EXHIBIT 10.1.A
SALE AGREEMENT
BONDABLE TRANSITION PROPERTY SALE AGREEMENT
between
JCP&L TRANSITION FUNDING LLC
Issuer
and
JERSEY CENTRAL POWER & LIGHT COMPANY
Seller
Dated as of _______, 2002
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.01 Definitions....................................................1
Section 1.02 Other Definitional Provisions..................................1
ARTICLE II
CONVEYANCE OF TRANSFERRED BONDABLE TRANSITION PROPERTY
Section 2.01 Conveyance of Initial Transferred Bondable Transition
Property......................................................2
Section 2.02 Conditions to Conveyance of Bondable Transition
Property......................................................3
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
Section 3.01 Organization and Good Standing.................................5
Section 3.02 Due Qualification..............................................5
Section 3.03 Power and Authority............................................5
Section 3.04 Binding Obligation.............................................5
Section 3.05 No Violation...................................................6
Section 3.06 No Proceedings.................................................6
Section 3.07 Approvals......................................................6
Section 3.08 The Transferred Bondable Transition Property...................7
Section 3.09 Solvency.......................................................9
ARTICLE IV
COVENANTS OF THE SELLER
Section 4.01 Seller's Existence.............................................9
Section 4.02 No Liens or Conveyances.......................................10
Section 4.03 Use of Proceeds...............................................10
Section 4.04 Delivery of Collections.......................................10
Section 4.05 Notice of Liens...............................................10
Section 4.06 Compliance with Law...........................................10
Section 4.07 Covenants Related to Transferred Bondable Transition
Property.....................................................10
Section 4.08 Indemnification Notice........................................11
Section 4.09 Protection of Title...........................................12
Section 4.10 Taxes.........................................................12
(i)
ARTICLE V
ADDITIONAL UNDERTAKINGS OF THE SELLER
Section 5.01 Liability of the Seller; Indemnities..........................13
Section 5.02 Merger or Consolidation of, or Assumption of the
Obligations of, the Seller...................................14
Section 5.03 Limitation on Liability of the Seller and Others..............15
ARTICLE VI
MISCELLANEOUS PROVISIONS
Section 6.01 Amendment.....................................................16
Section 6.02 Notices.......................................................16
Section 6.03 Assignment by Seller..........................................17
Section 6.04 Assignment to Trustee.........................................17
Section 6.05 Limitations on Rights of Others...............................17
Section 6.06 Severability..................................................17
Section 6.07 Separate Counterparts.........................................17
Section 6.08 Headings......................................................17
Section 6.09 Governing Law.................................................18
Section 6.10 Nonpetition Covenant..........................................18
EXHIBIT A - ▇▇▇▇ of Sale.....................................................A-1
EXHIBIT B - Opinion of Counsel...............................................B-1
EXHIBIT C - Opinion of Counsel...............................................C-1
APPENDIX A - Master Definitions
(ii)
BONDABLE TRANSITION PROPERTY SALE AGREEMENT, dated as of _________, 2002,
by and between JCP&L TRANSITION FUNDING LLC, a Delaware limited liability
company, as Issuer (the "Issuer"), and JERSEY CENTRAL POWER & LIGHT COMPANY, a
New Jersey corporation, in its capacity as Seller (the "Seller") hereunder.
W I T N E S S E T H:
WHEREAS the Issuer desires to purchase from time to time Bondable
Transition Property created pursuant to the Competition Act and the Financing
Order;
WHEREAS the Seller is willing to sell Bondable Transition Property to the
Issuer;
WHEREAS the Issuer, in order to finance the purchase of the Transferred
Bondable Transition Property, will from time to time issue Transition Bonds
under the Indenture; and
WHEREAS the Issuer, to secure its obligations under the Transition Bonds
and the Indenture, will pledge its right, title and interest in, to and under
the Transferred Bondable Transition Property to the Trustee for the benefit of
the owners of the Transition Bonds.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 DEFINITIONS. Capitalized terms used and not otherwise defined
herein shall have the meanings assigned to such terms in Appendix A of the
Indenture dated as of ________, 2002 between the Issuer and The Bank of New
York, as Trustee (the "Trustee").
SECTION 1.02 OTHER DEFINITIONAL PROVISIONS.
(a) Non-capitalized terms used herein that are defined in the Competition
Act, as the context requires, have the meanings assigned to such terms in the
Competition Act, but without giving effect to amendments to the Competition Act
after the date hereof which have a material adverse effect on the Issuer or the
owners of the Transition Bonds.
(b) All terms defined in this Sale Agreement have the defined meanings when
used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(c) The words "hereof", "herein", "hereunder" and words of similar import
when used in this Sale Agreement refer to this Sale Agreement as a whole and not
to any particular provision of this Sale Agreement; Article, Section, Schedule
and Exhibit references contained in this Sale Agreement are references to
Articles, Sections, Schedules and Exhibits in or to this Sale Agreement unless
otherwise specified; and the term "including" means "including without
limitation".
(d) The definitions contained in this Sale Agreement are applicable to the
singular as well as the plural forms of such terms.
ARTICLE II
CONVEYANCE OF TRANSFERRED BONDABLE TRANSITION PROPERTY
SECTION 2.01 CONVEYANCE OF INITIAL TRANSFERRED BONDABLE TRANSITION
PROPERTY.
(a) In consideration of the Issuer's payment to or upon the order of the
Seller of $__________, less the underwriting discount, original issue discount
and the financial advisory fee for the Transition Bonds in the aggregate amount
of $__________, or $__________ (the "Initial Purchase Price") by wire transfer
of funds immediately available on the date hereof to Seller's account no.
