Document:

Exhibit 10.1

   

   

  TRANSITION PROPERTY SERVICING AGREEMENT

   

  by and between

   

  AEP TEXAS RESTORATION FUNDING LLC,

   

  Issuer

   

  and

   

  AEP TEXAS INC.,

   

  Servicer

   

  Dated as of September 18, 2019

  
    
      
 

  

  
  TABLE OF CONTENTS

   

  Page

   

  	 ARTICLE I 

          DEFINITIONS
	SECTION 1.01.            

        	Definitions	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 Transition Property	2
	 ARTICLE III 

          ROLE OF SERVICER
	SECTION 3.01.            

        	Duties of Servicer	3
	SECTION 3.02.           

        	Servicing and Maintenance Standards	5
	SECTION 3.03.           

        	Annual Reports on Compliance with Regulation AB	6
	SECTION 3.04.          

        	Annual Report by Independent Registered Public Accountants	7
	SECTION 3.05.           

        	Monitoring of Third-Party Collectors	7
	 ARTICLE IV 

          SERVICES RELATED TO TRUE-UP ADJUSTMENTS
	SECTION 4.01.            

        	True-Up Adjustments	10
	SECTION 4.02.             

        	Limitation of Liability	14
	 ARTICLE V 

          THE TRANSITION PROPERTY
	SECTION 5.01.           

        	Custody of Transition Property Records	15
	SECTION 5.02.            

        	Duties of Servicer as Custodian	15
	SECTION 5.03.            

        	Custodian’s Indemnification	16
	SECTION 5.04.            

        	Effective Period and Termination	17
	 ARTICLE VI

          THE SERVICER
	SECTION 6.01.           

        	Representations and Warranties of Servicer	17
	SECTION 6.02.            

        	Indemnities of Servicer; Release of Claims	19
	SECTION 6.03.            

        	Binding Effect of Servicing Obligations	21
	SECTION 6.04.            

        	Limitation on Liability of Servicer and Others	22
	SECTION 6.05.            

        	AEP Texas Not to Resign as Servicer	22
	SECTION 6.06.            

        	Servicing Compensation	22
	SECTION 6.07.            

        	Compliance with Applicable Law	23
	SECTION 6.08.           

        	Access to Certain Records and Information Regarding Transition Property	23

  
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  	SECTION 6.09.          

        	Appointments	24
	SECTION 6.10.          

        	No Servicer Advances	24
	SECTION 6.11.           

        	Remittances	24
	SECTION 6.12.          

        	Maintenance of Operations	25
	 ARTICLE VII 

          DEFAULT
	SECTION 7.01.          

        	Servicer Default	25
	SECTION 7.02.         

        	Appointment of Successor	27
	SECTION 7.03.         

        	Waiver of Past Defaults	28
	SECTION 7.04.          

        	Notice of Servicer Default	28
	SECTION 7.05.         

        	Cooperation with Successor	28
	 ARTICLE VIII 

          MISCELLANEOUS PROVISIONS
	SECTION 8.01.          

        	Amendment	28
	SECTION 8.02.          

        	PUCT Condition	29
	SECTION 8.03.        

        	Maintenance of Accounts and Records	31
	SECTION 8.04.          

        	Notices	31
	SECTION 8.05.         

        	Assignment	31
	SECTION 8.06.         

        	Limitations on Rights of Others	32
	SECTION 8.07.          

        	Severability	32
	SECTION 8.08.         

        	Separate Counterparts	32
	SECTION 8.09.          

        	Headings	32
	SECTION 8.10.           

        	GOVERNING LAW	32
	SECTION 8.11.        

        	Assignment to Indenture Trustee	33
	SECTION 8.12.         

        	Nonpetition Covenants	33
	SECTION 8.13.          

        	Limitation of Liability	33
	SECTION 8.14.          

        	Rule 17g-5 Compliance	33

   

  EXHIBITS AND SCHEDULES

   

  	Exhibit A	 Form of Monthly Servicer’s Certificate
	Exhibit B	 Form of Semi-Annual Servicer’s Certificate
	Exhibit C-1	 Form of Regulation AB Servicer’s Certificate
	Exhibit C-2	 Form of Certificate of Compliance
	Schedule 4.01(a)	 Expected Amortization Schedule

   

  ANNEXES

   

  	Annex I	Servicing Procedures

  
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  This TRANSITION PROPERTY SERVICING AGREEMENT (this “Agreement”), dated as of September 18, 2019, is between AEP TEXAS RESTORATION FUNDING LLC, a Delaware
    limited liability company, as issuer (the “Issuer”), and AEP TEXAS INC. (“AEP Texas”), a Delaware corporation, as servicer (the “Servicer”).

   

  RECITALS

   

  WHEREAS, pursuant to the Securitization Law and the Financing Order, AEP Texas, in its capacity as seller (the “Seller”), and the Issuer are concurrently
    entering into the Sale Agreement pursuant to which the Seller is selling and the Issuer is purchasing certain Transition Property created pursuant to the Securitization Law and the Financing Order described therein;

   

  WHEREAS, in connection with its ownership of the Transition Property and in order to collect the associated System Restoration Charges, the Issuer desires to engage
    the Servicer to carry out the functions described herein (such functions or similar functions currently performed by the Servicer for itself with respect to its own charges to its customers and for AEP Texas Central Funding II LLC and AEP Texas Central
    Funding III LLC with respect to two prior transactions under the Securitization Law) and the Servicer desires to be so engaged;

   

  WHEREAS, the Issuer desires to engage the Servicer to act on its behalf in obtaining Annual True-Up Adjustments, Non-Standard True-Up Adjustments and Interim True-Up
    Adjustments from the PUCT and the Servicer desires to be so engaged;

   

  WHEREAS, the SRC Collections initially will be commingled with other funds collected by the Servicer;

   

  WHEREAS, certain parties may have an interest in such commingled collections, and such parties have entered into an Intercreditor Agreement that allows AEP Texas to
    allocate the collected, commingled funds according to each party’s interest; and

   

  WHEREAS, the PUCT, or its attorney, will enforce this Agreement for the benefit of the Customers to the extent permitted by law;

   

  NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows:

   

  ARTICLE I

    DEFINITIONS

   

  SECTION 1.01.           Definitions.

   

  (a)           Unless otherwise defined herein, capitalized terms used herein shall
    have the meanings assigned to them in that certain Indenture (including Appendix A thereto) dated as of the date hereof between the Issuer and U.S. Bank National Association, a national banking association, in its capacity as the indenture
    trustee (the “Indenture Trustee”) and in its separate capacity as a securities intermediary (the “Securities Intermediary”), as the same may be amended, restated, supplemented or otherwise modified from time to time.

  
    
      
 

  

  
  (b)           All terms defined in this Agreement shall have the defined meanings
    when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein.

   

  (c)           The words “hereof,” “herein,” “hereunder” and words of similar import,
    when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement; Section, Schedule, Exhibit, Annex and Attachment references contained in this Agreement are references to Sections, Schedules,
    Exhibits, Annexes and Attachments in or to this Agreement unless otherwise specified; and the term “including” shall mean “including without limitation.”

   

  (d)           The definitions contained in this Agreement are applicable to the
    singular as well as the plural forms of such terms.

   

  (e)           Non-capitalized terms used herein which are defined in the Utilities
    Code shall, as the context requires, have the meanings assigned to such terms in the Utilities Code, but without giving effect to amendments to the Utilities Code after the date hereof which have a material adverse effect on the Issuer or the Holders.

   

  ARTICLE II

    APPOINTMENT AND AUTHORIZATION

   

  SECTION 2.01.           Appointment of Servicer; Acceptance of Appointment.
    The Issuer hereby appoints the Servicer, and the Servicer, as an independent contractor, 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 Transition Property, the Servicer shall be, and hereby is, authorized and empowered by the Issuer to (a) execute and deliver, on behalf of itself and/or the Issuer, as the case may be, any and all instruments, documents or notices, and (b) on
    behalf of itself and/or the Issuer, as the case may be, make any filing and participate in proceedings of any kind with any Governmental Authority, including with the PUCT. The Issuer shall execute and deliver to the Servicer such documents as have
    been prepared by the Servicer for execution by the Issuer and shall furnish the Servicer with such other documents as may be in the Issuer’s possession, in each case as the Servicer may determine to be necessary or appropriate to enable it to carry out
    its servicing and administrative duties hereunder. Upon the Servicer’s written request, the Issuer shall furnish the Servicer with any powers of attorney or other documents necessary or appropriate to enable the Servicer to carry out its duties
    hereunder.

   

  SECTION 2.03.           Dominion and Control Over the Transition Property.
    Notwithstanding any other provision herein, the Issuer shall have dominion and control over the Transition Property, and the Servicer, in accordance with the terms hereof, is acting solely as the servicing agent and custodian for the Issuer with
    respect to the Transition Property and the Transition Property Records. The Servicer shall not take any action that is not authorized by this Agreement, that would contravene the Utilities Code, the PUCT Regulations or the Financing Order, that is not
    consistent with its customary procedures and practices, or that shall impair the rights of the Issuer in the Transition Property, in each case unless such action is required by applicable law or court or regulatory order.

  
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  ARTICLE III

    ROLE OF SERVICER

   

  SECTION 3.01.           Duties of Servicer. The Servicer, as agent for the
    Issuer, shall have the following duties:

   

  (a)           Duties of Servicer Generally. The Servicer’s duties in general
    shall include management, servicing and administration of the Transition Property; obtaining meter reads, calculating usage (including demand and including any such usage by Customers served by a REP), billing, collections and posting of all payments
    in respect of the Transition Property; responding to inquiries by Customers, REPs, the PUCT, or any other Governmental Authority with respect to the Transition Property; delivering Bills to Customers or REPs; investigating and handling delinquencies
    (and furnishing reports with respect to such delinquencies to the Issuer), processing and depositing collections and making periodic remittances; furnishing periodic reports to the Issuer, the Indenture Trustee and the Rating Agencies; making all
    filings with the PUCT and taking such other action as may be necessary to perfect the Issuer’s ownership interests in and the Indenture Trustee’s first priority Lien on and security interest in the Transition Property; making all filings and taking
    such other action as may be necessary to perfect and maintain the perfection and priority of the Indenture Trustee’s Lien on and security interest in all System Restoration Bond Collateral; selling as the agent for the Issuer as its interests may
    appear defaulted or written off accounts in accordance with the Servicer’s usual and customary practices; taking all necessary action in connection with True-Up Adjustments as set forth herein; and performing such other duties as may be specified under
    the Financing Order to be performed by it. Anything to the contrary notwithstanding, the duties of the Servicer set forth in this Agreement shall be qualified in their entirety by any PUCT Regulations, the Financing Order, and the federal securities
    laws and the rules and regulations promulgated thereunder, including without limitation, Regulation AB, as in effect at the time such duties are to be performed. Without limiting the generality of this Section 3.01(a), in furtherance of the
    foregoing, the Servicer hereby agrees that it shall also have, and shall comply with, the duties and responsibilities relating to data acquisition, usage and bill calculation, billing, customer service functions, collections, payment processing and
    remittance set forth in Annex I hereto, as it may be amended from time to time. For the avoidance of doubt, the term “usage” when used herein refers to both kilowatt hour consumption and kilowatt demand.

   

  (b)          Reporting Functions.

   

  (i)             Monthly Servicer’s Certificate. On or before the
    twenty-fifth calendar day of each month (or if such day is not a Servicer Business Day, on the immediately preceding Servicer Business Day), the Servicer shall prepare and deliver to the Issuer, the Indenture Trustee and the Rating Agencies a written
    report substantially in the form of Exhibit A hereto (a “Monthly Servicer’s Certificate”) setting forth certain information relating to SRC Payments received by the Servicer during the Collection Period immediately preceding such date; provided,
    however, that for any month in which the Servicer is required to deliver a Servicer’s Certificate pursuant to Section 4.01(c)(ii), the Servicer shall prepare and deliver the Monthly Servicer’s Certificate no later than the date of
    delivery of such Servicer’s Certificate.

  
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  (ii)           Notification of Laws and Regulations. The Servicer
    shall immediately notify the Issuer, the Indenture Trustee and the Rating Agencies in writing of any Requirements of Law or PUCT 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 Indenture Trustee or any Rating Agency, the Servicer shall provide to the Issuer, the Indenture Trustee or such Rating Agency, as the case may be, any public financial information in respect of the Servicer, or any material information
    regarding the Transition Property to the extent it is reasonably available to the Servicer, as may be reasonably necessary and permitted by law to enable the Issuer, the Indenture Trustee or the Rating Agencies to monitor the performance by the
    Servicer hereunder; provided, however, that any such request by the Indenture Trustee shall not create any obligation for the Indenture Trustee to monitor the performance of the Servicer. In addition, so long as any of the System Restoration Bonds are
    outstanding, the Servicer shall provide the Issuer and the Indenture 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 System
    Restoration Charges applicable to each SRC Customer Class.

   

  (iv)          Preparation of Reports. The Servicer shall prepare and
    deliver such additional reports as required under this Agreement, including a copy of each Servicer’s Certificate described in Section 4.01(c)(ii), the annual Certificate of Compliance described in Section 3.03, and the Annual
    Accountant’s Report described in Section 3.04. In addition, the Servicer shall prepare, procure, deliver and/or file, or cause to be prepared, procured, delivered or filed, any reports, attestations, exhibits, certificates or other documents
    required to be delivered or filed with the SEC (and/or any other Governmental Authority) by the Issuer or the Depositor under the federal securities or other applicable laws or in accordance with the Basic Documents, including, but without limiting the
    generality of foregoing, filing with the SEC, if applicable and required by applicable law, a copy or copies of (i) the Monthly Servicer’s Certificates described in Section 3.01(b)(i) (under Form 10-D or any other applicable form), (ii) the
    Servicer’s Certificates described in Section 4.01(c)(ii) (under Form 10-D or any other applicable form), (iii) the annual statements of compliance, attestation reports and other certificates described in Section 3.03, and (iv) the
    Annual Accountant’s Report (and any attestation required under Regulation AB) described in Section 3.04. In addition, the appropriate officer or officers of the Servicer shall (in its separate capacity as Servicer) sign the Depositor’s annual
    report on Form 10-K (and any other applicable SEC or other reports, attestations, certifications and other documents), to the extent that the Servicer’s signature is required by, and consistent with, the federal securities laws and/or any other
    applicable law.

  
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  (c)           Opinions of Counsel. The Servicer shall deliver to the Issuer
    and the Indenture Trustee:

   

  (i)             promptly after the execution and delivery of this Agreement
    and of each amendment hereto, an Opinion of Counsel from external counsel of the Issuer either (A) to the effect that, in the opinion of such counsel, all filings, including filings with the PUCT and the Texas Secretary of State and all filings
    pursuant to the UCC, that are necessary under the UCC and the Securitization Law to perfect or maintain, as applicable, the Liens of the Indenture Trustee in the Transition Property have been authorized, executed and filed, and reciting the details of
    such filings or referring to prior Opinions of Counsel in which such details are given, or (B) to the effect that, in the opinion of such counsel, no such action shall be necessary to preserve, protect and perfect such Liens; and

   

  (ii)           within ninety (90) days after the beginning of each calendar
    year beginning with the first calendar year beginning more than three (3) months after the date hereof, an Opinion of Counsel from external counsel of the Issuer, dated as of a date during such ninety (90)-day period, either (A) to the effect that, in
    the opinion of such counsel, all filings, including filings with the PUCT and the Texas Secretary of State and all filings pursuant to the UCC, have been executed and filed that are necessary under the UCC and the Securitization Law to maintain the
    Liens of the Indenture Trustee in the Transition Property, and reciting the details of such filings or referring to prior Opinions of Counsel in which such details are given, or (B) to the effect that, in the opinion of such counsel, no such action
    shall be necessary to preserve, protect and perfect such Liens.

   

  Each Opinion of Counsel referred to in clause (i) or (ii) above shall specify any action necessary (as of the date of such opinion) to be taken in the
    following year to perfect or maintain, as applicable, such interest or Lien.

   

  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 Transition Property with reasonable care and in material compliance with applicable Requirements of Law, including all applicable PUCT 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 Texas in
    performing its duties as Servicer; (c) use all reasonable efforts, consistent with its customary servicing procedures, to enforce, and maintain rights in respect of, the Transition Property and to bill and collect the System Restoration Charges; (d)
    comply with all Requirements of Law, including all applicable PUCT Regulations and guidelines, applicable to and binding on it relating to the Transition Property; (e) file all PUCT notices described in the Securitization Law and file and maintain the
    effectiveness of UCC financing statements with respect to the property transferred under the Sale Agreement, and (f) take such other action on behalf of the Issuer to ensure that the Lien of the Indenture Trustee on the System Restoration Bond
    Collateral remains perfected and of first priority. The Servicer shall follow such customary and usual practices and procedures as it shall deem necessary or advisable in its servicing of all or any portion of the Transition Property, which, in the
    Servicer’s judgment, may include the taking of legal action, at the Issuer’s expense but subject to the priority of payments set forth in Section 8.02(e) of the Indenture.

  
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  SECTION 3.03.           Annual Reports on Compliance with Regulation AB.

   

  (a)           The Servicer shall deliver to the Issuer, the Indenture Trustee and the
    Rating Agencies, on or before the earlier of (a) March 31 of each year or (b) with respect to each calendar year during which the Depositor’s annual report on Form 10-K is required to be filed in accordance with the Exchange Act and the rules and
    regulations thereunder, the date on which the annual report on Form 10-K is required to be filed in accordance with the Exchange Act and the rules and regulations thereunder, certificates from a Responsible Officer of the Servicer (i) containing, and
    certifying as to, the statements of compliance required by Item 1123 (or any successor or similar items or rule) of Regulation AB, as then in effect and (ii) containing, and certifying as to, the statements and assessment of compliance required by Item
    1122(a) (or any successor or similar items or rule) of Regulation AB, as then in effect. These certificates may be in the form of, or shall include the forms attached hereto as Exhibit C-1 and Exhibit C-2 hereto, with, in the case of Exhibit

      C-1, such changes as may be required to conform to the applicable securities law.

   

  (b)           The Servicer shall use commercially reasonable efforts to obtain from
    each other party participating in the servicing function any additional certifications as to the statements and assessment required under Item 1122 or Item 1123 of Regulation AB to the extent required in connection with the filing of the annual report
    on Form 10-K; provided, however, that a failure to obtain such certifications shall not be a breach of the Servicer’s duties hereunder. The parties acknowledge that the Indenture Trustee’s certifications shall be limited to the Item
    1122 certifications described in Exhibit C of the Indenture.

   

  (c)           The initial Servicer, in its capacity as Depositor, shall post on its
    website and file with or furnish to the SEC, in periodic reports and other reports as are required from time to time under Section 13 or Section 15(d) of the Exchange Act, the information described in Section 3.07(g) of the Indenture to the
    extent such information is reasonably available to the Depositor. Except to the extent permitted by applicable law, the initial Servicer, in its capacity as Depositor, shall not voluntarily suspend or terminate its filing obligations as Depositor with
    the SEC as described in this Section 3.03(c). The covenants of the initial Servicer, in its capacity as Depositor, pursuant to this Section 3.03(c) shall survive the resignation, removal or termination of the initial Servicer as
    Servicer hereunder.

  
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  SECTION 3.04.           Annual Report by Independent Registered Public Accountants.

   

  (a)           The Servicer, at its own expense in partial consideration of the
    Servicing Fee paid to it, shall cause a firm of Independent registered public accountants (which may provide other services to the Servicer or the Seller) to prepare annually, and the Servicer shall deliver annually to the Issuer, the Indenture Trustee
    and the Rating Agencies on or before the earlier of (a) March 31 of each year, beginning March 31, 2020, or (b) with respect to each calendar year during which the Depositor’s annual report on Form 10-K is required to be filed in accordance with the
    Exchange Act and the rules and regulations thereunder, the date on which the annual report on Form 10-K is required to be filed in accordance with the Exchange Act and the rules and regulations thereunder, a report (the “Annual Accountant’s Report”)

    regarding the Servicer’s assessment of compliance with the servicing criteria set forth in Item 1122(d) of Regulation AB during the immediately preceding twelve (12) months ended December 31 (or, in the case of the first Annual Accountant’s Report to
    be delivered on or before March 31, 2020, the period of time from the date of this Agreement until December 31, 2019), in accordance with paragraph (b) of Rule 13a-18 and Rule 15d-18 of the Exchange Act and Item 1122 of Regulation AB. Such report shall
    be signed by an authorized officer of the Servicer and shall at a minimum address each of the servicing criteria specified in Exhibit C-1. In the event that the accounting firm providing such report requires the Indenture Trustee to agree or consent to
    the procedures performed by such firm, the Issuer shall direct the Indenture Trustee in writing to so agree; it being understood and agreed that the Indenture Trustee will deliver such letter of agreement or consent in conclusive reliance upon the
    direction of the Issuer, and the Indenture Trustee will not make any independent inquiry or investigation as to, and shall have no obligation or liability in respect of the sufficiency, validity or correctness of such procedures.

   

  (b)          The Annual Accountant’s Report shall also indicate that the accounting
    firm providing such report is independent of the Servicer in accordance with the Rules of the Public Company Accounting Oversight Board, and shall include any attestation report required under Item 1122(b) of Regulation AB (or any successor or similar
    items or rule), as then in effect.

   

  SECTION 3.05.           Monitoring of Third-Party Collectors. From time to
    time, until the Retirement of the System Restoration Bonds, the Servicer shall, in accordance with the Servicing Standard, take all actions with respect to Third-Party Collectors required to be taken by the Servicer as set forth, if applicable, in any
    agreement with the Servicer, the Financing Order, Tariff, other tariffs and any other PUCT Regulations in effect from time to time and implement such additional procedures and policies as are necessary to ensure that the obligations of all Third-Party
    Collectors in connection with System Restoration Charges are properly enforced in accordance with, if applicable, the terms of any agreement with the Servicer, the Financing Order, Tariff, other tariffs and any other PUCT Regulations in effect from
    time to time. Such procedures and policies shall include the following:

   

  (a)           Maintenance of Records and Information. In addition to any
    actions required by the Tariff, PUCT Regulations or other applicable law, the Servicer shall:

   

  (i)             maintain adequate records for promptly identifying and
    contacting each Third-Party Collector;

   

  (ii)            maintain records of end-user Customers which are billed by
    Third-Party Collectors to permit prompt transfer of billing responsibilities in the event of default by such Third-Party Collectors;

  
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  (iii)           maintain adequate records for enforcing compliance by all
    Third-Party Collectors with their obligations with respect to System Restoration Charges, including compliance with all Remittance Requirements, REP Credit Requirements and REP Deposit Requirements; and

   

  (iv)          provide to each Third-Party Collector such information
    necessary for such Third-Party Collector to confirm the Servicer’s calculation of System Restoration Charges and remittances, including, if applicable, charge-off amounts.

   

  The Servicer shall update the records described above no less frequently than quarterly.

   

  (b)          Credit and Collection Policies. The Servicer shall, to the
    fullest extent permitted under the Financing Order, impose such terms with respect to credit and collection policies applicable to Third-Party Collectors as may be reasonably necessary to prevent the then-current rating of the System Restoration Bonds
    from being downgraded, withdrawn or suspended. The Servicer shall, in accordance with and to the extent permitted by the Utilities Code, applicable PUCT Regulations and the terms of the Financing Order, include and impose the above-described terms in
    any tariffs filed under the Utilities Code which would allow REPs or other utilities to issue single bills which include System Restoration Charges to AEP Texas’ Customers. The Servicer shall periodically review the need for modified or additional
    terms based upon, among other things, (i) the relative amount of SRC Payments received through REPs relative to the Periodic Billing Requirement, (ii) the historical payment and default experience of each REP and (iii) such other credit and collection
    policies to which the REPs are subject, and if permitted by applicable law, will set out any such modified or additional terms in a supplemental tariff filed with the PUCT.

   

  (c)           Monitoring of Performance and Payment by REPs. In addition to
    any actions required by the Tariff, PUCT Regulations or other applicable law, the Servicer shall undertake to do the following:

   

  (i)             The Servicer shall require each REP to pay all System
    Restoration Charges (less any applicable charge-off allowances) billed to such REP in accordance with the provisions of the Tariff, other tariffs and PUCT Regulations (whether or not disputed). The Servicer shall monitor compliance by each REP with all
    Remittance Requirements, REP Credit Requirements and REP Deposit Requirements and take prompt action to enforce such requirements.

   

  (ii)           Where a REP is responsible for billing the Customers, the
    Servicer shall, consistent with its customary billing practices, bill each Applicable REP no less frequently than the billing cycle otherwise applicable to such Customers.

   

  (iii)           The Servicer shall work with REPs to resolve any disputes
    using the dispute resolution procedures established in the Tariff and any PUCT Regulations, in accordance with the Servicing Standard.

