Exhibit 1.1
CENTERPOINT ENERGY TRANSITION BOND COMPANY II, LLC
CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC
$1,851,000,000 SENIOR SECURED TRANSITION BONDS, SERIES A
UNDERWRITING AGREEMENT
December 9, 2005
To the Representatives named in Schedule I hereto
of the Underwriters named in Schedule II hereto
Ladies and Gentlemen:
1. Introduction. CenterPoint Energy Transition Bond Company II, LLC, a
Delaware limited liability company (the "Issuer"), proposes to issue and sell
$1,851,000,000 aggregate principal amount of its Senior Secured Transition
Bonds, Series A (the "Bonds"), identified in Schedule I hereto. The Issuer and
CenterPoint Energy Houston Electric, LLC, a Texas limited liability company and
the Issuer's direct parent (the "Company"), hereby confirm their agreement with
the several Underwriters (as defined below) as set forth herein.
The term "Underwriters" as used herein shall be deemed to mean the entity
or several entities named in Schedule II hereto and any underwriter substituted
as provided in Section 7 hereof and the term "Underwriter" shall be deemed to
mean any one of such Underwriters. If the entity or entities listed in Schedule
I hereto (the "Representatives") are the same as the entity or entities listed
in Schedule II hereto, then the terms "Underwriters" and "Representatives", as
used herein, shall each be deemed to refer to such entity or entities. All
obligations of the Underwriters hereunder are several and not joint. If more
than one entity is named in Schedule I hereto, any action under or in respect of
this underwriting agreement ("Underwriting Agreement") may be taken by such
entities jointly as the Representatives or by one of the entities acting on
behalf of the Representatives and such action will be binding upon all the
Underwriters.
Capitalized terms used and not otherwise defined in this Underwriting
Agreement shall have the meanings given to them in the Indenture (as defined
below).
2. Description of the Bonds. The Bonds will be issued pursuant to an
indenture to be dated as of December 16, 2005, as supplemented by the First
Supplemental Indenture thereto, to be dated as of December 16 (as so
supplemented and as it may be further supplemented from time to time, the
"Indenture"), between the Issuer and Wilmington Trust Company, as indenture
trustee (the "Indenture Trustee"). The Bonds will be secured primarily by
transition property (as more fully described in the Financing Order relating to
the Bonds, "Series A Transition Property"), to be sold to the Issuer by the
Company pursuant to the Transition Property Sale Agreement, to be dated on or
about December 16, 2005, between the Company and the Issuer (the "Sale
Agreement"). The Series A Transition Property securing the
Bonds will be serviced pursuant to the Series A Transition Property
Servicing Agreement, to be dated on or about December 16, 2005, between the
Company, as servicer, and the Issuer, as owner of the Series A Transition
Property sold to it pursuant to the Sale Agreement (the "Servicing
Agreement").
3. Representations and Warranties of the Issuer. The Issuer represents and
warrants to the several Underwriters that:
(a) The Issuer has filed with the Securities and Exchange Commission
(the "Commission") a registration statement on Form S-3 on December 21,
2004 (Registration No. 333-121505), as amended by Amendment No. 1 thereto,
including a prospectus and form of prospectus supplement, for the
registration under the Securities Act of 1933, as amended (the "Securities
Act"), of up to $1,857,000,000 aggregate principal amount of its transition
bonds. Such registration statement, as amended ("Registration Statement No.
333-121505"), has been declared effective by the Commission and no stop
order suspending such effectiveness has been issued under the Securities
Act and no proceedings for that purpose have been instituted or are pending
or, to the knowledge of the Issuer, threatened by the Commission. No
transition bonds registered with the Commission under the Securities Act
pursuant to Registration Statement No. 333-121505 have been previously
issued. References herein to the term "Registration Statement" shall be
deemed to refer to Registration Statement No. 333-121505, including all
documents incorporated by reference therein pursuant to Item 12 of Form S-3
("Incorporated Documents") at the time it became effective, in the form in
which it was declared effective by the Commission, and including any
required information deemed to be a part thereof at the time of
effectiveness pursuant to Rule 430B under the Securities Act. The final
prospectus and the final prospectus supplement relating to the Bonds, as
filed with the Commission pursuant to Rule 424(b) under the Securities Act,
are referred to herein as the "Final Prospectus;" and the most recent
preliminary prospectus and prospectus supplement that omitted information
to be included upon pricing in a form of prospectus filed with the
Commission pursuant to Rule 424(b) under the Securities Act and that was
used after the initial effectiveness of the Registration Statement and
prior to the Applicable Time (as defined below) is referred to herein as
the "Pricing Prospectus."
(b) (i) At the earliest time after the filing of the Registration
Statement that the Issuer or another offering participant made a bona fide
offer (within the meaning of Rule 164(h)(2)) of the Bonds and (ii) at the
date hereof, the Issuer was not and is not an "ineligible issuer," as
defined in Rule 405 under the Securities Act.
(c) At any date as of which any part of the Registration Statement
relating to the Bonds became effective in accordance with the rules and
regulations under the Securities Act (each such date, an "Effective Date")
the Registration Statement fully complied, and the Final Prospectus, both
at the date and time it is filed with the Commission pursuant to Rule 424
(such date and time, the "424 Date") and at the Closing Date, and the
Indenture, at the Closing Date, will fully comply, in all material respects
with the applicable provisions of the Securities Act and the Trust
Indenture Act of 1939, as amended ("Trust Indenture Act"), respectively,
and, in each case, the applicable instructions, rules and regulations of
the Commission thereunder; the
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Registration Statement, at each Effective Date, did not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading; the Final Prospectus, both on the 424 Date and at the Closing
Date, will not contain an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
and on said dates the Incorporated Documents, taken together as a whole,
fully complied or will fully comply in all material respects with the
applicable provisions of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and the applicable rules and regulations of the
Commission thereunder; provided that the foregoing representations and
warranties in this paragraph (c) shall not apply to statements or omissions
made in reliance upon information furnished in writing to the Issuer or the
Company by, or on behalf of, any Underwriter through the Representatives
expressly for use in connection with the preparation of the Registration
Statement or the Final Prospectus or to any statements in or omissions from
any Statements of Eligibility on Form T-1 (or amendments thereto) of the
Indenture Trustee under the Indenture filed as exhibits to the Registration
Statement or Incorporated Documents or to any statements or omissions made
in the Registration Statement or the Final Prospectus relating to The
Depository Trust Company ("DTC") Book-Entry System that are based solely on
information contained in published reports of the DTC.
(d) As of the Applicable Time (as defined below), the Pricing
Prospectus and each Issuer Free Writing Prospectus (as defined below),
considered together, did not include any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading (except that the principal amount of the Bonds, the
tranches, the initial principal balances, the scheduled final payment
dates, the final maturity dates, the expected average lives, the Expected
Amortization Schedule and the Expected Sinking Fund Schedule described in
the Pricing Prospectus were subject to change based on market conditions,
and the interest rate, price to the public and underwriting discounts and
commissions for each tranche was not included in the Pricing Prospectus).
The preceding sentence does not apply to statements in or omissions from
the Pricing Prospectus and each Issuer Free Writing Prospectus in reliance
upon and in conformity with written information furnished to the Issuer or
the Company by any Underwriter through the Representatives specifically for
use therein, it being understood and agreed that the only such information
furnished by any Underwriter consists of the information described as such
in Section 11(b) hereof. "Issuer Free Writing Prospectus" means any "issuer
free writing prospectus," as defined in Rule 433, relating to the Bonds and
issued prior to the Applicable Time that is listed on Schedule IV hereto
(and only to the extent listed on such Schedule), in the form filed or
required to be filed with the Commission or, if not required to be filed,
in the form retained in the Issuer's records pursuant to Rule 433(g).
References to the term "Free Writing Prospectus" shall mean a free writing
prospectus, as defined in Rule 405 under the Securities Act. References to
the term "Applicable Time" means 4:00 PM, central time, on the date hereof.
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(e) Each Issuer Free Writing Prospectus, as of its issue date and at
all subsequent times through the completion of the public offer and sale of
the Bonds or until any earlier date that the Issuer notified or notifies
the Representatives as described in the next sentence, did not, does not
and will not include any information that conflicted, conflicts or will
conflict with the information then contained in the Registration Statement.
If at any time following issuance of an Issuer Free Writing Prospectus
there occurred or occurs an event or development as a result of which such
Issuer Free Writing Prospectus conflicted or would conflict with the
information then contained in the Registration Statement or included or
would include an untrue statement of a material fact or omitted or would
omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances prevailing at that subsequent
time, not misleading, (i) the Company or the Issuer has promptly notified
or will promptly notify the Representatives and (ii) the Company or the
Issuer has promptly amended or will promptly amend or supplement such
Issuer Free Writing Prospectus to eliminate or correct such conflict,
untrue statement or omission. The foregoing two sentences do not apply to
statements in or omissions from any Issuer Free Writing Prospectus in
reliance upon and in conformity with written information furnished to the
Issuer or the Company by any Underwriter through the Representatives
specifically for use therein, it being understood and agreed that the only
such information furnished by any Underwriter consists of the information
described as such in Section 11(b) hereof.
(f) The Issuer has been duly formed and is validly existing as a
limited liability company in good standing under the Limited Liability
Company Act of the State of Delaware, as amended, with full limited
liability company power and authority to execute, deliver and perform its
obligations under this Underwriting Agreement, the Bonds, the Sale
Agreement, the Servicing Agreement, the Indenture, the Issuer LLC
Agreement, the Intercreditor Agreement, the Administration Agreement and
the other agreements and instruments contemplated by the Pricing Prospectus
(collectively, the "Issuer Documents") and to own its properties and
conduct its business as described in the Pricing Prospectus; the Issuer has
been duly qualified as a foreign limited liability company for the
transaction of business and is in good standing under the laws of each
other jurisdiction in which it owns or leases properties or conducts any
business so as to require such qualification, except where failure to so
qualify or to be in good standing would not have a material adverse effect
on the business, properties or financial condition of the Issuer; the
Issuer has conducted and will conduct no business in the future that would
be inconsistent with the description of the Issuer's business set forth in
the Pricing Prospectus; the Issuer is not a party to or bound by any
agreement or instrument other than the Issuer Documents and other
agreements or instruments incidental to its formation; the Issuer has no
material liabilities or obligations other than those arising out of the
transactions contemplated by the Issuer Documents and as described in the
Pricing Prospectus; the Company is the beneficial owner of all of the
limited liability company interests of the Issuer; and based on current
law, the Issuer is not classified as an association taxable as a
corporation for United States federal income tax purposes.
