Exhibit 10.1
BGS BONDABLE TRANSITION PROPERTY SALE AGREEMENT
between
PSE&G TRANSITION FUNDING II LLC
Issuer
and
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
Seller
Dated as of _____________, 2005
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS
Section 1.1. Definitions................................................................................... 3
Section 1.2. Other Definitional Provisions................................................................. 3
ARTICLE II
CONVEYANCE OF TRANSFERRED BGS BONDABLE TRANSITION PROPERTY
Section 2.1. Conveyance of Initial Transferred BGS Bondable Transition Property............................ 4
Section 2.2. Conditions to Conveyance of BGS Bondable Transition Property.................................. 5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Section 3.1. Organization and Good Standing................................................................ 7
Section 3.2. Due Qualification............................................................................. 7
Section 3.3. Power and Authority........................................................................... 7
Section 3.4. Binding Obligation............................................................................ 7
Section 3.5. No Violation.................................................................................. 7
Section 3.6. No Proceedings................................................................................ 7
Section 3.7. Approvals..................................................................................... 8
Section 3.8. The Transferred BGS Bondable Transition Property.............................................. 8
Section 3.9. Solvency...................................................................................... 11
ARTICLE IV
COVENANTS OF THE SELLER
Section 4.1. Seller's Existence............................................................................ 11
Section 4.2. No Liens or Conveyances....................................................................... 11
Section 4.3. Use of Proceeds............................................................................... 11
Section 4.4. Delivery of Collections....................................................................... 11
Section 4.5. Notice of Liens............................................................................... 12
Section 4.6. Compliance with Law........................................................................... 12
Section 4.7. Covenants Related to Transferred BGS Bondable Transition Property............................. 12
Section 4.8. Protection of Title........................................................................... 13
Section 4.9. Taxes......................................................................................... 14
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ARTICLE V
ADDITIONAL UNDERTAKINGS OF THE SELLER
Section 5.1. Liability of the Seller; Indemnities.......................................................... 14
Section 5.2. Merger or Consolidation of, or Assumption of the Obligations of, the Seller................... 15
Section 5.3. Limitation on Liability of the Seller and Others.............................................. 16
ARTICLE VI
MISCELLANEOUS PROVISIONS
Section 6.1. Amendment..................................................................................... 17
Section 6.2. Notices....................................................................................... 18
Section 6.3. Assignment by Seller.......................................................................... 19
Section 6.4. Assignment to Trustee......................................................................... 19
Section 6.5. Limitations on Rights of Others............................................................... 19
Section 6.6. Severability.................................................................................. 19
Section 6.7. Separate Counterparts......................................................................... 19
Section 6.8. Headings...................................................................................... 19
Section 6.9. Governing Law................................................................................. 19
Section 6.10. Nonpetition Covenant......................................................................... 19
EXHIBIT A - ▇▇▇▇ of Sale.................................................................................... A-1
EXHIBIT B - Opinion of Counsel.............................................................................. B-1
EXHIBIT C - Opinion of Counsel.............................................................................. C-1
APPENDIX A - Master Definitions
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BGS BONDABLE TRANSITION PROPERTY SALE AGREEMENT, dated as of ___________,
2005, by and between PSE&G TRANSITION FUNDING II LLC, a Delaware limited
liability company, as issuer (the "Issuer"), and PUBLIC SERVICE ELECTRIC AND
GAS COMPANY, a New Jersey corporation, as seller hereunder (in such capacity,
the "Seller").
W I T N E S S E T H:
WHEREAS the Issuer desires to purchase from time to time BGS Bondable
Transition Property created pursuant to the Competition Act and the Financing
Order;
WHEREAS the Seller is willing to sell BGS Bondable Transition Property to
the Issuer;
WHEREAS the Issuer, in order to finance the purchase of the Transferred
BGS Bondable Transition Property, will from time to time issue BGS Transition
Bonds under the Indenture; and
WHEREAS the Issuer, to secure its obligations under the BGS Transition
Bonds and the Indenture, will pledge its right, title and interest in, to and
under the Transferred BGS Bondable Transition Property to the Trustee for the
benefit of the BGS Transition Bondholders.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally
bound hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. Capitalized terms used herein and not otherwise
defined herein have the meanings assigned to them in Appendix A hereto.
Section 1.2. Other Definitional Provisions.
(a) "Agreement" means this BGS Bondable Transition Property Sale
Agreement, as the same may be amended, supplemented or otherwise modified from
time to time.
(b) Non-capitalized terms used herein which are defined in the
Competition Act, as the context requires, have the meanings assigned to such
terms in the Competition Act, but without giving effect to amendments to the
Competition Act after the date hereof which have a material adverse effect on
the Issuer or the BGS Transition Bondholders.
(c) All terms defined in this Agreement have the defined meanings when
used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(d) The words "hereof," "herein," "hereunder" and words of similar import
when used in this Agreement 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
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references to Sections, Schedules and Exhibits in or to this Agreement unless
otherwise specified; and the term "including" means "including without
limitation."
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms.
ARTICLE II
CONVEYANCE OF TRANSFERRED BGS BONDABLE TRANSITION PROPERTY
Section 2.1. Conveyance of Initial Transferred BGS Bondable
Transition Property.
