File No. 70-9107
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 3 TO
FORM U-1 APPLICATION-DECLARATION
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
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CENTRAL AND SOUTH WEST CORPORATION CENTRAL POWER AND LIGHT COMPANY
1616 Woodall Rodgers Freeway 539 North Carancahua Street
Dallas, Texas 75202 Corpus Christi,Texas 78401-2802
(Names of companies filing this post-effective amendment and address
of principal executive offices)
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CENTRAL AND SOUTH WEST CORPORATION
(Name of top registered holding company parent)
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Wendy G. Hargus, Treasurer
Central and South West Corporation
1616 Woodall Rodgers Freeway
Dallas, Texas 75202
Kevin F. Blatchford, Esq.
Sidley & Austin
Bank One Plaza
10 South Dearborn Street
Chicago, Illinois 60603
(Names and addresses of agents for service)
<PAGE>
Central Power and Light Company, a wholly owned public utility
subsidiary of Central and South West Corporation, a registered holding company
under the Public Utility Holding Company Act of 1935, as amended, and CSW hereby
submit for filing this Post-Effective Amendment No. 3 to the Form U-1
Application-Declaration in this File 70-9107 (the "Application"). This
Post-Effective Amendment No. 3 amends and restates in its entirety
Post-Effective Amendments No. 1 and No. 2 to the Application. Except as amended
hereby, the Application as previously filed and amended will remain the same.
Item 1. Description of Proposed Transaction.
Central and South West Corporation and Central Power and
Light Company hereby amend Item 1 of this Application-Declaration by adding
the following thereto:
Summary
By order dated December 30, 1997 (Release No. 35-26811) (the
"Order"), the Securities and Exchange Commission (the "Commission") granted and
permitted to become effective the Form U-1 Application-Declaration, as amended
(File No. 70-9107), of Central and South West Corporation ("CSW"), a Delaware
corporation and a registered holding company under the Public Utility Holding
Company Act of 1935, as amended (the "Act"), Central Power and Light Company
("CPL") and certain other subsidiaries of CSW (CPL and such other subsidiaries
of CSW are collectively referred to herein as the "Subsidiaries"). The Order
authorized through December 31, 2002 (the "Authorization Period"), subject to
certain limitations set forth therein, among other things: (i) certain external
financings by CSW and the Subsidiaries; (ii) the acquisition by CSW of common
stock of the Subsidiaries; (iii) the Subsidiaries to repurchase their common
stock from CSW; (iv) CSW and the Subsidiaries to obtain certain credit
enhancements (e.g., letters of credit, liquidity facilities and insurance) for
the external financings authorized by the Order; (v) the creation and
capitalization by the Subsidiaries of new corporations, trusts, partnerships or
other entities for the purpose of facilitating certain types of financings
authorized by the Order; (vi) certain guarantees by the Subsidiaries of the
obligations of their subsidiary financing entities; and (vii) certain
refinancings, tender offers and retirements of debt and equity securities of the
Subsidiaries. In the Order, the Commission reserved jurisdiction "over
Applicants' proposals to . . . issue additional types of securities . . ." as
well as certain other matters.
Pursuant to the Order and such reservation of jurisdiction,
CSW and CPL hereby file this Post-Effective Amendment No. 3 to the
Application-Declaration. This Post-Effective Amendment seeks authorization for
CPL, or any affiliated successor in interest to its electric distribution
businesses and assets, to engage (in addition to the other transactions
authorized by the Order) in the transactions described herein from time to time
during the period beginning with the effective date of a supplemental order
issued in this proceeding pursuant to this Post-Effective Amendment through the
Authorization Period. To the extent not already authorized in the Order, CPL
seeks authority to:
(a) form one or more new wholly-owned entities to carry out the
transactions contemplated by this Post-Effective Amendment
(each a "Special Purpose Issuer") which are expected to be any
one of the following: a trust, corporation, limited liability
company or partnership;
(b) acquire all the equity securities issued by each Special
Purpose Issuer to establish its ownership of that Special
Purpose Issuer;
(c) cause one or more Special Purpose Issuers to issue and sell
transition bonds ("Transition Bonds") from time to time in an
aggregate principal amount of up to $800,000,000 (for all
Special Purpose Issuers) and as authorized and approved by the
Public Utility Commission of Texas ("PUCT") pursuant to the
terms and conditions of the PUCT financing order dated March
27, 2000 in PUCT Docket No. 21528 (the "Financing Order"), any
other PUCT orders or findings issued in PUCT Docket No. 21528
and in accordance with the Texas Public Utility Regulatory
Act, Section 39 (the "Statute") (the principal amount of
Transition Bonds so issued shall not reduce the amount of
external financings previously authorized by the Order);
(d) enter into or cause any Special Purpose Issuer to enter into
interest rate swaps, interest rate hedging programs and credit
enhancement arrangements to reduce interest rate risks with
respect to, and to facilitate the offering of, Transition
Bonds;
(e) enter into a Servicing Agreement pursuant to which CPL or its
affiliates will perform services for the Special Purpose
Issuer and be paid compensation determined on an "arms length"
basis, rather than the "at-cost" standard of Section 13(b) of
the Act;
(f) apply the proceeds received from the sale of the Transition
Bonds as authorized by the Statute and the Financing Order,
including the acquisition, redemption, retirement and
defeasance of certain of CPL's outstanding debt and equity
securities; and
(g) engage in certain related transactions described herein.
Except to the extent modified by a supplemental order issued by the
Commission pursuant to this Post-Effective Amendment, CSW and CPL request that
the Order remain in full force and effect and that the provisions of the Order
shall apply to the transactions and securities described herein.
Background
In 1999, Texas enacted the Statute, governing the
restructuring of the electric industry in Texas and providing for retail
competition for electric generation beginning January 1, 2002. The Statute
permits electric utilities with assets located in Texas to recover stranded
costs caused by the transition to a competitive market for electric generation
services, as authorized by the PUCT. Investments in generation related assets
were historically recoverable in rates established by the PUCT but may not be
recoverable in full in rates established by market forces in a competitive
electric generation supply market.
Under the Statute, the PUCT may authorize an electric utility
with assets located in Texas or its designee to issue Transition Bonds that have
a term of not more than 15 years to securitize regulatory assets and other
stranded costs. The proceeds of Transition Bonds may be used solely for purposes
of reducing the amount of recoverable regulatory assets and stranded costs, as
determined by the PUCT in accordance with the Statute, through the refinancing
or retirement of utility debt or equity and the recovery of other Qualified
Costs (as defined below).
Under the Statute, to the extent authorized from time to time
by the PUCT pursuant to a financing order, Transition Bonds may be issued and
sold in an aggregate principal amount up to the sum of the following costs
("Qualified Costs")1:100% of a utility's regulatory assets as of December 31,
1998; 75% of a utility's estimated stranded costs as determined by the PUCT;
100% of the costs of issuing, supporting and servicing the Transition Bonds; and
100% of the costs of retiring and refunding the utility's debt and equity
securities with the proceeds of the Transition Bonds. The Statute authorizes the
PUCT to adopt a financing order to approve the issuance of Transition Bonds by
CPL or a third-party assignee of CPL, such as a Special Purpose Issuer. The
rights of CPL under an issued financing order, when assigned to a Special
Purpose Issuer, will also create "Transition Property" ("Transition Property")
which will be the primary source of the payment of amounts due under the
Transition Bonds. Transition Property represents the rights and interests under
a financing order, including the right to impose, collect and receive
irrevocable "Transition Charges" ("TCs") authorized in that financing order. TCs
are generally defined in the Statute as nonbypassable amounts authorized to be
charged for the use or availability of electric service under a financing order
to recover a utility's Qualified Costs. The amount of TCs to be imposed will be
calculated at an amount sufficient to pay the principal and interest on the
Transition Bonds when due, premiums, if any, on the Transition Bonds, the costs
of any credit enhancements for the Transition Bonds and the costs of retiring or
repurchasing a portion of existing debt and equity and the fees, costs and
expenses of the issuance of the Transition Bonds and related transactions.
TCs are recoverable from each retail customer located in a
utility's certificated service territory as it existed on May 1, 1999,
regardless of whether that customer continues to purchase electricity from that
electric utility, subject to certain limited exceptions. The TCs will be as
determined and established by the PUCT. In a financing order, the PUCT will
provide for periodic adjustments to the TCs ("true-ups") in accordance with the
Statute and that financing order. Once a financing order becomes effective, that
financing order, together with the TCs authorized in that order, are irrevocable
(subject to true-ups). In the Statute, the State of Texas pledges (the "State
Pledge"), for the benefit of the holders of the Transition Bonds, that it will
not take or permit any action that would impair the value of the Transition
Property or reduce, alter or impair the TCs to be imposed, collected and
remitted (except for the true-ups described above) until the Transition Bonds
are paid in full. The Proposed Transaction
In accordance with the procedures set forth in the Statute,
CPL filed on October 18, 1999 its first application with the PUCT for a
financing order authorizing the issuance of Transition Bonds as described in
this Post-Effective Amendment. Such application sought authorization of
Qualified Costs in an aggregate amount of $1,270,247,000 of CPL's Texas retail
generation-related regulatory assets as of December 31, 1998, plus $46,763,000
for the costs of issuing the Transition Bonds and the costs of retiring and
refunding certain of CPL's debt and equity securities with the proceeds
therefrom. On February 9, 2000, CPL settled with various parties to the PUCT
proceeding regarding the amount of regulatory assets to be securitized. The PUCT
issued the Financing Order on March 27, 2000. CPL currently expects to issue
$797,334,897 principal amount of Transition Bonds under the Financing Order.