  
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  (d)          Enforcement of REP Obligations. The Servicer shall, in accordance
    with the terms of the Tariff, ensure that each REP remits all SRC Payments which it is obligated to remit to the Servicer. In the event of any default by any REP, the Servicer shall enforce all rights set forth in and take all other steps permitted by,
    if applicable, the Financing Order, Tariff, other tariffs and any other PUCT Regulations as it determines, in accordance with the Servicing Standard, are reasonably necessary to ensure the prompt payment of SRC Payments by such REP and to preserve the
    rights of the Holders with respect thereto, including, where appropriate, terminating the right of any REP to bill and collect System Restoration Charges or petitioning the PUCT to impose such other remedies or penalties as may be available under the
    circumstances. Any agreement entered into between the Servicer and a defaulted REP will be limited to the terms of this Agreement and will satisfy the Rating Agency Condition. In the event the Servicer has actual knowledge that a REP is in default,
    including due to the downgrade by the Rating Agencies of any party providing credit support for such REP, the Servicer shall promptly notify a Responsible Officer of the Indenture Trustee in writing of the same and, shall, if applicable, instruct the
    Indenture Trustee either to:

   

  (i)             withdraw from such REP’s REP Deposit Account and deposit
    into the Collection Account the lesser of (x) the amount of cash on deposit in such REP Deposit Account and allocable to the Transition Property at such time and (y) the amount of any System Restoration Charges then due and payable by such REP; or

   

  (ii)           make demand under any letter of credit, guarantee or other
    credit support up to the lesser of (x) the amount of such letter of credit, guarantee or other credit support and (y) the amount of any System Restoration Charges then due and payable by such REP, and forward the amounts received, if any, as a result
    of such demand to the Collection Account.

   

  The Indenture Trustee shall, within two (2) Business Days of receipt of such written notice, withdraw such funds from the REP Deposit Account or make demand under such credit support,
    as applicable, and deposit such funds withdrawn or received, as applicable, into the Collection Account.

   

  (e)           Maintenance of REP Deposit Accounts. The Servicer shall cause
    the entity acting as Indenture Trustee to maintain one or more REP Deposit Accounts as described in Section 8.02(g) of the Indenture. The Servicer shall provide written direction to the Indenture Trustee regarding the allocation and release of
    funds on deposit in the REP Deposit Accounts, as permitted or required by the Indenture, this Agreement, the Intercreditor Agreement, or the Financing Order, Tariff or PUCT Regulations. The Indenture Trustee shall be entitled to conclusively rely on
    any such written directions from the Servicer, and the Indenture Trustee shall have no duty to monitor the adequacy of amounts on deposit in any REP Deposit Account.

   

  (f)           Affiliated Third-Party Collectors. In performing its obligations
    under this Section 3.05, the Servicer shall deal with any Third-Party Collectors which are Affiliates of the Servicer on terms which are no more favorable in the aggregate to such affiliated Third-Party Collector than those used by the Servicer
    in its dealings with Third-Party Collectors that are not affiliates of the Servicer.

  
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  ARTICLE IV

    SERVICES RELATED TO TRUE-UP ADJUSTMENTS

   

  SECTION 4.01.           True-Up Adjustments. From time to time, until the
    Retirement of the System Restoration Bonds, the Servicer shall identify the need for Annual True-Up Adjustments, Mandatory Interim True-Up Adjustments, Optional Interim True-Up Adjustments and Non-Standard True-Up Adjustments and shall take all
    reasonable action to obtain and implement such True-Up Adjustments, all in accordance with the following:

   

  (a)           Expected Amortization Schedule. The Expected Amortization
    Schedule for the System Restoration Bonds is attached hereto as Schedule 4.01(a). If the Expected Amortization Schedule is revised, the Servicer shall send a copy of such revised Expected Amortization Schedule to the Issuer, the Indenture
    Trustee and the Rating Agencies promptly thereafter.

   

  (b)          True-Up Adjustments.

   

  (i)             Annual True-Up Adjustments and Filings. Each year no
    later than fifteen (15) days prior to the first billing cycle of September the Servicer
    shall: (A) update the data and assumptions underlying the calculation of the System Restoration Charges, including projected electricity usage during the next Calculation Period for each SRC Customer Class and including interest and estimated expenses
    and fees of the Issuer to be paid during such period, the Weighted Average Days Outstanding and write-offs; (B) determine the Periodic Payment Requirements and Periodic Billing Requirement for the next Calculation Period based on such updated data and
    assumptions; (C) determine the System Restoration Charges to be allocated to each SRC Customer Class during the next Calculation Period based on such Periodic Billing Requirement and the terms of the Financing Order, the Tariff and any other tariffs
    filed pursuant thereto and in doing so the Servicer shall use the method of allocating System Restoration Charges then in effect, including as applicable, the result of the implementation of the most recent Non-Standard True-Up Adjustment; (D) make all
    required notice and other filings with the PUCT to reflect the revised System Restoration Charges, including any Amendatory Tariff, and (E) take all reasonable actions and make all reasonable efforts to effect such Annual True-Up Adjustment and to
    enforce the provisions of the Securitization Law and the Financing Order; provided, however, that if the Servicer determines that the forecasted billing units for one or more of the SRC Customer Classes for an upcoming period decreases
    by more than 10% compared to the billing units for the threshold period set forth in the Financing Order, the Servicer shall implement a Non-Standard True-Up Adjustment and, if such Non-Standard True-Up Adjustment shall be made in the time period
    provided for Annual True-Up Adjustments pursuant to this Section 4.01(b)(i), such Non-Standard True-Up Adjustment shall also qualify as an Annual True-Up Adjustment for purposes of this Agreement. The Servicer shall implement the revised System
    Restoration Charges, if any, resulting from such Annual True-Up Adjustment as of the Annual True-Up Adjustment Date.

  

  
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  (ii)           Non-Standard True-Up Adjustments and Filings. In the
    event that the Servicer determines that a Non-Standard True-Up Adjustment is required, the Servicer shall, no later than ninety (90) days prior to the first billing cycle of September of each year, (A) recalculate the System Restoration Charges to
    reallocate the System Restoration Charges among SRC Customer Classes in accordance with the procedures for Non-Standard True-Up Adjustments set forth in the Financing Order and Tariff; (B) make all required notice and other filings with the PUCT to
    reflect the revised System Restoration Charges, including any Amendatory Tariff; and (C) take all reasonable actions and make all reasonable efforts to effect such Non-Standard True-Up Adjustment and to enforce the provisions of the Securitization Law
    and the Financing Order. The Servicer shall implement the revised System Restoration Charges, if any, resulting from such Non-Standard True-Up Adjustment on the Non-Standard True-Up Adjustment Date. For the avoidance of doubt, no Annual True-Up
    Adjustment or Interim True-Up Adjustment shall be considered a Non-Standard True-Up Adjustment solely because System Restoration Charges are allocated under such Annual True-Up Adjustment or Interim True-Up Adjustment in the same manner as in a
    preceding Non-Standard True-Up Adjustment.

   

  (iii)           Mandatory Interim True-Up Adjustments and Filings.
    Within the 30-day period ending on March 1 of each year, commencing March 1, 2020 and, if there are any System Restoration Bonds Outstanding following the last Scheduled Final Payment Date, within 30 days of the dates which are three months, six
    months, nine months and one year after the last Scheduled Final Payment Date (but in no event later than November 1, 2029), the Servicer shall (A) update the data and assumptions underlying the calculation of the System Restoration Charges, including
    projected electricity usage during the next Calculation Period for each SRC Customer Class and including interest and estimated expenses and fees of the Issuer to be paid during such period, the rate of delinquencies and write-offs; (B) determine the
    Periodic Payment Requirement and Periodic Billing Requirement for the next Calculation Period based on such updated data and assumptions; and (C) based upon such updated data and requirements, forecast whether SRC Collections together with available
    fund balances in the Excess Funds Subaccount, will be sufficient, (i) to make on a timely basis all scheduled payments of interest, principal and other amounts payable in respect of each Outstanding Tranche of System Restoration Bonds during such
    Calculation Period and (ii) to maintain the Capital Subaccount at the Required Capital Level. If the Servicer determines that SRC Collections will not be sufficient for such purposes, the Servicer shall, no later than fifteen (15) days prior to the end
    of each such thirty (30) day period (1) determine the System Restoration Charges to be allocated to each SRC Customer Class during the next Calculation Period based on such Periodic Billing Requirement and the terms of the Financing Order and the
    Tariff, and in doing so the Servicer shall use the method of allocating System Restoration Charges then in effect, including as applicable, the result of the implementation of the most recent Non-Standard True-Up Adjustment; (2) make all required
    notice and other filings with the PUCT to reflect the revised System Restoration Charges, including any Amendatory Tariff; and (3) take all reasonable actions and make all reasonable efforts to effect such Interim True-Up Adjustment and to enforce the
    provisions of the Securitization Law and the Financing Order.

  

  
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  (iv)          Optional Interim True-Up Adjustments and Filings. In
    addition to the True-Up Adjustments described above in Sections 4.01(b)(i), (ii) and (iii), the Servicer may implement an additional True-Up Adjustment (in the same manner as provided for the Mandatory Interim True-Up
    Adjustments) at any time (a) if the Servicer forecasts that SRC Collections during the current Calculation Period will be insufficient to make all scheduled payments of principal, interest, and other amounts in respect of the System Restoration Bonds
    on a timely basis during such Calculation Period; (b) to replenish any draws upon the Capital Subaccount.; and/or (c) generally to correct any under-collection or over-collection in order to assure timely payment of System Restoration Bonds.

   

  (c)          Reports.

   

  (i)             Notification of Amendatory Tariff Filings and True-Up
      Adjustments. Whenever the Servicer files an Amendatory Tariff with the PUCT or implements revised System Restoration Charges with notice to the PUCT without filing an Amendatory Tariff if permitted by the Financing Order, the Servicer shall send
    a copy of such filing or notice (together with a copy of all notices and documents which, in the Servicer’s reasonable judgment, are material to the adjustments effected by such Amendatory Tariff or notice) to the Issuer, the Indenture Trustee and the
    Rating Agencies concurrently therewith. If, for any reason any revised System Restoration Charges are not implemented and effective on the applicable date set forth herein, the Servicer shall notify the Issuer, the Indenture Trustee and each Rating
    Agency by the end of the second Servicer Business Day after such applicable date.

   

  (ii)           Servicer’s Certificate. Not later than five (5)
    Servicer Business Days prior to each Payment Date or Special Payment Date, the Servicer shall deliver a written report substantially in the form of Exhibit B hereto (the “Servicer’s Certificate”) to the Issuer, the Indenture Trustee and
    the Rating Agencies which shall include all of the following information (to the extent applicable and including any other information so specified in the Series Supplement) as to the System Restoration Bonds with respect to such Payment Date or
    Special Payment Date or the period since the previous Payment Date, as applicable:

   

  		(a)	the amount of the payment to Holder allocable to principal, if any;

  
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  		(b)	the amount of the payment to Holders allocable to interest;

   

  		(c)	the aggregate Outstanding Amount of the System Restoration Bonds, before and after giving effect to any payments allocated to principal reported under clause (a) above;

   

  		(d)	the difference, if any, between the amount specified in clause (c) above and the Outstanding Amount specified in the Expected Amortization Schedule;

   

  		(e)	any other transfers and payments to be made on such Payment Date or Special Payment Date, including amounts paid to the Indenture Trustee and to the Servicer; and

   

  		(f)	the amounts on deposit in the Capital Subaccount and the Excess Funds Subaccount, after giving effect to the foregoing payments.

   

  (iii)           Reports to Customers.

   

  (A)          After each revised System Restoration Charge has gone into
    effect pursuant to a True-Up Adjustment, the Servicer shall, to the extent and in the manner and time frame required by applicable PUCT Regulations, if any, cause to be prepared and delivered to Customers any required notices announcing such revised
    System Restoration Charges.

   

  (B)           The Servicer shall comply with the requirements of the
    Financing Order and Tariff with respect to the identification of System Restoration Charges on Bills. In addition, at least once each year, the Servicer shall (to the extent that it does not separately identify the System Restoration Charges as being
    owned by the Issuer in the Bills regularly sent to Customers or REPs) cause to be prepared and delivered to such Customers and REPs a notice stating, in effect, that the Transition Property and the System Restoration Charges are owned by the Issuer and
    not the Seller. Unless prohibited by applicable PUCT Regulations, the Servicer shall use reasonable efforts to cause each Applicable REP, at least once each year, to include similar notices in the bills sent by such Applicable REP to Customers
    indicating additionally that the System Restoration Charges are not owned by such Applicable REP (to the extent that such Applicable REP does not include such information in the Bills regularly sent to Customers) or the Seller. Such notice shall be
    included either as an insert to or in the text of the Bills delivered to such Customers or shall be delivered to Customers by electronic means or such other means as the Servicer or the Applicable REP may from time to time use to communicate with its
    respective Customers.

   

  (C)           Except to the extent that applicable PUCT Regulations make the
    Applicable REP responsible for such costs, or the Applicable REP has otherwise agreed to pay such costs, the Servicer shall pay from its own funds all costs of preparation and delivery incurred in connection with clauses (A) and (B)
    above, including printing and postage costs as the same may increase or decrease from time to time.

  
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  (iv)          REP Reports. The Servicer shall provide to the Rating
    Agencies, upon request, any publicly available reports filed by the Servicer with the PUCT (or otherwise made publicly available by the Servicer) relating to REPs and any other non-confidential and non-proprietary information relating to REPs
    reasonably requested by the Rating Agencies to the extent such information is reasonably available to the Servicer.

   

  SECTION 4.02.           Limitation of Liability. (a) The Issuer and the
    Servicer expressly agree and acknowledge that:

   

  (i)            In connection with any True-Up Adjustment, the Servicer is
    acting solely in its capacity as the servicing agent hereunder.

   

  (ii)           Neither the Servicer nor the Issuer nor the Indenture
    Trustee is 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 make any
    filings required by Section 4.01 in a timely and correct manner or any breach by the Servicer of its duties under this Agreement that adversely affects the Transition Property or the True-Up Adjustments), by the PUCT in any way related to the
    Transition Property or in connection with any True-Up Adjustment, the subject of any filings under Section 4.01, any proposed True-Up Adjustment, or the approval of any revised System Restoration Charges and the scheduled adjustments thereto.

   

  (iii)          Except to the extent that the Servicer is liable under Section

      6.02, the Servicer shall have no liability whatsoever relating to the calculation of any revised System Restoration Charges and the scheduled adjustments thereto, including as a result of any inaccuracy of any of the assumptions made in such
    calculation regarding expected energy usage volume and the Weighted Average Days Outstanding, write-offs and estimated expenses and fees of the Issuer, so long as the Servicer has acted in good faith and has not acted in a negligent manner in
    connection therewith, nor shall the Servicer have any liability whatsoever as a result of any Person, including the Holders, not receiving any payment, amount or return anticipated or expected or in respect of any System Restoration Bond generally.

   

  (b)          Notwithstanding the foregoing, this Section 4.02 shall not
    relieve the Servicer of liability for any misrepresentation by the Servicer under Section 6.01 or for any breach by the Servicer of its other obligations under this Agreement.

  
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  ARTICLE V

    THE TRANSITION PROPERTY

   

  SECTION 5.01.           Custody of Transition Property Records. To assure
    uniform quality in servicing the Transition Property and to reduce administrative costs, the Issuer hereby revocably appoints the Servicer, and the Servicer hereby accepts such appointment, to act as the agent of the Issuer as custodian of any and all
    documents and records that the Servicer shall keep on file, in accordance with its customary procedures, relating to the Transition Property, including copies of the Financing Order, Issuance Advice Letter, Tariff and Amendatory Tariffs relating
    thereto and all documents filed with the PUCT in connection with any True-Up Adjustment and computational records relating thereto (collectively, the “Transition Property Records”), which are hereby constructively delivered to the Indenture
    Trustee, as pledgee of the Issuer with respect to all Transition Property.

   

  SECTION 5.02.           Duties of Servicer as Custodian.

   

  (a)          Safekeeping. The Servicer shall hold the Transition Property
    Records on behalf of the Issuer and maintain such accurate and complete accounts, records and computer systems pertaining to the Transition Property Records as shall enable the Issuer and the Indenture Trustee, as applicable, to comply with this
    Agreement, the Sale 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, the Indenture Trustee and the Rating Agencies any failure on its part to hold the Transition Property Records and maintain its accounts, records and
    computer systems as herein provided and promptly take appropriate action to remedy any such failure. Nothing herein shall be deemed to require an initial review or any periodic review by the Issuer or the Indenture Trustee of the Transition Property
    Records. The Servicer’s duties to hold the Transition Property Records set forth in this Section 5.02, to the extent the Transition Property Records have not been previously transferred to a successor Servicer pursuant to Article VII,
    shall terminate one year and one day after the earlier of the date on which (i) the Servicer is succeeded by a successor Servicer in accordance with Article VII and (ii) no System Restoration Bonds are Outstanding.

   

  (b)          Maintenance of and Access to Records. The Servicer shall maintain
    the Transition Property Records at 212 East 6th Street, Tulsa, Oklahoma 74119 or at such other office as shall be specified to the Issuer and the Indenture Trustee by
    written notice at least thirty (30) days prior to any change in location. The Servicer shall make available for inspection, audit and copying to the Issuer and the Indenture Trustee or their respective duly authorized representatives, attorneys or
    auditors the Transition Property Records at such times during normal business hours as the Issuer or the Indenture 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 PUCT Regulation) prohibiting disclosure of information regarding the Customers, and the failure of the Servicer to provide access to such information
    as a result of such obligation shall not constitute a breach of this Section 5.02(b).

  
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  (c)           Release of Documents. Upon instruction from the Indenture
    Trustee in accordance with the Indenture, the Servicer shall release any Transition Property Records to the Indenture Trustee, the Indenture Trustee’s agent or the Indenture Trustee’s designee, as the case may be, at such place or places as the
    Indenture Trustee may designate, as soon as practicable. Nothing in this Section 5.02(c) shall affect the obligation of the Servicer to observe any applicable law (including any PUCT Regulation) prohibiting disclosure of information regarding the
    Customers, and the failure of the Servicer to provide access to such information as a result of such obligation shall not constitute a breach of this Section 5.02(c).

   

  (d)           Defending Transition Property Against Claims. The Servicer shall
    institute any action or proceeding necessary to compel performance by each REP (at the earliest possible time) and each party to the Intercreditor Agreement of any of their respective obligations or duties under the Securitization Law, the Financing
    Order or the Intercreditor Agreement with respect to the Transition Property, and the Servicer agrees to take such legal or administrative actions, including without limitation 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 Securitization Law or the Financing Order. The costs of any action described
    in this Section 5.02(d) shall be payable from SRC Collections as an Operating Expense (and shall not be deemed to constitute a portion of the Servicing Fee) in accordance with the Indenture. The Servicer’s obligations pursuant to this Section

      5.02(d) shall survive and continue notwithstanding that payment of such Operating Expense may be delayed pursuant to the terms of the Indenture (it being understood that the Servicer may be required initially to advance its own funds to satisfy
    its obligations hereunder).

   

  (e)           Additional Litigation to Defend Transition Property. In addition
    to the above, the Servicer shall, at its own expense, institute any action or proceeding necessary to compel performance by the PUCT or the State of Texas of any of their respective obligations or duties under the Securitization Law or the Financing
    Order with respect to the Transition Property, and to compel performance by REPs with any of their respective obligations or duties under the Tariff or any agreement with the Servicer entered into pursuant to the Tariff. In any proceedings related to
    the exercise of the power of eminent domain by any municipality to acquire a portion of AEP Texas’ electric distribution facilities, the Servicer shall assert that the court ordering such condemnation must treat such municipality as a successor to AEP
    Texas under the Securitization Law and Financing Order.

   

  SECTION 5.03.           Custodian’s Indemnification. The Servicer as custodian
    shall indemnify the Issuer, any Independent Manager and the Indenture Trustee (for itself and for the benefit of the Holders) and each of their respective officers, directors, employees and agents for, and defend and hold harmless each such Person from
    and against, any and all liabilities, obligations, losses, damages, payments and claims, and reasonable costs or expenses, of any kind whatsoever (collectively, “Indemnified Losses”) that may be imposed on, incurred by or asserted against each
    such Person as the result of any negligent act or omission in any way relating to the maintenance and custody by the Servicer, as custodian, of the Transition Property Records; provided, however, that the Servicer shall not be liable
    for any portion of any such amount resulting from the willful misconduct, bad faith or negligence of the Issuer, any Independent Manager or the Indenture Trustee, as the case may be.

  
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  Indemnification under this Section 5.03 shall survive resignation or removal of the Indenture Trustee or any Independent Manager and shall include reasonable
    out-of-pocket fees and expenses of investigation and litigation (including reasonable attorney’s fees and expenses and reasonable fees, out-of-pocket expenses and costs incurred in connection with any action, claim or suit brought to enforce the
    Indenture Trustee’s right to indemnification).

   

  SECTION 5.04.           Effective Period and Termination. The Servicer’s
    appointment as custodian shall become effective as of the Closing Date and shall continue in full force and effect until terminated pursuant to this Section 5.04. If the Servicer shall resign as Servicer in accordance with the provisions of
    this Agreement or if all of the rights and obligations of the Servicer shall have been terminated under Section 7.01, the appointment of the Servicer as custodian shall be terminated effective as of the date on which the termination or
    resignation of the Servicer is effective. Additionally, if not sooner terminated as provided above, the Servicer’s obligations as custodian shall terminate one year and one day after the date on which no System Restoration Bonds are Outstanding.

   

  ARTICLE VI

    THE SERVICER

   

  SECTION 6.01.           Representations and Warranties of Servicer. The
    Servicer makes the following representations and warranties, as of the Closing Date, and as of such other dates as expressly provided in this Section 6.01, on which the Issuer and the Indenture Trustee are deemed to have relied in entering into
    this Agreement relating to the servicing of the Transition Property. The representations and warranties shall survive the execution and delivery of this Agreement, the sale of any Transition Property and the pledge thereof to the Indenture Trustee
    pursuant to the Indenture.

   

  (a)           Organization and Good Standing. The Servicer is duly organized
    and validly existing and is in good standing under the laws of the State of Texas, with the requisite corporate or other 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 the Intercreditor Agreement, and had at all relevant times, and has, the requisite power, authority and legal right to service the Transition Property and to hold
    the Transition Property Records as custodian.

   

  (b)           Due Qualification. The Servicer is duly qualified to do business
    and is in good standing, and has obtained all necessary licenses and approvals, in all jurisdictions in which the ownership or lease of property or the conduct of its business (including the servicing of the Transition Property as required by this
    Agreement and the Intercreditor Agreement) shall require such qualifications, licenses or approvals (except where the failure to so qualify would not be reasonably likely to have a material adverse effect on the Servicer’s business, operations, assets,
    revenues or properties or to its servicing of the Transition Property).

   

  (c)           Power and Authority. The execution, delivery and performance of
    this Agreement have been duly authorized by all necessary action on the part of the Servicer under its organizational or governing documents and laws.

  
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  (d)           Binding Obligation. Each of this Agreement and the Intercreditor
    Agreement constitutes a legal, valid and binding obligation of the Servicer enforceable against the Servicer in accordance with its terms, subject to applicable insolvency, reorganization, moratorium, fraudulent transfer and other laws relating to or
    affecting creditors’ rights generally from time to time in effect and to general principles of equity (including concepts of materiality, reasonableness, good faith and fair dealing), regardless of whether considered in a proceeding in equity or at
    law.

   

  (e)           No Violation. The consummation of the transactions contemplated
    by this Agreement and the Intercreditor Agreement (to the extent applicable to the Servicer’s responsibilities thereunder) and the fulfillment of the terms of each will not conflict with, result in any breach of any of the terms and provisions of, nor
    constitute (with or without notice or lapse of time) a default under, the organizational documents of the Servicer, or any indenture or other agreement or instrument to which the Servicer is a party or by which it or any of its property is bound; nor
    result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement or other instrument (other than any Lien that may be granted under the Basic Documents or any Lien created pursuant to
    Section 39.309 of the Securitization Law); nor violate any existing law or any existing order, rule or regulation applicable to the Servicer of any Governmental Authority having jurisdiction over the Servicer or its properties.

   

  (f)           No Proceedings. There are no proceedings pending and, to the
    Servicer’s knowledge, there are no proceedings threatened and, to the Servicer’s knowledge, there are no investigations pending or threatened, before any Governmental Authority having jurisdiction over the Servicer or its properties involving or
    relating to the Servicer or the Issuer or, to the Servicer’s knowledge, any other Person: (i) asserting the invalidity of this Agreement or any of the other Basic Documents, (ii) seeking to prevent the issuance of the System Restoration Bonds or the
    consummation of any of the transactions contemplated by this Agreement or any of the other Basic Documents, (iii) seeking any determination or ruling that could reasonably be expected to materially and adversely affect the performance by the Servicer
    of its obligations under, or the validity or enforceability of, this Agreement, any of the other Basic Documents or the System Restoration Bonds or (iv) seeking to adversely affect the federal income tax or state income or franchise tax classification
    of the System Restoration Bonds as debt.