[INSERT ACCOUNT NO. DETAILS], subject to the conditions specified in Section
2.02, the Seller does hereby irrevocably sell, transfer, assign and otherwise
convey to the Issuer, without recourse (subject to the obligations of the Seller
herein), all right, title and interest of the Seller in, to and under the
Initial Transferred Bondable Transition Property identified in the ▇▇▇▇ of Sale
delivered pursuant to Section 2.02(a) on or prior to the Initial Transfer Date
(such sale, transfer, assignment and conveyance of the Initial Transferred
Bondable Transition Property to include, to the fullest extent permitted by the
Competition Act, the New Jersey UCC and the Delaware UCC, the assignment of all
revenues, collections, claims, rights, payments, money or proceeds of or arising
from the Transition Bond Charges related to the Initial Transferred Bondable
Transition Property, as the same may be adjusted from time to time). Such sale,
transfer, assignment and conveyance of the Initial Transferred Bondable
Transition Property is hereby expressly stated to be a sale or other absolute
transfer and, pursuant to Section 23.a. of the Competition Act, shall constitute
a sale or other absolute transfer of all of the Seller's right, title and
interest in, to and under, and not a borrowing secured by, the Initial
Transferred Bondable Transition Property. The preceding sentence is the
statement referred to in Section 23.a. of the Competition Act. The Seller agrees
and confirms that upon payment of the Initial Purchase Price and the execution
and delivery of this Sale Agreement and the related ▇▇▇▇ of Sale, the Seller
shall have no right, title or interest in, to or under the Initial Transferred
Bondable Transition Property.
(b) Subject to the conditions specified in Section 2.02, the Issuer does
hereby purchase the Initial Transferred Bondable Transition Property from the
Seller for the consideration set forth in clause (a) above.
(c) The Seller and the Issuer each acknowledge and agree that the Initial
Purchase Price for the Initial Transferred Bondable Transition Property sold
pursuant to this Sale Agreement is equal to its fair market value at the time of
sale.
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(d) The Seller and the Issuer further agree that from time to time the
Seller may offer to sell, transfer, assign and convey, and the Issuer may
purchase, Subsequent Transferred Bondable Transition Property as of Subsequent
Transfer Dates, subject to the conditions specified in Section 2.02, in exchange
for consideration to be agreed upon (the "Subsequent Purchase Price"). The
Seller and the Issuer hereby agree that each such sale, transfer, assignment and
conveyance of any Subsequent Transferred Bondable Transition Property shall
include, to the fullest extent permitted by the Competition Act, the New Jersey
UCC and the Delaware UCC, the assignment of all revenues, collections, claims,
rights, payments, money or proceeds of or arising from the Transition Bond
Charges related to the Subsequent Transferred Bondable Transition Property, as
the same may be adjusted from time to time. Such sale, transfer, assignment and
conveyance of the Subsequent Transferred Bondable Transition Property is hereby
expressly stated to be a sale or other absolute transfer and, pursuant to
Section 23.a. of the Competition Act, shall constitute a sale or other absolute
transfer of all of the Seller's right, title and interest in, to and under, and
not a borrowing secured by, the Subsequent Transferred Bondable Transition
Property. The preceding sentence is the statement referred to in Section 23.a.
of the Competition Act. The Seller agrees and confirms that after giving effect
to any sale contemplated by this clause (d) and the execution and delivery of
the related ▇▇▇▇ of Sale, the Seller shall have no right, title or interest in,
to or under the Subsequent Transferred Bondable Transition Property.
(e) Notwithstanding the foregoing, in the event that any sale, transfer,
assignment and conveyance of any Transferred Bondable Transition Property is
determined by a court of competent jurisdiction not to be a true and absolute
sale as contemplated by the parties hereto and by the Competition Act, then such
sale, transfer, assignment and conveyance shall be treated as a pledge of such
Transferred Bondable Transition Property and the Seller shall be deemed to have
granted, and does hereby grant, as of the date hereof a security interest in
such Transferred Bondable Transition Property to the Issuer to secure a payment
obligation incurred by the Seller in the amount paid by the Issuer for the
Transferred Bondable Transition Property.