In accordance with the Statute, CPL may from time to time file
one or more additional applications with the PUCT for additional financing
orders authorizing the issuance of additional Transition Bonds to recover
Qualified Costs not previously authorized by the PUCT. CPL may also, under
certain circumstances, seek a financing order to permit the refunding of
outstanding Transition Bonds.
After the issuance by the PUCT of a requested financing order,
CPL will sell and transfer the Transition Property and the associated TC revenue
stream created by that financing order to a Special Purpose Issuer2 pursuant to
a "Transition Property Sale Agreement" (the "Sale Agreement"). The Special
Purpose Issuer will issue Transition Bonds to finance its purchase of the
Transition Property and the associated TC revenue stream from CPL in accordance
with the related financing order.
The Special Purpose Issuer may issue Transition Bonds in one
or more series, and each such series may be issued in one or more classes.
Different series may have different maturities and coupon rates and each series
may have classes with different maturities and coupon rates. There will be a
date on which each class of Transition Bonds is expected to be repaid and a
legal final maturity date by which such class of Transition Bonds must be
repaid. Neither the expected final maturity nor the legal final maturity will be
later than 15 years after the date of issuance.
Pursuant to a "Transition Property Servicing Agreement"
between CPL and the Special Purpose Issuer, CPL will act as the "Servicer" of
the TC revenue stream and, in this capacity, such Servicer will, among other
things, (i) bill customers and retail electric providers and make collections on
behalf of the Special Purpose Issuer and (ii) file with the PUCT for adjustment
to the TCs to achieve a level which allows for payment of all debt service and
full recovery of Qualified Costs to be collected through TCs in accordance with
the amortization schedule for each series and class of Transition Bonds. It
should be noted that CPL may subcontract with its affiliates to carry out some
of its servicing responsibilities, so long as the ratings of the Transition
Bonds are neither reduced nor withdrawn as a result.
CPL will be entitled to compensation, in the form of a
"servicing fee", for its servicing activities and reimbursement for certain of
its expenses in the manner set forth in the Servicing Agreement and other
documentation applicable to each series. In order to satisfy the rating agency
requirements for a "bankruptcy remote" entity, the servicing fee must be an
"arms-length" fee, which would be reasonable and sufficient for a third party
performing similar services. As a result, the servicing fees will be set at an
annual level of not more than 1% of the initial principal amount of the
Transition Bonds while CPL is acting as Servicer and not more than 2% if a third
party is acting as Servicer. CPL will retain any investment earnings on TC
collections from the time of collection until the time of remittance to the
Special Purpose Issuer.
Under certain circumstances specified in a Servicing
Agreement, any entity (including an affiliate of CPL) which becomes the
successor or operator of the major part of CPL's electric transmission and
distribution business may, or may be required to, assume the obligations of CPL
under the Sale Agreement and the Servicing Agreement. If transmission and
distribution are not provided by a single entity successor or operator, the
entity which provides wire service directly to customers may, or may be required
to, assume such obligations.
The Special Purpose Issuer may also enter into an
"Administration Agreement" with CPL or another affiliate of CSW (the
"administrator"). Personnel employed by the administrator would provide
ministerial services on an as-needed basis to the Special Purpose Issuer under
the Administration Agreement. These services will consist primarily of
administrative or housekeeping matters relating to the Special Purpose Issuer
such as providing notices required under its Transition Bond documentation,
maintaining its books and records and maintaining authority to do business in
appropriate jurisdictions. Under the Administration Agreement, the Special
Purpose Issuer will reimburse the administrator for the cost of services
provided. Use of Proceeds
CPL will use the gross proceeds from the sale of Transition
Bonds as authorized by the Financing Order issued by the PUCT and in accordance
with the Statute. Such use of proceeds may include the following: (i) to pay
costs incurred in the issuance and sale of the Transition Bonds; (ii) to refund
or retire utility debt or equity; and (iii) to pay the costs of such refinancing
and retirement.
The specific steps taken to refinance or retire utility debt
or equity will depend, in large part, on the date on which the proceeds from the
sale of Transition Bonds become available, the then prevailing market conditions
and circumstances of CPL at that time, including but not limited to its overall
financial circumstances and other financial activities that may be in progress
or planned, as well as the advice of its financial advisors.
The Order provides that "... external financings by the
Subsidiaries [approved by the Commission in the Order], other than the refunding
of outstanding securities which will not be limited ..." (emphasis added) will
be subject to certain limitations. CSW and CPL request that the Commission find
that the use of the proceeds of the Transition Bonds constitutes "refunding of
outstanding securities" within the meaning of the Order and that the principal
amount of Transition Bonds issued from time to time shall not reduce the amount
of financings previously approved by the Order.3 Such finding is consistent with
the requirement under the Statute that "the proceeds of the transition bonds
shall be used solely for the purposes of reducing the amount of recoverable
regulatory assets and stranded costs, as determined by the commission in
accordance with this chapter, through the refinancing or retirement of utility
debt or equity." (emphasis added) Interest Rate Swaps
CPL also seeks authority for the Special Purpose Issuer
(and/or CPL, acting on behalf of the Special Purpose Issuer, to be so authorized
to the extent that it is legally required or more cost-effective for CPL to do
so) to enter into transactions to be initiated during the Authorization Period
to convert all or a portion of any Transition Bonds bearing interest at a
floating rate ("Floating Rate Transition Bonds") to fixed rate obligations using
interest rate swaps or other derivative products designed for such purposes.
If authorized hereunder, the Special Purpose Issuer may enter
into one or more interest rate swaps ("Swaps"), or one or more derivative
instruments, such as interest rate caps, interest rate floors and interest rate
collars (collectively, "Derivative Transactions"), with one or more
counterparties from time-to-time through the Authorization Period. The notional
amounts of the swaps and the expected average life of the swaps will not exceed
that of the underlying Transition Bonds.4
Under one swap strategy if interest on the Transition Bonds is
payable at a floating rate, the Special Purpose Issuer would enter into an
interest rate swap with a counterparty whereby it would receive the same
floating rate interest payment from the counterparty as it pays to the
Transition Bondholders. In return, the Special Purpose Issuer would agree to
make payments to the counterparty based upon the principal amount of such
Transition Bonds and at an agreed upon fixed interest rate. The net effect of
such a transaction would be to convert the Floating Rate Transition Bonds to
fixed rate obligations. The term of the interest rate swap would match the
maturity of the Floating Rate Transition Bonds and the swap notional amount
would at all times equal the outstanding principal amount of such bonds. Any
counterparty to a Swap or Derivative Transaction will, at the time of entering
into any Swap or Derivative Transaction, have investment grade credit ratings
for its senior long-term debt as established by a nationally recognized
statistical rating organization (as this term is defined in Rule
15c3-1(c)(2)(vi)(F) under the Securities Exchange Act of 1934, as amended). Any
swap agreement will also include customary provisions related to indemnification
by CPL or the Special Purpose Issuer for breakage costs and other losses under
certain circumstances related to termination of the swap.
Hedging Interest Rate Risk for Anticipated Debt
CSW and CPL also seek authorization for the Special Purpose
Issuer (or CPL, acting on behalf of the Special Purpose Issuer, to be so
authorized to the extent that it is legally required or more cost-effective for
CPL to do so) to enter into an interest rate hedging program ("Hedge Program")
utilizing Derivative Transactions. CPL will determine the optimal structure of
the Hedge Program at the time of execution. In order to sell the Transition
Bonds, CPL is required by the Statute to show that the Transition Bonds have
tangible and quantifiable benefits. In order to ensure that there will be
tangible and quantifiable benefits, the PUCT will have a cap on the weighted
average interest rate of the Transition Bonds. CPL will not be able to issue the
Transition Bonds if the weighted average interest rate is above the cap as set
by the PUCT. As a result, CPL may decide to lock-in interest rates and/or limit
exposure to, interest rate increases. CPL will not, at any time, take possession
of any U.S. Treasury securities underlying a hedging transaction.
These Hedge Programs provide benefits by minimizing the
potential volatility in financing costs. The Hedge Program would be utilized to
fix and/or limit the interest rate risk exposure of any new issuance of
Transition Bonds through: (i) establishing a short position in an
exchange-traded U.S. Treasury futures contract, or one or more designated U.S.
Treasury security(ies) or by paying a fixed rate in a forward starting interest
rate swap (each a "Forward Sale"); (ii) the purchase of put options on one or
more designated U.S. Treasury security(ies) or an option to pay a fixed rate in
a forward starting interest rate swap ("Put Options Purchase"); (iii) a Put
Options Purchase in combination with the sale of call options ("Call Options
Sale") on one or more designated U.S. Treasury security(ies) or the option to
pay a fixed rate in a forward starting interest rate swap ("Zero Cost Collar");
or (iv) some combination of a Forward Sale, Put Options Purchase and/or Zero
Cost Collar.
A forward starting interest rate swap is a contract where the
Special Purpose Issuer agrees to pay a fixed interest rate at a specific future
date and a counterparty agrees to pay a floating interest rate at a future date.
The contract will be cash settled at the maturity of the contract. Thus, a
forward starting swap that matures in three months would be cash settled at the
end of three months. If interest rates have increased, the counterparty will
make a payment to the Special Purpose Issuer. This receipt will offset the
higher interest rate that the Special Purpose Issuer will be paying on the
Transition Bonds. If interest rates have decreased, the Special Purpose Issuer
will make a payment to the counterparty. This payment will offset the lower
interest rate that the Special Purpose Issuer will be paying on the Transition
Bonds. Thus, the Special Purpose Issuer will lock-in a fixed interest rate
regardless of movement in interest rates between the time the contract is
entered into and the time it matures. A forward starting swap is the best low
cost hedging vehicle. It is not, however, a perfect hedge. It is possible that
new issue spreads for the Special Purpose Issuer and swap spreads do not track
each other on a 1 for 1 basis point move.
