Exhibit 1.1
PSE&G TRANSITION FUNDING II LLC
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
UNDERWRITING AGREEMENT
New York, New York
September 9, 2005
To Credit Suisse First Boston LLC as
representative of the
Underwriters named in
Schedule II hereto
Ladies and Gentlemen:
1. Introduction. PSE&G Transition Funding II LLC, a Delaware limited
liability company (the "Issuer"), and Public Service Electric and Gas Company,
an operating electric and gas public utility incorporated under the laws of
the State of New Jersey (the "Company"), as sole member and owner of the
entire equity interest in the Issuer, propose, subject to the terms and
conditions stated herein, that the Issuer issue and sell to the underwriters
named in Schedule II hereto (collectively, the "Underwriters"), for whom
Credit Suisse First Boston LLC is acting as representative (the
"Representative"), the principal amount of the PSE&G Transition Funding II LLC
Transition Bonds, Series 2005-1 (the "Transition Bonds"), identified in
Schedule I hereto.
The issuance of the Transition Bonds is authorized by the Bondable
Stranded Costs Rate Order, Docket No. EF03070532 (the "Financing Order"),
issued by the BPU on July 12, 2005. The Transition Bonds will be issued
pursuant to an indenture dated on or about the Closing Date (as defined
herein), as supplemented by the 2005-1 Series Supplement thereto, between the
Issuer and The Bank of New York, as trustee (the "Trustee") (and as amended
and supplemented from time to time, the "Indenture"). The Transition Bonds
will be secured primarily by Bondable Transition Property created by the
Financing Order, which Bondable Transition Property will be sold to the Issuer
by the Company (such sold Bondable Transition Property referred to herein as
"Transferred Bondable Transition Property"). The Company's sale of Transferred
Bondable Transition Property to the Issuer will occur pursuant to a Sale
Agreement dated on or about the Closing Date, between the Company and the
Issuer (the "Sale Agreement") and a related ▇▇▇▇ of Sale dated on or about the
Closing Date (the "▇▇▇▇ of Sale"). The Transferred Bondable Transition
Property will be serviced pursuant to a Servicing Agreement dated on or about
the Closing Date, between the Company, as servicer, and the Issuer, as owner
of the Transferred Bondable Transition Property (as amended and supplemented
from time to time, the "Servicing Agreement"). Pursuant to the Indenture, the
Issuer has granted to the
Trustee, as trustee for the benefit of the Transition Bondholders, all of its
right, title and interest in and to the Transferred Bondable Transition
Property as security for the Transition Bonds.
Capitalized terms used and not otherwise defined herein shall have
the meanings given to them in the Indenture, including Appendix A thereto.
2. Representations and Warranties. The Company and the Issuer jointly
and severally represent and warrant to, and agree with, each Underwriter as
follows (it being understood that certain terms used in this Section 2 are
defined in paragraph (d) hereof):
(a) If the offering of the Transition Bonds is a Delayed
Offering (as specified in Schedule I hereto), paragraph (i) below is
applicable and, if the offering of the Transition Bonds is a
Non-Delayed Offering (as so specified), paragraph (ii) below is
applicable.
(i) The Issuer and the Transition Bonds meet the
requirements for the use of Form S-3 under the Securities
Act of 1933 (the "Securities Act"), and the Issuer has filed
with the Securities and Exchange Commission (the
"Commission") a registration statement on such Form
(Registration No. 333-127545), including a basic prospectus,
for registration under the Securities Act of the offering
and sale of the Transition Bonds. The Issuer may have filed
one or more amendments thereto, and may have used a
Preliminary Final Prospectus, each of which has previously
been furnished to you. Such registration statement, as so
amended, has become effective. The offering of the
Transition Bonds is a Delayed Offering and, although the
Basic Prospectus (as herein defined) may not include all the
information with respect to the Transition Bonds and the
offering thereof required by the Securities Act and the
rules thereunder to be included in the Final Prospectus, the
Basic Prospectus includes all such information required by
the Securities Act and the rules thereunder to be included
therein as of the Effective Date. The Issuer will next file
with the Commission pursuant to Rules 415 and 424(b)(2) or
(5) a final supplement to the form of prospectus included in
such registration statement relating to the Transition Bonds
and the offering thereof. As filed, such final prospectus
supplement shall include all required information with
respect to the Transition Bonds and the offering thereof
and, except to the extent the Representative shall agree in
writing to a modification, shall be in all substantive
respects in the form furnished to you prior to the Execution
Time or, to the extent not completed at the Execution Time,
shall contain only such specific additional information and
other changes (beyond that contained in the Basic Prospectus
and any Preliminary Final Prospectus) as the Issuer has
advised you, prior to the Execution Time, will be included
or made therein.
(ii) The Issuer and the Transition Bonds meet the
requirements for the use of Form S-3 under the Securities
Act and the Issuer has filed with the Commission a
registration statement on such Form (Registration No.
333-127545), including a basic prospectus, for registration
under the Securities Act of the offering and sale of the
Transition Bonds. The Issuer may have filed one or
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more amendments thereto, including a Preliminary Final
Prospectus, each of which has previously been furnished to
you. The Issuer will next file with the Commission either
(x) a final prospectus supplement relating to the Transition
Bonds in accordance with Rules 430A and 424(b)(1) or (4), or
(y) prior to the effectiveness of such registration
statement, an amendment to such registration statement,
including the form of final prospectus supplement. In the
case of clause (x), the Issuer has included in such
registration statement, as amended at the Effective Date,
all information (other than Rule 430A Information) required
by the Securities Act and the rules thereunder to be
included in the Final Prospectus with respect to the
Transition Bonds and the offering thereof. As filed, such
final prospectus supplement or such amendment and form of
final prospectus supplement shall contain all Rule 430A
Information, together with all other such required
information, with respect to the Transition Bonds and the
offering thereof and, except to the extent the
Representative shall agree in writing to a modification,
shall be in all substantive respects in the form furnished
to you prior to the Execution Time or, to the extent not
completed at the Execution Time, shall contain only such
specific additional information and other changes (beyond
that contained in the Basic Prospectus and any Preliminary
Final Prospectus) as the Issuer has advised you, prior to
the Execution Time, will be included or made therein.
(b) On the Effective Date, the Registration Statement did or
will, and when the Final Prospectus is first filed (if required) in
accordance with Rule 424(b) and on the Closing Date, the Final
Prospectus (and any amendment or supplement thereto) will, comply in
all material respects with the applicable requirements of the
Securities Act, the Securities Exchange Act of 1934 (the "Exchange
Act") and the Trust Indenture Act of 1939 (the "Trust Indenture Act")
and the respective rules thereunder; on the Effective Date, the
Registration Statement did not or will not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which
they were made not misleading; on the Effective Date and on the
Closing Date the Indenture did or will comply with the requirements
of the Trust Indenture Act and the rules thereunder; and, on the
Effective Date, the Final Prospectus, if not filed pursuant to Rule
424(b), did not or will not, and on the date of any filing pursuant
to Rule 424(b) and on the Closing Date, the Final Prospectus
(together with any amendment or supplement thereto) will not, include
any 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, however, that neither the Issuer nor the Company makes any
representations or warranties as to (i) that part of the Registration
Statement which shall constitute the Statement of Eligibility and
Qualification (Form T-1) of the Trustee under the Trust Indenture Act
or (ii) the information contained in or omitted from the Registration
Statement or the Final Prospectus (or any supplement thereto) in
reliance upon and in conformity with information furnished in writing
to the Issuer by or on behalf of any Underwriter through the
Representative specifically for inclusion in the Registration
Statement or the Final Prospectus (or any supplement thereto). No
stop order suspending the effectiveness of
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the Registration Statement has been issued and no proceedings for
that purpose have been instituted.
(c) The documents incorporated by reference in the
Registration Statement and the Final Prospectus, when they became
effective or were filed (or, if an amendment with respect to any such
document was filed or became effective, when such amendment was filed
or became effective) with the Commission, as the case may be,
conformed in all material respects to the requirements of the
Securities Act, the Exchange Act, the Trust Indenture Act and the
rules and regulations thereunder, and any further documents so filed
and incorporated by reference will, when they become effective or are
filed with the Commission, as the case may be, conform in all
material respects to the requirements of the Securities Act, the
Exchange Act, the Trust Indenture Act and the rules and regulations
thereunder; none of such documents, when it became effective or was
filed (or, if an amendment with respect to any such documents was
filed or became effective, when such amendment was filed or became
effective) contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(d) The terms which follow, when used in this Underwriting
Agreement, shall have the meanings indicated. The term "Effective
Date" shall mean each date that the Registration Statement and any
post-effective amendment or amendments thereto became or become
effective and each date after the date hereof on which a document
incorporated by reference in the Registration Statement is filed.