SECTION 2.02 CONDITIONS TO CONVEYANCE OF BONDABLE TRANSITION PROPERTY. The
obligation of the Seller to sell, and the obligation of the Issuer to purchase,
Bondable Transition Property upon any Transfer Date shall be subject to and
conditioned upon the satisfaction or waiver of each of the following conditions:
(a) on or prior to the Transfer Date, the Seller shall deliver to the
Issuer a duly executed ▇▇▇▇ of Sale identifying the Bondable Transition Property
to be conveyed as of that date, substantially in the form of Exhibit A;
(b) as of the Transfer Date, no breach by the Seller of its
representations, warranties or covenants in this Sale Agreement shall exist and
the Seller shall have delivered to the Issuer and the Trustee an Officers'
Certificate to such effect and no Servicer Default shall have occurred and be
continuing;
(c) as of the Transfer Date:
(i) the Issuer shall have sufficient funds available to pay the
purchase price for the Transferred Bondable Transition Property to be
conveyed on such date; and
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(ii) all conditions set forth in the Indenture to the issuance
of one or more Series of Transition Bonds intended to provide such funds
shall have been satisfied or waived;
(d) on or prior to the Transfer Date, the Seller shall have taken all
actions required under the Competition Act, the Financing Order, the New Jersey
UCC and the Delaware UCC, including, without limitation, filings under the New
Jersey UCC and the Delaware UCC, to transfer to the Issuer ownership of the
Transferred Bondable Transition Property to be conveyed on such date, free and
clear of all Liens other than Liens created by the Issuer pursuant to the
Indenture, and the Issuer shall have taken any action required for the Issuer to
grant to the Trustee a valid perfected security interest in the Collateral and
maintain such security interest as of such date, including any filings under the
New Jersey UCC and the Delaware UCC;
(e) in the case of any sale of Subsequent Transferred Bondable Transition
Property only, the Seller shall have provided the Issuer and each Rating Agency
with a notice specifying the Subsequent Transfer Date for the Subsequent
Transferred Bondable Transition Property not later than ten (10) days prior to
such Subsequent Transfer Date;
(f) the Seller shall have delivered to each Rating Agency and to the
Issuer:
(i) an Opinion of Counsel to the Seller with respect to the
transfer of the Transferred Bondable Transition Property then being
conveyed to the Issuer, substantially in the form of Exhibit B, and
(ii) an Opinion of Counsel to the Seller, substantially in the
form of Exhibit C;
(g) the Seller shall have delivered to the Trustee and the Issuer an
Officers' Certificate confirming the satisfaction of each condition precedent
specified in this Section 2.02; and
(h) the Seller shall have received the Initial Purchase Price or the
Subsequent Purchase Price, as applicable, in funds immediately available on the
applicable Transfer Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF The SELLER
As of each Transfer Date, the Seller makes the following representations
and warranties on which the Issuer has relied and will rely in acquiring
Transferred Bondable Transition Property. The following representations and
warranties are made under existing law as in effect as of such Transfer Date.
The Seller shall not be in breach of any representation or warranty herein as a
result of a change in law occurring after such Transfer Date. The
representations and warranties shall survive the sale of Transferred Bondable
Transition Property to the Issuer and the pledge thereof to the Trustee pursuant
to the Indenture.
SECTION 3.01 ORGANIZATION AND GOOD STANDING. The Seller is a corporation
duly organized and in good standing under the laws of the State of New Jersey,
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with the full corporate power and authority to own its properties and conduct
its business as currently owned and conducted.
SECTION 3.02 DUE QUALIFICATION. The Seller is duly qualified to do business
as a foreign corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or lease of
its property or the conduct of its business requires such qualifications,
licenses or approvals (except where the failure to so qualify and to obtain such
licenses and approvals would not be reasonably likely to have a material adverse
effect on the Seller's business, operations, assets, revenues, properties or
prospects).
SECTION 3.03 POWER AND AUTHORITY. The Seller has the full corporate power
and authority to execute and deliver this Sale Agreement and to carry out its
terms; the Seller has the full corporate power and authority to own the Bondable
Transition Property and to sell, transfer, assign and otherwise convey the
Transferred Bondable Transition Property to the Issuer, and the Seller has duly
authorized such sale, transfer, assignment and conveyance to the Issuer by all
necessary corporate action; and the execution, delivery and performance of this
Sale Agreement have been duly authorized by the Seller by all necessary
corporate action.
SECTION 3.04 BINDING OBLIGATION. Each of the Sale Agreement and the ▇▇▇▇ of
Sale constitutes a legal, valid and binding obligation enforceable against the
Seller in accordance with its terms, subject to bankruptcy, receivership,
insolvency, reorganization, moratorium or other laws affecting creditors' rights
generally from time to time in effect and to general principles of equity
(regardless of whether considered in a proceeding in equity or at law).
SECTION 3.05 NO VIOLATION. The execution and delivery by the Seller of each
of this Sale Agreement and the ▇▇▇▇ of Sale, the performance by the Seller of
the transactions contemplated by each of the Sale Agreement and the ▇▇▇▇ of Sale
and the fulfillment by the Seller of the terms of this Sale Agreement and the
▇▇▇▇ of Sale do not conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time) a default
under, the Restated Certificate of Incorporation or By-Laws of the Seller, or
any indenture, agreement or other instrument to which the Seller is a party or
by which the Seller is bound, or result in the creation or imposition of any
lien upon any of the Seller's properties pursuant to the terms of any such
indenture, agreement or other instrument, except as contemplated by each of the
Basic Documents, or violate any law or any order, rule or regulation applicable
to the Seller of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over the Seller or its properties.
SECTION 3.06 NO PROCEEDINGS. Except as disclosed in the prospectus and the
related prospectus supplement, each dated __________, 2002, of the Issuer,
relating to the Transition Bonds (together, the "Prospectus"), there are no
proceedings or investigations pending or, to the Seller's best knowledge,
threatened, before any court, federal or State regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over the Seller
or its properties:
(a) asserting the invalidity of any of the Basic Documents or the
Transition Bonds;
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(b) seeking to prevent the issuance of the Transition Bonds or the
consummation of any of the transactions contemplated by the Basic Documents or
the Transition Bonds;
(c) seeking any determination or ruling that could reasonably be expected
to materially and adversely affect the performance by the Seller or the Issuer
of their respective obligations under, or the validity or enforceability of, the
Basic Documents or the Transition Bonds;
(d) challenging the Seller's treatment of the Transition Bonds as debt of
the Seller for federal and State income tax purposes; and
(e) challenging the Competition Act, the Financing Order or the
Restructuring Order (insofar as it relates to the sale, assignment or transfer
of the Transferred Bondable Transition Property and the sale of the Transition
Bonds).
SECTION 3.07 APPROVALS. Except for the filing of financing statements and
continuation statements under the New Jersey UCC and the Delaware UCC, no
approval, authorization, consent, order or other action of, or filing with, any
court, federal or State regulatory body, administrative agency or other
governmental instrumentality is required in connection with the execution and
delivery by the Seller and the Issuer of this Sale Agreement, the performance by
the Seller and the Issuer of the transactions contemplated hereby or the
fulfillment by the Seller and the Issuer of the terms hereof, except those that
have been obtained or made.
