AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 26, 1999
REGISTRATION NO. 333-75369
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NUMBER 4 TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PP&L TRANSITION BOND COMPANY LLC
(Issuer with respect to the Bonds)
(Exact name as specified in registrant's Certificate of Formation)
DELAWARE 23-3004428
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
PP&L TRANSITION BOND COMPANY LLC,
TWO NORTH NINTH STREET, GENA 9-2, ROOM 3
ALLENTOWN, PENNSYLVANIA 18101
(610)774-7934
(Address, including zip code, and telephone number,
including area code, of registrant's
principal executive offices)
JAMES E. ABEL
TWO NORTH NINTH STREET, GENA 9-2, ROOM 3
ALLENTOWN, PENNSYLVANIA 18101
(610) 774-7934
(Name, address, including zip code, and telephone number
including area code, of agent for service)
-----------
Copies to:
CHRISTOPHER J. KELL DEAN E. CRIDDLE
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP ORRICK, HERRINGTON & SUTCLIFFE LLP
919 THIRD AVENUE 400 SANSOME STREET
NEW YORK, NEW YORK 10022 SAN FRANCISCO, CA 94111
(212) 735-2160 (415) 773-5783
Approximate date of proposed sale to the public: As soon as practicable
after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|
If delivery of the Prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE (2)
<S> <C> <C> <C> <C>
Transition Bonds Issuable in $ 2,570,000,000 100% $2,570,000,000 $ 714,460
Series
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Previously paid.
</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON ANY DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON A DATE AS THE SECURITIES AND EXCHANGE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
EXPLANATORY NOTE
This Pre-Effective Amendment No. 4 to Form S-3 Registration
Statement for file no. 333-75369 which is referred to in this document as
the Registration Statement is being filed for the purpose of filing the
expenses of issuance and distribution which is required in Item 14 of this
Registration Statement, as well as to file the following exhibits:
EXHIBIT NUMBER DESCRIPTION
1.1 Form of Underwriting Agreement
4.1.2 Form of Amended and Restated Limited Liability Company
Agreement for PP&L Transition Bond Company LLC
4.4 Form of Transition Bonds
27.1 Financial Data Schedule
99.2 Internal Revenue Service Private Letter Ruling
pertaining to Transition Bonds
The expenses of issuance and distribution and the exhibits listed above
were not included in Amendment No. 3 to the Registration Statement filed
with the Securities and Exchange Commission on July 20, 1999.
In addition, this Pre-Effective Amendment No.4 to the Registration
Statement is being filed for the purpose of refiling Exhibit 5.1, which has
been revised to specify that the Transition Bonds will be fully paid and
non-assessable.
PART II
Item 14. Other Expenses of Issuance and Distribution
The following is an itemized list of the estimated expenses to be
incurred in connection with the offering of the securities being offered
hereunder other than underwriting discounts and commissions.
Registration Fee....................................................$ 714,460
Printing and Engraving Expenses.....................................$ 100,000
Trustee's Fees and Expenses........................................ $ 26,500
Legal Fees and Expenses.............................................$1,600,000
Blue Sky Fees and Expenses......................................... $ 12,000
Accountants' Fees and Expenses..................................... $ 75,000
Rating Agency Fees..................................................$ 500,000
Miscellaneous Fees and Expenses.....................................$ 75,000
----------
Total........................................... ...................$3,102,960
==========
Item 15. Indemnification of Members and Mangers.
Section 18-108 of the Delaware Limited Liability Company Act
provides that, subject to specified standards and restrictions, if any, as
are set forth in the limited liability company agreement, a limited
liability company shall have the power to indemnify and hold harmless any
member or manager or other person from and against any and all claims and
demands whatsoever.
The Amended and Restated Limited Liability Company Agreement (the
"LLC Agreement") of PP&L Transition Bond Company LLC (the "Issuer")
provides that, to the fullest extent permitted by law, the Issuer shall
indemnify its members and managers against any liability incurred in
connection with any proceeding in which any member or manager may be
involved as a party or otherwise by reason of the fact that the member or
manager is or was serving in its capacity as a member or manager, unless
this liability is based on or arises in connection with the member's or
manager's own willful misconduct or gross negligence, the failure to
perform the obligations set forth in the LLC Agreement, or taxes, fees or
other charges on, based on or measured by any fees, commissions or
compensation received by the managers in connection with any of the
transactions contemplated by the LLC Agreement and related agreements.
Item 16. Exhibits
Exhibit No. Description
1.1 Form of Underwriting Agreement.
4.1.1 Limited Liability Company Agreement of PP&L Transition Bond
Company LLC.**
4.1.2 Form of Amended and Restated Limited Liability Company Agreement
for PP&L Transition Bond Company LLC.
4.2 Certificate of Formation of PP&L Transition Bond Company LLC.**
4.3 Form of Indenture.**
4.4 Form of Transition Bonds.
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP, relating to
legality of the Transition Bonds (supersedes Exhibit 5.1 to
Amendment No. 1 to PP&L Transition Bond Company LLC's Registration
Statement on Form S-3 filed with the Securities and Exchange
Commission on June 7, 1999).
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP with respect
to material federal tax matters.**
8.2 Opinion of Morgan, Lewis & Bockius LLP with respect to material
Commonwealth of Pennsylvania tax matters.**
10.1 Form of Sale Agreement.**
10.2 Form of Contribution Agreement.**
10.3 Form of Servicing Agreement.**
10.4 Joint Petition for Full Settlement of PP&L's Restructuring Plan
and Related Appeals and Application for a Qualified Rate Order and
Application for Transfer of Generation Assets dated August 12,
1998.**
23.1.1 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in
its opinions filed as Exhibit 5.1, which is an exhibit to this
Amendment No. 4 to the PP&L Transition Bond Company LLC's
Registration Statement, and Exhibit 8.1, which was previously
filed).
23.1.2 Consent of Morgan, Lewis & Bockius LLP (included in its opinion
filed as Exhibit 8.2).**
23.2 Consent of PricewaterhouseCoopers LLP.**
25.1 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of the Bank of New York, as Trustee under the
Indenture.**
27.1 Financial Data Schedule.
99.1.1 Qualified Rate Order issued August 27, 1998.** 99.1.2 Supplemental
Order issued on May 21, 1999.**
99.2 Internal Revenue Service Private Letter Ruling pertaining to
Transition Bonds.
** Previously filed
Item 17. Undertakings
The undersigned Registrant on behalf of PP&L Transition Bond
Company, LLC (the "Issuer") hereby undertakes as follows:
(a) (1) to file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement: (i)
to include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933, as amended; (ii) to reflect in the prospectus any facts or
events arising after the effective date of the Registration Statement (or
the most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) of the Securities Act of 1933, as amended, if, in
the aggregate, the changes in volume and price represent no more than a
twenty percent change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective Registration
Statement; and (iii) to include any material information with respect to
the plan of distribution not previously disclosed in the Registration
Statement or any material change in this information in the Registration
Statement; provided, however, that (a)(1)(i) and (a)(i)(ii) will not apply
if the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed pursuant to Section
13 or Section 15(d) of the Securities Exchange Act of 1934, as amended,
that are incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, as amended, each relevant post-effective
amendment shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of these securities at
that time shall be deemed to be the initial bona fide offering hereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) That, for purposes of determining any liability under the
Securities Act of 1933, as amended, each filing of the Registrant's annual
report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange
Act of 1934, as amended) with respect to the Issuer that is incorporated by
reference in the Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of these securities at that time shall be deemed to be the initial
bona fide offering thereof.
(c) That insofar as indemnification for liabilities arising under
the Securities Act of 1933, as amended, may be permitted to directors,
officers and controlling persons of the registrant pursuant to the
provisions described under Item 15 above, or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission
this indemnification is against public policy as expressed in the Act and
is, theretofore, unenforceable. In the event that a claim for
indemnification against these liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer of
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by the director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether this indemnification by it is against
public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of this issue.
(d) That, for purposes of determining any liability under the
Securities Act of 1933, as amended, the information omitted from the form
of prospectus filed as part of this Registration Statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(i) or (4) or 497(h) under the Securities Act of
1933, as amended, shall be deemed to be part of this Registration Statement
as of the time it was declared effective.
(e) That, for the purpose of determining any liability under the
Securities Act of 1933, as amended, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
these securities at that time shall be deemed to be the initial bona fide
offering thereof.
(f) The undersigned registrant hereby undertakes to file an
application for the purpose of determining the eligibility of the Trustee
to act under subsection (a) of Section 310 of the Trust Indenture Act of
1939, as amended, in accordance with the rules and regulations prescribed
by the Commission under Section 305(b)(2) of the Trust Indenture Act of
1939, as amended.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3 and that the
security rating requirement of Form S-3 will be met by the time of sale,
and has duly caused this Amendment Number 4 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Allentown, Commonwealth of Pennsylvania, on July 26, 1999.
PP&L Transition Bond Company LLC
By: /s/ John R. Biggar
----------------------------
Name: John R. Biggar
Title: Manager
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
July 26, 1999 /s/ John R. Biggar
- ------------------- ----------------------------
Date Name: John. R. Biggar
Title: Manager
July 26, 1999 /s/ James E. Abel
- ------------------- ----------------------------
Date Name: James E. Abel
Title: Manager
July 26, 1999 /s/ James S. Pennington
- ------------------- ----------------------------
Date Name: James S. Pennington
Title: Manager
INDEX TO EXHIBITS
Exhibit No. Description
1.1 Form of Underwriting Agreement.
4.1.1 Limited Liability Company Agreement of PP&L Transition Bond
Company LLC.**
4.1.2 Form of Amended and Restated Limited Liability Company Agreement
for PP&L Transition Bond Company LLC.
4.2 Certificate of Formation of PP&L Transition Bond Company LLC.**
4.3 Form of Indenture.**
4.4 Form of Transition Bonds.
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP, relating to
legality of the Transition Bonds (supersedes Exhibit 5.1 to
Amendment No. 1 to PP&L Transition Bond Company LLC's Registration
Statement on Form S-3 filed with the Securities and Exchange
Commission on June 7, 1999).
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP with respect
to material federal tax matters.**
8.2 Opinion of Morgan, Lewis & Bockius LLP with respect to material
Commonwealth of Pennsylvania tax matters.**
10.1 Form of Sale Agreement.**
10.2 Form of Contribution Agreement.**
10.3 Form of Servicing Agreement.**
10.4 Joint Petition for Full Settlement of PP&L's Restructuring Plan
and Related Appeals and Application for a Qualified Rate Order and
Application for Transfer of Generation Assets dated August 12,
1998.**
23.1.1 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in
its opinions filed as Exhibit 5.1, which is an exhibit to this
Amendment No. 4 to the PP&L Transition Bond Company LLC's
Registration Statement, and Exhibit 8.1, which was previously
filed).
23.1.2 Consent of Morgan, Lewis & Bockius LLP (included in its opinion
filed as Exhibit 8.2).**
23.2 Consent of PricewaterhouseCoopers LLP.**
25.1 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of the Bank of New York, as Trustee under the
Indenture.**
27.1 Financial Data Schedule.
99.1.1 Qualified Rate Order issued August 27, 1998.** 99.1.2 Supplemental
Order issued on May 21, 1999.**
99.2 Internal Revenue Service Private Letter Ruling pertaining to
Transition Bonds.
** Previously filed
EXHIBIT 1.1
FORM OF UNDERWRITING AGREEMENT
FORM OF UNDERWRITING AGREEMENT
PP&L TRANSITION BOND COMPANY LLC TRANSITION BONDS, SERIES 1999-[__]
PP&L TRANSITION BOND COMPANY LLC
New York, New York
[date]
To the Representative
named in Schedule I hereto
of the Underwriters named in
Schedule II hereto
Ladies and Gentlemen:
1. Introduction. PP&L Transition Bond Company LLC (the
"ISSUER") proposes to sell to the underwriters named in Schedule II hereto
(the "UNDERWRITERS"), for whom you (the "REPRESENTATIVE") are acting as
representative, the principal amount of the PP&L Transition Bond Company
LLC Transition Bonds, Series 1999-[__] (the "BONDS"), identified in
Schedule I hereto. If the firm or firms listed in Schedule II hereto
include only the firm or firms listed in Schedule I hereto, then the terms
"Underwriters" and "Representative", as used herein, shall each be deemed
to refer to such firm or firms.
The Bonds will be issued pursuant to a base indenture dated as of
[date], as supplemented by the Series 1999-[__] Supplemental Indenture
thereto (as so supplemented, the "INDENTURE"), between the Issuer and The
Bank of New York, as bond trustee (the "TRUSTEE"). The Bonds will be
secured primarily by Transferred Intangible Transition Property sold to the
Issuer by CEP Securities Co. LLC, a Delaware limited liability company (the
"SELLER"). The sole member and owner of the entire equity interest in the
Seller is CEP Reserves, Inc., a Delaware corporation ("RESERVES"). All the
issued and outstanding capital stock of Reserves is owned by CEP Group,
Inc., a Pennsylvania corporation ("GROUP"). All the issued and outstanding
capital stock of Group is owned by PP&L, Inc., an operating electric
utility incorporated under the laws of the Commonwealth of Pennsylvania
(the "COMPANY"). The Seller acquired the Intangible Transition Property
pursuant to an Intangible Transition Property Contribution Agreement among
the Company, Group, Reserves and the Seller dated May 13, 1999 (as amended
and supplemented from time to time, the "CONTRIBUTION AGREEMENT"). The
Seller's sale of Transferred Intangible Transition Property to the Issuer
will occur pursuant to a Sale Agreement between the Seller and the Issuer,
dated as of [date] (the "SALE AGREEMENT"). The Transferred Intangible
Transition Property will be serviced pursuant to a Servicing Agreement,
dated as of [date], between the Company, as servicer, and the Issuer, as
owner of the Transferred Intangible Transition Property (as amended and
supplemented from time to time, the "SERVICING AGREEMENT").
Capitalized terms used and not otherwise defined in this Underwriting
Agreement shall have the meanings given to them in the Indenture.
2. Representations and Warranties. I. Each of the Company and
the Issuer represents and warrants to, and agrees with, each Underwriter as
set forth below in this Section 2.I. Certain terms used in this
Underwriting Agreement are defined in Section 2.I(c) below.
(a) If the offering of the Bonds is a Delayed Offering (as
specified in Schedule I hereto), paragraph (i) below is applicable
and, if the offering of the Bonds is a Non-Delayed Offering (as so
specified), paragraph (ii) below is applicable.
(i) The Issuer and the 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 "SEC") a registration statement (the file number of which is
set forth in Schedule I hereto) on such Form, including a basic
prospectus, for registration under the Act of the offering and
sale of the 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 Bonds is a Delayed Offering and, although the
Basic Prospectus may not include all the information with respect
to the 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 SEC 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 Bonds and the offering thereof. As filed, such final
prospectus supplement shall include all required information with
respect to the Bonds and the offering thereof and, except to the
extent the Representative shall agree in writing to a
modification, shall be in all substantive respects in the form
furnished to you prior to the Execution Time or, to the extent
not completed at the Execution Time, shall contain only such
specific additional information and other changes (beyond that
contained in the Basic Prospectus and any Preliminary Final
Prospectus) as the Issuer has advised you, prior to the Execution
Time, will be included or made therein.
(ii) The Issuer and the Bonds meet the requirements for the
use of Form S-3 under the Act and the Issuer has filed with the
SEC a registration statement (the file number of which is set
forth in Schedule I hereto) on such Form, including a basic
prospectus, for registration under the Act of the offering and
sale of the 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 SEC either (x) a final prospectus
supplement relating to the 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 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 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 in all
material respects 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,
the Seller nor the Company makes any representations or warranties as
to (i) that part of the Registration Statement that shall constitute
the Statement of Eligibility and Qualification (Forms T-1) under the
Trust Indenture Act of the Trustee 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 terms that follow, when used in this Underwriting
Agreement, shall have the meanings indicated. The term the "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 that
describes the 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 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 Bonds, including the Basic
Prospectus, included in the Registration Statement at the Effective
Date. "REGISTRATION STATEMENT" shall mean the registration statement
referred to in paragraph (a) above, including incorporated documents,
exhibits and financial statements, as amended at the Execution Time
(or, if not effective at the Execution Time, in the form in which it
shall become effective) and, in the event any post-effective amendment
thereto becomes effective prior to the Closing Date (as hereinafter
defined), shall also mean such registration statement as so amended.
Such term shall include any Rule 430A Information deemed to be
included therein at the Effective Date as provided by Rule 430A.
"Rule 415", "Rule 424", "Rule 430A" and "Regulation S-K" refer to such
rules or regulation under the Act. "Rule 430A Information" means
information with respect to the 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 that 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
that 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 Bonds is a Non-Delayed Offering
or a Delayed Offering shall be set forth in Schedule I hereto.
(d) PricewaterhouseCoopers LLP are independent certified public
accountants with respect to the Company, the Issuer and the Seller as
required by the Act and the rules and regulations of the Commission
thereunder.
(e) The Issuer has been duly organized and is validly existing
in good standing as a limited liability company under the laws of the
State of Delaware, has the power and authority to conduct its business
as presently conducted and as described in the Final Prospectus and is
duly qualified as a foreign 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 Bonds and purchase the Transferred Intangible
Transition Property as described in the Final Prospectus.
(f) The Company is a validly existing and subsisting corporation
under the laws of the Commonwealth of Pennsylvania; 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.
(g) 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 to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditor's rights and to general equity
principles.
(h) The Bonds have been duly authorized and executed by the
Issuer and will conform to the description thereof in the Prospectus;
and when the Bonds are 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 Bonds will
constitute the legal, valid and binding obligations of the Issuer,
enforceable in accordance with their terms, subject to bankruptcy,
insolvency, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditor's rights and to
general principles of equity;
(i) The issue and sale of the Bonds by the Issuer, the
execution, delivery and compliance by the Issuer with all of the
provisions of each of this Underwriting Agreement and the Basic
Documents to which the Issuer 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 is a party or by which the Issuer is
bound or to which any of the property or assets of the Issuer is
subject, which conflict, breach, violation or default would be
material to the issue of the Bonds or would have a material adverse
effect on the Issuer, nor will such action result in any violation of
the Issuer's Certificate of Formation or Limited Liability Company
Agreement or any statute, order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Issuer or its
properties.
(j) The assignment of the Transferred Intangible Transition
Property by the Company to the Seller, the execution, delivery and
compliance by the Company with all of the provisions of each of this
Underwriting Agreement and the Basic Documents to which the Company 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 Company is a
party or by which the Company is bound or to which any of the property
or assets of the Company is subject, which conflict, breach, violation
or default would be material to the issue and sale of the Bonds or
would have a material adverse effect on the financial position or
results of operations 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 any statute, order, rule or regulation of any
court or governmental agency or body having jurisdiction over the
Company or any of its properties.
(k) Except for:
(i) the order of the SEC making the Registration Statement
effective,
(ii) permits and similar authorizations required under the
securities or blue sky laws of any jurisdiction, and
(iii) the qualified rate order of the Pennsylvania
Public Utilities Commission dated August 27, 1998, as
supplemented by an order dated May 21, 1999 (collectively, the
"QRO"),
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.
(l) 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 to bankruptcy,
insolvency, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditor's rights and to
general equity principles.