A Put Options Purchase requires the Special Purpose Issuer to
make an upfront payment to the counterparty in exchange for protection against
rising interest rates. This strategy does not expose the Special Purpose Issuer
to making a payment to unwind the hedge in the event interest rates fall. The
asymmetric payout profile makes this strategy analogous to purchasing insurance
where the risk to the Special Purpose Issuer is known and is limited to the
upfront premium amount paid by the Special Purpose Issuer.
The Zero Cost Collar strategy does not lock in today's
interest rate environment. Under this strategy the Special Purpose Issuer is
left somewhat exposed to rising rates (up to the put strike level) but able to
benefit to some degree from falling rates (down to the call strike level). This
strategy is used frequently when an issuer: (i) wants to limit or cap its
exposure to rising rates; (ii) wants to avoid making an upfront option premium
payment; and (iii) does not want to just lock in today's interest rate
environment through a Forward Sale.
All Derivative Transactions and transactions entered into under the
Hedge Program will be in compliance with CSW's Risk Management Policy and
Guidelines and will also meet the Financial Accounting Standards Board
requirements for hedge accounting.
Common Equity Ratios
CSW and CPL believe that the issuance of Transition Bonds
should not be viewed as having any adverse impact on the consolidated common
equity ratios of CSW or CPL. As TCs are imposed and collected, such amounts will
be used to pay principal and interest on the Transition Bonds, as well as fees
and expenses related to the transaction. The Transition Bonds are payable solely
from the cash flows provided by the TCs and are, as a result, nonrecourse with
respect to CSW and CPL. Consequently, the Transition Bonds are not true
indebtedness of CSW or CPL for this purpose. In addition, because the sole
source of payment for the Transition Bonds is the related TC cash flow, the
payment of amounts due on Transition Bonds will have no adverse impact on the
regular cash flows of CSW or CPL.
The Statute provides that a transfer of Transition Property by
an electric utility to its assignee (such as CPL's Special Purpose Issuer) that
expressly states that the transfer is a sale or other absolute transfer shall be
a true sale and is not a secured transaction and that title, legal and
equitable, has passed to the transferee. Because the underlying securitized
assets (the Transition Property and its associated TC revenue stream) owned by
the Special Purpose Issuer are isolated from the risks associated with the
business and other assets of CPL, the Transition Bonds are expected to have a
credit rating higher than the credit rating of debt instruments issued by CPL.
The creditworthiness of the Transition Bonds is further increased by the State
Pledge and by the PUCT's issuance of an irrevocable financing order which
provides for the true-up procedure previously described.
As mentioned above, it is expected that the rating agencies
will recognize that the Transition Bonds are independent of the credit of CPL by
assigning ratings to the Transition Bonds which are higher than the ratings
assigned to the actual long-term indebtedness of CPL. Bonds similar to the
Transition Bonds which have been issued by other utility companies have been
rated AAA. It is expected that a AAA rating will be achieved by the Transition
Bonds. CPL's current credit ratings from Standard & Poor's Ratings Services,
Moody's Investors Service and Duff & Phelps Credit Rating Co., respectively, for
its senior secured long-term debt are A/A3/A.
For all of these reasons, CSW and CPL believe that the
Commission's traditional concern with the effect of issuances of indebtedness by
a holding company or a subsidiary thereof on its common equity ratio should not
be a factor in this case. Since the Transition Bonds are payable solely from the
cash flows provided by the TCs and are nonrecourse to CSW and CPL, the
Transition Bonds should not be included as long-term debt when considering CSW's
and CPL's common equity ratios and creditworthiness. As previously discussed,
this viewpoint is consistent with the rating agencies' treatment of bonds
similar to the Transition Bonds which have been issued by other utilities.
As a result of CPL's settlement in the PUCT proceeding with
respect to CPL's Transition Bond application, CPL will be able to redeem or
retire CPL equity in an amount not to exceed $450,000,000. At this time CSW and
CPL are unable to predict exactly how the proceeds of the Transition Bonds will
actually be allocated between debt and equity. See " Use of Proceeds." However,
assuming that $450,000,000 of the proceeds of the Transition Bonds are used to
redeem or retire CPL equity and $313,734,489 of such proceeds are used to retire
CPL indebtedness, then the issuance of $797,334,897 aggregate principal amount
of Transition Bonds by CPL would reduce its common equity to total
capitalization ratio from 48% at December 31, 1999 to approximately 41%. Under
the same assumptions the pro forma effect on CSW's consolidated common equity to
total capitalization ratio at December 31, 1999 would be a reduction from 47% to
44%.
If, however, the Commission nevertheless determines to treat
the Transition Bonds as ordinary long-term debt for this purpose, then under the
same assumptions listed above regarding the principal amount of Transition Bonds
to be issued and the maximum amount of proceeds which would be utilized to
redeem or retire CPL equity, the consolidated common equity to total
capitalization ratios for CSW and CPL, respectively, as of December 31, 1999
would be reduced to 40% and 30%. To the extent that CPL redeems or retires its
equity in an amount less than $450,000,000, then its common equity ratio would
be higher than 30%.
As set forth in the Order, the authorization requested by CSW
and CPL is subject to the condition that for CPL financings, CPL will maintain
long-term debt ratings which are investment grade as established by a nationally
recognized statistical rating organization (as this term is used in rule
15c3-1(c)(2)(vi)(F) under the Securities Exchange Act of 1934, as amended). Item
2. Fees and Expenses
An estimate of the fees and expenses to be paid or incurred by
CSW and CPL in connection with the transactions discussed in this Post-Effective
Amendment are set forth below:
Approximate
Amount
Printing and Marketing expenses $ 350,000
Trustee Fees and Counsel 50,000
Company Legal fees and expenses 2,500,000
Underwriters' Legal fees and expenses 300,000
Accountants/Consulting Fees 500,000
Rating Agency Fees 600,000
Legal Fees - Public Utility Commission of Texas 100,000
Miscellaneous expenses 1,000,000
Special Purpose Entity - Setup Costs 25,000
Upfront Servicer Setup costs 500,000
SEC Registration Fee 222,000
Underwriter Fees 3,867,000
PUCT Financial Advisory and Legal Fees 1,300,000
Capital Subaccount 3,987,000
Original Issue Discount 3,987,000
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Total $19,288,000
Item 3. "Applicable Statutory Provisions," is amended to read in its
entirety as follows:
Sections 6(a), 7, 9, 10, 12(b), 12(e), 12(f) and 13(b) of the
Act and Rules 42, 43, 45, 52, 54, 62, 90 and 91 thereunder are or may be
applicable to the proposed transactions. To the extent any other sections of the
Act may be applicable to the proposed transactions, CSW and CPL hereby request
appropriate orders thereunder.
Rule 54 promulgated under the Act states that in determining
whether to approve the issue or sale of a security by a registered holding
company for purposes other than the acquisition of an exempt wholesale generator
("EWG") or a foreign utility company ("FUCO"), or other transactions by such
registered holding company or its subsidiaries other than with respect to EWGs
or FUCOs, the Commission shall not consider the effect of the capitalization or
earnings of any subsidiary which is an EWG or a FUCO upon the registered holding
company system if Rule 53(a), (b) and (c) are satisfied. The Applicants
currently meet all of the criteria of Rule 53(a), except for clause (1). At
December 31, 1999, CSW's "aggregate investment," as defined in Rule 53(a)(1), in
EWGs and FUCOs was approximately $968 million, or approximately 53.6% of CSW's
average "consolidated retained earnings," as defined in Rule 53(a)(1), for the
four quarters ended December 31, 1999 (approximately $1.805 billion), which
exceeds the 50% "safe harbor" limitation contained in that rule.
By order dated January 24, 1997, (HCAR No. 26653) ("January
1997 Order"), the Commission authorized CSW to increase to 100% of average
"consolidated retained earnings," as defined in Rule 53(a)(1), the aggregate
amount which it may invest in EWGs and FUCOs. Although CSW's aggregate
investment exceed the 50% "safe harbor" limitation contained in Rule 53, CSW's
aggregate investment is below the 100% limitation authorized under the January
1997 Order.
As of September 30, 1996, the most recent period for which
financial statement information was evaluated in the January 1997 Order, CSW's
consolidated capitalization consisted of 43.5% equity and 56.5% debt. CSW's
consolidated pro forma capitalization as of December 31, 1999, taking into
account the effect of the proposed transactions, is 39.5% equity and 60.5%
debt.5
CSW asserts that since the date of the January 1997 Order,
there has been no material change in its consolidated capitalization ratio. CSW
further states that this ratio remains within acceptable ranges and limits, as
evidenced by CSW's corporate consolidated "A2" and "P2" short term credit
ratings, which have remained the same since the January 1997 Order.
In 1997, the government of Great Britain imposed a windfall
profits tax of $176 million on SeEboard plc, a FUCO in the United Kingdom wholly
owned by CSW. On December 2, 1999, the Office of Gas and Electric Makers
("OFGEM") published its final price proposals from its United Kingdom
electricity distribution review. OFGEM has proposed revenue reductions in
SEEBOARD's distribution business of 21%. In addition, OFGEM has proposed the
reallocation of a further 12% of costs out of SEEBOARD's distribution business
into its supply business. These proposals were accepted on December 20, 1999,
and will take effect on April 1, 2000, and remain in effect for five years.
OFGEM's proposals will reduce net income for SEEBOARD in the year 2000 by
approximately $40 million, dependent upon the level of further cost reductions
that can be achieved, and by approximately $60 million in 2001. CSW's net income
from SEEBOARD U.S.A., its United Kingdom business segment, was $113 million for
the twelve months ended December 31, 1999. Notwithstanding the imposition of the
windfall profits tax and OFGEM's proposals, CSW currently expects that earnings
attributable to CSW's interests in EWGs and FUCOs will continue to contribute
positively to consolidated earnings in 2000. Since the date of the January 1997
Order, the earnings attributable to CSW's investments in EWGs and FUCOs (i) have
contributed positively to CSW's consolidated earnings for the period January 1,
1997 through December 31, 1999 and (ii) have not had any adverse impact on CSW's
financial integrity.