SECTION 3.08 THE TRANSFERRED BONDABLE TRANSITION PROPERTY.
(a) Information. All information provided by the Seller to the Issuer with
respect to the Transferred Bondable Transition Property is correct in all
material respects.
(b) Effect of Transfer. Each sale, transfer, assignment and conveyance
herein contemplated constitutes a sale or other absolute transfer of all right,
title and interest of the Seller in, to and under the Transferred Bondable
Transition Property from the Seller to the Issuer; upon execution and delivery
of this Sale Agreement and the related ▇▇▇▇ of Sale, the Seller will have no
right, title or interest in, to or under the Transferred Bondable Transition
Property; and the Transferred Bondable Transition Property would not be part of
the estate of the Seller as debtor in the event of the filing of a bankruptcy
petition by or against the Seller under any bankruptcy law.
(c) Transfer Filings. The Seller is the sole owner of the Transferred
Bondable Transition Property sold to the Issuer on the Transfer Date; and the
Transferred Bondable Transition Property will have been validly sold, assigned,
transferred and conveyed to the Issuer free and clear of all Liens other than
Liens created by the Issuer pursuant to the Indenture. All actions or filings,
including filings with the New Jersey Secretary of State and the Delaware
Secretary of State under the New Jersey UCC and the Delaware UCC, respectively,
necessary in any jurisdiction to give the Issuer a valid perfected ownership
interest in the Transferred Bondable Transition Property and to grant to the
Trustee a perfected security interest in the Transferred Bondable Transition
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Property, free and clear of all Liens of the Seller or anyone else, other than
the Issuer or the Trustee, have been made.
(d) Financing Order Irrevocable; Process Valid; No Litigation; Etc.
(i) The Financing Order, as issued on January __, 2002, has been
issued by the BPU in accordance with the Competition Act, and such order
and the process by which it was issued comply with all applicable laws,
rules and regulations, including but not limited to the due process
requirements of the United States Constitution and the New Jersey
Constitution. The Financing Order has become effective pursuant to the
Competition Act and is and as of the date of issuance of any Transition
Bonds will be in full force and effect, final and non-appealable.
(ii) As of the Series Issuance Date, the Transition Bonds of the
related Series will be entitled to the protections provided by the
Competition Act and, in accordance with the Competition Act, the Financing
Order and the Transition Bond Charge authorized therein, subject to the
periodic Transition Bond Charge Adjustments authorized in the Financing
Order, have become irrevocable and, upon issuance, each Advice Letter will
be irrevocable, final and uncontestable.
(iii)
(A) Under the Competition Act, the State of New Jersey may
not limit, alter or impair the Transferred Bondable Transition Property or
other rights vested in the Seller, the Issuer and the Trustee (for the
benefit of the Transition Bondholders) pursuant to the Financing Order
until the Transition Bonds are fully paid and discharged, or in any way
limit, alter, impair or reduce the value or amount of the Transferred
Bondable Transition Property as approved by the BPU pursuant to the
Financing Order; and
(B) Under the Contract Clauses of the United States
Constitution and the New Jersey Constitution, the State of New Jersey,
including the BPU, could not constitutionally take any action of a
legislative character, including the repeal or amendment of the
Competition Act, which would substantially limit, alter or impair the
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, and under the Takings Clauses
of the United States and New Jersey Constitutions, the State of New Jersey
could not repeal or amend the Competition Act or take any other action in
contravention of its pledge and agreement quoted above without paying just
compensation to the 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. There is no assurance, however, that,
7
even if a court were to award just compensation, it would be sufficient to
pay the full amount of principal of and interest on the Transition Bonds.
(iv) There is no order by any court providing for the revocation,
alteration, limitation or other impairment of the Competition Act, the
Financing Order, the Restructuring Order (insofar as it relates to the sale
of the Transferred Bondable Transition Property), any Advice Letter, the
Transferred Bondable Transition Property or the Transition Bond Charge or
any rights arising under any of them or to enjoin the performance of any
obligations under the Financing Order.
(v) No other approval, authorization, consent, order or other
action of, or filing with, any court, federal or State regulatory body,
administrative agency or other governmental instrumentality is required in
connection with the creation, sale, transfer, assignment or conveyance of
the Transferred Bondable Transition Property, except those that have been
obtained or made.
(e) Assumptions. The assumptions used in calculating the Transition Bond
Charge in any Advice Letter delivered by the Issuer or the Seller to the BPU
pursuant to the Financing Order are reasonable and made in good faith.
(f) Creation of Transferred Bondable Transition Property.
(i) For purposes of the Competition Act, the New Jersey UCC and
the Delaware UCC, the Transferred Bondable Transition Property, upon
transfer thereof to the Issuer, will constitute a presently existing
property right;
(ii) the Bondable Transition Property includes, without
limitation, (A) the irrevocable right of the Seller to charge, collect and
receive, and be paid from collections of, the Transition Bond Charge in
the amounts necessary to provide for the full recovery of the Bondable
Stranded Costs which have been determined to be recoverable in the
Financing Order and (B) all rights of the Seller under the Financing
Order, including all rights to obtain periodic adjustments of the
Transition Bond Charge pursuant to the Competition Act, and all revenues,
collections, payments, money and proceeds arising under, or with respect
to, all of the foregoing;
(iii) the Bondable Transition Property is not subject to any
Lien created by a previous indenture; and
(iv) the Financing Order, including the right to collect the
Transition Bond Charge, has become irrevocable.
