon such Required Debt Service.
(ii) With respect to each Series, beginning on the
date that is twelve (12) months prior to the Expected Final
Payment Date of the final Class of such Series and continuing
through the Final Maturity Date of such Class, the Servicer
shall file a Routine True-Up Adjustment Request with the MPSC
at least 45 days prior to the end of any calendar quarter at
such times as it may reasonably determine to meet the Required
Debt Service for the then current Remittance Period.
(iii) The Servicer shall take all reasonable actions
and make all reasonable efforts to secure any Periodic
Adjustments in clauses (i) and (ii) above (each, a "Routine
True-Up Adjustment").
(c) Non-Routine True-Up Adjustments.
(i) Subject to the Rating Agency Condition,
whenever the Servicer determines that the existing model for
calculating the SB Charge should be amended or revised or the
Servicer otherwise determines that circumstances warrant, the
Servicer shall file a Non-Routine True-Up Adjustment Request
with
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the MPSC designating the adjustments to such model and/or any
corresponding adjustments to the SB Charge (collectively, a
"Non-Routine True-Up Adjustment"), subject to the review and
approval of the MPSC pursuant to the Financing Order.
(ii) The Servicer shall take all reasonable
actions and make all reasonable efforts to secure any
Non-Routine True-Up Adjustments.
(iii) The Servicer shall implement any resulting
adjustments to the model and any resulting revised SB Charge
as of the effective date of the Non-Routine True-Up Adjustment
Request. If any Non-Routine True-Up Adjustment Request is
denied by the MPSC, the Servicer shall notify the Issuer, the
Trustee and the Rating Agencies by the end of the second
Servicer Business Day after the Servicer's receipt of the
MPSC's order denying such Non-Routine True-Up Adjustment
Request.
(d) Reports.
(i) Notification of Adjustment Requests. Whenever
the Servicer files an Adjustment Request with the MPSC, the
Servicer shall send a copy of such filing to the Issuer, the
Trustee and the Rating Agencies concurrently therewith. If any
Routine True-Up Adjustment Request does not become effective
on the applicable date as provided in such filing and in
accordance with the Financing Order, the Servicer shall notify
the Issuer, the Trustee and the Rating Agencies by the end of
the second Servicer Business Day after such applicable date.
(ii) Monthly Servicer Certificate. So long as any
Securitization Bonds are outstanding, not later than fifteen
(15) days after the end of each month after the Securitization
Bonds are issued (excluding [ ] 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 Issuer, the Trustee and the Rating
Agencies.
(iii) Semiannual Servicer Certificate. So long as
any Securitization Bonds are outstanding, not later than the
Servicer Business Day immediately preceding each Payment Date,
the Servicer shall deliver a written report substantially in
the form of Exhibit D hereto (the "Semiannual Servicer
Certificate") to the Issuer, the Trustee and the Rating
Agencies.
SECTION 4.02. LIMITATION OF LIABILITY.
(a) The Issuer and the Servicer expressly agree and
acknowledge that:
(i) In connection with any Periodic Adjustment, the
Servicer is acting solely in its capacity as the servicing
agent of the Issuer hereunder.
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(ii) Neither the Servicer nor the Issuer shall be
responsible in any manner for, and shall have no liability
whatsoever as a result of, any action, decision, ruling or
other determination made or not made, or any delay (other than
any delay resulting from the Servicer's failure to file the
applications required by Section 4.01 in a timely and correct
manner or other material breach by the Servicer of its duties
under this Agreement that materially and adversely affects the
Periodic Adjustments), by the MPSC in any way related to the
Securitization Property or in connection with any Periodic
Adjustment, the subject of any filings under Section 4.01.
(iii) The Servicer shall have no liability whatsoever
relating to the calculation of the SB Charge and the
adjustments thereto (including any Non-Routine True-Up
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 Issuer, so long as the Servicer has
not acted in a grossly negligent manner in connection
therewith, nor shall the Servicer have any liability
whatsoever as a result of any Person, including the
Securitization Bondholders, not receiving any payment, amount
or return anticipated or expected in respect of any
Securitization Bond generally, except only to the extent that
the Servicer is liable under Section 6.02 of this Agreement.
(b) Notwithstanding the foregoing, this Section 4.02 shall not
relieve the Servicer of any liability under Section 6.02 for any
misrepresentation by the Servicer under Section 6.01 or for any breach
by the Servicer of its obligations under this Agreement.
SECTION 4.03. REMITTANCES; RECONCILIATIONS.
(a) Subject to Section 4.03(b) below, on each Servicer
Business Day commencing 45 days after the date of mailing of the first
Bill invoicing the SB Charge, the Servicer shall cause to be made,
within two (2) Servicer Business Days of deemed receipt, a wire
transfer of immediately available funds to the General Subaccount of
the Collection Account in an amount equal to the Estimated SB Charge
Payments (as calculated in accordance with Annex I 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 (taking into account
the Weighted Average Days Outstanding in effect from time to time).
Prior to or simultaneous with each Remittance to the General Subaccount
of the Collection Account pursuant to this Section 4.03, the Servicer
shall provide written notice to the Trustee of each such Remittance
(including the exact dollar amount to be remitted).
(b) On or before each [ ], the Servicer shall calculate the
amount of any Remittance Shortfall or Remittance Excess attributable to
the prior Reconciliation Period and (A) if a Remittance Shortfall
exists, the Servicer shall make a supplemental wire transfer of
immediately available funds to the General Subaccount of the Collection
Account on the next Servicer Business Day following such calculation in
the amount of such Remittance Shortfall, or (B) if a Remittance Excess
exists, the Servicer shall deliver to the Issuer and the Trustee an
Officer's Certificate requesting a payment or payments
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on succeeding Payment Dates from the Issuer equal to the amount of such
Remittance Excess until the balance of the Remittance Excess has been
reduced to zero. The Servicer shall deliver a written report
substantially in the form of Exhibit E hereto (an "Annual
Reconciliation Report") setting forth in reasonable detail the
calculation of any Remittance Excess or Remittance Shortfall to the
Issuer, the Trustee and the Rating Agencies.
(c) The Servicer agrees and acknowledges that it will remit
Estimated SB Charge Payments in accordance with this Section 4.03
without any surcharge, fee, offset, charge or other deduction except as
set forth in Section 4.03(b) above.
ARTICLE V
THE SECURITIZATION PROPERTY
SECTION 5.01. CUSTODY OF SECURITIZATION PROPERTY RECORDS. To assure
uniform quality in servicing the Securitization Property and to reduce
administrative costs, the Issuer hereby revocably appoints the Servicer, and the
Servicer hereby accepts such appointment, to act as the agent of the Issuer and
the 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
Securitization Property, including copies of the Financing Order and all
documents filed with the MPSC in connection with any Periodic Adjustment and
computational records relating thereto (collectively, the "Securitization
Property Records"), all of which are the sole property of the Issuer and which
are hereby constructively delivered to the Trustee, as pledgee of the Issuer
with respect to all Securitization Property.
SECTION 5.02. DUTIES OF SERVICER AS CUSTODIAN.