(m) [any other representations necessary to support assumptions
in opinions]
II. The Seller represents and warrants to each Underwriter as
set forth below in this Section 2.II.
(a) The Seller is a limited liability company duly organized and
in good standing under the laws of the State of Delaware, with power
and authority to own its properties and conduct its business as
currently owned or conducted, 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 Seller. The
Seller had at all relevant times, and has, the requisite power,
authority and legal right to own the Intangible Transition Property
and to sell the Transferred Intangible Transition Property to the
Issuer as described in the Final Prospectus.
(b) This Underwriting Agreement has been duly authorized,
executed and delivered by the Seller and constitutes a valid and
binding obligation of the Seller enforceable in accordance with its
terms, subject to bankruptcy, insolvency, reorganization, moratorium
and similar laws of general applicability relating to or affecting
creditor's rights and to general equity principles.
(c) Each of the Basic Documents to which the Seller is a party
has been duly authorized by the Seller and when executed and delivered
by the Seller will constitute a valid and binding obligation of the
Seller enforceable in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditor's rights and
to general equity principles.
(d) The sale of the Transferred Intangible Transition Property
by the Seller to the Issuer, the execution, delivery and compliance by
the Seller with this Underwriting Agreement and the Basic Documents to
which the Seller 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 Seller is a party or by which the Seller is bound or to
which any of the property or assets of the Seller is subject, which
conflict, breach, violation or default would be material to the issue
and sale of the Bonds, nor will such action result in any violation of
the provisions of the Seller's Certificate of Formation or Limited
Liability Company Agreement or any statute, order, rule or regulation
of any court or governmental agency or body having jurisdiction over
the Seller or any of its properties.
(e) No consent, approval, authorization or other order of any
governmental authority is legally required for the execution and
delivery of this Underwriting Agreement by the Seller.
III. The Company represents and warrants to each Underwriter as
set forth below in this Section 2.III.
(a) Group has been duly organized and is validly existing in
good standing as a corporation under the laws of the Commonwealth of
Pennsylvania, has the power and authority to conduct its business as
presently conducted 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 Group; and Group has all requisite
power and authority to enter into the Contribution Agreement.
(b) The Contribution Agreement has been duly authorized,
executed and delivered by Group and constitutes a valid and binding
obligation of Group enforceable in accordance with its terms, subject
to bankruptcy, insolvency, reorganization, moratorium and similar laws
of general applicability relating to or affecting creditor's rights
and to general equity principles.
(c) The execution and delivery by Group of the Contribution
Agreement 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 Group is a party
or by which Group is bound or to which any of the property or assets
of Group is subject, which conflict, breach, violation or default
would be material to the issue and sale of the Bonds, nor will such
action result in any violation of the provisions of the Articles of
Incorporation or Bylaws of Group or any statute, order, rule or
regulation of any court or governmental agency or body having
jurisdiction over Group or any of its properties.
(d) No consent, approval, authorization or other order of any
governmental authority is legally required for the execution and
delivery of the Contribution Agreement by Group.
IV. The Company represents and warrants to each Underwriter as
set forth below in this Section 2.IV.
(a) Reserves has been duly organized and is validly existing in
good standing as a corporation under the laws of the State of
Delaware, has the power and authority to conduct its business as
presently conducted 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 Reserves; and Reserves has all
requisite power and authority to enter into the Contribution
Agreement.
(b) The Contribution Agreement has been duly authorized,
executed and delivered by Reserves and constitutes a valid and binding
obligation of Reserves enforceable in accordance with its terms,
subject to bankruptcy, insolvency, reorganization, moratorium and
similar laws of general applicability relating to or affecting
creditor's rights and to general equity principles.
(c) The execution and delivery by Reserves of the Contribution
Agreement, 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 Reserves is a
party or by which Reserves is bound or to which any of the property or
assets of Reserves is subject, which conflict, breach, violation or
default would be material to the issue and sale of the Bonds, nor will
such action result in any violation of the provisions of the Articles
of Incorporation or Bylaws of Reserves or any statute, order, rule or
regulation of any court or governmental agency or body having
jurisdiction over Reserves or any of its properties.
(d) No consent, approval, authorization or other order of any
governmental authority is legally required for the execution and
delivery of the Contribution Agreement by Reserves.
V. Each of the several Underwriters represents and warrants to,
and agrees with, the Issuer, its directors and such of its officers as
shall have signed the Registration Statement, and to each other
Underwriter, that the information furnished in writing to the Issuer
by, or through the Representative on behalf of, such Underwriter
expressly for use in the Registration Statement or the Prospectus does
not contain an untrue statement of a material fact and does not omit
to state a material fact in connection with such information required
to be stated therein or necessary to make such information not
misleading.
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 Bonds set
forth opposite such Underwriter's name in Schedule II hereto.
4. Delivery and Payment. Delivery of and payment for the 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 10 hereof (such date and time of delivery and payment
for the Bonds being herein called the "CLOSING DATE"). Delivery of the
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. Delivery of the Bonds shall
be made at such location as the Representative shall reasonably designate
at least one business day in advance of the Closing Date. The Bonds to be
so delivered initially shall be represented by Bonds registered in the name
of Cede & Co., as nominee of The Depository Trust Company ("DTC"). The
interests of beneficial owners of the Bonds will be represented by book
entries on the records of DTC and participating members thereof.
Definitive Bonds will be available only under limited circumstances.
The Issuer agrees to have the Bonds available for inspection,
checking and packaging by the Representative in New York, New York, not
later than 1:00 PM 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 Bonds, the Issuer will not
file any amendment of the Registration Statement or supplement
(including the Final Prospectus or any Preliminary Final
Prospectus) to the Basic Prospectus unless the Issuer has
furnished you a copy for your review prior to filing and will not
file any such proposed amendment or supplement to which you
reasonably object. Subject to the foregoing sentence, the Issuer
will cause the Final Prospectus, properly completed, and any
supplement thereto to be filed with the SEC 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 SEC
pursuant to Rule 424(b), (C) when any amendment to the
Registration Statement shall have been filed or become effective,
(D) of any request by the SEC for any amendment of the
Registration Statement or supplement to the Final Prospectus or
for any additional information, (E) of the issuance by the SEC 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 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 Bonds
is required to be delivered under the Act in connection with
sales by an Underwriter or dealer, any event occurs as a result
of which the Final Prospectus as then amended or supplemented
would include an 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 is necessary at any time to amend the
Registration Statement or supplement the Final Prospectus to
comply with the Act in connection with sales by an Underwriter or
dealer, the Issuer agrees to advise you of such event or
necessity, as the case may be, and, promptly upon request made by
you, to prepare and file with the Commission an amendment or
supplement which will correct such statement or omission or an
amendment which will effect such compliance, provided that the
expense of preparing and filing any such amendment or supplement
(A) which is necessary in connection with such a delivery of a
prospectus more than nine months after the date of this
Underwriting Agreement or (B) which relates solely to the
activities of any Underwriter shall be borne by the Underwriter
or Underwriters or the dealer or dealers requiring the same; and
provided further that you shall, upon inquiry by the Company,
advise the Company whether or not any Underwriter or dealer which
shall have been selected by you retains any unsold Bonds and, for
the purposes of this subsection (ii), the Company shall be
entitled to assume that the distribution of the Bonds has been
completed when it is advised by you that no Underwriter or such
dealer retains any Bonds.
(iii) As soon as practicable, the Issuer will make
generally available to the Bondholders and to the Representative
an earnings statement or statements of the Issuer which will
satisfy the provisions of Section 11(a) of the Act and Rule 158
under the Act.
(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 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
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 Bonds
and will arrange for the determination of the legality of the
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,
other than those arising out of the offering or sale of the
Bonds, in any jurisdiction where it is not now so subject or meet
any other requirement in connection with this clause (v) deemed
by the Issuer to be unduly burdensome.
(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 Bonds).
(vii) For a period from the date of this Underwriting
Agreement until the retirement of the Bonds, or until such time
as the Underwriters shall cease to maintain a secondary market in
the Bonds, whichever occurs first, the Issuer will deliver to the
Representative the annual statements of compliance and the annual
independent auditor's servicing reports furnished to the Issuer
or the Trustee pursuant to the Servicing Agreement or the
Indenture, as applicable, as soon as such statements and reports
are furnished to the Issuer or the Trustee.
(viii) So long as any of the 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 SEC
under the Exchange Act, or mailed to Bondholders, (B) a copy of
any filings with the Pennsylvania Public Utility Commission
pursuant to the QRO including, but not limited to, any annual or
more frequent adjustment filings, and (C) from time to time, any
information concerning the Company or the Issuer as the
Representative may reasonably request.
(ix) To the extent, if any, that any rating necessary to
satisfy the condition set forth in Section 7(l) of this
Underwriting Agreement is conditioned upon the furnishing of
documents or the taking of other actions by the Issuer on or
after the Closing Date, the Issuer shall furnish such documents
and take such other actions.
(x) The Issuer will file with the Commission a report on
Form 8-K setting forth all Computational Materials and ABS Term
Sheets (as such terms are defined in Section 6) provided to the
Issuer by any Underwriter and identified by it as such within the
time period allotted for such filing pursuant to the No-Action
Letters (as defined in Section 6); provided, however, that prior
to any filing of the Computational Materials and ABS Term Sheets
by the Issuer, such Underwriter must comply with its obligations
pursuant to Section 6 and the Issuer must receive a letter from
PricewaterhouseCoopers LLP, certified public accountants,
satisfactory in form and substance to the Issuer and such
Underwriter, to the effect that such accountants have performed
specified procedures, all of which have been agreed to by the
Issuer and such Underwriter, as a result of which they have
determined that the information included in the Computational
Materials and ABS Term Sheets (if any), provided by such
Underwriter to the Issuer for filing on Form 8-K pursuant to
Section 6 and this subsection (x), and which the accountants have
examined in accordance with such agreed upon procedures, is
accurate except as to such matters that are not deemed by the
Issuer and such Underwriter to be material. The Issuer shall
file any corrected Computational Materials or ABS Terms Sheets
described in Section 6(a)(iv) as soon as practicable following
receipt thereof.
(b) Covenants of the Seller: The Seller 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), to the
extent, if any, that any rating necessary to satisfy the condition set
forth in Section 7(l) of this Underwriting Agreement is conditioned
upon the furnishing of documents or the taking of other actions by the
Seller on or after the Closing Date, the Seller shall furnish such
documents and take such other actions.
(c) Covenants of the Company. The Company covenants and agrees
with the several Underwriters that, to the extent that the Issuer or
the Seller has not already performed such act pursuant to Section 5(a)
or Section 5(b):
(i) the Company will use its best efforts to cause the
Registration Statement, if not effective at the Execution Time,
and any amendment thereto, to become effective. The Company will
use its best efforts to prevent the issuance by the SEC of any
stop order suspending the effectiveness of the Registration
Statement and, if issued, to obtain as soon as possible the
withdrawal thereof. If, at any time when a prospectus relating
to the 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 Company will, or will cause the
Issuer to (A) prepare and file with the SEC, subject to the
second sentence of paragraph (a) of this Section 5, an amendment
or supplement which will correct such statement or omission or
effect such compliance and (B) supply any supplemented Prospectus
to you in such quantities as you may reasonably request.
(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 (other than the Bonds).
(iii) so long as any of the 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 Issuer filed with the SEC under the Exchange Act, or mailed
to Bondholders, (B) a copy of any filings with the Pennsylvania
Public Utility Commission pursuant to the QRO, including, but not
limited to, any annual or more frequent adjustment filings, and
(C) from time to time, any information concerning the Company,
the Seller, and the Issuer as the Representative may reasonably
request.
(iv) to the extent, if any, that any rating necessary to
satisfy the condition set forth in Section 7(l) 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.
6. Offering by Underwriters.
(a) In connection with the offering of the Bonds, each
Underwriter may prepare and provide to prospective investors (i) items
similar to computational materials ("COMPUTATIONAL MATERIALS") as
defined in the no-action letter of May 20, 1994 issued by the
Commission to Kidder, Peabody Acceptance Corporation I, Kidder,
Peabody & Co. Incorporated and Kidder Structured Asset Corporation, as
made applicable to other issuers and underwriters by the Commission in
response to the request of the Public Securities Association dated May
24, 1994, as well as the PSA Letter referred to below (collectively,
the "NO-ACTION LETTERS") and (ii) items similar to ABS term sheets
("ABS TERM SHEETS") as defined in the no-action letter of February 17,
1995 issued by the Commission to the Public Securities Association,
subject to the following conditions:
(i) All Computational Materials and ABS Term Sheets
provided to prospective investors that are required to be filed
pursuant to the No-Action Letters shall bear a legend
substantially in the form attached hereto as Exhibit A. The
Issuer shall have the right to require additional specific
legends or notations to appear on any Computational Materials or
ABS Term Sheets, the right to require changes regarding the use
of terminology and the right to determine the types of
information appearing therein. Notwithstanding the foregoing,
this subsection (i) will be satisfied if all Computational
Materials and ABS Term Sheets referred to herein bear a legend in
a form previously approved in writing by the Issuer.
(ii) Such Underwriter shall provide to the Issuer, for
approval by the Issuer, representative forms of all Computational
Materials and ABS Term Sheets prior to their first use, to the
extent such forms have not previously been approved by the Issuer
for use by such Underwriter. Such Underwriter shall provide to
the Issuer, for filing on Form 8-K as provided in Section
5(a)(x), copies (in such format as required by the Issuer) of all
Computational Materials and ABS Term Sheets that are required to
be filed with the Commission pursuant to the No-Action Letters.
The Underwriter may provide copies of the foregoing in a
consolidated or aggregated form including all information
required to be filed if filing in such format is permitted by the
No-Action Letters. All Computational Materials and ABS Term
Sheets described in this subsection (ii) must be provided to the
Issuer not later than 10:00 a.m. New York City time one business
day before filing thereof is required pursuant to the terms of
this Underwriting Agreement. Such Underwriter shall not provide
to any investor or prospective investor in the Bonds any
Computational Materials or ABS Term Sheets on or after the day on
which Computational Materials or ABS Term Sheets are required to
be provided to the Issuer pursuant to this paragraph (ii) (other
than copies of Computational Materials or ABS Term Sheets
previously submitted to the Issuer in accordance with this
paragraph (ii) for filing pursuant to Section 5(a)(x)), unless
such Computational Materials or ABS Term Sheets are preceded or
accompanied by the delivery of a Final Prospectus to such
investor or prospective investor.
(iii) All information included in the Computational
Materials and ABS Term Sheets shall be generated based on
substantially the same methodology and assumptions that are used
to generate the information in the Registration Statement as set
forth therein. However, the Computational Materials and ABS Term
Sheets may include information based on alternative methodologies
or assumptions if specified therein. If any Computational
Materials or ABS Term Sheets are based on assumptions with
respect to the Transferred Intangible Transition Property that
differ from the final Transferred Intangible Transition Property
Information (as defined in Section 8(a) in any material respect
or on Bond structuring terms that were revised in any material
respect prior to the printing of the Final Prospectus, the
Underwriters shall prepare revised Computational Materials or ABS
Term Sheets, as the case may be, based on the final Transferred
Intangible Transition Property Information and structuring
assumptions, deliver with the Final Prospectus such revised
Computational Materials and ABS Term Sheets to each recipient of
the preliminary versions thereof that indicated orally to any
Underwriter that such recipient would purchase all or any portion
of the Bonds, and include such revised Computational Materials
and ABS Term Sheets (marked, "AS REVISED") in the materials
delivered to the Issuer pursuant to paragraph (ii) above. The
expenses of each Underwriter relating to the preparation and
transmission of its Computational Materials and ABS Term Sheets,
including without limitation fees and expenses of accountants,
shall be the responsibility of the Issuer.
(iv) The Issuer shall not be obligated to file any
Computational Materials or ABS Term Sheets that have been
determined to contain any material error or omission, provided
that, at the request of any Underwriter, the Issuer will file
Computational Materials or ABS Term Sheets that contain a
material error or omission if clearly marked "SUPERSEDED BY
MATERIALS DATED _________" and accompanied by corrected
Computational Materials or ABS Term Sheets that are marked,
"MATERIAL PREVIOUSLY DATED ___________, AS CORRECTED." If,
within the period during which a prospectus relating to the Bonds
is required to be delivered under the Act, any Computational
Materials or ABS Term Sheets are determined, in the reasonable
judgment of the Issuer or such Underwriter, to contain a material
error or omission, such Underwriter shall prepare a corrected
version of such Computational Materials or ABS Term Sheets, shall
circulate such corrected Computational Materials or ABS Term
Sheets to all recipients of the prior versions thereof that
either indicated orally to such Underwriter they would purchase
all or any portion of the Bonds, or actually purchased all or any
portion thereof, and shall deliver copies of such corrected
Computational Materials or ABS Term Sheets (marked, "AS
CORRECTED") to the Issuer for filing with the Commission in a
subsequent Form 8-K submission (subject to the Issuer's obtaining
an accountant's comfort letter in respect of such corrected
Computational Materials and ABS Term Sheets, which the parties
acknowledge shall be at the expense of the Issuer).
(v) Each Underwriter shall be deemed to have represented,
as of the Closing Date, that, except for Computational Materials
and ABS Term Sheets provided to the Issuer pursuant to subsection
(ii) above, such Underwriter did not provide any prospective
investors with any information in written or electronic form in
connection with the offering of the Bonds that is required to be
filed with the Commission in accordance with the No-Action
Letters.
(vi) In the event any delay in the delivery by any
Underwriter to the Issuer of all Computational Materials and ABS
Term Sheets required to be delivered in accordance with
subsection (ii) above, or in the delivery of the accountant's
comfort letter in respect thereof pursuant to Section 5(a)(x),
the Issuer shall have the right to delay the release of the Final
Prospectus to investors or to any Underwriter, to delay the
Closing Date and to take other appropriate actions in each case
set forth in Section 5(a)(x) to file the Computational Materials
and ABS Term Sheets by the time specified therein.
(vii) Each Underwriter represents that it has in place, and
covenants that it shall maintain, internal controls and
procedures that it reasonably believes to be sufficient to ensure
full compliance with all applicable legal requirements of the No-
Action Letters with respect to the generation and use of
Computational Materials and ABS Term Sheets in connection with
the offering of the Bonds.
(b) Each Underwriter further represents and warrants that, if
and to the extent it has provided any prospective investors with any
Computational Materials or ABS Term Sheets prior to the date hereof in
connection with the offering of the Bonds, all of the conditions set
forth in clause (a) above have been satisfied with respect thereto.
7. Conditions to the Obligations of the Underwriters. The
obligations of the Underwriters to purchase the Bonds shall be subject to
the accuracy of the representations and warranties on the part of the
Issuer, the Seller, Group, Reserves and the Company contained in this
Underwriting Agreement, on the part of the Seller contained in Article III
of the Sale Agreement, and on the part of the Company contained in Section
5.01 of the Servicing Agreement and in Article III of the Contribution
Agreement as of the Execution Time and the Closing Date; to the accuracy of
the statements of the Issuer, the Seller, Group, Reserves and the Company
made in any certificates pursuant to the provisions hereof, to the
performance by the Issuer, the Seller, Group, Reserves and the Company of
their obligations hereunder, and to the following additional conditions:
(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 New York City time, on the date of
determination of the public offering price, if such determination
occurred at or prior to 3:00 PM New York City time on such date, or
(ii) 12:00 Noon on the business day following the day on which the
public offering price was determined, if such determination occurred
after 3:00 PM New York City 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 from Michael A.