SECTION 3.09 SOLVENCY. After giving effect to the sale, transfer,
assignment and conveyance of any Transferred Bondable Transition Property
hereunder, the Seller:
(a) is solvent and expects to remain solvent;
(b) is adequately capitalized to conduct its business and affairs
considering its size and the nature of its business and intended purposes;
8
(c) is not engaged in, nor does it expect to engage in, a business for
which its remaining property represents an unreasonably small portion of its
capital;
(d) reasonably believes that it will be able to pay its debts as they come
due; and
(e) is able to pay its debts as they mature and does not intend to incur,
or does not believe that it will incur, indebtedness that it will not be able to
repay at its maturity.
ARTICLE IV
COVENANTS OF THE SELLER
SECTION 4.01 SELLER'S EXISTENCE. So long as any of the Transition Bonds are
outstanding, the Seller shall keep in full force and effect its existence as a
corporation and remain in good standing under the laws of the jurisdiction of
its organization, and shall obtain and preserve its qualification to do business
in each jurisdiction in which such qualification is or will be necessary to
protect the validity and enforceability of this Sale Agreement and each other
instrument or agreement to which the Seller is a party necessary to the proper
administration of this Sale Agreement and the transactions contemplated hereby.
SECTION 4.02 NO LIENS OR CONVEYANCES. Except for the sales, transfers,
assignments and conveyances hereunder, the Seller shall not sell, pledge,
assign, transfer or otherwise convey to any other Person, or grant, create,
incur, assume or suffer to exist any Lien on, any of the Transferred Bondable
Transition Property, whether now existing or hereafter created, or any interest
therein. The Seller shall not at any time assert any Lien against or with
respect to any Transferred Bondable Transition Property, and shall defend the
right, title and interest of the Issuer and the Trustee, as assignee of the
Issuer, in, to and under the Transferred Bondable Transition Property, whether
now existing or hereafter created, against all claims of third parties claiming
through or under the Seller.
SECTION 4.03 USE OF PROCEEDS. The Seller shall use the proceeds from the
sale of the Bondable Transition Property in accordance with the Financing Order
and the Competition Act.
SECTION 4.04 DELIVERY OF COLLECTIONS. In the event that the Seller is no
longer acting as the Servicer under the Servicing Agreement, if the Seller
receives collections of the Transition Bond Charge with respect to the
Transferred Bondable Transition Property or the proceeds thereof, the Seller
shall pay the Servicer, on behalf of the Issuer, all payments received by the
Seller in respect thereof as soon as practicable after receipt thereof by the
Seller, but in no event later than two Business Days after such receipt.
SECTION 4.05 NOTICE OF LIENS. The Seller shall notify the Issuer and the
Trustee promptly after becoming aware of any Lien on any Transferred Bondable
Transition Property other than the conveyances hereunder or under the Indenture.
SECTION 4.06 COMPLIANCE WITH LAW. The Seller shall comply with its
organizational or governing documents and all laws, treaties, rules, regulations
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and determinations of any governmental instrumentality applicable to the Seller,
except to the extent that failure to so comply would not adversely affect the
Issuer's or the Trustee's interests in the Transferred Bondable Transition
Property or under any of the Basic Documents or the Seller's performance of its
obligations hereunder or under any other Basic Document to which Seller is a
party.
SECTION 4.07 COVENANTS RELATED TO TRANSFERRED BONDABLE TRANSITION PROPERTY.
(a) So long as any of the Transition Bonds are Outstanding, the Seller
shall:
(i) treat the Transition Bonds as debt of the Issuer and not of
the Seller, except for financial accounting or tax reporting purposes;
(ii) clearly disclose in its financial statements that it is not
the owner of the Transferred Bondable Transition Property and that the
assets of the Issuer are not available to pay creditors of the Seller or
any of its Affiliates (other than the Issuer);
(iii) clearly disclose the effects of all transactions between
the Seller and the Issuer in accordance with generally accepted accounting
principles; and
(iv) not own or purchase any Transition Bonds.
(b) The Seller agrees that upon the sale, transfer, assignment and
conveyance by the Seller of the Transferred Bondable Transition Property to the
Issuer pursuant to this Sale Agreement:
(i) to the fullest extent permitted by law, including the
Competition Act and applicable BPU Regulations, the Issuer shall have all
of the rights originally held by the Seller with respect to the
Transferred Bondable Transition Property (other than the rights
exclusively conferred upon an electric public utility as set forth in the
Competition Act), including the right to collect any amounts payable by
any Customer or Third Party in respect of such Transferred Bondable
Transition Property, notwithstanding any objection or direction to the
contrary by the Seller; and
(ii) any payment by any Customer or Third Party to the Issuer
shall discharge such Customer's or such Third Party's obligations in
respect of such Transferred Bondable Transition Property to the extent of
such payment, notwithstanding any objection or direction to the contrary
by the Seller.
(c) So long as any of the Transition Bonds are Outstanding:
(i) in all proceedings relating directly or indirectly to the
Transferred Bondable Transition Property, the Seller shall (A)
affirmatively certify and confirm that it has sold the Transferred Bondable
Transition Property to the Issuer (other than for financial accounting or
tax reporting purposes) and (B) not make any statement or reference in
respect of the Transferred Bondable Transition Property that is
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inconsistent with the ownership thereof by the Issuer (other than for
financial accounting or tax reporting purposes); and
(ii) the Seller shall not take any action in respect of the
Transferred Bondable Transition Property except as contemplated by the
Basic Documents.