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(a) In consideration of the Issuer's payment to or upon the order of the
Seller of $________________, net of the underwriting discount, original issue
discount and the financial advisory fee for the BGS Transition Bonds in the
aggregate amount of $__________________, or $__________________ (the "Initial
Purchase Price") by wire transfer of funds immediately available on the date
hereof to Seller's account no. __________________ for further credit to
account no. _____________ at __________________, routing transit ABA#
_____________, subject to the conditions specified in Section 2.2, the Seller
does hereby irrevocably sell, transfer, assign and otherwise convey to the
Issuer, without recourse (subject to the obligations of the Seller herein),
all right, title and interest of the Seller in, to and under the Initial
Transferred BGS Bondable Transition Property identified in the ▇▇▇▇ of Sale
delivered pursuant to Section 2.2(a) on or prior to the Initial Transfer Date
(such sale, transfer, assignment and conveyance of the Initial Transferred BGS
Bondable Transition Property to include, to the fullest extent permitted by
the Competition Act, the New Jersey UCC and the Delaware UCC, the assignment
of all revenues, collections, claims, rights, payments, money or proceeds of
or arising from the BGS Transition Bond Charges related to the Initial
Transferred BGS Bondable Transition Property, as the same may be adjusted from
time to time). Such sale, transfer, assignment and conveyance of the Initial
Transferred BGS Bondable Transition Property is hereby expressly stated to be
a sale or other absolute transfer and, pursuant to Section 23.a. of the
Competition Act, shall constitute a sale or other absolute transfer of all of
the Seller's right, title and interest, in, to and under and not a borrowing
secured by, the Initial Transferred BGS Bondable Transition Property. The
preceding sentence is the statement referred to in Section 23.a. of the
Competition Act. The Seller agrees and confirms that upon payment of the
Initial Purchase Price and the execution and delivery of this Agreement and
the related ▇▇▇▇ of Sale, the Seller shall have no right, title or interest
in, to or under the Initial Transferred BGS Bondable Transition Property.
(b) Subject to the conditions specified in Section 2.2, the Issuer does
hereby purchase the Initial Transferred BGS Bondable Transition Property from
the Seller for the consideration set forth in paragraph (a) above.
(c) The Seller and the Issuer each acknowledge and agree that the
purchase price for the Initial Transferred BGS Bondable Transition Property
sold pursuant to this Agreement is equal to its fair market value at the time
of sale.
(d) The Seller and the Issuer further agree that from time to time the
Seller may offer to sell, and the Issuer may purchase, Subsequent Transferred
BGS Bondable Transition Property
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as of Subsequent Transfer Dates, subject to the conditions specified in Section
2.2, in exchange for consideration to be agreed upon (the "Subsequent Purchase
Price"). The Seller and the Issuer hereby agree that each such sale, transfer,
assignment and conveyance of any Subsequent Transferred BGS Bondable Transition
Property shall include, to the fullest extent permitted by the Competition Act,
the New Jersey UCC and the Delaware UCC, the assignment of all revenues,
collections, claims, rights, payments, money or proceeds of or arising from the
BGS Transition Bond Charges related to the Subsequent Transferred BGS Bondable
Transition Property, as the same may be adjusted from time to time. Such sale,
transfer, assignment and conveyance of the Subsequent Transferred BGS Bondable
Transition Property is hereby expressly stated to be a sale or other absolute
transfer and, pursuant to Section 23.a. of the Competition Act, shall constitute
a sale or other absolute transfer of all of the Seller's right, title and
interest, in, to and under and not a borrowing secured by, the Subsequent
Transferred BGS Bondable Transition Property. The preceding sentence is the
statement referred to in Section 23.a. of the Competition Act. The Seller agrees
and confirms that after giving effect to any sale contemplated by this paragraph
(d) and the execution and delivery of the related ▇▇▇▇ of Sale, it shall have no
right, title or interest in, to or under the Subsequent Transferred BGS Bondable
Transition Property.
(e) Notwithstanding the foregoing, in the event that any sale, transfer,
assignment and conveyance of any Transferred BGS Bondable Transition Property
is determined by a court of competent jurisdiction not to be a true and
absolute sale as contemplated by the parties hereto and by the Competition
Act, then such sale, transfer, assignment and conveyance shall be treated as a
pledge of such Transferred BGS Bondable Transition Property and the Seller
shall be deemed to have granted, and does hereby grant, as of the date hereof
a security interest to the Issuer in such Transferred BGS Bondable Transition
Property to secure a payment obligation incurred by the Seller in the amount
paid by the Issuer for the Transferred BGS Bondable Transition Property.