CSW will continue to maintain in conformity with United States
generally accepted accounting principles and make available the books and
records required by Rule 53(a)(2). CSW does, and will continue to, comply with
the requirement that no more than 2% of the employees of CSW's operating
subsidiaries shall, at any one time, directly or indirectly, render services to
an EWG or FUCO in which CSW directly or indirectly owns an interest, satisfying
Rule 53(a)(3). And lastly, CSW will continue to submit a copy of Item 9 and
Exhibits G and H of CSW's Form U5S to each of the public service commissions
having jurisdiction over the retail rates of CSW's operating utility
subsidiaries, satisfying Rule 53(a)(4). None of the conditions described in Rule
53(b) exist with respect to CSW or any of its subsidiaries, thereby satisfying
said Rule and making Rule 53(c) inapplicable. Item 4. Regulatory Approval
Item 4, "Regulatory Approval," is amended by adding the following:
With respect to the proposed issuance of the Transition Bonds and
related matters, the PUCT has jurisdiction pursuant to the Statute. The
transactions described in this Post-Effective Amendment are not subject to the
jurisdiction of any other state commission or of any federal commission other
than the Commission.
Item 5. Procedure
Item 5, "Procedure," is hereby amended by deleting the first two
paragraphs thereof and substituting the following:
Requisite notice under Rule 23 with respect to this
Application-- Declaration as amended hereby has been published. CSW and CPL
respectfully request that the Commission enter an appropriate supplemental order
granting and permitting this Application, as amended hereby, to become effective
no later than March 31, 2000.
No recommended decision by a hearing officer or other
responsible officer of the Commission is necessary or required in this matter.
The Division of Investment Management of the Commission may assist in the
preparation of the Commission's decision in this matter. There should be no
thirty-day waiting period between the issuance and the effective date of any
order issued by the Commission in this matter, and it is respectfully requested
that any such order be made effective immediately upon the entry thereof. Item
6. Exhibits and Financial Statements
CSW and CPL hereby amend Item 6 of this Application-Declaration by adding
the following thereto:
(a) Exhibits
*A-1 Form of Indenture between the Special Purpose Issuer and the
Trustee thereunder, including the form of Transition Bond
*B-1 Form of Transition Property Sale Agreement
*B-2 Form of Transition Property Service Agreement
B-3 Form of Administration Agreement - not applicable
B-4 Form of Underwriting Agreement
*B-5 Organizational document for Special Purpose Issuer
*C-1 Registration Statement on Form S-3 for the Transition Bonds
*D-1 Application to the Public Utility Commission of Texas ("PUCT"),
including the Financing Order
E-1 Not applicable
F-1 Opinions of Sidley & Austin, Vinson & Elkins L.L.P. and Richards,
Layton & Finger
**F-2 "Past tense" Opinion of Sidley & Austin
*(b) Financial Statements as of September 30, 1999
*Previously filed
**To be filed by Amendment
Item 7. Information as to Environmental Effects
No amendment
<PAGE>
Signature
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, as amended, the undersigned companies have duly caused this
document to be signed on their behalf by the undersigned thereunto duly
authorized.
Dated: April 20, 2000
CENTRAL AND SOUTH WEST CORPORATION CENTRAL POWER AND LIGHT COMPANY
By:/s/ WENDY G. HARGUS By: /s/ WENDY G. HARGUS
Wendy G. Hargus Wendy G. Hargus
Treasurer Treasurer
- --------
1 Under the Statute, Qualified Costs also include certain costs incurred by the
PUCT in a proceeding under the Statute. 2 CSW and CPL believe that the
organization and utilization of a Special Purpose Issuer will not unduly
complicate the holding company structure of CSW. Special Purpose Issuers are
necessary components of the transactions described herein with the resulting
benefits provided in the Statute. 3 The Order also provides that "The proceeds
from external financing transactions ... will be ... used principally ... (ii)
to acquire, retire, or redeem securities of which CSW or the Subsidiaries are
the issuer ... without the need for prior Commission approval." 4 Swaps and
Derivative Transactions entered into during the Authorization Period may remain
in effect until the maturity of the related Transition Bonds. 5 As discussed
under Item 1 "Common Equity Ratios," CSW believes that the Transition Bonds
should not be included in long-term debt when considering CSW's consolidated
capitalization ratios. Assuming that the Transition Bonds are not included in
long-term debt, the consolidated pro forma capitalization as of December 31,
1999, taking into account the effect of the proposed transaction, is 44% equity
and 56% debt.
Exhibit B-4
CPL Transition Funding LLC1
Transition Notes, Series [_________]
Central Power and Light Company
Underwriting Agreement
_________________________________ ___________ ___, 2000
Name of Co-Representatives]
As Representatives of the several
Underwriters named in Schedule I hereto,
c/o __________________,
__________________
__________________
Ladies and Gentlemen:
From time to time, CPL Transition Funding LLC, a limited liability
company formed under the laws of the State of Delaware (the "Issuer"), and
Central Power and Light Company, a Texas corporation (the "Company"), each
proposes to enter into one or more Pricing Agreements (each a "Pricing
Agreement") in the form of Annex I hereto, with such additions and deletions as
the parties thereto may determine, and the Issuer proposes, subject to the terms
and conditions stated herein, to issue and sell to the Underwriters named in
Schedule I to the applicable Pricing Agreement (such firms constituting the
"Underwriters" with respect to such Pricing Agreement and the Securities
specified therein) certain of the Issuer's Transition Notes (the "Securities").
The Securities represented by such Pricing Agreement are referred to as the
"Designated Securities" with respect to such Pricing Agreement.
The terms and rights of any particular issuance of Designated
Securities shall be as specified in the Pricing Agreement relating thereto.
The Issuer was formed pursuant to a limited liability company agreement
dated as of __________, 2000 (the "LLC Agreement"). The Designated Securities
will be issued pursuant to an indenture to be dated as of ________, 2000 (as
amended and supplemented from time to time, [including all Series Supplements
and Trustee's Issuance Certificates,] the "Indenture"), between the Issuer and
________________, a [national association/banking corporation/trust company]
organized under the laws of ________, as indenture trustee (the "Indenture
Trustee"). The Securities will be secured primarily by, and will be payable
from, the Transition Property described in the final financing order (the
"Financing Order") dated __________, 2000 in Docket No. 21528 issued by the
Public Utility Commission of Texas ("PUCT") pursuant to subchapter G of Chapter
39 of the Texas Utilities Code, as amended from time to time (the
"Securitization Law"), and sold to the Issuer by the Company pursuant to a
transition property purchase and sale agreement to be dated as of ________, 2000
(the "Sale Agreement") between the Company, as seller, and the Issuer. Pursuant
to the Indenture, the Issuer has granted to the Indenture Trustee, as trustee
for the benefit of the holders of the Securities, all of its right, title and
interest in and to transition property as security for the Securities. The
Transition Property will be serviced pursuant to a transition property servicing
agreement to be dated as of ________, 2000 (as amended and supplemented from
time to time, the "Servicing Agreement"), between the Company, as servicer, and
the Issuer.
Capitalized terms used and not otherwise defined herein shall have the
respective meanings given to them in the Indenture (including Appendix A
thereto).
1. Particular sales of Designated Securities may be made from time to
time to the Underwriters of such Designated Securities, for whom the firms
designated as representatives of the Underwriters of such Securities in the
Pricing Agreement relating thereto will act as representatives (the
"Representatives"). The term "Representatives" also refers to a single firm
acting as sole representative of the Underwriters and to Underwriters who act
without any firm being designated as their representative. This Underwriting
Agreement shall not be construed as an obligation of the Issuer to sell any of
the Securities or as an obligation of any of the Underwriters to purchase any of
the Securities. The obligation of the Issuer to issue and sell any of the
Securities and the obligation of any of the Underwriters to purchase any of the
Securities shall be evidenced by the Pricing Agreement with respect to the
Designated Securities specified therein. Each Pricing Agreement shall specify
the aggregate principal amount of Designated Securities, the initial public
offering price of such Securities or the manner of determining such price, the
terms of the Designated Securities, the purchase price to the Underwriters of
such Designated Securities, the names of the Underwriters of such Designated
Securities, the names of the Representatives of such Underwriters, the aggregate
principal amount of such Designated Securities to be purchased by each
Underwriter and the commission payable to the Underwriters with respect thereto
and shall set forth the date, time and manner of delivery of such Designated
Securities, and payment therefor. The Pricing Agreement shall also specify (to
the extent not set forth in the registration statement and prospectus with
respect thereto) the terms of such Designated Securities. A Pricing Agreement
shall be in the form of an executed writing (which may be in counterparts), and
may be evidenced by an exchange of telegraphic communications or any other rapid
transmission device designed to produce a written record of communications
transmitted. The obligations of the Underwriters under this Agreement and each
Pricing Agreement shall be several and not joint.