(a) Safekeeping. The Servicer shall hold the Securitization
Property Records on behalf of the Issuer and maintain such accurate and
complete accounts, records and computer systems pertaining to the
Securitization Property Records on behalf of the Issuer and the Trustee
as shall enable the Issuer to comply with this Agreement and the
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 Issuer and the Trustee any failure on its part
to hold the Securitization 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
Issuer or the Trustee of the Securitization Property Records. The
Servicer's duties to hold the Securitization Property Records on behalf
of the Issuer set forth in this Section 5.02, to the extent such
Securitization Property Records have not been previously transferred to
a successor Servicer pursuant to Article VII, shall terminate one year
and one day after the earlier of the date on which (i) the Servicer is
succeeded by a successor Servicer in accordance with Article VII hereof
and (ii) no Securitization Bonds are outstanding.
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(b) Maintenance of and Access to Records. The Servicer shall
maintain at all times records and accounts that will clearly identify
SB Charges billed on behalf of the Issuer. The Servicer shall maintain
the Securitization Property Records at 2000 2nd Avenue, Detroit,
Michigan 48226 or at such other office as shall be specified to the
Issuer and the Trustee by written notice at least 30 days prior to any
change in location. The Servicer shall make available for inspection to
the Issuer and the Trustee or their respective duly authorized
representatives, attorneys or auditors the Securitization Property
Records at such times during normal business hours as the Issuer or the
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 MPSC 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 Trustee in
accordance with the Indenture, the Servicer shall release any
Securitization Property Records to the Trustee, the Trustee's agent or
the Trustee's designee, as the case may be, at such place or places as
the Trustee may designate, as soon as practicable.
(d) Defending Securitization Property Against Claims. The
Servicer shall institute and maintain any action or proceeding
necessary to compel performance by the MPSC or the State of Michigan of
any of their obligations or duties under the Statute or the Financing
Order, 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 Securitization Property by
legislative enactment, voter initiative, referendum, constitutional
amendment or other means that would be adverse to Securitization
Bondholders. The costs of any such action shall be payable as an
Operating Expense in accordance with the priorities set forth in
Section 8.02 of the 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 of the
Indenture may be delayed (it being understood and agreed that the
Servicer may be required to temporarily advance its own funds to
satisfy its obligations hereunder).
SECTION 5.03. INSTRUCTIONS; AUTHORITY TO ACT. For so long as any
Securitization Bonds remain outstanding, the Servicer shall be deemed to have
received proper instructions with respect to the Securitization Property Records
upon its receipt of written instructions signed by an Authorized Officer of the
Trustee.
SECTION 5.04. EFFECTIVE PERIOD AND TERMINATION. The Servicer's
appointment as custodian shall become effective as of the Series Issuance 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
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custodian shall terminate upon appointment of a successor Servicer,
subject to the approval of the MPSC, and acceptance by such successor Servicer
of such appointment.
ARTICLE VI
THE SERVICER
SECTION 6.01. REPRESENTATIONS AND WARRANTIES OF SERVICER. The Servicer
makes the following representations and warranties as of each Transfer Date, on
which the Issuer has relied and will rely in acquiring Securitization Property
and in entering into this Agreement. The representations and warranties shall
survive the execution and delivery of this Agreement, the sale of any of the
Securitization Property to the Issuer and the pledge thereof to the Trustee
pursuant to the Indenture.
(a) Organization and Good Standing. The Servicer is a
corporation duly organized and in good standing under the laws of the
state of its incorporation, with the corporate power and authority to
own its properties and to conduct its business as such properties are
currently owned and such business is presently conducted and to
execute, deliver and carry out the terms of this Agreement, and has the
power, authority and legal right to service the Securitization
Property.
(b) Due Qualification. The Servicer is duly qualified to do
business as a foreign corporation in good standing, and has obtained
all necessary licenses and approvals in, all jurisdictions, other than
Michigan, in which the ownership or lease of property or the conduct of
its business (including the servicing of the Securitization Property as
required by this Agreement) requires such qualifications, licenses or
approvals (except where the failure to so qualify would not be
reasonably likely to have a material adverse effect on the Servicer's
business, operations, assets, revenues, properties or prospects or
adversely affect the servicing of the Securitization Property).
(c) Power and Authority. The Servicer has the corporate power
and authority to execute and deliver this Agreement and to carry out
its terms; and the execution, delivery and performance of this
Agreement have been duly authorized by the Servicer by all necessary
corporate action.
(d) Binding Obligation. This Agreement constitutes a legal,
valid and binding obligation of the Servicer enforceable against the
Servicer in accordance with its terms subject to bankruptcy,
receivership, insolvency, reorganization, moratorium or other laws
affecting creditors' rights generally from time to time in effect and
to general principles of equity (regardless of whether considered in a
proceeding in equity or at law).
(e) No Violation. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof
will not conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time)
a default under, the articles of incorporation or by-laws of the
Servicer, or any indenture, agreement or other instrument to which the
Servicer is a party or by which it is bound; or result in the creation
or imposition of any Lien upon any of its properties
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pursuant to the terms of any such indenture, agreement or other
instrument; or violate any law or any order, rule or regulation
applicable to the Servicer of any court or of any federal or state
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Servicer or its
properties.
(f) Approvals. Except for filings with the MPSC for adjusting
the SB Charge pursuant to this Agreement, filing of financing
statements under the Michigan UCC and Michigan UCC continuation
filings, no approval, authorization, consent, order or other action of,
or filing with, any court, federal or state regulatory body,
administrative agency or other governmental instrumentality is required
in connection with the execution and delivery by the Servicer of this
Agreement, the performance by the Servicer of the transactions
contemplated hereby or the fulfillment by the Servicer of the terms
hereof, except those that have been obtained or made.
(g) No Proceedings. There are no proceedings or investigations
pending or, to the Servicer's best knowledge, threatened before any
court, federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Servicer or
its properties:
(i) seeking to prevent the issuance of the
Securitization Bonds or the consummation of any of the
transactions contemplated by this Agreement or any of the
other Basic Documents;
(ii) except as set forth in Exhibit F, seeking any
determination or ruling that might materially and adversely
affect the performance by the Servicer of its obligations
under, or the validity or enforceability against the Servicer
of, this Agreement or any of the other Basic Documents; or
(iii) relating to the Servicer and which might
materially and adversely affect the federal or state income,
gross receipts or franchise tax attributes of the
Securitization Bonds.
(h) Reports and Certificates. Each report and certificate
delivered in connection with any filing made to the MPSC by the
Servicer on behalf of the Issuer with respect to the SB Charge or
Periodic Adjustments will constitute a representation and warranty by
the Servicer that each such report or certificate, as the case may be,
is true and correct in all material respects; provided, however, that
to the extent any such report or certificate is based in part upon or
contains assumptions, forecasts or other predictions of future events,
the representation and warranty of the Servicer with respect thereto
will be limited to the representation and warranty that such
assumptions, forecasts or other predictions of future events are
reasonable based upon historical performance.
SECTION 6.02. INDEMNITIES OF SERVICER; RELEASE OF CLAIMS.
(a) The Servicer shall be liable in accordance herewith only
to the extent of the obligations specifically undertaken by the
Servicer under this Agreement.