McGrail, Esq., Senior Counsel, or such other counsel for the Company
as may be acceptable to the Representative, an opinion, dated the
Closing Date, to the effect that:
(i) the Company has been duly incorporated and is validly
existing as a corporation in good standing under laws of the
Commonwealth of Pennsylvania, with power and authority (corporate
and others) to own to its properties and conduct its businesses
as described in the Registration Statement and the Final
Prospectus, and is duly qualified to do business in all
jurisdictions (and is in good standing under the laws of all such
jurisdictions) to the extent that such qualification and good
standing is or shall be necessary to protect the validity and
enforceability of this Underwriting Agreement, the Contribution
Agreement, the Servicing Agreement, the Administration Agreement
and each other instrument or agreement necessary or appropriate
to the proper administration of this Underwriting Agreement and
the transactions contemplated hereby;
(ii) this Underwriting Agreement, the Contribution
Agreement, the Servicing Agreement, the Administration Agreement
and each of the other Basic Documents to which the Company is a
party, has been duly authorized, executed and delivered, and
constitutes a valid and legally binding obligation of the Company
enforceable according to its terms (except to the extent limited
by bankruptcy, insolvency, or reorganization laws or laws
relating to or affecting the enforcement of creditors' rights and
by general equity principles); and no authorization, notice,
consent or action by the holders of any of the outstanding shares
of capital stock of the Company is necessary with respect
thereto;
(iii) such counsel does not know of any legal or
governmental proceedings required to be described in the
Registration Statement or Final Prospectus which are not
described, or of any franchises, contracts or documents of a
character required to be described in the Registration Statement
or the Final Prospectus or to be filed as exhibits to the
Registration Statement which are not described and filed as
required; it being understood that such counsel need express no
opinion as to the financial statements and other financial data
contained in the Registration Statement or the Final Prospectus;
(iv) except as described in the Registration Statement and
the Final Prospectus, the Company holds all franchises,
certificates of public convenience, licenses and permits
necessary to carry on the utility business in which it is
engaged; and
(v) neither the execution and delivery of this Underwriting
Agreement, the Servicing Agreement, the Administration Agreement
nor the consummation of the transactions contemplated by this
Underwriting Agreement, the Contribution Agreement or the
Servicing Agreement, the Administration Agreement nor the
fulfillment of the terms of this Underwriting Agreement, the Sale
Agreement, the Contribution Agreement, the Administration
Agreement or the Servicing Agreement by the Company, will (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 articles of incorporation, bylaws or
other organizational documents of the Company, or 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, agreement or other instrument to which the
Company is a party or by which the Company is bound, (B) result
in the creation or imposition of any lien upon any properties of
the Company pursuant to the terms of any such indenture,
agreement or other instrument (other than as contemplated by the
Indenture), or (C) violate any law or any order, rule or
regulation promulgated by the United States or the Commonwealth
of Pennsylvania applicable to the Company of any court or of any
federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the
Company, or any of its properties.
(c) The Representative shall have received an opinion, portions
of which shall be rendered by Morgan, Lewis & Bockius LLP, counsel for
the Company, the Seller, Group, Reserves and the Issuer, portions of
which may be rendered by Skadden, Arps, Slate, Meagher & Flom LLP,
special counsel for the Issuer, portions of which may be rendered by
Thelen, Reid & Priest LLP, special counsel for the Company, and
portions of which may be rendered by Stewart & Associates, special
counsel for Reserves and the Seller, each such opinion dated the
Closing Date, in form and substance reasonably satisfactory to the
Representative, to the effect that:
(i) Each of the Issuer, the Seller, Group and Reserves has
been duly organized and is validly existing as a limited
liability company or corporation under the laws of the State of
Delaware or the Commonwealth of Pennsylvania, as applicable, with
power and authority to own its properties and conduct its
businesses as described in the Registration Statement and the
Final Prospectus and contemplated by the Contribution Agreement,
and is duly qualified to do business in all jurisdictions (and is
in good standing under the laws of all jurisdictions) to the
extent that such qualification and good standing is or shall be
necessary to protect the validity and enforceability of this
Underwriting Agreement, the Contribution Agreement, the Sale
Agreement, and each other instrument or agreement necessary or
appropriate to the proper administration of this Underwriting
Agreement and the transactions contemplated herein.
(ii) The Sale Agreement and the Contribution Agreement have
been duly authorized, executed and delivered by, and constitute
valid and legally binding obligations of, the Seller, Group
and/or Reserves, as applicable, enforceable according to their
terms (except to the extent limited by bankruptcy, insolvency, or
reorganization laws or laws relating to or affecting the
enforcement of creditors' rights and by general equity
principles); and no authorization, notice, consent or action by
the holders of any outstanding equity interest in the Seller,
Group or Reserves, as applicable, is necessary with respect
thereto.
(iii) This Underwriting Agreement, the Contribution
Agreement, the Servicing Agreement and all other Basic Documents
to which the Company is a party, have been duly authorized,
executed and delivered by the Company, and constitute valid and
legally binding obligations of the Company, enforceable according
to their terms (except to the extent limited by bankruptcy,
insolvency or reorganization laws or by laws relating to or
affecting the enforcement of creditors' rights and by general
equity principles) and no authorization, notice, consent or
actions by the holders of any outstanding capital stock of the
Company is necessary with respect thereto.
(iv) This Underwriting Agreement, the Sale Agreement, the
Servicing Agreement, the Bonds, the Indenture, and all other
Basic Documents to which the Issuer is a party have been duly
authorized, executed and delivered by the Issuer, and constitute
valid and legally binding obligations of the Issuer, enforceable
according to their terms (except to the extent limited by
bankruptcy, insolvency or reorganization laws or by laws relating
to or affecting the enforcement of creditors' rights and by
general equity principles); and no authorization, notice, consent
or action by the holders of any outstanding equity interest in
the Issuer is necessary with respect thereto.
(v) No consent, approval, authorization or order of any
court or governmental agency or body is required for the
consummation of the transactions contemplated herein, except such
as have been obtained under Pennsylvania law and such as may be
required under the blue sky laws of any jurisdiction in
connection with the purchase and distribution of the Bonds by the
Underwriters and such other approvals (specified in such opinion)
as have been obtained.
(vi) Sections 2804 and 2812 of the Competition Act are
authorized by and validly enacted pursuant to the Pennsylvania
Constitution.
(vii) The QRO has been duly authorized and issued by the
Pennsylvania Public Utility Commission in accordance with the
Competition Act; and the QRO and the process by which it was
issued comply with all applicable laws, rules and regulations,
and the QRO is in full force and effect.
(viii) The Bonds are "transition bonds" within the
meaning of the Competition Act, the Bonds are entitled to the
protections provided in Section 2812(c) of the Competition Act,
and the issuance and sale of the Bonds and the consummation of
the transactions contemplated by the Basic Documents comply in
all respects with the requirements of the Competition Act and the
QRO.
(ix) The Commonwealth Pledge set forth in Section 2812(c) of
the Competition Act is enforceable according to its terms
pursuant to Pennsylvania and federal law, and cannot be defeated
or modified to the detriment of holders of Bonds by any
subsequent law or other action by the Commonwealth of
Pennsylvania or by its agencies or instrumentalities.
(x) Under Section 2812(b)(3) of the Competition Act,
neither the QRO nor the intangible transition charges authorized
to be imposed and collected pursuant to the QRO may be revoked,
reduced, postponed, impaired or terminated by any subsequent
action of the Pennsylvania Public Utility Commission.
(xi) Under the Taking Clauses of the United States and
Commonwealth of Pennsylvania Constitutions, the Commonwealth of
Pennsylvania could not repeal or amend the Competition Act or
take any action in contravention of the pledge set forth in
Section 2812(c)(2) of the Competition Act without paying just
compensation to the holders of the Bonds if so doing would
constitute a permanent appropriation of the property interest of
the holders of the Bonds in the Transferred Intangible Transition
Property and would deprive the holders of the Bonds of their
reasonable expectations arising from their investment in the
Bonds, as described in the Final Prospectus.
(xii) Under the Contract Clauses of the United States and
Commonwealth of Pennsylvania Constitutions, the Commonwealth of
Pennsylvania could not repeal or amend the Competition Act or
take any other action that substantially impairs the rights of
holders of the Bonds, without making adequate compensation by law
pursuant to Section 2812(c)(2) of the Competition Act, unless
such action is a reasonable exercise of the sovereign powers of
the Commonwealth of Pennsylvania and is of a character
appropriate to the public purpose justifying such action. A
court would not hold that the Commonwealth of Pennsylvania could
reduce, modify, alter or take any other action with respect to
the Transferred Intangible Transition Property that would
substantially impair the rights of holders of the Bonds unless
this action is reasonable and appropriate to further a legitimate
public purpose.
(xiii) The Seller is an "assignee" within the
meaning of Section 2812(g) of the Competition Act and the
transfer of the Intangible Transition Property from the Company
to the Seller pursuant to the Contribution Agreement, and from
the Seller to the Issuer pursuant to the Sale Agreement, have
been effected in compliance with the Competition Act.
(xiv) Holders of the Bonds are entitled to the protections
provided in the first sentence of Section 2812(c)(2) of the
Competition Act. The QRO authorizes the issuance of up to $2.85
billion aggregate principal amount of transition bonds, the
transfer of Intangible Transition Property to the Issuer, the
imposition of Intangible Transition Charges, and the collection
thereof from consumers of electricity within the Company's
historic electric service area who receive electric distribution
or transmission service from the Company or its successor, annual
adjustments to the Intangible Transition Charges and, in the last
twelve months preceding the scheduled maturity of the latest
maturing Class of Bonds, monthly or quarterly adjustments, in
order to ensure full recovery of Intangible Transition Charges
and the appointment of the Company as servicer for a specified
contractual fee. The sections of the QRO authorizing the
preceding matters have been declared irrevocable and are entitled
to the protection of Section 2812(b)(3) of the Competition Act,
which prohibits the PUC from reducing, postponing, impairing or
terminating such an order or the Intangible Transition Charges
authorized to be imposed and collected under such an order by its
subsequent action.
(xv) No subsequent failure to satisfy any condition imposed
by the Competition Act with respect to the recovery of stranded
costs will adversely affect the creation, transfer or sale under
the Contribution Agreement and the Sale Agreement of the
Transferred Intangible Transition Property or the right to
collect Intangible Transition Charges in respect of the
Transferred Intangible Transition Property.
(xvi) The Issuer will not be subject to utility gross
receipts taxes or any other taxes imposed by the Commonwealth of
Pennsylvania or by any of its agencies, instrumentalities or
political subdivisions, other than franchise taxes in respect of
the capital stock value of the Issuer.
(xvii) The descriptions of both federal and
Pennsylvania tax consequences to holders of the Bonds set forth
in the Final Prospectus under "Material Income Tax Matters for
the Transition Bondholders" are accurate and complete in all
material respects.
(xviii) The transfer of the Intangible Transition
Property by the Company to the Seller pursuant to the
Contribution Agreement and the Assignment was an absolute
transfer of the entire right, title and interest in (as in a
"true sale" of) the Intangible Transition Property by the Company
directly to the Seller; this transfer of the Intangible
Transition Property is perfected; such transfer has priority over
any other assignment of the Intangible Transition Property; and
immediately prior to the execution and delivery of the Sale
Agreement, the Seller owns all right, title and interest in and
to the Intangible Transition Property.
(xix) Either (1) (A) the transfer of the Transferred
Intangible Transition Property by the Seller to the Issuer
pursuant to the Sale Agreement is an absolute transfer of the
entire right, title and interest of the Seller in (as in a "true
sale" of) the Transferred Intangible Transition Property, (B)
such transfer is perfected, and (C) such transfer has priority
over any other transfer by the Seller of the Transferred
Intangible Transition Property; or (2) (A) the Sale Agreement
creates in favor of the Issuer a security interest in the rights
of the Seller in the Transferred Intangible Transition Property,
(B) such security interest is valid and enforceable against the
Seller and third parties and has attached, (C) such security
interest is perfected, and (D) such perfected security interest
is of first priority.
(xx) A court would not order the substantive consolidation
of the assets and liabilities of the Issuer with those of the
Company in the event of a bankruptcy, reorganization or other
insolvency proceeding involving the Company.
(xxi) A court would not order the substantive consolidation
of the assets and liabilities of the Seller with those of Reserves
in the event of a bankruptcy, reorganization or other insolvency
proceeding involving Reserves.
(xxii) Neither the Intangible Transition Property
nor any interest therein would become property of the estate of
Group or Reserves under 11 U.S.C. section 541(a)(1) or (6) as a
result of the Contribution Agreement or the Assignment in a case
under the Bankruptcy Code in which Group or Reserves was the
debtor and the automatic stay of 11 U.S.C. section 362(a) would
not apply to prevent the collections of Intangible Transition
Charges from being applied as provided in the Basic Documents.
(xxiii) The 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 hereof, will constitute
legal, valid and binding obligations of the Issuer entitled to
the benefits of the Indenture (subject, as to enforcement of
remedies, to applicable bankruptcy, reorganization, insolvency,
moratorium or other similar laws or equitable principles
affecting creditors' rights generally from time to time in
effect).
(xxiv) The Bonds, the Indenture, the Servicing
Agreement, this Underwriting Agreement, the Contribution
Agreement and the Sale Agreement conform to the descriptions
thereof contained in the Registration Statement and the Final
Prospectus.
(xxv) The Indenture has been duly qualified under the Trust
Indenture Act, and the Contribution Agreement, the Sale Agreement
and the Servicing Agreement are not required to be registered
under the Trust Indenture Act.
(xxvi) There is no pending or threatened action,
suit or proceeding before any court or governmental agency,
authority or body or any arbitrator involving the Issuer, or
relating to the Bonds, the QRO or the collection of Intangible
Transition Charges or the use and enjoyment of Intangible
Transition Property under the Competition Act of a character
required to be disclosed in the Registration Statement that is
not adequately disclosed in the Final Prospectus, and there is no
franchise, contract or other document of a character required to
be described in the Registration Statement or Final Prospectus,
or to be filed as an exhibit, that is not described or filed as
required; and the statements included or incorporated in the
Final Prospectus in the base prospectus under the headings "Risk
Factors -- Legal, Legislative or Regulatory Action that May
Adversely Affect Your Investment," "Risk Factors -- Unusual
Nature of Intangible Transition Property," "The Competition Act,"
"PP&L's Restructuring Plan," "The PUC Order and the Intangible
Transition Charges," "Prior Legal Challenges to the Competition
Act or the PUC Order," "The Transition Bonds," "The Contribution
Agreement," "The Sale Agreement," "The Servicing Agreement," "The
Indenture," "Material Income Tax Matters for the Transition
Bondholders," and "ERISA Considerations" and in the prospectus
supplement under the headings "The Series 1999-[__] Bonds," and
"Description of Intangible Transition Property" fairly summarize
the matters described therein.
(xxvii) The Registration Statement has become
effective under the Act; any required filing of the Basic
Prospectus, any Preliminary Final Prospectus and the Final
Prospectus, and any supplements thereto, pursuant to Rule 424(b)
has been made in the manner and within the time period required
by Rule 424(b); no stop order suspending the effectiveness of the
Registration Statement has been issued, no proceedings for that
purpose have been instituted or threatened, and the Registration
Statement and the Final Prospectus comply as to form in all
material respects with the applicable requirements of the Act,
the Exchange Act and the Trust Indenture Act and the respective
rules thereunder; all portions of the Registration Statement and
the Final Prospectus that describe Pennsylvania law are accurate
in all material respects, including (but not limited to)
descriptions of the Competition Act, the QRO, Intangible
Transition Property and the Intangible Transition Charges; and
such counsel has no reason to believe that at the Effective Date
the Registration Statement contained any untrue statement of a
material fact or omitted to state any material fact required to
be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading or that the Final Prospectus as of its date and the
Closing Date includes any untrue statement of a material fact or
omits to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were
made, not misleading.
(xxviii) No consent, approval, authorization or order
of any court or governmental agency or body is required for the
consummation of the transactions contemplated herein, except such
as have been obtained under Pennsylvania law and such as may be
required under the blue sky laws of any jurisdiction in
connection with the purchase and distribution of the Bonds by the
Underwriters and such other approvals (specified in such opinion)
as have been obtained.
(xxix) Neither the execution and delivery of this
Underwriting Agreement, the Contribution Agreement, the Sale
Agreement, the Servicing Agreement, the Indenture, nor the
issuance and sale of the Bonds, nor the consummation of the
transactions contemplated by this Underwriting Agreement, the
Contribution Agreement, the Sale Agreement, the Servicing
Agreement and the Indenture, nor the fulfillment of the terms of
this Underwriting Agreement, the Contribution Agreement, the Sale
Agreement, the Servicing Agreement and the Indenture, will (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 Amended and Restated Limited Liability
Company Agreement of the Issuer, or under the Amended and
Restated Limited Liability Company Agreement of the Seller, or
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, agreement or other instrument to
which the Issuer or the Seller is a party or by which the Issuer
or the Seller is bound, (B) result in the creation or imposition
of any lien upon any properties of the Issuer or the Seller
pursuant to the terms of any such indenture, agreement or other
instrument (other than as contemplated by the Indenture), or (C)
violate any law or any order, rule or regulation promulgated by
the United States, the State of Delaware, or the Commonwealth of
Pennsylvania applicable to the Issuer or the Seller of any court
or of any federal or state regulatory body, administrative agency
or other governmental instrumentality having jurisdiction over
the Issuer, or any of its properties.
(xxx) (A) The Indenture creates in favor of the Trustee a
security interest in the rights of the Issuer in the Collateral,
(B) such security interest is valid and enforceable against the
Issuer and third parties and has attached, (C) such security
interest is perfected, and (D) such perfected security interest
is of first priority.
(xxxi) The Issuer is not, and after giving effect to
the offering and sale of the Bonds and the application of the
proceeds thereof as described in the Final Prospectus, will not
be an "investment company" or under the "control" of an
"investment company" as such terms are defined under the
Investment Company Act of 1940, as amended.
(xxxii) Unless adequate compensation is made by law
for the protection of holders of the Bonds, the Competition Act
and other applicable law require the Commonwealth of Pennsylvania
and the PUC to require the imposition of intangible transition
charges at times and in amounts that are designed to ensure the
collection of intangible transition charge revenues sufficient to
discharge the Bonds in accordance with their terms.
(xxxiii) The Intangible Transition Property and the
other Collateral are not subject to the lien created by the
Mortgage Indenture, and the transfer of the Intangible Transition
Property to the Seller on May 13, 1999 pursuant to the terms and
conditions of the Contribution Agreement was, and the transfer of
other Collateral to the Issuer on the date of issuance of the
Bonds, is free and clear of the lien created by the Mortgage
Indenture.
(xxxiv) [other opinions to come as appropriate].