"Execution Time" shall mean the date and time that this Underwriting
Agreement is executed and delivered by the parties hereto. "Basic
Prospectus" shall mean the prospectus referred to in paragraph (a)
above contained in the Registration Statement at the Effective Date
including, in the case of a Non-Delayed Offering, any Preliminary
Final Prospectus. "Preliminary Final Prospectus" shall mean any
preliminary prospectus supplement, and any amendment or supplement
thereto, to the Basic Prospectus which describes the Transition Bonds
and the offering thereof and is used prior to filing of the Final
Prospectus. "Final Prospectus" shall mean the prospectus supplement,
and any amendment or supplement thereto, relating to the Transition
Bonds that is first filed pursuant to Rule 424(b) after the Execution
Time, together with the Basic Prospectus or, if, in the case of a
Non-Delayed Offering, no filing pursuant to Rule 424(b) is required,
shall mean the form of final prospectus relating to the Transition
Bonds, including the Basic Prospectus, included in the Registration
Statement at the Effective Date. "Registration Statement" shall mean
the registration statement referred to in paragraph (a) above,
including incorporated documents, exhibits and financial statements,
as amended at the Execution Time (or, if not effective at the
Execution Time, in the form in which it shall become effective) and,
in the event any post-effective amendment thereto becomes effective
prior to the Closing Date (as hereinafter defined), shall also mean
such registration statement as so amended. Such term shall include
any Rule 430A Information deemed to be included therein at the
Effective Date as provided by Rule 430A. "Rule 415," "Rule 424,"
"Rule 430A" and "Regulation S-K" refer to such rules or regulation
under the Securities Act. "Rule 430A Information" means information
with respect to the Transition Bonds and the offering thereof
permitted to be omitted from the Registration Statement when it
becomes
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effective pursuant to Rule 430A. Any reference herein to the
Registration Statement, the Basic Prospectus, any Preliminary Final
Prospectus or the Final Prospectus shall be deemed to refer to and
include the documents incorporated by reference therein pursuant to
Item 12 of Form S-3 which were filed under the Exchange Act on or
before the Effective Date of the Registration Statement or the issue
date of the Basic Prospectus, any Preliminary Final Prospectus or the
Final Prospectus, as the case may be; and any reference herein to the
terms "amend," "amendment" or "supplement" with respect to the
Registration Statement, the Basic Prospectus, any Preliminary Final
Prospectus or the Final Prospectus shall be deemed to refer to and
include the filing of any document under the Exchange Act after the
Effective Date of the Registration Statement or the issue date of the
Basic Prospectus, any Preliminary Final Prospectus or the Final
Prospectus, as the case may be, deemed to be incorporated therein by
reference. A "Non-Delayed Offering" shall mean an offering of
securities which is intended to commence promptly after the effective
date of a registration statement, with the result that, pursuant to
Rules 415 and 430A, all information (other than Rule 430A
Information) with respect to the securities so offered must be
included in such registration statement at the effective date
thereof. A "Delayed Offering" shall mean an offering of securities
pursuant to Rule 415 which does not commence promptly after the
effective date of a registration statement, with the result that only
information required pursuant to Rule 415 need be included in such
registration statement at the effective date thereof with respect to
the securities so offered. Whether the offering of the Transition
Bonds is a Non-Delayed Offering or a Delayed Offering shall be set
forth in Schedule I hereto.
(e) Deloitte & Touche LLP are independent public accountants
as required by the Securities Act and the rules and regulations of
the Commission thereunder.
(f) The financial statements included or incorporated by
reference in the Final Prospectus present fairly the financial
position and results of operations of the Company and the Issuer,
respectively, as of the respective dates and for the respective
periods specified and, except as otherwise stated in the Final
Prospectus, such financial statements have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis during the periods involved. Neither the Company nor
the Issuer has any material contingent obligation which is not
disclosed in the Final Prospectus.
(g) The Issuer has been duly organized and is validly
existing in good standing as a limited liability company under the
laws of the State of Delaware, has the power and authority to conduct
its business as presently conducted and as described in the Final
Prospectus and is duly qualified as a foreign limited liability
company to do business and in good standing in every jurisdiction in
which the nature of the business conducted or property owned by it
makes such qualification necessary and in which the failure to so
qualify would have a materially adverse effect on the Issuer; and the
Issuer has all requisite power and authority to issue the Transition
Bonds and purchase the Transferred Bondable Transition Property as
described in the Final Prospectus and to otherwise perform its
obligations under the Basic Documents.
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(h) The Company is a validly existing corporation under the
laws of the State of New Jersey; each of the Company's subsidiaries
is a validly existing corporation under the laws of its jurisdiction
of incorporation; the Company has all requisite power and authority
to own and occupy its properties and carry on its business as
presently conducted and as described in the Final Prospectus and is
duly qualified as a foreign corporation to do business and in good
standing in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary
and in which the failure to so qualify would have a materially
adverse effect on the Company.
(i) Each of the Basic Documents to which the Company or the
Issuer is a party has been duly authorized by the Company or the
Issuer, as applicable, and when executed and delivered by the Issuer
or the Company, as applicable, will constitute a valid and binding
obligation of the Company or the Issuer, as applicable, enforceable
in accordance with its terms (subject, as to enforcement of remedies,
to applicable bankruptcy, reorganization, insolvency, moratorium or
other laws or equitable principles affecting creditors' rights
generally from time to time in effect).
(j) The Transition Bonds have been duly authorized by the
Issuer and will conform to the description thereof in the Final
Prospectus; and when the Transition Bonds are executed by the Issuer,
authenticated by the Trustee and delivered to the Underwriters and
are paid for by the Underwriters in accordance with the terms of this
Underwriting Agreement, the Transition Bonds will constitute the
legal, valid and binding obligations of the Issuer, enforceable in
accordance with their terms (subject, as to enforcement of remedies,
to applicable bankruptcy, reorganization, insolvency, moratorium or
other laws affecting creditors' rights generally from time to time in
effect and to general principals of equity, whether considered in a
proceeding at law or in equity).
(k) The issuance and sale of the Transition Bonds by the
Issuer, the sale of the Transferred Bondable Transition Property by
the Company to the Issuer, the execution, delivery and compliance by
the Company and the Issuer with all of the provisions of this
Underwriting Agreement and each of the other Basic Documents to which
the Company or the Issuer, as applicable, is a party, and the
consummation of the transactions herein and therein contemplated will
not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any trust
agreement, indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which the Issuer or the Company is a
party or by which the Issuer or the Company is bound or to which any
of the property or assets of the Issuer or the Company is subject,
which conflict, breach, violation or default would be material to the
issuance and sale of the Transition Bonds or would have a material
adverse effect on the general affairs, management, prospects,
financial position or results of operations of the Issuer or the
Company or on the stockholders' equity of the Company, nor will such
action result in any violation of the provisions of the Articles of
Incorporation or Bylaws of the Company or the Issuer Certificate of
Formation or Issuer LLC Agreement or any statute, order, rule or
regulation of any court or governmental agency or body having
jurisdiction over the Issuer or the Company or any of their
respective properties.
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(l) Except for permits and similar authorizations required
under the Commission's order declaring the registration statement on
Form S-3 (Registration No. 333-127545) effective, or the applicable
securities or blue sky laws of any jurisdiction, no consent,
approval, authorization or other order of any governmental authority
is legally required for the execution, delivery and performance of
this Underwriting Agreement by the Issuer and the Company and the
consummation of the transactions contemplated hereby.
(m) This Underwriting Agreement has been duly authorized,
executed and delivered by the Issuer and the Company and constitutes
a valid and binding obligation of the Company and the Issuer,
enforceable in accordance with its terms (subject, as to enforcement
of remedies, to applicable bankruptcy, reorganization, insolvency,
moratorium or other laws affecting creditors' rights generally from
time to time in effect and to general principles of equity, whether
considered in a proceeding at law or in equity and subject to the
possible unenforceability of the indemnity provisions contained
herein).
(n) There is no pending or threatened suit or proceeding
before any court or governmental agency, authority or body or any
arbitration involving the Company or any of its subsidiaries or the
Issuer required to be disclosed in the Final Prospectus which is not
adequately disclosed in the Final Prospectus.
(o) The Indenture has been duly and validly authorized by
all necessary action by the Issuer and duly qualified under the Trust
Indenture Act; and, as of the Closing Date, the Indenture will have
been duly and validly executed and delivered by the Issuer and will
be a valid and enforceable instrument of the Issuer in accordance
with its terms (subject, as to enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency, moratorium or other laws
affecting creditors' rights generally from time to time in effect and
to general principles of equity, whether considered in a proceeding
at law or in equity).
(p) The Transition Bonds, when duly executed, authenticated
and delivered against payment of the agreed consideration therefor,
will be entitled to the benefits provided by the Indenture, and the
holders of the Transition Bonds will be entitled to the payment of
principal and interest as therein provided; the Transition Bonds and
the Indenture conform to the descriptions thereof contained in the
Final Prospectus.
Any certificate signed by any officer of the Company or the Issuer
and delivered to you or to counsel for the Underwriters shall be deemed a
representation and warranty by the Company and the Issuer, as the case may be,
to each Underwriter as to the matters covered thereby.
3. Purchase and Sale. Subject to the terms and conditions and in
reliance upon the representations and warranties herein set forth, the Issuer
agrees to sell to each Underwriter, and each Underwriter agrees, severally and
not jointly, to purchase from the Issuer, at the purchase price set forth in
Schedule I hereto the principal amount of each class of Transition Bonds set
forth opposite the name of such Underwriter on Schedule II hereto.
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4. Delivery and Payment. Delivery of and payment for the Transition
Bonds shall be made on the date and at the time specified in Schedule I hereto
(or such later date not later than ten business days after such specified date
as the Representative shall designate), which date and time may be postponed
by agreement between the Representative and the Issuer or as provided in
Section 9 hereof (such date and time of delivery and payment for the
Transition Bonds being herein called the "Closing Date"). Delivery of the
Transition Bonds shall be made to the Representative for the respective
accounts of the several Underwriters against payment by the several
Underwriters through the Representative of the purchase price thereof to the
Issuer by wire transfer of immediately available funds in U.S. dollars. The
Transition Bonds to be so delivered shall be initially represented by
Transition Bonds registered in the name of Cede & Co., as nominee of The
Depository Trust Company ("DTC"). The interests of beneficial owners of the
Transition Bonds will be represented by book entries on the records of DTC and
participating members thereof. Definitive Transition Bonds will be available
only under limited circumstances described in the Indenture.
The Issuer shall have the Transition Bonds available for inspection,
checking and packaging by the Representative in New York, New York, not later
than 1:00 PM Eastern Time on the business day prior to the Closing Date.
