Exhibit 1.1
PSE&G TRANSITION FUNDING LLC
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
UNDERWRITING AGREEMENT
New York, New York
January [ ], 2001
To ▇▇▇▇▇▇ Brothers Inc. as
representative of the
Underwriters named in
Schedule II hereto
Ladies and Gentlemen:
1. Introduction. PSE&G Transition Funding LLC, a Delaware limited
liability company (the "Issuer") and Public Service Gas and Electric 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 (the "Underwriters"), for whom ▇▇▇▇▇▇ Brothers Inc. is acting
as representative (the "Representative"), the principal amount of the PSE&G
Transition Funding LLC Transition Bonds, Series 2001-1 (the "Transition Bonds"),
identified in Schedule I hereto.
The issuance of the Transition Bonds is authorized by the Final Decision
and Order, Docket Nos. E097070461, E097070462 and E097070463 (the "Restructuring
Order"), issued by the State of New Jersey Board of Public Utilities (the "BPU")
on August 24, 1999, and by the Bondable Stranded Costs Rate Order, Docket No.
EF99060390 (the "Financing Order"), issued by the BPU on September 17, 1999. The
Transition Bonds will be issued pursuant to an indenture dated on or about
January [ ], 2001, as supplemented by the 2001-1 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 January [ ], 2001, between the Company and the
Issuer (the "Sale Agreement") and a related ▇▇▇▇ of Sale dated January [ ], 2001
(the "▇▇▇▇ of Sale"). The Transferred Bondable Transition Property will be
serviced pursuant to a Servicing
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Agreement dated on or about January [ ], 2001, 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. Each of the Company and the Issuer
represents and warrants to, and agrees with, each Underwriter as set forth below
in this Section 2. 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
"Act"), and the Issuer has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on such Form
(Registration No. 333-83635), including a basic prospectus, for
registration under the 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 may not include all the information with respect to the
Transition Bonds and the offering thereof required by the Act and
the rules thereunder to be included in the Final Prospectus, the
Basic Prospectus includes all such information required by the 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.
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(ii) The Issuer and the Transition Bonds meet the requirements
for the use of Form S-3 under the Act and the Issuer has filed with
the Commission a registration statement on such Form (Registration
No. 333-83635), including a basic prospectus, for registration under
the Act of the offering and sale of the Transition Bonds. The Issuer
may have filed one or 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 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
supplement thereto) will, comply in all material respects with the
applicable requirements of the 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
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 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
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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).
(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 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 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 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 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 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
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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 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 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 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
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authority to conduct 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 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.
(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 or equitable
principles affecting creditors' rights generally from time to time in
effect);
(k) The issue 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
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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 issue 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.
(l) Except for:
(i) the order of the Commission making the Registration
Statement effective,
(ii) permits and similar authorizations required under the
securities or blue sky laws of any jurisdiction,
(iii) the Restructuring Order, and
(iv) the Financing Order and all filings required thereunder,
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 or equitable principles affecting creditors' rights generally from
time to time in effect 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 the Indenture has been duly and validly executed and
delivered by the Issuer and is 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 or equitable
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principles affecting creditors' rights generally from time to time in
effect).
(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 Underwriters 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 the Transition Bonds set forth
opposite such Underwriter's name in Schedule II hereto.
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 five 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. 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.
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) The Issuer will use its best efforts to cause the
Registration Statement, if not effective at the Execution Time, and
any amendment thereto, to become effective. Prior to the termination
of the offering of the Transition Bonds, the
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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 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
Registration Statement, if not effective at the Execution Time, and
any amendment thereto, shall have become effective, (B) when the
Final Prospectus, and any supplement thereto, shall have been filed
with the Commission pursuant to Rule 424(b), (C) when, prior to
termination of the offering of the Transition Bonds, any amendment
to the Registration Statement shall have been filed or become
effective, (D) of any request by the Commission for any amendment of
the Registration Statement or supplement to the Final Prospectus or
for any additional information, (E) 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, (F) 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 (G) of the
happening of any event during the period mentioned in subparagraph
(ii) below. The Issuer will use its best efforts 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 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 Act or the Exchange Act or the respective rules thereunder,
the Issuer 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
Final Prospectus to you in such quantities as you may reasonably
request.
(iii) As soon as practicable but no later than 12 months after
the Closing Date, the Issuer will make generally available to the
Transition Bondholders and to the Representative an earnings
statement or statements of the Issuer that will satisfy the
provisions of Section 11(a) of the Act and Rule 158 under the Act.