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(b) The Servicer shall indemnify the Issuer and the Trustee
(for itself and on behalf of the Securitization Bondholders) and each
of their respective trustees, members, managers, officers, directors,
employees and agents for, and defend and hold harmless each such Person
from and against, any and all Losses that may be imposed upon, incurred
by or asserted against any such Person as a result of:
(i) the Servicer's wilful misconduct, bad faith or
gross negligence in the performance of its duties or
observance of its covenants under this Agreement or the
Servicer's reckless disregard of its obligations and duties
under this Agreement;
(ii) the Servicer's breach of any of its
representations or warranties in this Agreement; and
(iii) litigation and related expenses relating to its
status and obligations as Servicer,
provided, however, that the Servicer shall not be liable for any Losses
resulting from the wilful misconduct or gross negligence of any Person
indemnified pursuant to this Section 6.02 (each, an "Indemnified Person") or
resulting from a breach of a representation or warranty made by such Indemnified
Person in any of the Basic Documents that gives rise to the Servicer's breach.
Promptly after receipt by an Indemnified Person of notice of its
involvement in any action, proceeding or investigation, such Indemnified Person
shall, if a claim for indemnification in respect thereof is to be made against
the Servicer under this Section 6.02, notify the Servicer in writing of such
involvement. Failure by an Indemnified Person to so notify the Servicer shall
relieve the Servicer from the obligation to indemnify and hold harmless such
Indemnified Person under this Section 6.02 only to the extent that the Servicer
has actually been prejudiced as a result of such failure. With respect to any
action, proceeding or investigation brought by a third party for which
indemnification may be sought under this Section 6.02, 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 (including local
counsel), and the Servicer shall bear the reasonable fees, costs and expenses of
such separate counsel. The Indemnified Person shall not settle or compromise or
consent to the entry of any judgment with respect to any pending or threatened
claim, action, suit or proceeding in respect of which indemnification may be
sought under this Section 6.02 (whether or not the Servicer is an actual or
potential party to such claim or action) unless the Servicer agrees in writing
to such settlement, compromise or consent and such settlement, compromise or
consent includes an unconditional release of the Servicer from all liability
arising out of such claim, action, suit or proceeding.
(c) If any action, claim, demand or proceeding (including any
governmental investigation) is brought or asserted against an
Indemnified Person entitled to any indemnification provided for under
this Section 6.02, such Indemnified Person shall promptly notify the
Servicer in writing; provided, however, that failure to give such
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notification shall not affect the indemnification provided hereunder
except to the extent the Servicer has been actually prejudiced as a
result of such failure.
(d) The Servicer shall indemnify the Trustee and its
respective officers, directors and agents for, and defend and hold
harmless each such Person from and against, any and all Losses that may
be imposed upon, incurred by or asserted against any such Person as a
result of the acceptance or performance of the trusts and duties
contained herein and in the Indenture, except to the extent that any
such Loss is due to the wilful misconduct, bad faith or gross
negligence of the Trustee; provided, however, that the foregoing
indemnity is extended to the Trustee solely in its individual capacity
and not for the benefit of the Securitization Bondholders or any other
Person. Such amounts with respect to the Trustee shall be deposited and
distributed in accordance with the Indenture.
(e) The Servicer's indemnification obligations under Section
6.02(b) and (d) for events occurring prior to the removal or
resignation of the Trustee or the termination of this Agreement shall
survive the resignation or removal of the Trustee or the termination of
this Agreement and shall include reasonable costs, fees and expenses of
investigation and litigation (including the Issuer's and the Trustee's
reasonable attorneys' fees and expenses).
(f) Except to the extent expressly provided for in the Basic
Documents (including the Servicer's claims with respect to the
Servicing Fees and the Seller's claim for payment of the purchase price
of the Securitization Property), the Servicer hereby releases and
discharges the Issuer (including its Member, Managers, officers,
employees and agents, if any), and the Trustee (including its
respective officers, directors and agents) (collectively, the "Released
Parties") from any and all actions, claims and demands whatsoever,
which the Servicer shall or may have against any such Person relating
to the Securitization Property or the Servicer's activities with
respect thereto other than any actions, claims and demands arising out
of the wilful misconduct, bad faith or gross negligence of the Released
Parties.
SECTION 6.03. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, SERVICER. Any Person:
(a) into which the Servicer may be merged or consolidated and
which succeeds to all or the major part of the electric distribution
business of the Servicer,
(b) which results from the division of the Servicer into two
or more Persons and which succeeds to all or the major part of the
electric distribution business of the Servicer,
(c) which may result from any merger or consolidation to which
the Servicer shall be a party and which succeeds to all or the major
part of the electric distribution business of the Servicer,
(d) which may succeed to the properties and assets of the
Servicer substantially as a whole and which succeeds to all or the
major part of the electric distribution business of the Servicer, or
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(e) which may otherwise succeed to all or the major part of
the electric distribution business of the Servicer,
which Person in any of the foregoing cases executes an agreement of assumption
to perform every obligation of the Servicer under this Agreement, shall be the
successor to the Servicer hereunder without the execution or filing of any
document or any further act by any of the parties to this Agreement; provided,
however, that:
(i) immediately after giving effect to such
transaction, no representation or warranty made pursuant to
Section 6.01 shall have been breached and no Servicer Default,
and no event that, after notice or lapse of time, or both,
would become a Servicer Default, shall have occurred and be
continuing;
(ii) the Servicer shall have delivered to the Issuer,
the Trustee and the Rating Agencies an Officer's Certificate
and an Opinion of Counsel each stating that such
consolidation, merger or succession and such agreement of
assumption comply with this Section 6.03 and that all
conditions precedent, if any, provided for in this Agreement
relating to such transaction have been complied with;
(iii) the Servicer shall have delivered to the
Issuer, the Trustee and the Rating Agencies an Opinion of
Counsel either:
(A) stating that, in the opinion of such
counsel, all filings to be made by the Servicer,
including Michigan UCC filings, that are necessary
fully to preserve and protect the interests of the
Trustee in the Securitization Property have been
executed and filed and reciting the details of such
filings, or
(B) stating that, in the opinion of such
counsel, no such action is necessary to preserve and
protect such interests;
(iv) the Rating Agencies shall have received prior
written notice of such transaction; and
(v) the Servicer shall have delivered to the Issuer,
the Trustee and the Rating Agencies an opinion of independent
tax counsel (as selected by, and in form and substance
reasonably satisfactory to, the Servicer, and which may be
based on a ruling from the Internal Revenue Service) to the
effect that, for federal income tax purposes, such
consolidation or merger will not result in a material adverse
federal income tax consequence to the Servicer, the Issuer,
the Trustee or the then existing Securitization Bondholders.
The Servicer shall not consummate any transaction referred to in subclauses (a),
(b), (c), (d) or (e) above except upon execution of the above described
agreement of assumption and compliance with subclauses (i), (ii), (iii), (iv)
and (v) above. When any Person 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 6.03, then upon the satisfaction of
all of the
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other conditions of this Section 6.03, the Servicer shall
automatically and without further notice be released from its obligations
hereunder.
SECTION 6.04. ASSIGNMENT OF SERVICER'S OBLIGATIONS. The Servicer may
not assign its obligations hereunder to any successor unless either (i) the
Rating Agency Condition and any other condition specified in the Financing Order
have been satisfied, or (ii) the Servicer is replaced by a successor pursuant to
Section 6.03 hereof.