5. Covenants.
(a) Covenants of the Issuer. The Issuer covenants and agrees
with the several Underwriters that:
(i) Prior to the termination of the offering of the
Transition Bonds, the Issuer will not file any amendment of
the Registration Statement or supplement (including the
Final Prospectus or any Preliminary Final Prospectus) to the
Basic Prospectus unless the Issuer has furnished you a copy
for your review prior to filing and will not file any such
proposed amendment or supplement to which you reasonably
object. Subject to the foregoing sentence, the Issuer will
cause the Final Prospectus, properly completed, and any
amendment or supplement thereto to be filed with the
Commission pursuant to the applicable paragraph of Rule
424(b) within the time period prescribed and will provide
evidence satisfactory to the Representative of such timely
filing. The Issuer will promptly advise the Representative
(A) when the Final Prospectus, and any amendment or
supplement thereto, shall have been filed with the
Commission pursuant to Rule 424(b), (B) when, prior to
termination of the offering of the Transition Bonds, any
amendment to the Registration Statement shall have been
filed or become effective, (C) of any request by the
Commission for any amendment of the Registration Statement
or amendment or supplement to the Final Prospectus or for
any additional information, (D) of the issuance by the
Commission of any stop order suspending the effectiveness of
the Registration Statement or the institution or threatening
of any proceeding for that purpose, (E) of the receipt by
the Issuer of any notification with respect to the
suspension of the qualification of the Transition Bonds for
sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose, and (F) of the happening of
any event during the period mentioned in subparagraph (ii)
below. The Issuer will use its best efforts
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to prevent the issuance of any such stop order and, if
issued, to obtain as soon as possible the withdrawal
thereof.
(ii) If, at any time when a prospectus relating to
the Transition Bonds is required to be delivered under the
Securities Act, any event occurs as a result of which the
Final Prospectus as then amended or supplemented would
include any untrue statement of a material fact or omit to
state any material fact necessary to make the statements
therein in the light of the circumstances under which they
were made not misleading, or if it shall be necessary to
amend the Registration Statement or supplement the Final
Prospectus to comply with the Securities Act or the Exchange
Act or the respective rules thereunder, the Issuer promptly
will (x) promptly notify the Representative of such event,
(y) prepare and file with the Commission an amendment or
supplement which will correct such statement or omission or
effect such compliance, provided that prior to filing any
amendment or supplement the Issuer will provide the
Representative with a copy for its review and will not file
any such proposed amendment or supplement to which the
Representative reasonably objects, and (z) supply any
supplemented Final Prospectus to the Underwriters in such
quantities as they may reasonably request.
(iii) The Issuer will file or to cause to be filed
with the Commission a current report on Form 8-K setting
forth all Computational Materials, ABS Term Sheets and
Collateral Term Sheets (collectively, "Investor Materials")
provided to the Issuer by any Underwriter within the
applicable time periods allotted for such filing pursuant to
the No-Action Letter of May 20, 1994, issued by the
Commission to ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ Acceptance Corporation I,
▇▇▇▇▇▇, Peabody & 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
(collectively, the "▇▇▇▇▇▇/PSA Letter"), and the
requirements of the No-Action Letter of February 17, 1995,
issued by the Commission to the Public Securities
Association (the "PSA Letter" and, together with the
▇▇▇▇▇▇/PSA Letter, the "No-Action Letters"). For purposes
hereof, "Computational Materials" shall have the meaning
given such term in the No-Action Letters, but shall include
only those Computational Materials that have been prepared
or delivered to prospective investors by any Underwriter.
For purposes hereof, "ABS Term Sheets" and "Collateral Term
Sheets" shall have the meanings given such terms in the PSA
Letter but shall include only those ABS Term Sheets or
Collateral Term Sheets that have been prepared or delivered
to prospective investors by any Underwriter.
(iv) The Issuer will furnish to the Representative
and counsel for the Underwriters, without charge, copies of
the Registration Statement (including exhibits thereto) and,
so long as delivery of a prospectus by an Underwriter or
dealer may be required by the Securities Act, as many copies
of any Preliminary Final Prospectus and the Final Prospectus
and any amendment or supplement thereto as the
Representative may reasonably request. The Issuer shall
furnish or cause to be furnished to the Representative
copies of all reports required by Rule
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463 under the Securities Act. The Issuer will pay the
expenses of printing, distribution or other production of
all documents relating to the offering.
(v) The Issuer will arrange for the qualification
of the Transition Bonds for sale under the laws of such
jurisdictions as the Representative may designate, will
maintain such qualifications in effect so long as required
for the distribution of the Transition Bonds and will
arrange for the determination of the legality of the
Transition Bonds for purchase by institutional investors;
provided, however, that in no event shall the Issuer be
obligated to qualify to do business in any jurisdiction where
it is not now so qualified or to take any action that would
subject it to service of process in suits, other than those
arising out of the offering or sale of the Transition Bonds,
in any jurisdiction where it is not now so subject.
(vi) Until the business date set forth on Schedule
I hereto, the Issuer will not, without the written consent
of the Representative, offer, sell or contract to sell, or
otherwise dispose of, directly or indirectly, or announce
the offering of, any securities (other than the Transition
Bonds).
(vii) For a period from the date of this
Underwriting Agreement until the retirement of the
Transition Bonds, or until such time as the Underwriters
shall cease to maintain a secondary market in the Transition
Bonds, whichever occurs first, the Issuer will deliver to
the Representative the annual statements of compliance and
the annual independent auditor's servicing reports furnished
to the Issuer or the Trustee pursuant to the Servicing
Agreement or the Indenture, as applicable, as soon as such
statements and reports are furnished to the Issuer or the
Trustee.
(viii) To the extent, if any, that any rating
necessary to satisfy the condition set forth in Section 6(n)
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.
(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 5(a):
(i) The Registration Statement became effective
August 29, 2005. The Company will make every reasonable
effort to prevent the issuance by the Commission of any stop
order suspending the effectiveness of the Registration
Statement and, if issued, to promptly use its best efforts
to obtain its withdrawal thereof.
(ii) The Company will apply the proceeds of the
sale of the Bondable Transition Property to the Issuer for
the purposes described in the Final Prospectus and in
compliance with the Financing Order.
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(iii) Until the business date set forth on Schedule
I hereto, the Company will not, without the consent of the
Representative, offer, sell or contract to sell, or
otherwise dispose of, directly or indirectly, or announce
the offering of, any asset-backed securities similar to the
Transition Bonds (other than the Transition Bonds).
(iv) To the extent, if any, that any rating
necessary to satisfy the condition set forth in Section 6(m)
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 or cause to be furnished such documents and take
such other actions.
(v) The initial Transition Bond Charge will be
calculated in accordance with the Financing Order.
(vi) If, at any time when a prospectus relating to
the Transition Bonds is required to be delivered under the
Securities Act, any event occurs as a result of which the
Final Prospectus as then supplemented would include any
untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein in
the light of the circumstances under which they were made
not misleading, or if it shall be necessary to amend the
Registration Statement or supplement the Final Prospectus to
comply with the Securities Act or the Exchange Act or the
respective rules thereunder, such Company at the Issuer's
expense promptly will (i) prepare and file with the
Commission an amendment or supplement which will correct
such statement or omission or effect such compliance and
(ii) supply any supplemented Prospectus to you in such
quantities as you may reasonably request.
6. Conditions to the Obligations of the Underwriters. The obligations
of the Underwriters to purchase the Transition Bonds shall be subject to the
accuracy of the representations and warranties on the part of the Issuer and
the Company contained herein as of the Execution Time and the Closing Date, on
the part of the Company contained in Article III of the Sale Agreement and in
Section 5.01 of the Servicing Agreement as of the Closing Date, to the
accuracy of the statements in the Transition Bonds pursuant to the provisions
hereof, to the performance by the Issuer and the Company of their obligations
hereunder, and to the following additional conditions precedent:
(a) The Registration Statement became effective August 29,
2005. No stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose
shall have been instituted or threatened.
(b) The Representative shall have received opinions, each
dated as of the Closing Date, from ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.A.,
special regulatory counsel to the Company, each subject to customary
qualifications, exceptions and limitations, in form and substance
satisfactory to the Representative, to the effect set forth in
Exhibits A, B, C, D, E and F hereto.
11
(c) The Representative shall have received an opinion, dated
as of the Closing Date, from either ▇▇▇▇▇ ▇. ▇▇▇▇▇, General Corporate
Counsel or R. ▇▇▇▇▇ ▇▇▇▇▇▇▇, Senior Vice President and General
Counsel, subject to customary qualifications, exceptions and
limitations, in form and substance satisfactory to the
Representative, to the effect set forth in Exhibits G and H hereto.
(d) The Representative shall have received opinions, each
dated as of the Closing Date, from Sidley ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ LLP,
special counsel to the Issuer and the Company, each subject to
customary qualifications, exceptions and limitations, in form and
substance satisfactory to the Representative, to the effect set forth
in Exhibits I, J, and K hereto.
(e) The Representative shall have received from Sidley
▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇ LLP, counsel to the Underwriters, an opinion of
counsel, dated as of the Closing Date, in form satisfactory to the
Underwriters, and the Company and the Issuer shall have furnished to
such counsel with such documents as they reasonably request for the
purpose of enabling them to pass upon such matters.
(f) The Representative shall have received an opinion or
opinions of counsel to the Trustee, dated the Closing Date, in form
and substance reasonably satisfactory to the Representative, to the
effect that:
(i) the Trustee is validly existing as a banking
corporation in good standing under the laws of New York;
(ii) the Indenture has been duly authorized,
executed and delivered by the Trustee and constitutes the
legal, valid and binding agreement enforceable against the
Trustee in accordance with its terms (subject, as to
enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium or other laws or
equitable principles affecting creditors' rights generally
from time to time in effect); and
(iii) the Transition Bonds have duly authenticated
and delivered by the Trustee.