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(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 Act,
as many copies of any Preliminary Final Prospectus and the Final
Prospectus and any 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 463 under the Act. The Issuer will pay the expenses of printing
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
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
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 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 (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, Issuer or the
Trustee.
(viii) So long as any of the Transition Bonds are outstanding,
the Issuer will furnish to the Representative, (A) as soon as
available, a copy of each report of the Issuer filed with the
Commission under the Exchange Act, or mailed to Transition
Bondholders, (B) a copy of any filings with the BPU pursuant to the
Competition Act and the Financing Order including, but not limited
to, any annual or more frequent Transition Bond Charge Adjustment
filings, and (C) from time to time, any information concerning the
Issuer as the Representative may reasonably request.
(ix) To the extent, if any, that any rating necessary to
satisfy the condition set
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forth in Section 6(m) 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 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
Restructuring Order and the Financing Order.
(ii) 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).
(iii) So long as any of the Transition Bonds are outstanding
and the Company is the Servicer, the Company will furnish to the
Representative (A) as soon as available, a copy of each report of
the Company or the Issuer filed with the Commission under the
Exchange Act, or mailed to Transition Bondholders, (B) a copy of any
filings with the BPU pursuant to the Competition Act and the
Financing Order including, but not limited to, any annual or more
frequent Transition Bond Charge Adjustment filings, and (C) from
time to time, any information concerning the Company as the
Representative may reasonably request.
(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 such documents and take such other
actions.
(v) The initial Transition Bond Charge will be calculated in
accordance with the Financing Order.
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
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Issuer and the Company of their obligations hereunder, and to the following
additional conditions precedent:
(a) If the Registration Statement has not become effective prior to
the Execution Time, unless the Representative agrees in writing to a later
time, the Registration Statement will become effective not later than (i)
6:00 PM Eastern Time, on the date of determination of the public offering
price, if such determination occurred at or prior to 3:00 PM Eastern Time
on such date, or (ii) 12:00 Noon Eastern Time on the business day
following the day on which the public offering price was determined, if
such determination occurred after 3:00 PM Eastern Time on such date; if
filing of the Final Prospectus, or any supplement thereto, is required
pursuant to Rule 424(b), the Final Prospectus, and any such supplement,
shall have been filed in the manner and within the time period required by
Rule 424(b); and 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 Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP,
outside 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 ▇,
▇, ▇, ▇, ▇, ▇, ▇, ▇, ▇, ▇, and M hereto.
(c) The Representative shall have received an opinion, dated as of
the Closing Date, from ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.C., special regulatory
counsel to the Company, subject to customary qualifications, exceptions
and limitations, in form and substance satisfactory to the Representative,
to the effect set forth in Exhibit F hereto.
(d) The Representative shall have received an opinion, dated as of
the Closing Date, from in-house counsel to the Company, subject to
customary qualifications, exceptions and limitations, in form and
substance satisfactory to the Representative, to the effect set forth in
Exhibit E hereto
(e) The Representative shall have received (i) an opinion letter of,
or a reliance letter thereon from, Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇
LLP, counsel to the Issuer, dated the Closing Date, in form and substance
reasonably satisfactory to the Representative, required to be delivered by
such counsel pursuant to Section 2.10 of the Indenture and (ii) the
opinion of in-house counsel to the Company delivered to the Mortgage
Trustee relating to the release of the Bondable Transition Property under
the Company's mortgage indenture, together with a reliance letter
addressed to the Representative.
(f) The Representative shall have received an opinion or opinions of
counsel to the Trustee, portions of which may be delivered by Stradley,
Ronon, ▇▇▇▇▇▇▇ & Young, LLP, outside counsel to the Trustee, and portions
of which may be delivered by in-house counsel for the Trustee, dated the
Closing Date, in form and substance reasonably
12
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 from ▇▇▇▇▇ & ▇▇▇▇ LLP,
counsel for the Underwriters, such opinion or opinions, dated the Closing
Date, with respect to the issuance and sale of the Transition Bonds, the
Indenture, the Registration Statement, the Final Prospectus (together with
any supplement thereto) and other related matters as the Representative
may reasonably require, and the Company and the Issuer shall have
furnished to such counsel such documents as they request for the purpose
of enabling them to pass upon such matters.
(h) The Representative shall have received a certificate of the
Issuer, signed by a duly authorized manager of the Issuer, 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 Issuer in this
Underwriting Agreement and in the Sale Agreement and the Indenture
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 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 condition (financial or
other), prospects, earnings, 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
13
Act, the Restructuring Order 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 the Representative, confirming that
they are independent accountants within the meaning of the 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 (i) include any
supplement thereto at the date of the letter.