In rendering such opinions, such counsel may rely (A) as to
matters involving the application of laws of any jurisdiction other
than the Commonwealth of Pennsylvania, the State of Delaware, the
State of New York, the State of Nevada or the federal laws of the
United States of America, to the extent deemed proper and specified in
such opinion, upon the opinion of other counsel of good standing
believed to be reliable and who are satisfactory to counsel for the
Underwriters, and (B) as to matters of fact, to the extent deemed
proper, on certificates of responsible officers of the Issuer, the
Seller, Group, Reserves, the Company and public officials. References
to the Final Prospectus in this paragraph (c) include any supplements
thereto at the Closing Date.
(d) The Representative shall have received an opinion of counsel
to the Trustee, dated the Closing Date, in form and substance
reasonably satisfactory to the Representative, to the effect that:
(i) the Trustee is validly existing as a national banking
association in good standing under the federal laws of the United
States of America; and
(ii) the Indenture has been duly authorized, executed and
delivered, and constitutes a legal, valid and binding instrument
enforceable against the Trustee in accordance with its terms
(subject, as to enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency, moratorium or other
similar laws or equitable principles affecting creditors' rights
generally from time to time in effect); and
(iii) the Bonds have been duly authenticated by the
Trustee.
(e) The Representative shall have received from Orrick,
Herrington & Sutcliffe LLP, counsel for the Underwriters, such opinion
or opinions, dated the Closing Date, with respect to the issuance and
sale of the 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, the Seller, 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.
(f) The Representative shall have received a certificate of the
Issuer, signed by a duly authorized manager of the Issuer, 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 Issuer in
this Underwriting Agreement and in 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, business or properties of the
Issuer, whether or not arising from transactions in the ordinary
course of business, or (B) the Transferred Intangible Transition
Property, except as set forth in or contemplated in the Final
Prospectus (exclusive of any supplement thereto).
(g) The Representative shall have received a certificate of the
Company, signed by the 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 Contribution Agreement, the Sale
Agreement and the Servicing 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 Company's
financial position or results of operation, or (B) the
Transferred Intangible Transition Property.
(h) The Representative shall have received a certificate of the
Seller, signed by a duly authorized manager of the Seller, 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 Seller in
this Underwriting Agreement, the Contribution Agreement and the
Sale 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 Seller 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; and
(ii) 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 the Seller's financial
position or results of operation.
(i) The Representative shall have received a certificate of the
Company, signed by the President and the principal financial or
accounting officer of the Company, dated the Closing Date, to the
effect that:
(i) the representations and warranties of Group and
Reserves in this Underwriting Agreement and in the Contribution
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 Group and Reserves have complied with all the
agreements and satisfied all the conditions on their part to be
performed or satisfied at or prior to the Closing Date; and
(ii) 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 the condition (financial or
other), prospects, earnings, business or properties of Group or
Reserves, whether or not arising from transactions in the
ordinary course of business.
(j) At the Closing Date, PricewaterhouseCoopers LLP shall have
furnished to the Representative (i) 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 (ii) 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(7) of the Indenture.
In addition, except as provided in Schedule I hereto, at the
Execution Time, PricewaterhouseCoopers 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) Subsequent to the Execution Time or, if earlier, the dates
as of which information is given in the Registration Statement
(exclusive of any amendment thereof) and the Final Prospectus
(exclusive of any supplement thereto), there shall not have occurred
any change, or any development involving a prospective change, in or
any event affecting either (i) the business, prospects, properties or
financial condition of the Company, the Seller or the Issuer, or (ii)
the Transferred Intangible Transition Property, the Bonds, the QRO or
the Competition Act, the effect of which is, 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 Bonds as
contemplated by the Registration Statement (exclusive of any amendment
thereof) and the Final Prospectus (exclusive of any supplement
thereto).
(l) The Bonds shall have been rated in the highest long-term
rating category by each of the Rating Agencies.
(m) 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 made in accordance with the Competition Act and
other applicable law reflecting (1) the sale of the Intangible
Transition Property by the Company directly to the Seller, including
the filing of notices with the PUC under the Competition Act and of
UCC financing statements in the office of the Secretary of the
Commonwealth of Pennsylvania, (2) the sale of the Transferred
Intangible Transition Property by the Seller to the Issuer, including
the filing of UCC financing statements in the office of the Secretary
of State of the State of Nevada, and (3) the grant of a security
interest by the Issuer in the Collateral to the Trustee, including the
filing of notices with the PUC under the Competition Act and of UCC
financing statements in the office of the Secretary of the
Commonwealth of Pennsylvania.
(n) On or prior to the Closing Date, the Issuer shall have
delivered to the Representative evidence, in form and substance
satisfactory to the Representative, of the Pennsylvania Public Utility
Commission's issuance of the QRO relating to the Transferred
Intangible Transition Property.
(o) Prior to the Closing Date, the Issuer, the Seller and the
Company shall have furnished to the Representative such further
information, certificates, opinions and documents as the
Representative may reasonably request.
If any of the conditions specified in this Section 7 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 7 shall be
delivered at the office of Skadden, Arps, Slate, Meagher & Flom LLP in the
City of New York on the Closing Date.
8. Indemnification and Contribution.
(a) The Company, the Seller and the Issuer will, jointly and
severally, 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 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 or are based upon any untrue statement or
alleged untrue statement of a material fact or any 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, contained in
(i) the Transferred Intangible Transition Property Information and the
Computational Materials and ABS Term Sheets delivered to investors by
any Underwriter to the extent such loss, claim, damage or liability
arises from the Transferred Intangible Transition Property Information
and (ii) the Registration Statement for the registration of the Bonds
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 and, except as
hereinafter in this Section 8 provided, will reimburse each such
indemnified party for any legal or other expenses reasonably incurred
by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that none of
the Company, the Seller or the Issuer will be liable in any such case
to the extent that any such loss, claim, damage or liability arises
out of or is based upon any such untrue statement or alleged untrue
statement or omission or alleged omission made therein in reliance
upon and in conformity with written information furnished to the
Issuer, the Seller or the Company by or on behalf of any Underwriter
through the Representative specifically for inclusion therein or Trust
Indenture Act statement of eligibility; provided further, that with
respect to any untrue statement or omission of material fact made in
any Preliminary Final Prospectus, the indemnity agreement contained in
this Section 8(a) shall not inure to the benefit of any Underwriter or
any person controlling such Underwriter from whom the person asserting
any such loss, claim, damage or liability purchased the Bonds that are
the subject thereof, to the extent that any such loss, claim, damage
or liability of such Underwriter occurs under the circumstance where
it shall have been determined by a court of competent jurisdiction by
final and nonappealable judgment that (i) the Company, the Seller or
the Issuer had previously furnished copies of the Final Prospectus to
the Representative, (ii) delivery of the Final Prospectus was required
by the Act to be made to such person, (iii) the untrue statement or
omission of a material fact contained in the Preliminary Final
Prospectus was corrected in the Final Prospectus and (iv) there was
not sent or given to such person, at or prior to the written
confirmation of the sale of such Bonds to such person, a copy of the
Final Prospectus. This indemnity agreement will be in addition to any
liability which the Company, the Seller and the Issuer otherwise may
have. As used herein, the term "TRANSFERRED INTANGIBLE TRANSITION
PROPERTY INFORMATION" means information, whether in written or
electronic format or otherwise, regarding the Transferred Intangible
Transition Property provided to the Underwriters by or on behalf of
the Company or the Issuer.
(b) Each Underwriter severally and not jointly agrees to
indemnify and hold harmless the Company, the Seller and the Issuer,
each of their directors, each of their officers who signs the
Registration Statement, and each person who controls the Company, the
Seller 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, the Seller and the Issuer to each Underwriter, but only with
reference to (i) written information relating to such Underwriter
furnished to the Issuer, the Seller 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 and (ii)
untrue statements or alleged untrue statements in the Computational
Materials or ABS Term Sheets delivered to the purchasers of the Bonds
by such Underwriter except to the extent that such losses, claims,
damages or other liabilities arise from factual errors in the
Transferred Intangible Transition Property Information. This
indemnity agreement will be in addition to any liability which any
Underwriter may otherwise have.
(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, or (ii) the indemnifying
party shall authorize the indemnified party to employ separate counsel
at the expense of the indemnifying party. 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 includes an unconditional release of each
indemnified party from all liability arising out of such claim,
action, suit or proceeding.
(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 Seller,
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 Bonds. If the
allocation provided by the immediately preceding sentence is
unavailable for any reason, the Company, the Issuer, the Seller 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, the Seller and of the Underwriters 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, the Seller or the Underwriters. The Company, the
Issuer, the Seller 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 which 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(d), 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, the Seller or the Company within the meaning of
either the Act or the Exchange Act, each officer of the Issuer, the
Seller or the Company who shall have signed the Registration Statement
and each director of the Issuer, the Seller or the Company shall have
the same rights to contribution as the Issuer, the Seller or the
Company, subject in each case to the applicable terms and conditions
of this paragraph (d). The Underwriters' obligations to contribute
pursuant to this Section 8 are several in proportion to the respective
principal amounts of Bonds set forth opposite their names in Schedule
II hereto and not joint.
(e) Notwithstanding the provisions of this Section 8, no
Underwriter shall be required to contribute any amount in excess of
the amount by which the total price of the Bonds underwritten by it
and distributed to the public exceeds the amount of any damages which
such Underwriter has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission.
9. Reimbursement of Expenses. If the sale of the Bonds
provided for herein is not consummated because any condition to the
obligations of the Underwriters 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,
the Seller or the Issuer to perform any agreement herein or comply with any
provision hereof other than by reason of a default (including under Section
10) by any of the Underwriters, the Company, the Seller and the Issuer
will, jointly and severally, reimburse the Underwriters upon demand for all
out-of-pocket expenses (including reasonable fees and disbursements of
counsel) that shall have been incurred by them in connection with the
proposed purchase and sale of the Bonds; provided, however, that the
reimbursement of fees and expenses of counsel to the Underwriters shall be
subject to the engagement letter dated [date], between the Company and the
Representative.
10. Default by an Underwriter. If any Underwriter or
Underwriters defaults in their obligations under this Underwriting
Agreement, the non-defaulting Underwriters may make arrangements
satisfactory to the Issuer and the Company for the purchase of such Bonds
by other persons, including any of the Underwriters, but if no such
arrangement are made by the Closing Date, the other Underwriters shall be
obligated, severally in the proportion that their respective commitments in
Schedule II hereto bear to the total commitment of the non-defaulting
Underwriters set forth opposite the names of all the remaining
Underwriters, to purchase the Bonds that the defaulting Underwriter or
Underwriters agreed but failed to purchase. In the event that any
Underwriter or Underwriters defaults in their obligations to purchase Bonds
hereunder, the Company may by prompt written notice to the non-defaulting
Underwriters postpone the Closing Date for a period of not more than seven
full business days to effect whatever changes may thereby be made necessary
in the Registration Statement and the Final Prospectus or in any other
documents, and the Company will promptly file any amendments to the
Registration Statement or supplements to the Final Prospectus that may
thereby be necessary. As used in this Underwriting Agreement, the term
"Underwriter" includes any person substituted for an Underwriter under this
Section. Nothing contained in this Underwriting Agreement shall relieve
any defaulting Underwriter of its liability, if any, to the Issuer, the
Seller and the Company and any non-defaulting Underwriter for damages
occasioned by its default hereunder.
11. Termination. This Underwriting Agreement shall be subject
to termination, in the absolute discretion of the Representative, by notice
given to the Issuer prior to delivery of and payment for the Bonds, if
prior to such time (i) there shall have occurred any change, or any
development involving a prospective change, in or any event affecting
either (A) the business, prospects, properties or financial condition of
the Issuer, the Seller, or the Company or (B) the Transferred Intangible
Transition Property, the Bonds, the QRO or the Competition Act, the effect
of which, in the judgment of the Representative, materially impairs the
investment quality of the Bonds or makes it impractical or inadvisable to
market the Bonds, (ii) trading in the Common Stock of PP&L Resources, Inc.
shall have been suspended by the SEC 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, New York State or Pennsylvania State 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 Bonds as contemplated by the Final
Prospectus (exclusive of any supplement thereto) and the Representative
shall have made a similar determination with respect to all other
underwritings of stranded cost asset-backed securities in which it is
participating and has the contractual right to make such a determination.
12. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements
of the Company or its officers, the Issuer or its officers, Group or its
officers, Reserves or its officers, the Seller or its officers, and of the
Underwriters set forth in or made pursuant to this Underwriting Agreement
will remain in full force and effect, regardless of any investigation made
by or on behalf of any Underwriter or of the Company, the Issuer, Group,
Reserves, the Seller or any of the officers, directors or controlling
persons referred to in Section 8 hereof, and will survive delivery of and
payment for the Bonds. The provisions of Sections 7 and 8 hereof shall
survive the termination or cancellation of this Underwriting Agreement.
13. Notices. All communications hereunder will be in writing
and may be given by United States mail, courier service, telecopy, telefax
or facsimile (confirmed by telephone or in writing in the case of notice by
telecopy, telefax or facsimile) or any other customary means of
communication, and any such communication shall be effective when
delivered, or if mailed, three days after deposit in the United States mail
with proper postage for ordinary mail prepaid, and if sent to the
Representative, to it at the address specified in Schedule I hereto; and if
sent to the Company, to it at Two North Ninth Street, Allentown, PA 18101,
Attention: [_________]; if sent to the Seller to it at 3960 Howard Hughes
Parkway, Suite 630 North, Las Vegas, Nevada 89107, Attention: [________];
and if sent to the Issuer, to it at Two North Ninth Street, GENA 9-2,
Room 3, Allentown, PA 18101, Attention: [_________]. The parties hereto,
by notice to the others, may designate additional or different addresses
for subsequent communications.
14. Successors. This Underwriting Agreement will inure to the
benefit of and be binding upon the parties hereto and their respective
successors and the officers and directors and controlling persons referred
to in Section 8 hereof, and no other person will have any right or
obligation hereunder.
15. Applicable Law. This Underwriting Agreement will be
governed by and construed in accordance with the laws of the State of New
York.
16. Counterparts. This Underwriting Agreement may be signed in
any number of counterparts, each of which shall be deemed an original,
which taken together shall constitute one and the same instrument.
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 Seller, the Issuer and the several
Underwriters.
Very truly yours,
PP&L, INC.
By: _______________________________
Name:
Title:
PP&L TRANSITION BOND COMPANY LLC
By: _________________________________
Name:
Title:
CEP SECURITIES CO. LLC
By: _________________________________
Name:
Title:
The foregoing Underwriting Agreement is
hereby confirmed and accepted
as of the date specified in Schedule I hereto.
MORGAN STANLEY & CO. INCORPORATED
By: _________________________________
Name:
Title:
For itself and the other
several Underwriters, if any,
named in Schedule II to the
foregoing Underwriting Agreement.
SCHEDULE I
Underwriting Agreement dated:
Registration Statement No. 333-75369
Representative:
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Title, Purchase Price and Description of Bonds:
Title: PP&L Transition Bond Company LLC Transition Bonds, Series
1999-[__]
Principal amount, Price to
Public, Underwriting Discounts
and Commissions and Proceeds
to Issuer:
Underwriting
Total Principal Discounts and
Amount of Class Price to Public Commissions Proceeds to Issuer
- ---------------- --------------- ------------- ------------------
$ % % %
$ % % %
$ % % %
$ % % %
$ % % %
$ % % %
$ % % %
$ % % %
$ % % %
Plus, the Underwriters will be
reimbursed by the Issuer for:
$[_________] of expenses,
consisting of $[________]
of out-of-pocket expenses and
$[________] for Underwriters Counsel
Original Issue Discount (if any): $[___________]
Redemption provisions: At the Issuer's option when the outstanding
principal balance of the Bonds has been
reduced to 5% of the original principal
balance.
Other provisions: [None]
Closing Date, Time and Location:
Type of Offering: Delayed Offering
Date referred to in Section 5(a)(vi) and Section 5(b)(ii) after which the
Company, the Seller and the Issuer may offer or sell asset-backed
securities without the consent of the Representative:
SCHEDULE II
Principal Amount of Bonds to be Purchased (in thousands)
--------------------------------------------------------
EXHIBIT A
This information has been prepared in connection with the issuance of the
securities described herein, and is based on information provided by PP&L,
Inc. with respect to the expected characteristics of the intangible
transition property securing these securities. The actual characteristics
and performance of the intangible transition property will differ from the
assumptions used in preparing these materials, which are hypothetical in
nature. Changes in the assumptions may have a material impact on the
information set forth in these materials. No representation is made that
any performance or return indicated herein will be achieved. This
information may not be used or otherwise disseminated in connection with
the offer or sale of these or any other securities, except in connection
with the initial offer or sale of these securities to you to the extent set
forth below. NO REPRESENTATION IS MADE AS TO THE APPROPRIATENESS,
USEFULNESS, ACCURACY OR COMPLETENESS OF THESE MATERIALS OR THE ASSUMPTIONS
ON WHICH THEY ARE BASED. The underwriters disclaim any and all liability
relating to this information, including without limitation any express or
implied representations and warranties for, statements contained in, and
omissions from this information. Additional information is available upon
request. These materials do not constitute an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any particular trading strategy. ANY SUCH OFFER TO BUY OR
SELL ANY SECURITY WOULD BE MADE PURSUANT TO A DEFINITIVE PROSPECTUS AND
PROSPECTUS SUPPLEMENT PREPARED BY THE ISSUER WHICH WOULD CONTAIN MATERIAL
INFORMATION NOT CONTAINED IN THESE MATERIALS. SUCH PROSPECTUS AND
PROSPECTUS SUPPLEMENT WILL CONTAIN ALL MATERIAL INFORMATION IN RESPECT OF
ANY SUCH SECURITY OFFERED THEREBY AND ANY DECISION TO INVEST IN SUCH
SECURITIES SHOULD BE MADE SOLELY IN RELIANCE UPON SUCH PROSPECTUS AND
PROSPECTUS SUPPLEMENT. ANY CAPITALIZED TERMS USED BUT NOT DEFINED HEREIN
ARE TO BE READ IN CONJUNCTION WITH SUCH PROSPECTUS AND PROSPECTUS
SUPPLEMENT. In the event of any such offering, these materials, including
any description of the intangible transition property contained herein,
shall be deemed superseded, amended and supplemented in their entirety by
such Prospectus and Prospectus Supplement. To Our Readers Worldwide: In
addition, please note that this information has been provided by Morgan
Stanley & Co., Incorporated and approved by Morgan Stanley & Co.
International Limited, a member of the Securities and Futures Authority,
and Morgan Stanley Japan Ltd. We recommend that investors obtain the
advice of their Morgan Stanley & Co. International Limited or Morgan
Stanley Japan Ltd. representative about the investment concerned. NOT FOR
DISTRIBUTION TO PRIVATE CUSTOMERS AS DEFINED BY THE U.K. SECURITIES AND
FUTURES AUTHORITY.
EXHIBIT 4.1.2
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT OF
PP&L TRANSITION BOND COMPANY LLC
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
PP&L TRANSITION BOND COMPANY LLC,
a Delaware Limited Liability Company
(the "Company")
AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT, dated
August __, 1999 (as further amended, supplemented or otherwise modified and
in effect from time to time, the "LLC Agreement"), of PP&L TRANSITION BOND
COMPANY LLC, a Delaware limited liability company (the "Company"), having
its principal office at Two North Ninth Street, Allentown, Pennsylvania
18101.