2. Each of the Company and the Issuer, jointly and severally,
represents and warrants to, and agrees with, each of the Underwriters that:
(a) The Issuer and the Securities meet the requirements for
the use of Form S-3 under the Securities Act of 1933, as amended (the
"Act"), and the Issuer has filed a registration statement on Form S-3
(File No. 333-________), as amended by Amendment No. __ thereto (the
"Initial Registration Statement"), in respect of the Securities,
including a prospectus relating to the Securities, and the offering
thereof from time to time in accordance with Rule 415 under the Act
with the Securities and Exchange Commission (the "Commission"); the
Initial Registration Statement and any post-effective amendment
thereto, each in the form heretofore delivered or to be delivered to
the Representatives and, excluding exhibits to such registration
statement but including all documents incorporated by reference in the
prospectus included therein, to the Representatives for each of the
other Underwriters has been declared effective by the Commission in
such form; other than a registration statement, if any, increasing the
size of the offering (a "Rule 462(b) Registration Statement"), filed
pursuant to Rule 462(b) under the Act, which becomes effective upon
filing, no other document with respect to the Initial Registration
Statement or document incorporated by reference therein has heretofore
been filed, or transmitted for filing, with the Commission (other than
prospectuses filed pursuant to Rule 424 under the Act, each in the form
heretofore delivered to the Representatives); and no stop order
suspending the effectiveness of the Initial Registration Statement, and
post-effective amendment thereto or the Rule 462(b) Registration
Statement, if any, has been issued and no proceeding for that purpose
has been initiated or threatened, to the knowledge of the Company or
the Issuer, by the Commission (any preliminary prospectus included in
the Initial Registration Statement or filed with the Commission
pursuant to Rule 424(a) under the Act, is hereinafter called a
"Preliminary Prospectus"; the various parts of the Initial Registration
Statement and the 462(b) Registration Statement, if any, including all
exhibits thereto, the information contained in the form of final
prospectus filed with the Commission pursuant to Rule 424(b) under the
Act in accordance with Section 5(a) hereof and deemed by virtue of Rule
430A under the Act to be part of the Initial Registration Statement at
the time it was declared effective and the documents incorporated by
reference in the prospectus contained in the Initial Registration
Statement at the time such part of the Initial Registration Statement
became effective (but excluding Form T-1), each as amended at the time
such part of the Initial Registration Statement became effective or
such part of the Rule 462(b) Registration Statement, if any, became or
hereafter becomes effective, are hereinafter collectively called the
"Registration Statement"; such final prospectus relating to the
Securities in the form in which it has most recently been filed, or
transmitted for filing, with the Commission on or prior to the date of
this Agreement is hereinafter called the "Prospectus"; any reference
herein to any Preliminary Prospectus or the Prospectus shall be deemed
to refer to and include the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 under the Act, as of the date of such
Preliminary Prospectus or Prospectus, as the case may be; any reference
to any amendment or supplement to any Preliminary Prospectus or the
Prospectus shall be deemed to refer to and include any documents filed
after the date of such Preliminary Prospectus or Prospectus, as the
case may be, under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and incorporated by reference in such Preliminary
Prospectus or Prospectus, as the case may be; any reference to any
amendment to the Registration Statement shall be deemed to refer to and
include any annual report of the Issuer filed pursuant to Section 13(a)
or 15(d) of the Exchange Act after the effective date of the Initial
Registration Statement that is incorporated by reference in the
Registration Statement; and any reference to the Prospectus as amended
or supplemented shall be deemed to refer to the Prospectus as amended
or supplemented in relation to the applicable Designated Securities in
the form in which it is filed with the Commission pursuant to Rule
424(b) under the Act in accordance with Section 5(a) hereof, including
any documents incorporated by reference therein as of the date of such
filing).
(b) Any documents incorporated by reference in the Prospectus
as amended or supplemented, when they became effective or were filed
with the Commission, as the case may be, conformed in all material
respects to the requirements of the Act or the Exchange Act, as
applicable, and the rules and regulations of the Commission thereunder,
and none of such documents contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading; and any
further documents so filed and incorporated by reference in the
Prospectus or any further amendment or supplement thereto, when such
documents become effective or are filed with the Commission, as the
case may be, will conform in all material respects to the requirements
of the Act or the Exchange Act, as applicable, and the rules and
regulations of the Commission thereunder and will not include an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon
and in conformity with information furnished in writing to the Issuer
by an Underwriter of Designated Securities through the Representatives
expressly for use in the Prospectus as amended or supplemented relating
to such Designated Securities.
(c) The Registration Statement, as of its effective date, and
the Prospectus, at the time it is filed with the Commission, conform
and will conform, as the case may be, and any further amendments or
supplements to the Registration Statement or the Prospectus will
conform, in all material respects with the applicable requirements of
the Act and the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"), and the rules and regulations of the Commission
thereunder; neither the Registration Statement nor any amendment
thereto, as of the applicable effective date, contains or will contain
an untrue statement of a material fact or omits or will omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; and each of the Prospectus and any
amendment or supplement thereto at the time it is filed with the
Commission, does not contain and will not contain an untrue statement
of a material fact and does not omit and will not omit to state a
material fact necessary to make the statements therein in light of the
circumstances under which they were made not misleading; provided,
however, that this representation and warranty shall not apply to the
part of the Registration Statement that constitutes the statement of
eligibility on Form T-1 under the Trust Indenture Act of the Indenture
Trustee and any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Issuer by an
Underwriter of Designated Securities through the Representatives
expressly for use in the Registration Statement or the Prospectus as
amended or supplemented relating to such Securities.
(d) Since the respective dates as of which information is
given in the Registration Statement and in the Prospectus as amended or
supplemented, there has been no (i) material adverse change in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, or
the Issuer, or (ii) adverse development concerning the business or
assets of the Company and its subsidiaries, taken as a whole, or the
Issuer, which would result in a material adverse change in the
prospective financial condition or results of operations of the Company
and its subsidiaries, taken as a whole, or the Issuer, except such
changes as are set forth or contemplated in such Registration Statement
or the Prospectus as amended or supplemented (including the financial
statements and notes thereto included or incorporated by reference
therein).
(e) The Issuer has been duly created and is validly existing
as a limited liability company in good standing under the Limited
Liability Company Act of the State of Delaware (the "Delaware LLC Act")
with full power and authority to execute, deliver and perform its
obligations under this Agreement, any Pricing Agreement, the
Securities, the Sale Agreement, the Servicing Agreement, the Indenture,
the Limited Liability Company Agreement (the "LLC Agreement") of the
Issuer and the other agreements and instruments contemplated by the LLC
Agreement (collectively, the Issuer Documents") and to own its
properties and conduct its business as described in the Prospectus as
amended or supplemented, and the Issuer has conducted and will conduct
no business in the future that would be inconsistent with the
description of the Issuer set forth in the Prospectus as amended or
supplemented; the Issuer is not a party to or bound by any agreement or
instrument other than the Issuer Documents; the Issuer has no
liabilities or obligations other than those arising out of the
transactions contemplated by the Issuer Documents and as described in
the Prospectus; based on current law, the Issuer is not classified as
an association taxable as a corporation for United States federal
income tax purposes; and the Issuer is not a party to or subject to any
action, suit or proceeding of any nature other than Docket No. 21528
before the Public Utility Commission of Texas entitled "Application of
Central Power and Light Company for Financing Order to Securitize
Regulatory Assets and Other Qualified Costs".
(f) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Texas, with full corporate power and authority to own its properties
and conduct its business and to own, sell and transfer the Transition
Property, in each case as described in the Prospectus as amended or
supplemented, and has been duly qualified as a foreign corporation for
the transaction of business and is in good standing under the laws of
each other jurisdiction in which it owns or leases properties, or
conducts any business so as to require such qualification except where
the failure to so qualify would not have a material adverse effect on
(i) the financial condition of the Company and its subsidiaries, taken
as a whole or (ii) on the ability of the Company to perform its
obligations under the Sale Agreement, the Servicing Agreement, this
Agreement or any Pricing Agreement (a "Company Material Adverse
Effect").
(g) The Company has no significant subsidiaries, as
"significant subsidiary" is defined in Rule 405 of Regulation C of the
rules and regulations promulgated by the Commission under the Act.
(h) This Agreement has been duly authorized, executed and
delivered by each of the Company and the Issuer; and the Pricing
Agreements conform to the description thereof in the Prospectus.
(i) The Securities have been duly and validly authorized by
the Issuer in accordance with the LLC Agreement, and, when issued and
delivered pursuant to this Agreement and, in the case of the Designated
Securities, pursuant to the Pricing Agreements with respect to such
Designated Securities, such Designated Securities will have been duly
executed, authenticated, issued and delivered and will constitute valid
and legally binding obligations of the Issuer entitled to the benefits
provided by the Indenture, under which they are to be issued, which
will be substantially in the form filed as an exhibit to the
Registration Statement; the Securities and the Indenture will conform
in all material respects to the description thereof contained in the
Registration Statement and the Designated Securities will conform in
all material respects to the description thereof contained in the
Prospectus as amended or supplemented; the issuance of the Securities
is not subject to preemptive or other similar rights; and the terms of
the Securities are valid and binding on the Issuer; the Securities will
be entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under the
General Corporation Law of the State of Delaware.
(j) The Indenture has been duly and validly authorized by the
Issuer and when executed and delivered by the Trustee will have been
duly executed and delivered and will constitute a valid and legally
binding obligation of the Issuer enforceable in accordance with its
terms, except as limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization and other similar laws relating to or
affecting creditors' rights generally and general equitable principles
(whether considered in a proceeding in equity or at law); and the
Indenture has been qualified under the Trust Indenture Act.
(k) Other than as set forth in the Prospectus as amended or
supplemented, there are no legal or governmental proceedings pending
or, to the knowledge of the Issuer or the Company, threatened to which
the Issuer or the Company or any of the Company's subsidiaries is a
party or to which any of the properties of the Company or any of its
subsidiaries is subject, which are required to be described in the
Prospectus, as amended or supplemented; and there are no contracts or
other documents that are required to be described in the Registration
Statement or the Prospectus as amended or supplemented or to be filed
as exhibits to the Registration Statement that are not described or
filed as required.