SECTION 4.08 INDEMNIFICATION NOTICE. The Seller shall deliver an Officer's
Certificate to the Issuer and Trustee promptly after having obtained knowledge
of the occurrence of any event which requires or which, with the giving or
notice or the passage of time or both, would require the Seller to make any
indemnification payment pursuant to this Sale Agreement.
SECTION 4.09 PROTECTION OF TITLE. The Seller shall execute and file such
filings, and cause to be executed and filed such filings, and take all such
actions, all in such manner and in such places as may be required by law fully
to preserve, maintain and protect the interests of the Issuer and the Trustee in
the Transferred Bondable Transition Property, including all filings required
under the New Jersey UCC and the Delaware UCC relating to the transfer of the
ownership of the Transferred Bondable Transition Property by the Seller to the
Issuer and the pledge of the Transferred Bondable Transition Property by the
Issuer to the Trustee. The Seller shall deliver (or cause to be delivered) to
the Issuer and the Trustee file-stamped copies of, or filing receipts for, any
document filed as provided above, as soon as available following such filing.
The Seller shall institute any action or proceeding necessary to compel the
performance by the BPU or the State of New Jersey of any of their obligations or
duties under the Competition Act or the Financing Order, and the Seller agrees
to take such legal or administrative actions, including defending against or
instituting and pursuing legal actions and appearing or testifying at hearings
or similar proceedings, in each case as may be reasonably necessary:
(a) to protect the Issuer and the Trustee for the benefit of the
Transition Bondholders from claims, State actions or other actions or
proceedings of third parties which, if successfully pursued, would
result in a breach of any representation or warranty set forth in
Article III; or
(b) to block or overturn any attempts to cause a repeal of, modification
of or supplement to the Competition Act, the Financing Order, any
Advice Letter, the Restructuring Order (to the extent it affects the
rights of Transition Bondholders or the validity or value of the
Bondable Transition Property), the Bondable Transition Property or the
rights of the Transition Bondholders by legislative enactment or
constitutional amendment that would be adverse to the Issuer, the
Trustee or the Transition Bondholders.
The costs of any such actions or proceedings shall be reimbursed by the Issuer
to the Seller from amounts on deposit in the Collection Account as an Operating
Expense. The Seller's obligations pursuant to this Section 4.09 shall survive
and continue notwithstanding that the payment of Operating Expenses pursuant to
the Indenture may be delayed (it being understood that the Seller may be
required to advance its own funds to satisfy its obligation hereunder). The
Seller designates the Issuer as its agent and attorney-in-fact to execute any
filings of financing statements, continuation statements or other instruments
11
required of the Issuer pursuant to this Section 4.09, it being understood that
the Issuer shall have no obligation to execute any such instruments.
SECTION 4.10 TAXES. So long as any of the Transition Bonds are Outstanding,
the Seller shall, and shall cause each of its subsidiaries to, pay all material
taxes, assessments and governmental charges imposed upon it or any of its
properties or assets (including any Bondable Transition Property which the
Seller is deemed to own for tax purposes) or with respect to any of its
franchises, business, income or property before any penalty accrues thereon if
the failure to pay any such material taxes, assessments and governmental charges
would, after any applicable grace periods, notices or other similar
requirements, result in a Lien on the Transferred Bondable Transition Property;
provided, that no such tax need be paid if the Seller or one of its subsidiaries
is contesting the same in good faith by appropriate proceedings promptly
instituted and diligently conducted and if the Seller or such subsidiary has
established appropriate reserves as shall be required in conformity with
generally accepted accounting principles.
ARTICLE V
ADDITIONAL UNDERTAKINGS OF THE SELLER
The Seller hereby undertakes the obligations contained in this Article V
and agrees that the Issuer shall have the right to assign its rights with
respect to such obligations to the Trustee for the benefit of the Transition
Bondholders.
SECTION 5.01 LIABILITY OF THE SELLER; INDEMNITIES.
(a) The Seller shall be liable in accordance herewith only to the extent of
the obligations specifically undertaken by the Seller under this Sale Agreement.
(b) The Seller shall indemnify the Issuer, any Swap Counterparty and the
Trustee, for itself and on behalf of the Transition Bondholders, and each of
their respective officers, directors, managers, employees and agents, for, and
defend and hold harmless each such person from and against, any and all taxes
(other than any taxes imposed on the Transition Bondholders solely as a result
of their ownership of the Transition Bonds) that may at any time be imposed on
or asserted against any such person under existing law as of any Transfer Date
as a result of the sale, transfer, assignment and conveyance of the Transferred
Bondable Transition Property by the Seller to the Issuer, the acquisition or
holding of the Transferred Bondable Transition Property by the Issuer or the
issuance and sale by the Issuer of the Transition Bonds, including any sales,
gross receipts, general corporation, personal property, privilege, franchise or
license taxes not recovered by the Issuer through the Transition Bond Charge or
through the Market Transition Charge, but excluding any taxes imposed as a
result of a failure of such person to properly withhold or remit taxes imposed
with respect to payments on any Transition Bond, it being understood that the
Transition Bondholders shall be entitled to enforce their rights against the
Seller under this Section 5.01(b) solely through a cause of action brought for
their benefit by the Trustee.