(g) The issuance and sale of the Bonds by the Issuer, the purchase of
the Series A Transition Property by the Issuer from the Company and the
consummation of the transactions herein contemplated by the Issuer, and the
fulfillment of the terms hereof
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on the part of the Issuer to be fulfilled, will not result in a breach of
any of the terms or provisions of, or constitute a default under the
Issuer's certificate of formation or limited liability company agreement
(collectively, the "Issuer Charter Documents"), or any indenture, mortgage,
deed of trust or other agreement or instrument to which the Issuer is now a
party.
(h) This Underwriting Agreement has been duly authorized, executed and
delivered by the Issuer, which has the necessary limited liability company
power and authority to execute, deliver and perform its obligations under
this Underwriting Agreement, and constitutes a valid and binding obligation
of the Issuer, enforceable against the Issuer in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, receivership, moratorium or other similar laws
relating to or affecting creditors' or secured parties' rights generally
and by 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; and limitations on
enforceability of rights to indemnification or contribution by federal or
state securities laws or regulations or by public policy.
(i) The Issuer (i) is not in violation of the Issuer Charter
Documents, (ii) is not in default and no event has occurred which, with
notice or lapse of time or both, would constitute such a default, in the
due performance or observance of any term, covenant or condition contained
in any indenture, mortgage, deed of trust or other agreement or instrument
to which it is a party or by which it is bound or to which any of its
properties is subject, except for any such defaults that would not,
individually or in the aggregate, have a material adverse effect on its
business, property or financial condition, and (iii) is not in violation of
any law, ordinance, governmental rule, regulation or court decree to which
it or its property may be subject, except for any such violations that
would not, individually or in the aggregate, have a material adverse effect
on its business, property or financial condition.
(j) The Indenture has been duly authorized by the Issuer, and, on the
Closing Date, will have been duly executed and delivered by the Issuer and
will be a valid and binding instrument, enforceable against the Issuer in
accordance with its terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization, receivership, moratorium
or other similar laws relating to or affecting creditors' or secured
parties' rights generally and by 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; and
limitations on enforceability of rights to indemnification by federal or
state securities laws or regulations or by public policy. On the Closing
Date, the Indenture will (i) comply as to form in all material respects
with the requirements of the Trust Indenture Act and (ii) conform in all
material respects to the description thereof in the Pricing Prospectus and
Final Prospectus.
(k) The Bonds have been duly authorized by the Issuer for issuance and
sale to the Underwriters pursuant to this Underwriting Agreement and, when
executed by the Issuer and authenticated by the Indenture Trustee in
accordance with the Indenture and delivered to the Underwriters against
payment therefor in accordance with the terms of
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this Underwriting Agreement, will constitute valid and binding obligations
of the Issuer entitled to the benefits of the Indenture and enforceable
against the Issuer in accordance with their terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium or other similar laws relating to
or affecting creditors' or secured parties' rights generally and by 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; and limitations on enforceability of rights
to indemnification by federal or state securities laws or regulations or by
public policy, and the Bonds conform in all material respects to the
description thereof in the Pricing Prospectus and Final Prospectus. The
Issuer has all requisite limited liability company power and authority to
issue, sell and deliver the Bonds in accordance with and upon the terms and
conditions set forth in this Underwriting Agreement and in the Pricing
Prospectus and Final Prospectus.
(l) Other than as set forth or contemplated in the Pricing Prospectus,
there is no litigation or governmental proceeding to which the Issuer is a
party or to which any property of the Issuer is subject or which is pending
or, to the knowledge of the Issuer, threatened against the Issuer that
could reasonably be expected to, individually or in the aggregate, result
in a material adverse effect on the Issuer's business, property or
financial condition.
(m) Other than any necessary action of the PUCT, any filings required
under the Restructuring Act or Financing Order or as otherwise set forth or
contemplated in the Pricing Prospectus, no approval, authorization, consent
or order of any public board or body (except such as have been already
obtained and other than in connection or in compliance with the provisions
of applicable blue-sky laws or securities laws of any state, as to which
the Issuer makes no representations or warranties), is legally required for
the issuance and sale by the Issuer of the Bonds.
(n) The Issuer is not, and after giving effect to the sale and
issuance of the Bonds, will not be an "investment company" within the
meaning of the Investment Company Act of 1940, as amended (the "1940 Act").
(o) The financial statements, together with the related notes,
included in the Pricing Prospectus present fairly in all material respects
the financial position, and member's equity of the Issuer as of the
respective dates and for the respective periods specified and, except as
otherwise stated in the Pricing Prospectus, such financial statements have
been prepared in conformity with generally accepted accounting principles
in the United States applied on a consistent basis during the periods
involved.
(p) Deloitte & Touche LLP, who have certified certain financial
statements of the Issuer, are independent public accountants as required by
the Securities Act and the rules and regulations of the Commission
thereunder.
(q) Each of the Sale Agreement and Servicing Agreement has been duly
authorized by the Issuer, and when executed and delivered by the Issuer and
the other parties thereto, will constitute a valid and legally binding
obligation of the Issuer,
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enforceable against the Issuer in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium or other similar laws relating to
or affecting creditors' or secured parties' rights generally and by 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, and limitations on enforceability of rights
to indemnification by federal or state securities laws or regulations or by
public policy. Each of the Intercreditor Agreement, the Administration
Agreement and Issuer LLC Agreement has been duly authorized by the Issuer,
and when executed and delivered by the Issuer and other parties thereto,
will constitute a valid and legally binding obligation of the Issuer,
enforceable against the Issuer in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium or other similar laws relating to
or affecting creditors' or secured parties' rights generally and by 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; and limitations on enforceability of rights
to indemnification by federal or state securities laws or regulations or by
public policy.
4. Representations and Warranties of the Company. The Company represents
and warrants to the several Underwriters that:
(a) The Issuer has filed with the Commission Registration Statement
No. 333-121505 for the registration under the Securities Act of up to
$1,857,000,000 aggregate principal amount of its transition bonds.
Registration Statement No. 333-121505 has been declared effective by the
Commission and no stop order suspending such effectiveness has been issued
under the Securities Act and no proceedings for that purpose have been
instituted or are pending or, to the knowledge of the Company, threatened
by the Commission.
(b) The Registration Statement at each Effective Date fully complied,
and the Final Prospectus, both on the 424 Date and at the Closing Date, and
the Indenture, at the Closing Date, will fully comply, in all material
respects with the applicable provisions of the Securities Act and the Trust
Indenture Act, respectively, and, in each case, the applicable
instructions, rules and regulations of the Commission thereunder; the
Registration Statement, at each Effective Date, did not contain an untrue
statement of a material fact, or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading; the Final Prospectus, both on the 424 Date and at the Closing
Date, will not include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
provided, that the foregoing representations and warranties in this
paragraph (b) shall not apply to statements or omissions made in reliance
upon and in conformity with information furnished in writing to the Issuer
or the Company by, or on behalf of, any Underwriter through the
Representatives expressly for use in connection with the preparation of the
Registration Statement or the Final Prospectus, or to any statements in or
omissions from any Statement of Eligibility on Form T-1, or amendments
thereto, of the Indenture Trustee under the Indenture filed as exhibits to
the Registration Statement or Incorporated
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Documents or to any statements or omissions made in the Registration
Statement or Final Prospectus relating to the DTC Book-Entry-Only System
that are based solely on information contained in published reports of DTC.
(c) As of the Applicable Time, the Pricing Prospectus and each Issuer
Free Writing Prospectus, considered together, did not include any untrue
statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading (except that the principal
amount of the Bonds, the tranches, the initial principal balances, the
scheduled final payment dates, the final maturity dates, the expected
average lives, the Expected Amortization Schedule and the Expected Sinking
Fund Schedule described in the Pricing Prospectus were subject to change
based on market conditions, and the interest rate, price to the public and
underwriting discounts and commissions for each tranche was not included in
the Pricing Prospectus). The preceding sentence does not apply to
statements in or omissions from the Pricing Prospectus and each Issuer Free
Writing Prospectus in reliance upon and in conformity with written
information furnished to the Issuer or Company by any Underwriter through
the Representatives specifically for use therein, it being understood and
agreed that the only such information furnished by any Underwriter consists
of the information described as such in Section 11(b) hereof.
(d) Each Issuer Free Writing Prospectus, as of its issue date and at
all subsequent times through the completion of the public offer and sale of
the Bonds or until any earlier date that the Issuer or the Company notified
or notifies the Representatives as described in the next sentence, did not,
does not and will not include any information that conflicted, conflicts or
will conflict with the information then contained in the Registration
Statement. If at any time following issuance of an Issuer Free Writing
Prospectus there occurred or occurs an event or development as a result of
which such Issuer Free Writing Prospectus conflicted or would conflict with
the information then contained in the Registration Statement or included or
would include an untrue statement of a material fact or omitted or would
omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances prevailing at that subsequent
time, not misleading, (i) the Company or the Issuer has promptly notified
or will promptly notify the Representatives and (ii) the Company or the
Issuer has promptly amended or will promptly amend or supplement such
Issuer Free Writing Prospectus to eliminate or correct such conflict,
untrue statement or omission. The foregoing two sentences do not apply to
statements in or omissions from any Issuer Free Writing Prospectus in
reliance upon and in conformity with written information furnished to the
Issuer or the Company by any Underwriter through the Representatives
specifically for use therein, it being understood and agreed that the only
such information furnished by any Underwriter consists of the information
described as such in Section 11(b) hereof.
(e) The Company has been duly formed and is validly existing as a
limited liability company in good standing under the laws of the
jurisdiction of its formation, has the limited liability company power and
authority to own, lease and operate its properties and to conduct its
business as presently conducted and as set forth in or contemplated by the
Pricing Prospectus, and is qualified as a foreign limited liability company
to transact business and is in good standing in each jurisdiction in which
such qualification is
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required, whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure to so qualify or be in good
standing would not have a material adverse effect on the business, property
or financial condition of the Company and its subsidiaries considered as a
whole. The Company is the beneficial owner of all of the limited liability
company interests of the Issuer.
(f) The Company has no significant subsidiaries within the meaning of
Rule 1-02(w) of Regulation S-X.