(g) The Representative shall have received opinions, each
dated as of the Closing Date, from ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & Finger, P.A.,
Delaware counsel to the Issuer, each subject to customary
qualifications, exceptions and limitations, in form and substance
satisfactory to the Representative, to the effect set forth in
Exhibits L and M hereto.
(h) The Representative shall have received a certificate of
the Issuer, signed by a duly authorized officer of the Issuer, to the
effect that the signer of such certificate has carefully examined the
Registration Statement, the Final Prospectus, any supplement to the
Final Prospectus and this Underwriting Agreement and that:
(i) the representations and warranties of the
Issuer in this Underwriting Agreement and in the Sale
Agreement and the Indenture are true
12
and correct in all material respects on and as of the
Closing Date with the same effect as if made on the Closing
Date, and the Issuer has complied with all the agreements
and satisfied all the conditions on its part to be performed
or satisfied at or prior to the Closing Date;
(ii) no stop order suspending the effectiveness of
the Registration Statement has been issued and no
proceedings for that purpose have been instituted or
threatened; and
(iii) since the dates as of which information is
given in the Final Prospectus (exclusive of any supplement
thereto), there has been no material adverse change in (A)
the financial condition, prospects, business or properties
of the Issuer, whether or not arising from transactions
contemplated by the Final Prospectus in the ordinary course
of business, or (B) the Transferred Bondable Transition
Property or any right related thereto under the Competition
Act or the Financing Order, except as set forth in or
contemplated in the Final Prospectus (exclusive of any
supplement thereto).
(i) The Representative shall have received a certificate of
the Company, signed by the Chief Executive Officer, the President or
a Vice-President and the principal financial or accounting officer of
the Company, dated the Closing Date, to the effect that the signers
of such certificate have carefully examined the Registration
Statement, the Final Prospectus, any supplement to the Final
Prospectus and this Underwriting Agreement and that:
(i) the representations and warranties of the
Company in this Underwriting Agreement, the Sale Agreement,
the Servicing Agreement and the Administration Agreement are
true and correct in all material respects on and as of the
Closing Date with the same effect as if made on the Closing
Date, and the Company has complied with all the agreements
and satisfied all the conditions on its part to be performed
or satisfied at or prior to the Closing Date;
(ii) no stop order suspending the effectiveness of
the Registration Statement has been issued and no
proceedings for that purpose have been instituted or, to the
Company's knowledge, threatened; and
(iii) since the dates as of which information is
given in the Final Prospectus (exclusive of any supplement
thereto), there has been no material adverse change in (A)
the condition (financial or other), prospects, earnings,
business or properties of the Company and its subsidiaries
taken as a whole, whether or not arising from transactions
contemplated by the Final Prospectus or in the ordinary
course of business, or (B) the Transferred Bondable
Transition Property.
(j) At the Closing Date, Deloitte & Touche LLP shall have
furnished to the Representative (A) a letter or letters (which may
refer to letters previously delivered to the Representative), dated
as of the Closing Date, in form and substance satisfactory to
13
the Representative, confirming that they are independent accountants
within the meaning of the Securities Act and the Exchange Act and the
respective applicable published rules and regulations thereunder and
stating in effect that they have performed certain specified
procedures as a result of which they determined that certain
information of an accounting, financial or statistical nature set
forth in the Registration Statement and the Final Prospectus, agrees
with the accounting records of the Company and its subsidiaries,
excluding any questions of legal interpretation, and (B) the opinion
or certificate, dated as of the Closing Date, in form and substance
satisfactory to the Representative, satisfying the requirements of
Section 2.10(6) of the Indenture.
References to the Final Prospectus in this paragraph (j)
include any supplement thereto at the date of the letter.
In addition, except as provided in Schedule I hereto, at the
Execution Time, Deloitte & Touche LLP shall have furnished to the
Representative a letter or letters, dated as of the Execution Time,
in form and substance satisfactory to the Representative, to the
effect set forth above.
(k) There shall not have occurred any change, or any
development involving a prospective change, in or any event
subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the Registration Statement and the
Final Prospectus (exclusive of any supplement thereto relating to
such change, development or event) affecting either (i) the business,
prospects, properties or financial condition of the Company or the
Issuer, or (ii) the Transferred Bondable Transition Property, the
Transition Bonds, the Restructuring Order, the Financing Order or the
Competition Act, the effect of which is, in the case of either (i) or
(ii) above, in the judgment of the Representative, so material and
adverse as to make it impractical or inadvisable to proceed with the
offering or delivery of the Transition Bonds as contemplated by the
Registration Statement (exclusive of any amendment thereof relating
to such change, development or event) and the Final Prospectus
(exclusive of any supplement thereto relating to such change,
development or event).
(l) On or prior to the Closing Date, the Issuer shall have
delivered to the Representative evidence, in form and substance
reasonably satisfactory to the Representative, of compliance with
Section 2.10 of the Indenture, together with such reliance letters as
the Representative shall request.
(m) The Transition Bonds shall have been rated in the
highest long-term rating category by each of the Rating Agencies, and
on or after the date hereof (i) no downgrade shall have occurred in
the rating accorded to the debt securities of the Company by any
Rating Agency, and (ii) no such organization shall have publicly
announced that it has under surveillance or review, with possible
negative implications, its rating of any of the Company's debt
securities.
(n) On or prior to the Closing Date, the Issuer shall have
delivered to the Representative evidence, in form and substance
reasonably satisfactory to the Representative, that appropriate
filings have been, are being or will be made, as
14
applicable, pursuant to Section 3.08 of the Sale Agreement and in
accordance with the Competition Act and other applicable law
reflecting the Issuer's first priority perfected ownership interest
in the Transferred Bondable Transition Property.
(o) The Representative shall have received an opinion, or
reliance letter thereon, from Sidley ▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇ LLP, special
federal income tax counsel to the Issuer, substantially in the form
of Exhibit 8.1 to the Registration Statement.
(p) The Representative shall have received an opinion, or
reliance letter thereon, from ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.A.,
special New Jersey tax counsel to Company and the Issuer,
substantially in the form of Exhibit 8.2 to the Registration
Statement.
(q) Prior to the Closing Date, the Company and the Issuer
shall have furnished to the Representative such further information,
certificates, opinions and documents as the Representative may
reasonably request, as contemplated by the Final Prospectus.
If any of the conditions specified in this Section 6 shall not have
been fulfilled in all material respects when and as provided in this
Underwriting Agreement, or if any of the opinions and certificates mentioned
above or elsewhere in this Underwriting Agreement shall not be in all material
respects reasonably satisfactory in form and substance to the Representative
and counsel for the Underwriters, this Underwriting Agreement and all
obligations of the Underwriters hereunder may be canceled at, or at any time
prior to, the Closing Date by the Representative. Notice of such cancellation
shall be given to the Issuer in writing or by telephone or facsimile confirmed
in writing.
The documents required to be delivered by this Section 6 shall be
delivered at the offices of Sidley ▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇ LLP in the City of New
York on the Closing Date.
7. Expenses.
(a) Upon the Sale of the Transition Bonds, the Company and
the Issuer will pay, or cause to be paid, all reasonable costs and
expenses incident to the performance of the obligations of the
Company, the Issuer, the Trustee and the Underwriters hereunder,
including, without limiting the generality of the foregoing, (A) all
costs, taxes and expenses incident to the issue and delivery of the
Transition Bonds to the Underwriters, (B) all costs and expenses
incident to the preparation, printing, reproduction, filing and
distribution of the Registration Statement as originally filed with
the Commission and each amendment thereto, any Preliminary Final
Prospectus, the Basic Prospectus and the Final Prospectus (including
any amendments and supplements thereto), (C) all fees, disbursements
and expenses of the Company's, the Issuer's, the Trustee's and the
Underwriters' counsel and the Company's and the Issuer's accountants,
(D) all fees charged by the Rating Agencies in connection with the
rating of the Transition Bonds, (E) all fees of DTC in connection
with the book-entry registration of the Transition Bonds, (F) all
costs and expenses incurred in connection with the qualification of
the Transition Bonds for sale under the laws of such jurisdictions in
the United States as the Representative may designate, together with
costs and expenses in connection with any
15
filing with the National Association of Securities Dealers with
respect to the transactions contemplated hereby, and (G) and all
costs and expenses of printing and distributing all of the documents
in connection with the Transition Bonds.
(b) If the sale of the Transition Bonds provided for herein
is not consummated because any condition set forth in Section 6
hereof is not satisfied, because of any termination pursuant to
Section 10 hereof or because of any refusal, inability or failure on
the part of the Company or the Issuer to perform any agreement herein
or comply with any provision hereof other than by reason of a default
(including under Section 9) by any of the Underwriters, the Company
and the Issuer, jointly and severally, will reimburse the
Underwriters upon demand for all reasonable out-of-pocket expenses
(including reasonable fees and disbursements of counsel) that shall
have been incurred by them in connection with the proposed purchase
and sale of the Transition Bonds.
8. Indemnification and Contribution.
(a) The Company and the Issuer, jointly and severally, will
indemnify and hold harmless each Underwriter, the directors,
officers, members, employees and agents of each Underwriter, and each
person who controls any Underwriter within the meaning of either the
Securities Act or the Exchange Act against any and all losses,
claims, damages or liabilities, joint or several, to which they or
any of them may become subject under the Competition Act, the
Securities Act, the Exchange Act or other federal or state statutory
law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect
thereof) arise out of, directly or indirectly, or are based upon any
untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement as originally filed or in any
amendment thereof, 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, any untrue statement or
alleged untrue statement of material fact contained in the Basic
Prospectus, any Preliminary Final Prospectus or the Final Prospectus,
or any Investor Materials, or in any amendment thereof or supplement
thereto, or arise out of, directly or indirectly, or are based upon
the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were
made, not misleading, and will reimburse each such indemnified party,
as incurred, for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss,
claim, damage, liability or action. This indemnity agreement will be
in addition to any liability which the Company and the Issuer may
otherwise have.