   

  (g)           Approvals. No governmental approval, authorization, consent,
    order or other action of, or filing with, any Governmental Authority is required in connection with the execution and delivery by the Servicer of this Agreement or the Intercreditor Agreement, the performance by the Servicer of the transactions
    contemplated hereby or thereby or the fulfillment by the Servicer of the terms of each, except those that have been obtained or made, those that the Servicer is required to make in the future pursuant to Article IV and those that the Servicer
    may need to file in the future to continue the effectiveness of any financing statement filed under the UCC.

   

  (h)           Reports and Certificates. Each report and certificate delivered
    in connection with the Issuance Advice Letter or delivered in connection with any filing made to the PUCT by the Issuer with respect to the System Restoration Charges or True-Up 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 (and facts known to the Servicer on the date such report or certificate is delivered).

  
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  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.

   

  (b)           The Servicer shall indemnify the Issuer, the Indenture Trustee (for
    itself and for the benefit of the Holders) and any Independent Manager, and each of their respective trustees, officers, directors, employees and agents (each, an “Indemnified Person”) for, and defend and hold harmless each such Person from and
    against, any and all Indemnified Losses imposed on, incurred by or asserted against any such Person as a result of (i) the Servicer’s willful misconduct, bad faith or negligence in the performance of its duties or observance of its covenants under this
    Agreement or its reckless disregard of its obligations and duties under this Agreement or the Intercreditor Agreement, (ii) the Servicer’s breach of any of its representations and warranties contained in this Agreement or the Intercreditor Agreement,
    (iii) any litigation or related expenses relating to the Servicer’s status or obligations as Servicer (other than any proceeding the Servicer is required to institute under the Servicing Agreement) or (iv) any finding that interest payable to a REP
    with respect to disputed funds must be paid by the Issuer or from the Transition Property, except to the extent of Indemnified Losses either resulting from the willful misconduct, bad faith or gross negligence of such Person seeking indemnification
    hereunder or resulting from a breach of a representation or warranty made by such Person seeking indemnification hereunder in any of the Basic Documents that gives rise to the Servicer’s breach.

   

  (c)           For purposes of Section 6.02(b), in the event of the
    termination of the rights and obligations of AEP Texas (or any successor thereto pursuant to Section 6.03) as Servicer pursuant to Section 7.01, or a resignation by such Servicer pursuant to this Agreement, such Servicer shall be deemed
    to be the Servicer pending appointment of a successor Servicer pursuant to Section 7.02.

   

  (d)           Indemnification under this Section 6.02 shall survive any
    repeal of, modification of, or supplement to, or judicial invalidation of, the Securitization Law or the Financing Order and shall survive the resignation or removal of the Indenture Trustee or any Independent Manager or the termination of this
    Agreement and shall include reasonable out-of-pocket fees and expenses of investigation and litigation (including reasonable attorney’s fees and expenses and the reasonable fees, out-of-pocket expenses and costs incurred in connection with any action,
    claim or suit brought to enforce the Indenture Trustee’s right to indemnification).

  
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  (e)           Except to the extent expressly provided in this Agreement or the other
    Basic Documents (including the Servicer’s claims with respect to the Servicing Fee, reimbursement for any Excess Remittance, reimbursement for costs incurred pursuant to Section 5.02(d) and the payment of the purchase price of Transition
    Property), the Servicer hereby releases and discharges the Issuer, any Independent Manager and the Indenture Trustee, and each of their respective officers, directors and agents (collectively, the “Released Parties”) from any and all actions,
    claims and demands whatsoever, whenever arising, which the Servicer, in its capacity as Servicer or otherwise, shall or may have against any such Person relating to the Transition Property or the Servicer’s activities with respect thereto other than
    any actions, claims and demands arising out of the willful misconduct, bad faith or gross negligence of the Released Parties.

   

  (f)           Promptly after receipt by an Indemnified Person of notice (or, in the
    case of the Indenture Trustee, receipt of notice by a Responsible Officer only) of the commencement of any action, proceeding or investigation, such Indemnified Person shall, if a claim in respect thereof is to be made against the Servicer under this Section

      6.02, notify the Servicer in writing of the commencement thereof. 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 suffers actual prejudice as a result of such failure. With respect to any action, proceeding or investigation brought by a third party for which indemnification may be sought under this Section 6.02,
    the Servicer shall be entitled to conduct and control, at its expense and with counsel of its choosing that is reasonably satisfactory to such Indemnified Person, the defense of any such action, proceeding or investigation (in which case the Servicer
    shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the Indemnified Person except as set forth below); provided that the Indemnified Person shall have the right to participate in such action, proceeding or
    investigation through counsel chosen by it and at its own expense. Notwithstanding the Servicer’s election to assume the defense of any action, proceeding or investigation, the Indemnified Person shall have the right to employ separate counsel
    (including local counsel), and the Servicer shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the defendants in any such action include both the Indemnified Person and the Servicer and the Indemnified Person shall have
    reasonably concluded that there may be legal defenses available to it that are different from or additional to those available to the Servicer, (ii) the Servicer shall not have employed counsel reasonably satisfactory to the Indemnified Person to
    represent the Indemnified Person within a reasonable time after notice of the institution of such action or (iii) the Servicer shall authorize the Indemnified Person to employ separate counsel at the expense of the Servicer or (iv) in the case of the
    Indenture Trustee, such action exposes the Indenture Trustee to a material risk of criminal liability or forfeiture or a Servicer Default has occurred and is continuing. Notwithstanding the foregoing, the Servicer shall not be obligated to pay for the
    fees, costs and expenses of more than one separate counsel for the Indemnified Persons other than one local counsel, if appropriate.

   

  (g)          The Servicer shall indemnify the PUCT (for the benefit of Customers)
    for, and defend and hold harmless against, any and all Indemnified Losses that may be imposed upon, incurred by or asserted against the PUCT, including any increase in the Servicing Fee that becomes payable pursuant to Section 6.06, as a result
    of a Servicer Default resulting from the Servicer’s willful misconduct, bad faith or negligence in performance of its duties or observance of its covenants under this Agreement. The indemnification obligation set forth in this paragraph may be enforced
    by the PUCT but is not enforceable by any REP or any Customer. Any indemnity payments made to the PUCT under this paragraph for the benefit of Customers shall be remitted to the Indenture Trustee promptly for deposit into the Collection Account.

  
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  SECTION 6.03.           Binding Effect of Servicing Obligations. The
    obligations to continue to provide service and to collect and account for System Restoration Charges will be binding upon the Servicer and any other entity that provides transmission and distribution services or direct wire services to a Person that
    was a retail customer of AEP Texas located within the Texas AEP Central Division as of the date the Financing Order or that became a retail customer for electric services within such area after such date and is still located within such area, and to
    the successor of any such other entity. Any Person (a) into which the Servicer may be merged, converted or consolidated and which is a Permitted Successor, (b) that may result from any merger, conversion or consolidation to which the Servicer shall be
    a party and which is a Permitted Successor, (c) that may succeed to the properties and assets of the Servicer substantially as a whole and which is a Permitted Successor, (d) which results from the division of the Servicer into two or more Persons and
    which is a Permitted Successor, or (e) which otherwise is a Permitted Successor, which Person in any of the foregoing cases executes an agreement of assumption to perform all of the obligations of the Servicer hereunder, shall be the successor to the
    Servicer under this Agreement without further act on the part of any of the parties to this Agreement; provided, however, that (i) immediately after giving effect to such transaction, no representation or warranty made pursuant to Section

      6.01 shall have been breached and no Servicer Default and no event which, after notice or lapse of time, or both, would become a Servicer Default shall have occurred and be continuing, (ii) the Servicer shall have delivered to the Issuer and the
    Indenture Trustee an Officer’s Certificate and an Opinion of Counsel from external counsel stating that such consolidation, conversion, merger, division or succession and such agreement of assumption complies 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 Indenture Trustee and the Rating Agencies an Opinion of Counsel from external
    counsel of the Servicer either (A) stating that, in the opinion of such counsel, all filings to be made by the Servicer, including filings with the PUCT pursuant to the Securitization Law and the UCC, have been executed and filed and are in full force
    and effect that are necessary to fully preserve, perfect and maintain the priority of the interests of the Issuer and the Liens of the Indenture Trustee in the Transition Property and reciting the details of such filings or (B) stating that, in the
    opinion of such counsel, no such action shall be necessary to maintain such interests, (iv) the Servicer shall have delivered to the Issuer, the Indenture Trustee, the Rating Agencies and the PUCT an Opinion of Counsel from independent tax counsel
    stating that, for federal income tax purposes, such consolidation, conversion, merger, division or succession and such agreement of assumption will not result in a material federal income tax consequence to the Issuer or the Holders of System
    Restoration Bonds and (v) the Servicer shall have given the Rating Agencies prior written notice of such transaction. When any Person (or more than one Person) acquires the properties and assets of the Servicer substantially as a whole or otherwise
    becomes the successor, by merger, conversion, consolidation, sale, transfer, lease or otherwise, to all or substantially all the electric transmission and distribution business of the Servicer (or, if transmission and distribution are not provided by a
    single entity, provides wire service directly to customers taking services at facilities, premises or loads located in Texas AEP Central Division as of the date of the Financing Order in accordance with the terms of this Section 6.03, then upon
    satisfaction of all of the other conditions of this Section 6.03, the preceding Servicer shall automatically and without further notice be released from all its obligations hereunder.

  
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  SECTION 6.04.           Limitation on Liability of Servicer and Others. Except
    as otherwise provided under this Agreement, neither the Servicer nor any of the directors, officers, employees or agents of the Servicer shall be liable to the Issuer or any other Person for any action taken or for refraining from the taking of any
    action pursuant to this Agreement or for good faith errors in judgment; provided, however, that this provision shall not protect the Servicer or any such person against any liability that would otherwise be imposed by reason of willful
    misconduct, bad faith or negligence in the performance of duties or by reason of reckless disregard of obligations and duties under this Agreement or the Intercreditor 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 Indenture 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, including but not limited to Sections 5.02(d) and (e), the Servicer shall not be under any obligation to appear
    in, prosecute or defend any legal action relating to the Transition Property that is not directly related to one of the Servicer’s enumerated duties in this Agreement or related to its obligation to pay indemnification, and that in its reasonable
    opinion may cause it to incur any expense or liability; provided, however, that the Servicer may, in respect of any Proceeding, undertake any action that it is not specifically identified in this Agreement as a duty of the Servicer but
    that the Servicer reasonably determines is necessary or desirable in order to protect the rights and duties of the Issuer or the Indenture Trustee under this Agreement and the interests of the Holders and Customers under this Agreement. The Servicer’s
    costs and expenses incurred in connection with any such proceeding shall be payable from SRC Collections as an Operating Expense (and shall not be deemed to constitute a portion of the Servicing Fee) in accordance with the Indenture. The Servicer’s
    obligations pursuant to this Section 6.04 shall survive and continue notwithstanding that payment of such Operating Expense may be delayed pursuant to the terms of the Indenture (it being understood that the Servicer may be required initially
    to advance its own funds to satisfy its obligations hereunder).

   

  SECTION 6.05.           AEP Texas Not to Resign as Servicer. Subject to the
    provisions of Section 6.03, AEP Texas shall not resign from the obligations and duties hereby imposed on it as Servicer under this Agreement unless AEP Texas delivers to the Indenture Trustee and the PUCT an opinion of external counsel to the
    effect that AEP Texas’ performance of its duties under this Agreement shall no longer be permissible under applicable law. No such resignation shall become effective until a successor Servicer shall have assumed the responsibilities and obligations of
    AEP Texas in accordance with Section 7.02.

   

  SECTION 6.06.           Servicing Compensation. (a) In consideration for its
    services hereunder, until the Retirement of the System Restoration Bonds, the Servicer shall receive an annual fee (the “Servicing Fee”) in an amount equal to (i) 0.10% of the aggregate initial principal amount of all Outstanding System
    Restoration Bonds for so long as AEP Texas or an Affiliate of AEP Texas is the Servicer or (ii) if AEP Texas or any of its Affiliates is not the Servicer, an amount agreed upon by the Successor Servicer and the Indenture Trustee, provided that
    any amount in excess of 0.60% of the aggregate initial principal amount of all Outstanding System Restoration Bonds must be approved by the PUCT and the Indenture Trustee. The Servicing Fee owing shall be calculated based on the initial principal
    amount of the System Restoration Bonds and shall be paid semi-annually with half of the Servicing Fee being paid on each Payment Date. The Servicer also shall be entitled to retain as additional compensation (i) any interest earnings on SRC Payments
    received by the Servicer and invested by the Servicer during each Collection Period prior to remittance to the Collection Account and (ii) all late payment charges, if any, collected from Customers or REPs; provided, however, that if
    the Servicer has failed to remit the Daily Remittance to the General Subaccount of any Collection Account on the Servicer Business Day that such payment is to be made pursuant to Section 6.11 on more than three (3) occasions during the period
    that the System Restoration Bonds are outstanding, then thereafter the Servicer will be required to pay to the Indenture Trustee interest on each Daily Remittance accrued at the Federal Funds Rate from the Servicer Business Day on which such Daily
    Remittance was required to be made to the date that such Daily Remittance is actually made.

  
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  (b)           The Servicing Fee set forth in Section 6.06(a) shall be paid to
    the Servicer by the Indenture Trustee, on each Payment Date in accordance with the priorities set forth in Section 8.02(e) 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 any such date should be added to the Servicing Fee payable on the subsequent Payment Date. In no event shall the Indenture Trustee be liable for the payment of any Servicing Fee or other
    amounts specified in this Section 6.06; provided that this Section 6.06 does not relieve the Indenture Trustee of any duties it has to allocate funds for payment for such fees under Section 8.02 of the Indenture.

   

  (c)           Except as expressly provided elsewhere in this Agreement, the Servicer
    shall be required to pay from its own account expenses incurred by the Servicer in connection with its activities hereunder (including any fees to and disbursements by accountants, counsel, or any other Person, any taxes imposed on the Servicer and any
    expenses incurred in connection with reports to Holders) out of the compensation retained by or paid to it pursuant to this Section 6.06, and shall not be entitled to any extra payment or reimbursement therefor.

   

  (d)          The foregoing Servicing Fees constitute a fair and reasonable price for
    the obligations to be performed by the Servicer. Such Servicing Fee shall be determined without regard to the income of the Issuer, shall not be deemed to constitute distributions to the recipient of any profit, loss or capital of the Issuer and shall
    be considered a fixed Operating Expense of the Issuer subject to the limitations on such expenses set forth in the Financing Order.

   

  SECTION 6.07.           Compliance with Applicable Law. The Servicer covenants
    and agrees, in servicing the Transition Property, to comply in all material respects with all laws applicable to, and binding upon, the Servicer and relating to the Transition Property the noncompliance with which would have a material adverse effect
    on the value of the Transition Property; provided, however, that the foregoing is not intended to, and shall not, impose any liability on the Servicer for noncompliance with any Requirement of Law that the Servicer is contesting in good
    faith in accordance with its customary standards and procedures.

   

  SECTION 6.08.           Access to Certain Records and Information Regarding
      Transition Property. The Servicer shall provide to the Indenture Trustee access to the Transition Property Records as is reasonably required for the Indenture Trustee to perform its duties and obligations under the Indenture and the other Basic
    Documents, and shall provide access to such records to the Holders as required by applicable law. Access shall be afforded without charge, but only upon reasonable request and during normal business hours at the respective offices of the Servicer.
    Nothing in this Section 6.08 shall affect the obligation of the Servicer to observe any applicable law (including any PUCT Regulation) prohibiting disclosure of information regarding the Customers, and the failure of the Servicer to provide
    access to such information as a result of such obligation shall not constitute a breach of this Section 6.08.

  
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  SECTION 6.09.           Appointments. The Servicer may at any time appoint any
    Person to perform all or any portion of its obligations as Servicer hereunder; provided, however, that, unless such Person is an Affiliate of AEP Texas, the Rating Agency Condition shall have been satisfied in connection therewith; provided
    further that the Servicer shall remain obligated and be liable under this Agreement for the servicing and administering of the Transition Property in accordance with the provisions hereof without diminution of such obligation and liability by
    virtue of the appointment of such Person and to the same extent and under the same terms and conditions as if the Servicer alone were servicing and administering the Transition Property. The fees and expenses of any such Person shall be as agreed
    between the Servicer and such Person from time to time and none of the Issuer, the Indenture Trustee, the Holders or any other Person shall have any responsibility therefor or right or claim thereto. Any such appointment shall not constitute a Servicer
    resignation under Section 6.05.

   

  SECTION 6.10.           No Servicer Advances. The Servicer shall not make any
    advances of interest on or principal of the System Restoration Bonds.

   

  SECTION 6.11.           Remittances. (a) On each Servicer Business Day,
    commencing thirty-five (35) days after the Closing Date, the Servicer shall remit to the General Subaccount of the Collection Account the total SRC Payments estimated to have been received by the Servicer from or on behalf of Customers on such Servicer
    Business Day in respect of all previously billed System Restoration Charges (the “Daily Remittance”), which Daily Remittance shall be calculated according to the procedures set forth in Annex I and shall be remitted as soon as reasonably
    practicable but in no event later than the second Servicer Business Day after such payments are estimated to have been received. Prior to each remittance to the General Subaccount of the Collection Account pursuant to this Section 6.11, the
    Servicer shall provide written notice to the Indenture Trustee of each such remittance (including the exact dollar amount to be remitted). The Servicer shall also, promptly upon receipt, remit to the Collection Account any other proceeds of the System
    Restoration Bond Collateral which it may receive from time to time.

   

  (b)           The Servicer agrees and acknowledges that it holds all SRC Payments
    collected by it and any other proceeds for the System Restoration Bond Collateral received by it for the benefit of the Indenture Trustee and the Holders and that all such amounts will be remitted by the Servicer in accordance with this Section
      6.11 without any surcharge, fee, offset, charge or other deduction except (i) as set forth in clause (c) below and (ii) for late fees permitted by Section 6.06. The Servicer further agrees not to make any claim to reduce its
    obligation to remit all SRC Payments collected by it in accordance with this Agreement except (i) as set forth in clause (c) below and (ii) for late fees permitted by Section 6.06.

  
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  (c)           On or before the twenty-fifth calendar day of each calendar month (or,
    if such day is not a Servicer Business Day, the immediately preceding Servicer Business Day) commencing with September 25, 2020, the Servicer shall calculate the amount of any Remittance Shortfall or Excess Remittance for the first Collection Period of
    the immediately preceding Reconciliation Period, shall allocate such Remittance Shortfall or Excess Remittance ratably based on the System Restoration Charges billed for such Reconciliation Period, and (A) if a Remittance Shortfall exists, the Servicer
    shall make a supplemental remittance, to the General Subaccount of the Collection Account within two (2) Servicer Business Days, or (B) if an Excess Remittance exists, the Servicer shall be entitled either (i) to reduce the amount of each Daily
    Remittance which the Servicer subsequently remits to the General Subaccount of the Collection Account for application to the amount of such Excess Remittance until the balance of such Excess Remittance has been reduced to zero, the amount of such
    reduction becoming the property of the Servicer or (ii) so long as such withdrawal would not cause the amounts on deposit in the General Subaccount or the Excess Funds Subaccount to be insufficient for the payment of the next installment of interest on
    the System Restoration Bonds or principal due at maturity on the next Payment Date or upon acceleration on or before the next Payment Date, to be paid immediately from the General Subaccount or Excess Funds Subaccount the amount of such Excess
    Remittance, such payment becoming the property of the Servicer. If there is a Remittance Shortfall, the amount which the Servicer remits to the General Subaccount of the Collection Account on the relevant date set forth above shall be increased by the
    amount of such Remittance Shortfall, such increase coming from the Servicer’s own funds.

   

  (d)           Unless otherwise directed to do so by the Issuer, the Servicer shall be
    responsible for selecting Eligible Investments in which the funds in each Collection Account shall be invested pursuant to Section 8.03 of the Indenture.

   

  SECTION 6.12.           Maintenance of Operations. Subject to Section 6.03,
    AEP Texas agrees to continue, unless prevented by circumstances beyond its control, to operate its electric transmission and distribution system to provide service (or, if transmission and distribution are split, to provide wire service directly to its
    customers) so long as it is acting as the Servicer under this Agreement.

   

  ARTICLE VII

    DEFAULT

   

  SECTION 7.01.           Servicer Default. If any one or more of the following
    events (a “Servicer Default”) shall occur and be continuing:

   

  (a)           any failure by the Servicer to remit to the Collection Account on
    behalf of the Issuer any required remittance that shall continue unremedied for a period of five (5) Business Days after written notice of such failure is received by the Servicer from the Issuer or the Indenture Trustee or after discovery of such
    failure by an officer of the Servicer; or

   

  (b)           any failure on the part of the Servicer or, so long as the Servicer is
    AEP Texas or an Affiliate thereof, any failure on the part of AEP Texas, as the case may be, duly to observe or to perform in any material respect any covenants or agreements of the Servicer or AEP Texas, as the case may be, set forth in this Agreement
    (other than as provided in clause (a) of this Section 7.01) or any other Basic Document to which it is a party, which failure shall (i) materially and adversely affect the rights of the Holders and (ii) continue unremedied for a period
    of sixty (60) days after the date on which (A) written notice of such failure, requiring the same to be remedied, shall have been given to the Servicer or AEP Texas, as the case may be, by the Issuer (with a copy to the Indenture Trustee) or to the
    Servicer or AEP Texas, as the case may be, by the Indenture Trustee or (B) such failure is discovered by an officer of the Servicer; or

  
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  (c)           any failure by the Servicer duly to perform its obligations under Section

      4.01(b) of this Agreement in the time and manner set forth therein, which failure continues unremedied for a period of five (5) days; or

   

  (d)           any representation or warranty made by the Servicer in this Agreement
    or any Basic Document shall prove to have been incorrect in a material respect when made, which has a material adverse effect on the Holders and which material adverse effect continues unremedied for a period of sixty (60) days after the date on which
    (A) written notice thereof, requiring the same to be remedied, shall have been delivered to the Servicer (with a copy to the Indenture Trustee) by the Issuer or the Indenture Trustee or (B) such failure is discovered by an officer of the Servicer; or

   

  (e)           an Insolvency Event occurs with respect to the Servicer or AEP Texas;

   

  then, and in each and every case, so long as the Servicer Default shall not have been remedied, either the Indenture Trustee may, or shall upon the instruction of the PUCT (acting on
    behalf of Customers) or of Holders evidencing not less than a majority of the Outstanding Amount of the System Restoration Bonds, by notice then given in writing to the Servicer (and to the Indenture Trustee if given by the Holders) (a “Termination
      Notice”), terminate all the rights and obligations (other than the obligations set forth in Section 6.02 and the obligation under Section 7.02 to continue performing its functions as Servicer until a successor Servicer is
    appointed) of the Servicer under this Agreement. The appointment of any successor Servicer shall be subject to the terms and provisions of the Intercreditor Agreement. In addition, upon a Servicer Default described in Section 7.01(a), the
    Holders and the Indenture Trustee as financing parties under the Securitization Law (or any of their representatives) shall be entitled to (i) apply to the district court of Travis County for sequestration and payment of revenues arising with respect
    to the Transition Property, (ii) foreclose on or otherwise enforce the lien and security interests in any Transition Property and (iii) apply to the PUCT for an order that amounts arising from the System Restoration Charges be transferred to a separate
    account for the benefit of the Secured Parties, in accordance with the Securitization Law. 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 System
    Restoration Bonds, the Transition Property, the System Restoration Charges or otherwise, shall, without further action, pass to and be vested in such successor Servicer as may be appointed under Section 7.02; and, without limitation, the
    Indenture Trustee is hereby authorized and empowered to execute and deliver, on behalf of the predecessor Servicer, as attorney-in-fact or otherwise, any and all documents and other instruments, and to do or accomplish all other acts or things
    necessary or appropriate to effect the purposes of such Termination Notice, whether to complete the transfer of the Transition Property Records and related documents, or otherwise. The predecessor Servicer shall cooperate with the successor Servicer,
    the Issuer and the Indenture Trustee in effecting the termination of the responsibilities and rights of the predecessor Servicer under this Agreement, including the transfer to the successor Servicer for administration by it of all Transition Property
    Records and all cash amounts that shall at the time be held by the predecessor Servicer for remittance, or shall thereafter be received by it with respect to the Transition Property or the System Restoration Charges. As soon as practicable after
    receipt by the Servicer of such Termination Notice, the Servicer shall deliver the Transition Property Records to the successor Servicer. In case a successor Servicer is appointed as a result of a Servicer Default, all reasonable costs and expenses
    (including reasonable attorney’s fees and expenses) incurred in connection with transferring the Transition Property Records to the successor Servicer and amending this Agreement to reflect such succession as Servicer pursuant to this Section 7.01
    shall be paid by the predecessor Servicer upon presentation of reasonable documentation of such costs and expenses. Termination of AEP Texas as Servicer shall not terminate AEP Texas’ rights or obligations under the Sale Agreement (except rights
    thereunder deriving from its rights as the Servicer hereunder).