14
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 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 Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ 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.C., special New Jersey
tax counsel to Company and the
15
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,
including such certificates, opinions and documents as the Representative
may reasonably request to evidence the enforceability of any interest rate
swap agreement entered into in connection with any class of floating rate
bonds and the qualification or listing of any floating rate bonds as
contemplated by the Final Prospectus.
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 Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ 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 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 filing with the National Association of
Securities Dealers with respect with the transactions contemplated hereby,
and (G) and all costs and expenses of printing and distributing all of the
documents in connection the Transition Bonds.
16
(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 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 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 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
in the Basic Prospectus, any Preliminary Final Prospectus or the Final
Prospectus, 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 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 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 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 2001-1 Transition Bonds" or "Plan of Distribution
for the Transition Bonds" in
17
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.
(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 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
18
and (ii) does not include a statement as to or an 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 which 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 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 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 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.
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 Underwriters
19
hereunder and such failure to purchase shall constitute a default in the
performance of its or their obligations under this Underwriting Agreement, 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. 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 Restructuring Order, 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).
11. 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
20
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.
12. 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 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.
13. 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.
14. Applicable Law. This Underwriting Agreement will be governed by and
construed in accordance with the laws of the State of New York.
15. 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:
Name:
Title:
PSE&G TRANSITION FUNDING LLC,
By:
Name:
Title:
The foregoing Underwriting Agreement is hereby confirmed and accepted as of the
date specified in Schedule I hereto.
▇▇▇▇▇▇ Brothers Inc.
By:
Name:
Title:
For itself and the other several Underwriters, if any, named in Schedule II to
the foregoing Underwriting Agreement.
22
SCHEDULE I
Underwriting Agreement dated January [ ], 2001
Registration Statement No. 333-83635
Representative:
▇▇▇▇▇▇ Brothers Inc.
3 World Financial Center
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Title, Purchase Price and Description of Transition Bonds:
Title: PSE&G Transition Funding LLC
Transition Bonds, Series 2001-1
Principal Amount, Price to Public,
Underwriting Discounts and
Commissions and Proceeds to Issuer:
Price to Public Underwriting Proceeds to Issuer
Total Principal Discounts and
Amount of Class Commissions
Per Class A-1 % % %
Transition Bond $
Per Class A-2
Transition Bond
Per Class A-3
Transition Bond
Per Class A-4
Transition Bond
Per Class A-5
Transition Bond
Per Class A-6
Transition Bond
Per Class A-7
Transition Bond
Per Class A-8
Transition Bond
------- -------- ------- --------
Total
$ $ $ $
======= ======== ======= ========
Original Issue Discount (if any):
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 and provided there
is no interest rate swap
agreement in effect with
respect to any class of the
Transition Bonds, as set
forth in Section 10.01 of
the Indenture.
Floating Rate Class:
Other provisions:
Closing Date, Time and Location: January [ ], 2001, 10:00 AM;
offices of Skadden, Arps, Slate,
▇▇▇▇▇▇▇ & ▇▇▇▇ 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 Company and
the Issuer may offer or sell asset-backed securities without the consent of the
Representative: [ ], 2001
SCHEDULE II
Class A-1 Class A-2 Class A-3 Class A-4 Class A-5 Class A-6 Class A-7 Class A-8
Transition Transition Transition Transition Transition Transition Transition Transition
Underwriters Bonds Bonds Bonds Bonds Bonds Bonds Bonds Bonds Total
▇▇▇▇▇▇ Brothers Inc. $ $ $ $ $ $ $ $ $
-------- -------- -------- -------- -------- -------- -------- -------- ------
Total $ $ $ $ $ $ $ $ $
======== ======== ======== ======== ======== ======== ======== ======== ======
EXHIBIT A
[Opinion Regarding Security Interest Granted by Issuer to Trustee Under 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
Bondable Transition Property described in the ▇▇▇▇ of Sale (the "Transferred
Bondable Transition Property"), which security interest if characterized as a
transfer for security will secure the amount paid by the Issuer for such
Transferred 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 the proper characterization of the transfer of
the Transferred Bondable Transition Property by the Seller to the Issuer.
2. The security interest in favor of the Issuer in the Transferred
Bondable Transition Property has been 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 Transferred Bondable
Transition Property.