(g) The transfer by the Company of all of its rights and interests
under the Financing Order relating to the Bonds to the Issuer and the
consummation of the transactions herein contemplated by the Company, and
the fulfillment of the terms hereof on the part of the Company to be
fulfilled, will not result in a breach of any of the terms or provisions
of, or constitute a default under, the Company's Articles of Formation or
limited liability company agreement (collectively, the "Company Charter"),
or in a material breach of any of the terms of, or constitute a material
default under, any indenture, mortgage, deed of trust or other agreement or
instrument to which the Company is now a party.
(h) This Underwriting Agreement has been duly authorized, executed and
delivered by the Company, which has the necessary limited liability company
power and authority to execute, deliver and perform its obligations under
this Underwriting Agreement, and constitutes a valid and binding obligation
of the Company, enforceable against the Company in accordance with its
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, receivership, moratorium or other similar laws
relating to or affecting creditors' or secured parties' rights generally
and by 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, and limitations on
enforceability of rights to indemnification or contribution by federal or
state securities laws or regulations or by public policy.
(i) The Company (i) is not in violation of the Company Charter, (ii)
is not in default and no event has occurred which, with notice or lapse of
time or both, would constitute such a default, in the due performance or
observance of any term, covenant or condition contained in any indenture,
mortgage, deed of trust or other agreement or instrument to which it is a
party or by which it is bound or to which any of its properties is subject,
except for any such defaults that would not, individually or in the
aggregate, have a material adverse effect on the business, property or
financial condition of the Company and its subsidiaries considered as a
whole, or (iii) is not in violation of any law, ordinance, governmental
rule, regulation or court decree to which it or its property may be
subject, except for any such violations that would not, individually or in
the aggregate, have a material adverse effect on the business, property or
financial condition of the Company and its subsidiaries considered as a
whole.
(j) Except as set forth or contemplated in the Pricing Prospectus,
there is no litigation or governmental proceeding to which the Company or
any of its subsidiaries is a party or to which any property of the Company
or any of its subsidiaries is subject or
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which is pending or, to the knowledge of the Company, threatened against
the Company or any of its subsidiaries that could reasonably be expected
to, individually or in the aggregate, result in a material adverse effect
on the Company and its subsidiaries taken as a whole.
(k) Other than any necessary action of the PUCT, any filings required
under the Restructuring Act (as such term is defined in the Pricing
Prospectus) or Financing Order or as otherwise set forth or contemplated in
the Pricing Prospectus, no approval, authorization, consent or order of any
public board or body (except such as have been already obtained and other
than in connection or in compliance with the provisions of applicable
blue-sky laws or securities laws of any state, as to which the Company
makes no representations or warranties), is legally required for the
issuance and sale by the Issuer of the Bonds.
(l) The Company is not, and after giving effect to the sale and
issuance of the Bonds, will not be an "investment company" within the
meaning of the 1940 Act.
(m) Each of the Sale Agreement and Servicing Agreement has been duly
and validly authorized by the Company, and when executed and delivered by
the Company and the other parties thereto will constitute a valid and
legally binding obligation of the Company, enforceable against the Company
in accordance with its terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization, receivership, moratorium
or other similar laws relating to or affecting creditors' or secured
parties' rights generally and by 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, and
limitations on enforceability of rights to indemnification by federal or
state securities laws or regulations or by public policy. Each of the
Administration Agreement and Intercreditor Agreement has been duly
authorized by the Company, and when executed and delivered by the Company
and other parties thereto will constitute a valid and legally binding
obligation of the Company, enforceable against the Company in accordance
with its terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, receivership, moratorium or other
similar laws relating to or affecting creditors' or secured parties' rights
generally and by 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, and limitations on
enforceability of rights to indemnification by federal or state securities
laws or regulations or by public policy.
(n) There are no Texas transfer taxes related to the transfer of the
Series A Transition Property or the issuance and sale of the Bonds to the
Underwriters pursuant to this Underwriting Agreement required to be paid at
or prior to the Closing Date by the Company or the Issuer.
5. Representations and Warranties of the Underwriters. Each Underwriter
represents and warrants to the Company and the Issuer that:
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(a) If and to the extent it has provided any prospective investors
with any Computational Materials or ABS Term Sheets (as such terms are
hereinafter defined) prior to the date hereof in connection with the
offering of the Bonds, all of the conditions set forth in Section 8A hereof
have been satisfied with respect thereto.
(b) [Reserved]
6. Purchase and Sale. On the basis of the representations and warranties
herein contained, and subject to the terms and conditions herein set forth, the
Issuer shall sell to each of the Underwriters, and each Underwriter shall
purchase from the Issuer, at the time and place herein specified, severally and
not jointly, at the purchase price set forth in Schedule I hereto, the principal
amount of the Bonds set forth opposite such Underwriter's name in Schedule II
hereto. The Underwriters agree to make a public offering of the Bonds. The
Issuer shall pay (in the form of a discount to the principal amount of the
offered Bonds) to the Underwriters a commission equal to $7,022,925.
7. Time and Place of Closing. Delivery of the Bonds against payment of the
aggregate purchase price therefor by wire transfer in federal funds shall be
made at the place, on the date and at the time specified in Schedule I hereto,
or at such other place, time and date as shall be agreed upon in writing by the
Issuer and the Representatives. The hour and date of such delivery and payment
are herein called the "Closing Date". The Bonds shall be delivered to DTC or to
Wilmington Trust Company, as custodian for DTC, in fully registered global form
registered in the name of Cede & Co., for the respective accounts specified by
the Representatives not later than the close of business on the business day
preceding the Closing Date or such other time as may be agreed upon by the
Representatives. The Issuer agrees to make the Bonds available to the
Representatives for checking purposes not later than 1:00 P.M. New York Time on
the last business day preceding the Closing Date at the place specified for
delivery of the Bonds in Schedule I hereto, or at such other place as the Issuer
may specify.
If any Underwriter shall fail or refuse to purchase and pay for the
aggregate principal amount of Bonds that such Underwriter has agreed to purchase
and pay for hereunder, the Issuer shall immediately give notice to the other
Underwriters of the default of such Underwriter, and the other Underwriters
shall have the right within 24 hours after the receipt of such notice to
determine to purchase, or to procure one or more others, who are members of the
National Association of Securities Dealers, Inc. ("NASD") (or, if not members of
the NASD, who are not eligible for membership in the NASD and who agree (i) to
make no sales within the United States, its territories or its possessions or to
persons who are citizens thereof or residents therein and (ii) in making sales
to comply with the NASD's Conduct Rules) and satisfactory to the Issuer, to
purchase, upon the terms herein set forth, the aggregate principal amount of
Bonds that the defaulting Underwriter had agreed to purchase. If any
non-defaulting Underwriter or Underwriters shall determine to exercise such
right, such Underwriter or Underwriters shall give written notice to the Issuer
of the determination in that regard within 24 hours after receipt of notice of
any such default, and thereupon the Closing Date shall be postponed for such
period, not exceeding three business days, as the Issuer shall determine.
If in the event of such a default no non-defaulting Underwriter shall give
such notice, then this Underwriting Agreement may be terminated by the Issuer,
upon like notice given to the non-defaulting Underwriters, within a
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further period of 24 hours. If in such case the Issuer shall not elect to
terminate this Underwriting Agreement it shall have the right, irrespective
of such default:
(a) to require each non-defaulting Underwriter to purchase and pay for
the respective aggregate principal amount of Bonds that it had agreed to
purchase hereunder as hereinabove provided and, in addition, the aggregate
principal amount of Bonds that the defaulting Underwriter shall have so
failed to purchase up to aggregate principal amount of Bonds equal to
one-ninth (1/9) of the aggregate principal amount of Bonds that such
non-defaulting Underwriter has otherwise agreed to purchase hereunder,
and/or
(b) to procure one or more persons, reasonably acceptable to the
Representatives, who are members of the NASD (or, if not members of the
NASD, who are not eligible for membership in the NASD and who agree (i) to
make no sales within the United States, its territories or its possessions
or to persons who are citizens thereof or residents therein and (ii) in
making sales to comply with the NASD's Conduct Rules), to purchase, upon
the terms herein set forth, either all or a part of the aggregate principal
amount of Bonds that such defaulting Underwriter had agreed to purchase or
that portion thereof that the remaining Underwriters shall not be obligated
to purchase pursuant to the foregoing clause (a).
In the event the Issuer shall exercise its rights under (a) and/or (b)
above, the Issuer shall give written notice thereof to the non-defaulting
Underwriters within such further period of 24 hours, and thereupon the Closing
Date shall be postponed for such period, not exceeding three business days, as
the Issuer shall determine.
In the computation of any period of 24 hours referred to in this Section 7,
there shall be excluded a period of 24 hours in respect of each Saturday, Sunday
or legal holiday that would otherwise be included in such period of time.
Any action taken by the Issuer or the Company under this Section 7 shall
not relieve any defaulting Underwriter from liability in respect of any default
of such Underwriter under this Underwriting Agreement. Termination by the Issuer
under this Section 7 shall be without any liability on the part of the Issuer,
the Company or any non-defaulting Underwriter, except as otherwise provided in
Sections 8(a)(vii) and 11 hereof.
8. Covenants.
(a) Covenants of the Issuer. The Issuer covenants and agrees with the
several Underwriters that:
(i) The Issuer will upon request promptly deliver to the
Representatives and Counsel to the Underwriters a signed copy of the
Registration Statement as originally filed or, to the extent a signed copy
is not available, a conformed copy, certified by an officer of the Issuer
to be in the form as originally filed, including all Incorporated Documents
and exhibits and all amendments thereto.
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(ii) The Issuer will deliver to the Underwriters, as soon as
practicable after the date hereof, as many copies of the Final Prospectus
as they may reasonably request.
(iii) The Issuer will cause the Final Prospectus to be filed with the
Commission pursuant to Rule 424 as soon as practicable and advise the
Underwriters of any stop order suspending the effectiveness of the
Registration Statement or the institution of any proceeding therefor of
which Issuer shall have received notice. The Issuer will use its reasonable
best efforts to prevent the issuance of any such stop order and, if issued,
to obtain as soon as possible the withdrawal thereof. The Issuer has
complied and will comply with Rule 433 under the Securities Act in
connection with the offering of the Bonds.