Section 2.2. Conditions to Conveyance of BGS Bondable Transition
Property. The obligation of the Seller to sell, and the obligation of the
Issuer to purchase BGS Bondable Transition Property upon any Transfer Date
shall be subject to and conditioned upon the satisfaction or waiver of each of
the following conditions:
(a) on or prior to the Transfer Date, the Seller shall deliver
to the Issuer a duly executed ▇▇▇▇ of Sale identifying the BGS
Bondable Transition Property to be conveyed as of that date,
substantially in the form of Exhibit A hereto;
(b) as of the Transfer Date, no breach by the Seller of its
representations, warranties or covenants in this Agreement shall
exist and the Seller shall have delivered to the Issuer and the
Trustee an Officers' Certificate to such effect and no Servicer
Default shall have occurred and be continuing;
(c) as of the Transfer Date:
(i) the Issuer shall have sufficient funds available to
pay the purchase price for the Transferred BGS Bondable
Transition Property to be conveyed on such date, and
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(ii) all conditions set forth in the Indenture to the
issuance of one or more Series of BGS Transition Bonds
intended to provide such funds shall have been satisfied or
waived;
(d) on or prior to the Transfer Date, the Seller shall have
taken all actions required under the Competition Act, the Financing
Order, the New Jersey UCC and the Delaware UCC, including, without
limitation, filings under the New Jersey UCC and the Delaware UCC, to
transfer to the Issuer ownership of the Transferred BGS Bondable
Transition Property to be conveyed on such date, free and clear of
all Liens other than Liens created by the Issuer pursuant to the
Indenture and to perfect such transfer and the Issuer shall have
taken any action required for the Issuer to grant to the Trustee a
first priority perfected security interest in the Collateral and
maintain such security interest as of such date, including, without
limitation, filings under the New Jersey UCC and the Delaware UCC;
(e) in the case of any sale of Subsequent Transferred BGS
Bondable Transition Property only, the Seller shall have provided the
Issuer and each Rating Agency with a notice specifying the Subsequent
Transfer Date for the Subsequent Transferred BGS Bondable Transition
Property not later than 10 days prior to the Subsequent Transfer
Date;
(f) the Seller shall have delivered to each Rating Agency and to
the Issuer:
(i) an Opinion of Counsel to the Seller with respect to
the transfer of the Transferred BGS Bondable Transition
Property then being conveyed to the Issuer substantially in
the form of Exhibit B hereto, and
(ii) an Opinion of Counsel to the Seller, substantially
in the form of Exhibit C hereto;
(g) the Seller shall have delivered to the Trustee and the
Issuer an Officers' Certificate confirming the satisfaction of each
condition precedent specified in this Section 2.2;
(h) with respect to any Subsequent Sale, the Seller shall have
taken any action necessary in order for the Rating Agency Condition
to have been satisfied; and
(i) the Seller shall have received the Initial Purchase Price or
the Subsequent Purchase Price, as applicable, in funds immediately
available on the applicable Transfer Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
As of the Transfer Date, the Seller makes the following representations
and warranties on which the Issuer has relied and will rely in acquiring
Transferred BGS Bondable Transition Property. The following representations
and warranties are made under existing law as in effect
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as of the Transfer Date. The Seller shall not be in breach of any representation
or warranty herein as a result of a change in law occurring after the Transfer
Date. The representations and warranties shall survive the sale of Transferred
BGS Bondable Transition Property to the Issuer and the pledge thereof to the
Trustee pursuant to the Indenture.
Section 3.1. Organization and Good Standing. The Seller is a corporation
duly organized and in good standing under the laws of the State of New Jersey,
with corporate power and authority to own its properties and conduct its
business as currently owned or conducted.
Section 3.2. Due Qualification. The Seller is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions in which the ownership
or lease of property or the conduct of its business requires such
qualifications, licenses or approvals (except where the failure to so qualify
and to obtain such licenses and approvals would not be reasonably likely to
have a material adverse effect on the Seller's business, operations, assets,
revenues, properties or prospects).
Section 3.3. Power and Authority. The Seller has the corporate power and
authority to execute and deliver this Agreement and to carry out its terms;
the Seller has full corporate power and authority to own the BGS Bondable
Transition Property and sell and assign the Transferred BGS Bondable
Transition Property to the Issuer, and the Seller has duly authorized such
sale and assignment to the Issuer by all necessary corporate action; and the
execution, delivery and performance of this Agreement has been duly authorized
by the Seller by all necessary corporate action.
Section 3.4. Binding Obligation. This Agreement constitutes a legal,
valid and binding obligation of the Seller enforceable against the Seller in
accordance with its terms subject to bankruptcy, receivership, insolvency,
reorganization, moratorium or other laws affecting creditors' rights generally
from time to time in effect and to general principles of equity (regardless of
whether considered in a proceeding in equity or at law).
Section 3.5. No Violation. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof do not
conflict with, result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time) a default under, the
articles of incorporation or by-laws of the Seller, or any indenture,
agreement or other instrument to which the Seller is a party or by which it 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 (except as contemplated by the Basic Documents and as set forth in
Section 2.1(e) hereof); nor violate any law or any order, rule or regulation
applicable to the Seller of any court or of any federal or State regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Seller or its properties. The BGS Bondable Transition
Property is not subject to any Lien thereon created by the indenture, dated
August 1, 1924 (as amended and supplemented by 95 supplemental indentures), of
Public Service Electric and Gas Company to Fidelity Union Trust Company, as
successor trustee.
Section 3.6. No Proceedings. Except as disclosed in writing by the Seller
to the Issuer, there are no proceedings or investigations pending or, to the
Seller's best knowledge, threatened,
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before any court, federal or State regulatory body, administrative agency or
other governmental instrumentality having jurisdiction over the Seller or its
properties:
(a) asserting the invalidity of the Basic Documents, the BGS
Transition Bonds, the Competition Act or the Financing Order;
(b) seeking to prevent the issuance of the BGS Transition Bonds
or the consummation of any of the transactions contemplated by the
Basic Documents or the BGS Transition Bonds;
(c) challenging the Seller's treatment of the BGS Transition
Bonds as debt of the Seller for federal and State income, gross
receipts or franchise tax purposes; or
(d) seeking any determination or ruling that could reasonably be
expected to materially and adversely affect the performance by the
Seller of its obligations under, or the validity or enforceability
of, the Basic Documents or the BGS Transition Bonds.
Section 3.7. Approvals. Except for the filing of financing statements and
continuation statements under the New Jersey UCC and the Delaware UCC, no
approval, authorization, consent, order or other action of, or filing with,
any court, federal or State regulatory body, administrative agency or other
governmental instrumentality is required in connection with the execution and
delivery by the 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. The Pricing Advice
Certificate (as defined in the Financing Order) has been filed in accordance
with the Financing Order and is final and incontestable in accordance with its
terms.
Section 3.8. The Transferred BGS Bondable Transition Property.
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(a) Information. All information provided by the Seller to the Issuer
with respect to the Transferred BGS Bondable Transition Property is correct in
all material respects.