(b) Each Underwriter severally agrees to indemnify and hold
harmless the Company and the Issuer, each of their directors, each of
their officers who signs the Registration Statement, and each person
who controls the Company or the Issuer within the meaning of either
the Securities Act or the Exchange Act, to the same extent as the
foregoing indemnity from the Company and the Issuer to each
Underwriter, but only with reference to written information relating
to such Underwriter furnished to the Issuer or the Company by or on
behalf of such Underwriter through the Representative specifically
for inclusion in the documents referred to in the foregoing
indemnity. This indemnity
16
agreement will be in addition to any liability which any Underwriter
may otherwise have. The Issuer and the Company acknowledge that the
statements set forth under the heading "Underwriting the Series
2005-1 Transition Bonds" or "Plan of Distribution for the Transition
Bonds" in any Preliminary Final Prospectus or the Final Prospectus
constitute the only information furnished in writing by or on behalf
of the several Underwriters for inclusion in the documents referred
to in the foregoing indemnity, and you, as the Representative,
confirm that such statements are correct in all material respects.
(c) Promptly after receipt by an indemnified party under
this Section 8 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made
against the indemnifying party under this Section 8, notify the
indemnifying party in writing of the commencement thereof; but the
failure so to notify the indemnifying party (i) will not relieve it
from liability under paragraph (a) or (b) above unless and to the
extent it did not otherwise learn of such action and such failure
results in the forfeiture by the indemnifying party of substantial
rights and defenses and (ii) will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party
other than the indemnification obligation provided in paragraph (a)
or (b) above. The indemnifying party shall be entitled to appoint
counsel of the indemnifying party's choice at the indemnifying
party's expense to represent the indemnified party in any action for
which indemnification is sought (in which case the indemnifying party
shall not thereafter be responsible for the fees and expenses of any
separate counsel retained by the indemnified party or parties except
as set forth below); provided, however, that such counsel shall be
reasonably satisfactory to the indemnified party. Notwithstanding the
indemnifying party's election to appoint counsel to represent the
indemnified party in an action, the indemnified party shall have the
right to employ separate counsel (including local counsel), and the
indemnifying party shall bear the reasonable fees, costs and expenses
of such separate counsel if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present
such counsel with a conflict of interest, (ii) the actual or
potential defendants in, or targets of, any such action include both
the indemnified party and the indemnifying party and the indemnified
party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying
party, (iii) the indemnifying party shall not have employed counsel
reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of the
institution of such action, or (iv) the indemnifying party shall
authorize the indemnified party to employ separate counsel at the
expense of the indemnifying party. It is understood that the
indemnifying party shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the
reasonable fees and expenses of more than one separate firm (in
addition to local counsel) for all such indemnified parties. An
indemnifying party will not, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of
any judgment with respect to any pending or threatened claim, action,
suit or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified
parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding and (ii) does
not include a statement as to or an
17
admission of fault, culpability or failure to act, by or on behalf of
any indemnified party. The indemnifying party shall not be liable for
any settlement of any proceeding effected without its written
consent, which consent shall not be unreasonably withheld.
(d) In the event that the indemnity provided in paragraph
(a) or (b) of this Section 8 is unavailable to or insufficient to
hold harmless an indemnified party for any reason, the Company, the
Issuer and the Underwriters agree to contribute to the aggregate
losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating or
defending same) (collectively "Losses") to which the Issuer and one
or more of the Underwriters may be subject in such proportion as is
appropriate to reflect the relative benefits received by the Issuer
and by the Underwriters from the offering of the Transition Bonds;
provided, however, that in no case shall any Underwriter (except as
may be provided in any agreement among underwriters relating to the
offering of the Transition Bonds) be responsible for any amount in
excess of the underwriting discount or commission applicable to the
Transition Bonds purchased by such Underwriter hereunder. If the
allocation provided by the immediately preceding sentence is
unavailable for any reason, the Company, the Issuer and the
Underwriters shall contribute in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault
of the Company, the Issuer and the Underwriters respectively in
connection with the statements or omissions that resulted in such
Losses as well as any other relevant equitable considerations.
Relative fault shall be determined by reference to whether any
alleged untrue statement or omission relates to information provided
by the Company, the Issuer or the Underwriters, as the case may be.
The Company, the Issuer and the Underwriters agree that it would not
be just and equitable if contribution were determined by pro rata
allocation or any other method of allocation that does not take
account of the equitable considerations referred to above.
Notwithstanding the provisions of this paragraph (d), no person
guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 8, each person who controls an
Underwriter within the meaning of either the Securities Act or the
Exchange Act and each director, officer, employee and agent of an
Underwriter shall have the same rights to contribution as such
Underwriter, and each person who controls the Issuer or the Company
within the meaning of either the Securities Act or the Exchange Act,
each officer of the Issuer or the Company who shall have signed the
Registration Statement and each director of the Issuer or the Company
shall have the same rights to contribution as the Issuer or the
Company, subject in each case to the applicable terms and conditions
of this paragraph (d). The Underwriters' obligations in this Section
8 to contribute are several in proportion to the respective principal
amounts of Transition Bonds set forth opposite their names in
Schedule II hereto and not joint. In no case shall any Underwriter
(except as may be provided in any agreement among underwriters
relating to the offering of the Transition Bonds) be responsible for
any amount in excess of the underwriting discount or commission
applicable to the Transition Bonds purchased by such Underwriter
hereunder.
9. Default by an Underwriter. If any one or more Underwriters shall
fail to purchase and pay for any of the Transition Bonds agreed to be
purchased by such Underwriter or
18
Underwriters, the Representative may in its discretion arrange for the
Underwriters or another party or other parties to purchase such Transition
Bonds on the terms contained herein. If within 36 hours after such default by
any Underwriter, the Representative did not arrange for the purchase of such
Transition Bonds, the nondefaulting Underwriters shall be obligated severally
to take up and pay for (in the respective proportions which the amount of
Transition Bonds set forth opposite their names in Schedule II hereto bears to
the aggregate amount of Transition Bonds set forth opposite the names of all
the remaining Underwriters) the Transition Bonds which the defaulting
Underwriter or Underwriters agreed but failed to purchase; provided, however,
that in the event that the aggregate amount of Transition Bonds which the
defaulting Underwriter or Underwriters agreed but failed to purchase shall
exceed 10% of the aggregate amount of Transition Bonds set forth in Schedule
II hereto, the nondefaulting Underwriters shall have the right to purchase
all, but shall not be under any obligation to purchase any, of the Transition
Bonds, and if such nondefaulting Underwriters do not purchase all the
Transition Bonds, this Underwriting Agreement will terminate without liability
to any nondefaulting Underwriter, the Issuer or the Company. In the event of a
default by any Underwriter as set forth in this Section 9, the Closing Date
shall be postponed for such period, not exceeding seven days, as the
Representative shall determine in order that the required changes in the
Registration Statement and the Final Prospectus or in any other documents or
arrangements may be effected. Nothing contained in this Underwriting Agreement
shall relieve any defaulting Underwriter of its liability, if any, to the
Issuer and the Company and any nondefaulting Underwriter for damages
occasioned by its default hereunder.
10. Absence of Fiduciary Relationship. The Company acknowledges and
agrees that:
(a) The Representative has been retained solely to act as
underwriter in connection with the sale of the Transition Bonds and
that no fiduciary, advisory or agency relationship between the
Company has been created in respect of any of the transactions
contemplated by this Underwriting Agreement, irrespective of whether
the Representative has advised or is advising the Company on other
matters;
(b) the price of the Transition Bonds was established by the
Company following discussions and arms-length negotiations with the
Representative and the Company is capable of evaluating and
understanding and understands and accepts the terms, risks and
conditions of the transaction contemplated by this Underwriting
Agreement;
(c) has been advised that the Representative and its
affiliates are engaged in a broad range of transactions which may
involve interests that differ from those of the Company and that the
Representative has no obligation to disclose such interests and
transactions to 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 Representative for breach of fiduciary
duty or alleged breach of fiduciary duty and agrees that the
Representative shall have no liability (whether direct or indirect)
to the Company in respect of such fiduciary duty claim or to any
person asserting a
19
fiduciary duty claim on behalf of or in right of the Company
including stockholders, employees or creditors of the Company.
11. Termination. This Underwriting Agreement shall be subject to
termination in the absolute discretion of the Representative, by notice given
to the Company and the Issuer prior to delivery of and payment for the
Transition Bonds, if prior to such time (i) there shall have occurred any
change, or any development involving a prospective change, in or affecting
either (A) the business, prospects, properties or financial condition of the
Issuer or the Company or (B) the Transferred Bondable Transition Property, the
Transition Bonds, the Financing Order or the Competition Act, the effect of
which, in the judgment of the Representative, materially impairs the
investment quality of the Transition Bonds or makes it impractical or
inadvisable to market the Transition Bonds, (ii) trading in the Company's
Common Stock shall have been suspended by the Commission or the New York Stock
Exchange or trading in securities generally on the New York Stock Exchange
shall have been suspended or limited or minimum prices shall have been
established on such Exchange, (iii) a banking moratorium shall have been
declared either by federal, State of New York or State of New Jersey
authorities or (iv) there shall have occurred any outbreak or escalation of
hostilities, declaration by the United States of a national emergency or war
or other calamity or crisis the effect of which on financial markets is such
as to make it, in the judgment of the Representative, impracticable or
inadvisable to proceed with the offering or delivery of the Transition Bonds
as contemplated by the Final Prospectus (exclusive of any supplement thereto).
12. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of
the Company or its officers, the Issuer or its officers and of the
Underwriters set forth in or made pursuant to this Underwriting Agreement
shall remain in full force and effect, regardless of any investigation made by
or on behalf of any Underwriter or of the Company, the Issuer or any of the
officers, directors or controlling persons referred to in Section 8 hereof,
and will survive delivery of and payment for the Transition Bonds. The
provisions of Sections 7 and 8 hereof shall survive the termination or
cancellation of this Underwriting Agreement and the complete or partial
judicial invalidation of the Competition Act.
13. Notices. Unless otherwise specifically provided herein, all
notices, directions, consents and waivers required under the terms and
provisions of this Underwriting Agreement shall be in English and in writing,
and any such notice, direction, consent or waiver may be given by United
States first class mail, reputable overnight courier service, facsimile
transmission or electronic mail (confirmed by telephone, United States first
class mail or reputable overnight courier service in the case of notice by
facsimile transmission or electronic mail) or any other customary means of
communication, and any such notice, direction, consent or waiver shall be
effective when delivered or transmitted, or if mailed, three days after
deposit in the United States mail with proper first class postage prepaid: (a)
in the case of the Representative, to it at the address specified in Schedule
I hereto, (b) in the case of the Company, to it at Public Service Electric and
Gas Company, ▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, Attention: General
Corporate Counsel, and (b) in the case of the Issuer, to it at PSE&G
Transition Funding II LLC, ▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇-▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: Managers; or, as to each of the foregoing, at such other address as
shall be designated by written notice to the other parties.
20
14. 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.
15. Applicable Law. This Underwriting Agreement will be governed by
and construed in accordance with the laws of the State of New York.
16. 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.
21
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,
PUBLIC SERVICE ELECTRIC AND GAS COMPANY,
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: VICE PRESIDENT and TREASURER
PSE&G TRANSITION FUNDING II LLC,
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: VICE PRESIDENT and TREASURER and
CHIEF FINANCIAL OFFICER
The foregoing Underwriting
Agreement is hereby confirmed and
accepted as of the date specified
in Schedule I hereto.
CREDIT SUISSE FIRST BOSTON LLC
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
-------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title:
For itself and the other several
Underwriters, if any, named in
Schedule II to the foregoing
Underwriting Agreement.
SCHEDULE I
Underwriting Agreement dated September 9, 2005
Registration Statement No. 333-127545
Representative:
Credit Suisse First Boston LLC
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Title, Purchase Price and Description of Transition Bonds:
Title: PSE&G Transition Funding II LLC
Transition Bonds, Series ▇▇▇▇-▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Price to Public,
Underwriting Discounts and
Commissions and Proceeds to Issuer:
Underwriting
Total Principal Discounts and
Amount of Class Price to Public Commissions Proceeds to Issuer
--------------- --------------- ----------- ------------------
Per Class A-1 $ 25,200,000 99.98600% 0.35% $ 25,108,272
Transition Bond
Per Class A-2 $ 35,000,000 99.98049% 0.45% $ 34,835,672
Transition Bond
Per Class A-3 $ 20,000,000 99.96503% 0.56% $ 19,881,006
Transition Bond
Per Class A-4 $ 22,500,000 99.95365% 0.60% $ 22,354,571
Transition Bond
Total $ 102,700,000 399.88517% 1.96% $ 102,179,521
============= ================ ============== ================
Original Issue Discount (if any): $27,779.25
Redemption provisions: At the Issuer's option when
the outstanding principal
balance of the Transition
Bonds has been reduced to less
than 5% of the original
principal balance, as set
forth in Section 10.01 of the
Indenture.
Other provisions:
Closing Date, Time and Location: On or about September 23,
2005, 10:00 AM; offices of
Sidley ▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇
LLP, New York, New York
Type of Offering: Delayed Offering
Date referred to in Section 5(a)(vi) and 5(b)(iii) after which the Issuer may
offer or sell securities without the consent of the Representative: N/A
SCHEDULE II
Class A-1 Class A-2 Class A-3 Class A-4
Underwriters Transition Bonds Transition Bonds Transition Bonds Transition Bonds
---------------------- --------------------- ------------------- ----------------- ------------------
Credit Suisse First Boston $ 11,340,000 $ 15,750,000 $ 9,000,000 $ 10,125,000
Barclays Capital Inc. $ 11,340,000 $ 15,750,000 $ 9,000,000 $ 10,125,000
▇.▇. ▇▇▇▇ & Company $ 2,520,000 $ 3,500,000 $ 2,000,000 $ 2,250,000
Total.......................$ 25,200,000 $ 35,000,000 $ 20,000,000 $ 22,500,000
=================== =================== ================== ==================
EXHIBIT A
[Corporate Opinion Regarding Issuer Under New Jersey Law]
1. The Issuer is duly qualified to do business and is in good
standing under the laws of the State of New Jersey.
2. Each of the Transition Bonds has been duly executed and delivered
by the Issuer.
3. The issue and sale of the Transition Bonds by the Issuer, the
execution and delivery by the Issuer of the Sale Agreement, the ▇▇▇▇ of Sale,
the Servicing Agreement, the Administration Agreement, the Indenture and the
Underwriting Agreement (collectively the "Transaction Documents") and the
performance by the Issuer of its obligations under each of the foregoing, each
in accordance with its terms, do not (a) conflict with or breach any of the
material terms or provisions of, or constitute (with or without notice or
lapse of time) a default under any indenture, material agreement or instrument
to which the Issuer is a party or by which the Issuer is bound and which has
been identified to us in the Issuer's Certificate (defined in the Issuer's
Certificate as the "Issuer Applicable Contracts"), (b) result in the creation
or imposition of any security interest or lien on any properties of the Issuer
pursuant to the terms of any of the Issuer Applicable Contracts (other than as
contemplated by the Transaction Documents), (c) violate any consent, order or
decree of any court or federal or state regulatory body, administrative agency
or other governmental authority having jurisdiction over the Issuer or any of
its properties and identified in the Issuer's Certificate, or (d) violate any
Applicable Law applicable to the Issuer.
4. Except for the filing of applicable UCC financing statements, no
consent, approval, license, authorization or validation of, giving of notice
to, or filing, recording or registration with, any governmental authority
pursuant to Applicable Law which has not been obtained or taken and is not in
full force and effect, is required under Applicable Law to authorize, or is
required under Applicable Law in connection with, the execution, delivery or
performance by the Issuer of any of the Transaction Documents or the
Transition Bonds, or the performance by the Issuer of the transactions
contemplated by the Transaction Documents and the Transition Bonds.
5. Each of the Transaction Documents (other than the Underwriting
Agreement) constitutes the valid and binding obligation of the Issuer,
enforceable against the Issuer in accordance with its terms.
6. When the Transition Bonds have been duly authorized and executed,
and authenticated in accordance with the provisions of the Indenture and
delivered to and paid for by the Underwriters in accordance with the terms of
the Underwriting Agreement, the Transition Bonds will constitute the valid and
binding obligations of the Issuer enforceable against the Issuer in accordance
with their respective terms and will be entitled to the benefits of the
Indenture.
A-1
EXHIBIT B
[Opinion Regarding True Sale Under Competition Act]
A court properly applying the Competition Act and the New Jersey UCC
to the transactions contemplated by the Sale Agreement would conclude that,
under the Competition Act and the New Jersey UCC, (i) the provisions of the
Sale Agreement and the ▇▇▇▇ of Sale are effective to constitute a sale or
other absolute transfer to the Issuer of all of PSE&G's right, title and
interest in and to the Initial Transferred Bondable Transition Property, and
not a borrowing secured by the Initial Transferred Bondable Transition
Property, other than for federal, state and local tax purposes and financial
accounting purposes; and (ii) such transfer of the Initial Transferred
Bondable Transition Property has been perfected as against third persons by
the issuance of the Financing Order, the execution and delivery of the Sale
Agreement by the parties thereto, the filing of the Seller Financing Statement
together with the tender of the required filing fee.
B-1
EXHIBIT C
[Corporate Opinion Regarding PSE&G Under New Jersey Law]
1. The Sale Agreement, the ▇▇▇▇ of Sale, the Servicing Agreement, and
the Administration Agreement constitute the valid and binding obligations of
PSE&G, enforceable against PSE&G in accordance with its terms under the laws
of the State of New Jersey.
C-1
EXHIBIT D
[Regulatory Opinion]
1. The Financing Order has been duly authorized and issued by the BPU
in accordance with all applicable laws, rules and regulations, including the
Competition Act; the Financing Order and process by which it was issued
complies with all applicable laws, rules and regulations, including the
Competition Act; the Financing Order is in full force and effect and is final
and nonappealable.
2. The Competition Act has been duly enacted by the Legislature of
the State of New Jersey in accordance with all applicable laws, is in full
force and effect and (insofar as it relates to the transaction contemplated in
the Sale Agreement, the ▇▇▇▇ of Sale, the Servicing Agreement, the
Administration Agreement, the Indenture, and the Underwriting Agreement
(collectively, the "Transaction Documents")) is not the subject of any pending
appeal or litigation. The provisions of the Competition Act relating to the
Transition Bonds are constitutional under the Constitutions of the United
States and the State of New Jersey.
3. Neither the BPU nor any other governmental entity has the
authority, directly or indirectly, legally or equitably to (A) rescind, alter,
repeal, modify or amend the Financing Order, (B) revalue, re-evaluate or
revise the amount of the Bondable Stranded Costs, (C) determine that the BGS
Transition Bond Charges or the revenues required to recover Bondable Stranded
Costs are unjust or unreasonable, or (D) in any way reduce or impair the value
of the BGS Bondable Transition Property.
4. The Transition Bonds are "transition bonds" within the meaning of
Section 3 of the Competition Act and the Transition Bonds are entitled to the
protections provided thereunder.