4. The provisions of the Indenture are effective to create, in favor of
the Trustee for the benefit of the Transition Bondholders to secure the
obligations of the Issuer under the Indenture to the Transition Bondholders, a
valid security interest in the Issuer's rights in the Transferred Bondable
Transition Property and that portion of the Collateral (as defined in the
Indenture) consisting of "accounts" (other than the Bondable Transition
Property) or "general intangibles," each as defined in Article 9 of the UCC (the
"Intangible Collateral").
5. The security interest in favor of the Trustee for the benefit of the
Transition Bondholders in the Transferred Bondable Transition Property and in
that portion of the Intangible Collateral which is described in the Issuer
Financing Statement has been 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
Transition Bondholders in the Transferred Bondable Transition Property and in
that portion of the Intangible Collateral 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 Transition
Bondholders to secure the obligations of the Issuer under the Indenture to the
Transition Bondholders in the Issuer's rights in all Security Entitlements. The
provisions of the Control Agreement are effective to perfect the security
interest of the Trustee for the benefit of the Transition Bondholders in the
Security Entitlements. 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 Transition Bondholders in the Security Entitlements.
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 BTP, and not a borrowing secured by the BTP, other than for federal,
state and local tax purposes and financial accounting purposes; and (ii) such
transfer of the BTP 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 Department of Treasury Financing
Statement and the due presentation of the Seller Secretary of State Financing
Statement together with the tender of the required filing fee.
EXHIBIT C
[Opinion Regarding Security Enforceability of Delaware LLC Provisions Under
Federal Bankruptcy Law]
1. The bankruptcy or dissolution of PSE&G would not, by itself, cause
the Issuer to be dissolved or its affairs to be wound up,
2. A judgment creditor of PSE&G may not satisfy its claims against
PSE&G by asserting these claims directly against the assets of the
Issuer, and
3. (A) The Issuer is a separate legal entity, and
(B) The existence of the Issuer as a separate legal entity will
continue until the cancellation of its Issuer Certificate of
Formation.
4. A bankruptcy court would hold that compliance with those provisions
of the Issuer LLC Agreement requiring the prior unanimous written
consent of the Issuer's Managers to commence a Voluntary Case is
necessary in order to commence a Voluntary Case.
EXHIBIT D
[Corporate Opinion Regarding PSE&G]
1. Each of the Transaction Documents (other than the Underwriting
Agreement) constitutes the valid and binding obligation of PSE&G, enforceable
against PSE&G in accordance with its terms under the laws of the State of New
Jersey.
2. The Underwriting Agreement constitutes the valid and binding obligation
of PSE&G, enforceable against PSE&G in accordance with its terms under the laws
of the State of New York.
EXHIBIT E
[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
Transaction Documents. PSE&G has the power and authority to execute, deliver and
perform its obligations under the Transaction 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 Transaction
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 Transaction 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 Transaction 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 Transaction Documents or in connection with the
execution, delivery and performance by PSE&G of the Transaction Documents have
been obtained or made.
4. The execution, delivery and performance by PSE&G of the Transaction
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 BTP 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.
EXHIBIT F
[Regulatory Opinion]
1. The Restructuring Order and the Financing Order have been duly
authorized and issued by the BPU in accordance with all applicable laws, rules
and regulations, including the Competition Act; the Restructuring Order and the
Financing Order and process by which they were issued comply with all applicable
laws, rules and regulations, including the Competition Act; the Restructuring
Order (insofar as it relates to the transaction contemplated in the Transaction
Documents) and the Financing Order are in full force and effect and are final
and nonappealable, subject only to any rights that the appellants in the
proceedings before the New Jersey Supreme Court referred to above may have to
seek an enlargement of the time within which they may apply for reconsideration
of the New Jersey Supreme Court's order and/or to file a petition for a writ of
certiorari from the United States Supreme Court. The time period within which
the appellants may apply for reconsideration of the New Jersey Supreme Court's
order has lapsed, and that period may be enlarged only by court order.
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
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 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 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.
EXHIBIT G
[Constitutional Opinion Regarding New Jersey and U.S. Contract Clause and
Takings Clause]
1. Based on interpretation of existing case law, in our opinion, under the
Contract Clauses of the United States Constitution and 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 Bondable Transition Property or other
rights vested in the Transition Bondholders pursuant to the Financing Order, or
substantially limit, alter, impair or reduce the value or amount of the 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 Clauses of the United States and New Jersey
Constitutions, the State of New Jersey could not repeal or amend the Competition
Act or take any other action in contravention of its pledge and agreement quoted
above without paying just compensation to the 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 Transition
Bondholders in the Bondable Transition Property and deprive the Transition
Bondholders of their reasonable expectations arising from their investments in
the Transition Bonds.