   

  
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  SECTION 7.02.           Appointment of Successor.

   

  (a)           Upon the Servicer’s receipt of a Termination Notice pursuant to Section

      7.01 or the Servicer’s resignation or removal in accordance with the terms of this Agreement, the predecessor Servicer shall continue to perform its functions as Servicer under this Agreement, and shall be entitled to receive the requisite
    portion of the Servicing Fee, until a successor Servicer shall have assumed in writing the obligations of the Servicer hereunder as described below. In the event of the Servicer’s removal or resignation hereunder, the Indenture Trustee may, or, at the
    written direction and with the consent of the Holders of at least a majority of the Outstanding Amount of the System Restoration Bonds, shall, appoint a successor Servicer with the Issuer’s prior written consent thereto (which consent shall not be
    unreasonably withheld), and the successor Servicer shall accept its appointment by a written assumption in form reasonably acceptable to the Issuer and the Indenture Trustee and provide prompt written notice of such assumption to the Issuer and the
    Rating Agencies. If within thirty (30) days after the delivery of the Termination Notice, a new Servicer shall not have been appointed, the Indenture Trustee may petition the PUCT or a court of competent jurisdiction to appoint a successor Servicer
    under this Agreement. A Person shall qualify as a successor Servicer only if (i) such Person is permitted under PUCT Regulations to perform the duties of the Servicer, (ii) the Rating Agency Condition shall have been satisfied and (iii) such Person
    enters into a servicing agreement with the Issuer having substantially the same provisions as this Agreement (as the System Restoration Bond Servicer). In no event shall the Indenture Trustee be liable for its appointment of a successor Servicer. The
    Indenture Trustee’s expenses incurred under this Section 7.02(a) shall be at the sole expense of the Issuer and payable from the Collection Account as provided in Section 8.02 of the Indenture.

   

  (b)           Upon appointment, the successor Servicer shall be the successor in all
    respects to the predecessor Servicer and shall be subject to all the responsibilities, duties and liabilities arising thereafter relating thereto placed on the predecessor Servicer and shall be entitled to the Servicing Fee and all the rights granted
    to the predecessor Servicer by the terms and provisions of this Agreement.

  
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  SECTION 7.03.           Waiver of Past Defaults. The PUCT, together with
    Holders evidencing not less than a majority of the Outstanding Amount of the System Restoration Bonds may, on behalf of all Holders, direct the Indenture Trustee to 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 deposits to the Collection Account in accordance with this Agreement. Upon any such waiver of a past default, such default shall cease to exist, and any Servicer Default arising
    therefrom shall be deemed to have been remedied for every purpose of this Agreement. No such waiver shall extend to any subsequent or other default or impair any right consequent thereto. Promptly after the execution of any such waiver, the Servicer
    shall furnish copies of such waiver to each of the Rating Agencies.

   

  SECTION 7.04.           Notice of Servicer Default. The Servicer shall deliver
    to the Issuer, the Indenture Trustee, the PUCT and the Rating Agencies, promptly after having obtained knowledge thereof, but in no event later than five (5) Business Days thereafter, written notice of any event which with the giving of notice or lapse
    of time, or both, would become a Servicer Default under Section 7.01.

   

  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. (a) This Agreement may be amended in
    writing by the Servicer and the Issuer with the prior written consent of the Indenture Trustee, the satisfaction of the Rating Agency Condition and, if the contemplated amendment may in the judgment of the PUCT increase ongoing Qualified Costs, the
    consent of the PUCT pursuant to Section 8.02; provided that any such amendment may not adversely affect the interest of any Holder in any material respect without the consent of the Holders of a majority of the outstanding principal
    amount of the System Restoration Bonds. Promptly after the execution of any such amendment or consent, the Issuer shall furnish copies of such amendment or consent to each of the Rating Agencies.

   

  In addition, this Agreement may be amended in writing by the Servicer and the Issuer with ten Business Days’ prior written notice given to the Rating Agencies and
    the prior written consent of the Indenture Trustee (which consent shall be given in reliance on an Opinion of Counsel and an Officer’s Certificate stating that such amendment is permitted or authorized under and adopted in accordance with the
    provisions of this Agreement and that all conditions precedent have been satisfied, upon which the Indenture Trustee may conclusively rely) and, if the contemplated amendment may in the judgment of the PUCT increase ongoing Qualified Costs, the consent
    of the PUCT pursuant to Section 8.02, but without the consent of any of the Holders, (i) to cure any ambiguity, to correct or supplement any provisions in this Agreement or for the purpose of adding any provisions to or changing in any manner
    or eliminating any of the provisions in this Agreement or of modifying in any manner the rights of the Holders; provided, however, that such action shall not, as evidenced by an Officer’s Certificate delivered to the Issuer and the
    Indenture Trustee, adversely affect in any material respect the interests of any Holder or (ii) to conform the provisions hereof to the description of this Agreement in the Prospectus. Promptly after the execution of any such amendment or consent, the
    Issuer shall furnish copies of such amendment or consent to each of the Rating Agencies.

  
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  Prior to the execution of any amendment to this Agreement, the Issuer and the Indenture Trustee shall be entitled to receive and conclusively rely upon an Opinion of
    Counsel of external counsel stating that such amendment is authorized or permitted by this Agreement and that all conditions precedent have been satisfied and upon the Opinion of Counsel from external counsel referred to in Section 3.01(c)(i).
    The Issuer and the Indenture Trustee may, but shall not be obligated to, enter into any such amendment which affects their own rights, duties, indemnities or immunities under this Agreement or otherwise.

   

  (b)           Notwithstanding Section 8.01(a) or anything to the contrary in
    this Agreement, the Servicer and the Issuer may amend Annex I to this Agreement in writing with prior written notice given to the Indenture Trustee and the Rating Agencies, but without the consent of the Indenture Trustee, any Rating Agency or
    any Holder, solely to address changes to the Servicer’s method of calculating SRC Payments as a result of changes to the Servicer’s current computerized customer information system, including changes which would replace the remittances contemplated by
    the estimation procedures set forth in Annex I with remittances of SRC Collections determined to have been actually received; provided that any such amendment shall not have a material adverse effect on the Holders of then Outstanding System
    Restoration Bonds as evidenced by an Officer’s Certificate of the Issuer.

   

  (c)           If the PUCT adopts a rule or regulation the effect of which is to
    modify or supplement any provision of this Agreement related to the REP Credit Requirements and the REP Deposit Requirements, this Agreement will be deemed so modified or supplemented on the effective date of such rule or regulation in the manner
    necessary to comply therewith without the necessity of any further action by any party hereto; provided that (i) the Rating Agency Condition has been satisfied, (ii) the Servicer shall have notified the Issuer and the Indenture Trustee in
    writing of such modification or supplement and delivered an Opinion of Counsel as described in the second paragraph of Section 8.01(a) and (iii) neither the Issuer nor the Indenture Trustee shall be bound by any such modification to the extent
    it affects their own rights, duties, indemnities or immunities under this Agreement or otherwise.

   

  (d)           It shall not be necessary for the consent of Holders pursuant to this
    Article to approve the particular form of any proposed amendment or consent, but it shall be sufficient if such consent shall approve the substance thereof.

   

  (e)           Any Opinion of Counsel may be based, insofar as it relates to factual
    matters (including financial and capital markets), upon a certificate or opinion of, or representations by, an officer or officers of the Servicer or the Issuer and other documents necessary and advisable in the judgment of counsel delivering such
    opinion.

   

  SECTION 8.02.           PUCT Condition. Notwithstanding anything to the
    contrary in Section 8.01(a), no amendment or modification of this Agreement shall be effective unless the process set forth in this Section 8.02 has been followed.

  
    29

    
      
 

  

  (a)           At least thirty-one (31) days prior to the effectiveness of any such
    amendment or modification and after obtaining the other necessary approvals set forth in Section 8.01(a) (except that the consent of the Indenture Trustee may be subject to the consent of Holders if such consent is required or sought by the
    Indenture Trustee in connection with such amendment or modification), the Servicer shall have delivered to the PUCT’s executive director and general counsel written notification of any proposed amendment, which notification shall contain:

   

  (i)            a reference to Docket No. 49308;

   

  (ii)           an Officer’s Certificate stating that the proposed amendment
    or modification has been approved by all parties to this Agreement;

   

  (iii)          a statement identifying the person to whom the PUCT or its
    staff is to address any response to the proposed amendment or modification or to request additional time; and

   

  (iv)          a statement as to the possible effect of the amendment or
    modification on the ongoing Qualified Costs.

   

  (b)          The PUCT or its staff shall, within thirty (30) days of receiving the
    notification complying with Section 8.02(a), either:

   

  (i)            provide notice of its determination that the proposed
    amendment or modification will not under any circumstances have the effect of increasing the ongoing Qualified Costs related to the System Restoration Bonds,

   

  (ii)           provide notice of its consent or lack of consent to the
    person specified in Section 8.02(a)(iii), or

   

  (iii)          be conclusively deemed to have consented to the proposed
    amendment or modification,

   

  unless, within thirty (30) days of receiving the notification complying with Section 8.02(a), the PUCT or its staff delivers to the office of the person specified in Section
      8.02(a)(iii) a written statement requesting an additional amount of time not to exceed thirty (30) days in which to consider whether to consent to the proposed amendment or modification. If the PUCT or its staff requests an extension of time in
    the manner set forth in the preceding sentence, then the PUCT shall either provide notice of its consent or lack of consent or notice of its determination that the proposed amendment or modification will not under any circumstances increase ongoing
    Qualified Costs to the person specified in Section 8.02(a)(iii) no later than the last day of such extension of time or be conclusively deemed to have consented to the proposed amendment or modification on the last day of such extension of
    time. Any amendment or modification requiring the consent of the PUCT shall become effective on the later of (i) the date proposed by the parties to such amendment or modification and (ii) the first day after the expiration of the thirty (30)-day
    period provided for in this Section 8.02(b), or, if such period has been extended pursuant hereto, the first day after the expiration of such period as so extended.

  
    30

    
      
 

  

  (c)           Following the delivery of a notice to the PUCT by the Servicer under Section

      8.02(a), the Servicer and the Issuer shall have the right at any time to withdraw from the PUCT further consideration of any notification of a proposed amendment. Such withdrawal shall be evidenced by the Servicer’s giving prompt written notice
    thereof to the PUCT, the Issuer and the Indenture Trustee.

   

  SECTION 8.03.           Maintenance of Accounts and Records. (a) The Servicer
    shall maintain accounts and records as to the Transition Property accurately and in accordance with its standard accounting procedures and in sufficient detail to permit reconciliation between SRC Payments received by the Servicer and SRC Collections
    from time to time deposited in the Collection Account.

   

  (b)          The Servicer shall permit the Indenture Trustee and its agents at any
    time during normal business hours, upon reasonable notice to the Servicer and to the extent it does not unreasonably interfere with the Servicer’s normal operations, to inspect, audit and make copies of and abstracts from the Servicer’s records
    regarding the Transition Property and the System Restoration Charges. Nothing in this Section 8.03(b) shall affect the obligation of the Servicer to observe any applicable law (including any PUCT Regulation) prohibiting disclosure of
    information regarding the Customers, and the failure of the Servicer to provide access to such information as a result of such obligation shall not constitute a breach of this Section 8.03(b).

   

  SECTION 8.04.           Notices. Unless otherwise specifically provided
    herein, all demands, notices and communications upon or to the Servicer, the Issuer, the Indenture Trustee or the Rating Agencies under this Agreement shall be sufficiently given for all purposes hereunder if in writing and delivered personally, sent
    by documented delivery service or, to the extent receipt is confirmed telephonically, sent by telecopy or other form of electronic transmission:

   

  (a)           in the case of the Servicer, to AEP Texas Inc., at 1 Riverside Plaza,
    Columbus, Ohio 43215, Attention: Treasurer, Telephone: (614) 716-1000, Facsimile: (614) 716-2807;

   

  (b)           in the case of the Issuer, to AEP Texas Restoration Funding LLC at 539
    N. Carancahua Street, Suite 1700, Corpus Christi, Texas 78401, Attention: Manager, Telephone: (361) 881-5399, Facsimile: (361) 880-6128;

   

  (c)           in the case of the Indenture Trustee, to the Corporate Trust Office;

   

  (d)           in the case of the PUCT, to 1701 N. Congress Avenue, Austin, Texas
    78701, Attention: Executive Director and General Counsel, Telephone: (512) 936-7040, Facsimile: (512) 936-7036;

   

  (e)           to Moody’s Investors Service, Inc., ABS/RMBS Monitoring Department, 25th Floor, 7 World Trade Center, 250 Greenwich Street, New York, New York 10007, Email: ServicerReports@moodys.com (all such notices to be delivered to Moody’s in writing by
    email), and solely for purposes of Rating Agency Condition communications: abscormonitoring@moodys.com;

   

  (f)           in the case of Standard & Poor’s, to Standard & Poor’s Ratings
    Group, Inc., Structured Credit Surveillance, 55 Water Street, New York, New York 10041, Telephone: (212) 438-8991, Email: servicer_reports@spglobal.com (all such notices to be delivered to Standard & Poor’s in writing by email); or

  
    31

    
      
 

  

  (g)           as to each of the foregoing, at such other address as shall be
    designated by written notice to the other parties.

   

  SECTION 8.05.           Assignment. Notwithstanding anything to the contrary
    contained herein, except as provided in Section 6.03 and as provided in the provisions of this Agreement concerning the resignation of the Servicer, this Agreement may not be assigned by the Servicer.

   

  SECTION 8.06.           Limitations on Rights of Others. The provisions of
    this Agreement are solely for the benefit of the Servicer and the Issuer and, to the extent provided herein or in the Basic Documents, Customers, the Indenture Trustee and the Holders, and the other Persons expressly referred to herein, and such
    Persons shall have the right to enforce the relevant provisions of this Agreement. Nothing in this Agreement, whether express or implied, shall be construed to give to any other Person any legal or equitable right, remedy or claim in the Transition
    Property or System Restoration Bond Collateral or under or in respect of this Agreement or any covenants, conditions or provisions contained herein. Notwithstanding anything to the contrary contained herein, for the avoidance of doubt, any right,
    remedy or claim to which any Customer may be entitled pursuant to the Financing Order and to this Agreement may be asserted or exercised only by the PUCT (or by the Attorney General of the State of Texas in the name of the PUCT) for the benefit of such
    Customer.

   

  SECTION 8.07.           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 remainder of such provision (if any) or the remaining provisions hereof
    (unless such a construction shall be unreasonable), and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

   

  SECTION 8.08.           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 8.09.           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 8.10.           GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
    CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW), AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
    SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

  
    32

    
      
 

  

  SECTION 8.11.           Assignment to Indenture Trustee. (a) The Servicer
    hereby acknowledges and consents to any mortgage, pledge, assignment and grant of a security interest by the Issuer to the Indenture Trustee for the benefit of the Secured Parties pursuant to the Indenture of any or all of the Issuer’s rights hereunder
    and (b) in no event shall the Indenture Trustee have any liability for the representations, warranties, covenants, agreements or other obligations of the Issuer hereunder or in any of the certificates delivered pursuant hereto, as to all of which any
    recourse shall be had solely to the assets of the Issuer subject to the availability of funds therefor under Section 8.02 of the Indenture.

   

  SECTION 8.12.           Nonpetition Covenants. Notwithstanding any prior
    termination of this Agreement or the Indenture, the Servicer shall not, prior to the date which is one year and one day after the satisfaction and discharge of the Indenture, acquiesce, petition or otherwise invoke or cause the Issuer to invoke or join
    with any Person in provoking the process of any Governmental Authority for the purpose of commencing or sustaining an involuntary 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 dissolution, winding up or liquidation of the affairs of the Issuer.

   

  SECTION 8.13.           Limitation of Liability. It is expressly understood
    and agreed by the parties hereto that this Agreement is executed and delivered by the Indenture Trustee, not individually or personally but solely as Indenture Trustee in the exercise of the powers and authority conferred and vested in it, and that the
    Indenture Trustee, in acting hereunder, is entitled to all rights, benefits, protections, immunities and indemnities accorded to it under the Indenture.

   

  SECTION 8.14.           Rule 17g-5 Compliance. The Servicer agrees that any
    notice, report, request for satisfaction of the Rating Agency Condition, document or other information provided by the Servicer to any Rating Agency under this Agreement or any other Basic Document to which it is a party for the purpose of determining
    the initial credit rating of the System Restoration Bonds or undertaking credit rating surveillance of the System Restoration Bonds with any Rating Agency, or satisfy the Rating Agency Condition, shall be substantially concurrently posted by the
    Servicer on the 17g-5 Website.

   

  [SIGNATURE PAGE FOLLOWS]

  
    33

    
      
 

  

  IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective officers as of the day and year first above written.

  
    	 	 	 	 
	 	 	AEP TEXAS RESTORATION FUNDING LLC,
	 	 	as Issuer
	 	 	 	 
	 	 	By:	/s/ Renee V. Hawkins

          
	 	 	 	Name: Renee V. Hawkins
	 	 	 	Title: Assistant Treasurer

          
	 	 	 	 
	 	 	AEP TEXAS INC., as Servicer
	 	 	 	 
	 	 	By:	 /s/ Renee V. Hawkins
	 	 	 	Name: Renee V. Hawkins
	 	 	 	Title: Assistant Treasurer
	 	 	 	 
	ACKNOWLEDGED AND ACCEPTED:	 	 
	 	 	 	 
	U.S. BANK NATIONAL ASSOCIATION,	 	 
	as Indenture Trustee	 	 
	 	 	 	 
	By:	/s/ Nicholas C. Xeros

          	 	 
	 	Name: Nicholas C. Xeros

          	 	 
	 	Title: Assistant Vice President

          	 	 

  

   

   

   

   

  Signature Page to

  Transition Property Servicing Agreement

   

  
    
      
 

  

  EXHIBIT A

   

  MONTHLY SERVICER’S CERTIFICATE

   

  See Attached.

   

  EXHIBIT A

  1

   

   

  
    
      
 

  

  	
          Remittance Dates

           

          Monthly Servicer’s Certificate

          (to be delivered each month pursuant to Section 3.01 (b) of the Transition Property Servicing Agreement)

        

   

  
  

  
   

   

  AEP TEXAS RESTORATION FUNDING LLC

   

  

  

  
   

  AEP Texas Inc., as Servicer

   

  Pursuant to the Transition Property Servicing Agreement dated as of September 18, 2019 (the “Transition Property
    Servicing Agreement”) between

   

  AEP Texas Inc., as Servicer, and AEP Texas Restoration Funding LLC, as Issuer, the Servicer does hereby certify as follows:

   

  	
          Collection Period: 

          Remittance Dates: 

        

  	
          SRC Class

           

           

           

           

           

           

           

           

           

           

           

           

           

          Total

        	a. SRCs in Effect	b. SRCs Billed	
          c. Estimated SRC Payments Received

           

        

   

  Collection Period:

  	
          SRC Class

           

           

           

           

           

           

           

           

           

           

           

           

           

          Total

        	
          d. Estimated SRC Payments Received

          Total

        	e. Actual SRC Payments
          Received	f. Remittance Shortfall for
          this Collection	
          g. Excess Remittance for this Collection

           

        

  	
           

          h. Daily remittances previously made by the Servicer to the Collection Account in respect of this Collection Period (c):

           

          i. The amount to be remitted by the Servicer to the Collection Account for this Collection Period is (c + f - g):

           

          j. If (i>h), (i-h) equals net amount due from the Servicer to the Collection Amount:

           

          k. If (h>i), (h-i) equals net amount due to the Servicer from the Collection Amount:

           

          Capitalized terms used herein have their respective meanings set forth in the Transition Property Servicing Agreement.

           

          In WITNESS HEREOF, the undersigned has duly executed and delivered this Monthly Servicer’s Certificate the          day of 

        

    

  	 	AEP TEXAS INC., as Servicer	 
	 	 	 
	Title:	Assistant Treasurer	 

   

  
    
      
 

  

  EXHIBIT B

   

  FORM OF SEMI-ANNUAL SERVICER’S CERTIFICATE

   

  Pursuant to Section 4.01(c)(ii) of the Transition Property Servicing Agreement,
      dated as of September 18, 2019 (the “Servicing Agreement”), between,
      AEP TEXAS INC., as Servicer and AEP TEXAS RESTORATION FUNDING LLC, as Issuer, the Servicer does hereby certify, for the ________, 20__ Payment Date (the “Current Payment Date”), as follows:

   

  Capitalized terms used herein have their respective meanings as set forth in the Indenture. References herein to certain sections and
    subsections are references to the respective sections of the Servicing Agreement or the Indenture, as the context indicates.

   

  	Collection Periods:	____ to ______

   

  	Payment Date:	_____________

   

  		1.	Collections Allocable and Aggregate Amounts Available for the Current Payment Date::

   

  	i.	Remittances for the ___ Collection Period (1)	 	$_________
	ii.	Remittances for the ___ Collection Period 	 	$_________
	iii.	Remittances for the ___ Collection Period	 	$_________
	iv.	Remittances for the ___ Collection Period 	 	$_________
	v.	Remittances for the ___ Collection Period 	 	$_________
	vi.	Remittances for the ___ Collection Period (2)	 	$_________
	vii.	Investment Earnings on Collection Account 	 	 
		viii.      Investment Earnings on Capital Subaccount	 	$_________
		ix.         Investment Earnings on Excess Funds Subaccount	 	$_________
		x.          Investment Earnings on General Subaccount	 	$_________
	xi.	General Subaccount Balance (sum of  i through x above) 	 	$_________
	 	 	 	 	 	 	 
	xii.	Excess Funds Subaccount Balance as of Prior Payment Date	 	$_________
	xiii.	Capital Subaccount Balance as of Prior Payment Date	 	$_________
	xiv.	Collection Account Balance (sum of  xii through xiii above)	 	$_________
	 	 	 	 	 	 	 

  

  

  
   

  
    	(1) Includes amounts calculated for the Reconciliation Period for the prior Collection Period,
            which was settled in [month-date]. 
	(2) Does not include the reconciliation amounts calculated for the Reconciliation Period for such Collection
            Period, which will be settled in the month following such Collection Period.