SECTION 6.05. LIMITATION ON LIABILITY OF SERVICER AND OTHERS. The
Servicer shall not be liable to the Issuer or the Trustee, except as provided
under this Agreement, for any action taken or for refraining from the taking of
any action pursuant to this Agreement or for errors in judgment; provided,
however, that this provision shall not protect the Servicer against any
liability that would otherwise be imposed by reason of wilful misconduct, bad
faith or gross negligence in the performance of its duties or by reason of
reckless disregard of obligations and duties under this Agreement. The Servicer
and any director, officer, employee or agent of the Servicer may rely in good
faith on the advice of counsel reasonably acceptable to the Trustee or on any
document of any kind, prima facie properly executed and submitted by any Person,
respecting any matters arising under this Agreement.
Except as provided in this Agreement, the Servicer shall not be under
any obligation to appear in, prosecute or defend any legal action that is not
incidental to its duties to service the Securitization Property in accordance
with this Agreement or related to its obligation to pay indemnification.
SECTION 6.06. DETROIT EDISON NOT TO RESIGN AS SERVICER. Subject to the
provisions of Sections 6.03 and 6.04, Detroit Edison shall not resign from the
obligations and duties imposed on it as Servicer under this Agreement except
upon a determination that the performance of its duties under this Agreement
shall no longer be permissible under applicable law. Notice of any such
determination permitting the resignation of Detroit Edison shall be communicated
to the Issuer, the Trustee and each Rating Agency at the earliest practicable
time (and, if such communication is not in writing, shall be confirmed in
writing at the earliest practicable time), and any such determination shall be
evidenced by an Opinion of Counsel to such effect delivered to the Issuer and
the Trustee concurrently with or promptly after such notice. No such resignation
shall become effective until a successor Servicer has assumed the servicing
obligations and duties hereunder of the Servicer in accordance with Section
7.04.
SECTION 6.07. SERVICING FEE. The Issuer agrees to pay the Servicer the
Servicing Fee with respect to all Series of Securitization Bonds. For so long as
Detroit Edison is the Servicer, the Servicing Fee shall be five one-hundredths
of one percent (0.05%) of the initial Principal Balance of the Securitization
Bonds per annum payable by the Issuer in semiannual installments in arrears on
each Payment Date pursuant Section 8.02 of the 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. The foregoing
fees constitute a fair and reasonable price for the obligations to be performed
by the Servicer.
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SECTION 6.08. SERVICER EXPENSES. Except as otherwise expressly provided
herein, the Servicer shall be required to pay all expenses incurred by the
Servicer in performing its activities hereunder, including fees and
disbursements of independent accountants and counsel, taxes imposed on the
Servicer and expenses incurred in connection with reports to Securitization
Bondholders and shall not be entitled to any additional payment or reimbursement
therefor.
SECTION 6.09. SUBSERVICING. The Servicer may at any time appoint a
subservicer to perform all or any portion of its obligations as Servicer
hereunder; provided, however, that unless such subservicer is an Affiliate of
the Servicer the Rating Agency Condition shall have been satisfied in connection
therewith; and provided further that the Servicer shall remain obligated and be
liable to the Issuer, the Trustee and the Securitization Bondholders for the
servicing and administering of the Securitization Property in accordance with
the provisions hereof without diminution of such obligation and liability by
virtue of the appointment of such subservicer and to the same extent and under
the same terms and conditions as if the Servicer alone were servicing and
administering the Securitization Property. The fees and expenses of the
subservicer shall be as agreed between the Servicer and its subservicer from
time to time, and none of the Issuer, the Trustee or the Securitization
Bondholders shall have any responsibility therefor. Any such appointment shall
not constitute a Servicer resignation under Section 6.06.
SECTION 6.10. NO SERVICER ADVANCES. The Servicer shall not make any
advances of interest on or principal of the Securitization Bonds.
SECTION 6.11. PROTECTION OF TITLE. The Servicer shall take such actions
and execute and file such filings and cause to be executed and filed such
filings, take such actions and all in such manner and in such places as may be
required by law to fully preserve, maintain and protect the interests of the
Issuer and the Trustee in the Securitization Property, including all filings
required under the Michigan UCC relating to the transfer of ownership of the
Securitization Property by the Seller to the Issuer or the security interest
granted by the Issuer to the Trustee in the Securitization Property. The
Servicer shall deliver (or cause to be delivered) to the Issuer and the Trustee
file-stamped copies of, or filing receipts for, any document filed as provided
above, as soon as available following such filing.
ARTICLE VII
DEFAULT
SECTION 7.01. SERVICER DEFAULT. If any one of the following events
(each a "Servicer Default") shall occur and be continuing:
(a) any failure by the Servicer to remit to the Trustee, on
behalf of the Issuer, any required remittance that continues unremedied
for a period of five Business Days after written notice of such failure
is received by the Servicer from the Issuer or the Trustee; or
(b) any failure by the Servicer duly to observe or perform in
any material respect any other covenant or agreement of the Servicer
set forth in this Agreement, which failure:
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(i) materially and adversely affects the
Securitization Property or the rights of the Securitization
Bondholders, and
(ii) continues unremedied for a period of 60 days
after written notice of such failure has been given to the
Servicer by the Issuer or by the Trustee or after discovery of
such failure by an officer of the Servicer; or
(c) any representation or warranty made by the Servicer in
this Agreement proves to have been incorrect when made, which has a
material adverse effect on the Issuer or the Securitization Bondholders
and which material adverse effect continues unremedied for a period of
60 days after the date on which written notice thereof has been given
to the Servicer by the Issuer or the Trustee or after discovery of such
failure by an officer of the Servicer, as the case may be;
(d) an Insolvency Event occurs with respect to the Servicer;
or
(e) an Event of Investment Ineligibility under the trade
receivables purchase and sale agreement, dated as of February 28, 1989,
as amended and restated, among Detroit Edison, as seller, Corporate
Asset Funding Company, Inc. and Citibank, N.A. and Citicorp North
America, Inc., individually and as agent, and/or an Event of
Termination under the trade receivables purchase and sale agreement
dated as of February 28, 1989, as amended and restated, among Detroit
Edison, as seller, Citibank, N.A. and Citicorp North America, Inc.,
individually and as agent;
then, and in each and every case, so long as the Servicer Default shall not have
been remedied, the Trustee, with the consent of the Holders of a majority of the
outstanding principal amount of the Securitization Bonds of all Series, by
notice then given in writing to the Servicer (a "Termination Notice") may
terminate all the rights and obligations (other than the indemnification
obligations set forth in Section 6.02 hereof and the obligation under Section
7.04 to continue performing its functions as Servicer until a successor Servicer
is appointed) of the Servicer under this Agreement. In addition, upon a Servicer
Default, the Issuer and the Trustee shall be entitled to apply to the MPSC or
any court of competent jurisdiction for sequestration and payment to the Trustee
of revenues arising with respect to the Securitization Property.