(iv) If, during such period of time (not exceeding nine months) after
the Final Prospectus has been filed with the Commission pursuant to Rule
424 as in the opinion of Counsel for the Underwriters a prospectus covering
the Bonds is required by law to be delivered in connection with sales by an
Underwriter or dealer (including in circumstances where such requirement
may be satisfied pursuant to Rule 172 under the Securities Act), any event
relating to or affecting the Issuer, the Bonds or the Series A Transition
Property or of which the Issuer shall be advised in writing by the
Representatives shall occur that in the Issuer's reasonable judgment after
consultation with Counsel for the Underwriters (as defined below) should be
set forth in a supplement to, or an amendment of, the Final Prospectus in
order to make the Final Prospectus not misleading in the light of the
circumstances when it is delivered to a purchaser (including in
circumstances where such requirement may be satisfied pursuant to Rule 172
under the Securities Act), the Issuer will, at its expense, amend or
supplement the Final Prospectus by either (A) preparing and furnishing to
the Underwriters at the Issuer's expense a reasonable number of copies of a
supplement or supplements or an amendment or amendments to the Final
Prospectus or (B) making an appropriate filing pursuant to Section 13 or
Section 15 of the Exchange Act, which will supplement or amend the Final
Prospectus so that, as supplemented or amended, it will not contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances when the Final Prospectus is delivered to a purchaser
(including in circumstances where such requirement may be satisfied
pursuant to Rule 172 under the Securities Act), not misleading; provided
that should such event relate solely to the activities of any of the
Underwriters, then such Underwriters shall assume the expense of preparing
and furnishing any such amendment or supplement.
(v) As soon as practicable, but not later than 16 months, after the
date hereof, the Issuer will make generally available to its security
holders, an earnings statement (which need not be audited) that will
satisfy the provisions of Section 11(a) of the Securities Act.
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(vi) The Issuer will furnish such proper information as may be
lawfully required and otherwise cooperate in qualifying the Bonds for offer
and sale under the blue-sky laws of such jurisdictions as the
Representatives may designate; provided that the Issuer shall not be
required to qualify as a foreign limited liability company or dealer in
securities, to file any consents to service of process under the laws of
any jurisdiction, or meet any other requirements deemed by the Issuer to be
unduly burdensome.
(vii) The Issuer or the Company will, except as herein provided, pay
or cause to be paid all expenses and taxes (except transfer taxes) in
connection with (i) the preparation and filing by it of the Registration
Statement, Pricing Prospectus and Final Prospectus, (ii) the issuance and
delivery of the Bonds as provided in Section 7 hereof (including, without
limitation, reasonable fees and disbursements of Counsel for the
Underwriters and all trustee, rating agency and PUCT financial advisor
fees), (iii) the qualification of the Bonds under blue-sky laws (including
counsel fees not to exceed $20,000), and (iv) the printing and delivery to
the Underwriters of reasonable quantities of the Registration Statement
and, except as provided in Section 8(a)(iv) hereof, of the Pricing
Prospectus and Final Prospectus. The Issuer shall not, however, be required
to pay any amount for any expenses of the Underwriters or for any fees and
expenses of counsel for the PUCT financial advisor, except that, if this
Underwriting Agreement shall be terminated in accordance with the
provisions of Section 7 (but excluding terminations arising thereunder out
of an Underwriter default), 9 or 13 hereof, the Issuer will reimburse the
Underwriters for the reasonable fees and disbursements of Counsel for the
Underwriters, and will reimburse the Underwriters for their reasonable
out-of-pocket expenses, in an aggregate amount not exceeding $200,000,
incurred in contemplation of the performance of this Underwriting
Agreement. The Issuer shall not in any event be liable to any of the
several Underwriters for damages on account of loss of anticipated profits.
(viii) During the period from the date of this Underwriting Agreement
to the date that is five days after the Closing Date, the Issuer will not,
without the prior written consent of the Representatives, offer, sell or
contract to sell, or otherwise dispose of, directly or indirectly, or
announce the offering of, any asset-backed securities (other than the
Bonds).
(ix) To the extent, if any, that any rating necessary to satisfy the
condition set forth in Section 9(z) of this Underwriting Agreement is
conditioned upon the furnishing of documents or the taking of other actions
by the Issuer on or after the Closing Date, the Issuer shall furnish such
documents and take such other actions.
(x) The Issuer will file with the Commission a report on Form 8-K
setting forth all Computational Materials and ABS Term Sheets (as such
terms are hereinafter defined) provided to the Issuer by any Underwriter
and identified by it as such within the time period allotted for such
filing pursuant to the No-Action Letters (as hereinafter defined);
provided, however, that, prior to any filing of the
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Computational Materials and ABS Term Sheets by the Issuer, such Underwriter
must comply with its obligations pursuant to Section 8A hereof, and the
Issuer must receive, prior to the Closing Date, an agreed upon procedures
report from Deloitte & Touche LLP as determined by the Issuer and such
Underwriter. The Issuer shall file any corrected Computational Materials or
ABS Terms Sheets described in Section 8A hereof as soon as practicable
following receipt thereof.
(xi) For a period from the date of this Underwriting Agreement until
the retirement of the Bonds or until such time as the Underwriters shall
cease to maintain a secondary market in the Bonds, whichever occurs first,
the Issuer shall file with the Commission, and to the extent permitted by
and consistent with the Issuer's obligations under applicable law, make
available on the website associated with the Issuer's parent, such periodic
reports, if any, as are required (without regard to the number of holders
of Bonds to the extent permitted by and consistent with the Issuer's
obligations under applicable law) from time to time under Section 13 or
Section 15(d) of the Exchange Act, and the Issuer shall not voluntarily
suspend or terminate its filing obligations with the Commission. The Issuer
shall also, to the extent permitted by and consistent with the Issuer's
obligations under applicable law, include in the periodic and other reports
to be filed with the Commission as provided above, such information as
required by Section 3.07(d) of the Indenture with respect to the Bonds. To
the extent that the Issuer's obligations are terminated or limited by an
amendment to Section 3.07(d) of the Indenture, or otherwise, such
obligations shall be correspondingly terminated or limited hereunder.
(xii) The Issuer will not file any amendment to the Registration
Statement or amendment or supplement to the Final Prospectus during the
period when a prospectus relating to the Bonds is required to be delivered
under the Securities Act, without prior notice to the Underwriters, or to
which ▇▇▇▇▇▇ ▇▇▇▇ & Priest LLP, who are acting as counsel for the
Underwriters ("Counsel for the Underwriters"), shall reasonably object in
writing.
(xiii) The Issuer agrees that, unless it has obtained or will obtain,
as the case may be, the prior written consent of the Representatives, and
each Underwriter, severally and not jointly, agrees with the Issuer and
Company that, unless it has obtained or will obtain, as the case may be,
the prior written consent of the Company or Issuer and the Representatives,
it has not made and will not make any offer relating to the Bonds that
would constitute an Issuer Free Writing Prospectus or that would otherwise
constitute a Free Writing Prospectus required to be filed by the Issuer
with the Commission or retained by the Issuer under Rule 433 under the
Securities Act; provided that (a) the prior written consent of the parties
hereto shall be deemed to have been given in respect of the Free Writing
Prospectus identified in item 1 in Schedule IV hereto and (b) any such
consent by the Company, the Issuer or the Representatives may be given
orally by authorized representatives with respect to the pricing sheet
containing the final terms of the Bonds, dated December 9, 2005. Any such
Free Writing Prospectus consented to by the Representatives or the Issuer
(or Company) is hereinafter referred to as a
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"Issuer Permitted Free Writing Prospectus." The Issuer agrees that (x) it
has treated and will treat, as the case may be, each Issuer Permitted Free
Writing Prospectus as an Issuer Free Writing Prospectus and (y) it has
complied and will comply, as the case may be, with the requirements of
Rules 164 and 433 under the Securities Act applicable to any Issuer
Permitted Free Writing Prospectus, including in respect of timely filing
with the Commission where required, legending and record keeping.
(b) Covenants of the Company. The Company covenants and agrees with the
several Underwriters that, to the extent that the Issuer has not already
performed such act pursuant to Section 8(a):
(i) To the extent permitted by applicable law and the agreements and
instruments that bind the Company, the Company will use its reasonable best
efforts to cause the Issuer to comply with the covenants set forth in
Section 8(a) hereof.
(ii) The Company will use its reasonable best efforts to prevent the
issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement and, if issued, to obtain as soon as possible
the withdrawal thereof.
(iii) If, during such period of time (not exceeding nine months) after
the Final Prospectus has been filed with the Commission pursuant to Rule
424 as in the opinion of Counsel for the Underwriters a prospectus covering
the Bonds is required by law to be delivered in connection with sales by an
Underwriter or dealer, any event relating to or affecting the Company, the
Bonds or the Series A Transition Property or of which the Company shall be
advised in writing by the Representatives shall occur that in the Company's
reasonable judgment after consultation with Counsel for the Underwriters
should be set forth in a supplement to, or an amendment of, the Final
Prospectus in order to make the Final Prospectus not misleading in the
light of the circumstances when it is delivered to a purchaser, the Company
will cause the Issuer, at the Company's or the Issuer's expense, to amend
or supplement the Final Prospectus by either (A) preparing and furnishing
to the Underwriters at the Company's or the Issuer's expense a reasonable
number of copies of a supplement or supplements or an amendment or
amendments to the Final Prospectus or (B) causing the Issuer to make an
appropriate filing pursuant to Section 13 or Section 15 of the Exchange
Act, which will supplement or amend the Final Prospectus so that, as
supplemented or amended, it will not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make
the statements therein, in the light of the circumstances when the Final
Prospectus is delivered to a purchaser, not misleading; provided that
should such event relate solely to the activities of any of the
Underwriters, then such Underwriters shall assume the expense of preparing
and furnishing any such amendment or supplement.
-16-
(iv) During the period from the date of this Underwriting Agreement to
the date that is five days after the Closing Date, the Company will not,
without the prior written consent of the Representatives, offer, sell or
contract to sell, or otherwise dispose of, directly or indirectly, or
announce the offering of, any asset-backed securities (other than the
Bonds).
(v) The Company will cause the proceeds for the issuance and sale of
the Bonds to be applied for the purposes described in the Pricing
Prospectus.
(vi) To the extent, if any, that any rating necessary to satisfy the
condition set forth in Section 9(z) of this Underwriting Agreement is
conditioned upon the furnishing of documents or the taking of other actions
by the Company on or after the Closing Date, the Company shall furnish such
documents and take such other actions.