WHEREAS, CEP Group, Inc., as sole Member, on March 25, 1999 filed
a Certificate of Formation of the Company with the Delaware Secretary of
State, and executed a Limited Liability Company Agreement, dated March 25,
1999, as amended on April 26, 1999 (the "Original LLC Agreement"); and
WHEREAS, on [May __, 1999], CEP Group, Inc. transferred its sole
Common Interest in the Company to its parent corporation, PP&L, Inc., as a
dividend on account of the common stock in CEP Group, Inc. held by PP&L,
Inc., such that PP&L, Inc. succeeded to the Common Interest of CEP Group,
Inc. as the sole Member of the Company; and
WHEREAS, this LLC Agreement amends and restates the Original LLC
Agreement in all respects, and from and after the date hereof constitutes
the governing instrument of the Company;
NOW THEREFORE, the Member hereby amends and restates the Original
LLC Agreement as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Capitalized Terms. For all purposes of this
Agreement, the following terms shall have the meanings set forth below:
"Act" shall mean the Delaware Limited Liability Company Act, as
amended, as in effect on the date hereof (currently Chapter 18 of Title 6,
Sections 18-101 through 18-1109 of the Delaware Code) and as it may be
amended hereafter, from time to time.
"Administration Agreement" shall mean the Administration
Agreement, dated August __, 1999, between the Company and PP&L, Inc., as
administrator.
"Affiliate" shall mean, with respect to any specified Person, any
other Person controlling or controlled by or under common control with such
specified Person. For the purposes of this definition, "control" when used
with respect to any specified Person means the power to direct the
management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and
the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agreement" shall mean this Limited Liability Company Agreement
of the Company, as the same may be amended from time to time in accordance
with the provisions hereof.
"Basic Documents" shall mean this Agreement, the Certificate of
Formation of the Company, the Contribution Agreement, the Assignment, dated
May __, 1999, executed and delivered by PP&L, Inc. in favor of CEP
Securities Co. LLC pursuant to the Contribution Agreement, the Sale
Agreement, dated August __, 1999, between CEP Securities Co. LLC and the
Company, the bill of sale dated August __, 1999, issued by CEP Securities
Co. LLC to the Company pursuant to the Sale Agreement, the Servicing
Agreement, dated August __, 1999, between the Company and PP&L, Inc., as
servicer, the Administration Agreement, and the Indenture.
"Bonds" shall have the meaning set forth in Section 2.03(b).
"Business Day" shall mean any day other than a Saturday, Sunday
or other day on which banks are authorized or required by law to be closed
in New York City, New York or Harrisburg, Pennsylvania.
"Certificate of Formation" shall mean the Certificate of
Formation of the Company as filed with the Secretary of State of the State
of Delaware on March 25, 1999, in accordance with the Act.
"Code" shall mean the Internal Revenue Code of 1986, as amended
(or any successor law).
"Common Interest" shall mean the interest of the Member in the
Company. The Company shall have one class of Common Interest.
"Company" shall mean PP&L Transition Bond Company LLC, a Delaware
limited liability company.
"Contribution Agreement" shall mean the Contribution Agreement,
dated as of May 13, 1999, among PP&L, Inc., CEP Group, Inc., CEP Reserves,
Inc. and CEP Securities Co. LLC.
"Fiscal Year" shall mean, unless the Managers shall at any time
determine otherwise pursuant to the requirements of the Code, a calendar
year.
"GAAP" shall mean the generally accepted accounting principles
promulgated or adopted by the Financial Accounting Standards Board and its
successors from time to time.
"Governmental Authority" shall mean any federal, state, local or
foreign court or governmental department, commission, board, bureau,
agency, authority, instrumentality or regulatory body.
"Indenture" shall mean the Indenture, dated as of August __,
1999, between the Company and the Trustee, as amended, modified or
supplemented from time to time, including any Supplement thereto creating a
new Series of Bonds.
"Independent Manager" shall mean, with respect to the Company, a
Manager who is not, and within the last five years was not (except solely
by virtue of such Person's serving as, or affiliation with any other Person
serving as, an independent director or manager, as applicable, of PP&L,
Inc., CEP Group, Inc., CEP Reserves, Inc. or CEP Securities Co. LLC or any
bankruptcy remote special purpose entity that is a subsidiary or Affiliate
of PP&L, Inc. or the Company), (i) a stockholder, member, partner,
director, officer, employee, Affiliate, customer, supplier, creditor or
independent contractor of, or any person that has received any benefit in
any form whatever from (other than in such Manager's capacity as a
ratepayer or customer of PP&L, Inc. in the ordinary course of business), or
any Person that has provided any service in any form whatever to, or any
major creditor (or any Affiliate of any major creditor) of, the Company,
PP&L, Inc., or any of their Affiliates, or (ii) any Person owning
beneficially, directly or indirectly, any outstanding shares of common
stock, any limited liability company interests or any partnership
interests, as applicable, of the Company, PP&L, Inc., or any of their
Affiliates, or of any major creditor (or any Affiliate of any major
creditor) of any of the foregoing, or a stockholder, member, partner,
director, officer, employee, Affiliate, customer, supplier, creditor or
independent contractor of, or any Person that has received any benefit in
any form whatever from (other than in such Person's capacity as a ratepayer
or customer of PP&L, Inc. in the ordinary course of business), or any
Person that has provided any service in any form whatever to, such
beneficial owner or any of such beneficial owner's Affiliates, or (iii) a
member of the immediate family of any person described above; provided that
the indirect or beneficial ownership of stock through a mutual fund or
similar diversified investment vehicle with respect to which the owner does
not have discretion or control over the investments held by such
diversified investment vehicle shall not preclude such owner from being an
Independent Manager; and provided, further, that for purposes of this
definition, "major creditor" shall mean a natural person or business entity
to which the Company, PP&L, Inc. or any of their Affiliates has outstanding
indebtedness for borrowed money or credit on open account in a sum
sufficiently large as would reasonably be expected to influence the
judgment of the proposed Independent Director adversely to the interests of
the Company when the interests of that person or entity are adverse to
those of the Company.
"Intangible Transition Property" shall mean the irrevocable right
of PP&L, Inc. or its successor or assignee to collect intangible transition
charges from customers to recover through the issuance of Bonds the
qualified transition expenses described in the final order issued by the
Pennsylvania Public Utility Commission (the "PUC") on August 27, 1998
pursuant to the Pennsylvania Electricity Generation Customer Choice and
Competition Act Chapter 28 of Title 66 of the Pennsylvania Consolidated
Statutes, 66 Pa. C.S. Section 2801, et seq., as such order has been
supplemented by the Supplemental Order issued by the PUC on May 21, 1999,
and as such order may hereafter be further supplemented by an order of the
PUC issued pursuant to paragraph 19 of the August 27, 1998 order, including
all right, title and interest of PP&L, Inc. or its successor or assignee in
such order and in all revenues, collections, claims, payments, money or
proceeds of or arising from intangible transition charges pursuant to such
order, and all proceeds of any of the foregoing.
"Manager" shall mean any manager of the Company
"Member" shall mean PP&L, Inc., in its capacity as the sole
member in the Company under this Agreement, or any successor thereto as
sale member pursuant to Article VI.
"Person" shall mean any natural person, corporation, business
trust, joint venture, association, company, partnership, joint stock
company, corporation, trust, unincorporated organization or Governmental
Authority.
"Proceeding" shall have the meaning set forth in Section 8.01.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the United States Securities and
Exchange Commission promulgated thereunder.
"Series" means each series of Bonds issued and authenticated
pursuant to the Indenture and a related Supplement.
"Supplement" shall mean a supplement to the Indenture complying
(to the extent applicable) with the terms of Article 9 of the Indenture.
"Treasury Regulations" shall mean regulations, including proposed
or temporary regulations, promulgated under the Code. References herein to
specific provisions of proposed or temporary regulations shall include
analogous provisions of final Treasury Regulations or other successor
Treasury Regulations.
"Trustee" shall mean the party named as such in the Indenture
until a successor replaces it in accordance with the applicable provisions
of the Indenture and thereafter means the successor serving thereunder.
SECTION 1.2 Other Definitional Provisions.
(a) All terms in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant
hereto unless otherwise defined therein.
(b) As used in this Agreement and in any certificate or other
documents made or delivered pursuant hereto or thereto, accounting terms
not defined in this Agreement or in any such certificate or other document,
and accounting terms partly defined in this Agreement or in any such
certificate or other document to the extent not defined, shall have the
respective meanings given to them under GAAP. To the extent that the
definitions of accounting terms in this Agreement or in any such
certificate or other document are inconsistent with the meanings of such
terms under GAAP, the definitions contained in this Agreement or in any
such certificate or other document shall control.
(c) The words "hereof", "herein", "hereunder", and words of
similar import when used in this Agreement shall refer to this Agreement as
a whole and not to any particular provision of this Agreement; Section
references contained in this Agreement are references to Sections in this
Agreement unless otherwise specified; and the term "including" shall mean
"including without limitation".
(d) The definitions contained in this Agreement are applicable
to the singular as well as the plural forms of such terms.
(e) Any agreement, instrument or statute defined or referred to
herein or in any instrument or certificate delivered in connection herewith
means such agreement, instrument or statute as from time to time amended,
modified or supplemented and includes (in the case of agreements or
instruments) references to all attachments thereto and instruments
incorporated therein; references to a Person are also to its permitted
successors and assigns.
ARTICLE II
FORMATION OF THE LIMITED LIABILITY COMPANY
SECTION 2.1 Formation; Filings. Pursuant to the Act and in
accordance with the further terms and provisions hereof, the Member has
formed the Company as a limited liability company. The Member has executed
a Certificate of Formation of the Company, and the Member shall execute or
cause to be executed from time to time all other instruments, certificates,
notices and documents, and shall do or cause to be done all such filing,
recording, publishing and other acts, in each case, as may be necessary or
appropriate from time to time to comply with all applicable requirements
for the formation and/or operation and, when appropriate, termination of a
limited liability company in the State of Delaware and all other
jurisdictions where the Company shall desire to conduct its business.
SECTION 2.2 Name and Office.
(a) The name of the Company shall be "PP&L Transition Bond
Company LLC." All business of the Company shall be conducted in such name
and all contracts, property and other assets of the Company shall be held
in that name and the Member shall not have any ownership interests in such
contracts, property or other assets in its individual name.
(b) The address of the registered office of the Company in the
State of Delaware is the Corporation Trust Center, 1209 Orange Street in
the city of Wilmington, County of New Castle, 19801. The name of its
registered agent at that address is The Corporation Trust Company.
(c) The Company may also have offices at such other places both
within and without the State of Delaware as the Member may from time to
time determine.
SECTION 2.3 Business Purpose. The nature of the business or
purpose to be conducted or promoted by the Company is to engage exclusively
in the following business and financial activities:
(a) to authorize, issue, sell and deliver one or more Series or
classes of transition bonds or other evidence of indebtedness
("Bonds") under the Indenture and, in connection therewith, to
execute and deliver Supplements providing for the issuance of
additional Series of Bonds, each as permitted by and in
accordance with the terms of the Indenture;
(b) to purchase and hold Intangible Transition Property and pledge
the same to the Trustee pursuant to the terms and conditions of
the Basic Documents;
(c) to negotiate, authorize, execute, deliver, assume the obligations
under, and perform, the Basic Documents and any other agreement
or instrument or document relating to the activities set forth in
clauses (a) and (b) above, including but not limited to
agreements with third-party credit enhancers and interest rate
swap agreements relating to any Series of Bonds, provided, that
the Company shall not incur any indebtedness or other liability
pursuant to any such other agreement or instrument or document
except for such indebtedness or liability that by its terms
provides that the holder thereof may not cause the filing of a
petition in bankruptcy or take any similar action against the
Company until one year and one day after every other indebtedness
or liability of the Company represented by any previously issued
Series of Bonds and amounts owed under the Indenture to third-
party credit enhancers with respect to such Bonds is paid in
full; and
(d) to engage in any activity and to exercise any powers permitted to
limited liability companies under the laws of the State of
Delaware that are related or incidental to the foregoing and
necessary, convenient or advisable to accomplish the foregoing.
SECTION 2.4 Term. The term of the Company shall continue in
existence until dissolved and liquidated in accordance with the Act,
subject to Section 6.03 hereof.
SECTION 2.5 No State Law Partnership. The Member intends that
the Company shall not be a partnership (including, without limitation, a
general partnership or a limited partnership) or joint venture, and that
neither the Member nor any Manager shall be a partner or joint venturer of
the Member or any Manager with respect to the business of the Company, for
any purposes other than federal, state and local tax purposes, and this
Agreement shall not be construed to suggest otherwise.
SECTION 2.6 Authority of Member. Subject to Section 3.04, the
Member, acting in such capacity, shall have the authority or power to act
for or on behalf of the Company, to do any act that would be binding on the
Company, or to incur any expenditures, debts, liabilities or obligations on
behalf of the Company.
SECTION 2.7 Liability to Third Parties. Neither the Member nor
any Manager shall be liable for the debts, obligations or liabilities of
the Company (whether arising in contract, tort or otherwise), including
without limitation under a judgment, decree or order of a court, by reason
of being the Member or acting as a Manager of the Company.
SECTION 2.8 No Personal Liability of Member, Managers, Etc.
(a) The Member shall not be subject in such capacity to any personal
liability whatsoever to any Person in connection with the assets or the
acts, obligations or affairs of the Company, (b) the Member shall have the
same limitation of personal liability as is extended to stockholders of a
private corporation for profit incorporated under the General Corporation
Law of the State of Delaware, and (c) no Manager or officer of the Company
shall be subject in such capacity to any personal liability whatsoever to
any Person, other than the Company or its Member, in connection with the
assets or the affairs of the Company; and, subject to the provisions of
Article VIII, all such Persons shall look solely to the assets of the
Company for satisfaction of claims of any nature arising in connection with
the affairs of the Member; provided, that such protection from personal
liability shall apply to the fullest extent permitted by applicable law, as
the same exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the Company to
provide greater or broader indemnification rights than such law permitted
the Company to provide prior to such amendment).
SECTION 2.9 Separateness.
(a) The funds and other assets of the Company shall not be
commingled with those of any other entity, and shall maintain its accounts
separate from the Member and any other person or entity.
(b) The Company shall not hold itself out as being liable for
the debts of any other entity, and shall conduct its own business in its
own name.
(c) The Company shall not form, or cause to be formed, any
subsidiaries.
(d) The Company shall act solely in its limited liability
company name and through its duly authorized Member, Managers, officers or
agents in the conduct of its business, and shall conduct its business so as
not to mislead others as to the identity of the entity or assets with which
they are concerned.
(e) The Company shall maintain separate records, books of
account and financial statements, and shall not commingle its records and
books of account with the records and books of account of any other entity
or the Member.
(f) The Managers shall hold appropriate meetings to authorize
all of its limited liability company actions, which meetings may be held by
telephone conference call. The Company shall observe all formalities
required by this Agreement.
(g) The Company shall at all times ensure that its
capitalization is adequate in light of its business and purpose.
(h) Neither the Member nor any Manager shall guaranty, become
liable on or hold itself out as being liable for the debts of the Company.
The Company shall not guarantee or become obligated for the debts of the
Member or any Manager, any Affiliate thereof or any other Person, or
otherwise hold out its credit as being available to satisfy the obligations
of the Member, any Manager or any other Person, shall not pledge its assets
for the benefit of any entity other than the Trustee, shall not make loans
or advances to any Person, and shall not acquire obligations or securities
of the Member, any Manager or any Affiliate thereof.
(i) The Company shall pay its own liabilities out of its own
funds, including and fees and expenses of the Administrator pursuant to the
Administration Agreement.
(j) The Company shall maintain an arm's-length relationship with
its Affiliates.
(k) The Company shall allocate fairly and reasonably any
overhead for office space shared with the Member or any Manager.
(l) The Company shall use its own separate stationery, invoices,
checks and other business forms.
(m) The Company shall correct any known misunderstanding
regarding its separate identity.
SECTION 2.10 Limited Liability and Bankruptcy Remoteness.
Without limiting the generality of Section 2.09, the Company shall be
operated in such a manner as the Managers deem reasonable and necessary or
appropriate to preserve (a) the limited liability of PP&L, Inc. (or its
successor) as the Member in the Company, (b) the separateness of the
Company from the business of PP&L, Inc. (or its successor) as the Member in
the Company, or any Affiliate thereof and (c) until one year and one day
after all of the Bonds are paid in full, the special purpose, bankruptcy-
remote status of the Company.
ARTICLE III
MANAGEMENT
SECTION 3.01 Management by Managers. The powers of the Company
shall be exercised by or under the authority of, and the business and
affairs of the Company shall be managed under the direction of, the
Managers.
SECTION 3.02 Acts by Managers.
(a) The Managers shall be obliged to devote only as much of
their time to the Company's business as shall be reasonably required in
light of the Company's business and objectives. A Manager shall perform
his or her duties as a Manager in good faith, in a manner he or she
reasonably believes to be in the best interests of the Company, and with
such care as an ordinarily prudent person in a like position would use
under similar circumstances.
(b) Every Manager is an agent of the Company for the purpose of
its business, and the act of every Manager, including the execution in the
Company name of any instrument for carrying on the business of the Company,
binds the Company, unless such act is in contravention of the Certificate
of Formation or this Agreement or unless the Manager so acting otherwise
lacks the authority to act for the Company and the person with whom he or
she is dealing has knowledge of the fact that he or she has no such
authority.
(c) The Managers shall have the right and authority to take all
actions which the Managers deem necessary, useful or appropriate for the
day-to-day management and conduct of the Company's business.
(d) The Managers may exercise all powers of the Company and do
all such lawful acts and things as are not by the Act, other applicable
law, the Certificate of Formation or this Agreement directed or required to
be exercised or done by the Member. All instruments, contracts, agreements
and documents providing for the acquisition or disposition of property of
the Company shall be valid and binding on the Company if executed by one or
more of the Managers. All instruments, contracts, agreements and documents
of whatsoever type executed on behalf of the Company shall be executed in
the name of the Company by one or more Managers.
SECTION 3.03 Number and Qualifications. The number of Managers
of the Company shall not be less than three nor more than five, as may be
determined by the Member from time to time, but no decrease in the number
of Managers shall have the effect of shortening the term of any incumbent
Manager.
SECTION 3.04 Independent Managers.
(a) The Company shall have at all times at least two individuals
who are each Independent Managers. If any Independent Manager resigns,
dies or becomes incapacitated, or such position is otherwise vacant, no
action requiring the unanimous affirmative vote of the Managers shall be
taken until a successor Independent Manager is appointed by the Member and
qualified and approves such action.