On or after the receipt by the Servicer of a Termination Notice, all
authority and power of the Servicer under this Agreement, whether with respect
to the Securitization Property, the related SB Charge or otherwise, shall, upon
appointment of a successor Servicer pursuant to Section 7.04, without further
action, pass to and be vested in such successor Servicer and, without
limitation, the Trustee is hereby authorized and empowered to execute and
deliver, on behalf of the predecessor Servicer, as attorney-in-fact or
otherwise, any and all documents and other instruments, and to do or accomplish
all other acts or things necessary or appropriate to effect the purposes of such
Termination Notice, whether to complete the transfer of the Securitization
Property Records and related documents, or otherwise. The predecessor Servicer
shall cooperate with the successor Servicer, the Trustee and the Issuer in
effecting the termination of the responsibilities and rights of the predecessor
Servicer under this 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
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received by it with respect to the Securitization Property or the related SB
Charge. As soon as practicable after receipt by the Servicer of such Termination
Notice, the Servicer shall deliver the Securitization Property Records to the
successor Servicer. All reasonable costs and expenses (including attorneys fees
and expenses) incurred in connection with transferring the Securitization
Property Records to the successor Servicer and amending this Agreement to
reflect such succession as Servicer pursuant to this Section 7.01 shall be paid
by the predecessor Servicer upon presentation of reasonable documentation of
such costs and expenses. Termination of Detroit Edison as Servicer shall not
terminate Detroit Edison's rights or obligations under the Sale Agreement.
SECTION 7.02. NOTICE OF SERVICER DEFAULT. The Servicer shall deliver to
the Issuer, the Trustee and each Rating Agency promptly after having obtained
knowledge thereof, but in no event later than five Business Days thereafter,
written notice in an Officer's Certificate of any event or circumstance which,
with the giving of notice or the passage of time, would become a Servicer
Default under Section 7.01.
SECTION 7.03. WAIVER OF PAST DEFAULTS. The Trustee, with the consent of
Holders of the majority of the outstanding principal amount of the
Securitization Bonds of all Series, may waive in writing any default by the
Servicer in the performance of its obligations hereunder and its consequences,
except a default in making any required Remittances to the Trustee 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. APPOINTMENT OF SUCCESSOR.
(a) Upon the Servicer's receipt of a Termination Notice
pursuant to Section 7.01 or the Servicer's resignation in accordance
with the terms of this Agreement, the predecessor Servicer shall
continue to perform its functions as Servicer under this Agreement and
shall be entitled to receive the requisite portion of the Servicing
Fees, until a successor Servicer has assumed in writing the obligations
of the Servicer hereunder pursuant to an assumption agreement or
pursuant to clause (iii) below. In the event of the Servicer's removal
or resignation hereunder, the Trustee, as assignee of the Issuer, may
appoint a successor Servicer, with the consent of the Holders of a
majority of the outstanding principal amount of the Securitization
Bonds of all Series, and the successor Servicer shall accept its
appointment by a written assumption in form acceptable to the Issuer
and the Trustee. If, within 30 days after the delivery of the
Termination Notice, a new Servicer has not been appointed and accepted
such appointment, the Trustee may petition the MPSC 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 to perform the duties of
the Servicer pursuant to the Statute, the MPSC Regulations,
the Financing Order and this Agreement;
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(ii) the Rating Agency Condition has been satisfied;
and
(iii) such Person enters into a servicing agreement
with the Issuer having substantially the same provisions as
this Agreement.
(b) Upon appointment, the successor Servicer shall be the
successor in all respects to the predecessor Servicer under this
Agreement and shall be subject to all the responsibilities, duties and
liabilities arising thereafter relating thereto placed on the
predecessor Servicer and shall be entitled to the Servicing Fee and all
the rights granted to the predecessor Servicer by the terms and
provisions of this Agreement.
(c) The successor Servicer may resign only if it is prohibited
from serving as such by applicable law.
SECTION 7.05. COOPERATION WITH SUCCESSOR. The Servicer covenants and
agrees with the Issuer that it will, on an ongoing basis, cooperate with the
successor Servicer and provide whatever information is, and take whatever
actions are, reasonably necessary to assist the successor Servicer in performing
its obligations hereunder.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
SECTION 8.01. AMENDMENT. This Agreement may be amended by the Servicer
and the Issuer, with the consent of the Trustee and the satisfaction of the
Rating Agency Condition. Promptly after the execution of any such amendment or
consent, the Issuer shall furnish written notification of the substance of such
amendment or consent to each of the Rating Agencies.
Prior to the execution of any amendment to this Agreement, the Issuer
and the Trustee shall be entitled to receive and rely upon an Opinion of Counsel
stating that the execution of such amendment is authorized or permitted by this
Agreement and the most recent Opinion of Counsel referred to in Section 3.05.
The Issuer and the Trustee may, but shall not be obligated to, enter into any
such amendment which affects their own rights, duties or immunities under this
Agreement or otherwise.
SECTION 8.02. MAINTENANCE OF ACCOUNTS AND RECORDS.
(a) The Servicer shall maintain accounts and records as to the
Securitization Property accurately and in accordance with its standard
accounting procedures and in sufficient detail to permit reconciliation
between Estimated SB Charge Payments and Deemed SB Charge Payments.
(b) The Servicer shall permit the 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 Securitization
Property and the SB Charge. Nothing in this Section 8.02(b) shall
affect the obligation of the Servicer to observe any applicable law
(including any MPSC Regulation) prohibiting
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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 first-class
mail, reputable overnight courier service, facsimile transmission or electronic
mail (confirmed by telephone, United States first-class mail or reputable
overnight courier service in the case of notice by facsimile transmission or
electronic mail) or any other customary means of communication, and any such
notice, direction, consent or waiver shall be effective when delivered or
transmitted, or if mailed, five days after deposit in the United States
first-class mail with proper postage for first-class mail prepaid,
(a) in the case of the Servicer, at The Detroit Edison
Company, 2000 2nd Avenue, Detroit, Michigan 48226-1279, Attention:
Secretary;
(b) in the case of the Issuer, at The Detroit Edison
Securitization Funding LLC, 2000 2nd Avenue, 937 WCB, Detroit, Michigan
48226-1279, Attention: Corporate Secretary;
(c) in the case of the Trustee, at the address provided for
notices or communications to the Trustee in the Indenture;
(d) in the case of Moody's, at Moody's Investors Service,
Inc., ABS Monitoring Department, 99 Church Street, New York, New York
10007;
(e) in the case of Standard & Poor's, at Standard & Poor's
Ratings Services, 55 Water Street, New York, New York 10041, Attention:
Asset Backed Surveillance Department; and
(f) in the case of Fitch, at Fitch, Inc., 1 State Street
Plaza, New York, New York 10004, Attention: ABS Surveillance;
or, as to each of the foregoing, at such other address as shall be designated by
written notice to the other parties.
SECTION 8.04. LIMITATIONS ON RIGHTS OF OTHERS. The provisions of this
Agreement are solely for the benefit of the Servicer, the Issuer and the
Trustee, on behalf of itself and the Securitization Bondholders, and nothing in
this Agreement, whether express or implied, shall be construed to give to any
other Person any legal or equitable right, remedy or claim in any Collateral or
under or in respect of this Agreement or any covenants, conditions or provisions
contained herein.
SECTION 8.05. SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
-21-
25
SECTION 8.06. SEPARATE COUNTERPARTS. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 8.07. HEADINGS. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 8.08. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF MICHIGAN, WITHOUT REFERENCE TO ITS
CONFLICT OF LAWS PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 8.09. ASSIGNMENT TO THE TRUSTEE.