8A. Obligations of Underwriters Relating to Computational Materials and
Terms Sheets. In connection with the offering of the Bonds, each Underwriter may
prepare and provide to prospective investors (x) items similar to computational
materials ("Computational Materials"), as defined in the no-action letter of May
20, 1994 issued by the Commission to ▇▇▇▇▇▇, Peabody Acceptance Corporation I,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & Co. Incorporated and ▇▇▇▇▇▇ Structured Asset Corporation, as
made applicable to other issuers and underwriters by the Commission in response
to the request of the Public Securities Association dated May 24, 1994, as well
as the no-action letter of February 17, 1995 issued by the Commission to the
Public Securities Association (the "PSA Letter") (collectively, the "No-Action
Letters") and (y) items similar to ABS term sheets ("ABS Term Sheets") as
defined in the PSA Letter, subject to the following conditions:
(a) All Computational Materials and ABS Term Sheets provided to
prospective investors that are required to be filed pursuant to the
No-Action Letters shall include a legend substantially in the form attached
hereto as Schedule III. The Issuer shall have the right to require
additional specific legends or notations to appear on any Computational
Materials or ABS Term Sheets, the right to require changes regarding the
use of terminology and the right to determine the types of information
appearing therein. Notwithstanding the foregoing, this Section 8A(a) will
be satisfied if all Computational Materials and ABS Term Sheets referred to
herein bear a legend in a form previously approved by the Issuer.
(b) Such Underwriter shall provide to the Issuer, for approval by the
Issuer, representative forms of all Computational Materials and ABS Term
Sheets prior to their first use, to the extent such forms have not
previously been approved by the Issuer for use by such Underwriter. Such
Underwriter shall provide to the Issuer, for filing on Form 8-K as provided
in Section 8(a)(x) hereof, copies (in such format as required by the
Issuer) of all Computational Materials and ABS Term Sheets that are
required to be filed with the Commission pursuant to the No-Action Letters.
Such Underwriter may provide copies of the foregoing in a consolidated or
aggregated form including all information required to be filed if filing in
such format is permitted by the No-Action Letters. All Computational
Materials and ABS Term Sheets described in this Section 8A(b) must be
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provided to the Issuer no later than 10:00 a.m. New York City time one
business day before filing thereof is required pursuant to the terms of
this Underwriting Agreement. Such Underwriter shall not provide to any
investor or prospective investor in the Bonds any Computational Materials
or ABS Term Sheets on or after the day on which Computational Materials or
ABS Term Sheets are required to be provided to the Issuer pursuant to this
Section 8A(b) (other than copies of Computational Materials or ABS Term
Sheets previously submitted to the Issuer in accordance with this Section
8A(b) for filing pursuant to Section 8(a)(x) hereof), unless such
Computational Materials or ABS Term Sheets are preceded or accompanied by
the delivery of a Pricing Prospectus to such investor or prospective
investor. No Underwriter may, without the prior consent of the Company or
the Issuer, convey or deliver any Computational Materials or ABS Term
Sheets in connection with the offering of the Bonds.
(c) All information included in the Computational Materials and ABS
Term Sheets shall be generated based on substantially the same methodology
and assumptions that are used to generate the information in the
Registration Statement as set forth therein. If any Computational Materials
or ABS Term Sheets are based on assumptions with respect to the
information, whether in written or electronic format or otherwise,
regarding the Series A Transition Property initially provided to the
Underwriters by or on behalf of the Company or the Issuer (the "Transition
Property Information") that differ from the final Transition Property
Information in any material respect or on Bond structuring terms that were
revised in any material respect prior to the printing of the Final
Prospectus, the Underwriters shall prepare revised Computational Materials
or ABS Term Sheets, as the case may be, based on the final Transition
Property Information and structuring assumptions, deliver with the Final
Prospectus such revised Computational Materials and ABS Term Sheets to each
recipient of the preliminary versions thereof that indicated orally to any
Underwriter that such recipient would purchase all or any portion of the
Bonds, and include such revised Computational Materials and ABS Term Sheets
(marked "AS REVISED") in the materials delivered to the Issuer pursuant to
Section 8A(b) hereof. The expenses of each Underwriter relating to the
preparation and transmission of its Computational Material and ABS Term
Sheets, including, without limitation, fees and expenses of accountants,
shall be the responsibility of the Issuer.
(d) The Issuer shall not be obligated to file any Computational
Materials or ABS Term Sheets that have been determined to contain any
material error or omission; provided, that, at the request of any
Underwriter, the Issuer will file Computational Materials or ABS Term
Sheets that contain a material error or omission if clearly marked
"SUPERSEDED BY MATERIALS DATED _______________" and accompanied by
corrected Computational Materials or ABS Term Sheets that are marked
"MATERIAL PREVIOUSLY DATED ____________ AS CORRECTED". If, within the
period during which a prospectus relating to the Bonds is required to be
delivered under the Securities Act, any Computational Materials or ABS Term
Sheets are determined, in the reasonable judgment of the Issuer or such
Underwriter, to contain a material error or omission, such Underwriter
shall prepare a corrected version of such Computational Materials or ABS
Term Sheets, shall circulate such corrected Computational Materials or ABS
Term Sheets to all recipients of the prior versions thereof that either
indicated orally to such Underwriter they would purchase all or any portion
of the Bonds, or actually purchased
-18-
all or any portion thereof, and shall deliver copies of such corrected
Computational Materials or ABS Term Sheets (marked "AS CORRECTED") to the
Issuer for filing with the Commission in a subsequent Form 8-K submission
(subject to the Issuer's obtaining an accountant's agreed upon procedures
report in respect of such corrected Computational Materials and ABS Term
Sheets, which the parties acknowledge shall be at the expense of the
Issuer).
(e) Each Underwriter shall be deemed to have represented, as of the
Closing Date, that, except for Computational Materials and ABS Term Sheets
provided to the Issuer pursuant to Section 8A(b) hereof, such Underwriter
did not provide any prospective investors with any information in written
or electronic form in connection with the offering of the Bonds that is
required to be filed with the Commission in accordance with the No-Action
Letters.
(f) In the event of any delay in the delivery by any Underwriter to
the Issuer of all Computational Materials and ABS Term Sheets required to
be delivered in accordance with Section 8A(b) hereof, or in the delivery of
the accountant's agreed upon procedures report in respect thereof pursuant
to Section 8(a)(x) hereof, the Issuer shall have the right to delay the
release of the Final Prospectus to investors or to any Underwriter, to
delay the Closing Date and to take other appropriate actions, in each case
set forth in Section 8(a)(x) hereof, to file the Computational Materials
and ABS Term Sheets by the time specified therein.
(g) Each Underwriter represents that it has in place, and covenants
that it shall maintain, internal controls and procedures that it reasonably
believes to be sufficient to ensure full compliance with all applicable
legal requirements of the No-Action Letters with respect to the generation
and use of Computational Materials and ABS Term Sheets in connection with
the offering of the Bonds.
9. Conditions to the Obligations of the Underwriters. The obligations of
the Underwriters to purchase the Bonds shall be subject to the accuracy of the
representations and warranties on the part of the Issuer and the Company
contained in this Underwriting Agreement, on the part of the Company contained
in Article III of the Sale Agreement, and on the part of the Company contained
in Section 5.01 of the Servicing Agreement as of the Closing Date, to the
accuracy of the statements of the Issuer and the Company made in any
certificates pursuant to the provisions hereof, to the performance by the Issuer
and the Company of their obligations hereunder, and to the following additional
conditions:
(a) The Final Prospectus shall have been filed with the Commission
pursuant to Rule 424 prior to 5:30 P.M., New York time, on the second
business day after the date of this Underwriting Agreement, or such other
time and date as may be approved by the Underwriters. In addition, all
material required to be filed by the Issuer or Company pursuant to Rule
433(d) under the Securities Act that was prepared by either of them or that
was prepared by any Underwriter and timely provided to the Issuer or the
Company shall have been filed with the Commission within the applicable
time period prescribed for such filing by such Rule 433(d).
-19-
(b) No stop order suspending the effectiveness of the Registration
Statement shall be in effect, and no proceedings for that purpose shall be
pending before, or threatened by, the Commission on the Closing Date; and
the Underwriters shall have received one or more certificates, dated the
Closing Date and signed by an officer of the Company and the Issuer, as
appropriate, to the effect that no such stop order is in effect and that no
proceedings for such purpose are pending before, or to the knowledge of the
Company or the Issuer, as the case may be, threatened by, the Commission.
(c) ▇▇▇▇▇▇ ▇▇▇▇ & Priest LLP, counsel for the Underwriters, shall have
furnished to the Representatives their written opinion (substantially in
the form attached as Annex I (a) hereto), dated the Closing Date, with
respect to the issuance and sale of the Bonds, the Indenture, the other
Issuer Documents, the Registration Statement and other related matters; and
such counsel shall have received such papers and information as they may
reasonably request to enable them to pass upon such matters.
(d) ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & Finger, P.A., special Delaware counsel for the
Company and the Issuer, shall have furnished to the Representatives their
written opinion (substantially in the form attached as Annex I (b) hereto),
dated the Closing Date, regarding the filing of a voluntary bankruptcy
petition.
(e) ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & Finger, P.A., special Delaware counsel for the
Company and the Issuer, shall have furnished to the Representatives their
written opinion (substantially in the form attached as Annex I (c) hereto),
dated the Closing Date, regarding certain Delaware Uniform Commercial Code
matters.
(f) ▇▇▇▇▇ ▇▇▇▇▇ L.L.P., counsel for the Issuer and the Company, shall
have furnished to the Representatives their written opinion (substantially
in the form attached as Annex I (d) hereto), dated the Closing Date,
regarding certain aspects of the transactions contemplated by the Issuer
Documents.
(g) ▇▇▇▇▇ ▇▇▇▇▇ L.L.P., counsel for the Issuer and the Company, shall
have furnished to the Representatives their written opinion (substantially
in the form attached as Annex I (e) hereto), dated the Closing Date, to the
effect that a court sitting in bankruptcy would not order the substantive
consolidation of the assets and liabilities of the Issuer with those of the
Company in connection with a bankruptcy, reorganization or other insolvency
proceeding involving the Company; that if the Company were to become a
debtor in such insolvency proceeding, such court would hold that the
Transition Property is not property of the estate of the Company.
(h) ▇▇▇▇▇ ▇▇▇▇▇ L.L.P., counsel for the Issuer and the Company, shall
have furnished to the Representatives their written opinion (substantially
in the form attached as Annex I (f) hereto), dated the Closing Date,
regarding certain Federal and Texas constitutional matters relating to the
Series A Transition Property.