(l) The Company (i) is in compliance with any and all
applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment
or hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), (ii) has received all permits, licenses or
other approvals required of them under applicable Environmental Laws to
conduct their respective businesses and (iii) is in compliance with all
terms and conditions of any such permit, license or approval, except
where such noncompliance with Environmental Laws, failure to receive
required permits, licenses or other approvals or failure to comply with
the terms and conditions of such permits, licenses or approvals would
not, singly or in the aggregate, have a Company Material Adverse
Effect.
(m) Each of the Sale Agreement and the Servicing Agreement has
been duly and validly authorized, executed and delivered by each of the
Company and the Issuer constitute a valid and legally binding
obligation of each of the Company and the Issuer enforceable against
each of the Company and the Issuer in accordance with its terms, except
as limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization and other similar laws relating to or affecting
creditors' rights generally and general equitable principles (whether
considered in a proceeding in equity or at law).
(n) [The LLC Agreement has been duly and validly authorized,
executed and delivered by the Company and constitutes a valid and
legally binding agreement of the Company enforceable in accordance with
its terms, except as limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization and other similar laws relating to or
affecting creditors' rights generally and general equitable principles
(whether considered in a proceeding in equity or at law).]
(o) The Commission has entered an order (the "Order") under
the Public Utility Holding Company Act of 1935, as amended (the "1935
Act"), permitting to become effective the Form U-1
Application-Declaration filed by the Company authorizing the creation
of the Issuer, the sale and transfer of the Transition Property to the
Issuer, and the issue and sale of the Securities by the Issuer. A copy
of such order heretofore entered by the Commission has been or will be
delivered to ______________., on behalf of the Representatives.
(p) The issue and sale of the Securities by the Issuer, the
compliance by the Issuer with all of the provisions of this Agreement,
any Pricing Agreement, the Sale Agreement, the Servicing Agreement and
the Indenture, and the consummation of the transactions contemplated
herein and therein 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 indenture or other material 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, nor will such
action result in any violation of the provisions of the LLC Agreement
or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Issuer or any
of its properties; and no consent, approval, authorization, order,
license, certificate, permit, registration or qualification of or with
any such court or governmental agency or body, other than the Financing
Order and the Order, which have been duly obtained and are in full
force and effect, is required, for the issue and sale of the Securities
by the Issuer or the consummation by the Issuer of the transactions
contemplated by this Agreement, any Pricing Agreement, the Sale
Agreement, the Servicing Agreement and the Indenture, except such as
have been, or will have been prior to the Time of Delivery (as defined
in Section 4 hereof), obtained under the Act and the Exchange Act, of
the Securities, the qualification of the Indenture under the Trust
Indenture Act, and such consents, approvals, authorizations, orders,
licenses, certificates, permits, registrations or qualifications as
have already been obtained, or as may be required under state
securities or Blue Sky laws in connection with the purchase of the
Securities and the distribution of the Securities by the Underwriters.
(q) The compliance by the Company with all of the provisions
of this Agreement, any Pricing Agreement, the Sale Agreement, the
Servicing Agreement and the LLC Agreement, and the consummation of the
transactions contemplated herein and therein 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 indenture or other material
agreement or instrument to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries is bound
or to which any of the property or assets of the Company or any of its
subsidiaries is subject, nor will such action result in any violation
of the provisions of the Restated Articles of Incorporation or by-laws
of the Company or the charter or by-laws of any of its subsidiaries or
any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or any
of its subsidiaries or any of their properties; and no consent,
approval, authorization, order, license, certificate, permit,
registration or qualification of or with any such court or other
governmental agency or body, other than the Financing Order and the
Order, which have been duly obtained and are in full force and effect,
is required for the consummation by the Company of the transactions
contemplated by this Agreement, any Pricing Agreement, the Sale
Agreement, the Servicing Agreement or the LLC Agreement, except the
registration under the Act of the Securities, the qualification of the
Indenture under the Trust Indenture Act and such consents, approvals,
authorizations, orders, licenses, certificates, permits, registrations
or qualifications as have already been obtained, or as may be required
under state securities or Blue Sky laws and in connection with the
purchase of the Securities and distribution of the Securities by the
Underwriters.
(r) None of the Issuer, the Company or any of the Company's
subsidiaries is in violation of its organizational documents or in
default in the performance or observance of any material obligation,
agreement, covenant or condition contained in any indenture or other
material agreement or instrument to which it is a party or by which it
or any of its properties may be bound.
(s) The statements set forth in the Prospectus under the
captions "Description of the Notes" and "Security for the Notes",
insofar as they purport to constitute a summary of the terms of the
Securities and under the captions "Energy Deregulation and New Texas
Market Structure", "Description of the Transition Property", "the Sale
Agreement", "the Servicing Agreement", "Material U.S. Federal Tax
Consequences Taxation", "ERISA Considerations" and under the caption
"Plan of Distribution", insofar as they purport to describe the
provisions of the laws and documents referred to therein, are accurate,
complete and fair.
(t) Neither the Issuer nor the Company is, and after giving
effect to the offering and sale of the Securities and the use of the
proceeds thereof, neither the Issuer nor the Company will be, an
"investment company" or an entity "controlled" by an "investment
company" as such terms are defined in the Investment Company Act of
1940, as amended (the "Investment Company Act").
(u) There are no contracts, agreements or understandings
between the Issuer or the Company and any person that grant such person
the right to require the Issuer or the Company to file a registration
statement under the Act with respect to LLC interests of the Issuer or
any capital stock of the Company owned or to be owned by such person or
to require the Issuer or the Company to include such securities in the
securities registered pursuant to the Registration Statement.
(v) Arthur Andersen LLP, who have certified certain financial
statements of the Company and the Company's subsidiaries, are
independent public accountants as required by the Act and the rules and
regulations of the Commission thereunder.
[Consider Additional Reps]
Any certificate signed by any officer of the Company or the Issuer and
delivered to you or to counsel for the Underwriters shall be deemed a
representation and warranty by the Company or the Issuer, as the case may be, to
each Underwriter as to the matters covered by such certificate.
3. Upon the execution of the Pricing Agreement applicable to any
Designated Securities, the several Underwriters party to such Pricing Agreement
propose to offer the Designated Securities for sale upon the terms and
conditions set forth in the Prospectus as amended or supplemented.
4. The Designated Securities to be purchased by each Underwriter
hereunder and under the applicable Pricing Agreement, in the form specified in
the related Pricing Agreement, and in such authorized denominations and
registered in such names as _____________ may request upon at least forty-eight
hours' prior notice to the Issuer, shall be delivered by or on behalf of the
Issuer to the Representatives, through the facilities of The Depository Trust
Company ("DTC"), for the accounts of the several Underwriters, against payment
by or on behalf of the several Underwriters of the purchase price therefor by
wire transfer of immediately available funds to the account specified by the
Issuer to the Representatives at least forty-eight hours in advance. The Issuer
will cause the certificates representing the Designated Securities to be made
available for checking and packaging by the Representatives at least twenty-four
hours prior to the Time of Delivery (as defined below). The time, date and place
of such delivery shall be as _______________ and the Issuer may agree upon in
writing. Such time and date are herein called the "Time of Delivery".