  

   

   

  

  EXHIBIT B

  1

  
    
      
 

  

  		2.	Outstanding Amounts of as of Prior Payment Date:

   

  
    	i. 	Tranche A-1 Outstanding Amount	$__________
	ii. 	Tranche A-2 Outstanding Amount	$__________
	iii. 	Aggregate Outstanding Amount of all Tranches of System Restoration Bonds:	
            $__________

          

  

   

   

   

  		3.	Required Funding/Payments as of Current Payment Date:

   

  
    	Principal	Principal Due
	i. 	Tranche A-1 	$__________
	ii. 	Tranche A-2 	$__________
	 	 	 
	iii. 	For all Tranches of System Restoration Bonds:	$__________

  

   

   

   

   

  
    	Interest	 
	Tranche	Interest Rate	Days in Interest Period1	Principal Balance	
             

          	
            Interest Due

          
	iv. Tranche A-1	 	 	 	$__________
	v.Tranche A-2	 	 	 	$__________
	vi.	For all Tranches of System Restoration Bonds:	$__________
	 	 	 	 	 
	 	 	 	Required Level		Funding Required
	 vii. Capital Subaccount	 	 

  

   

   

   

   

  	4.	Allocation of Remittances as of Current Payment Date Pursuant to 8.02(e) of Indenture

  

  
    	i.  Trustee Fees and Expenses; Indemnity Amounts2	 	$_____________
	ii. Servicing Fee	 	$_____________
	iii. Administration Fee	 	$_____________
	iv. Operating Expenses	 	$_____________
	v.  Semi-Annual Interest (including any past-due for prior periods)	 	$_____________

  

   

   

   

   

   

   

   

  

  

  
   

  1 On 30/360 day basis for initial payment date; otherwise use one-half of annual rate.

   

  2 Subject to $100,000 cap per annum

  

   

  EXHIBIT B

  2

  
    
      
 

  

  	Tranche	Aggregate 

        	
          Per $1000 of Original

          Principal Amount

        	 
	 	 	 	 
	  1. Tranche A-1 Interest Payment	$_____________ 

        	$_____________ 

        	 
	  2. Tranche A-2 Interest Payment	$_____________	$_____________	 
	 	$_____________	 	 
	 	 	 	 
	vi.  Principal Due and Payable as a Result of an Event of Default or on Final Maturity Date	 	$_____________
	Tranche 	Aggregate	
          Per $1000 of Original

          Principal Amount

        
	  1. Tranche A-1 Principal Payment	$_____________	$_____________	 
	  2. Tranche A-2 Principal Payment	$_____________	$_____________	 
	 	$_____________	 	 
	 	 	 	 
	vii.  Semi-Annual Principal	 	 	$_____________
	Tranche 	Aggregate	
          Per $1000 of Original

          Principal Amount

        
	 	 	 	 
	  Tranche A-1 Principal Payment	$_____________	$_____________	 
	  Tranche A-2 Principal Payment	$_____________	$_____________	 
	 	 	 	 
	viii. Funding of Capital Subaccount (to required level)	 	 	
          $_____________

        
	ix. Investment Earnings on Capital Subaccount Released to Issuer	 	 	
          $_____________

        
	x. Deposit to Excess Funds Subaccount	 	 	
          $_____________

        
	xi. Released to Issuer upon Retirement of all Notes	 	 	
          $_____________

        
	xii. Aggregate Remittances as of Current Payment Date	 	 	
          $_____________

        

   

   

   

   

   

  	5.	Subaccount Withdrawals as of Current Payment (if applicable, pursuant to Section 8.02(e) of Indenture:

   

  
    	i.	Excess Funds Subaccount	$_____________
	ii.	Capital Subaccount	$_____________
	iii.	Total Withdrawals	$_____________

  

   

    

  EXHIBIT B

  3

   

  
    
      
 

  

   

  	6.	Outstanding Amount and Collection Account Balance as of Current Payment Date (after giving effect to payments to be
          made on such Payment Date):

   
  
    	i.  	Tranche A-1	 	$_____________
	ii.  	Tranche A-2	 	$_____________
	iii.	Aggregate Outstanding Amount of all Tranches of System Restoration Bonds:	  	$_____________
	 	 	 	 
	iv. 	Excess Funds Subaccount Balance	 	$_____________
	v. 	Capital Subaccount Balance	 	$_____________
	vi. 	
            Aggregate Collection Account Balance

          	 	$_____________

  

   

   

   

  	7.	Shortfalls in Interest and Principal Payments as of Current Payment Date

   

  
    	i.	Semi-annual Interest	 	 
	Tranche A-1 Interest Payment	 	$_____________
	Tranche A-2 Interest Payment	 	$_____________
	 	 	 
	 	 	 	$_____________
	ii.	Semi-annual Principal	 	 
	Tranche A-1 Principal Payment	 	$_____________
	Tranche A-2 Principal Payment	 	$_____________
	 	 	 
	 	 	$_____________
	 	 	 	 

  

   

   

  	8.	Shortfalls in Required Subaccount Levels as of Current Payment Date

   
  	ii.	Capital Subaccount	$_____________

   

  IN WITNESS WHEREOF, the undersigned has duly executed and delivered this Semi-Annual Servicer’s Certificate this __ day of __________.

   

  EXHIBIT B

  4

  
    
      
 

  

  
    	 	 	 
	 	AEP TEXAS INC.,
	 	 	as Servicer
	 	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:

  

   

   

  

  EXHIBIT B

  5

   

   

  
    
      
 

  

  EXHIBIT C-1

   

  REGULATION AB SERVICER’S CERTIFICATE

   

  The undersigned hereby certifies that he/she is the duly elected and acting [__________] of [AEP TEXAS INC.], as servicer (the “Servicer”) under the
    Transition Property Servicing Agreement dated as of September 18, 2019 (the “Servicing Agreement”) between the Servicer and AEP Texas Restoration Funding LLC (the “Issuer”) and further that:

   

  1.        The undersigned is responsible for assessing the Servicer’s compliance with the servicing criteria set forth in Item 1122(d) of Regulation AB (the “Servicing

      Criteria”).

   

  2.        With respect to each of the Servicing Criteria, the undersigned has made the following assessment of the Servicing Criteria in accordance with Item 1122(d)
    of Regulation AB, with such discussion regarding the performance of such Servicing Criteria during the fiscal year covered by the Depositor’s annual report on Form 10-K Report (such fiscal year, the “Assessment Period”):

   

  	 	Servicing Criteria 	Applicable 

          Servicing Criteria
	Reference	Criteria	 
	 	General Servicing Considerations	 
	1122(d)(1)(i)	Policies and procedures are instituted to monitor any performance or other triggers and events
          of default in accordance with the transaction agreements.	
           

          Applicable; assessment below.

           

        
	1122(d)(1)(ii)	If any material servicing activities are outsourced to third parties, policies and procedures
          are instituted to monitor the third party’s performance and compliance with such servicing activities.	Not applicable; no servicing activities were outsourced.
	1122(d)(1)(iii)	Any requirements in the transaction agreements to maintain a back-up servicer for the pool
          assets are maintained.	Not applicable; documents do not provide for a back-up servicer.
	1122(d)(1)(iv)	A fidelity bond and errors and omissions policy is in effect on the party participating in the
          servicing function throughout the reporting period in the amount of coverage required by and otherwise in accordance with the terms of the transaction agreements.	Not applicable; PUCT rules impose credit standards on retail electric providers who handle
          customer collections and govern performance requirements of utilities.  

   

  
    EXHIBIT C-1

    1

  

  
    
      
 

  

  	 	Servicing Criteria 	Applicable 

          Servicing Criteria
	Reference	Criteria	 
	1122(d)(1)(v)	Aggregation of information, as applicable, is mathematically accurate and the
          information conveyed accurately reflects the information.	Applicable
	 	Cash Collection and Administration	 
	1122(d)(2)(i)	Payments on pool assets are deposited into the appropriate custodial bank accounts and related
          bank clearing accounts no more than two business days of receipt, or such other number of days specified in the transaction agreements.	Applicable
	1122(d)(2)(ii)	Disbursements made via wire transfer on behalf of an obligor or to an investor are made only by
          authorized personnel.	Applicable
	1122(d)(2)(iii)	Advances of funds or guarantees regarding collections, cash flows or distributions, and any
          interest or other fees charged for such advances, are made, reviewed and approved as specified in the transaction agreements.	Applicable, but no current assessment required; no advances by the Servicer are permitted under
          the transaction agreements.
	1122(d)(2)(iv)	The related accounts for the transaction, such as cash reserve accounts or accounts established
          as a form of overcollateralization, are separately maintained (e.g., with respect to commingling of cash) as set forth in the transaction agreements.	Applicable, but no current assessment is required since transaction accounts are maintained by
          and in the name of the Indenture Trustee.
	1122(d)(2)(v)	Each custodial account is maintained at a federally insured depository institution as set forth
          in the transaction agreements. For purposes of this criterion, “federally insured depository institution” with respect to a foreign financial institution means a foreign financial institution that meets the requirements of Rule 13k-1(b)(1) of the
          Securities Exchange Act.	Applicable, but no current assessment required;  all “custodial accounts” are maintained by the
          Indenture Trustee.
	1122(d)(2)(vi)	Unissued checks are safeguarded so as to prevent unauthorized access.	Not applicable; all transfers made by wire transfer.
	1122(d)(2)(vii)	Reconciliations are prepared on a monthly basis for all asset-backed securities related bank
          accounts, including custodial accounts and related bank clearing accounts. These reconciliations (A) are mathematically accurate; (B) are prepared within 30 calendar days after the bank statement cutoff date, or such other number of days
          specified in the transaction agreements; (C) are reviewed and approved by someone other than the person who prepared the reconciliation; and (D) contain explanations for reconciling items. These reconciling items are resolved within 90 calendar
          days of their original identification, or such other number of days specified in the transaction agreements.	Applicable; assessment below.  

   

  
    EXHIBIT C-1

    2

  

  
    
      
 

  

  	 	Servicing Criteria 	Applicable 

          Servicing Criteria
	Reference	Criteria	 
	 	Investor Remittances and Reporting	 
	1122(d)(3)(i)	Reports to investors, including those to be filed with the Commission, are maintained in
          accordance with the transaction agreements and applicable Commission requirements. Specifically, such reports (A) are prepared in accordance with timeframes and other terms set forth in the transaction agreements; (B) provide information
          calculated in accordance with the terms specified in the transaction agreements; (C) are filed with the Commission as required by its rules and regulations; and (D) agree with investors’ or the trustee’s records as to the total unpaid principal
          balance and number of pool assets serviced by the Servicer.	Applicable; assessment below. 
	1122(d)(3)(ii)	Amounts due to investors are allocated and remitted in accordance with timeframes, distribution
          priority and other terms set forth in the transaction agreements.	Not applicable; investor records maintained by Indenture Trustee.
	1122(d)(3)(iii)	Disbursements made to an investor are posted within two business days to the Servicer’s
          investor records, or such other number of days specified in the transaction agreements.	Applicable
	1122(d)(3)(iv)	Amounts remitted to investors per the investor reports agree with cancelled checks, or other
          form of payment, or custodial bank statements.	Applicable; assessment below.
	 	Pool Asset Administration	 
	1122(d)(4)(i)	Collateral or security on pool assets is maintained as required by the transaction agreements
          or related pool asset documents.	Applicable; assessment below. 
	1122(d)(4)(ii)	Pool assets and related documents are safeguarded as required by the transaction agreements.	Applicable; assessment below. 
	1122(d)(4)(iii)	Any additions, removals or substitutions to the asset pool are made, reviewed and approved in
          accordance with any conditions or requirements in the transaction agreements.	Not applicable; no removals or substitutions of transition property are contemplated or allowed
          under the transaction documents.

   

  
    EXHIBIT C-1

    3

    
      
        
 

    

  

   

  	 	Servicing Criteria 	Applicable 

          Servicing Criteria
	Reference	Criteria	 
	1122(d)(4)(iv)	Payments on pool assets, including any payoffs, made in accordance with the related
          pool asset documents are posted to the Servicer’s obligor records maintained no more than two business days after receipt, or such other number of days specified in the transaction agreements, and allocated to principal, interest or other items
          (e.g., escrow) in accordance with the related pool asset documents.	Applicable; assessment below.
	1122(d)(4)(v)	The Servicer’s records regarding the pool assets agree with the Servicer’s records with respect
          to an obligor’s unpaid principal balance.	Not applicable; because underlying obligation (system restoration charge) is not an interest
          bearing instrument.
	1122(d)(4)(vi)	Changes with respect to the terms or status of an obligor’s pool asset (e.g., loan
          modifications or re-agings) are made, reviewed and approved by authorized personnel in accordance with the transaction agreements and related pool asset documents.	Applicable; assessment below
	1122(d)(4)(vii)	Loss mitigation or recovery actions (e.g., forbearance plans, modifications and deeds in lieu
          of foreclosure, foreclosures and repossessions, as applicable) are initiated, conducted and concluded in accordance with the timeframes or other requirements established by the transaction agreements.	Applicable; limited assessment below. Servicer actions governed by PUCT regulations.
	1122(d)(4)(viii)	
          Records documenting collection efforts are maintained during the period a pool asset is delinquent in accordance with the transaction agreements. Such records are maintained on
            at least a monthly basis, or such other period specified in the transaction agreements, and describe the entity’s activities in monitoring delinquent pool assets including, for example, phone calls, letters and payment rescheduling plans in
            cases where delinquency is deemed temporary (e.g., illness or unemployment).

        	Applicable, but does not require assessment since no explicit documentation  requirement with
          respect to delinquent accounts are imposed under the transactional documents due to availability of “true-up” mechanism.  
	1122(d)(4)(ix)	
          Adjustments to interest rates or rates of return for pool assets with variable rates are computed based on the related pool asset documents.

        	Not applicable; system restoration charges are not interest bearing instruments.

   

  
    EXHIBIT C-1

    4

  

  
    
      
 

  

  	 	Servicing Criteria 	Applicable 

          Servicing Criteria
	Reference	Criteria	 
	1122(d)(4)(x)	Regarding any funds held in trust for an obligor (such as escrow accounts): (A)
          such funds are analyzed, in accordance with the obligor’s pool asset documents, on at least an annual basis, or such other period specified in the transaction agreements; (B) interest on such funds is paid, or credited, to obligors in accordance
          with applicable pool asset documents and state laws; and (C) such funds are returned to the obligor within 30 calendar days of full repayment of the related pool asset, or such other number of days specified in the transaction agreements.	Applicable; Servicer maintains REP deposit accounts in accordance with PUCT rules
          and regulations.
	1122(d)(4)(xi)	Payments made on behalf of an obligor (such as tax or insurance payments) are made on or before
          the related penalty or expiration dates, as indicated on the appropriate bills or notices for such payments, provided that such support has been received by the servicer at least 30 calendar days prior to these dates, or such other number of days
          specified in the transaction agreements.	Not applicable; Servicer does not make payments on behalf of obligors.
	1122(d)(4)(xii)	Any late payment penalties in connection with any payment to be made on behalf of an obligor
          are paid from the servicer’s funds and not charged to the obligor, unless the late payment was due to the obligor’s error or omission.	Not applicable; Servicer cannot make advances of its own funds on behalf of customers under the
          transaction documents.
	1122(d)(4)(xiii)	Disbursements made on behalf of an obligor are posted within two business days to the obligor’s
          records maintained by the servicer, or such other number of days specified in the transaction agreements.	Not applicable; Servicer cannot make advances of its own funds on behalf of customers to pay
          principal or interest on the bonds. 
	1122(d)(4)(xiv)	Delinquencies, charge-offs and uncollectable accounts are recognized and recorded in accordance
          with the transaction agreements.	Applicable; assessment below. 
	1122(d)(4)(xv)	Any external enhancement or other support, identified in Item 1114(a)(1) through (3) or Item
          1115 of Regulation AB, is maintained as set forth in the transaction agreements.	Not applicable; no external enhancement is required under the transaction documents.

   

  EXHIBIT C-1

  5

  
    
      
 

  

  3.        To the best of the undersigned’s knowledge, based on such review, the Servicer is in compliance in all material respects with the applicable servicing
    criteria set forth above as of and for the period ending the end of the fiscal year covered by the Depositor’s annual report on Form 10-K. [If not true, include description of any material
    instance of noncompliance.]

   

  4.        A registered public accounting firm has issued an attestation report on the undersigned’s assessment of compliance with the applicable servicing criteria set
    forth above as of and for the period ending the end of the fiscal year covered by the Depositor’s annual report on Form 10-K.

   

  Executed as of this ______________ day of _________________, ____.

   

  
    	 	[AEP TEXAS INC.]
	 	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:

  

   

   

  EXHIBIT C-1

  6

   

  
    
      
 

  

  EXHIBIT C-2

   

  CERTIFICATE OF COMPLIANCE

   

  The undersigned hereby certifies that he/she is the duly elected and acting [__________] of [NAME OF SERVICER], as servicer (the “Servicer”) under the
    Transition Property Servicing Agreement dated as of September 18, 2019 (the “Servicing Agreement”) between the Servicer and AEP Texas Restoration Funding LLC (the “Issuer”) and further that:

   

  1.       A review of the activities of the Servicer and of its performance under the Servicing Agreement during the twelve months ended [________], [       ] has been made under the supervision of the undersigned pursuant to Section

      3.03 of the Servicing Agreement; and

   

  2.       To the best of the undersigned’s knowledge, based on such review, the Servicer has fulfilled all of its obligations in all material respects under the
    Servicing Agreement throughout the twelve months ended [________],[
    _____], except as set forth on Annex A hereto.

   

  Executed as of this ______________ day of _________________, ____.

   

  
    	 	[NAME OF SERVICER]
	 	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:

  

   

   

  EXHIBIT C-2

  1

  
    
      
 

  

  ANNEX A

   

  to Certificate of Compliance

   

  LIST OF SERVICER DEFAULTS

   

  The following Servicer Defaults, or events which with the giving of notice, the lapse of time, or both, would become Servicer Defaults known to the undersigned
    occurred during the year ended [__________]:

   

  	Nature of Default	Status
	 	 
	 	 
	 	 
	 	 
	 	 
	 	 

   

  
    EXHIBIT C-2

    2

  

  
    
      
 

  

  SCHEDULE 4.01(a)

   

  EXPECTED AMORTIZATION SCHEDULE

   

  See Attached.

   

  SCHEDULE 4.01(a)

  1

  
    
      
 

  

   

  ANNEX I

   

  The Servicer agrees to comply with the following servicing procedures:

   

  SECTION 1. Definitions.

   

  (a)           Capitalized terms used herein and not otherwise defined herein shall
    have the meanings ascribed to such terms in the Transition Property Servicing Agreement (the “Agreement”).

   

  (b)           Whenever used in this Annex I, the following words and
    phrases shall have the following meanings:

   

  “Applicable MDMA” means with respect to each Customer, the meter data management agent providing meter reading services for that Customer’s account.

   

  “Billed SRCs” means the amounts of System Restoration Charges billed by the Servicer, whether billed directly to Customers by the Servicer or indirectly through
    REPs.

   

  “Other Providers” means each electric utility, municipally owned utility and/or cooperative, which, pursuant to the Tariff, any other tariffs filed with the
    PUCT, or any agreement with AEP Texas, is obligated to bill, pay or collect System Restoration Charges.

   

  “Servicer Policies and Practices” means, with respect to the Servicer’s duties under this Annex I, the policies and practices of the Servicer applicable
    to such duties that the Servicer follows with respect to comparable assets that it services for itself and, if applicable, others.

   

  SECTION 2. Data Acquisition.

   

  (a)           Installation and Maintenance of Meters. Except to the extent
    that a REP is responsible for such services, the Servicer shall cause to be installed, replaced and maintained meters in such places and in such condition as will enable the Servicer to obtain usage measurements for each Customer at least once every
    Billing Period. To the extent an Other Provider is responsible for such services, such Other Provider may obtain usage measurements for each Customer less frequently than once every Billing Period in accordance with its current practices so long as the
    PUCT Regulations so permit and the number of retail Customers of any such Other Provider for whom such modified terms apply shall be less than 5,000 as of the end of the preceding calendar year. To the extent a REP is responsible for such services, but
    not performing such services, the Servicer shall take all reasonably necessary actions to obtain usage measurements for each Customer at least once every Billing Period.

   

  (b)           Meter Reading. At least once each Billing Period, the Servicer
    shall obtain usage measurements from the Applicable MDMA for each Customer; provided, however, that the Servicer may estimate any Customer’s usage determined in accordance with applicable PUCT Regulations.

   

  ANNEX I

  1

  
    
      
 

  

  (c)           Cost of Metering. The Issuer shall not be obligated to pay any
    costs associated with the routine 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 or any REP as a result of new metering and/or billing technologies.

   

  (d)           ERCOT. The Servicer shall take all reasonable actions
    available under PUCT Regulations to obtain timely information from ERCOT (or, if such information is not available from ERCOT, directly from the Applicable MDMA) which is necessary for the Servicer to fulfill its obligations under the Servicing
    Agreement.

   

  SECTION 3. Usage and Bill Calculation.

   

  The Servicer (a) shall obtain a calculation of each Customer’s usage (which may be based on data obtained from such Customer’s meter read or on usage estimates
    determined in accordance with applicable PUCT Regulations) at least once each Billing Period; provided, however that the Servicer may obtain such calculations less frequently for those Customers whose usage is calculated by Other
    Providers in accordance with such Other Provider’s current practices so long as the PUCT Regulations so permit and the number of retail Customers of any such Other Provider for whom such modified terms apply shall be less than 5,000 as of the end of
    the preceding calendar year; and (b) shall either (i) determine therefrom each Customer’s individual System Restoration Charges to be included on Bills issued by it to such Customer or to the Applicable REP or Other Provider responsible for billing
    such Customer, or (ii) where the Applicable REP or Other Provider is responsible for billing the Customers, allow the Applicable REP or Other Provider, rather than the Servicer, to determine such Customers’ individual System Restoration Charges to be
    included on such Customers’ Bills based on billing factors provided by the Servicer, and, in such case, the Servicer shall deliver to the Applicable REP or Other Provider such billing factors as are necessary for the Applicable REP or Other Provider to
    calculate such Customers’ respective System Restoration Charges as such charges may change from time to time pursuant to the True-Up Adjustments.

   

  SECTION 4. Billing.

   

  The Servicer shall implement the System Restoration Charges as of the Closing Date and shall thereafter bill each Customer or, with respect to Customers billed by a
    REP or Other Provider, the Applicable REP or Other Provider, for the respective Customer’s outstanding current and past due System Restoration Charges accruing through the date on which the System Restoration Charges may no longer be billed under the
    Tariff, all in accordance with the following:

   

  (a)           Frequency of Bills; Billing Practices. In accordance with the
    Servicer’s then-existing Servicer Policies and Practices for its own charges, as such Servicer Policies and Practices may be modified from time to time, the Servicer shall generate and issue a Bill to each Customer, or, where the Applicable REP or
    Other Provider is responsible for billing the Customers, to the Applicable REP or Other Provider, for such Customers’ System Restoration Charges once every applicable Billing Period, at the same time, with the same frequency and on the same Bill as
    that containing the Servicer’s own charges to such Customers, REPs or Other Providers, as the case may be; provided, however, that the Servicer may bill Other Providers less frequently in accordance with its current practices so long as
    the PUCT Regulations so permit and the number of retail Customers of any such Other Provider for whom such modified billing terms apply shall be less than 5,000 as of the end of the preceding calendar year. In the event that the Servicer makes any
    material modification to these practices, it shall notify the Issuer, the Indenture Trustee, and the Rating Agencies prior to the effectiveness of any such modification; provided, however, that the Servicer may not make any modification
    that will materially adversely affect the Holders as evidenced by an Officer’s Certificate of the Issuer.

   

  ANNEX I

  2

  
    
      
 

  

  (b)           Format.

   

  (i)            Each Bill issued by the Servicer shall contain the charge
    corresponding to the respective System Restoration Charges owed by such Customer for the applicable Billing Period. The System Restoration Charges shall be separately identified if required by and in accordance with the terms of the Financing Order and
    the Tariff. If such charges are not separately identified, the Servicer shall provide, and unless prohibited by applicable PUCT Regulations, shall cause each Applicable REP to provide, Customers with the annual notice required by Section
      4.01(c)(iii)(B) of the Servicing Agreement.

   

  (ii)           Where a REP is responsible for billing the Customers, the Servicer
    shall deliver to the Applicable REP itemized charges for such Customer setting forth such Customers’ System Restoration Charges.

   

  (iii)         The Servicer shall conform to such requirements in respect of the
    format, structure and text of Bills delivered to Customers and REPs in accordance with, if applicable, the Financing Order, Tariff, other tariffs and any other PUCT Regulations. To the extent that Bill format, structure and text are not prescribed by
    the Utilities Code or by applicable PUCT Regulations, the Servicer shall, subject to clauses (i) and (ii) above, determine the format, structure and text of all Bills in accordance with its reasonable business judgment, its Servicer
    Policies and Practices with respect to its own charges and prevailing industry standards.

   

  (c)           Delivery. The Servicer shall deliver all Bills issued by it
    (i) by United States mail in such class or classes as are consistent with the Servicer Policies and Practices followed by the Servicer with respect to its own charges to its customers or (ii) by any other means, whether electronic or otherwise, that
    the Servicer may from time to time use to present its own charges to its customers. Where a REP is responsible for billing the Customers, the Servicer shall deliver all Bills to the Applicable REP by such means as are prescribed by applicable PUCT
    Regulations, or if not prescribed by applicable PUCT Regulations, by such means as are mutually agreed upon by the Servicer and the Applicable REP and are consistent with PUCT Regulations. The Servicer or each REP, as applicable, shall pay from its own
    funds all costs of issuance and delivery of all Bills, including but not limited to printing and postage costs as the same may increase or decrease from time to time.

   

  SECTION 5. Customer Service Functions.

   

  The Servicer shall handle all Customer inquiries and other Customer service matters according to the same procedures it uses to service Customers with respect to its
    own charges.

   

  ANNEX I

  3

  
    
      
 

  

  SECTION 6. Collections; Payment Processing; Remittance.

   

  (a)           Collection Efforts, Policies, Procedures.

   

  (i)            The Servicer shall use reasonable efforts to collect all Billed SRCs
    from Customers and Third-Party Collectors as and when the same become due and shall follow such collection procedures as it follows with respect to comparable assets that it services for itself or others, including with respect to the following:

   

  		(A)	The Servicer shall prepare and deliver overdue notices to Customers and REPs in accordance with applicable PUCT Regulations and Servicer Policies and Practices.

   

  		(B)	The Servicer shall apply late payment charges to outstanding Customer and REP balances in accordance with applicable PUCT Regulations and as required by the Financing Order.