(i) ▇▇▇▇▇ ▇▇▇▇▇ L.L.P., counsel for the Issuer and the Company, shall
have furnished to the Representatives their written opinion (substantially
in the form attached as Annex I (g) hereto), dated the Closing Date,
regarding certain tax matters.
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(j) In-house counsel for the Company and the Issuer, shall have
furnished to the Representatives their written opinion (substantially in
the form attached as Annex I (h) hereto), dated the Closing Date, regarding
certain aspects of the transactions contemplated by the Issuer Documents.
(k) ▇▇▇▇▇ ▇▇▇▇▇ L.L.P., counsel for the Issuer and the Company, shall
have furnished to the Representatives their written opinion (substantially
in the form attached as Annex I (i) hereto), dated the Closing Date, with
respect to the characterization of the transfer of the Series A Transition
Property by the Company to the Issuer as a "true sale" for Texas law
purposes.
(l) ▇▇▇▇▇ ▇▇▇▇▇ L.L.P. and Morris, James, Hitchens & ▇▇▇▇▇▇▇▇ LLP,
counsel for the Issuer and the Company, shall have furnished to the
Representatives its written respective opinions (substantially in the form
attached as Annex I (j) hereto), dated the Closing Date, to the effect that
the Series A Transition Property is not subject to the lien of the Company's
Mortgage and Deed of Trust, dated as of November 1, 1944.
(m) Winston & ▇▇▇▇▇▇ LLP and Morris, James, Hitchens & ▇▇▇▇▇▇▇▇ LLP,
counsel for the Indenture Trustee, shall have furnished to the
Representatives their written opinions (each substantially in the form
attached as Annex I (k) hereto), dated the Closing Date, regarding certain
matters relating to the Indenture Trustee.
(n) ▇▇▇▇▇ ▇▇▇▇▇ L.L.P., counsel for the Company and the Issuer, shall
have furnished to the representatives their opinion (substantially in the
form attached as Annex I (l) hereto), dated the Closing Date, regarding
certain Texas regulatory issues.
(o) ▇▇▇▇▇ ▇▇▇▇▇ L.L.P., counsel for the Issuer and the Company, shall
have furnished to the Representatives their written opinion (substantially
in the form attached as Annex I (m) hereto), dated the Closing Date,
regarding the Trustee's security interest under the Uniform Commercial
Code.
(p) ▇▇▇▇▇ ▇▇▇▇▇ L.L.P., counsel for the Issuer and the Company, shall
have furnished to the Representatives their written opinion (substantially
in the form attached as Annex I (n) hereto), dated the Closing Date,
regarding certain Texas perfection and priority issues.
(q) ▇▇▇▇▇ ▇▇▇▇▇ L.L.P., counsel for the Issuer and the Company, shall
have furnished to the Representatives their written opinion (substantially
in the form attached as Annex I (o) hereto), dated the Closing Date,
regarding bankruptcy and corporate governance matters.
(r) ▇▇▇▇▇ ▇▇▇▇▇ L.L.P., counsel for the Issuer and the Company, shall
have furnished to the Representatives their written opinion (substantially
in the form attached as Annex I (p) hereto), dated the Closing Date,
regarding certain bankruptcy matters relating to the Issuer LLC Agreement.
(s) ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & Finger, P.A., counsel for the Issuer and the
Company, shall have furnished to the Representatives their written opinion
(substantially in the form
-21-
attached as Annex I (q) hereto), dated the Closing Date, regarding certain
matters of Delaware law.
(t) ▇▇▇▇▇ ▇▇▇▇▇ L.L.P., counsel for the Issuer and the Company, shall
have furnished to the Representatives their written opinion (substantially
in the form attached as Annex I (r) hereto), dated the Closing Date,
regarding the constitutionality under the United States Constitution of the
Texas Electric Choice Plan (Tex. Util. Code ▇▇▇. Sections 11.001-64.158).
(u) On or before the Closing Date, Deloitte & Touche LLP shall have
furnished to the Representatives one or more agreed upon procedure reports
regarding certain calculations and computations relating to the Bonds, in
form or substance reasonably satisfactory to the Representatives, in each
case in respect of which the Representatives shall have made specific
requests therefor and shall have provided acknowledgment or similar letters
to Deloitte & Touche LLP reasonably necessary in order for Deloitte &
Touche LLP to issue such reports.
(v) Subsequent to the respective dates as of which information is
given in each of the Registration Statement, the Pricing Prospectus and the
Final Prospectus, there shall not have been any change specified in the
letters required by subsection (u) of this Section 9 which is, in the
judgment of the Representatives, so material and adverse as to make it
impracticable or inadvisable to proceed with the offering or the delivery
of the Bonds as contemplated by the Registration Statement and the Final
Prospectus.
(w) The Issuer LLC Agreement, the Administrative Agreement, the
Intercreditor Agreement, the Sale Agreement, the Servicing Agreement and
the Indenture and any amendment or supplement to any of the foregoing shall
have been executed and delivered.
(x) Since the respective dates as of which information is given in
each of the Registration Statement and in the Pricing Prospectus and as of
the Closing Date there shall have been no (i) material adverse change in
the business, property or financial condition of the Company and its
subsidiaries, taken as a whole, whether or not in the ordinary course of
business, or the Issuer or (ii) adverse development concerning the business
or assets of the Company and its subsidiaries, taken as a whole, or the
Issuer which would be reasonably likely to result in a material adverse
change in the prospective business, property or financial condition of the
Company and its subsidiaries, taken as a whole, whether or not in the
ordinary course of business, or the Issuer or (iii) development which would
be reasonably likely to result in a material adverse change, in the Series
A Transition Property, the Bonds or the Financing Order.
(y) At the Closing Date, (i) the Bonds shall be rated at least "Aaa",
"AAA", and "AAA" by ▇▇▇▇▇'▇ Investors Service, Inc. ("Moody's"), Standard &
Poor's, a division of the ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc. ("S&P") and Fitch,
Inc. ("Fitch"), respectively, and the Issuer shall have delivered to the
Underwriters a letter from each such rating agency, or other evidence
satisfactory to the Underwriters, confirming that the Bonds have such
ratings, and (ii) neither Moody's, S&P nor Fitch shall have, since the
-22-
date of this Underwriting Agreement, downgraded or publicly announced that
it has under surveillance or review, with possible negative implications,
its ratings of the Bonds.
(z) The Issuer and the Company shall have furnished or caused to be
furnished to the Representatives at the Closing Date certificates of
officers of the Company and the Issuer, reasonably satisfactory to the
Representatives, as to the accuracy of the representations and warranties
of the Issuer and the Company herein, in the Sale Agreement, Servicing
Agreement and the Indenture at and as of the Closing Date, as to the
performance by the Issuer and the Company of all of their obligations
hereunder to be performed at or prior to such Closing Date, as to the
matters set forth in subsections (b) and (x) of this Section and as to such
other matters as the Representatives may reasonably request.
(aa) An issuance advice letter, in a form consistent with the
provisions of the Financing Order, shall have been filed with the PUCT and
shall have become effective.
(bb) On or prior to the Closing Date, the Issuer shall have delivered
to the Representatives evidence, in form and substance reasonably
satisfactory to the Representatives, that appropriate filings have been or
are being made in accordance with the Restructuring Act, the Financing
Order and other applicable law reflecting the grant of a security interest
by the Issuer in the collateral relating to the Bonds to the Indenture
Trustee, including the filing of the requisite notices in the office of the
Secretary of State of the State of Texas.
(cc) On or prior to the Closing Date, the Company shall have funded
the capital subaccount of the Issuer with cash in an amount equal to
$9,255,000.
(dd) The Issuer and the Company shall have furnished or caused to be
furnished or agree to furnish to the Rating Agencies at the Closing Date
such opinions and certificates as the Rating Agencies may reasonably
request.
(ee) On or prior to the Closing Date, the Issuer and the Company shall
have furnished to the Underwriters such further certificates as the
Underwriters may reasonably request, including such certificates as the
Representatives may reasonably request to evidence the authorization and
execution of any interest rate swap agreement entered into in connection
with any class of floating rate Bonds and the qualification or listing of
any floating rate Bonds as contemplated by the Final Prospectus.
10. Conditions of Issuer's Obligations. The obligation of the Issuer to
deliver the Bonds shall be subject to the conditions that the Final Prospectus
shall have been filed with the Commission pursuant to Rule 424 prior to 5:30
P.M., New York time, on or before the second business day after the date of this
Underwriting Agreement or such other time and date as may be approved by the
Issuer, and no stop order suspending the effectiveness of the Registration
Statement shall be in effect at the Closing Date and no proceedings for that
purpose shall be pending before, or threatened by, the Commission at the Closing
Date. In case these conditions shall not have been fulfilled, this Underwriting
Agreement may be terminated by the
-23-
Issuer upon notice thereof to the Underwriters. Any such termination shall
be without liability of any party to any other party except as otherwise
provided in Sections 8(a)(vii) and 11 hereof.