(b) Notwithstanding any other provision of this Agreement and
any provision of law that otherwise so empowers the Company, the Company
shall not, without the prior unanimous consent of the Managers, including
each of the Independent Managers, do any of the following: (i) engage in
any business or activity other than those set forth in Article II hereof;
(ii) incur any indebtedness, other than the Bonds and ordinary course
expenses as set forth in Article II hereof, or assume or guaranty any
indebtedness of any other entity; (iii) make a general assignment for the
benefit of creditors; (iv) file a voluntary petition in bankruptcy; (v)
file a petition or answer seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any statute,
law or regulation; (vi) file an answer or other pleading admitting or
failing to contest the material allegations of a petition filed against it
in any proceeding seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any statute,
law or regulation, or the entry of any order appointing a trustee,
liquidator or receiver of it or of its assets or any substantial portion
thereof; (vii) seek, consent to or acquiesce in the appointment of a
trustee, receiver or liquidator of it or of all or any substantial part of
its assets; (viii) consolidate or merge with or into any other entity or
convey or transfer substantially all of its properties and assets
substantially as an entirety to any entity, or (ix) amend this Agreement or
take action in furtherance of any such action. With regard to any action
contemplated by the preceding sentence, or with regard to any action taken
or determination made at any time when the Company is insolvent, each
Manager will owe its primary fiduciary duty to the Company (including the
creditors of the Company).
SECTION 3.05 Appointment and Vacancy. The Member will appoint
each Manager, including any Manager to be appointed by reason of an
increase in the number of Managers.
SECTION 3.06 Term. Each Manager shall hold office until his
successor shall be selected by the Member and qualified, or until his or
her earlier death, resignation or removal as provided in this Agreement.
SECTION 3.07 Removal. Subject to Section 3.04(a) and Section
9.01 of this Agreement, the Member may remove, with or without cause, any
Manager.
SECTION 3.08 Resignation. Any Manager may resign at any time.
Such resignation shall be made in writing and shall take effect at the time
specified therein or, if no time is specified therein, at the time of its
receipt by the remaining Managers; provided, that the resignation of an
Independent Manager shall not be effective until a replacement Independent
Manager has been appointed. The acceptance of a resignation shall not be
necessary to make it effective, unless so expressly provided in the
resignation.
SECTION 3.09 Place of Meetings of Managers. Any meetings of the
Managers may be held either within or without the State of Delaware at such
place or places as shall be determined from time to time by resolution of
the Managers.
SECTION 3.10 Meetings of Managers. Meetings of the Managers may
be held when called by any Managers or Manager. The Manager or Managers
calling any meeting shall cause notice to be given of such meeting,
including therein the time, date and place of such meeting, to each Manager
at least two Business Days before such meeting. The business to be
transacted at, or the purpose of, any meeting of the Managers shall be
specified in the notice or waiver of notice of any such meeting. If fewer
than all the Managers are present in person, by telephone or by proxy,
business transacted at any such meeting shall be confined to the business
or purposes specifically stated in the notice or waiver of notice of such
meeting.
SECTION 3.11 Quorum; Majority Vote. At all meetings of the
Managers, the presence in person, by telephone or by proxy of a majority of
the Managers shall be necessary and sufficient to constitute a quorum for
the transaction of business unless a greater number is required by this
Agreement or by law. The act of a majority of the Managers present in
person, by telephone or by proxy at a meeting at which a quorum is present
in person, by telephone or by proxy shall be the act of the Managers,
except as otherwise provided by law, the Certificate of Formation or this
Agreement. If a quorum shall not be present in person, by telephone or by
proxy at any meeting of the Managers, the Managers present in person, by
telephone or by proxy at the meeting may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present in person, by telephone or by proxy.
SECTION 3.12 Methods of Voting; Proxies. A Manager may vote
either in person, by telephone or by proxy executed in writing by the
Manager; provided further that the Person designated to act as proxy for an
Independent Manager must be an Independent Manager.
SECTION 3.13 Actions Without a Meeting. Any action required or
permitted to be taken at a meeting of the Managers may be taken without a
meeting, without prior notice, and without a vote, if a consent in writing,
setting forth the action so taken, is signed by the Managers having not
fewer than the minimum number of votes that would be necessary to take the
action at a meeting at which all Managers entitled to vote on the action
were present and voted.
SECTION 3.14 Telephone and Similar Meetings. The Managers, or
members of any committee thereof, may participate in and hold meetings by
means of conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each other.
Such participation in any such meeting shall constitute presence in person
at such meeting, except where a Person participates in such meeting for the
express purpose of objecting to the transaction of any business on the
ground that such meeting is not lawfully called or convened.
SECTION 3.15 Managers. The Member and each Manager shall take
all actions necessary from time to time to ensure that at all times the
number of Managers shall be not less than three nor more than five;
provided, however, that pursuant to Section 3.04, the Company shall at all
times have at least two Independent Managers. The Managers upon the
execution of this Agreement shall be __________, _________, __________,
__________ (who will serve as an Independent Manager) and __________ (who
will serve as an Independent Manager).
ARTICLE IV
OFFICERS
SECTION 4.01 Designation; Term; Qualifications. The Managers
may, from time to time, designate one or more Persons to be officers of the
Company. Any officer so designated shall have such title and authority and
perform such duties as the Managers may, from time to time, delegate to
them. Each officer shall hold office for the term for which such officer
is designated and until its successor shall be duly designated and shall
qualify or until its death, resignation or removal as provided in this
Agreement. Any Person may hold any number of offices. No officer need be a
Manager, the Member, a Delaware resident, or a United States citizen.
SECTION 4.02 Removal and Resignation. Any officer of the
Company may be removed as such, with or without cause, by the Managers at
any time. Any officer of the Company may resign as such at any time upon
written notice to the Company. Such resignation shall be made in writing
and shall take effect at the time specified therein or, if no time is
specified therein, at the time of its receipt by the Managers.
SECTION 4.03 Vacancies. Any vacancy occurring in any office of
the Company may be filled by the Managers.
SECTION 4.04 Compensation. The compensation, if any, of the
officers of the Company shall be fixed from time to time by the Managers.
ARTICLE V
MEMBER
SECTION 5.01 Powers. Subject to the provisions of the
Certificate of Formation, this Agreement and the Act, all powers shall be
exercised by or under the authority of, and the business and affairs of the
Company shall be controlled by, the Member pursuant to Section 5.03.
Pursuant to Section 3.01 of this Agreement, the Member has delegated such
powers to the Managers. Without prejudice to such general powers, but
subject to the same limitations, it is hereby expressly declared that the
Member shall have the following powers, subject to Section 3.04 in all
cases:
First: To select and remove the Managers and prescribe such
powers and duties for them as may be consistent with the Act and other
applicable law, the Certificate of Formation and this Agreement.
Second: To conduct, manage and control the affairs and business
of the Company, and to make such rules and regulations therefor consistent
with the Act and other applicable law, the Certificate of Formation and
this Agreement.
Third: To change the registered office of the Company in
Delaware from one location to another; to fix and locate from time to time
one or more other offices of the Company; and to designate any place within
or without the State of Delaware for the conduct of the business of the
Company.
SECTION 5.02 Compensation of Member. The Company shall have
authority to pay to the Member reasonable compensation for the Member's
services to the Company. It is understood that the compensation paid to
the Member under the provisions of this Section shall be determined without
regard to the income of the Company, shall not be deemed to constitute
distributions to the recipient of any profit, loss or capital of the
Company and shall be considered as an operating expense of the Company.
SECTION 5.03 Actions by the Member. All actions of the Member
may be taken by written resolution of the Member which shall be signed on
behalf of the Member by an authorized officer of the Member and filed with
the records of the Company.
SECTION 5.04 Control by Member. To the extent the Member takes
any action with respect to the Company (including by means of its
appointment of any individual Manager or its control or employment of any
individual Manager in any other capacity), the Member, or any such Manager,
as applicable, will act in good faith in accordance with the terms of this
Agreement, and make decisions with respect to the business and daily
operations of the Company independent of, and not dictated by, the Member,
any such Manager, as applicable, or any Affiliate of the foregoing, and any
such Manager shall bear a fiduciary duty to the Company (including its
creditors) under the circumstances set forth in Section 3.04 hereof.
ARTICLE VI
COMMON INTEREST
SECTION 6.01 General. The Common Interest constitutes personal
property and shall be freely transferable and assignable in whole but not
in part upon registration of such transfer and assignment on the books of
the Company in accordance with the procedures established for such purpose
by the Managers of the Company. Upon registration of the transfer and
assignment of the Common Interest on the books of the Company, the
transferee/assignee shall be and become the sole Member of the Company and
shall have the rights and powers, and be subject to the restrictions and
liabilities, of the Member under this Agreement and the Act, and the
transferor/assignor shall cease to be the Member, each as of the date of
such registration. The Common Interest of the Member in the Company shall
be evidenced by a certificate in the form set forth in Schedule B hereto.
SECTION 6.02 Distributions. The Member shall be entitled to
receive, out of the assets of the Company legally available therefor, when,
as and if declared by the Managers, distributions payable in cash in such
amounts, if any, as the Managers shall declare.
SECTION 6.03 Rights on Liquidation, Dissolution or Winding Up.
(a) In the event of any liquidation, dissolution or winding up
of the Company, the Member shall be entitled to all remaining assets of the
Company available for distribution to the Member after payment of all
liabilities, debts and obligations of the Company.
(b) Neither the sale of all or substantially all of the property
or business of the Company, nor the merger or consolidation of the Company
into or with another Company or other entity, shall be deemed to be a
dissolution, liquidation or winding up, voluntary or involuntary, for the
purpose of this Section 6.03.
(c) The commencement of a bankruptcy, insolvency, receivership
or other similar proceeding by or against the Company or the Member shall
not result in the dissolution of the Company or in the cessation of the
interest of the Member in the Company. The withdrawal or resignation of
the Member shall not constitute a dissolution of the Company.
SECTION 6.04 Redemption. The Common Interest shall not be
redeemable.
SECTION 6.05 Voting Rights. The Member shall have the sole
right to vote on all matters as to which members of a limited liability
company shall be entitled to vote pursuant to the Act and other applicable
law.
ARTICLE VII
ALLOCATIONS; DISTRIBUTIONS; EXPENSES; TAXES;
BOOKS; RECORDS; AND BANK ACCOUNTS
SECTION 7.01 Allocations. Except as may be required by section
704(c) of the Code and Treasury Regulation section 1.704-1(b)(2)(iv)(f)(4),
all items of income, gain, loss, deduction, and credit of the Company for
each Fiscal Year shall be allocated to the Member. Any credit available
for federal income tax purposes shall be allocated to the Member in the
same manner.
SECTION 7.02 Distributions. All distributions shall be made to
the Member from surplus funds. Except as provided in Section 7.03 of this
Agreement, all distributions shall be made in such amounts and at such
times as determined by the Managers.
SECTION 7.03 Limitation Upon Distributions. No distribution
shall be declared and paid unless, after the distribution is made, the fair
value of the Company assets is in excess of all liabilities of the Company
and no default has occurred and is continuing under the Indenture or any
Series of Bonds then outstanding.
SECTION 7.04 Expenses. Except as otherwise provided in this
Agreement, and subject to the provisions of the Basic Documents, the
Company shall be responsible for all expenses and the allocation thereof
including without limitation:
(a) all expenses incurred by the Member or its Affiliates in
organizing the Company;
(b) all expenses related to the payment of the principal of and
interest on the transition bonds issued by the Company;
(i) all expenses related to the business of the Company and
all routine administrative expenses of the Company,
including any amounts payable under the Administration
Agreement, the maintenance of books and records of the
Company, the preparation and dispatch to the Member of
checks, financial reports, tax returns and notices
required pursuant to this Agreement;
(ii) all expenses incurred in connection with any litigation
or arbitration involving the Company (including the
cost of any investigation and preparation) and the
amount of any judgment or settlement paid in connection
therewith;
(c) all expenses for indemnity or contribution payable by
the Company to any person;
(d) all expenses incurred in connection with the collection of
amounts due to the Company from any person;
(e) all expenses incurred in connection with the preparation of
amendments to this Agreement;
(f) all expenses incurred in connection with the liquidation,
dissolution and winding up of the Company; and
(g) all expenses otherwise allocated in good faith to the
Company by the Managers.
SECTION 7.05 Tax Elections. The Managers shall make the
following elections on behalf of the Company:
(a) To elect the calendar year as the Company's Fiscal Year;
(b) To elect the accrual method of accounting;
(c) To elect to treat all organization and start-up costs of the
Company as deferred expenses amortizable over 60 months under Section 195
of the Code; and
(d) To elect with respect to such other federal, state and local
tax matters as the Managers shall agree upon from time to time.
SECTION 7.06 Annual Tax Information. The Managers shall cause
the Company to deliver to the Member all information necessary for the
preparation of the Member's federal or Commonwealth income tax return.
SECTION 7.07 Tax Matters Member. The Member shall communicate
and negotiate with the Internal Revenue Service on any tax matter on behalf
of the Member and the Company.
SECTION 7.08 Maintenance of Books. The Company shall keep books
and records of accounts and shall keep minutes of the proceedings of the
Member, the Managers and each committee of the Managers. The Fiscal Year
shall be the accounting year of the Company.
SECTION 7.09 Reports. Within sixty (60) days following the end
of each Fiscal Year during the term of the Company, the Managers shall
cause the Member to be furnished with a balance sheet, an income statement
and a statement of changes in Member's capital account for, or as of the
end of, that Fiscal Year. Such financial statements must be prepared in
accordance with the accounting method selected by the Managers consistently
applied (except as therein noted), and shall be accompanied by an audit
report from a nationally recognized accounting firm. The Managers also may
cause to be prepared or delivered such other reports as they may deem
appropriate. The Company shall bear the costs of all such financial
statements and reports.
SECTION 7.10 Bank and Investment Accounts. The Managers shall
establish and maintain one or more separate bank and investment accounts
and arrangements for Company funds in the Company name with financial
institutions and firms that the Managers determine.
ARTICLE VIII
INDEMNIFICATION OF MEMBER, MANAGERS AND OFFICERS
SECTION 8.01 Mandatory Indemnification of Member and Managers.
Any Person who was or is a party or is threatened to be made a party to or
is involved in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, arbitrative, or
investigative (hereafter a "Proceeding"), or any appeal in such a
Proceeding or any inquiry or investigation that could lead to such a
Proceeding, by reason of the fact that such Person is or was the Member or
a Manager, or while the Member or a Manager is or was serving at the
request of the Company as a director, manager, officer, partner, venturer,
proprietor, trustee, employee, agent or similar functionary of another
foreign or domestic corporation, limited liability company or partnership,
joint venture, partnership, trust, sole proprietorship, employee benefit
plan or other enterprise, shall be indemnified by the Company to the
fullest extent permitted by applicable law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Company to provide greater or
broader indemnification rights than such law permitted the Company to
provide prior to such amendment) against judgments, penalties (including,
without limitation, excise and similar taxes and punitive damages), fines,
settlements and reasonable expenses (including, without limitation,
attorneys' fees) actually incurred by such Person in connection with such
Proceeding. It is expressly acknowledged that the indemnification provided
in this Article VIII could involve indemnification for negligence or under
theories of strict liability.
SECTION 8.02 Mandatory Advancement of Expenses. Expenses
incurred by a Person of the type entitled to be indemnified under Section
8.01 of this Agreement in defending any Proceeding shall be paid or
reimbursed by the Company in advance of the final disposition of the
Proceeding, without any determination as to such Person's ultimate
entitlement to indemnification under Section 8.01 of this Agreement, upon
receipt of a written affirmation by such Person of such Person's good faith
belief that such Person has met the standard of conduct necessary for
indemnification under applicable law and a written undertaking by or on
behalf of such Person to repay all amounts so advanced if it shall
ultimately be determined that such Person is not entitled to be indemnified
by the Company as authorized in Section 8.01 of this Agreement or
otherwise. The written undertaking shall be an unlimited general
obligation of the Person but need not be secured and shall be accepted
without reference to financial ability to make repayment.
SECTION 8.03 Indemnification of Officers, Employees and Agents.
The Company shall indemnify and pay and advance expenses to an officer,
employee or agent of the Company to the same extent and subject to the same
conditions under which it may indemnify and pay and advance expenses to the
Member or any Managers under this Article VIII; and the Company shall
indemnify and pay and advance expenses to any Person who is not or was not
the Member, a Manager, officer, employee or agent of the Company but who is
or was serving at the request of the Company as a manager, director,
officer, partner, venturer, proprietor, trustee, employee, agent or similar
functionary of another foreign or domestic limited liability company or
partnership, corporation, partnership, joint venture, sole proprietorship,
trust, employee benefit plan or other enterprise against any liability
asserted against such Person and incurred by such Person in such a capacity
or arising out of such Person's status as such to the same extent and
subject to the same conditions that the Company may indemnify and pay and
advance expenses to the Member or any Manager under this Article VIII.
SECTION 8.04 Nonexclusivity of Rights. The indemnification and
advancement and payment of expenses provided by this Article VIII (i) shall
not be deemed exclusive of any other rights to which the Member, a Manager
or other Person seeking indemnification may be entitled under any statute,
provision of the Certificate of Formation, agreement, decision of the
Member or disinterested Managers, or otherwise both as to action in such
Person's official capacity and as to action in another capacity while
holding such office, (ii) shall continue as to any Person who has ceased to
serve in the capacity which initially entitled such Person to indemnity and
advancement and payment of expenses, and (iii) shall inure to the benefit
of the heirs, executors, administrators, successors and assigns of the
Member, such Manager or other Person.
SECTION 8.05 Contract Rights. The rights granted pursuant to
this Article VIII shall be deemed to be contract rights, and no amendment,
modification or repeal of this Article VIII shall have the effect of
limiting or denying any such rights with respect to actions taken or
Proceedings arising prior to any such amendment, modification or repeal.
SECTION 8.06 Insurance. The Company may purchase and maintain
insurance or other arrangement or both, at its expense, on behalf of itself
or any Person who is or was serving as the Member, a Manager, officer,
employee or agent of the Company, or is or was serving at the request of
the Company as a manager, director, officer, partner, venturer, proprietor,
trustee, employee, agent or similar functionary of another foreign or
domestic limited liability company, partnership, corporation, partnership,
joint venture, sole proprietorship, trust, employee benefit plan or other
enterprise, against any liability, expense or loss, whether or not the
Company would have the power to indemnify such Person against such
liability under the provisions of this Article VIII.
SECTION 8.07 Savings Clause. If this Article VIII or any
portion hereof shall be invalidated on any ground by any court of competent
jurisdiction, then the Company shall nevertheless indemnify and hold
harmless the Member, each Manager or any other Person indemnified pursuant
to this Article VIII as to costs, charges and expenses (including, without
limitation, attorneys' fees), judgments, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, to the fullest extent permitted
by any applicable portion of this Article VIII that shall not have been
invalidated and to the fullest extent permitted by applicable law.
SECTION 8.08 Other Ventures. It is expressly agreed that the
Member, any Manager and any Affiliates, officers, directors, managers,
stockholders, partners or employees of the Member or any Manager, may
engage in other business ventures of every nature and description, whether
or not in competition with the Company, independently or with others, and
the Company shall not have any rights in and to any independent venture or
activity or the income or profits derived therefrom.