(c) The Seller shall indemnify the Issuer, any Swap Counterparty and the
Trustee, for itself and on behalf of the Transition Bondholders, and each of
12
their respective officers, directors, managers, employees and agents, for, and
defend and hold harmless each such person from and against, (i) any and all
amounts of principal of and interest on the Transition Bonds (including amounts
owed to Holders of any floating rate Transition Bonds) not paid when due or when
scheduled to be paid in accordance with their terms and the amount of any
deposits to the Issuer required to have been made in accordance with the terms
of the Basic Documents or the Financing Order which are not made when so
required, in each case as a result of the Seller's breach of any of its
representations, warranties or covenants contained in this Sale Agreement, and
(ii) any and all liabilities, obligations, claims, actions, suits or payments of
any kind whatsoever that may be imposed on or asserted against any such Person,
other than any liabilities, obligations or claims for, or payments of, principal
of, or interest on, the Transition Bonds, together with any reasonable costs and
expenses incurred by such Person, as a result of the Seller's breach of any of
its representations, warranties or covenants contained in this Sale Agreement.
(d) Indemnification under this Section 5.01 shall survive the resignation
or removal of the Trustee and the termination of this Sale Agreement and shall
include reasonable fees and expenses of investigation and litigation (including
reasonable attorneys' fees and expenses). The Seller shall not indemnify any
party under this Section 5.01 for any changes in law after the Transfer Date.
(e) The indemnification obligation of the Seller under this Section 5.01
shall be pari passu with all other general unsecured obligations of the Seller.
SECTION 5.02 MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS
OF, THE SELLER. Any Person:
(a) into which the Seller may be merged or consolidated and which succeeds
to all or substantially all of the electric distribution business of
the Seller,
(b) which results from the division of the Seller into two or more Persons
and which succeeds to all or substantially all of the electric
distribution business of the Seller,
(c) which may result from any merger or consolidation to which the Seller
shall be a party and which succeeds to all or substantially all of the
electric distribution business of the Seller,
(d) which may succeed to the properties and assets of the Seller
substantially as a whole and which succeeds to all or substantially
all of the electric distribution business of the Seller, or
(e) which may otherwise succeed to all or substantially all of the
electric distribution business of the Seller,
which Person in any of the foregoing cases executes an agreement of assumption
to perform every obligation of the Seller under this Sale Agreement, shall be
the successor to the Seller hereunder without the execution or filing of any
document or any further act by any of the parties to this Sale Agreement;
provided, however, that
13
(i) immediately after giving effect to such transaction, no
representation, warranty or covenant made pursuant to Article III or
Article IV, as the case may be, shall have been breached and no
Servicer Default, and no event that, after notice or lapse of time,
or both, would become a Servicer Default, shall have occurred and be
continuing,
(ii) the Seller shall have delivered to the Issuer and the Trustee an
Officers' Certificate and an Opinion of Counsel each stating that
such consolidation, merger or succession and such agreement of
assumption comply with this Section 5.02 and that all conditions
precedent, if any, provided for in this Sale Agreement relating to
such transaction have been complied with,
(iii) the Seller shall have delivered to the Issuer and the Trustee an
Opinion of Counsel either
(A) stating that, in the opinion of such counsel, all filings to be
made by the Seller, including New Jersey UCC filings and the
Delaware UCC filings, that are necessary fully to preserve and
protect fully the respective interests of the Issuer and the
Trustee in the Transferred Bondable Transition Property have
been executed and filed, and reciting the details of such
filings, or
(B) stating that, in the opinion of such counsel, no such action is
necessary to preserve and protect such interests,
(iv) the Rating Agencies shall have received prior written notice of such
transaction and
(v) the Seller shall have delivered to the Issuer and the Trustee an
opinion of independent tax counsel (as selected by, and in form and
substance reasonably satisfactory to, the Seller, and which may be
based on a ruling from the Internal Revenue Service) to the effect
that, for federal income tax purposes, such consolidation or merger
will not result in a material adverse federal income tax consequence
to the Seller, the Issuer, the Trustee or the Holders of the
Outstanding Transition Bonds.
The Seller shall not consummate any transaction referred to in clauses (a), (b),
(c), (d) or (e) above except upon execution of the above described agreement of
assumption and compliance with clauses (i), (ii), (iii), (iv) and (v) above.
When any Person acquires the properties and assets of the Seller substantially
as a whole and becomes the successor to the Seller in accordance with the terms
of this Section 5.02, then upon the satisfaction of all of the other conditions
of this Section 5.02, the Seller shall automatically and without further notice
be released from its obligations hereunder.
SECTION 5.03 LIMITATION ON LIABILITY OF THE SELLER AND OTHERS. The Seller
and any director, officer, employee or agent of the Seller may rely in good
faith on the advice of counsel or on any document of any kind, prima facie
properly executed and submitted by any Person, respecting any matters arising
hereunder. Subject to Section 4.09, the Seller shall not be under any obligation
14
to appear in, prosecute or defend any legal action that is not incidental to its
obligations under this Sale Agreement, and that in its opinion may involve it in
any expense or liability.
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 6.01 AMENDMENT.
(a) This Sale Agreement may be amended by the Seller and the Issuer, with
the consent of the Trustee, provided written notice of the substance of the
amendment is provided by the Issuer to each Rating Agency.
(b) Prior to the execution of any amendment to this Sale Agreement, the
Issuer and the Trustee shall be entitled to receive and rely upon an Opinion of
Counsel stating that the execution of such amendment is authorized or permitted
by this Sale Agreement. The Issuer and the Trustee may, but shall not be
obligated to, enter into any such amendment which affects their own rights,
duties or immunities under this Sale Agreement or otherwise.