11. Indemnification and Contribution.
(a) The Company and the Issuer, jointly and severally, shall
indemnify, defend and hold harmless each Underwriter, each Underwriter's
officers and directors and each person who controls any Underwriter within
the meaning of Section 15 of the Securities Act from and against any and
all losses, claims, damages or liabilities, joint or several, to which they
or any of them may become subject under the Securities Act or any other
statute or common law and shall reimburse each such Underwriter and
controlling person for any reasonable legal or other expenses (including,
to the extent hereinafter provided, reasonable counsel fees) as and when
incurred by them in connection with investigating any such losses, claims,
damages or liabilities or in connection with defending any actions, insofar
as such losses, claims, damages, liabilities, expenses or actions arise out
of or are based upon (i) any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement or any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading or (ii)
any untrue statement or alleged untrue statement of a material fact
contained in the Pricing Prospectus, the Final Prospectus and, together
with the Pricing Prospectus, the Issuer Free Writing Prospectuses,
collectively (but not with regard to the principal amount of the Bonds, the
tranches, the initial principal balances, the scheduled final payment
dates, the final maturity dates, the expected average lives, the Expected
Amortization Schedule and the Expected Sinking Fund Schedule described in
the Pricing Prospectus as subject to change based on market conditions, and
the interest rate, price to the public and underwriting discounts and
commissions for each tranche, which were not included in the Pricing
Prospectus), or any omission or alleged omission to state therein a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that the indemnity agreement contained in this Section 11 shall
not apply to any such losses, claims, damages, liabilities, expenses or
actions arising out of, or based upon, any such untrue statement or alleged
untrue statement, or any such omission or alleged omission, if such
statement or omission was made in reliance upon and in conformity with
information furnished in writing to the Issuer or Company by any
Underwriter, through the Representatives, expressly for use in connection
with the preparation of the Registration Statement, the Pricing Prospectus,
the Final Prospectus or any Issuer Free Writing Prospectus or any amendment
or supplement to either thereof, or arising out of, or based upon,
statements in or omissions from that part of the Registration Statement
that shall constitute the Statement of Eligibility under the Trust
Indenture Act of the Indenture Trustee with respect to any indenture
qualified pursuant to the Registration Statement; and provided further,
that the indemnity agreement contained in this Section 11 shall not inure
to the benefit of any Underwriter (or of any officer or director of such
Underwriter or of any person controlling such Underwriter within the
meaning of Section 15 of the Securities Act) on account of any such losses,
claims, damages, liabilities, expenses or actions, joint or several,
arising from the sale of the Bonds to any person if a copy of the Pricing
Prospectus (including any amendment or supplement thereto if any amendments
or supplements thereto shall have been furnished to the Underwriters at or
prior to the time of the sale
-24-
involved) (exclusive of the Incorporated Documents) shall not have been
given or sent to such person by or on behalf of such Underwriter with or
prior to the sale of the Bonds to such person unless the alleged omission
or alleged untrue statement was not corrected in the Pricing Prospectus
(including any amendment or supplement thereto if any amendments or
supplements thereto shall have been furnished to the Underwriters at or
prior to the time of the sale involved) at the time of such sale. The
indemnity agreement of the Company and Issuer contained in this Section 11
and the representations and warranties of the Issuer and Company contained
in Sections 3 and 4 hereof shall remain operative and in full force and
effect regardless of any termination of this Underwriting Agreement or of
any investigation made by or on behalf of any Underwriter, its officers or
its directors or any such controlling person, and shall survive the
delivery of the Bonds.
(b) Each Underwriter shall severally indemnify, defend and hold
harmless the Company and the Issuer, each of the Company's and Issuer's
officers, directors, and managers, and each person who controls the Issuer
or Company within the meaning of Section 15 of the Securities Act, from and
against any and all losses, claims, damages or liabilities, joint or
several, to which they or any of them may become subject under the
Securities Act or any other statute or common law and shall reimburse each
of them for any reasonable legal or other expenses (including, to the
extent hereinafter provided, reasonable counsel fees) as and when incurred
by them in connection with investigating any such losses, claims, damages
or liabilities or in connection with defending any actions, insofar as such
losses, claims, damages, liabilities, expenses or actions arise out of or
are based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading or (ii)
any untrue statement or alleged untrue statement of a material fact
contained in the the Final Prospectus and, together with the Pricing
Prospectus, the Issuer Free Writing Prospectuses, collectively (but not
with regard to the principal amount of the Bonds, the tranches, the initial
principal balances, the scheduled final payment dates, the final maturity
dates, the expected average lives, the Expected Amortization Schedule and
the Expected Sinking Fund Schedule described in the Pricing Prospectus as
subject to change based on market conditions, and the interest rate, price
to the public and underwriting discounts and commissions for each tranche,
which were not included in the Pricing Prospectus) or any omission or
alleged omission to state therein a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; if such statement or omission was made in reliance
upon and in conformity with information furnished in writing to the Company
or Issuer by such Underwriter, through the Representatives, expressly for
use in connection with the preparation of the Registration Statement, the
Pricing Prospectus, the Final Prospectus or any Issuer Free Writing
Prospectus or any amendment or supplement to any of them. The only
information furnished to the Company by the Underwriters in writing
expressly for use in such foregoing documents is set forth in Schedule V
hereto. The indemnity agreement of the respective Underwriters contained in
this Section 11 and the representations and warranties of the Underwriters
contained in Section 5 hereof shall remain operative and in full force and
effect regardless of any termination of this Underwriting Agreement or of
any investigation made by or on behalf of the Company or the Issuer, their
directors, managers or officers, any such Underwriter, or any such
controlling person, and shall survive the delivery of the Bonds.
(c) The Company and the several Underwriters each shall, upon the
receipt of notice of the commencement of any action against it or any
person controlling it as aforesaid, in respect of which indemnity may be
sought on account of any indemnity
-25-
agreement contained herein, promptly give written notice of the
commencement thereof to the party or parties against whom indemnity shall
be sought under (a) or (b) above, but the failure to notify such
indemnifying party or parties of any such action shall not relieve such
indemnifying party or parties from any liability hereunder to the extent
such indemnifying party or parties is/are not materially prejudiced as a
result of such failure to notify and in any event shall not relieve such
indemnifying party or parties from any liability which it or they may have
to the indemnified party otherwise than on account of such indemnity
agreement. In case such notice of any such action shall be so given, such
indemnifying party shall be entitled to participate at its own expense in
the defense, or, if it so elects, to assume (in conjunction with any other
indemnifying parties) the defense of such action, in which event such
defense shall be conducted by counsel chosen by such indemnifying party or
parties and reasonably satisfactory to the indemnified party or parties who
shall be defendant or defendants in such action, and such defendant or
defendants shall bear the fees and expenses of any additional counsel
retained by them; but if the indemnifying party shall elect not to assume
the defense of such action, such indemnifying party will reimburse such
indemnified party or parties for the reasonable fees and expenses of any
counsel retained by them; provided, however, if the defendants in any such
action (including impleaded parties) include both the indemnified party and
the indemnifying party and counsel for the indemnifying party shall have
reasonably concluded that there may be a conflict of interest involved in
the representation by a single counsel of both the indemnifying party and
the indemnified party, the indemnified party or parties shall have the
right to select separate counsel, satisfactory to the indemnifying party,
whose reasonable fees and expenses shall be paid by such indemnifying
party, to participate in the defense of such action on behalf of such
indemnified party or parties (it being understood, however, that the
indemnifying party shall not be liable for the fees and expenses of more
than one separate counsel (in addition to local counsel) representing the
indemnified parties who are parties to such action). Each of the Company,
Issuer and the several Underwriters agrees that without the other party's
prior written consent, which consent shall not be unreasonably withheld, it
will not settle, compromise or consent to the entry of any judgment in any
claim in respect of which indemnification may be sought under the
indemnification provisions of this Underwriting Agreement, unless such
settlement, compromise or consent (i) includes an unconditional release of
such other party from all liability arising out of such claim and (ii) does
not include a statement as to or an admission of fault, culpability or a
failure to act by or on behalf of such other party.
(d) If the indemnification provided for in subparagraph (a) or (b)
above shall be unenforceable under applicable law by an indemnified party,
each indemnifying party agrees to contribute to such indemnified party with
respect to any and all losses, claims, damages, liabilities and expenses
for which each such indemnification provided for in subparagraph (a) or (b)
above shall be unenforceable, in such proportion as shall be appropriate to
reflect (i) the relative benefits received by the Company and the Issuer on
the one hand and the Underwriters on the other hand from the offering of
the Bonds pursuant to this Underwriting Agreement or (ii) if an allocation
solely on the basis provided by clause (i) is not permitted by applicable
law or is inequitable or against public policy, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of each indemnifying party on the
-26-
one hand and the indemnified party on the other in connection with the
statements or omissions which have resulted in such losses, claims, damages,
liabilities and expenses and (iii) any other relevant equitable considerations;
provided, however, that no indemnified party guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any indemnifying party not guilty of such
fraudulent misrepresentation. Relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by such indemnifying party or the indemnified
party and each such party's relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
Company, the Issuer and each of the Underwriters agree that it would not be just
and equitable if contributions pursuant to this subparagraph (d) were to be
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to above.
Notwithstanding the provisions of this Section 11, no Underwriter shall be
required to contribute in excess of the amount equal to the excess of (i) the
total underwriting discount and commissions received by it, over (ii) the amount
of any damages which such Underwriter has otherwise been required to pay by
reason of any such untrue or alleged untrue statement or omission or alleged
omission. The obligations of each Underwriter to contribute pursuant to this
Section 11 are several and not joint and shall be in the same proportion as such
Underwriter's obligation to underwrite Bonds is to the total number of Bonds set
forth in Schedule II hereto.
12. Termination. This Underwriting Agreement may be terminated, at any time
prior to the Closing Date with respect to the Bonds by the Representatives by
written notice to the Issuer if after the date hereof and at or prior to the
Closing Date (a) there shall have occurred any general suspension of trading in
securities on the New York Stock Exchange ("NYSE"), the American Stock Exchange,
Inc. ("AMEX") or the NASDAQ Stock Market, Inc. ("NASDAQ") or there shall have
been established by the NYSE, AMEX or NASDAQ or by the Commission any general
limitation on prices for such trading or any general restrictions on the
distribution of securities, or a general banking moratorium declared by New York
or federal authorities or a material disruption in commercial banking or
securities settlement or clearance services in the United States, or (b) there
shall have occurred any (i) material outbreak of hostilities (including, without
limitation, an act of terrorism) or (ii) material other national or
international calamity or crisis, or any material adverse change in financial,
political or economic conditions affecting the United States, including, but not
limited to, an escalation of hostilities that existed prior to the date of this
Underwriting Agreement or (iii) material adverse change in the financial markets
in the United States, and the effect of any such event specified in clause (a)
or (b) above on the financial markets of the United States shall be such as to
make it impracticable or inadvisable, in the reasonable judgment of the
Representatives, to proceed with the public offering or the delivery of the
Bonds on the terms and in the manner contemplated by the Final Prospectus. Any
termination hereof pursuant to this Section 12 shall be without liability of any
party to any other party except as otherwise provided in Sections 8(a)(vii) and
11 hereof.