   

  		(C)	In circumstances where the Servicer is allowed to bill Customers directly, the Servicer shall deliver verbal and written final notices of delinquency and possible disconnection in accordance with applicable PUCT Regulations and Servicer
          Policies and Practices.

   

  		(D)	The Servicer shall adhere to and carry out disconnection policies and termination of REP billing in accordance with the Utilities Code, the Financing Order, applicable PUCT Regulations and the Servicer Policies and Practices.

   

  		(E)	The Servicer may employ the assistance of collection agents to collect any past-due System Restoration Charges in accordance with applicable PUCT Regulations and Servicer Policies and Practices and the Tariff.

   

  		(F)	The Servicer shall apply Customer and REP deposits to the payment of delinquent accounts in accordance with applicable PUCT Regulations and Servicer Policies and Practices and according to the priorities set forth in Section 6(b)(ii), (iii),
          (iv) and (v) of this Annex I.

   

  (ii)           The Servicer shall not waive any late payment charge or any other fee
    or charge relating to delinquent payments, if any, or waive, vary or modify any terms of payment of any amounts payable by a Customer, in each case unless such waiver or action: (A) would be in accordance with the Servicer’s customary practices or
    those of any successor Servicer with respect to comparable assets that it services for itself and for others; (B) would not materially adversely affect the rights of the Holders as evidenced by an Officer’s Certificate of the Issuer; and (C) would
    comply with applicable law; provided, however, that notwithstanding anything in the Agreement or this Annex I to the contrary, the Servicer is authorized to write off any Billed SRCs, in accordance with its Servicer Policies and
    Practices, that have remained outstanding for one hundred eighty (180) days or more.

   

  ANNEX I

  4

  
    
      
 

  

  (iii)            The Servicer shall accept payment from Customers in respect of
    Billed SRCs in such forms and methods and at such times and places as it accepts for payment of its own charges. The Servicer shall accept payment from REPs in respect of Billed SRCs in such forms and methods and at such times and places as the
    Servicer and each REP shall mutually agree in accordance with, if applicable, the Financing Order, Tariff, other tariffs and any other PUCT Regulations.

   

  (b)           Payment Processing; Allocation; Priority of Payments.

   

  (i)            The Servicer shall post all payments received to Customer accounts as
    promptly as practicable, and, in any event, substantially all payments shall be posted no later than three (3) Business Days after receipt.

   

  (ii)           Subject to clause (iii) below, the Servicer shall apply
    payments received to each Customer’s or each Applicable REP’s account in proportion to the charges contained on the outstanding Bill to such Customer or Applicable REP.

   

  (iii)            Any amounts collected by the Servicer that represent partial
    payments of the total Bill to a Customer or REP shall be allocated as follows: (A) first to amounts owed to the Issuer, AEP Texas and any other affiliate of AEP Texas which is owed “transition charges” as defined in Section 39.302(7) (including as
    modified by Section 36.403(f) to include system restoration charges) of the Securitization Law and other fees and charges, (excluding any late fees), regardless of age, pro rata in proportion to their respective percentages of the total amount of their
    combined outstanding charges on such Bill; then (B) all late charges shall be allocated to the Servicer; provided that penalty payments owed on late payments of System Restoration Charges shall be allocated to the Issuer in accordance with the
    terms of the Tariff. As provided in the Intercreditor Agreement, if more than one issue of system restoration bonds or transition bonds issued under the Securitization Law is outstanding, the Servicer shall allocate, or cause to the allocated, amounts
    owed to the Issuer and to each other issuer of system restoration bonds or transition bonds ratably based upon the total amount of system restoration charges or transition charges, as applicable, on such bill which were billed in respect to each such
    issue of system restoration bonds or transition bonds.

   

  (iv)            The Servicer shall hold all over-payments for the benefit of the
    Issuer and AEP Texas and shall apply such funds to future Bill charges in accordance with clauses (ii) and (iii) as such charges become due.

   

  (v)           For Customers on a Budget Billing Plan, the Servicer shall treat SRC
    Payments received from such Customers as if such Customers had been billed for their respective System Restoration Charges in the absence of the Budget Billing Plan; partial payment of a Budget Billing Plan payment shall be allocated according to clause

      (iii) and overpayment of a Budget Billing Plan payment shall be allocated according to clause (iv).

   

  (c)           Accounts; Records.

   

  The Servicer shall maintain accounts and records as to the Transition Property accurately and in accordance with its standard accounting procedures and in sufficient
    detail (i) to permit reconciliation between payments or recoveries with respect to the Transition Property and the amounts from time to time remitted to the Collection Account in respect of the Transition Property and (ii) to permit the SRC Collections
    held by the Servicer to be accounted for separately from the funds with which they may be commingled, so that the dollar amounts of SRC Collections commingled with the Servicer’s funds may be properly identified and traced.

   

  ANNEX I

  5

  
    
      
 

  

  (d)           Investment of SRC Payments Received.

   

  Prior to each Daily Remittance, the Servicer may invest SRC Payments received at its own risk and (except as required by applicable PUCT Regulations) for its own
    benefit. So long as the Servicer complies with its obligations under Section 6(c), neither such investments nor such funds shall be required to be segregated from the other investment and funds of the Servicer.

   

  (e)           Calculation of Daily Remittance.

   

  (i)            For purposes of calculating the Daily Remittance, (i) all Billed SRCs
    shall be deemed to be collected the same number of days after billing as is equal to the Weighted Average Days Outstanding then in effect and (ii) the Servicer will, on each Servicer Business Day, remit to the Indenture Trustee for deposit in the
    Collection Account an amount equal to the product of the applicable Billed SRCs multiplied by one hundred percent less the system wide charge-off percentage used by the Servicer to calculate the most recent Periodic Billing Requirement. Such product
    shall constitute the amount of Estimated SRC Collections for such Servicer Business Day. Pursuant to Section 6.11(c) of the Agreement, commencing no later than September 25, 2020, the Servicer shall calculate in each Monthly Servicer’s
    Certificate the amount of Actual SRC Collections for the first Collection Period of the Reconciliation Period as compared to the Estimated SRC Collections forwarded to the Collection Account in respect of such calendar month. No Excess Remittance shall
    be withdrawn from the Collection Account if such withdrawal would cause the amounts on deposit in the General Subaccount or the Excess Funds Subaccount to be insufficient for the payment of the next installment of interest or principal due at maturity
    on the next Payment Date or upon acceleration on or before the next Payment Date on the System Restoration Bonds. The Servicer shall be allowed to use the proceeds from any Excess Remittance to reimburse any Applicable REPs for the excess of their
    remittances over actual SRC Payments received by such REPs in accordance with the terms of PUCT Regulations.

   

  (ii)           On or before August 15 of each year in accordance with Section
      4.01(b) of the Agreement, the Servicer shall, in a timely manner so as to perform all required calculations under such Section 4.01(b), update the Weighted Average Days Outstanding and the system-wide charge-off percentage in order to be
    able to calculate the Periodic Billing Requirement for the next True-Up Adjustment and to calculate any change in the Daily Remittances for the next Calculation Period.

   

  ANNEX I

  6

  
    
      
 

  

  (iii)            The Servicer and the Issuer acknowledge that, as contemplated in Section

      8.01(b) of the Agreement, the Servicer may make certain changes to its current computerized customer information system, which changes, when functional, would affect the Servicer’s method of calculating the SRC Payments estimated to have been
    received by the Servicer during each Collection Period as set forth in this Annex I. Should these changes to the computerized customer information system become functional during the term of the Agreement, the Servicer and the Issuer agree that
    they shall review the procedures used to calculate the SRC Payments estimated to have been received in light of the capabilities of such new system and shall amend this Annex I in writing to make such modifications and/or substitutions to such
    procedures as may be appropriate in the interests of efficiency, accuracy, cost and/or system capabilities; provided, however, that the Servicer may not make any modification or substitution that will materially adversely affect the
    Holders as evidenced by an Officer’s Certificate of the Issuer. As soon as practicable, and in no event later than sixty (60) Business Days after the date on which all Customer accounts are being billed under such new system, the Servicer shall notify
    the Issuer, the Indenture Trustee and the Rating Agencies of the same.

   

  (iv)            All calculations of collections, each update of the Weighted Average
    Days Outstanding or system-wide charge off percentage and any changes in procedures used to calculate the Estimated SRC Payments pursuant to this Section 6(e) shall be made in good faith, and in the case of any update pursuant to clause
      (ii) above or any change in procedures pursuant to clause (iii) above, in a manner reasonably intended to provide estimates and calculations that are at least as accurate as those that would be provided on the Closing Date utilizing the
    initial procedures.

   

  (f)           Remittances.

   

  (i)            The Issuer shall cause to be established the Collection Account in the
    name of the Indenture Trustee in accordance with the Indenture.

   

  (ii)           The Servicer shall make remittances to the Collection Account in
    accordance with Section 6.11 of the Agreement.

   

  (iii)          In the event of any change of account or change of institution
    affecting any Collection Account, the Issuer shall provide written notice thereof to the Servicer and the Rating Agencies not later than five (5) Business Days from the effective date of such change.

   

  ANNEX I

  7Exhibit 10.2

   

  TRANSITION PROPERTY PURCHASE AND SALE AGREEMENT

    

    by and between

    

    AEP TEXAS RESTORATION FUNDING LLC,

    

    Issuer

    

    and

    

    AEP TEXAS INC.,

    

    Seller

    

    Dated as of September 18, 2019

  
    
      
 

  

  
  TABLE OF CONTENTS

   

  Page

   

  
    	ARTICLE I
	DEFINITIONS
	 	 	 
	SECTION 1.01.	Definitions	1
	SECTION 1.02.	Other Definitional Provisions	2
	 
	ARTICLE II
	CONVEYANCE OF TRANSITION PROPERTY
	 	 	 
	SECTION 2.01.	Conveyance of Transition Property	2
	SECTION 2.02.	Conditions to Conveyance of Transition Property	3
	 
	ARTICLE III
	REPRESENTATIONS AND WARRANTIES OF SELLER
	 	 	 
	SECTION 3.01.	Organization and Good Standing	4
	SECTION 3.02.	Due Qualification	5
	SECTION 3.03.	Power and Authority	5
	SECTION 3.04.	Binding Obligation	5
	SECTION 3.05.	No Violation	5
	SECTION 3.06.	No Proceedings	5
	SECTION 3.07.	Approvals	6
	SECTION 3.08.	The Transition Property	6
	SECTION 3.09.	Limitations on Representations and Warranties	9
	 
	ARTICLE IV
	COVENANTS OF THE SELLER
	 	 	 
	SECTION 4.01.	Existence	10
	SECTION 4.02.	No Liens	10
	SECTION 4.03.	Delivery of Collections	10
	SECTION 4.04.	Notice of Liens	10
	SECTION 4.05.	Compliance with Law	10
	SECTION 4.06.	Covenants Related to System Restoration Bonds and Transition  Property	11
	SECTION 4.07.	Protection of Title	12
	SECTION 4.08.	Nonpetition Covenants	12
	SECTION 4.09.	Taxes	13
	SECTION 4.10.	Issuance Advice Letter	13
	SECTION 4.11.	Tariff	13
	SECTION 4.12.	Notice of Breach to Rating Agencies, Etc	13

  

   

  
    i

    
      
 

  

   

  	SECTION 4.13.	Use of Proceeds	13
	SECTION 4.14.	Further Assurances	13
	 
	ARTICLE V
	THE SELLER
	 	 	 
	SECTION 5.01.	Liability of Seller; Indemnities	13
	SECTION 5.02.	Merger, Conversion or Consolidation of, or Assumption of the Obligations of, Seller	16
	SECTION 5.03.	Limitation on Liability of Seller and Others	16
	 
	ARTICLE VI
	MISCELLANEOUS PROVISIONS
	 	 	 
	SECTION 6.01.	Amendment	17
	SECTION 6.02.	PUCT Condition	17
	SECTION 6.03.	Notices	19
	SECTION 6.04.	Assignment	19
	SECTION 6.05.	Limitations on Rights of Third Parties	19
	SECTION 6.06.	Severability	20
	SECTION 6.07.	Separate Counterparts	20
	SECTION 6.08.	Headings	20
	SECTION 6.09.	Governing Law	20
	SECTION 6.10.	Assignment to Indenture Trustee	20
	SECTION 6.11.	Limitation of Liability	20
	SECTION 6.12.	Waivers	21
	 	 	 
	EXHIBITS
	Exhibit A	Form of Bill of Sale	 

    

  
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  This TRANSITION PROPERTY PURCHASE AND SALE AGREEMENT (this “Agreement”), dated as of September 18, 2019, is between
    AEP Texas Restoration Funding LLC, a Delaware limited liability company (the “Issuer”), and AEP Texas Inc., a Delaware corporation (together with its successors in interest to the extent permitted hereunder, the “Seller”).

   

  RECITALS

   

  WHEREAS, the Issuer desires to purchase the Transition Property created pursuant to the Securitization Law;

   

  WHEREAS, the Seller is willing to sell its rights and interests under the Financing Order to the Issuer whereupon such rights and interests will become the
    Transition Property;

   

  WHEREAS, the Issuer, in order to finance the purchase of the Transition Property, will issue the System Restoration Bonds under the Indenture; and

   

  WHEREAS, the Issuer, to secure its obligations under the System Restoration Bonds and the Indenture, will pledge, among other things, all right, title and interest
    of the Issuer in and to the Transition Property and this Agreement to the Indenture Trustee for the benefit of the Secured Parties.

   

  NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows:

   

  ARTICLE I

    DEFINITIONS

   

  SECTION 1.01.          Definitions. (a) Unless otherwise defined herein,
    capitalized terms used herein shall have the meanings assigned to them in that certain Indenture (including Appendix A thereto) dated as of the date hereof between the Issuer and U.S. Bank National Association, a national banking association,
    in its capacity as indenture trustee (the “Indenture Trustee”) and in its separate capacity as a securities intermediary (the “Securities Intermediary”), as the same may be amended, restated, supplemented or otherwise modified from time
    to time.

   

  (b)          Whenever used in this Agreement, the following words and phrases shall
    have the following meanings:

   

  “Bill of Sale” means a bill of sale substantially in the form of Exhibit A hereto delivered pursuant to Section 2.02(i).

   

  “Losses” means (i) any and all amounts of principal and interest on the System Restoration Bonds not paid when due or when scheduled to be paid in accordance
    with their terms and the amounts of any deposits by or to the Issuer required to have been made in accordance with the terms of the Basic Documents or the Financing Order which are not made when so required and (ii) any and all other liabilities,
    obligations, losses, claims, damages, payments, costs or expenses of any kind whatsoever.

   

  
    
      
 

  

  
  “Transition Property” means all of the Seller’s rights and interests under the Financing Order.

   

  SECTION 1.02.          Other Definitional Provisions.

   

  (a)          All terms defined in this Agreement shall have the defined meanings
    when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein.

   

  (b)          The words “hereof,” “herein,” “hereunder” and words of similar import,
    when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement; Section, Schedule and Exhibit references contained in this Agreement are references to Sections, Schedules and Exhibits in or
    to this Agreement unless otherwise specified; and the term “including” shall mean “including without limitation”.

   

  (c)          The definitions contained in this Agreement are applicable to the
    singular as well as the plural forms of such terms.

   

  ARTICLE II

    CONVEYANCE OF TRANSITION PROPERTY

   

  SECTION 2.01.          Conveyance of Transition Property. (a) In
    consideration of the Issuer’s delivery to or upon the order of the Seller of $231,184,014, subject to the conditions specified in Section 2.02, the Seller does hereby irrevocably sell, transfer, assign, set over and otherwise convey to the
    Issuer, without recourse or warranty, except as set forth herein, all right, title and interest of the Seller in and to the Transition Property (such sale, transfer, assignment, setting over and conveyance of the Transition Property includes, to the
    fullest extent permitted by the Securitization Law, the right to impose, collect and receive System Restoration Charges and the assignment of all revenues, collections, claims, rights, payments, money or proceeds of or arising from the System
    Restoration Charges related to the Transition Property, as the same may be adjusted from time to time). Such sale, transfer, assignment, setting over and conveyance is hereby expressly stated to be a sale and, pursuant to Section 39.308 (as
    incorporated through Section 36.403(a)) of the Securitization Law and other applicable law, shall be treated as an absolute transfer of all of the Seller’s right, title and interest in and to (as in a true sale), and not as a pledge or other financing
    of, the Transition Property. The Seller and the Issuer agree that after giving effect to the sale, transfer, assignment, setting over and conveyance contemplated hereby the Seller has no right, title or interest in or to the Transition Property to
    which a security interest could attach because (i) it has sold, transferred, assigned, set over and conveyed all right, title and interest in and to the Transition Property to the Issuer, (ii) as provided in Section 39.304 (as incorporated through
    Section 36.403(a)) of the Securitization Law, such rights are only contract rights until the time of such sale, transfer, assignment, setting over and conveyance and (iii) as provided in Section 39.309(c) (as incorporated through Section 36.403(a)) of
    the Securitization Law, appropriate notice has been filed and such transfer is perfected against all third parties, including subsequent judicial or other lien creditors. If such sale, transfer, assignment, setting over and conveyance is held by any
    court of competent jurisdiction not to be a true sale as provided in Section 39.308 (as incorporated through Section 36.403(a)) of the Securitization Law, then such sale, transfer, assignment, setting over and conveyance shall be treated as a pledge of
    the Transition Property and as the creation of a security interest (within the meaning of the Securitization Law and the UCC) in the Transition Property and, without prejudice to its position that it has absolutely transferred all of its rights in the
    Transition Property to the Issuer, the Seller hereby grants a security interest in the Transition Property to the Issuer (and to the Indenture Trustee for the benefit of the Secured Parties) to secure their respective rights under the Basic Documents
    to receive the System Restoration Charges and all other Transition Property.

   

  
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  (b)          Subject to Section 2.02, the Issuer does hereby purchase the
    Transition Property from the Seller for the consideration set forth in Section 2.01(a).

   

  SECTION 2.02.                  Conditions to Conveyance of Transition Property.
    The obligation of the Issuer to purchase Transition Property on the Closing Date shall be subject to the satisfaction of each of the following conditions:

   

  (i)                 on or prior to the Closing Date, the Seller shall have delivered
    to the Issuer a duly executed Bill of Sale identifying the Transition Property to be conveyed on the Closing Date;

   

  (ii)                on or prior to the Closing Date, the Seller shall have received
    the Financing Order creating the Transition Property;

   

  (iii)               as of the Closing Date, the Seller is not insolvent and will not
    have been made insolvent by such sale and the Seller is not aware of any pending insolvency with respect to itself;

   

  (iv)              as of the Closing Date, the representations and warranties of the
    Seller set forth in this Agreement shall be true and correct with the same force and effect as if made on the Closing Date (except to the extent that they relate to an earlier date); on and as of the Closing Date no breach of any covenant or agreement
    of the Seller contained in this Agreement has occurred and is continuing; and no Servicer Default shall have occurred and be continuing;

   

  (v)               as of the Closing Date, (A) the Issuer shall have sufficient funds
    available to pay the purchase price for the Transition Property to be conveyed on such date and (B) all conditions to the issuance of the System Restoration Bonds intended to provide such funds set forth in the Indenture shall have been satisfied or
    waived;

   

  (vi)              on or prior to the Closing Date, the Seller shall have taken all
    action required to transfer to the Issuer ownership of the Transition Property to be conveyed on such date, free and clear of all Liens other than Liens created by the Issuer pursuant to the Basic Documents and to perfect such transfer, including,
    without limitation, filing any statements or filings under the Securitization Law or the UCC; and the Issuer or the Servicer, on behalf of the Issuer, shall have taken any action required for the Issuer to grant the Indenture Trustee a first priority
    perfected security interest in the System Restoration Bond Collateral and maintain such security interest as of such date;

   

  (vii)             the Seller shall have delivered to the Rating Agencies and the
    Issuer any Opinions of Counsel required by the Rating Agencies;

   

  
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  (viii)             the Seller shall have received and delivered to the Issuer and the
    Indenture Trustee an opinion or opinions of outside tax counsel (as selected by the Seller, and in form and substance reasonably satisfactory to the Issuer and the Underwriters) to the effect that (i) the Issuer will not be subject to United States
    federal income tax as an entity separate from its sole owner and that the System Restoration Bonds will be treated as debt of the Issuer's sole owner for United States federal income tax purposes, and (ii) the issuance of the System Restoration Bonds
    will not result in gross income to the Seller. The opinion of outside tax counsel described above may, if the Seller so chooses, be conditioned on the receipt by the Seller of one or more letter rulings from the Internal Revenue Service (unless the
    Internal Revenue Service has announced that it will not rule on the issues described in this paragraph) and in rendering such opinion outside tax counsel shall be entitled to rely on the rulings contained in such ruling letters and to rely on the
    representations made, and information supplied, to the Internal Revenue Service in connection with such letter rulings;

   

  (ix)               on and as of the Closing Date, each of the LLC Agreement, the
    Servicing Agreement, this Agreement, the Indenture, the Financing Order, the Tariff and the Securitization Law shall be in full force and effect;

   

  (x)                the System Restoration Bonds shall have received a rating or
    ratings required by the Financing Order; and

   

  (xi)               the Seller shall have delivered to the Indenture Trustee and the
    Issuer an Officers’ Certificate confirming the satisfaction of each condition precedent specified in this Section 2.02.

   

  ARTICLE III

    REPRESENTATIONS AND WARRANTIES OF SELLER

   

  Subject to Sections 3.09, the Seller makes the following representations and warranties, as of the Closing Date, and the Seller acknowledges that the Issuer
    has relied thereon in acquiring the Transition Property. The representations and warranties shall survive the sale and transfer of Transition Property to the Issuer and the pledge thereof to the Indenture Trustee pursuant to the Indenture. The Seller
    agrees that (i) the Issuer may assign the right to enforce the following representations and warranties to the Indenture Trustee and (ii) the representations and warranties inure to the benefit of the Issuer and the Indenture Trustee.

   

  SECTION 3.01.          Organization and Good Standing. The Seller is a
    corporation duly organized and validly existing and is in good standing under the laws of the state of its organization, with the requisite corporate or other power and authority to own its properties as such properties are currently owned and to
    conduct its business as such business is now conducted by it, and has the requisite corporate or other power and authority to obtain the Financing Order and own the rights and interests under the Financing Order and to sell and assign those rights and
    interests to the Issuer, whereupon (subject to the effectiveness of the Issuance Advice Letter) such rights and interests shall become “transition property” as defined in Section 39.302(8) (as incorporated through Section 36.403(a)) of the
    Securitization Law.

   

  
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  SECTION 3.02.          Due Qualification. The Seller is duly qualified to do
    business and is in good standing, and has obtained all necessary licenses and approvals, in all jurisdictions in which the ownership or lease of property or the conduct of its business shall require such qualifications, licenses or approvals (except
    where the failure to so qualify or obtain such licenses and approvals would not be reasonably likely to have a material adverse effect on the Seller’s business, operations, assets, revenues or properties).

   

  SECTION 3.03.          Power and Authority. The Seller has the requisite
    corporate or other power and authority to execute and deliver this Agreement and to carry out its terms; and the execution, delivery and performance of this Agreement have been duly authorized by all necessary action on the part of the Seller under its
    organizational or governing documents and laws.

   

  SECTION 3.04.          Binding Obligation. This Agreement constitutes a
    legal, valid and binding obligation of the Seller enforceable against it in accordance with its terms, subject to applicable insolvency, reorganization, moratorium, fraudulent transfer and other laws relating to or affecting creditors’ or secured
    parties’ rights generally from time to time in effect and to general principles of equity (including concepts of materiality, reasonableness, good faith and fair dealing), regardless of whether considered in a proceeding in equity or at law.

   

  SECTION 3.05.          No Violation. The consummation of the transactions
    contemplated by this Agreement and the fulfillment of the terms hereof do not and will not: (i) conflict with or result in any breach of any of the terms and provisions of, nor constitute (with or without notice or lapse of time) a default under, the
    Seller’s organizational documents, or any indenture or other agreement or instrument to which the Seller is a party or by which it or any of its property is bound; (ii) result in the creation or imposition of any Lien upon any of the Seller’s
    properties pursuant to the terms of any such indenture, agreement or other instrument (other than any Lien that may be granted in the Issuer’s favor or any Lien created in favor of the Indenture Trustee for the benefit of the Holders pursuant to
    Section 39.309 (as incorporated through Section 36.403(a)) of the Securitization Law or any Lien that may be granted under the Basic Documents); or (iii) violate any existing law or any existing order, rule or regulation applicable to the Seller of any
    Governmental Authority having jurisdiction over the Seller or its properties.