(b) Effect of Transfer. Each sale, transfer, assignment and conveyance
herein contemplated constitutes a sale or other absolute transfer, of all
right, title and interest of the Seller in, to and under the Transferred BGS
Bondable Transition Property from the Seller to the Issuer; upon execution and
delivery of this Agreement and the related ▇▇▇▇ of Sale, the Seller will have
no right, title or interest in, to or under the Transferred BGS Bondable
Transition Property; and the Transferred BGS Bondable Transition Property
would not be part of the estate of the Seller as debtor in the event of the
filing of a bankruptcy petition by or against the Seller under any bankruptcy
law.
(c) Transfer Filings. The Seller is the sole owner of the Transferred BGS
Bondable Transition Property sold to the Issuer on the Transfer Date; and the
Transferred BGS Bondable Transition Property will have been validly sold,
assigned, transferred and conveyed to the Issuer free and clear of all Liens
other than Liens created by the Issuer pursuant to the Indenture. All actions
or filings, including filings with the New Jersey Division of Revenue/Office
of Commercial Recording under the New Jersey UCC and the Delaware UCC
necessary in any jurisdiction to give the Issuer a valid first priority
perfected ownership interest in the Transferred
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BGS Bondable Transition Property and to grant to the Trustee a first priority
perfected security interest in the Transferred BGS Bondable Transition
Property, free and clear of all Liens of the Seller or anyone else have been
taken or made.
(d) Financing Order Irrevocable; Process Valid; No Litigation; Etc.
(i) The Financing Order as issued on July 12, 2005 has been
issued by the BPU in accordance with the Competition Act, and such
order and the process by which it was issued comply with all
applicable laws, rules and regulations, including but not limited to
the due process requirements of the United States Constitution and
the New Jersey Constitution. The Financing Order has become effective
pursuant to the Competition Act and is and as of the date of issuance
of any BGS Transition Bonds will be in full force and effect and
final and non-appealable.
(ii) As of the Series Issuance Date, the BGS Transition Bonds
of the related Series will be entitled to the protections provided by
the Competition Act and, in accordance with the Competition Act, the
Financing Order and the BGS Transition Bond Charge authorized therein
have become irrevocable and each Advice Letter is final and
uncontestable.
(A) Under the Competition Act, the State of New Jersey
may not limit, alter or impair the Transferred BGS Bondable
Transition Property or other rights vested in the Seller, the
Issuer, the Trustee or the BGS Transition Bondholders pursuant
to the Financing Order until the BGS Transition Bonds are fully
paid and discharged, or in any way limit, alter, impair or
reduce the value or amount of the Transferred BGS Bondable
Transition Property; and
(B) under the Contract Clauses of the United States
Constitution and the New Jersey Constitution, the State of New
Jersey, including the BPU, could not constitutionally take any
action of a legislative character, including the repeal or
amendment of the Competition Act, which would substantially
limit, alter or impair the BGS Bondable Transition Property or
other rights vested in the BGS Transition Bondholders pursuant
to the Financing Order, or substantially limit, alter, impair
or reduce the value or amount of the BGS Bondable Transition
Property, unless such action is a reasonable exercise of the
State of New Jersey's sovereign powers and of a character
reasonable and appropriate to the public purpose justifying
such action and under the Takings Clauses of the United States
and New Jersey Constitutions, the State of New Jersey could
not repeal or amend the Competition Act or take any other
action in contravention of its pledge and agreement quoted
above without paying just compensation to the BGS Transition
Bondholders, as determined by a court of competent
jurisdiction, if doing so would constitute a permanent
appropriation of a substantial property interest of the BGS
Transition Bondholders in the BGS Bondable Transition Property
and deprive the BGS Transition Bondholders of their reasonable
expectations arising from their investments in the BGS
Transition Bonds. There is no assurance, however, that, even
if a court were to award just compensation, it would be
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sufficient to pay the full amount of principal of and interest
on the BGS Transition Bonds.
(iii) There is no order by any court providing for the
revocation, alteration, limitation or other impairment of the
Competition Act, the Financing Order, any Advice Letter, the
Transferred BGS Bondable Transition Property or the BGS Transition
Bond Charge or any rights arising under any of them or to enjoin the
performance of any obligations under the Financing Order.
(iv) No other approval, authorization, consent, order or other
action of, or filing with, any court, federal or State regulatory body,
administrative agency or other governmental instrumentality is
required in connection with the creation or transfer of the
Transferred BGS Bondable Transition Property, except those that have
been obtained or made.
(v) Except as disclosed by the Seller to the Issuer in
writing, there are no proceedings or investigations pending, or to
the best of the Seller's knowledge, threatened before any court,
federal or State regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Seller or
the Issuer or their respective properties challenging the Competition
Act or the Financing Order.
(e) Assumptions. The assumptions used in calculating the BGS Transition
Bond Charge in any Advice Letter delivered by the Issuer to the BPU pursuant
to the Financing Order are reasonable and made in good faith.
(f) Creation of Transferred BGS Bondable Transition Property.
(i) For purposes of the Competition Act, the New Jersey UCC and
the Delaware UCC, the Transferred BGS Bondable Transition Property
constitutes presently existing property;
(ii) the BGS Bondable Transition Property consists of (A) the
irrevocable right of the Seller to charge, collect and receive, and
be paid from collections of, the BGS Transition Bond Charge in the
amount necessary to provide for the full recovery of the Bondable
Stranded Costs which have been determined to be recoverable in the
Financing Order and (B) all rights of the Seller under the Financing
Order, including, without limitation, all rights to obtain periodic
adjustments of the BGS Transition Bond Charge pursuant to the
Competition Act, and (C) all revenues, collections, payments, money
and proceeds arising under, or with respect to, all of the
foregoing;
(iii) the BGS Bondable Transition Property is not subject to
any lien created by a previous indenture; and
(iv) the Financing Order, including the right to collect the
BGS Transition Bond Charge, has become irrevocable.