(a) The Servicer hereby acknowledges and consents to any
pledge, assignment and grant of a security interest by the Issuer to
the Trustee pursuant to the Indenture for the benefit of the
Securitization Bondholders of all right, title and interest of the
Issuer in, to and under the Securitization Property owned by the Issuer
and the proceeds thereof and the assignment of any or all of the
Issuer's rights hereunder to the Trustee.
(b) In no event shall the Trustee have any liability for the
representations, warranties, covenants, agreements or other obligations
of the Issuer hereunder or in any of the certificates, notices or
agreements delivered pursuant hereto, as to all of which recourse shall
be had solely to the assets of the Issuer.
SECTION 8.10. NONPETITION COVENANTS. Notwithstanding any prior
termination of this Agreement or the Indenture, the Servicer hereby covenants
and agrees that it shall not, prior to the date which is one year and one day
after the termination of the Indenture and the payment in full of the
Securitization Bonds, any other amounts owed under the Indenture, including,
without limitation, any amounts owed to third-party credit enhancers, and any
amounts owed by the Issuer under any Interest Rate Swap Agreement, acquiesce in,
petition or otherwise invoke or cause the Issuer to invoke the process of any
court or government authority for the purpose of commencing or sustaining a case
against the Issuer under any federal or state bankruptcy, insolvency or similar
law or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Issuer or any substantial part of
the property of the Issuer, or ordering the winding up or liquidation of the
affairs of the Issuer.
SECTION 8.11. TERMINATION. This Agreement shall terminate when all
Securitization Bonds have been retired, redeemed or defeased in full in
accordance with the Indenture.
SECTION 8.12. INTERCREDITOR AGREEMENT. The Issuer and the Servicer are
parties to an intercreditor agreement with the parties referred to in Section
7.01(e). So long as such intercreditor agreement remains in effect, to the
extent of inconsistencies, if any, herewith, the intercreditor agreement shall
govern.
-22-
26
IN WITNESS WHEREOF, the parties hereto have caused this Securitization
Property Servicing Agreement to be duly executed by their respective officers as
of the day and year first above written.
THE DETROIT EDISON SECURITIZATION FUNDING LLC,
as Issuer
By:
-------------------------------------------
Name:
Title:
THE DETROIT EDISON COMPANY,
as Servicer
By:
-------------------------------------------
Name:
Title:
Acknowledged and Accepted:
THE BANK OF NEW YORK,
not in its individual capacity but solely as
Trustee on behalf of the Holders of the
Securitization Bonds
By:
-------------------------------------------
Name:
Title:
S-1
27
EXHIBIT A
CERTIFICATE OF COMPLIANCE
The undersigned hereby certifies that he/she is the duly elected and
acting [________] of The Detroit Edison Company, as servicer (the "Servicer")
under the Securitization Property Servicing Agreement, dated as of [ ] (the
"Servicing Agreement"), between the Servicer and The Detroit Edison
Securitization Funding LLC (the "Issuer"), and further certifies on behalf of
the Servicer that:
1. A review of the activities of the Servicer and of its performance
under the Servicing Agreement during the [twelve] months ended December 31,
[___] has been made under the supervision of the undersigned pursuant to Section
3.03 of the Servicing Agreement; and
2. To the undersigned's knowledge, based on such review, the Servicer
has fulfilled all of its material obligations in all material respects under the
Servicing Agreement throughout the [twelve] months ended December 31, [___],
except as listed on Annex A hereto.
Executed as of this _______ day of ___________ .
By:
-------------------------------------------
Name:
Title:
28
ANNEX A TO EXHIBIT A
LIST OF SERVICER DEFAULTS
Nature of Default Status
29
EXHIBIT B
FORM OF ROUTINE TRUE-UP ADJUSTMENT REQUEST
DATE:
Executive Secretary
Michigan Public Service Commission
6545 Mercantile Way, Suite 7
Lansing, MI 48911
Re: Case No. U-12478
Dear :
As required by Section 10k(3) of 2000 PA 142 and pursuant to the Order dated
November 2, 2000 in Case No. U-12478 as clarified by an Order dated January 4,
2001 ("Financing Order"), The Detroit Edison Company ("Company") as Servicer (or
any successor Servicer) of the Securitization Bonds, Series 2001-1
("Securitization Bonds"), and on behalf of the trustee as assignee of The
Detroit Edison Securitization Funding LLC hereby requests an adjustment to the
Securitization Bond Charge ("SB Charge") and the securitization bond tax charge
(the "Tax Charge").
This proposed adjustment is intended to satisfy Section 10k(3) and the Financing
Order by ensuring that the SB Charge will recover amounts sufficient to timely
provide all payments of debt service and other required amounts and charges in
connection with the Securitization Bonds as it [increases] [decreases] the
charges due to [reduced] [increased] projected energy consumption levels
[Explain other facts]. The proposed adjustment to the Tax Charge will ensure
recovery of the associated tax liability.
Using the formula approved by the Commission in the Financing Order, this filing
modifies the variables used in the SB Charge and provides the resulting adjusted
SB Charge and Tax Charge. Attachment A shows, among other things, the revised
assumptions and values for each of the variables used in calculating the
proposed adjusted SB Charge, and Tax Charge, which is _______ (mills/kWh) and
_______ (mills/kWh) respectively.
In accordance with the Financing Order, the Company requests that the Commission
review and approve, on an expedited basis, the arithmetic computations set forth
Attachment A. Assuming such review and approval, these changes shall be
effective no later than [insert date 45 days after letter date].
Respectfully submitted,
Attachment
30
ATTACHMENT A TO EXHIBIT B
Table I below shows the current assumptions for each of the variables used in
the SB Charge and Tax Charge calculation.
TABLE I
INPUT VALUES FOR SB CHARGE
a) Most recent payment date for which payment data is available ("Measure
Date"):
b) Last payment date related to this remittance period ("Target Date"):
c) Annual ongoing transaction expenses to be paid through Target Date:
d) Unpaid ongoing transaction expenses following payments on Measure Date:
e) Required annual overcollateralization amount:
f) Overcollateralization account deficiency following payments on Measure
Date:
g) Capital account deficiency following payments on Measure Date:
h) Expected annual principal payments through Target Date:
i) Unpaid principal payments following payments on Measure Date:
j) Interest payments on outstanding principal to be paid through Target Date:
k) Unpaid interest following payments on Measure Date:
l) Total annual revenue requirement (sum of c. through k. above):
m) Amounts on deposit in reserve account following payments on Measure Date:
n) Collections expected to be realized in this remittance period from prior SB
Charge:
o) Required Debt Service (l. - m. - n.):
p) KWh consumption on which SB Charge is expected to be billed and collected
in this remittance period:
q) Federal corporate income tax rate
r) Michigan single business tax rate
s) Adjusted SB Charge ((cent)/kWh) (o./p.):
t) Adjusted Tax Charge:
TABLE II
INPUT VALUES FOR WEIGHTED AVERAGE DAYS SALES OUTSTANDING
a) Weighted Average Days Sales Outstanding ("WAD"):
b) WAD: Percent of billed amounts collected in current month:
c) WAD: Percent of billed amounts collected in second month after billing:
d) WAD: Percent of billed amounts collected in third month after billing:
e) WAD: Percent of billed amounts collected in fourth month after billing:
f) WAD: Percent of billed amounts collected in fifth month after billing:
g) Annual charge-offs for most recent reconciliation period:
31
EXHIBIT C
FORM OF MONTHLY SERVICER CERTIFICATE
Pursuant to Section 4.01(d)(ii) of the Securitization Property
Servicing Agreement, dated as of [ ] (the "Agreement"), between The Detroit
Edison Company, as servicer (the "Servicer") and The Detroit Edison
Securitization 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 SB Charge:
c) Total SB Charge Amount Invoiced this Month:
d) Cumulative SB Charge Amount Invoiced this Remittance Period:
2. REMITTANCES:
a) Weighted Average Days Outstanding:
b) Total Amount Remitted this Month:
c) Cumulative Amount Remitted this Remittance Period:
3. BALANCES ON SUBACCOUNTS (AT END OF MONTHLY PERIOD):
a) Reserve Subaccount Balance:
b) Series Overcollateralization Subaccount Balance:
c) Series Capital Subaccount Balance:
Executed as of this _____________ day of ___________.