SECTION 8.09 Other Arrangements Not Excluded. The
indemnification and advancement of expenses authorized in or ordered by a
court pursuant to this Article VIII:
(a) Does not exclude any other rights to which a Person seeking
indemnification or advancement of expenses may be entitled
under the Certificate of Formation or any agreement,
decision of the Member or otherwise, for either an action of
the Member or any Manager, officer, employee or agent in the
official capacity of such Person or an action in another
capacity while holding such position, except that
indemnification, unless ordered by a court pursuant to
Section 8.05 above, may not be made to or on behalf of the
Member or any Manager if a final adjudication established
that its acts or omissions involved intentional misconduct,
fraud or a knowing violation of the law and was material to
the cause of action; and
(b) Continues for a person who has ceased to be the Member,
Manager, officer, employee or agent and inures to the
benefit of the successors, heirs, executors and
administrators of such a person.
ARTICLE IX
MISCELLANEOUS PROVISIONS
SECTION 9.01 Offset. Whenever the Company is to pay any sum to
the Member, any amounts the Member owes the Company may be deducted from
such sum before payment.
SECTION 9.02 Notices. Except as expressly set forth to the
contrary in this Agreement, all notices, requests, or consents provided for
or permitted to be given under this Agreement shall be in writing and shall
be given either by depositing such writing in the United States mail,
addressed to the recipient, postage paid, and registered or certified with
return receipt requested or by delivering such writing to the recipient in
person, by courier, or by facsimile transmission; and a notice, request, or
consent given under this Agreement shall be effective on receipt by the
Person to whom sent. All notices, requests, and consents to be sent to the
Member shall be sent to or made to Two North Ninth Street, Allentown,
Pennsylvania 18101, Attention: [________] or such other address as the
Member may specify by notice to the Company and the Managers. Any notice,
request, or consent to the Company or the Managers must be given to the
Managers at the following address: c/o Two North Ninth Street, Allentown,
Pennsylvania 18101, Attention: [________]. Whenever any notice is required
to be given by law, the Certificate of Formation or this Agreement, a
written waiver thereof, signed by the Person entitled to notice, whether
before or after the time stated therein, shall be deemed equivalent to the
giving of such notice.
SECTION 9.03 Effect of Waiver or Consent. A waiver or consent,
express or implied, to or of any breach or default by any Person in the
performance by such Person of its obligations with respect to the Company
shall not be a consent or waiver to or of any other breach or default in
the performance by such Person of the same or any other obligations of such
Person with respect to the Company.
SECTION 9.04 Governing Law; Severability. This Agreement shall
be governed by and shall be construed in accordance with the law of the
State of Delaware, excluding any conflict-of-laws rule or principle that
might refer the governance or the construction of this Agreement to the law
of another jurisdiction. In the event of a direct conflict between the
provisions of this Agreement and (i) any provision of the Certificate of
Formation, or (ii) any mandatory provision of the Act, then the applicable
provision of the Certificate of Formation or the Act shall control. If any
provision of this Agreement or the application thereof to any Person or
circumstance is held invalid or unenforceable to any extent, the remainder
of this Agreement and the application of that provision to other Persons or
circumstances shall not be affected thereby and such provision shall be
enforced to the fullest extent permitted by law.
SECTION 9.05 Waiver of Certain Rights; No Bankruptcy Petition.
The Member irrevocably waives any right it may have to maintain any action
for dissolution of the Company or for partition of any Company asset. The
Member and each Manager (by agreeing to act in such capacity) hereby
covenants and agrees (or shall be deemed to have hereby covenanted and
agreed) that, prior to the date which is one year and one day after the
payment in full of every other indebtedness or liability of the Company
represented by any previously issued Series of Bonds and amounts owed under
the Indenture to third-party credit enhancers or hedge agreement
counterparties with respect to such Bonds, it will not institute against,
or join with any other Person in instituting against, the Company, any
bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any Federal or state bankruptcy or
similar law, provided, however, that nothing in this Section 9.05 shall
constitute a waiver of any right to indemnification, reimbursement or other
payment from the Company pursuant to this Agreement. In the event that the
Member or any Manager takes action in violation of this Section 9.05, the
Company agrees that it shall file an answer with the bankruptcy court or
otherwise properly contest the filing of such petition or the commencement
of such action and raise the defense that the Member or Manager, as the
case may be, has agreed in writing not to take such action and should be
estopped and precluded therefrom and such other defenses, if any, as its
counsel advises that it may assert. The provisions of this Section 9.05
shall survive the termination of this Agreement and the resignation or
removal of any Manager. Nothing herein contained shall preclude
participation by the Member or a Manager in assertion or defense of its
claims in any such proceeding involving the Company.
SECTION 9.06 Amendment. This Agreement may not be amended,
except in writing by the Member and the Company, upon prior approval of the
Trustee and receipt of notification in writing by each Rating Agency (as
defined in the Indenture) then rating the Bonds of any Class or Series, to
the Trustee and the Company that such amendment will not result in a
reduction or withdrawal of the then current rating by any such Rating
Agency of any outstanding Series or Class of Bonds.
SECTION 9.07 Headings and Sections. The headings in this
Agreement are inserted for convenience only and are in no way intended to
describe, interpret, define, or limit the scope, extent or intent of this
Agreement or any provision hereof.
IN WITNESS WHEREOF, this Limited Liability Company Agreement is
hereby executed by the undersigned as the Member of the Company as of
August __, 1999.
PP&L, INC.
By: /s/ John R. Biggar
-------------------------------
Name: John R. Biggar
Title: Senior Vice President and
Chief Financial Officer
SCHEDULE A
Schedule of Capital Contributions of Member
COMMON INTEREST
CAPITAL COMMON INTEREST CAPITAL
MEMBER'S NAME CONTRIBUTION PERCENTAGE ACCOUNT
------------- ------------ --------------- -------
PP&L, Inc. $12,000,000 100% $12,000,000
SCHEDULE B
CERTIFICATE OF COMMON INTEREST
of
PP&L TRANSITION BOND COMPANY LLC
A Limited Liability Company
Organized under the Laws of the State of Delaware
This Certificate is issued and shall be held subject to the provisions
of the Certificate of Formation of PP&L TRANSITION BOND COMPANY LLC, a
Limited Liability Company organized under the laws of the State of Delaware
(the "Company"), filed on March 25, 1999 with the Secretary of State of the
State of Delaware, and the Limited Liability Company Agreement dated March
25, 1999 of the Company, as each may be amended from time to time.
This Certificate of Common Interest certifies that PP&L, Inc. is the
registered holder of the entire Common Interest of the Company, which
Common Interest shall be transferable only on the books of the Company by
the holder hereof in person or by a duly authorized attorney upon surrender
of this Certificate with a proper endorsement.
IN WITNESS WHEREOF, this Company has caused this Certificate to be
signed by one of its duly authorized Managers this __ day of July, 1999.
/s/ John R. Biggar
---------------------------
Title: Manager
PP&L TRANSITION BOND COMPANY LLC
For Value Received the undersigned hereby sells, assigns and transfers unto
___________________________________________________________________________
the entire Common Interest of the Company represented by the within
Certificate and does hereby irrevocably constitute and appoint
___________________________________________________________________________
Attorney, to transfer said Common Interest on the books of the Company with
full power of substitution in the premises.
Dated: __________________
_____________________________
SCHEDULE C
Names Managers
----- --------
1) John R. Biggar
2) James E. Abel
3) James S. Pennington
[4) Independent Manager]
[5) Independent Manager]
EXHIBIT 4.4
FORM OF TRANSITION BONDS
REGISTERED $
No. ______
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP NO.
THE PRINCIPAL OF THIS CLASS __ TRANSITION BOND WILL BE PAID IN
INSTALMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL
AMOUNT OF THIS CLASS __ TRANSITION BOND AT ANY TIME MAY BE LESS THAN THE
AMOUNT SHOWN ON THE FACE HEREOF.
PP&L TRANSITION BOND COMPANY LLC
TRANSITION BONDS, SERIES 1999-1, Class __.
Bond Original Principal Expected Final Class Final
Rate Amount Payment Date Maturity Date
_____% $____________ ______________ _____________
PP&L Transition Bond Company LLC, a limited liability company
organized and existing under the laws of the State of Delaware (herein
referred to as the "Issuer"), for value received, hereby promises to pay to
the Registered Holder hereof, or registered assigns, the Original Principal
Amount shown above in quarterly instalments on the Payment Dates (as
defined below) and in the amounts specified on the reverse hereof or, if
less, the amounts determined pursuant to Section 8.02(e) of the Indenture,
in each year, commencing on the date determined as provided on the reverse
hereof and ending on or before the Class Final Maturity Date, to pay the
entire unpaid principal hereof on the Class Final Maturity Date and to pay
interest, at the Bond Rate shown above at a [floating] [fixed] rate
calculated as follows [insert rate or formula], on each March 25, June 25,
September 25 and December 26, and or if any such day is not a Business
Day, the next succeeding Business Day, commencing on December 27, 1999 and
continuing until the earlier of the payment of the principal hereof and the
Class Final Maturity Date (each a "Payment Date"), on the principal amount
of this Series 1999-1, Class __ Transition Bond outstanding from time to
time. Interest on this Series 1999-1, Class __ Transition Bond will accrue
for each Payment Date from the most recent Payment Date on which interest
has been paid to but excluding such Payment Date or, if no interest has yet
been paid, from July , 1999. Interest will be computed on the basis of a
360-day year of twelve 30-day months the actual number of days from the
preceding Payment Date, to but excluding the next Payment Date, divided by
360 . Such principal of and interest on this Series 1999-1, Class __
Transition Bond shall be paid in the manner specified on the reverse
hereof.
The principal of and interest on this Series 1999-1, Class __
Transition Bond are payable in such coin or currency of the United States
of America as at the time of payment is legal tender for payment of public
and private debts. All payments made by the Issuer with respect to this
Class __ Transition Bond shall be applied first to interest due and
payable on this Class __ Transition Bond as provided above and then to the
unpaid principal of and premium, if any, on this Class __ Transition Bond,
all in the manner set forth in Section 8.02(e) of the Indenture.
Reference is made to the further provisions of this Class __
Transition Bond set forth on the reverse hereof, which shall have the same
effect as though fully set forth on the face of this Class __ Transition
Bond.
Unless the certificate of authentication hereon has been executed by
the Trustee whose name appears below by manual signature, this Class __
Transition Bond shall not be entitled to any benefit under the Indenture
referred to on the reverse hereof, or be valid or obligatory for any
purpose.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be
signed, manually or in facsimile, by an Authorized Officer of the Member.
Date:
PP&L TRANSITION BOND COMPANY LLC,
By:______________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
Dated: July __, 1999
This is one of the Class __ Transition Bonds of the Series 1999-1
Transition Bonds, designated above and referred to in the within-mentioned
Indenture.
THE BANK OF NEW YORK,
not in its individual capacity
but solely as Trustee on behalf
of the Transition Bondholders,
By:____________________________
Name:
Title:
REVERSE OF TRANSITION BOND
This Series __, Class __ Transition Bond is one of a duly
authorized issue of Transition Bonds of the Issuer, designated as its
Transition Bonds (herein called the "Transition Bonds"), issued and to be
issued in one or more Series, which Series are issuable in one or more
Classes, and this Series Transition Bond, in which this Series 1999-1,
Class __ Transition Bond represents an interest, consists of Classes,
including the Class __ Transition Bonds (herein called the "Class __
Transition Bonds"), all issued and to be issued under an indenture dated as
of July __, 1999, and a series supplement thereto dated as of July __, 1999
(such series supplement, as supplemented or amended, the "Supplement" and,
collectively with such indenture, as supplemented or amended, the
"Indenture"), each between the Issuer and The Bank of New York, as Trustee
(the "Trustee", which term includes any successor trustee under the
Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the Collateral property
pledged, the nature and extent of the security, the respective rights,
obligations and immunities thereunder of the Issuer, the Trustee and the
Holders of the Transition Bonds and the terms and conditions under which
additional Transition Bonds may be issued. All terms used in this Class __
Transition Bond that are defined in the Indenture, as supplemented or
amended, shall have the meanings assigned to them in the Indenture.
The Class __ Transition Bonds, the other Classes of Series __
Transition Bonds and any other Series of Transition Bonds issued by the
Issuer are and will be equally and ratably secured by the Collateral
pledged as security therefor as provided in the Indenture or the Series
1999-1 Supplement.
The principal of this Class __ Transition Bond shall be payable on
each Payment Date only to the extent that amounts in the Collection Account
are available therefor, and only until the outstanding principal balance
thereof on such Payment Date (after giving effect to all payments of
principal, if any, made on such Payment Date) has been reduced to the
principal balance specified in the Expected Amortization Schedule which is
attached to the Supplement as Schedule A, unless payable earlier either
because
(i) an Event of Default shall have occurred and be continuing and the
Trustee or the Holders of Transition Bonds representing not less than
a majority of the Outstanding Amount of the Transition Bonds of all
Series have declared the Transition Bonds to be immediately due and
payable in accordance with Section 5.02 of the Indenture,
(ii) [the Issuer, at its option, shall have called for the redemption
of the Series Transition Bonds in whole or from time to time in part
pursuant to Section 10.01 of the Indenture,]
(iii) [the Issuer shall redeem the Series 1999-1 Transition Bonds
pursuant to Section 10.02 of the Indenture] or
(iv) [the Issuer shall have called for the redemption of the Series
1999-1 Transition Bond in whole or from time to time in part pursuant
to Section 7(a) or 7(b) of the Supplement.]
However, actual principal payments may be made in lesser than expected
amounts and at later than expected times as determined pursuant to Section
8.02(e) of the Indenture. The entire unpaid principal amount of this Series
1999-1, Class __ Transition Bond shall be due and payable on the earlier of
the Class Final Maturity Date hereof and the Redemption Date, if any,
herefor. Notwithstanding the foregoing, the entire unpaid principal amount
of the Transition Bonds shall be due and payable, if not then previously
paid, on the date on which an Event of Default shall have occurred and be
continuing and the Trustee or the Holders of the Transition Bonds of all
Series representing not less than a majority of the Outstanding Amount of
the Transition Bonds have declared the Transition Bonds to be immediately
due and payable in the manner provided in Section 5.02 of the Indenture.
All principal payments on the Class __ Transition Bonds shall be made pro
rata to the Class __ Transition Bondholders entitled thereto based on the
respective principal amounts of the Series 1999-1, Class __ Transition
Bonds held by them.
Payments of interest on this Class __ Transition Bond due and payable
on each Payment Date, together with the instalment of principal or premium,
if any, due on this Class __ Transition Bond on such Payment Date shall be
made by check mailed first-class, postage prepaid, to the Person whose name
appears as the Registered Holder of this Class __ Transition Bond (or one
or more predecessor of such Transition Bond) in the Transition Bond
Register as of the close of business on the Record Date or in such other
manner as may be provided in the Supplement, except that with respect to
Class __ Transition Bonds registered on the Record Date in the name of a
Clearing Agency, payments will be made by wire transfer in immediately
available funds to the account designated by such Clearing Agency and
except for the final instalment of principal and premium, if any, payable
with respect to this Class __ Transition Bond on a Payment Date which shall
be payable as provided below. Such checks shall be mailed to the Person
entitled thereto at the address of such Person as it appears in the
Transition Bond Register as of the applicable Record Date without requiring
that this Class __ Transition Bond be submitted for notation of payment.
Any reduction in the principal amount of this Class __ Transition Bond (or
any one or more predecessor to such Transition Bond) effected by any
payments made on any Payment Date shall be binding upon all future Holders
of this Class __ Transition Bond and of any Class __ Transition Bond
issued upon the registration of transfer hereof or in exchange hereof or in
lieu hereof, whether or not noted hereon. If funds are expected to be
available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Class __ Transition Bond on a
Payment Date, then the Trustee, in the name of and on behalf of the Issuer,
will notify the Person who was the Registered Holder hereof as of the
second preceding Record Date to such Payment Date by notice mailed no later
than five days prior to such final Payment Date and shall specify that such
final instalment will be payable to the Registered Holder hereof as of the
Record Date immediately preceding such final Payment Date and only upon
presentation and surrender of this Class __ Transition Bond and shall
specify the place where this Series 1999-1, Class __ Transition Bond may be
presented and surrendered for payment of such instalment.
The Issuer shall pay interest on overdue instalments of interest on
this Class __ Transition Bond at the Bond Rate for Class __ to the extent
lawful.
[As provided in the Indenture, the Class __ Transition Bonds may be
redeemed, in whole or from time to time in part, at the option of the
Issuer on any Redemption Date at the Redemption Price. The Issuer will
also be required to redeem the Series 1999-1, Class __ Transition Bonds in
certain circumstances as provided in Sections 7(a) and 7(b) of the
Supplement.]
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Class __ Transition Bond may be
registered in the Transition Bond Register upon surrender of this Class __
Transition Bond for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Trustee duly executed by the Holder hereof or his attorney duly authorized
in writing, with such signature guaranteed by an Eligible Guarantor
Institution, and thereupon one or more new Class __ Transition Bonds of any
Authorized Denominations and in the same aggregate initial principal amount
will be issued to the designated transferee or transferees. No service
charge will be charged for any registration of transfer or exchange of this
Class __ Transition Bond, but the transferor may be required to pay a sum
sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange.
Prior to the due presentment for registration of transfer of this
Class __ Transition Bond, the Issuer, the Trustee and any agent of the
Issuer or the Trustee may treat the Person in whose name this Class
Transition Bond is registered (as of the day of determination) as the owner
hereof for the purpose of receiving payments of principal of and premium,
if any, and interest on this Class __ Transition Bond and for all other
purposes whatsoever, whether or not this Class __ Transition Bond be
overdue, and neither the Issuer, the Trustee nor any such agent shall be
affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of
the Issuer and the rights of the Holders of the Transition Bonds under the
Indenture at any time by the Issuer with the consent of the Holders of
Transition Bonds representing a majority of the Outstanding Amount of all
Transition Bonds at the time Outstanding of each Series or Class to be
affected. The Indenture also contains provisions permitting the Holders of
Transition Bonds representing specified percentages of the Outstanding
Amount of the Transition Bonds of all Series, on behalf of the Holders of
all the Transition Bonds, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture
and their consequences. Any such consent or waiver by the Holder of this
Class __ Transition Bond (or any one of more predecessor of such transition
bonds) shall be conclusive and binding upon such Holder and upon all future
Holders of this Class __ Transition Bond and of any Class __ Transition
Bond issued upon the registration of transfer hereof or in exchange hereof
or in lieu hereof whether or not notation of such consent or waiver is made
upon this Class __ Transition Bond. The Indenture also permits the Trustee
to amend or waive certain terms and conditions set forth in the Indenture
without the consent of Holders of the Transition Bonds issued thereunder.
The term "Issuer" as used in this Series 1999-1, Class __ Transition
Bond includes any successor to the Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Trustee and the
Holders of Transition Bonds under the Indenture.
The Class __ Transition Bonds are issuable only in registered form in
Authorized Denominations as provided in the Indenture and the Supplement,
subject to certain limitations therein set forth.
This Class __ Transition Bond, the Indenture and the Supplement shall
be construed in accordance with the laws of the Commonwealth of
Pennsylvania, without reference to its conflict of law provisions, and the
obligations, rights and remedies of the parties hereunder and thereunder
shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Class __
Transition Bond or of the Indenture shall alter or impair the obligation of
the Issuer, which is absolute and unconditional, to pay the principal of
and interest on this Class __ Transition Bond at the times, place, and
rate, and in the coin or currency herein prescribed.