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(g) Prospectus. As of the date hereof, the information describing the
Seller under the caption "The Seller and Servicer of the BGS Bondable
Transition Property" in the Prospectus is correct in all material respects.
Section 3.9. Solvency. After giving effect to the sale of any Transferred
BGS Bondable Transition Property hereunder, the Seller:
(a) is solvent and expects to remain solvent;
(b) is adequately capitalized to conduct its business and
affairs considering its size and the nature of its business and
intended purposes;
(c) is not engaged in nor does it expect to engage in a
business for which its remaining property represents an unreasonably
small capital;
(d) reasonably believes that it will be able to pay its debts
as they come due; and
(e) is able to pay its debts as they mature and does not intend
to incur, or believes that it will incur, indebtedness that it will
not be able to repay at its maturity.
ARTICLE IV
COVENANTS OF THE SELLER
Section 4.1. Seller's Existence. So long as any of the BGS Transition
Bonds are outstanding, the Seller shall keep in full force and effect its
existence as a corporation and remain in good standing under the laws of the
jurisdiction of its organization, and shall obtain and preserve its
qualification to do business in each jurisdiction in which such qualification
is or will be necessary to protect the validity and enforceability of this
Agreement and each other instrument or agreement to which the Seller is a
party necessary to the proper administration of this Agreement and the
transactions contemplated hereby.
Section 4.2. No Liens or Conveyances. Except for the conveyances
hereunder, the Seller shall not sell, pledge, assign or transfer to any other
Person, or grant, create, incur, assume or suffer to exist any Lien on, any of
the Transferred BGS Bondable Transition Property, whether now existing or
hereafter created, or any interest therein. The Seller shall not at any time
assert any Lien against or with respect to any Transferred BGS Bondable
Transition Property, and shall defend the right, title and interest of the
Issuer and the Trustee, as assignee of the Issuer, in, to and under the
Transferred BGS Bondable Transition Property, whether now existing or
hereafter created, against all claims of third parties claiming through or
under the Seller.
Section 4.3. Use of Proceeds. The Seller shall use proceeds from the sale
of the BGS Bondable Transition Property in accordance with the Financing Order
and the Competition Act.
Section 4.4. Delivery of Collections. If the Seller receives collections
of the BGS Transition Bond Charge with respect to the Transferred BGS Bondable
Transition Property or the proceeds thereof, the Seller shall pay the Servicer
all payments received by the Seller in
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respect thereof as soon as practicable after receipt thereof by the Seller,
but in no event later than two Business Days after such receipt.
Section 4.5. Notice of Liens. The Seller shall notify the Issuer and the
Trustee promptly after becoming aware of any Lien on any Transferred BGS
Bondable Transition Property other than the conveyances hereunder or under the
Indenture.
Section 4.6. Compliance with Law. The Seller shall comply with its
organizational or governing documents and all laws, treaties, rules,
regulations and determinations of any governmental instrumentality applicable
to the Seller, except to the extent that failure to so comply would not
adversely affect the Issuer's or the Trustee's interests in the Transferred
BGS Bondable Transition Property or under any of the Basic Documents or the
Seller's performance of its obligations hereunder.
Section 4.7. Covenants Related to Transferred BGS Bondable Transition
Property.
(a) So long as any of the BGS Transition Bonds are outstanding,
the Seller shall:
(i) treat the BGS Transition Bonds as debt of the Issuer
and not of the Seller, except for financial accounting or tax
reporting purposes;
(ii) disclose in its financial statements that it is not
the owner of the Transferred BGS Bondable Transition Property
and that the assets of the Issuer are not available to pay
creditors of the Seller or any of its Affiliates (other than
the Issuer);
(iii) disclose the effects of all transactions between the
Seller and the Issuer in accordance with generally accepted
accounting principles; and
(iv) not own or purchase any BGS Transition Bonds.
(b) The Seller agrees that upon the sale by the Seller of the
Transferred BGS Bondable Transition Property to the Issuer pursuant
to this Agreement:
(i) to the fullest extent permitted by law, including the
Competition Act and applicable BPU Regulations, the Issuer
shall have all of the rights originally held by the Seller with
respect to the Transferred BGS Bondable Transition Property,
including the right to collect any amounts payable by any
Customer or Third Party in respect of such Transferred BGS
Bondable Transition Property, notwithstanding any objection or
direction to the contrary by the Seller; and
(ii) any payment by any Customer or Third Party to the
Issuer shall discharge such Customer's or such Third Party's
obligations in respect of such Transferred BGS Bondable
Transition Property to the extent of such payment,
notwithstanding any objection or direction to the contrary by
the Seller.
(c) So long as any of the BGS Transition Bonds are Outstanding,
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(i) in all proceedings relating directly or indirectly to
the Transferred BGS Bondable Transition Property the Seller
shall: (A) affirmatively certify and confirm that it has sold
the Transferred BGS Bondable Transition Property to the Issuer
(other than for financial accounting or tax reporting
purposes), and (B) not make any statement or reference in
respect of the Transferred BGS Bondable Transition Property
that is inconsistent with the ownership thereof by the Issuer
(other than for financial accounting or tax reporting
purposes); and
(ii) the Seller shall not take any action in respect of
the Transferred BGS Bondable Transition Property except as
contemplated by the Basic Documents; and
(iii) [the Seller shall not sell any BGS Bondable
Transition Property unless such sale satisfies the Rating
Agency Condition.]