THE DETROIT EDISON COMPANY
as Servicer
By:
-------------------------------------------
Name:
Title:
32
EXHIBIT D
FORM OF SEMIANNUAL SERVICER CERTIFICATE
Pursuant to Section 4.01(d)(iii) of the Securitization Property
Servicing Agreement, dated as of [ ] (the "Agreement"), between The Detroit
Edison Company, as servicer and The Detroit Edison Securitization 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. ESTIMATED SB CHARGE PAYMENTS 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. TOTAL AMOUNT REMITTED FOR THIS PERIOD (SUM OF I. THROUGH VI. ABOVE):
viii. Net Earnings on Collection Account: ix. Expenses Paid to Date:
X. GENERAL SUBACCOUNT BALANCE (SUM OF VII. AND VIII. ABOVE MINUS IX.):
xi. Reserve Subaccount Balance
xii. Overcollateralization Subaccount Balance
xiii. Capital Subaccount Balance
XIV. COLLECTION ACCOUNT BALANCE (SUM OF X. THROUGH XIII. ABOVE):
2. OUTSTANDING PRINCIPAL BALANCE AS OF PRIOR PAYMENT DATE BY TRANCHE:
i. Class A-1 Principal Balance Outstanding Securitization Bond:
ii. Class A-2 Principal Balance Outstanding Securitization Bond:
iii. Class A-3 Principal Balance Outstanding Securitization Bond:
iv. Class A-4 Principal Balance Outstanding Securitization Bond:
v. Class A-5 Principal Balance Outstanding Securitization Bond:
vi. Class A-6 Principal Balance Outstanding Securitization Bond:
VII. TOTAL SECURITIZATION BOND PRINCIPAL BALANCE:
33
3. REQUIRED FUNDING/PAYMENTS AS OF CURRENT PAYMENT DATE:
A) PROJECTED PRINCIPAL BALANCES AND PAYMENTS
Projected
Principal Balance Principal Due
----------------- -------------
i. Class A-1 Securitization Bond
ii. Class A-2 Securitization Bond
iii Class A-3 Securitization Bond
iv. Class A-4 Securitization Bond
v. Class A-5 Securitization Bond
vi. Class A-6 Securitization Bond
VII. TOTAL PROJECTED PRINCIPAL AMOUNT:
B) REQUIRED INTEREST PAYMENTS
Securitization Bond Days in Interest
Interest Rate Applicable Period Due
------------------ ----------------- --------
i. Class A-1 Securitization Bond
ii. Class A-2 Securitization Bond
iii. Class A-3 Securitization Bond
iv. Class A-4 Securitization Bond
v. Class A-5 Securitization Bond
vi. Class A-6 Securitization Bond
VII. TOTAL REQUIRED INTEREST AMOUNT:
C) PROJECTED SUBACCOUNT PAYMENTS AND LEVELS
Subaccount Projected Level Funding Required
---------- --------------- ----------------
i. Capital Subaccount:
ii. Overcollateralization Subaccount:
III. TOTAL SUBACCOUNT PAYMENTS AND LEVELS:
4. ALLOCATION OF REMITTANCES AS OF CURRENT PAYMENT DATE PURSUANT TO SECTION
8.02 OF INDENTURE:
A) SEMIANNUAL EXPENSES
Net Expense Amount (Payable on current Payment Date)
i. Trustee Fees and Expenses:
ii. Semiannual Total of Servicing Fee:
iii. Semiannual Administration Fee:
iv. Operating Expenses (subject to $100,000 cap):
V. TOTAL EXPENSES:
34
B) SEMIANNUAL INTEREST
Aggregate
---------
i. Class A-1 Securitization Bond
ii. Class A-2 Securitization Bond
iii Class A-3 Securitization Bond
iv. Class A-4 Securitization Bond
v. Class A-5 Securitization Bond
vi. Class A-6 Securitization Bond
VII. TOTAL SEMIANNUAL INTEREST:
C) SEMIANNUAL PRINCIPAL
Aggregate
---------
i. Class A-1 Securitization Bond
ii. Class A-2 Securitization Bond
iii Class A-3 Securitization Bond
iv. Class A-4 Securitization Bond
v. Class A-5 Securitization Bond
vi. Class A-6 Securitization Bond
VII. TOTAL SEMIANNUAL PRINCIPAL:
D) OTHER PAYMENTS
i. Operating Expenses (in excess of $100,000):
ii. Funding of Series Capital Subaccount (to required amount):
iii. Funding of Series Overcollateralization Subaccount (to required level):
iv. Deposits to Reserve Subaccount:
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 Securitization Bond:
ii. Class A-2 Principal Balance Outstanding Securitization Bond:
iii. Class A-3 Principal Balance Outstanding Securitization Bond:
iv. Class A-4 Principal Balance Outstanding Securitization Bond:
v. Class A-5 Principal Balance Outstanding Securitization Bond:
vi. Class A-6 Principal Balance Outstanding Securitization Bond:
VII. TOTAL SECURITIZATION BOND PRINCIPAL BALANCE:
B) COLLECTION ACCOUNT BALANCES OUTSTANDING:
i. Series Capital Subaccount:
ii. Series Overcollateralization Subaccount:
iii. Reserve Subaccount:
IV. TOTAL SUBACCOUNT AMOUNT:
35
6. SUBACCOUNT BALANCES AS OF CURRENT PAYMENT DATE (IF APPLICABLE, PURSUANT TO
SECTION 8.02 OF INDENTURE):
i. Series Capital Subaccount:
ii. Series Overcollateralization Subaccount:
iii. Reserve Subaccount:
IV. TOTAL SUBACCOUNT BALANCES:
7. SHORTFALLS IN INTEREST AND PRINCIPAL PAYMENTS AS OF CURRENT PAYMENT DATE
(IF APPLICABLE):
A) SEMIANNUAL INTEREST SHORTFALL
i. Class A-1 Securitization Bond
ii. Class A-2 Securitization Bond
iii Class A-3 Securitization Bond
iv. Class A-4 Securitization Bond
v. Class A-5 Securitization Bond
vi. Class A-6 Securitization Bond
VII. TOTAL SEMIANNUAL INTEREST SHORTFALL:
B) SEMIANNUAL PRINCIPAL SHORTFALL
i. Class A-1 Securitization Bond
ii. Class A-2 Securitization Bond
iii Class A-3 Securitization Bond
iv. Class A-4 Securitization Bond
v. Class A-5 Securitization Bond
vi. Class A-6 Securitization Bond
VII. TOTAL SEMIANNUAL PRINCIPAL SHORTFALL:
8. SHORTFALLS IN REQUIRED SUBACCOUNT LEVELS AS OF CURRENT DISTRIBUTION DATE:
i. Series Capital Subaccount:
ii. Series Overcollateralization Subaccount:
III. TOTAL SUBACCOUNT SHORTFALLS:
36
IN WITNESS WHEREOF, the undersigned has duly executed and delivered
this Semiannual Servicer Certificate this ___ day of ____, ____.