5. The Issuer is a "financing entity" within the meaning of Section 3
of the Competition Act.
6. There presently is no judicial, statutory or constitutional
authority in the State of New Jersey for a voter initiative or referendum for
the purpose of amending or repealing the Competition Act.
7. Under the Competition Act, the provisions of that Act are
severable, such that if any provision of the Competition Act or its
application to any person or circumstance is held invalid by any court of
competent jurisdiction, the invalidity shall not affect any other provision or
the applications of the Act which can be given effect without the invalid
provision or application.
8. In addition to the foregoing, we have reviewed the statements in
the Prospectus regarding the Competition Act and the Financing Order under the
captions "Summary of Terms", "Risk Factors", "Use of Proceeds", "The
Competition Act" and "The BPU Financing Order and the Transition Bond Charge"
and in the Prospectus Supplement under the captions "Introduction", "The Bonds
- The Collateral" and " - Payment Sources", "Credit Enhancement" and "The
Transition Bond Charge" and, based upon our participation in the financing as
regulatory counsel, we are of the opinion that such statements accurately
summarize the
D-1
provisions and legal effect of the Competition Act and the Financing Order.
Furthermore, in the course of such participation, nothing has come to our
attention which has caused us to believe that such statements (excluding the
financial and statistical data or forecasts, numbers, charts, estimates,
projections, assumptions or expressions of opinion included therein as to all
of which no view is expressed) contain any untrue statement of a material fact
or omit to state any material fact necessary to make such statements, in light
of the circumstances under which they were made, not misleading.
D-2
EXHIBIT E
[Constitutional Opinion Regarding New Jersey Contract Clause and
Takings Clause]
1. Based on interpretation of existing case law, in our opinion,
under the Contract Clause of the New Jersey Constitution, the State of New
Jersey, including the New Jersey Board of Public Utilities, could not
constitutionally take any action of a legislative character, including the
repeal or amendment of the Competition Act, which would substantially limit,
alter or impair the BGS Bondable Transition Property or other rights vested in
the BGS Transition Bondholders pursuant to the Financing Order, or
substantially limit, alter, impair or reduce the value or amount of the BGS
Bondable Transition Property, unless such action is a reasonable exercise of
the State of New Jersey's sovereign powers and of a character reasonable and
appropriate to the public purpose justifying such action.
2. Under the Takings Clause of the New Jersey Constitution, the State
of New Jersey could not repeal or amend the Competition Act or take any other
action in contravention of its pledge and agreement quoted above without
paying just compensation to the BGS Transition Bondholders, as determined by a
court of competent jurisdiction, if doing so would constitute a permanent
appropriation of a substantial property interest of the BGS Transition
Bondholders in the BGS Bondable Transition Property and deprive the BGS
Transition Bondholders of their reasonable expectations arising from their
investments in the BGS Transition Bonds. There is no assurance, however, that,
even if a court were to award just compensation, it would be sufficient to pay
the full amount of principal of and interest on the BGS Transition Bonds.
E-1
EXHIBIT F
[Opinion Regarding Security Interest Granted by Issuer to Trustee
Under New Jersey UCC]
1. The provisions of the Sale Agreement together with the ▇▇▇▇ of
Sale are effective to create, in favor of the Issuer, a valid security
interest (as such term is defined in Section 1-201 of the UCC) in the Seller's
rights in the Initial Transferred BGS Bondable Transition Property described
in the ▇▇▇▇ of Sale (the "Initial Transferred BGS Bondable Transition
Property"), which security interest if characterized as a transfer for
security will secure the amount paid by the Issuer for such Initial
Transferred BGS Bondable Transition Property. We note that the term "security
interest" includes both a sale and a transfer for security of an account and
we express no opinion herein as to whether the transfer of the Initial
Transferred BGS Bondable Transition Property by the Seller to the Issuer
constitutes a sale or transfer for security.
2. Upon filing the Seller Financing Statement in the Filing Office,
the security interest in favor of the Issuer in the Initial Transferred BGS
Bondable Transition Property will be perfected.
3. No other security interest of any other creditor of the Seller is
equal or prior to the security interest of the Issuer in the Initial
Transferred BGS Bondable Transition Property.
4. The provisions of the Indenture are effective to create, in favor
of the Trustee for the benefit of the BGS Transition Bondholders to secure the
payment of the BGS Transition Bonds, a valid security interest in the Issuer's
rights in the Initial Transferred BGS Bondable Transition Property and that
portion of the Collateral (as defined in the Indenture) consisting of
"accounts" or "general intangibles," each as defined in Article 9 of the UCC
(the "Intangible Collateral").
5. Upon the filing of the Issuer Financing Statement in the Filing
Office, the security interest in favor of the Trustee for the benefit of the
BGS Transition Bondholders in the Initial Transferred BGS Bondable Transition
Property and in that portion of the Intangible Collateral (to the extent such
constitutes Initial Transferred BGS Bondable Property) which is described in
the Issuer Financing Statement will be perfected.
6. No other security interest of any other creditor of the Issuer is
equal or prior to the security interest of the Trustee for the benefit of the
BGS Transition Bondholders in the Initial Transferred BGS Bondable Transition
Property and in that portion of the Intangible Collateral (to the extent such
constitutes Initial Transferred BGS Bondable Property) described in the Issuer
Financing Statement.
7. The provisions of the Indenture are effective to create a valid
security interest in favor of the Trustee for the benefit of the BGS
Transition Bondholders to secure the obligations of the Issuer under the
Indenture to the BGS Transition Bondholders in the Issuer's rights in the
Security Entitlements maintained within the Collection Account or subaccount
thereof established under the Indenture. The provisions of the Control
Agreement are effective to perfect the security interest of the Trustee for
the benefit of the BGS Transition Bondholders in said Security Entitlements.
No other security interest of any other creditor of the Issuer is equal
F-1
or prior to the security interest of the Trustee for the benefit of the BGS
Transition Bondholders in said Security Entitlements.
F-2
EXHIBIT G
[Company Corporate General Counsel Opinion]
1. PSE&G has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of New Jersey, and is
duly qualified to do business in each jurisdiction where the nature of PSE&G's
business requires such qualification to the extent such qualification and good
standing is necessary to protect the validity and enforceability of the Basic
Documents. PSE&G has the power and authority to execute, deliver and perform
its obligations under the Basic Documents and to own its properties and
conduct its business as described in the Registration Statement and the Final
Prospectus.
2. The execution, delivery and performance by PSE&G of the Basic
Documents and the consummation by PSE&G of the transactions contemplated
thereby have been duly authorized by all requisite corporate action on the
part of PSE&G and each of the Basic Documents has been duly executed and
delivered by PSE&G.
3. PSE&G holds all franchises, certificates of public convenience,
licenses and permits necessary to carry on the utility business in which it is
engaged, the absence of which would have a material adverse effect on the
financial condition of PSE&G or on the validity of the Basic Documents. All
consents, approvals, authorizations of, or filings or registrations with, any
governmental body, authority or agency applicable to PSE&G and required as a
condition to the validity of the Basic Documents or in connection with the
execution, delivery and performance by PSE&G of the Basic Documents have been
obtained or made.
4. The execution, delivery and performance by PSE&G of the Basic
Documents, each in accordance with its terms, do not (a) conflict with the
Articles of Incorporation or By-laws of PSE&G, (b) conflict with or breach any
of the material terms or provisions of, or constitute (with or without notice
or lapse of time) a default under any indenture, material agreement or
instrument to which PSE&G is a party or by which PSE&G or any of its property
is bound, (c) result in the creation or imposition of any security interest or
lien on any properties of PSE&G pursuant to the terms of any such agreement or
instrument, except as provided in the Sale Agreement, (d) violate any law or
any consent, order, rule, regulation or decree of any court or federal or
state regulatory body, administrative agency or other governmental authority
having jurisdiction over PSE&G or any of its properties, or (e) violate any
law, rule or regulation applicable to PSE&G.
5. There is no pending and, to the best of my knowledge, no
threatened action, suit or proceeding before any court or governmental agency,
authority or body or any arbitrator involving PSE&G or any of its
subsidiaries, or involving or relating to the Financing Order or the
Restructuring Order or the collection of the Transition Bond Charge or the use
and enjoyment of the Bondable Transition Property under the Competition Act,
of a character required to be disclosed in the Registration Statement or the
Final Prospectus that is not adequately disclosed in the Final Prospectus, and
there is no franchise, contract or document of a character required to be
described in the Registration Statement or the Final Prospectus or be filed as
an exhibit to the Registration Statement that is not described or filed as
required.
G-1
6. The statements included in the Final Prospectus under the headings
"The Competition Act", "PSE&G's Restructuring" and "The BPU Financing Order
and the Transition Bond Charge", to the extent they purport to summarize
provisions of the Competition Act, the Restructuring Order and the Financing
Order, fairly summarize such provisions.
7. No facts have come to our attention that have led us to believe
that the Registration Statement at the effective date thereof contained an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or that the Final Prospectus contained as of its date or contains
as of the Closing Date an untrue statement of a material fact or omitted or
omits, as the case may be, to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except that we express no opinion or belief with respect
to (i) the numerical, statistical and financial information included therein
or excluded therefrom, (ii) the Trustee's Statement of Eligibility and
Qualification under the Trust Indenture Act of 1939, as amended, on Form T-1
or (iii) the statements under the subheading "The Transition Bonds-Transition
Bonds Will Be Issued in Book-Entry Form".
G-2
EXHIBIT H
[Opinion Regarding Mortgage Indenture]
1. The Bondable Transition Property is not subject to any lien
thereon created by the Mortgage Indenture.