SECTION 6.02 NOTICES. Unless otherwise specifically provided herein, all
notices, directions, consents and waivers required under the terms and
provisions of this Sale Agreement shall be in English and in writing, and any
such notice, direction, consent or waiver may be given by United States
first-class mail, reputable overnight courier service, facsimile transmission or
electronic mail (confirmed by telephone, United States first-class mail or
reputable overnight courier service in the case of notice by facsimile
transmission or electronic mail) or any other customary means of communication,
and any such notice, direction, consent or waiver shall be effective when
delivered or transmitted, or if mailed, five days after deposit in the United
States first-class mail with proper postage for first-class mail prepaid:
(a) in the case of the Seller, at Jersey Central Power & Light Company,
▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, Attention: Treasurer;
(b) in the case of the Issuer, at JCP&L Transition Funding LLC, c/o GPU
Service, Inc., ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, Attention:
Managers;
(c) in the case of Moody's, at ▇▇▇▇▇'▇ Investors Service, Inc., ABS
Monitoring Department, ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇;
(d) in the case of Standard & Poor's, at Standard & Poor's Ratings Group,
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Asset Backed
Surveillance Department;
(e) in the case of Fitch, at Fitch, Inc., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ABS Surveillance; and
(f) in the case the Trustee, at the address provided for notices or
communications to the Trustee in Section 11.04(a) of the Indenture;
15
or, as to each of the foregoing, at such other address as shall be designated by
written notice to the other parties.
SECTION 6.03 ASSIGNMENT BY SELLER. Subject to Section 5.02, this Sale
Agreement may not be assigned by the Seller.
SECTION 6.04 ASSIGNMENT TO TRUSTEE. The Seller hereby acknowledges and
consents to any pledge, assignment and grant of a security interest by the
Issuer to the Trustee pursuant to the Indenture for the benefit of the
Transition Bondholders of all right, title and interest of the Issuer in, to and
under the Transferred Bondable Transition Property and the proceeds thereof and
the assignment of any or all of the Issuer's rights hereunder to the Trustee.
SECTION 6.05 LIMITATIONS ON RIGHTS OF OTHERS. The provisions of this Sale
Agreement are solely for the benefit of the Seller, the Issuer and the Trustee,
on behalf of itself and the Transition Bondholders, and nothing in this Sale
Agreement, whether express or implied, shall be construed to give to any other
Person any legal or equitable right, remedy or claim in the Collateral or under
or in respect of this Sale Agreement or any covenants, conditions or provisions
contained herein.
SECTION 6.06 SEVERABILITY. Any provision of this Sale Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 6.07 SEPARATE COUNTERPARTS. This Sale Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 6.08 HEADINGS. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
SECTION 6.09 GOVERNING LAW. THIS SALE AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW JERSEY, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 6.10 NONPETITION COVENANT. Notwithstanding any prior termination of
this Sale Agreement or the Indenture, the Seller hereby covenants and agrees
that it shall not, prior to the date which is one year and one day after the
termination of the Indenture and the payment in full of the Transition Bonds,
any other amounts owed under the Indenture, including, without limitation and
any amounts owed to third-party credit enhancers, and any amounts owed under the
Interest Rate Swap Agreement, acquiesce, petition or otherwise invoke or, cause
the Issuer to invoke, the process of any court or government authority for the
purpose of commencing or sustaining a case against the Issuer under any federal
or State bankruptcy, insolvency or similar law or appointing a receiver,
16
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Issuer or any substantial part of the property of the Issuer, or ordering
the winding up or liquidation of the affairs of the Issuer.
17
IN WITNESS WHEREOF, the parties hereto have caused this Sale Agreement to
be duly executed and delivered by their respective duly authorized officers as
of the date and year first above written.
JCP&L TRANSITION FUNDING LLC,
as Issuer
By:
Name:
Title:
JERSEY CENTRAL POWER & LIGHT COMPANY,
as Seller
By:
Name:
Title:
18
EXHIBIT A
▇▇▇▇ OF SALE
For good and valuable consideration, the receipt of which is hereby
acknowledged, JERSEY CENTRAL POWER & LIGHT COMPANY, a New Jersey corporation
(the "Seller"), does hereby sell, assign, transfer and convey to JCP&L
TRANSITION FUNDING LLC, a Delaware limited liability company (the "Issuer"),
without recourse except as provided in the Bondable Transition Property Sale
Agreement dated as of __________, 2002 (the "Sale Agreement") between the Issuer
and the Seller, all of the Seller's right, title and interest in, to and under
all of its Bondable Transition Property, which sale, assignment, transfer and
conveyance of such Bondable Transition Property shall include, as provided in
the Competition Act, the sale, assignment, transfer and conveyance of all of the
Seller's right, title and interest in, to and under all revenues, collections,
payments, money or proceeds arising under or with respect to the Transition Bond
Charge related to such Bondable Transition Property, as the same may be adjusted
from time to time in accordance with the Competition Act and the Financing
Order, to have and to hold the same unto the Issuer and to the successors and
assigns of the Issuer, forever.
Capitalized terms used and not otherwise defined herein shall have the
meanings assigned to such terms in Appendix A of the Indenture dated as of
________, 2002 between the Issuer and The Bank of New York, as Trustee.
This ▇▇▇▇ of Sale is governed by the laws of the State of New Jersey.
IN WITNESS WHEREOF, the Seller has duly executed and delivered this ▇▇▇▇ of
Sale this ___ day of __________, 2002.
JERSEY CENTRAL POWER & LIGHT COMPANY,
as Seller
By: ____________________________________
Name:
Title:
Accepted this ___ day of __________, 2002.
JCP&L TRANSITION FUNDING LLC,
as Issuer
By: _______________________________
Name:
Title:
▇-▇
▇▇▇▇▇▇▇ ▇
▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇
▇-▇
EXHIBIT C
OPINION OF COUNSEL
C-1