5. Each of the Issuer and the Company, jointly and severally agrees
with each of the Underwriters of any Designated Securities:
(a) To prepare the Prospectus as amended and supplemented in
relation to the applicable Designated Securities in a form approved by
the Representatives and to file such Prospectus pursuant to Rule 424(b)
under the Act not later than the Commission's close of business on the
second business day following the execution and delivery of the Pricing
Agreement relating to the applicable Designated Securities, or, if
applicable, such time as may be required by Rule 424A(b) under the Act;
to make no further amendment or any supplement to the Registration
Statement or Prospectus as amended or supplemented after the date of
the Pricing Agreement relating to such Securities and prior to any Time
of Delivery for such Securities which shall be disapproved in writing
by the Representatives for such Securities promptly after reasonable
notice thereof; to advise the Representatives promptly of any such
amendment or supplement after any Time of Delivery for such Securities
and furnish the Representatives with copies thereof; to file promptly
all reports and any definitive proxy or information statements required
to be filed by the Issuer or the Company with the Commission pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act for so long
as the delivery of a prospectus is required in connection with the
offering or sale of such Securities, and during such same period to
advise the Representatives, promptly after it receives notice thereof,
of the time when any amendment to the Registration Statement has been
filed or becomes effective or any supplement to the Prospectus or any
amended Prospectus has been filed with the Commission, of the issuance
by the Commission of any stop order or of any order preventing or
suspending the use of any prospectus relating to the Securities, of the
suspension of the qualification of the Securities for offering or sale
in any jurisdiction, of the initiation or threatening of any proceeding
for any such purpose, or of any request by the Commission for the
amending or supplementing of the Registration Statement or Prospectus
or for additional information; and, in the event of the issuance of any
such stop order or of any such order preventing or suspending the use
of any prospectus relating to the Securities or suspending any such
qualification, promptly to use its best efforts to obtain the
withdrawal of such order;
(b) Promptly from time to time to take such action as the
Representatives may reasonably request to qualify the Securities for
offering and sale under the securities laws of such jurisdictions as
the Representatives may request and to comply with such laws so as to
permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the
distribution of such Securities, provided that in connection therewith
neither the Issuer nor the Company shall be required to qualify as a
foreign corporation or limited liability company or to qualify as a
dealer in securities or to file any general consents to service of
process in any jurisdiction;
(c) To use its best efforts to furnish, prior to 12:00 noon,
New York City time, on the New York Business Day next succeeding the
date of the applicable Pricing Agreement and from time to time during
the period when a prospectus is required to be delivered under the Act
by any Underwriter or dealer, the Underwriters with copies of the
Prospectus as amended or supplemented in New York City in such
quantities as the Representatives may reasonably request, and if, in
the reasonable opinion of counsel to the Company, the delivery of a
prospectus is required at any time in connection with the offering or
sale of the Securities and if at such time any event shall have
occurred as a result of which the Prospectus as then amended or
supplemented would in the reasonable opinion of counsel for the Company
include an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made when such
Prospectus is delivered, not misleading, or, if for any other reason it
shall be necessary during such period to amend or supplement the
Prospectus or to file under the Exchange Act any document incorporated
by reference in the Prospectus in order to comply in the reasonable
opinion of counsel for the Company with the Act, the Exchange Act or
the respective rules thereunder, to notify the Representatives and upon
their request to file such document and to prepare and furnish without
charge to each Underwriter and to any dealer in securities as many
copies as the Representatives may from time to time reasonably request
of an amended Prospectus or a supplement to the Prospectus, if any,
which will correct such statement or omission or effect such
compliance;
(d) To make generally available to its security holders as
soon as practicable, but in any event not later than eighteen months
after the effective date of the Registration Statement (as defined in
Rule 158(c) under the Act), an earnings statement of the Issuer (which
need not be audited) complying with Section 11(a) of the Act and the
rules and regulations of the Commission thereunder (including, at the
option of the Company, Rule 158);
(e) During the period beginning from the date of the Pricing
Agreement for such Designated Securities and continuing to and
including the earlier of (i) the date, after the Time of Delivery, on
which the distribution of the Securities ceases, as determined by the
Representatives on behalf of the Underwriters, and (ii) 30 days after
the Time of Delivery for such Designated Securities, not to offer,
sell, contract to sell or otherwise dispose of, except as provided
hereunder, any securities of the Issuer, any other beneficial interests
of the Issuer, or any other securities of the Issuer or the Company, as
the case may be, that are substantially similar to the Designated
Securities and including but not limited to any securities that are
convertible into or exchangeable for, or that represent the right to
receive Securities or any substantially similar securities of either
the Issuer or the Company, without the prior consent of the
Representatives;
(f) If the Issuer and the Company elect to rely upon Rule
462(b), to file a Rule 462(b) Registration Statement with the
Commission in compliance with Rule 462(b) by 10:00 p.m. Washington,
D.C. time, on the date of the applicable Pricing Agreement, and at the
time of filing either pay to the Commission the filing fee for the Rule
462(b) Registration Statement or give irrevocable instructions for the
payment of such fee pursuant to Rule 111(b) under the Act;
(g) [To cause the proceeds for the issuance and sale of the
Securities to be applied for the purposes described in the Prospectus
and to furnish or cause to be furnished to the Representatives copies
of all reports on Form SR required by Rule 463 under the Act;]
(h) So long as any of the Securities are outstanding, to
deliver to the Representatives the annual statements of compliance and
the annual independent auditor's servicing reports furnished to the
Issuer or the Indenture Trustee pursuant to the Servicing Agreement or
the Indenture, as applicable, as soon as such statements or reports, as
the case may be, are furnished to the Note Issuer or Indenture Trustee;
(i) So long as any of the Securities are outstanding, to
furnish to the Representatives (i) as soon as available, a copy of each
report filed by it with the Commission under the Exchange Act, or
mailed to holders of Securities, (ii) a copy of any filings with the
PUCT pursuant to the Financing Order or the Securitization Law and
(iii) any information concerning either of the Company or the Issuer,
as the Representatives may reasonably request from time to time;
(j) To the extent that any rating necessary to satisfy the
condition set forth in Section 7(m) hereof is conditioned upon the
furnishing of documents or taking of other actions by the Issuer or the
Company on or after the Closing Date, to furnish such documents and
take such other actions;
(k) To take any and all actions reasonably necessary to
preserve the rights of the holders of Securities with respect to
payment on the Securities out of the amounts represented by Transition
Charges or their equivalent, including, but not limited to, (i) making
appropriate filings with the State of Texas, the PUCT or other
regulatory bodies to defend, preserve and create on behalf of the
holders of the Securities the right to receive payments as provided for
in the Securities and (ii) continuing to deduct and pay over to the
Servicer for the benefit of the Issuer all Transition Charges and TC
Collections or equivalent revenues received by the Company
notwithstanding any declaration of invalidity of the Securitization
Law, in each such case unless otherwise prohibited by applicable law or
judicial or regulatory order in effect at such time.
6. Each of the Issuer and the Company, jointly and severally, covenants
and agrees with the several Underwriters that it will pay or cause to be paid
the following: (i) the fees, disbursements and expenses of the Issuer's and the
Company's counsel and accountants in connection with the registration of the
Securities under the Act, the reasonable fees, disbursements and expenses of
counsel to the Underwriters, and all other expenses in connection with the
preparation, printing and filing of the Registration Statement, any Preliminary
Prospectus and the Prospectus and any amendments and supplements thereto and the
mailing and delivering of copies thereof to the Underwriters and dealers; (ii)
the cost of printing or producing any Agreement among Underwriters, this
Agreement, any Pricing Agreement, the Sale Agreement, the Servicing Agreement,
the Indenture, the LLC Agreement, any Blue Sky Memorandum and any other
documents in connection with the offering, purchase, sale and delivery of the
Securities; (iii) all expenses in connection with the qualification of the
Securities for offering and sale under state securities laws as provided in
Section 5(b) hereof, including the fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with the
Blue Sky surveys, not exceeding however $6,000 in the aggregate; (iv) any fees
charged by securities rating services for rating the Securities; (v) the cost
and charges of the transfer agent or registrar; (vi) the cost of qualifying the
Securities with The Depository Trust Company; (vii) all reasonable fees and
expenses of the Managers, the Indenture Trustee and their respective counsel;
and (viii) the cost of preparing certificates for the Securities. It is
understood, however, that, except as provided in this Section and Sections 8 and
11 hereof, the Underwriters will pay all of their own costs and expenses,
transfer taxes on resale of any of the Securities by them, and any advertising
expenses connected with any offers they may make.
7. The obligations of the Underwriters of any Designated Securities
under the Pricing Agreement relating to such Designated Securities shall be
subject, in the discretion of the Representatives, to the condition that all
representations and warranties and other statements of the Issuer and the
Company in or incorporated by reference in the Pricing Agreement relating to
such Designated Securities, and on the part of the Company contained in Article
[ ] of the Sale Agreement and in Section [ ] of the Servicing Agreement, are, at
and as of each Time of Delivery for such Designated Securities, true and
correct, the condition that the Issuer and the Company shall have performed all
of their respective obligations hereunder theretofore to be performed, and the
following additional conditions:
(a) The Prospectus as amended or supplemented in relation to
such Designated Securities shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed
for such filing by the rules and regulations under the Act and in
accordance with Section 5(a) hereof; if the Issuer and the Company have
elected to rely upon Rule 462(b), the Rule 462(b) Registration
Statement shall have become effective by 10:00 p.m. Washington, D.C.
time, on the date of the applicable Pricing Agreement; no stop order
suspending the effectiveness of the Registration Statement or any part
thereof shall have been issued and no proceeding for that purpose shall
have been initiated or, to the knowledge of the Company or the
Representatives, threatened by the Commission; and all requests for
additional information on the part of the Commission shall have been
complied with to the reasonable satisfaction of the Representatives;
(b) Milbank, Tweed, Hadley & McCloy LLP, counsel for the
Underwriters, shall have furnished to the Representatives such opinion
or opinions (a draft of each such opinion is attached as Annex II(a)
hereto), dated each Time of Delivery for such Designated Securities,
with respect to: insofar as the federal laws of the United States or
the General Corporation Law of the State of Delaware is concerned, the
validity of the Securities; the Registration Statement and the
Prospectus; and other related matters as the Representatives may
reasonably request; and such counsel shall have received such papers
and information as they may reasonably request to enable them to pass
upon such matters;
(c) [Richards, Layton & Finger, P.A.], special Delaware
counsel for the Company, the Issuer and the Managers, shall have
furnished to the Representatives their written opinion (a draft of such
opinion is attached as Annex II(b) hereto), dated each Time of Delivery
for such Designated Securities, in form and substance satisfactory to
the Representatives, to the effect set forth in such Annex;
(d) [Richards, Layton & Finger, P.A.], special Delaware
counsel for the Issuer and the Company, shall have also furnished to
the Representatives their written opinion (a draft of such opinion is
attached as Annex II(c) hereto), dated each Time of Delivery for such
Designated Securities, in form and substance satisfactory to the
Representatives, to the effect that: (i) if properly presented to a
Delaware court, a Delaware court applying Delaware law, would conclude
that in order for a person to file a voluntary bankruptcy petition on
behalf of the Issuer, the prior affirmative vote of its Sole Member and
of all of its Managers (including the Independent Manager), as provided
in Section [ ] of the LLC Agreement is required and (ii) the LLC
Agreement constitutes a legal, valid and binding agreement of the Sole
Member and is enforceable against the Sole Member in accordance with
its terms as more fully set forth in such Annex;
(e) Sidley & Austin, counsel for the Issuer and the Company,
shall have furnished to the Representatives their written opinion (a
draft of such opinion is attached as Annex II(d) hereto), dated each
Time of Delivery for such Designated Securities, in form and substance
satisfactory to the Representatives, to the effect set forth in such
Annex;
(f) Sidley & Austin, counsel for the Issuer and the Company,
shall have also furnished to the Representatives their written opinion
(a draft of such opinion is attached as Annex II(e) hereto), dated each
Time of Delivery for such Designated Securities, in form and substance
satisfactory to the Representatives, (i) with respect to the
characterization of the transfer of the Transition Property by the
Company to the Issuer as a "true sale" for bankruptcy purposes and (ii)
to the effect that 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 as more fully set forth in
such Annex;
(g) Sidley & Austin, counsel for the Issuer and the Company,
shall have also furnished to the Representatives their written opinion
(a draft of such opinion is attached as Annex II(f) hereto), dated each
Time of Delivery for such Designated Securities, in form and substance
satisfactory to the Representatives, [regarding certain Federal and
Texas constitutional matters relating to the Transition Property] as
more fully set forth in such Annex;
(h) [Vinson & Elkins L.L.P., special Texas counsel for the
Company and the Issuer, shall have furnished to the Representatives
their written opinion (a draft of such opinion is attached as Annex
II(g) hereto), dated each Time of Delivery for such Designated
Securities, in form and substance satisfactory to the Representatives,
to the effect set forth in such Annex;]
(i) ______________, special counsel for the Indenture Trustee,
shall have furnished to the Representatives their written opinion (a
draft of such opinion is attached as Annex II(h) hereto), dated each
Time of Delivery for such Designated Securities, in form and substance
satisfactory to the Representatives, to the effect set forth in such
Annex;
[List of opinions of counsel to be conformed as various transaction parties
are identified.]