H-1
EXHIBIT I
[Constitutional Opinion Regarding U.S. Contract Clause and
Takings Clause]
1. Based on our analysis of relevant judicial authority, it is our
opinion, subject to all of the qualifications, limitations and assumptions
(including the assumption that any impairment would be "substantial") set
forth in this letter, that, absent a demonstration by the State of New Jersey
that limits, alters, impairs or reduces the value of the Bondable Transition
Property is necessary to further a significant and legitimate public purpose,
a reviewing court would conclude that the State Pledge provides a basis upon
which the Bondholders (or the Trustee acting on their behalf) could challenge
successfully, under the Federal Contract Clause, the constitutionality of any
law subsequently passed by the New Jersey legislature determined by such court
to reduce, alter, or impair the value of the Bondable Transition Property so
as to cause an impairment prior to the time that the Transition Bonds are
fully paid and discharged.
2. Based on our analysis of relevant judicial authority, as set forth
above, it is our opinion, subject to all of the qualifications, limitations
and assumptions set forth in this letter, that, under the Federal Takings
Clause, a reviewing court would hold that the State of New Jersey would be
required to pay just compensation to Bondholders if the State's repeal or
amendment of the Competition Act or taking of any other action in
contravention of the state pledge in Section 17.a of the Competition Act
constituted a permanent appropriation of a substantial property interest of
the Bondholders in the Bondable Transition Property and deprived the
Bondholders of their reasonable expectations arising from their investments in
the Transition Bonds. There can be no assurance, however, that any such award
of just compensation would be sufficient to pay the full amount of principal
of and interest on the Transition Bonds.
I-1
EXHIBIT J
[Opinion Regarding the Securities Act of 1933, Trust Indenture Act of 1939 and
Investment Company Act of 1940]
1. The statements set forth in the final prospectus dated [ ], 2005
relating to the Transition Bonds (together with the Prospectus Supplement
relating to the Transition Bonds dated [ ], 2005, the "Final Prospectus") (a)
under the headings "PSE&G Transition Funding II LLC, The Issuer", "The
Transition Bonds" (other than the statements under the subheading "Transition
Bonds Will Be Issued in Book-Entry Form"), "The Sale Agreement", "The
Servicing Agreement" and "The Indenture", insofar as they purport to summarize
certain provisions of the Issuer LLC Agreement, the Transition Bonds, the Sale
Agreement, the Servicing Agreement and the Indenture, respectively, constitute
fair summaries of such provisions, (b) under the heading "ERISA
Considerations", fairly summarize the matters described therein, and (c) under
the heading "How a Bankruptcy of the Seller or Servicer May Affect Your
Investment", fairly summarize the matters described therein.
2. The Transition Bonds, the Indenture, the Servicing Agreement and
the Sale Agreement (including the ▇▇▇▇ of Sale) conform in all material
respects to the descriptions thereof (other than, with respect to the
Transition Bonds, the statements under the subheading "The Transition
Bonds-Transition Bonds Will Be Issued in Book-Entry Form") contained in the
Final Prospectus.
3. The Indenture has been duly qualified under the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"), and neither the Sale
Agreement nor the Servicing Agreement is required to be registered under the
Trust Indenture Act.
4. The Registration Statement has become effective under the
Securities Act; any required filing of the Final Prospectus, and any
supplements thereto, pursuant to Rule 424(b) under the Securities Act has been
made in the manner and within the time period required by Rule 424(b); to the
best of our knowledge after due inquiry with the Commission, no stop order
suspending the effectiveness of the Registration Statement has been issued and
no proceedings for that purpose have been instituted or threatened; and the
Registration Statement and the Final Prospectus (other than the financial
statements and other financial and statistical information contained therein,
as to which we express no opinion) comply as to form in all material respects
with the applicable requirements of the Securities Act, the Exchange Act and
the Trust Indenture Act and the respective rules thereunder.
5. The Issuer is not, and after giving effect to the offering and
sale of the Transition Bonds and the application of the proceeds thereof as
described in the Final Prospectus, will not be required to be registered as an
"investment company" as such term is defined in the Investment Company Act of
1940, as amended.
J-1
EXHIBIT K
[Opinion Regarding True Sale of Bondable Transition Property from PSE&G to
Issuer Under Federal Bankruptcy Law and Non-Consolidation of PSE&G and
Issuer Under Federal Bankruptcy Law]
1. Based on the foregoing facts, and subject to the assumptions,
qualifications and discussions contained herein and the reasoned analysis of
analogous case law (although there is no precedent directly on point), it is
our opinion that if PSE&G were to become a debtor (regardless of whether the
Issuer is also a debtor) a court would not disregard the separate limited
liability company existence of the Issuer so as to consolidate the Issuer's
assets and liabilities with those of PSE&G.
2. Based on the foregoing facts, and subject to the qualifications
and discussion contained herein and the reasoned analysis of analogous case
law (although there is no precedent directly on point), it is our opinion
that, if PSE&G were to become a debtor (regardless of whether the Issuer is
also a debtor) a court would hold that the Bondable Transition Property
(including the revenues and collections thereon) is not property of the estate
of PSE&G under Section 541(a)(1) or 541(a)(6) of the Bankruptcy Code and that
Section 362(a) of the Bankruptcy Code would not apply to prevent PSE&G in its
capacity as servicer from paying collections on the Transition Bond Charges to
the Issuer and its assigns.
K-1
EXHIBIT L
[Opinion Regarding Security Interest Granted by Issuer to
Trustee Under Delaware UCC]
1. The Financing Statement is in an appropriate form for filing with
the Secretary of State.
2. Insofar as Article 9 of the Uniform Commercial Code as in effect
in the State of Delaware on the date hereof (the "Delaware UCC") is applicable
(without regard to conflict of laws principles), upon the filing of the
Financing Statement with the Secretary of State, the Trustee will have a
perfected security interest in the Issuer's rights in that portion of the
Bondable Transition Property described in the Financing Statement in which a
security interest may be perfected by the filing of a UCC Financing Statement
with the Secretary of State (the "Filing Collateral") and the proceeds (as
defined in Section 9-102(a)(64) of the Delaware UCC) thereof.
3. The search report sets for the proper filing office and the proper
debtor necessary to identify those Persons who under the Delaware UCC have on
file Financing Statements against the Issuer covering the Filing Collateral as
of the effective time. The search report identifies no secured party who has
on file with the Secretary of State a currently effective Financing Statement
naming the Issuer as debtor and describing the Filing Collateral prior to the
effective time.
L-1
EXHIBIT M
[Delaware Law Opinion Regarding Issuer]
1. The Issuer has been duly formed and is validly existing in good
standing as a limited liability company under the laws of the State of
Delaware.
2. Under the Delaware Limited Liability Company Act, 6 Del. C. ss.
18-101, et seq. (the "LLC Act"), and the Issuer LLC Agreement, the Issuer has
all necessary limited liability company power and authority to execute and
deliver the Basic Documents and issue the Transition Bonds, and to perform its
obligations thereunder.
3. Under the LLC Act and the Issuer LLC Agreement, the Issuer has all
the necessary limited liability company power and authority to own its
property and conduct its business, all as described in the Issuer LLC
Agreement.
4. Under the LLC Act and the Issuer LLC Agreement, the execution and
delivery by the Issuer of the Basic Documents and Transition Bonds, and the
performance by the Issuer of its obligations thereunder, have been duly
authorized by all necessary limited liability company action on the part of
the Issuer.
5. The Issuer LLC Agreement constitutes a valid and binding agreement
of PSE&G, as the sole member of the Issuer, and is enforceable against PSE&G
in accordance with its terms.
6. If properly presented to a Delaware court, a Delaware court
applying Delaware law would conclude that (i) compliance with Section
3.04(b)(iv) of the Issuer LLC Agreement requiring a prior unanimous written
consent of the Issuer's Managers, including the Independent Manager, to
commence a voluntary case under Title 11 of the United States Code (a
"Voluntary Case") for the Issuer, is necessary in order to commence a
Voluntary Case, and (ii) Section 3.04(b)(iv) of the Issuer LLC Agreement
requiring a prior written unanimous consent of the Issuer's Managers,
including the Independent Manager, to commence a Voluntary Case for the
Issuer, constitutes a legal, valid and binding agreement of PSE&G, and is
enforceable against PSE&G, as the sole member of the Issuer, in accordance
with its terms.
7. Under the LLC Act, and the Issuer LLC Agreement, the bankruptcy or
dissolution of PSE&G would not, by itself, cause the Issuer to be dissolved or
its affairs to be wound up.
8. Although under the LLC Act, on application to a court of competent
jurisdiction, a judgment creditor of PSE&G may be able to charge PSE&G's share
of any profits and losses of the Issuer and PSE&G's right to receive
distributions of assets of the Issuer (the "PSE&G Member's Interest") with
payment of the unsatisfied amount of the judgment, with interest, to the
extent so charged, the judgment creditor of PSE&G has only the rights of an
assignee of the PSE&G Member's Interest. Thus, under the LLC Act, a judgment
creditor of PSE&G may not attach specific assets of the Issuer directly and
may not satisfy its claims against PSE&G by asserting a claim directly against
the assets of the Issuer.
M-1
9. Under the LLC Act (i) the Issuer is a separate legal entity, and
(ii) the existence of the Issuer as a separate legal entity will continue
until the cancellation of the Issuer Certificate of Formation.
10. No authorization, consent, approval or order of any Delaware
court or any Delaware governmental or administrative body is required solely
in connection with the execution and delivery by the Issuer of the Basic
Documents, or the performance by the Issuer of its obligations thereunder
(except for filings that may be required under the Uniform Commercial Code as
in effect in the State of Delaware).
11. The execution and delivery by the Issuer of the Basic Documents,
and the performance by the Issuer of its obligations thereunder, do not
violate (i) any Delaware law, rule or regulation, or (ii) the Issuer
Certificate of Formation or the Issuer LLC Agreement.
M-2