   

  SECTION 3.06.          No Proceedings. There are no proceedings pending and,
    to the Seller’s knowledge, there are no proceedings threatened and, to the Seller’s knowledge, there are no investigations pending or threatened, before any Governmental Authority having jurisdiction over the Seller or its properties involving or
    relating to the Seller or the Issuer or, to the Seller’s knowledge, any other Person: (i) asserting the invalidity of the Securitization Law, the Financing Order, this Agreement, any of the other Basic Documents or the System Restoration Bonds, (ii)
    seeking to prevent the issuance of the System Restoration Bonds or the consummation of any of the transactions contemplated by this Agreement or any of the other Basic Documents, (iii) seeking any determination or ruling that could reasonably be
    expected to materially and adversely affect the performance by the Seller of its obligations under, or the validity or enforceability of the Securitization Law, the Financing Order, this Agreement, any of the other Basic Documents or the System
    Restoration Bonds or (iv) seeking to adversely affect the federal income tax or state income or franchise tax classification of the System Restoration Bonds as debt.

   

  
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  SECTION 3.07.          Approvals. Except for UCC financing statement filings
    and other filings under the Securitization Law, no approval, authorization, consent, order or other action of, or filing with, any Governmental Authority is required in connection with the execution and delivery by the Seller of this Agreement, the
    performance by the Seller of the transactions contemplated hereby or the fulfillment by the Seller of the terms hereof, except those that have been obtained or made and those that the Seller, in its capacity as Servicer under the Servicing Agreement,
    is required to make in the future pursuant to the Servicing Agreement.

   

  SECTION 3.08.          The Transition Property.

   

  (a)          Information. Subject to subsection (f) below, at the
    Closing Date, all written information, as amended or supplemented from time to time, provided by the Seller to the Issuer with respect to the Transition Property (including the Expected Amortization Schedule, the Financing Order and the Issuance Advice
    Letter relating thereto) is true and correct in all material respects.

   

  (b)          Title. It is the intention of the parties hereto that (other
    than for federal income tax purposes and, to the extent consistent with applicable state tax law, state income and franchise tax purposes) the transfers and assignments herein contemplated each constitute a sale and absolute transfer of the Transition
    Property from the Seller to the Issuer and that no interest in, or right or title to, the Transition Property shall be part of the Seller’s estate in the event of the filing of a bankruptcy petition by or against the Seller under any bankruptcy law. No
    portion of the Transition Property has been sold, transferred, assigned or pledged or otherwise conveyed by the Seller to any Person other than the Issuer, and no security agreement, financing statement or equivalent security or lien instrument listing
    the Seller as debtor covering all or any part of the Transition Property is on file or of record in any jurisdiction, except such as may have been filed, recorded or made in favor of the Issuer or the Indenture Trustee in connection with the Basic
    Documents. The Seller has not authorized the filing of and is not aware (after due inquiry) of any financing statement against it that includes a description of collateral including the Transition Property other than any financing statement filed,
    recorded or made in favor of the Issuer or the Indenture Trustee in connection with the Basic Documents. The Seller is not aware (after due inquiry) of any judgment or tax lien filings against either the Seller or the Issuer. At the Closing Date,
    immediately prior to the sale of the Transition Property hereunder, the Seller is the original and the sole owner of the Transition Property free and clear of all Liens and rights of any other Person, and no offsets, defenses or counterclaims exist or
    have been asserted with respect thereto.

   

  (c)          Transfer Filings. On the Closing Date, immediately upon the sale
    hereunder, the Transition Property shall be validly transferred and sold to the Issuer, the Issuer shall own all the Transition Property free and clear of all Liens (except for any Lien created in favor of the Holders pursuant to Section 39.309 (as
    incorporated through Section 36.403(a)) of the Securitization Law or any Lien that may be granted under the Basic Documents) and all filings and action to be made or taken by the Seller (including, without limitation, filings with the Secretary of
    State of the State of Texas under the Securitization Law) necessary in any jurisdiction to give the Issuer a perfected ownership interest (subject to any Lien created in favor of the Indenture Trustee for the benefit of the Holders pursuant to Section
    39.309 (as incorporated through Section 36.403(a)) of the Securitization Law and any Lien that may be granted under the Basic Documents) in the Transition Property have been made or taken. No further action is required to maintain such ownership
    interest (subject to any Lien created in favor of the Indenture Trustee for the benefit of the Holders pursuant to Section 39.309 (as incorporated through Section 36.403(a)) of the Securitization Law and any Lien that may be granted under the Basic
    Documents) and to give the Indenture Trustee a first priority perfected security interest in the Transition Property. All filings and action have also been made or taken to perfect the security interest in the Transition Property granted by the Seller
    to the Issuer (subject to any Lien created in favor of the Indenture Trustee for the benefit of the Holders pursuant to Section 39.309 (as incorporated through Section 36.403(a)) of the Securitization Law and any Lien that may be granted under the
    Basic Documents) and, to the extent necessary, the Indenture Trustee pursuant to Section 2.01.

   

  
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  (d)          Financing Order, Issuance Advice Letter and Tariff; Other Approvals.
    On the Closing Date, under the laws of the State of Texas and the United States in effect on the Closing Date, (i) the Financing Order pursuant to which the rights and interests of the Seller, including the right to impose, collect and receive the
    System Restoration Charge and, in and to the Transition Property transferred on such date have been created, is Final and non-appealable and is in full force and effect; (ii) as of the issuance of the System Restoration Bonds, the System Restoration
    Bonds are entitled to the protection of the Securitization Law and, accordingly, the Financing Order, the System Restoration Charges and the Issuance Advice Letter are not revocable by the PUCT; (iii) as of the issuance of the System Restoration Bonds,
    the Tariff is in full force and effect and is not subject to modification by the PUCT except as provided under Section 39.307 (as incorporated through Section 36.403(a)) of the Securitization Law; (iv) the process by which the Financing Order creating
    the Transition Property transferred on such date was adopted and approved, and the Financing Order, Issuance Advice Letter and Tariff themselves, comply with all applicable laws, rules and regulations; (v) the Issuance Advice Letter and the Tariff
    relating to the Transition Property transferred on such date have been filed in accordance with the Financing Order creating the Transition Property transferred on such date and an officer of the Seller has provided the certification to the PUCT
    required by the Issuance Advice Letter; and (vi) no other approval, authorization, consent, order or other action of, or filing with any Governmental Authority is required in connection with the creation of the Transition Property transferred on such
    date, except those that have been obtained or made.

   

  (e)          State Action. Under the Securitization Law, the State of Texas
    has pledged that it will not take or permit any action that would impair the value of the Transition Property transferred on such date, or, except as permitted by Section 39.307 (as incorporated through Section 36.403(a)) of the Securitization Law,
    reduce, alter or impair the System Restoration Charges relating to the Transition Property until the principal, interest and premium and any other charges incurred and contracts to be performed in connection with the System Restoration Bonds relating
    to the Transition Property have been paid and performed in full. Under the laws of the State of Texas and the United States, the State of Texas could not constitutionally take any action of a legislative character including the repeal or amendment of
    the Securitization Law, which would substantially limit, alter or impair the Transition Property or other rights vested in the Holders pursuant to the Financing Order or substantially limit, alter, impair or reduce the value or amount of the Transition
    Property, unless such action is a reasonable exercise of the sovereign powers of the State of Texas and of a character reasonable and appropriate to further a legitimate public purpose, and, under the takings clauses of the United States and Texas
    Constitutions, the State of Texas could not repeal or amend the Securitization Law or take any other action in contravention of its pledge quoted above without paying just compensation to the Holders, as determined by a court of competent jurisdiction
    if doing so would constitute a permanent appropriation of a substantial property interest of the Holders in the Transition Property and deprive the Holders of their reasonable expectations arising from their investments in the System Restoration Bonds.
    There is no assurance, however, that, even if a court were to award just compensation it would be sufficient to pay the full amount of principal and interest on the System Restoration Bonds.

   

  
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  (f)           Assumptions. On the Closing Date, based upon the information
    available to the Seller on such date, the assumptions used in calculating the System Restoration Charges are reasonable and are made in good faith. Notwithstanding the foregoing, the Seller makes no representation or warranty, express or implied, that
    amounts actually collected arising from those System Restoration Charges will in fact be sufficient to meet the payment obligations on the related System Restoration Bonds or that the assumptions used in calculating such System Restoration Charges will
    in fact be realized.

   

  (g)          Creation of Transition Property. Upon the effectiveness of the
    Financing Order, the Issuance Advice Letter and the Tariff with respect to the Transition Property and the transfer of the Transition Property pursuant to this Agreement: (i) the rights and interests of the Seller under the Financing Order, including
    the right to impose, collect and receive the System Restoration Charges authorized in the Financing Order, become “transition property” as defined in Section 39.302(8) (as incorporated through Section 36.403(a)) of the Securitization Law; (ii) the
    Transition Property constitutes a present property right vested in the Issuer; (iii) the Transition Property includes (A) the right, title and interest of the Seller in the Financing Order and the System Restoration Charges and (B) the right to impose,
    collect and obtain periodic adjustments (with respect to adjustments, in the manner and with the effect provided in Section 4.01(b) of the Servicing Agreement) of such System Restoration Charges, and the rates and other charges authorized by
    the Financing Order and all revenues, collections, claims, payments, money or proceeds of or arising from the System Restoration Charges; (iv) the owner of the Transition Property is legally entitled to bill System Restoration Charges and collect
    payments in respect of the System Restoration Charges in the aggregate sufficient to pay the interest on and principal of the System Restoration Bonds in accordance with the Indenture, to pay the fees and expenses of servicing the System Restoration
    Bonds, to replenish the Capital Subaccount to the Required Capital Level until the System Restoration Bonds are paid in full or until the last date permitted for the collection of payments in respect of the System Restoration Charge under the Financing
    Order, whichever is earlier, and the Customer class allocation percentages in the Financing Order do not prohibit the owner of the Transition Property from obtaining adjustments and effecting allocations to the System Restoration Charges in order to
    collect payments of such amounts; and (v) the Transition Property is not subject to any Lien other than any Lien created in favor of the Indenture Trustee for the benefit of the Holders pursuant to Section 39.309 (as incorporated through Section
    36.403(a)) of the Securitization Law or any Lien that may be granted under the Basic Documents.

   

  
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  (h)          Nature of Representations and Warranties. The representations
    and warranties set forth in this Section 3.08, insofar as they involve conclusions of law, are made not on the basis that the Seller purports to be a legal expert or to be rendering legal advice, but rather to reflect the parties’ good faith
    understanding of the legal basis on which the parties are entering into this Agreement and the other Basic Documents and the basis on which the Holders are purchasing the System Restoration Bonds, and to reflect the parties’ agreement that, if such
    understanding turns out to be incorrect or inaccurate, the Seller will be obligated to indemnify the Issuer and its permitted assigns (to the extent required by and in accordance with Section 5.01), and that the Issuer and its permitted assigns
    will be entitled to enforce any rights and remedies under the Basic Documents, on account of such inaccuracy to the same extent as if the Seller had breached any other representations or warranties hereunder.

   

  (i)           Prospectus. As of the date hereof, the information describing
    the Seller under the caption “The Depositor, Seller, Initial Servicer and Sponsor” in the prospectus dated September 11, 2019 relating to the System Restoration Bonds is true and correct in all material respects.

   

  (j)           Solvency. After giving effect to the sale of the Transition
    Property hereunder, the Seller:

   

  (i)                 is solvent and expects to remain solvent;

   

  (ii)                is adequately capitalized to conduct its business and affairs
    considering its size and the nature of its business and intended purpose;

   

  (iii)               is not engaged in nor does it expect to engage in a business for
    which its remaining property represents an unreasonably small capital;

   

  (iv)               reasonably believes that it will be able to pay its debts as they
    come due; and

   

  (v)                is able to pay its debts as they mature and does not intend to
    incur, or believes that it will not incur, indebtedness that it will not be able to repay at its maturity.

   

  (k)          No Court Order. There is no order by any court providing for the
    revocation, alteration, limitation or other impairment of the Securitization Law, the Financing Order, the Issuance Advice Letter, the Transition Property or the System Restoration Charges or any rights arising under any of them or that seeks to enjoin
    the performance of any obligations under the Financing Order.

   

  (l)           Survival of Representations and Warranties The representations
    and warranties set forth in this Section 3.08 shall survive the execution and delivery of this Agreement and may not be waived by any party hereto except pursuant to a written agreement executed in accordance with Article VI and as to
    which the Rating Agency Condition has been satisfied.

   

  SECTION 3.09.          Limitations on Representations and Warranties. Without
    prejudice to any of the other rights of the parties, the Seller will not be in breach of any representation or warranty, as a result of a change in law by means of any legislative enactment, constitutional amendment or voter initiative. THE SELLER
    MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, THAT BILLED SYSTEM RESTORATION CHARGES WILL BE ACTUALLY COLLECTED FROM CUSTOMERS.

   

  
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  ARTICLE IV

    COVENANTS OF THE SELLER

   

  SECTION 4.01.          Existence. Subject to Section 5.02, so long as
    any of the System Restoration Bonds are Outstanding, the Seller (a) will keep in full force and effect its existence and remain in good standing under the laws of the jurisdiction of its organization, (b) will obtain and preserve its qualification to
    do business, in each case to the extent that in each such jurisdiction such existence or qualification is or shall be necessary to protect the validity and enforceability of this Agreement, the other Basic Documents to which the Seller is a party and
    each other instrument or agreement necessary or appropriate to the proper administration of this Agreement and the transactions contemplated hereby or to the extent necessary for the Seller to perform its obligations hereunder or thereunder and (c)
    will continue to operate its electric transmission and distribution system to provide service to its customers (or, if transmission and distribution are split, to provide distribution service directly to its customers).

   

  SECTION 4.02.          No Liens. Except for the conveyances hereunder or any
    Lien under Section 39.309 (as incorporated through Section 36.403(a)) of the Securitization Law in favor of the Indenture Trustee for the benefit of the Holders and any Lien that may be granted under the Basic Documents, the Seller will not sell,
    pledge, assign or transfer, or grant, create, incur, assume or suffer to exist any Lien on, any of the Transition Property, or any interest therein, and the Seller shall defend the right, title and interest of the Issuer and the Indenture Trustee, on
    behalf of the Secured Parties, in, to and under the Transition Property against all claims of third parties claiming through or under the Seller. AEP Texas, in its capacity as Seller, will not at any time assert any Lien against, or with respect to,
    any of the Transition Property.

   

  SECTION 4.03.          Delivery of Collections. In the event that the Seller
    receives any SRC Collections or other payments in respect of the System Restoration Charges or the proceeds thereof other than in its capacity as the Servicer, the Seller agrees to pay to the Servicer, on behalf of the Issuer, all payments received by
    it in respect thereof as soon as practicable after receipt thereof. Prior to such remittance to the Servicer by the Seller, the Seller agrees that such amounts are held by it in trust for the Issuer and the Indenture Trustee. If the Seller becomes a
    party to any future trade receivables purchase and sale arrangement or similar arrangement under which it sells all or any portion of its accounts receivables, the Seller and the other parties to such arrangement shall enter into an intercreditor
    agreement in connection therewith and the terms of the documentation evidencing such trade receivables purchase and sale arrangement or similar arrangement shall expressly exclude System Restoration Charges from any receivables or other assets pledged
    or sold under such arrangement.

   

  SECTION 4.04.          Notice of Liens. The Seller shall notify the Issuer
    and the Indenture Trustee promptly after becoming aware of any Lien on any of the Transition Property, other than the conveyances hereunder, any Lien under the Basic Documents or any Lien under Section 39.309 (as incorporated through Section 36.403(a))
    of the Securitization Law created in favor of the Indenture Trustee for the benefit of the Holders.

   

  SECTION 4.05.          Compliance with Law. The Seller hereby agrees to
    comply with its organizational or governing documents and all laws, treaties, rules, regulations and determinations of any Governmental Authority applicable to it, except to the extent that failure to so comply would not materially adversely affect the
    Issuer’s or the Indenture Trustee’s interests in the Transition Property or under any of the other Basic Documents to which the Seller is party or the Seller’s performance of its obligations hereunder or under any of the other Basic Documents to which
    it is party.

   

  
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  SECTION 4.06.          Covenants Related to System Restoration Bonds and
      Transition Property.

   

  (a)          So long as any of the System Restoration Bonds are outstanding, the
    Seller shall treat the Transition Property as the Issuer’s property for all purposes other than financial reporting, state or federal regulatory or tax purposes, and treat the System Restoration Bonds as debt for all purposes and specifically as debt
    of the Issuer, other than for financial reporting, state or federal regulatory or tax purposes.

   

  (b)          Solely for the purposes of federal taxes and, to the extent consistent
    with applicable state, local and other tax law, for purposes of state, local and other taxes, so long as any of the System Restoration Bonds are outstanding, the Seller agrees to treat the System Restoration Bonds as indebtedness of the Seller (as the
    sole owner of the Issuer) secured by the System Restoration Bond Collateral unless otherwise required by appropriate taxing authorities.

   

  (c)          So long as any of the System Restoration Bonds are outstanding, the
    Seller shall disclose in its financial statements that the Issuer and not the Seller is the owner of the Transition Property and that the assets of the Issuer are not available to pay creditors of the Seller or its Affiliates (other than the Issuer).

   

  (d)          So long as any of the System Restoration Bonds are outstanding, the
    Seller shall not own or purchase any System Restoration Bonds.

   

  (e)          So long as the System Restoration Bonds are outstanding, the Seller
    shall disclose the effects of all transactions between the Seller and the Issuer in accordance with generally accepted accounting principles.

   

  (f)           The Seller agrees that, upon the sale by the Seller of the Transition
    Property to the Issuer pursuant to this Agreement, (i) to the fullest extent permitted by law, including applicable PUCT Regulations and the Securitization Law, the Issuer shall have all of the rights originally held by the Seller with respect to the
    Transition Property, including the right (subject to the terms of the Servicing Agreement) to exercise any and all rights and remedies to collect any amounts payable by any Customer or REP in respect of the Transition Property, notwithstanding any
    objection or direction to the contrary by the Seller (and the Seller agrees not to make any such objection or to take any such contrary action) and (ii) any payment by any Customer or REP directly to the Issuer shall discharge such Customer’s or REP’s
    obligations, if any, in respect of the Transition Property to the extent of such payment, notwithstanding any objection or direction to the contrary by the Seller.

   

  
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  (g)          So long as any of the System Restoration Bonds are outstanding, (i) in
    all proceedings relating directly or indirectly to the Transition Property, the Seller shall affirmatively certify and confirm that it has sold all of its rights and interests in and to such property (other than for financial reporting or tax
    purposes), (ii) the Seller shall not make any statement or reference in respect of the Transition Property that is inconsistent with the ownership interest of the Issuer (other than for financial accounting or tax purposes or as required by state or
    federal regulatory purposes), (iii) the Seller shall not take any action in respect of the Transition Property except solely in its capacity as the Servicer thereof pursuant to the Servicing Agreement or as otherwise contemplated by the Basic
    Documents, (iv) the Seller shall not sell transition property under a separate financing order in connection with the issuance of additional transition bonds or system restoration bonds unless the Rating Agency Condition shall have been satisfied, and
    (v) neither the Seller nor the Issuer shall take any action, file any tax return, or make any election inconsistent with the treatment of the Issuer, for purposes of federal taxes and, to the extent consistent with applicable state, local and other tax
    law, for purposes of state, local and other taxes, as a disregarded entity that is not separate from the Seller (or, if relevant, from another sole owner of the Issuer).

   

  SECTION 4.07.          Protection of Title. The Seller shall execute and file
    such filings, including, without limitation, filings with the Secretary of State of the State of Texas pursuant to the Securitization Law, and cause to be executed and filed such filings, all in such manner and in such places as may be required by law
    to fully preserve, maintain, protect and perfect the ownership interest of the Issuer and the first priority security interest of the Indenture Trustee in the Transition Property, including, without limitation, all filings required under the
    Securitization Law and the UCC relating to the transfer of the ownership of the rights and interest in the Transition Property by the Seller to the Issuer or the pledge of the Issuer’s interest in the Transition Property to the Indenture Trustee. The
    Seller shall deliver or cause to be delivered to the Issuer and the Indenture Trustee file-stamped copies of, or filing receipts for, any document filed as provided above, as soon as available following such filing. The Seller shall institute any
    action or proceeding necessary to compel performance by the PUCT, the State of Texas or any of their respective agents, of any of their obligations or duties under the Securitization Law, the Financing Order or the Issuance Advice Letter, and the
    Seller agrees to take such legal or administrative actions, including defending against or instituting and pursuing legal actions and appearing or testifying at hearings or similar proceedings, in each case as may be reasonably necessary (i) to protect
    the Issuer and the Secured Parties from claims, state actions or other actions or proceedings of third parties which, if successfully pursued, would result in a breach of any representation set forth in Article III or any covenant set forth in
    Article IV and (ii) to block or overturn any attempts to cause a repeal of, modification of or supplement to the Securitization Law, the Financing Order, the Issuance Advice Letter or the rights of Holders by legislative enactment or
    constitutional amendment that would be materially adverse to the Issuer or the Secured Parties or which would otherwise cause an impairment of the rights of the Issuer or the Secured Parties. The costs of any such actions or proceedings will be payable
    by the Seller.

   

  SECTION 4.08.          Nonpetition Covenants. Notwithstanding any prior
    termination of this Agreement or the Indenture, the Seller shall not, prior to the date which is one year and one day after the termination of the Indenture and payment in full of the System Restoration Bonds or any other amounts owed under the
    Indenture, petition or otherwise invoke or cause the Issuer to invoke the process of any Government Authority for the purpose of commencing or sustaining an involuntary case against the Issuer under any federal or state bankruptcy, insolvency or
    similar law, appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Issuer or any substantial part of the property of the Issuer, or ordering the winding up or liquidation of the affairs of the
    Issuer.

   

  
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  SECTION 4.09.          Taxes. So long as any of the System Restoration Bonds
    are outstanding, the Seller shall, and shall cause each of its subsidiaries to, pay all taxes, assessments and governmental charges imposed upon it or any of its properties or assets or with respect to any of its franchises, business, income or
    property before any penalty accrues thereon if the failure to pay any such taxes, assessments and governmental charges would, after any applicable grace periods, notices or other similar requirements, result in a Lien on the Transition Property;
    provided that no such tax need be paid if the Seller or one of its Affiliates is contesting the same in good faith by appropriate proceedings promptly instituted and diligently conducted and if the Seller or such Affiliate has established appropriate
    reserves as shall be required in conformity with generally accepted accounting principles.

   

  SECTION 4.10.          Issuance Advice Letter. The Seller hereby agrees not
    to withdraw the filing of any Issuance Advice Letter with the PUCT.

   

  SECTION 4.11.          Tariff. The Seller hereby agrees to make all
    reasonable efforts to keep the Tariff in full force and effect at all times.

   

  SECTION 4.12.          Notice of Breach to Rating Agencies, Etc. Promptly
    after obtaining knowledge thereof, in the event of a breach in any material respect (without regard to any materiality qualifier contained in such representation, warranty or covenant) of any of the Seller’s representations, warranties or covenants
    contained herein, the Seller shall promptly notify the Issuer, the Indenture Trustee, the PUCT and the Rating Agencies of such breach (with prior written notice to the Servicer in order to enable compliance with Section 8.14 of the Servicing
    Agreement). For the avoidance of doubt, any breach which would adversely affect scheduled payments on the System Restoration Bonds will be deemed to be a material breach for purposes of this Section 4.12.

   

  SECTION 4.13.          Use of Proceeds. The Seller shall use the proceeds of
    the sale of the Transition Property in accordance with the Financing Order and the Securitization Law.

   

  SECTION 4.14.          Further Assurances. Upon the request of the Issuer,
    the Seller shall execute and deliver such further instruments and do such further acts as may be reasonably necessary to carry out more effectually the provisions and purposes of this Agreement.

   

  ARTICLE V

    THE SELLER

   

  SECTION 5.01.          Liability of Seller; Indemnities.

   

  (a)          The Seller shall be liable in accordance herewith only to the extent of
    the obligations specifically undertaken by the Seller under this Agreement.

   

  (b)          The Seller shall indemnify the Issuer and the Indenture Trustee (for
    the benefit of the Secured Parties) and each of their respective officers, directors, employees, trustees, managers and agents for, and defend and hold harmless each such Person from and against, any and all taxes (other than taxes imposed on Holders
    as a result of their ownership of a System Restoration Bond) that may at any time be imposed on or asserted against any such Person as a result of the sale of the Transition Property to the Issuer, including any franchise, sales, gross receipts,
    general corporation, tangible personal property, privilege or license taxes but excluding any taxes imposed as a result of a failure of such Person to withhold or remit taxes with respect to payments on any System Restoration Bond; it being understood
    that the Holders shall be entitled to enforce their rights against the Seller under this Section 5.01(b) solely through a cause of action brought for their benefit by the Indenture Trustee.