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto
(name and address of assignee)
the within Class __ Transition Bond and all rights thereunder, and hereby
irrevocably constitutes and appoints
(name and address of appointee)
attorney, to transfer said Class __ Transition Bond on the books kept for
registration thereof, with full power of substitution in the premises.
Dated:
_____________ _________________________*
Signature Guaranteed:
_____________ _________________________
* NOTE: The signature to this assignment must correspond with the name
of the registered owner as it appears on the face of the within
Class __ Transition Bond in every particular, without alteration,
enlargement or any change whatsoever.
EXHIBIT 5.1
OPINION OF SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP,
RELATING TO THE LEGALITY OF THE TRANSITION BONDS
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 THIRD AVENUE
NEW YORK 10022-3897
(212) 735-3000
July 23, 1999
PP&L Transition Bond Company LLC
Two North Ninth Street
Allentown, Pennsylvania 18101-1179
Re: PP&L Transition Bond Company LLC
--------------------------------
Ladies and Gentlemen:
We have acted as special counsel to PP&L Transition Bond Company LLC,
a Delaware limited liability company (the "Company"), in connection with
the preparation of the Registration Statement, as amended to the date
hereof, filed on Form S-3 (the "Registration Statement") with the
Securities and Exchange Commission (the "Commission") in connection with
the registration under the Securities Act of 1933, as amended, of
transition bonds (the "Transition Bonds") of the Company to be offered from
time to time as described in the form of the prospectus (the "Prospectus")
included as part of the Registration Statement. Capitalized terms used in
this letter and not defined herein have the meanings given to such terms in
the Prospectus.
We are familiar with the proceedings taken and proposed to be taken
by the Company in connection with the proposed authorization, issuance and
sale of the Transition Bonds. In this connection, we have examined
originals or copies, certified or otherwise identified to our satisfaction,
of such records of the Company and such agreements, certificates of public
officials, certificates of officers or other representatives of the Company
and others and such other documents, certificates and records as we have
deemed necessary or appropriate as a basis for the opinion set forth
herein.
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original
documents of all documents submitted to us as certified, conformed or
photostatic copies and the authenticity of the originals of such latter
documents. In making our examination of documents, we have assumed that the
parties thereto, other than the Company, had or will have the power,
corporate or other, to enter into and perform all obligations thereunder
and have also assumed the due authorization by all requisite action,
corporate or other, and execution and delivery by such parties of such
documents and the validity and binding effect thereof on such parties. As
to any facts material to the opinions expressed herein which we have not
independently established or verified, we have relied upon statements and
representations of officers and other representatives of the Company, PP&L,
Inc. and others.
The opinion expressed below is based on the following assumptions:
(a) the Registration Statement will become effective;
(b) the proposed transactions are consummated as contemplated in
the Registration Statement;
(c) prior to the issuance of any Series or Class of Transition
Bonds:
(i) all necessary orders, approvals and authorizations for the
Company's purchase from time to time of Intangible Transition
Property from PP&L Securities Co., LLC, a Delaware limited
liability company ("Securities Co."), in exchange for the net
proceeds of Transition Bonds will have been obtained by the
Company;
(ii) the Amended and Restated Limited Liability Company Agreement of
the Company will have been executed and delivered by an
authorized representative of PP&L as sole member of the
Company;
(iii) the Indenture will have been executed and delivered by the
Company's authorized representative and The Bank of New York,
as trustee;
(iv) the maturity dates, the bond rates, the redemption provisions
and the other terms of the Transition Bonds being offered will
be fixed in accordance with the terms of the Indenture;
(v) the Sale Agreement between the Company and Securities Co., as
Seller, will have been executed and delivered;
(vi) the Servicing Agreement between the Company and PP&L, Inc., as
Servicer, will have been executed and delivered; and
(vi) the Underwriting Agreement among the Company, PP&L, Inc. and
the underwriters of the Transition Bonds (the "Underwriting
Agreement") will have been executed and delivered; and
(d) the Indenture will be qualified in accordance with the provisions
of the Trust Indenture Act of 1939, as amended.
Members of our firm are admitted to practice in the States of New
York and Delaware, and we do not express any opinion as to the laws of any
other jurisdiction other than the federal laws of the United States.
In rendering the opinion set forth herein, we have assumed that the
execution and delivery by the Company of the Indenture and the Transition
Bonds and the performance by the Company of its obligations thereunder do
not violate, conflict with or constitute a default under (i) any agreement
or instrument to which the Company or its properties is subject, except for
those agreements and instruments which have been identified to us by the
Company as being material to it, (ii) any law, rule or regulation to which
the Issuer is subject, except for those laws, rules and regulations of the
State of New York and the United States of America which, in our
experience, are normally applicable to transactions of the type
contemplated by the Indenture and the Transition Bonds ("Applicable Laws"),
but without our having made any special investigation concerning any other
laws, rules or regulations, and (iii) any judicial or regulatory order or
decree of any governmental authority other than orders or decrees which has
been identified to us by the Company as being material to it of any New
York, Delaware or federal executive, legislative, judicial, administrative
or regulatory body established under Applicable Laws.
Based on and subject to the foregoing, we are of the opinion that,
when properly executed and authenticated in accordance with the Indenture
and delivered against payment of the purchase price provided for in the
Underwriting Agreement, and upon satisfaction of all other conditions
contained on the Indenture and the Underwriting Agreement, the Transition
Bonds will constitute valid and binding obligations of the Company, will be
fully paid and non-assessable and will be enforceable against the Company
in accordance with their terms, except to the extent that enforcement
thereof may be limited by (1) bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws now or hereafter in
effect relating to creditor's rights generally and (2) general principles
of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity).
We consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the references to this firm under the heading
"Various Legal Matters Relating to the Transition Bonds" in the Prospectus
included in the Registration Statement. In giving this consent, we do not
thereby admit that we are included in the category of persons whose consent
is required under Section 7 of the Act or the rules and regulations of the
Commission.
Very truly yours,
/s/ Skadden, Arps, Slate,
Meagher & Flom LLP
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 1
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,057
<CURRENT-LIABILITIES> 1,056
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1
<TOTAL-LIABILITY-AND-EQUITY> 1,057
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
<F1> Other Stockholders' Equity in this case represents Member's equity.
<F2> Total Liabilities and Stockholders' Equity in this case represents
total liabilities and Member's equity.
</TABLE>
EXHIBIT 99.2
INTERNAL REVENUE SERVICE PRIVATE LETTER
RULING PERTAINING TO TRANSITION BONDS
INTERNAL REVENUE SERVICE Department of the Treasury
INDEX NUMBERS: Washington, DC 20224
61.00-00 61.03-00
61.43-00 451.01-00
Person to Contact:
THOMAS M. PRESTON (ID NO. 50-05811)
W. Kirk Wallace Telephone Number:
Skadden, Arps, Slate, Meagher, 202-622-4443
& Flom LLP Refer Reply To:
919 Third Avenue CC: DOM: FI&P:2
New York, N.Y. 10022 Date: JUL - 9 1999
Legend
Parent = PP&L Resources, Inc.
EIN: 23-2758192
Company = PP&L, Inc.
EIN: 23-0959590
SPE = Special Purpose Limited Liability Company
Trustee = Transition Bond Trustee
State A = Pennsylvania
State B = Delaware
Statute = Title 66 Pa. Consolidated Statutes,
Section 2801, Electricity Generation
Customer Choice and Competition Act
Date 1 = January 1, 1999
Date 2 = January 2, 1999
Date 3 = January 1, 2000
Date 4 = August 27, 1998
Date 5 = December 31, 2009
Year 1 = 1996
a = $2.97 billion
b = $2.85 billion
c = $
d = $
e = .5%
f = 2%
Dear Mr. Wallace:
This letter supplements and supercedes the letter dated June 22,
1999, which ruled on a proposed transaction described in a letter dated
December 18, 1998.
FACTS
Parent is the common parent of an affiliated group of corporations
which includes Company and which files a consolidated return with Company.
Company, a calendar year taxpayer using the accrual method of accounting,
is an investor-owned electric utility in State A engaged in the generation,
transmission, distribution and sale of electricity and the distribution and
sale of natural gas within a designated territory. As such Company has a
monopoly within a designated territory and is subject to regulation by both
the State A Public Utility Commission (PUC) and the Federal Energy
Regulatory Commission (FERC).
State A is deregulating its electric utility industry. As a result,
Company's customers will be allowed to contract directly with alternative
suppliers of electricity, and Company will compete with other parties to
sell electricity.
The Statute was enacted in December, Year 1, to provide for the
restructuring of the electric utility industry in State A through the
unbundling of electric services into separate generation, transmission and
distribution services with open retail competition for generation. Electric
distribution and transmission services will remain regulated by the PUC.
Full electric generation competition will be phased in, in three steps.
Direct retail access is to be phased in for one-third of each customer
class by Date 1, for an additional one-third by Date 2, and for all
remaining custom ers by Date 3.
The Statute requires utilities to submit to the PUC restructuring
plans that include a statement regarding the amount of "stranded costs"
resulting from competi tion. Stranded costs include regulatory assets,
nuclear decommissioning costs and long-term purchased power commitments,
for which full recovery is allowed, and other costs, including investment
in generating plants, spent-fuel disposal, retirement costs and
reorganization costs, for which an opportunity for recovery is allowed in
an amount determined by the PUC as just and reasonable. These costs, after
mitigation by the utility, are to be recovered through the competitive
transition charge (CTC) approved by the PUC and collected from distribution
customers for up to nine years.
As a mechanism for the mitigation of CTCs and the reduction of
customer rates, the Statute authorizes an electric utility to securitize
its stranded costs through the issuance of Transition Bonds either directly
by the utility, by a finance subsidiary or third party assignee of the
utility. The Statute facilitates this securitization by creating, as
security for the Transition Bonds, a property right designated as intangi
ble transition property (ITP), which represents the irrevocable right to
recover from a utility's jurisdictional customers through an intangible
transition charge (ITC), amounts sufficient to recover the utility's
stranded costs, as well as amounts to cover the expenses of issuing and
servicing the Transition Bonds, and the funding of any necessary reserve
accounts, which are collectively defined as qualified transition expenses
(QTEs). ITP is created through the issuance of a qualified rate order (QRO)
by the PUC that has been declared irrevocable. Although the PUC may approve
periodic adjustments to the ITC in accordance with the Statute and the QRO,
once a QRO is declared irrevocable, it may not be modified by the Company,
the PUC, the State or any instrumentality thereof. The Statute provides
that the transfer of ITP, to a subsidiary or assignee of the utility,
pursuant to an irrevocable QRO shall be treated as an absolute transfer of
the utility's right, title and interest as in a true sale, and not as a
pledge or other financing for state income and franchise tax purposes.
Transition Bonds will be repayable from intangible transition charges
(ITCs). ITCs are non-bypassable charges imposed on a utility's
jurisdictional customers to recover the utility's authorized QTEs.
Jurisdictional customers are those located in the utility's certificated
territory, whether or not the customers purchase electricity from the
electric utility. The ITC will be calculated as a percentage of expected
total base rate revenue to be collected by customer rate class, the
collection of which will likely be dependent on, inter alia, a utility's
ability to forecast the usage, delinquen cies, chargeoffs, and payment lags
of customers in each rate class.
PROPOSED TRANSACTION
On Date 4, the PUC issued a final order approving a settlement
agreement that contained a QRO providing for, inter alia, (a) the recovery
of stranded costs in the amount of a over an eleven year period (b) the
issuance of Transition Bonds not to exceed the aggregate principal amount
of b in one or more series, (c) the imposition of an ITC on customers
sufficient to recover the Company's QTEs (d) the assignment, sale transfer,
or pledge of the ITP for purposes of the financing contem plated by the
proposed transaction, and (e) annual adjustments to the ITC to ensure that
the assignee of the ITP receives revenue sufficient to recover fully the
QTEs.
The Company's assignee will be the SPE a newly formed, bankruptcy
remote, wholly owned State B limited liability company formed solely for
this purpose. Company will also contribute equity to the SPE in an amount
equal to approximately e of the total principal amount of the Transition
Bonds. The SPE will not elect to be treated as an association taxable as a
corporation under section 301.7701-3(b)(1) of the Procedure and
Administration Regulations.
For each QRO declared irrevocable by the PUC, the SPE will issue
Transi tion Bonds in the form of debt securities in one or more series, and
one or more tranches of each series. The Transition Bonds will have a
legal, final maturity of up to ten years, but in no event may a maturity
date extend beyond Date 5. Interest and principal will be payable
quarterly, and interest will be set at fixed or floating rates. Principal
will be paid in accordance with an expected amortization schedule, but only
to the extent that the funds are available therefor. The Transition Bonds
will be recourse to the SPE and will be secured by all of the SPE's assets
(i.e., the ITP, trust accounts and miscellaneous assets) pledged to the
Trustee under the indenture pursuant to which the Transition Bonds will be
issued. It is anticipated that at least two nationally recognized credit
rating agencies will give the Transition Bonds their respective highest
available credit ratings.
Company will act as the servicer of the ITC revenue stream as part of
normal collections and, in this capacity, will bill customers and make
collections on behalf of the SPE, and will make applications to the PUC to
maintain the ITC at a level which allows for full recovery of QTEs in
accordance with the amortization schedule for each series of Transition
Bonds. The ITC will be used by the SPE to make quarterly payments of
principal and interest on the Transition Bonds and to pay related servicer,
Trustee, and other fees.
Amounts collected by Company in respect of the ITC will be deposited
into its accounts and remitted monthly to a "Collection Account" maintained
by the Trustee for the benefit of Transition Bondholders. The Collection
Account will be divided into five subaccounts, the General Subaccount, the
Series Subaccount, the Overcollateralization Subaccount, the Capital
Subaccount and the Reserve Subaccount. Amounts in each of the subaccounts
will be available to make pay ments on all series of Transition Bonds on
each payment date. Investment income earned on collections of ITC prior to
the payment of quarterly debt service on the Transition Bonds will be
available to pay debt service. Any amount of investment income remaining
after the Transition Bonds have been fully paid will be retained by the
SPE. Investment earnings on the SPE capital pledged to the Trustee, if not
needed currently to pay debt service, will be released from the lien of the
bond indenture on a quarterly basis. The SPE may distribute those earnings
not utilized for debt service to the Company from time to time. Until
distributed, such funds are subject to claims of the SPE's creditors,
including bondholders.
The ITC collected from customers will include an amount attributable
to overcollateralization, which will be equal to at least e of the initial
principal balance of each series of Transition Bonds. That amount will be
collected on a pro rata basis over the term of the Transition Bonds and
deposited into an Overcollateralization Subaccount. The amounts in the
Overcollateralization Subaccount will serve as Overcollateralization for
the Transition Bonds and will be retained by the SPE to the extent not
needed to pay principal and interest on the Transition Bonds or other
expenses. Amounts in the Overcollateralization Subaccount may not be
limited to e, however, such amounts are not expected to exceed f of the
original principal amount of the Transition Bonds.
The Trustee will allocate amounts in the General Subaccount of the
Collec tions Account in the following order: to all amounts owed the
Trustee (including legal fees and expenses, Indemnity Amounts and Loss
Amounts); to fees owed the Independent Manager; to current and overdue
monthly servicing fees owed to the Servicer; to fees owed the
Administrator; to all other operating expenses other than Trustee,
servicer, and Administrator fees; to interest then due on the Transition
Bonds; to principal payment legally required to be paid on the Transition
Bonds; to principal payments scheduled to be paid on the Transition Bonds;
to all unpaid operating expenses, indemnity amounts and loss amounts; an
amount necessary to maintain the Capital Subaccount equal to its required
balance; to the Overcollateralization Subaccount up to the required amount;
to an amount equal to the investment earnings on amounts in the Capital
Subaccount that will be released to the SPE from the lien of the indenture
which the SPE will then be able to (but not required to) distribute to the
Issuer; and finally to the Reserve Subaccount.
If ITC collections are insufficient to pay debt service, the
shortfall will be paid from the following accounts in the following order:
the Reserve Subaccount, the Overcollateralization Subaccount and the
Capital Subaccount. If, on any payment date, available collections of ITC,
together with available amounts in the subaccounts, are not sufficient to
pay interest due on the all outstanding Transition Bonds, amounts available
will be allocated among the outstanding series of Transition Bonds pro
rata based on the amount of interest payable on the outstanding series. If,
on any payment date, remaining collections on the ITP, together with
available amounts in the subaccounts, are not sufficient to pay principal
legally due on all outstanding series of Transition Bonds, amounts
available will be allocated among the outstanding series pro rata based on
the sum of interest and principal then legally due on the outstanding
series. If, on any payment date, remaining collections on the ITP, together
with available amounts in the subaccounts, are not sufficient to pay
principal scheduled to be paid on all outstanding classes or series of
Transition Bonds, amounts available will be allocated on a pro rata basis
based on the sum of interest and scheduled principal payable on the payment
date.
ISSUES
Does the issuance of the QRO authorizing the collection of the ITC
result in gross income to Company?
Does the issuance of the Transition Bonds result in gross income to
Com pany?
Are the Transition Bonds obligations of the Company?
LAW
Section 61 of the Internal Revenue Code generally defines gross
income as "income from whatever source derived", except as otherwise
provided by law. Gross income includes income realized in any form, whether
in money, property, or services. Section 1.61 -1 (a) of the Income Tax
Regulations. This definition encom passes all "accessions to wealth,
clearly realized, and over which the taxpayers have complete dominion."
Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 431 (1955), 1955-1 C.B.
207.
The right to collect the ITC is of significant value in producing
income for Company, and State A's action in making the ITC rights
transferable has enhanced that value. Generally, the granting of a
transferable right by the government does not cause the realization of
income. Rev. Rul. 920-16, 1992-1 C.B. 15 (allocation of air emission rights
by the Environmental Protection Agency does not cause a utility to realize
gross income); Rev. Rul. 67-135, 1967-1 C.B. 20 (fair market value of an
oil and gas lease obtained from the government through a lottery is not
includible in income).
The economic substance of a transaction generally governs its federal
tax consequences. Gregory v. Helvering, 293 U.S. 465 (1935), XIV-1 C.B.
193. Affixing a label to an undertaking does not determine its character.
Rev. Rul. 97-3, Rev. Rul. 973, 1997-1 C.B. 9. An instrument secured by
property may be an obligation of the taxpayer or, alternatively, may be a
disposition of the underlying property by the taxpayer. Cf. id. (the Small
Business Administration is the primary obligor of certain guaranteed
payment rights that are created under its participating security program).
CONCLUSIONS
Based on the facts as represented, we rule as follows:
(1) The issuance of the QRO financing order authorizing the
collection of the ITC does not result in gross income to Company.
(2) The issuance of the Transition Bonds does not result in gross
income to Company.
(3) The Transition Bonds are obligations of the Company.
Except as specifically ruled on above, no opinion is expressed or
implied regarding the federal tax aspects of the transaction.
This ruling is directed only to Company. Under section 6110(k)(3) of
the Code, this ruling may not be used or cited as precedent.
A copy of this letter should be attached to the federal income tax
return of Company for the taxable years that include the transaction
described in this letter.
Sincerely yours,
Assistant Chief Counsel
(Financial Institutions & Products)
By: /s/ Marshall Feiring
------------------------------------
Marshall Feiring
Senior Technician Reviewer, Branch 2