Section 4.8. Protection of Title. The Seller shall execute and file such
filings, and cause to be executed and filed such filings, and take all such
actions, all in such manner and in such places as may be required by law fully
to preserve, maintain, protect and perfect the interests of the Issuer and the
Trustee in the Transferred BGS Bondable Transition Property, including all
filings required under the New Jersey UCC and the Delaware UCC relating to the
transfer of the ownership of the Transferred BGS Bondable Transition Property
by the Seller to the Issuer and the pledge of the Transferred BGS Bondable
Transition Property by the Issuer to the Trustee. The Seller shall deliver (or
cause to be delivered) to the Issuer and the Trustee file-stamped copies of,
or filing receipts for, any document filed as provided above, as soon as
available following such filing. The Seller shall institute any action or
proceeding necessary to compel the performance by the BPU or the State of New
Jersey of any of their obligations or duties under the Competition Act or the
Financing Order, 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:
(a) to protect the Issuer and the BGS Transition Bondholders from
claims, State actions or other actions or proceedings of third parties which,
if successfully pursued, would result in a breach of any representation set
forth in Article III; or
(b) to block or overturn any attempts to cause a repeal of,
modification of or supplement to the Competition Act, the Financing
Order, any Advice Letter, or the rights of BGS Transition Bondholders by
legislative enactment or constitutional amendment that would be adverse
to the Issuer, the Trustee or the BGS Transition Bondholders.
The costs of any such actions or proceedings shall be reimbursed by
the Issuer to the Seller from amounts on deposit in the Collection Account as
an Operating Expense. The Seller's obligations pursuant to this Section 4.8
shall survive and continue notwithstanding that the payment of Operating
Expenses pursuant to the Indenture may be delayed (it being understood that
the Seller may be required to advance its own funds to satisfy its obligation
hereunder). The Seller irrevocably, and as a power coupled with an interest,
designates the Issuer as its agent and attorney-in-fact to execute any filings
of financing statements, continuation statements or other
13
instruments required of the Issuer pursuant to this Section, it being
understood that the Issuer shall have no obligation to execute any such
instruments.
Section 4.9. Taxes. So long as any of the BGS Transition Bonds are
outstanding, the Seller shall, and shall cause each of its subsidiaries to,
pay all material 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 Transferred BGS Bondable 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.
ARTICLE V
ADDITIONAL UNDERTAKINGS OF THE SELLER
The Seller hereby undertakes the obligations contained in this Article V
and agrees that the Issuer shall have the right to assign its rights with
respect to such obligations to the Trustee for the benefit of the BGS
Transition Bondholders.
Section 5.1. Liability of the 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 Trustee, for itself and
on behalf of the BGS Transition Bondholders, and each of their respective
officers, directors, managers, employees and agents for, and defend and hold
harmless each such Person from and against, any and all taxes (other than any
taxes imposed on BGS Transition Bondholders solely as a result of their
ownership of BGS Transition Bonds) that may at any time be imposed on or
asserted against any such Person under existing law as of any Transfer Date as
a result of the sale and assignment of the Transferred BGS Bondable Transition
Property by the Seller to the Issuer, the acquisition or holding of the
Transferred BGS Bondable Transition Property by the Issuer or the issuance and
sale by the Issuer of the BGS Transition Bonds, including any sales, gross
receipts, general corporation, personal property, privilege, franchise or
license taxes, but excluding any taxes imposed as a result of a failure of
such person to properly withhold or remit taxes imposed with respect to
payments on any BGS Transition Bond, it being understood that the BGS
Transition Bondholders shall be entitled to enforce their rights against the
Seller under this Section 5.1(b) solely through a cause of action brought for
their benefit by the Trustee.
(c) The Seller shall indemnify the Issuer and the Trustee, for itself and
on behalf of the BGS Transition Bondholders, and each of their respective
officers, directors, managers, employees and agents for, and defend and hold
harmless each such Person from and against, any and all amounts of principal
of and interest on the BGS Transition Bonds not paid when due or when
scheduled to be paid in accordance with their terms and the amount of any
deposits to the
14
Issuer required to have been made in accordance with the terms of the Basic
Documents which are not made when so required, in each case as a result of the
Seller's breach of any of its representations, warranties or covenants
contained in this Agreement, and any and all liabilities, obligations, claims,
actions, suits or payments of any kind whatsoever that may be imposed on or
asserted against any such Person, other than any liabilities, obligations or
claims for or payments of principal of or interest on the BGS Transition
Bonds, together with any reasonable costs and expenses incurred by such
Person, as a result of the Seller's breach of any of its representations,
warranties or covenants contained in this Agreement.
(d) The Seller shall pay any and all taxes levied or assessed upon all or
any part of the Issuer's property or assets based on existing law as of the
Transfer Date.
(e) Indemnification under this Section 5.1 shall survive the resignation
or removal of the Trustee and the termination of this Agreement and shall
include reasonable fees and expenses of investigation and litigation
(including reasonable attorneys' fees and expenses). The Seller shall not
indemnify any party under this Section 5.1 for any changes in law after the
Transfer Date.
(f) The indemnification obligation of the Seller under this Section 5.1
shall be pari passu with all other general unsecured obligations of the
Seller.
(g) The Seller will not indemnify any person for any loss, damages,
liability, obligation, claim, action, suit or payment resulting solely from a
downgrade in the ratings on the BGS Transition Bonds or for any consequential
damages, including any loss of market value of the BGS Transition Bonds,
resulting from any default or any downgrade of the ratings on the BGS
Transition Bonds.