   

  
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  (c)          The Seller shall indemnify the Issuer and the Indenture Trustee (for
    the benefit of the Secured Parties) and each of their respective officers, directors, employees, trustees, managers, and agents for, and defend and hold harmless each such Person from and against, any and all taxes (other than taxes imposed on Holders
    as a result of their ownership of a System Restoration Bond) that may at any time be imposed on or asserted against any such Person as a result of the Issuer’s ownership and assignment of the Transition Property, the issuance and sale by the Issuer of
    the System Restoration Bonds or the other transactions contemplated in the Basic Documents, including any franchise, sales, gross receipts, general corporation, tangible personal property, privilege or license taxes but excluding any taxes imposed as a
    result of a failure of such Person to withhold or remit taxes with respect to payments on any System Restoration Bond.

   

  (d)          The Seller shall indemnify the Issuer, the Indenture Trustee (for the
    benefit of the Secured Parties) and each of their respective officers, directors, employees and agents for, and defend and hold harmless each such Person from and against all Losses that may be imposed on, incurred by or asserted against each such
    Person, in each such case, as a result of the Seller’s breach of any of its representations, warranties or covenants contained in this Agreement.

   

  (e)          Indemnification under Sections 5.01(b), 5.01(c), 5.01(d)
    and 5.01(f) shall include reasonable out-of-pocket fees and expenses of investigation and litigation (including reasonable attorney’s fees and expenses), except as otherwise expressly provided in this Agreement.

   

  
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  (f)           The Seller shall indemnify the Indenture Trustee (for itself) and each
    Independent Manager, and any of their respective officers, directors, employees and agents (each, an “Indemnified Person”) for, and defend and hold harmless each such Person from and against, any and all Losses incurred by any of such
    Indemnified Persons as a result of the Seller’s breach of any of its representations and warranties or covenants contained in this Agreement, except to the extent of Losses either resulting from the willful misconduct, bad faith or gross negligence of
    such Indemnified Person or resulting from a breach of a representation or warranty made by such Indemnified Person in any of the Basic Documents that gives rise to the Seller’s breach. The Seller shall not be required to indemnify an Indemnified Person
    for any amount paid or payable by such Indemnified Person in the settlement of any action, proceeding or investigation without the prior written consent of the Seller which consent shall not be unreasonably withheld. Promptly after receipt by an
    Indemnified Person of notice of the commencement of any action, proceeding or investigation, such Indemnified Person shall, if a claim in respect thereof is to be made against the Seller under this Section 5.01(f), notify the Seller in writing
    of the commencement thereof. Failure by an Indemnified Person to so notify the Seller shall relieve the Seller from the obligation to indemnify and hold harmless such Indemnified Person under this Section 5.01(f) only to the extent that the
    Seller suffers actual prejudice as a result of such failure. With respect to any action, proceeding or investigation brought by a third party for which indemnification may be sought under this Section 5.01(f), the Seller shall be entitled to
    conduct and control, at its expense and with counsel of its choosing that is reasonably satisfactory to such Indemnified Person, the defense of any such action, proceeding or investigation (in which case the Seller shall not thereafter be responsible
    for the fees and expenses of any separate counsel retained by the Indemnified Person except as set forth below); provided that the Indemnified Person shall have the right to participate in such action, proceeding or investigation through counsel chosen
    by it and at its own expense. Notwithstanding the Seller’s election to assume the defense of any action, proceeding or investigation, the Indemnified Person shall have the right to employ separate counsel (including local counsel), and the Seller shall
    bear the reasonable fees, costs and expenses of such separate counsel if (i) the defendants in any such action include both the Indemnified Person and the Seller and the Indemnified Person shall have reasonably concluded that there may be legal
    defenses available to it that are different from or additional to those available to the Seller, (ii) the Seller shall not have employed counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person within a reasonable
    time after notice of the institution of such action, (iii) the Seller shall authorize the Indemnified Person to employ separate counsel at the expense of the Seller or (iv) in the case of the Indenture Trustee, such action exposes the Indenture Trustee
    to a material risk of criminal liability or forfeiture or a Servicer Default has occurred and is continuing. Notwithstanding the foregoing, the Seller shall not be obligated to pay for the fees, costs and expenses of more than one separate counsel for
    the Indemnified Persons other than one local counsel, if appropriate.

   

  (g)          The Seller shall indemnify the Servicer (if the Servicer is not the
    Seller) for the costs of any action instituted by the Servicer pursuant to Section 5.02(d) of the Servicing Agreement which are not paid as Operating Expenses in accordance with the priorities set forth in Section 8.02(e) of the
    Indenture.

   

  (h)          The remedies provided in this Agreement are the sole and exclusive
    remedies against the Seller for breach of its representations and warranties in this Agreement.

   

  (i)           Indemnification under this Section 5.01 shall survive any
    repeal of, modification of, or supplement to, or judicial invalidation of, the Securitization Law or the Financing Order and shall survive the resignation or removal of the Indenture Trustee or the termination of this Agreement and will rank in
    priority with other general, unsecured obligations of the Seller. The Seller shall not indemnify any party under this Section 5.01 for any changes in law after the Closing Date, whether such changes in law are effected by means of any legislative
    enactment, constitutional amendment or any final and non-appealable judicial decision.

   

  
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  SECTION 5.02.          Merger, Conversion or Consolidation of, or Assumption of
      the Obligations of, Seller. Any Person (a) into which the Seller may be merged, converted or consolidated and which is a Permitted Successor, (b) that may result from any merger, conversion or consolidation to which the Seller shall be a party
    and which is a Permitted Successor, (c) that may succeed to the properties and assets of the Seller substantially as a whole and which is a Permitted Successor, (d) which is a successor entity resulting from the division of the Seller into two or more
    Persons and which is a Permitted Successor, or (e) which otherwise succeeds to all or substantially all of the electric transmission and distribution business of the Seller (or, if transmission and distribution are not provided by a single entity,
    which provides wire service directly to customers taking service at facilities, premises or loads located in the Texas AEP Central Division as of the date of the Financing Order) (a “Permitted Successor”) and which Person in any of the foregoing
    cases executes an agreement of assumption to perform all of the obligations of the Seller hereunder (including the Seller’s obligations under Section 5.01 incurred at any time prior to or after the date of such assumption), shall be the
    successor to the Seller under this Agreement without further act on the part of any of the parties to this Agreement; provided, however, that (i) immediately after giving effect to such transaction, no representation, warranty or
    covenant made pursuant to Article III or Article IV shall be breached and no Servicer Default, and no event which, after notice or lapse of time, or both, would become a Servicer Default shall have occurred and be continuing, (ii) the
    Seller shall have delivered to the Issuer, the Indenture Trustee and each Rating Agency an Officer’s Certificate and an Opinion of Counsel from external counsel stating that such consolidation, merger, division or succession and such agreement of
    assumption comply with this Section 5.02 and that all conditions precedent, if any, provided for in this Agreement relating to such transaction have been complied with, (iii) the Seller shall have delivered to the Issuer, the Indenture Trustee
    and each Rating Agency an Opinion of Counsel from external counsel of the Seller either (A) stating that, in the opinion of such counsel, all filings to be made by the Seller and the Issuer, including filings with the PUCT pursuant to the
    Securitization Law, have been authorized, executed and filed that are necessary to fully maintain the respective interest of the Issuer and the Indenture Trustee in all of the Transition Property and reciting the details of such filings, or (B) stating
    that, in the opinion of such counsel, no such action shall be necessary to maintain such interests, (iv) the Seller shall have delivered to the Issuer, the Indenture Trustee, the Rating Agencies and the PUCT an Opinion of Counsel from independent tax
    counsel stating that, for federal income tax purposes, such consolidation, conversion, merger, division or succession and such agreement of assumption will not result in a material federal income tax consequence to the Issuer or the Holders of System
    Restoration Bonds and (v) the Seller shall have given the Rating Agencies prior written notice of such transaction (with prior written notice to the Servicer in order to enable compliance with Section 8.14 of the Servicing Agreement). When any
    Person (or more than one Person) acquires the properties and assets of the Seller substantially as a whole or otherwise becomes the successor, whether by merger, conversion, consolidation, sale, transfer, lease, management contract or otherwise, to all
    or substantially all of the electric transmission and distribution business of the Seller (or, if transmission and distribution are not provided by a single entity, provides wire service directly to customers taking service at facilities, premises or
    loads located in the Texas AEP Central Division as of the date of the Financing Order) in accordance with the terms of this Section 5.02, then upon satisfaction of all of the other conditions of this Section 5.02, the preceding Seller
    shall automatically and without further notice be released from all of its obligations hereunder.

   

  SECTION 5.03.          Limitation on Liability of Seller and Others. The
    Seller and any director, officer, employee or agent of the Seller may rely in good faith on the advice of counsel or on any document of any kind, prima facie properly executed and submitted by any Person, respecting any matters arising hereunder.
    Subject to Section 4.07, the Seller shall not be under any obligation to appear in, prosecute or defend any legal action that is not incidental to its obligations under this Agreement, and that in its opinion may involve it in any expense or
    liability.

   

  
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  ARTICLE VI

    MISCELLANEOUS PROVISIONS

   

  SECTION 6.01.          Amendment. This Agreement may be amended in writing by
    the Seller and the Issuer with ten Business Days’ prior written notice given to the Rating Agencies and, if the contemplated amendment may in the judgment of the PUCT increase ongoing Qualified Costs, the consent of the PUCT pursuant to Section
      6.02, but without the consent of any of the Holders, (i) to cure any ambiguity, to correct or supplement any provisions in this Agreement or for the purpose of adding any provisions to or changing in any manner or eliminating any of the
    provisions in this Agreement or of modifying in any manner the rights of the Holders; provided, however, that such action shall not, as evidenced by an Officer’s Certificate delivered to the Issuer and the Indenture Trustee, adversely
    affect in any material respect the interests of any Holder or (ii) to conform the provisions hereof to the description of this Agreement in the Prospectus.

   

  In addition, this Agreement may be amended in writing by the Seller and the Issuer with (i) the prior written consent of the Indenture Trustee, (ii) the satisfaction
    of the Rating Agency Condition, (iii) the satisfaction of the condition set forth below in Section 6.02, (iv) if such amendment may in the judgment of the PUCT increase ongoing Qualified Costs, the consent of the PUCT pursuant to Section 6.02 and (v)
    if any amendment would adversely affect in any material respect the interest of any Holder of the System Restoration Bonds, the consent of a majority of the Holders of each affected Tranche of System Restoration Bonds. In determining whether a majority
    of Holders have consented, System Restoration Bonds owned by the Issuer, Seller or any Affiliate of the Issuer or Seller shall be disregarded, except that, in determining whether the Indenture Trustee shall be protected in relying upon any such
    consent, the Indenture Trustee shall only be required to disregard any System Restoration Bonds it actually knows to be so owned. Promptly after the execution of any such amendment or consent, the Issuer shall furnish copies of such amendment or
    consent to each of the Rating Agencies.

   

  It shall not be necessary for the consent of Holders pursuant to this Section to approve the particular form of any proposed amendment or consent, but it shall be
    sufficient if such consent shall approve the substance thereof.

   

  Prior to the execution of any amendment to this Agreement, the Issuer and the Indenture Trustee shall be entitled to receive and rely upon an Opinion of Counsel from
    external counsel of the Seller stating that the execution of such amendment is authorized or permitted by this Agreement and that all conditions precedent have been satisfied and the Opinion of Counsel referred to in Section 3.01(c)(i) of the
    Servicing Agreement. The Issuer and the Indenture Trustee may, but shall not be obligated to, enter into any such amendment which affects the Indenture Trustee’s own rights, duties or immunities under this Agreement or otherwise.

   

  SECTION 6.02.          PUCT Condition. Notwithstanding anything to the
    contrary in Section 6.01, no amendment or modification of this Agreement shall be effective unless the process set forth in this Section 6.02 has been followed.

   

  
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  (a)          At least thirty-one (31) days prior to the effectiveness of any such
    amendment or modification and after obtaining the other necessary approvals set forth in Section 6.01, (except that the consent of the Indenture Trustee may be subject to the consent of the Holders if such consent is required or sought by the
    Indenture Trustee in connection with such amendment or modification), the Seller shall have delivered to the PUCT’s executive director and general counsel written notification of any proposed amendment or modification, which notification shall contain:

   

  (i)                 a reference to Docket No. 49308;

   

  (ii)                an Officer’s Certificate stating that the proposed amendment or
    modification has been approved by all parties to this Agreement;

   

  (iii)               a statement identifying the person to whom the PUCT or its staff
    is to address any response to the proposed amendment or modification or to request additional time; and

   

  (iv)              a statement as to the possible effect of the amendment or
    modification on the ongoing Qualified Costs.

   

  (b)          The PUCT or its staff shall, within thirty (30) days of receiving the
    notification complying with Section 6.02(a) above, either:

   

  (i)                 provide notice of its determination that the proposed amendment or
    modification will not under any circumstances have the effect of increasing the ongoing Qualified Costs related to the System Restoration Bonds,

   

  (ii)                provide notice of its consent or lack of consent to the person
    specified in Section 6.02(a)(iii) above, or

   

  (iii)               be conclusively deemed to have consented to the proposed
    amendment or modification,

   

  unless, within thirty (30) days of receiving the notification complying with Section 6.02(a) above, the PUCT or its staff delivers to the office of the person specified in Section

      6.02(a)(iii) above a written statement requesting an additional amount of time not to exceed thirty (30) days in which to consider whether to consent to the proposed amendment or modification. If the PUCT or its staff requests an extension of
    time in the manner set forth in the preceding sentence, then the PUCT shall either provide notice of its consent or lack of consent or notice of its determination that the proposed amendment or modification will not under any circumstances increase
    ongoing Qualified Costs to the person specified in Section 6.02(a)(iii) no later than the last day of such extension of time or be conclusively deemed to have consented to the proposed amendment or modification on the last day of such extension
    of time. Any amendment or modification requiring the consent of the PUCT shall become effective on the later of (i) the date proposed by the parties to such amendment or modification and (ii) the first day after the expiration of the thirty (30)-day
    period provided for in this Section 6.02(b), or, if such period has been extended pursuant hereto, the first day after the expiration of such period as so extended.

   

  (c)          Following the delivery of a notice to the PUCT by the Seller under Section
        6.02(a), the Seller and the Issuer shall have the right at any time to withdraw from the PUCT further consideration of any notification of a proposed amendment or modification. Such withdrawal shall be evidenced by the prompt written notice
      thereof by the Seller to the PUCT, the Indenture Trustee, the Issuer and the Servicer.

   

  
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  SECTION 6.03.          Notices. All demands, notices and communications upon
    or to the Seller, the Issuer, the Indenture Trustee, the PUCT or the Rating Agencies under this Agreement shall be sufficiently given for all purposes hereunder if in writing, and delivered personally, sent by documented delivery service or, to the
    extent receipt is confirmed telephonically, sent by telecopy or other form of electronic transmission:

   

  (a)          in the case of the Seller, to AEP Texas Inc., at 1 Riverside Plaza, Columbus, Ohio 43215, Attention: Treasurer, Telephone: (614) 716-1000, Facsimile:
    (614) 716-2807;

   

  (b)          in the case of the Issuer, to AEP Texas Restoration Funding LLC at 539 N. Carancahua Street, Suite 1700, Corpus Christi, Texas 78401, Attention:
    Manager, Telephone: (361) 881-5399, Facsimile: (361) 880-6128;

   

  (c)          in the case of the Indenture Trustee, to the Corporate Trust Office;

   

  (d)          in the case of the PUCT, to 1701 N. Congress Avenue, Austin, Texas 78701, Attention: Executive Director and General Counsel, Telephone: (512) 936-7040,
    Facsimile: (512) 936-7036;

   

  (e)          in the case of Moody’s, to Moody’s Investors Service, Inc., ABS/RMBS Monitoring Department, 25th Floor, 7 World Trade Center, 250 Greenwich Street, New York, New York 10007, Email: ServicerReports@moodys.com (all such notices to be delivered to Moody’s in writing by email), and solely for purposes of Rating Agency
    Condition communications: abscormonitoring@moodys.com;

   

  (f)           in the case of Standard & Poor’s, to Standard & Poor’s Ratings Group, Inc., Structured Credit Surveillance, 55 Water Street, New York, New York
    10041, Telephone: (212) 438-8991, Email: servicer_reports@spglobal.com (all such notices to be delivered to Standard & Poor’s in writing by email); or

   

  (h)          as to each of the foregoing, at such other address as shall be designated by written notice to the other parties.

   

  SECTION 6.04.          Assignment. Notwithstanding anything to the contrary
    contained herein, except as provided in Section 5.02, this Agreement may not be assigned by the Seller.

   

  SECTION 6.05.          Limitations on Rights of Third Parties. The provisions
    of this Agreement are solely for the benefit of the Seller, the Issuer, the Indenture Trustee (for the benefit of the Secured Parties) and the other Persons expressly referred to herein, and such Persons shall have the right to enforce the relevant
    provisions of this Agreement. Nothing in this Agreement, whether express or implied, shall be construed to give to any other Person any legal or equitable right, remedy or claim in the Transition Property or under or in respect of this Agreement or any
    covenants, conditions or provisions contained herein.

   

  
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  SECTION 6.06.          Severability. Any provision of this Agreement that is
    prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remainder of such provision (if any) or the remaining provisions hereof
    (unless such construction shall be unreasonable), and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

   

  SECTION 6.07.          Separate Counterparts. This Agreement may be executed
    by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument.

   

  SECTION 6.08.          Headings. The headings of the various Articles and
    Sections herein are for convenience of reference only and shall not define or limit any of the terms or provisions hereof.

   

  SECTION 6.09.          Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
    ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

   

  SECTION 6.10.          Assignment to Indenture Trustee. The Seller hereby
    acknowledges and consents to any mortgage, pledge, assignment and grant of a security interest by the Issuer to the Indenture Trustee pursuant to the Indenture for the benefit of the Secured Parties of all right, title and interest of the Issuer in, to
    and under this Agreement, the Transition Property and the proceeds thereof and the assignment of any or all of the Issuer’s rights hereunder to the Indenture Trustee for the benefit of the Secured Parties. For the avoidance of doubt, the Indenture
    Trustee is a third-party beneficiary of this Agreement and is entitled to the rights and benefits hereunder and may enforce the provisions hereof as if it were a party hereto.

   

  SECTION 6.11.          Limitation of Liability. It is expressly understood
    and agreed by the parties hereto that this Agreement is executed and delivered by the Indenture Trustee, not individually or personally but solely as Indenture Trustee on behalf of the Secured Parties, in the exercise of the powers and authority
    conferred and vested in it. The Indenture Trustee in acting hereunder is entitled to all rights, benefits, protections, immunities and indemnities accorded to it under the Indenture.

   

  
    20

    
      
 

  

  SECTION 6.12.          Waivers. Any term or provision of this Agreement may
    be waived, or the time for its performance may be extended, by the party or parties entitled to the benefit thereof; provided, however, that no such waiver delivered by the Issuer shall be effective unless the Indenture Trustee has
    given its prior written consent thereto. Any such waiver shall be validly and sufficiently authorized for the purposes of this Agreement if, as to any party, it is authorized in writing by an authorized representative of such party. The failure of any
    party hereto to enforce at any time any provision of this Agreement shall not be construed to be a waiver of such provision, nor in any way to affect the validity of this Agreement or any part hereof or the right of any party thereafter to enforce each
    and every such provision. No waiver of any breach of this Agreement shall be held to constitute a waiver of any other or subsequent breach.

   

  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

   

  
    21

    
      
 

  

  IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective officers as of the day and year first above written.

   

  	 	AEP TEXAS RESTORATION FUNDING LLC, as Issuer
	 	 	 
	 	By:	/s/ Renee V. Hawkins

        
	 	 	Name: Renee V. Hawkins
	 	 	Title: Assistant Treasurer
	 	 	 
	 	 	 
	 	AEP TEXAS INC., as Seller
	 	 	 
	 	By:	
           

          /s/ Renee V. Hawkins

        
	 	 	Name: Renee V. Hawkins
	 	 	Title: Assistant Treasurer

   

  	Acknowledged and Accepted:	 
	 	 
	
          U.S. BANK NATIONAL ASSOCIATION,

          as Indenture Trustee

        	 
	 	 	 
	
          By:

        	/s/ Nicholas C. Xeros	 
	 	Name: Nicholas C. Xeros	 
	 	Title: Assistant Vice President	 

   

  Signature Page to

  Transition Property Purchase and Sale Agreement

  
    
      
 

  

  EXHIBIT A

   

  FORM OF BILL OF SALE

   

  This Bill of Sale is being delivered pursuant to the Transition Property Purchase and Sale Agreement, dated as of September 18, 2019 (the “Sale Agreement”), by
    and between AEP Texas Inc. (the “Seller”) and AEP Texas Restoration Funding LLC (the “Issuer”). All capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to such terms in the Sale Agreement.

   

  In consideration of the Issuer’s delivery to or upon the order of the Seller of $231,184,014, the Seller does hereby
    irrevocably sell, transfer, assign, set over and otherwise convey to the Issuer, without recourse or warranty, except as set forth in the Sale Agreement, all right, title and interest of the Seller in and to the Transition Property identified on Schedule

      1 hereto (such sale, transfer, assignment, setting over and conveyance of the Transition Property includes, to the fullest extent permitted by the Securitization Law, the right to impose, collect and receive System Restoration Charges and the
    assignment of all revenues, collections, claims, rights, payments, money or proceeds of or arising from the System Restoration Charges related to the Transition Property, as the same may be adjusted from time to time). Such sale, transfer, assignment,
    setting over and conveyance is hereby expressly stated to be a sale and, pursuant to Section 39.308 (as incorporated through Section 36.403(a)) of the Securitization Law and other applicable law, shall be treated as an absolute transfer of all of the
    Seller’s right, title and interest in and to (as in a true sale), and not as a pledge or other financing of, the Transition Property. The Seller and the Issuer agree that after giving effect to the sale, transfer, assignment, setting over and
    conveyance contemplated hereby the Seller has no right, title or interest in or to the Transition Property to which a security interest could attach because (i) it has sold, transferred, assigned, set over and conveyed all right, title and interest in
    and to the Transition Property to the Issuer, (ii) as provided in Section 39.304 (as incorporated through Section 36.403(a)) of the Securitization Law, such rights are only contract rights until the time of such sale, transfer, assignment, setting over
    and conveyance and (iii) as provided in Section 39.309(c) (as incorporated through Section 36.403(a)) of the Securitization Law, appropriate notice has been filed and such transfer is perfected against all third parties, including subsequent judicial
    or other lien creditors. If such sale, transfer, assignment, setting over and conveyance is held by any court of competent jurisdiction not to be a true sale as provided in Section 39.308 (as incorporated through Section 36.403(a)) of the
    Securitization Law, then such sale, transfer, assignment, setting over and conveyance shall be treated as a pledge of the Transition Property and as the creation of a security interest (within the meaning of the Securitization Law and the UCC) in the
    Transition Property and, without prejudice to its position that it has absolutely transferred all of its rights in the Transition Property to the Issuer, the Seller hereby grants a security interest in the Transition Property to the Issuer (and, to the
    extent necessary to qualify the grant as a security interest under the Securitization Law and the UCC, to the Indenture Trustee for the benefit of the Secured Parties to secure the right of the Issuer under the Basic Documents to receive the System
    Restoration Charges and all other Transition Property).

   

  The Issuer does hereby purchase the Transition Property from the Seller for the consideration set forth in the preceding paragraph.

   

  EXHIBIT A

  1

  
    
      
 

  

  The Seller and the Issuer each acknowledge and agree that the purchase price for the Transition Property sold pursuant to this Bill of Sale and the Sale Agreement is
    equal to its fair market value at the time of sale.

   

  The Seller confirms that (i) each of the representations and warranties on the part of the Seller contained in the Sale Agreement are true and correct in all respects
    on the date hereof as if made on the date hereof and (ii) each condition precedent that must be satisfied under Section 2.02 of the Sale Agreement has been satisfied upon or prior to the execution and delivery of this Bill of Sale by the
    Seller.

   

  This Bill of Sale 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.

   

  THIS BILL OF SALE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS,
    RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAW.

   

  EXHIBIT A

  2

  
    
      
 

  

  IN WITNESS WHEREOF, the Seller and the Issuer have duly executed this Bill of Sale as of the ___ day of ___________, ______.

   

  
    	 	AEP TEXAS RESTORATION FUNDING LLC
	 	 	 
	 	By:	 
             

          
	 	 	Name:
	 	 	Title:
	 	 	 
	 	 	 
	 	AEP TEXAS INC.
	 	 	 
	 	By:	
             

              

          
	 	 	Name:
	 	 	Title:

  

   

  EXHIBIT A

  3

  
    
      
 

  

  SCHEDULE 1

    to

    BILL OF SALE

    

    Transition Property

   

  EXHIBIT A

  4

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