THE DETROIT EDISON COMPANY, as Servicer
By:
-------------------------------------------
Name:
Title:
37
EXHIBIT E
FORM OF ANNUAL RECONCILIATION
Pursuant to Section 4.03(b) of the Securitization Property Servicing
Agreement, dated as of [ ], between The Detroit Edison Company, as servicer (the
"Servicer") and The Detroit Edison Securitization Funding LLC, the Servicer does
hereby certify as follows:
For the Reconciliation Period:_____________ to _____________
1. CALCULATION OF REMITTANCE SHORTFALL OR REMITTANCE EXCESS:
a) System-wide Billed Revenues:
b) System-wide Charge-Offs:
c) Actual Charge-Off % (b / a):
f) "Estimated Charge-Off Percent":
g) kWh Consumption ( [ ] to [ ]):
h) SB Charge ( [ ] to [ ]):
i) [Billed SB Charges ( [ ] to [ ]) (g x h):]
j) kWh Consumption ( [ ] to [ ]):
k) SB Charge ( [ ] to [ ]):
l) [Billed SB Charges ( [ ] to [ ]) (j x k):]
m) Deemed SB Charge Payments ([100% - c] x [i + l]):
n) Estimated SB Charge Payments ([100% - f] x [i + l]):
o) Remittance Shortfall (m - n, if positive):
p) Remittance Excess (n - m, if positive):
Executed as of this _____________ day of ___________.
THE DETROIT EDISON COMPANY,
as Servicer
By:
-------------------------------------------
Name:
Title:
38
EXHIBIT F
PROCEEDINGS
39
ANNEX I
SERVICING PROCEDURES
The Servicer agrees to comply with the following servicing procedures:
SECTION 1. DEFINITIONS
Capitalized terms used herein and not otherwise defined herein shall
have the meanings set forth in the Agreement and Appendix A thereto.
SECTION 2. DATA ACQUISITION
(a) Installation and Maintenance of Meters. 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 MPSC Regulations.
(c) Cost of Metering. The Issuer shall not be obligated to pay any
costs associated with the metering duties set forth in this Section 2, including
the costs of installing, replacing and maintaining meters, nor shall the Issuer
be entitled to any credit against the Servicing Fee for any cost savings
realized by the Servicer 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 MPSC Regulations) in accordance with the
Servicer Policies and Practices and shall determine therefrom Billed SB Charges.
SECTION 4. BILLING
(a) The Servicer shall implement the SB Charge as soon as practical and
shall thereafter bill each Customer for each Customer's Billed SB 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. In the event that the Servicer makes any material modification to
the Servicer Policies and Practices, it shall notify the Issuer, the 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 Securitization Bondholders.
40
(c) Format.
(i) Each Bill to a Customer shall contain or be deemed to contain a
Securitization Charge that shall include the SB Charge owed by such Customer for
the applicable billing period.
(ii) Each Bill shall identify the SB Charge and shall state that
the entire SB Charge is owned by the 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 as MPSC
Regulations shall from time to time prescribe. To the extent that Bill format,
structure and text are not prescribed by applicable law or by MPSC 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. The
Servicer 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.
2
41
SECTION 6. CUSTOMER SERVICE FUNCTIONS
The Servicer shall handle all Customer inquiries and other Customer
service matters according to the Servicer Policies and Practices.
SECTION 7. COLLECTIONS; PAYMENT PROCESSING; REMITTANCE
(a) Collection Efforts, Policies, Procedures.
(i) The Servicer shall collect Billed SB Charges from Customers 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 in accordance with MPSC Regulations and the Servicer Policies and
Practices.
(B) The Servicer shall deliver past-due and shut-off notices in
accordance with MPSC Regulations and the Servicer Policies and Practices.
(C) The Servicer may employ the assistance of collection agents
in accordance with MPSC Regulations and the Servicer Policies and Practices.
(D) The Servicer shall apply Customer deposits to the payment
of delinquent accounts in accordance with MPSC Regulations and the Servicer
Polices and Practices.
(ii) The Servicer shall not waive any late payment charge or any
other fee or charge relating to delinquent payments, if any, or waive, vary or
modify any terms of payment of any amounts payable by a Customer, in each case
unless such waiver or action: (A) would be in accordance with the Servicer
Policies and Practices and (B) would comply in all material respects with
applicable law.
(iii) The Servicer shall accept payment from Customers in respect
of Billed SB Charges in such forms and methods and at such times and places in
accordance with the Servicer Policies and Practices.
(b) Payment Processing, Allocation, Priority of Payments. The Servicer
shall post all payments received to Customer accounts as promptly as
practicable, and, in any event, substantially all payments shall be posted no
later than two Servicer Business Days after receipt.
(c) Investment of Estimated SB Charge Payments Received. Prior to
remittance on the applicable Remittance Date, the Servicer may invest Estimated
SB Charge Payments at its own risk and for its own benefit, and such investments
and funds shall not be required to be segregated from the other investments and
funds of the Servicer. The Servicer shall be entitled to retain as additional
compensation any interest earnings on Estimated SB Charge Payments invested by
it.
3
42
(d) Calculation of Estimated SB Charge Payments and Deemed SB Charge
Payments; Remittances. In accordance with Section 4.03(a) of the Agreement, the
Servicer shall remit to the Trustee for deposit in the Collection Account an
amount equal to the product of the Billed SB Charges for a particular billing
date multiplied by the result of one hundred percent less the Estimated
Charge-Off Percent. Such product shall constitute the amount of Estimated SB
Charge Payments. Pursuant to Section 4.03(b) of the Agreement, on or before [ ]
of each year, the Servicer shall calculate the amount of Deemed SB Charge
Payments by multiplying the Billed SB Charges by the result of one hundred
percent less the Actual Charge-Off Percent.
(e) Remittances.
(i) The Issuer shall cause to be established the Collection Account
in the name of the Trustee in accordance with Section 8.02 of the 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 Issuer has provided at least
fifteen (15) Servicer Business Days written notice thereof to the Servicer.
(f) Partial Collections. Upon a partial payment of amounts billed,
including amounts billed under special contracts, such partial payments shall be
allocated ratably among the SB Charge, the SB Tax Charge (as defined in the
Financing Order) and the Seller's other billed amounts (including any accrued
interest and late fees) based on the ratio of each component of the bill to the
total bill.
SECTION 8. Alternative Energy Suppliers
The Servicer shall not permit any AES to bill or collect SB Charges on
behalf of the Issuer unless required by applicable law or regulation and, to the
extent permitted by applicable law or regulation, the Rating Agency Condition is
satisfied.
4