EXHIBIT H
[Opinion Regarding Mortgage Indenture]
1. The Bondable Transition Property is not subject to any lien thereon
created by the Mortgage Indenture.
EXHIBIT I
[Corporate Opinion Regarding Issuer]
1. The Issuer has been duly formed and is validly existing and in good
standing as a limited liability company under the laws of the State of Delaware,
and is duly qualified to do business and is in good standing under the laws of
the State of New Jersey.
2. The Issuer has the limited liability company power and authority to
execute, deliver and perform its obligations under the Transaction Documents and
the Transition Bonds and to own its properties and conduct its business as
described in the Registration Statement and the Final Prospectus.
3. The execution and delivery of each of the Transaction Documents and the
Transition Bonds and the consummation by the Issuer of the transactions
contemplated thereby have been duly authorized by all requisite limited
liability company action on the part of the Issuer and each of the Transaction
Documents and the Transition Bonds has been duly executed and delivered by the
Issuer.
4. The issue and sale of the Transition Bonds by the Issuer, the execution
and delivery by the Issuer of each of 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, result in any breach of
any of the terms or provisions of, or constitute (with or without notice or
lapse of time) a default under the Issuer Certificate of Formation or the Issuer
LLC Agreement, (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 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"), (c) 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), (d) 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
paragraph [ ] of the Issuer's Certificate, or (e) violate any Applicable Law
applicable to the Issuer.
5. 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.
6. 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.
7. The Underwriting Agreement constitutes the valid and binding obligation
of the Issuer, enforceable against the Issuer in accordance with its terms under
the laws of the State of New York.
8. The Transition Bonds have been duly authorized and executed, and, when
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, 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.
9. Neither the execution, delivery or performance by the Issuer of the
Transaction Documents or the Transition Bonds nor the compliance by the Issuer
with the terms and provisions thereof nor the issuance and sale by the Issuer of
the Transition Bonds, will contravene any provisions of any Applicable Law of
the State of New Jersey, the State of Delaware or the United States of America.
10. 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.
11. 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 and the rules thereunder, and any
amendments thereto under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), comply as to form in all material respects with the applicable
requirements of the Exchange Act and the rules thereunder.
12. 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.
I-36
EXHIBIT J
[10b-5/Fair Summary Letter]
1. The statements set forth in the final prospectus dated January __, 2001
relating to the Transition Bonds (together with the Prospectus Supplement
relating to the Transition Bonds dated January __, 2001, the "Final Prospectus")
(a) under the headings "PSE&G Transition Funding 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, the
Interest Rate Swap Agreements 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 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.
4. 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".
EXHIBIT K
[Opinion Regarding True Sale of Bondable Transition Property from PSE&G to
Issuer Under Federal Bankruptcy Law]
1. In a properly presented and argued case, as a legal matter, and based
upon existing case law, in the event of the bankruptcy of PSE&G, the transfer of
the right, title and interest of PSE&G in, to and under the BTP would be treated
as a true sale to the Issuer, such that (i) section 362(a) of the Bankruptcy
Code would not apply to prevent PSE&G in its capacity as Servicer from paying
collections of TBC to the Issuer and its assigns as provided in the Servicing
Agreement, and (ii) the BTP or collections of the TBC imposed on account of BTP
transferred by PSE&G to the Issuer in the Transaction would not become property
of PSE&G's bankruptcy estate under section 541(a)(1) or 541(a)(6) of the
Bankruptcy Code.
EXHIBIT L
[Opinion Regarding Non-Consolidation of PSE&G and Issuer Under Federal
Bankruptcy Law]
1. If PSE&G becomes a debtor in a case under the Bankruptcy Code, for the
reasons, among others, set forth below, it is our opinion that regardless of
which of the approaches or standards a court follows, a creditor or trustee of
PSE&G (or PSE&G as debtor in possession) would not have valid grounds to have a
court disregard the limited liability company form of the Issuer so as to cause
a substantive consolidation of the assets and liabilities of the Issuer with the
assets and liabilities of PSE&G in a manner prejudicial to the holders of
Transition Bonds.
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. 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.
3. 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 each of the Independent Managers, 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 each of the Independent Managers, 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.
4. Under the Delaware Limited Liability Company Act, 6 Del. C. ss. 18-101,
et seq. (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.
5. 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.
6. 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.