Section 5.2. Merger or Consolidation of, or Assumption of the Obligations
of, the Seller. Any Person:
(a) into which the Seller may be merged or consolidated and which
succeeds to all or any material part of the electric distribution
business of the Seller,
(b) which results from the division of the Seller into two or more
Persons and which succeeds to all or any material part of the electric
distribution business of the Seller,
(c) which may result from any merger or consolidation to which the
Seller shall be a party and which succeeds to all or any material part of
the electric distribution business of the Seller,
(d) which may succeed to the properties and assets of the Seller
substantially as a whole and which succeeds to all or any material part
of the electric distribution business of the Seller, or
(e) which may otherwise succeed to all or any material part of the
electric distribution business of the Seller,
15
which Person in any of the foregoing cases executes an agreement of assumption
to perform every obligation of the Seller under this Agreement, shall be the
successor to the Seller hereunder without the execution or filing of any
document or any further act by any of the parties to this Agreement; provided,
however, that
(i) immediately after giving effect to such transaction, no
representation or warranty made pursuant to Article III shall have
been breached and no Servicer Default, and no event that, after
notice or lapse of time, or both, would become a Servicer Default,
shall have occurred and be continuing,
(ii) the Seller shall have delivered to the Issuer and the
Trustee an Officers' Certificate and an Opinion of Counsel each
stating that such consolidation, merger or succession and such
agreement of assumption comply with this Section 5.2 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 and the
Trustee an Opinion of Counsel either
(A) stating that, in the opinion of such counsel, all
filings to be made by the Seller, including [New Jersey UCC and
the Delaware UCC] filings, that are necessary fully to preserve
and protect fully the respective interests of the Issuer and
the Trustee in the Transferred BGS Bondable Transition Property
have been executed and filed, and reciting the details of such
filings, or
(B) stating that, in the opinion of such counsel, no such
action is necessary to preserve and protect such interests,
(iv) the Rating Agencies shall have received prior written
notice of such transaction; and
(v) the Seller shall have delivered to the Issuer and the
Trustee an opinion of independent tax counsel (as selected by, and
in form and substance reasonably satisfactory to, the Seller, and
which may be based on a ruling from the Internal Revenue Service) to
the effect that, for federal income tax purposes, such consolidation
or merger will not result in a material adverse federal income tax
consequence to the Seller, the Issuer, the Trustee or the holders of
the Outstanding BGS Transition Bonds.
The Seller shall not consummate any transaction referred to in clauses (a),
(b), (c), (d) or (e) above except upon execution of the above described
agreement of assumption and compliance with clauses (i), (ii), (iii), (iv) and
(v) above. When any Person acquires the properties and assets of the Seller
substantially as a whole and becomes the successor to the Seller in accordance
with the terms of this Section 5.2, then upon the satisfaction of all of the
other conditions of this Section 5.2, the Seller shall automatically and
without further notice be released from its obligations hereunder.
Section 5.3. Limitation on Liability of the 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
16
or on any document of any kind, prima facie properly executed and submitted by
any Person, respecting any matters arising hereunder. Subject to Section 4.8,
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.
ARTICLE VI
Miscellaneous Provisions
Section 6.1. Amendment.
(a) This Agreement may be amended by the Seller and the Issuer, with the
consent of the Trustee and the satisfaction of the Rating Agency Condition.
Promptly after the execution of any such amendment or consent, the Issuer
shall furnish written notification of the substance of such amendment or
consent to each of the Rating Agencies.
(b) Prior to the execution of any amendment to this Agreement, the Issuer
and the Trustee shall be entitled to receive and rely upon an Opinion of
Counsel stating that the execution of such amendment is authorized or
permitted by this Agreement. The Issuer and the Trustee may, but shall not be
obligated to, enter into any such amendment which affects their own rights,
duties or immunities under this Agreement or otherwise.
(c) Notwithstanding anything to the contrary in this paragraph, no
amendment or modification of this Agreement shall be effective except upon
satisfaction of the conditions precedent in this paragraph (c).
(i) At least fifteen days prior to the effectiveness of any
such amendment or modification and after obtaining the other
necessary approvals set forth in paragraph (a) above (except that
the consent of the Trustee may be subject to the consent of Holders
if such consent is required or sought by the Trustee in connection
with such amendment or modification), the Servicer shall have
delivered to the BPU's executive director and general counsel
written notification of any proposed amendment, which notification
shall contain:
(A) a reference to Docket No. EF03070532;
(B) an officer's certificate stating that the proposed
amendment or modification has been approved by all parties to
this Agreement; and
(C) a statement identifying the person to whom the BPU or
its staff is to address any response to the proposed amendment
or to request additional time;
(ii) If the BPU or its staff, within fifteen days (subject to
extension as provided in clause (iii) below) of receiving a
notification complying with paragraph (a) above, shall have
delivered to the office of the person specified in paragraph (i)(C)
above a written statement that the BPU might object to the proposed
amendment or modification, then such proposed amendment or
modification shall not be effective
17
unless and until the BPU subsequently delivers a written
statement that it does not object to such proposed amendment or
modification.
(iii) If the BPU or its staff shall have, within fifteen days
of receiving a notification complying with paragraph (a) above,
delivered to the office of the person specified in paragraph (i)(C)
above a written statement requesting an additional amount of time
not to exceed thirty days in which to consider such proposed
amendment or modification, then such proposed amendment or
modification shall not be effective if, within such extended period,
the BPU shall have delivered to the office of the person specified
in paragraph (i)(C) above a written statement as described in clause
(ii) above, unless and until the BPU subsequently delivers a written
statement that it does not object to such proposed amendment or
modification.
(iv) If the BPU or its staff shall not have delivered written
notice that the BPU might object to such proposed amendment or
modification within the time periods described in clause (ii) or
clause (iii) above, whichever is applicable, then the BPU shall be
conclusively deemed not to have any objection to the proposed
amendment or modification and such amendment or modification may
subsequently become effective upon satisfaction of the other
conditions specified in paragraph (a) above.