13. Absence of Fiduciary Relationship. Each of the Issuer and the Company
acknowledges and agrees that:
-27-
(a) the Underwriters have been retained solely to act as underwriters in
connection with the sale of the Bonds and that no fiduciary, advisory or agency
relationship between the Underwriters, on one hand, and the Company and/or the
Issuer, on the other hand, has been created in respect of any of the
transactions contemplated by this Underwriting Agreement, irrespective of
whether the Underwriters have advised or are advising the Company and/or the
Issuer on other matters;
(b) the price of the Bonds was established by the Issuer and the Company
following discussions and arms-length negotiations with the Underwriters, among
others;
(c) it has been advised that the Underwriters and their affiliates are
engaged in a broad range of transactions which may involve interests that differ
from those of the Issuer and Company and that the Underwriters have no
obligation to disclose such interests and transactions to the Issuer or the
Company by virtue of any fiduciary, advisory or agency relationship; and
(d) it waives, to the fullest extent permitted by law, any claims it may
have against the Underwriters for breach of fiduciary duty or alleged breach of
fiduciary duty and agrees that the Underwriters shall have no liability (whether
direct or indirect) to the Issuer or the Company in respect of such fiduciary
duty claim or to any person asserting a fiduciary duty claim on behalf of or in
right of the Issuer or the Company including stockholders, employees or
creditors of the Issuer and/or the Company.
14. Notices. All communications hereunder will be in writing and may be
given by United States mail, courier service, telecopy, telefax or facsimile
(confirmed by telephone or in writing in the case of notice by telecopy, telefax
or facsimile) or any other customary means of communication, and any such
communication shall be effective when delivered, or if mailed, three days after
deposit in the United States mail with proper postage for ordinary mail prepaid,
and if sent to the Representatives, to it at the address specified in Schedule I
hereto; and if sent to the Company, to it at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇; and if sent to the Issuer, to it at ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇. The
parties hereto, by notice to the others, may designate additional or different
addresses for subsequent communications.
15. Successors. This Underwriting Agreement will inure to the benefit of
and be binding upon the parties hereto and their respective successors and the
officers and directors and controlling persons referred to in Section 8 hereof,
and no other person will have any right or obligation hereunder.
16. Applicable Law. This Underwriting Agreement will be governed by and
construed in accordance with the laws of the State of New York.
17. Counterparts. This Underwriting Agreement may be signed in any number
of counterparts, each of which shall be deemed an original, which taken together
shall constitute one and the same instrument.
18. Integration. This Agreement supersedes all prior agreements and
understandings (whether written or oral) among the Issuer, the Company and the
Underwriters, or any of them, with respect to the subject matter hereof.
-28-
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us the enclosed duplicate hereof, whereupon this
letter and your acceptance shall represent a binding agreement among the
Company, the Issuer and the several Underwriters.
Very truly yours,
CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President and Treasurer
CENTERPOINT ENERGY TRANSITION BOND COMPANY II, LLC
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Sole Manager
The foregoing Underwriting Agreement is
hereby confirmed and accepted as of the
date specified in Schedule I hereto.
-29-
▇▇▇▇▇▇ BROTHERS INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Managing Director
CREDIT SUISSE FIRST BOSTON LLC
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Managing Director
GREENWICH CAPITAL MARKETS, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Managing Director
-30-
SCHEDULE I
Underwriting Agreement dated December 9, 2005
Registration Statement No. 333-121505
Representatives:
Credit Suisse First Boston LLC. Greenwich Capital Markets Inc.
▇▇▇▇▇▇ Brothers Inc.
c/▇
▇▇▇▇▇▇ Brothers Inc.
▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title, Purchase Price and Description of Bonds:
Title: CenterPoint Energy Transition Bond Company II, LLC Senior Secured
Transition Bonds, Series A
Total
Principal Underwriting
Amount of Price to Discounts and
Tranche Bond Rate Public Commissions Proceeds to Issuer
-------------- -------- -------- ------------- ------------------
Per Tranche A-1 Bond $250,000,000 4.840% 99.98928% 0.32500% $249,160,700
Per Tranche A-2 Bond $368,000,000 4.970% 99.96013% 0.35000% $366,565,278
Per Tranche A-3 Bond $252,000,000 5.090% 99.99640% 0.40000% $250,982,928
Per Tranche A-4 Bond $519,000,000 5.170% 99.97450% 0.42000% $516,687,855
Per Tranche A-5 Bond $462,000,000 5.302% 100.0000% 0.37546% $460,265,375
============= =========== ==============
Total $1,851,000,000 $ 7,022,925 $1,843,662,136
Original Issue Discount (if any): $314,939
Redemption provisions: None
Other provisions: None
Closing Date, Time and Location: December 16, 2005, 10:00 a.m.; offices of
▇▇▇▇▇ ▇▇▇▇▇ L.L.P.; Houston, Texas
I-1
SCHEDULE II
Principal Amount of Bonds to be Purchased
Principal Amount
Underwriter Tranche ▇-▇ ▇▇▇▇▇▇▇ ▇-▇ ▇▇▇▇▇▇▇ ▇-▇ Tranche ▇-▇ ▇▇▇▇▇▇▇ ▇-▇ Total
----------- ------------ ------------ ------------ ------------ ------------ --------------
▇▇▇▇▇▇ Brothers Inc. $ 65,334,000 $ 95,333,000 $ 74,000,000 $147,333,000 $146,667,000 $ 528,667,000
Credit Suisse First Boston LLC $ 65,333,000 $ 95,334,000 $ 74,000,000 $147,333,000 $146,667,000 $ 528,667,000
Greenwich Capital Markets, Inc. $ 65,333,000 $ 95,333,000 $ 74,000,000 $147,334,000 $146,666,000 $ 528,666,000
Barclays Capital Inc. $ 6,000,000 $ 10,000,000 $ 6,000,000 $ 14,000,000 - $ 36,000,000
Deutsche Bank Securities Inc. $ 6,000,000 $ 10,000,000 $ 6,000,000 - - $ 22,000,000
▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. $ 6,000,000 $ 10,000,000 $ 6,000,000 $ 14,000,000 - $ 36,000,000
First Albany Capital Inc. $ 19,000,000 $ 10,500,000 $ 6,000,000 $ 34,000,000 $ 12,000,000 $ 81,500,000
Loop Capital Markets, LLC - $ 5,500,000 - $ 5,000,000 - $ 10,500,000
▇.▇. ▇▇▇▇ & Company - $ 12,000,000 - - - $ 12,000,000
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co., - - $ 10,000,000
L.L.C. $ 6,000,000 $ 4,000,000 -
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ & Co., Inc. $ 5,000,000 $ 10,000,000 - $ 10,000,000 $ 10,000,000 $ 35,000,000
SunTrust Capital Markets, Inc. $ 6,000,000 $ 10,000,000 $ 6,000,000 - - $ 22,000,000
Total $250,000,000 $368,000,000 $252,000,000 $519,000,000 $462,000,000 $1,851,000,000
============ ============ ============ ============ ============ ==============
SCHEDULE III
ALL INFORMATION IN THIS PRELIMINARY TERM SHEET IS PRELIMINARY AND SUBJECT TO
CHANGE. A REGISTRATION STATEMENT (REGISTRATION NO. 333-121505) RELATING TO THE
BONDS HAS BEEN FILED WITH THE COMMISSION AND DECLARED EFFECTIVE. THE ISSUER WILL
PREPARE, CIRCULATE AND FILE WITH THE COMMISSION A COMPLETE PROSPECTUS
SUPPLEMENT, WHICH WILL BE ACCOMPANIED BY A BASE PROSPECTUS. YOU SHOULD READ THE
COMPLETE PROSPECTUS SUPPLEMENT AND BASE PROSPECTUS BECAUSE THEY CONTAIN
IMPORTANT INFORMATION. YOU CAN OBTAIN THE REGISTRATION STATEMENT, AND, ONCE
FILED, THE PROSPECTUS SUPPLEMENT AND THE BASE PROSPECTUS FOR FREE AT THE
COMMISSION'S WEB SITE (▇▇▇.▇▇▇.▇▇▇). THIS PRELIMINARY TERM SHEET HAS BEEN
PREPARED SOLELY FOR INFORMATION PURPOSES AND IS NOT AN OFFER TO BUY OR SELL OR A
SOLICITATION OF AN OFFER TO BUY OR SELL ANY SECURITY OR INSTRUMENT IN ANY
JURISDICTION WHERE SUCH OFFER OR SALE IS PROHIBITED OR TO PARTICIPATE IN ANY
TRADING STRATEGY. NEITHER THE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS
APPROVED OR DISAPPROVED OF THE BONDS OR DETERMINED IF THIS PRELIMINARY TERM
SHEET IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE. The State of Texas, the PUCT, Saber Partners, LLC, Saber Capital
Partners LLC, Credit Suisse First Boston LLC, ▇▇▇▇▇▇ Brothers Inc., Greenwich
Capital Markets, Inc. and their affiliates make no representation or warranty
with respect to the appropriateness, usefulness, accuracy or completeness of the
information, or with respect to the terms of any future offer of securities
conforming to the terms hereof. A definitive base prospectus and prospectus
supplement prepared by the Issuer will contain material information not
contained herein, and the prospective purchasers are referred to those
materials. Such base prospectus and prospectus supplement will contain all
material information in respect of any securities offered thereby. The
information contained in this material may be based on assumptions regarding
market conditions and other matters as reflected therein and is therefore
subject to change. We make no representations regarding the reasonableness of
such assumptions or the likelihood that any of such assumptions will coincide
with actual market conditions or events, and this material should not be relied
on for such purposes. No representation is made that any returns indicated will
be achieved. Changes to the assumptions may have a material impact on any
returns detailed. Although the analyses herein may not show a negative return on
the securities referred to herein, such securities are not principal protected
and, in certain circumstances, investors in such securities may suffer a
complete or partial loss on their investment. The State of Texas, the PUCT,
Saber Partners, LLC, Saber Capital Partners LLC, Credit Suisse First Boston LLC,
▇▇▇▇▇▇ Brothers Inc., Greenwich Capital Markets, Inc. and their affiliates
disclaim any and all liability relating to this information, including without
limitation any express or implied representations or warranties for, statements
contained in, and omissions from, this information. Additional information is
available upon request. Past performance is not necessarily indicative of future
results. Price and availability are subject to change without notice.
Information contained in this material is current as of the date appearing on
this material only. Information in this material regarding any assets backing
any securities discussed herein supersedes all prior information regarding such
assets. Saber Partners, LLC is acting as financial advisor to the PUCT. Certain
financial advisory services, including any activities that may be considered
activities of a broker dealer, will be assigned to Saber Capital Partners, LLC,
as a wholly-owned subsidiary of Saber Partners, LLC. Neither the State of Texas,
the PUCT, Saber Partners, LLC, Saber Capital Partners LLC, Credit Suisse First
Boston LLC, ▇▇▇▇▇▇ Brothers Inc. or
III-1
Greenwich Capital Markets, Inc. is acting as an agent for the Issuer or its
affiliates in connection with the proposed transaction.
III-2