(v) Following the delivery of a notice to the BPU by the
Servicer under clause (ii) above, the Servicer and the Issuer shall
have the right at any time to withdraw from the BPU further
consideration of any proposed amendment.
Section 6.2. Notices. Unless otherwise specifically provided herein, all
notices, directions, consents and waivers required under the terms and
provisions of this Agreement shall be in English and in writing, and any such
notice, direction, consent or waiver may be given by United States first-class
mail, reputable overnight courier service, facsimile transmission or
electronic mail (confirmed by telephone, United States first-class mail or
reputable overnight courier service in the case of notice by facsimile
transmission or electronic mail) or any other customary means of
communication, and any such notice, direction, consent or waiver shall be
effective when delivered or transmitted, or if mailed, five days after deposit
in the United States first-class mail with proper postage for first-class mail
prepaid:
(a) in the case of the Seller, at Public Service Electric and Gas
Company, ▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Treasurer,
(b) in the case of the Issuer, at PSE&G Transition Funding II LLC,
▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇-▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Managers,
(c) in the case of Moody's, at ▇▇▇▇▇'▇ Investors Service, Inc., ABS
Monitoring Department, ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
(d) in the case of Standard & Poor's, at Standard & Poor's Ratings
Group, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Asset Backed
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇,
▇▇
(e) in the case of Fitch, at Fitch, Inc., ▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ABS Surveillance, and
(f) in the case the Trustee, at the address provided for notices or
communications to the Trustee in the Indenture;
or, as to each of the foregoing, at such other address as shall be designated
by written notice to the other parties.
Section 6.3. Assignment by Seller. Subject to Section 5.2, this Agreement
may not be assigned by the Seller.
Section 6.4. Assignment to Trustee. The Seller hereby acknowledges and
consents to any pledge, assignment and grant of a security interest by the
Issuer to the Trustee pursuant to the Indenture for the benefit of the BGS
Transition Bondholders of all right, title and interest of the Issuer in, to
and under the Transferred BGS Bondable Transition Property and the proceeds
thereof and the assignment of any or all of the Issuer's rights hereunder to
the Trustee.
Section 6.5. Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of the Seller, the Issuer, the BPU, on
behalf of itself and electricity customers, and the Trustee, on behalf of
itself and the BGS Transition Bondholders, and nothing in this Agreement,
whether express or implied, shall be construed to give to any other Person any
legal or equitable right, remedy or claim in the Collateral or under or in
respect of this Agreement or any covenants, conditions or provisions contained
herein.
Section 6.6. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
Section 6.7. 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 6.8. 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 6.9. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW JERSEY, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 6.10. Nonpetition Covenant. Notwithstanding any prior termination
of this Agreement or the Indenture, the Seller hereby covenants and agrees that
it shall not, prior to the date which is one year and one day after the
termination of the Indenture and the payment in full of the BGS Transition
Bonds, any other amounts owed under the Indenture, acquiesce, petition
19
or otherwise invoke or cause the Issuer to invoke the process of any court or
government authority for the purpose of commencing or sustaining a case
against the Issuer under any federal or State bankruptcy, insolvency or
similar law or appointing a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar official of the Issuer or any
substantial part of the property of the Issuer, or ordering the winding up or
liquidation of the affairs of the Issuer.
20
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective duly authorized officers as
of the date and year first above written.
PSE&G TRANSITION FUNDING II LLC, as Issuer
By:
-------------------------------------------
Name:
Title: Manager
PUBLIC SERVICE ELECTRIC AND GAS COMPANY, as Seller
By:
-------------------------------------------
Name:
Title:
21
▇▇▇▇ OF SALE
For good and valuable consideration the receipt of which is hereby
acknowledged, PUBLIC SERVICE ELECTRIC AND GAS COMPANY, a New Jersey
corporation (the "Seller"), does hereby sell, assign, transfer and convey to
PSE&G TRANSITION FUNDING II LLC, a Delaware limited liability company (the
"Issuer"), without recourse except as provided in the BGS Bondable Transition
Property Sale Agreement referred to below, all of the Seller's right, title
and interest in, to and under its BGS Bondable Transition Property, which
sale, assignment, transfer and conveyance of such BGS Bondable Transition
Property shall include, as provided in the Competition Act, the sale,
assignment, transfer and conveyance of all of the Seller's right, title and
interest in, to and under all revenues, collections, payments, money or
proceeds arising under or with respect to the BGS Transition Bond Charge
related to such BGS Bondable Transition Property, as the same may be adjusted
from time to time in accordance with the Competition Act and the Financing
Order, to have and to hold the same unto the Issuer and to the successors and
assigns of the Issuer, forever.
Capitalized terms used herein and not defined shall have the meanings
set forth in the BGS Bondable Transition Property Sale Agreement dated as of
______________, 2005 (the "Sale Agreement") between the Issuer and the Seller.
This ▇▇▇▇ of Sale is governed by the laws of the State of New Jersey.
IN WITNESS WHEREOF, the Seller has duly executed and delivered this
▇▇▇▇ of Sale this ______ day of ______________ 2005.
PUBLIC SERVICE ELECTRIC AND GAS COMPANY, as Seller
By:
------------------------------------------------
Name:
----------------------------------------------
Title:
---------------------------------------------
Accepted this _____ day of ______________ 2005.
PSE&G TRANSITION FUNDING II LLC
By:
------------------------------------------------
Name:
----------------------------------------------
Title:
---------------------------------------------
22
EXHIBIT B
Opinion of Counsel
B-1
EXHIBIT C
Opinion of Counsel
C-1