(j) On the date of the Pricing Agreement for such Designated
Securities and at each Time of Delivery for such Designated Securities,
Arthur Andersen LLP shall have furnished to the Representatives
letters, dated the date of the Pricing Agreement and the Time of
Delivery, respectively, to the effect set forth in Annex III hereto,
and with respect to such letter dated such Time of Delivery, as to such
other matters as the Representatives may reasonably request and in form
and substance satisfactory to the Representatives (a draft of the form
of letter to be delivered at a time prior to the execution of the
Pricing Agreement, on the effective date of any post-effective
amendment to the Registration Statement and as of each Time of Delivery
is attached as Annex III hereto);
Subsequent to the respective dates as of which information is
given in each of the Registration Statement and the Prospectus, there
shall not have been any change or decrease specified in the letters
required by subsection (j) of this Section 7 which is, in the judgment
of the Representatives, so material and adverse as to make it
impracticable or inadvisable to proceed with the offering or the
delivery of the Designated Securities as contemplated by the
Registration Statement and the Prospectus;
(k) The LLC Agreement, the Sale Agreement, the Servicing
Agreement and the Indenture and any amendment or supplement to any of
the foregoing shall have been executed and delivered, in each case in a
form reasonably satisfactory to the Representatives;
(l) Since the respective dates as of which information is
given in each of the Registration Statement and in the Prospectus as
amended prior to the date of the Pricing Agreement relating to the
Designated Securities there shall have been no (i) material adverse
change in the condition, financial or otherwise, or in the earnings,
business or operations of the Issuer or the Company and its
subsidiaries, taken as a whole, or (ii) any adverse development
concerning the business or assets of the Issuer or the Company and its
subsidiaries, taken as a whole, which would result in a material
adverse change in the prospective financial condition or results of
operations of the Issuer or the Company and its subsidiaries, taken as
a whole, except such changes as are set forth or contemplated in such
Registration Statement or the Prospectus as amended prior to the date
of the Pricing Agreement relating to the Designated Securities
(including the financial statements and notes thereto included or
incorporated by reference in the Registration Statement);
(m) The Designated Securities shall have been rated in the
highest long-term rating category by each of the Rating Agencies and on
or after the date of the Pricing Agreement relating to the Designated
Securities no downgrading shall have occurred in the rating accorded
the Securities or the Company's debt securities or preferred stock by
any "nationally recognized statistical rating organization," as that
term is defined by the Commission for purposes of Rule 436(g)(2) under
the Act;
(n) On or after the date of the Pricing Agreement relating to
the Designated Securities there shall not have occurred any of the
following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange; (ii) a suspension
or material limitation in trading in (i) Central and South West
Corporation's common stock on the New York Stock Exchange or (ii) the
Company's or the Issuer's securities; (iii) a general moratorium on
commercial banking activities declared by either Federal, New York
State or Texas authorities; or (iv) the outbreak or escalation of
hostilities involving the United States or the declaration by the
United States of national emergency or war, if the effect of any such
event specified in this Clause (iv) in the judgment of the
Representatives makes it impracticable or inadvisable to proceed with
the public offering or the delivery of the Designated Securities on the
terms and in the manner contemplated in the Prospectus as amended or
supplemented relating to the Designated Securities;
(o) The Issuer and the Company shall have furnished or caused
to be furnished to the Representatives at each Time of Delivery for
Designated Securities certificates of officers of the Company and the
Issuer, satisfactory to the Representatives, as to the accuracy of the
representations and warranties of the Issuer and the Company herein at
and as of such Time of Delivery, as to the performance by the Issuer
and the Company of all of their obligations hereunder to be performed
at or prior to such Time of Delivery, as to the matters set forth in
subsections (a) and (l) of this Section and as to such other matters as
the Representatives may reasonably request;
(p) The Issuance Advice Letter, as filed, shall have become
effective;
(q) On or prior to the Time of Delivery, the Issuer shall have
delivered to the Representatives evidence, in form and substance
reasonably satisfactory to the Representatives, that appropriate
filings have been or are being made in accordance with the
Securitization Law and other applicable law reflecting the grant of a
security interest by the Issuer in the Collateral to the Trustee,
including the filing of the UCC financing statements in the office of
the Secretary of State of the State of Texas and the Secretary of State
of the State of Delaware;
(r) On or prior to the Time of Delivery, the Issuer shall have
delivered to the Representatives evidence, in form and substance
satisfactory to the Representatives, of the PUCT's issuance of the
Financing Order relating to the Transition Property and the related
Issuance Advice Letter;
(s) Prior to the Time of Delivery, the Company shall have
funded the Capital Subaccount with cash in an amount equal to $_______;
(t) The Issuer and the Company shall have furnished or caused
to be furnished to the Rating Agencies at the Time of Delivery such
opinions and certificates as the Rating Agencies may reasonably
request;
(u) Prior to the Time of Delivery, the Issuer and the Company
shall have furnished to the Underwriters such further information,
certificates, opinions and documents as the Underwriters may reasonably
request.
[Consider additional closing conditions.]
If any of the conditions specified in this Section 7 shall not have
been fulfilled when and as provided in this Agreement, or if any of the opinions
and certificates mentioned above or elsewhere in this Agreement shall not be
reasonably satisfactory in form and substance to the Representatives and counsel
for the Underwriters, this Agreement, the applicable Pricing Agreement and all
obligations of the Underwriters hereunder and thereunder may be canceled at, or
at any time prior to, the Time of Delivery by the Representatives. Notice of
such cancellation shall be given by the Representatives to the Issuer and the
Company in writing or by telephone or telegraph confirmed in writing.
8. (a) The Issuer and the Company, jointly and severally, agree to
indemnify and hold harmless each Underwriter, the directors, officers, members
and agents of each Underwriter and each person, if any, who controls any
Underwriter within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act from and against any and all losses, claims, damages or
liabilities, joint or several, to which such Underwriter or such controlling
person may become subject under the Securities Act, the Exchange Act or other
Federal or state statutory law or regulation, at common law or otherwise, and to
reimburse each such Underwriter or such controlling person for any reasonable
legal or other expenses (including, to the extent hereinafter provided,
reasonable counsel fees) incurred by it or them in connection with investigating
or defending against any such losses, claims, damages or liabilities, arising
out of or based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any amendment thereof,
any preliminary prospectus or the Prospectus (as amended or supplemented if the
Issuer shall have furnished any amendments or supplements thereto) or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading and/or
(ii) the invalidation (for any reason) of the Securitization Law or the
Financing Order; provided, however, that the indemnity agreement contained in
this subsection (a) shall not apply to any such losses, claims, damages or
liabilities arising out of or based upon (x) any such untrue statement or
alleged untrue statement, or any such omission or alleged omission, if such
statement or omission was made in reliance upon and in conformity with
information furnished in writing to the Issuer by any of the Underwriters for
use in the Registration Statement or the Prospectus or any amendment or
supplement to either thereof or (y) the failure of any Underwriter to deliver
(either directly or through the Representatives) a copy of the Prospectus
(excluding the documents incorporated therein by reference), or of the
Prospectus as amended or supplemented after it shall have been amended or
supplemented by the Company (excluding the documents incorporated therein by
reference), to any person to whom a copy of any preliminary prospectus shall
have been delivered by or on behalf of such Underwriter and to whom any
Designated Securities shall have been sold by such Underwriter, as such delivery
may be required by the Securities Act and the rules and regulations of the
Commission thereunder.
(b) Each of the Underwriters, severally and not jointly, agrees to
indemnify and hold harmless the Issuer and the Company, each of their officers
who signs the Registration Statement, each of their directors, each person who
controls the Issuer or the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, damages or liabilities, joint or several, to which any one or
more of them may become subject under the Securities Act, the Exchange Act or
the common law or otherwise, and to reimburse each of them for any reasonable
legal or other expenses (including, to the extent hereinafter provided,
reasonable counsel fees) incurred by them in connection with defending against
any such losses, claims, damages or liabilities of the character above specified
arising out of or based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or the
Prospectus or any amendment to the Registration Statement or amendment or
supplement to the Prospectus or upon any omission or alleged omission to state
in any thereof a material fact required to be stated therein or necessary to
make the statements therein not misleading if such statement or omission was
made in reliance upon and in conformity with information furnished in writing to
the Issuer by such Underwriter for use in the Registration Statement or the
Prospectus or any amendment or supplement to either thereof or (ii) the failure
of such Underwriter, due to the negligence of such Underwriter, to deliver
(either directly or through the Representatives) a copy of the Prospectus
(excluding the documents incorporated therein by reference), or of the
Prospectus as amended or supplemented after it shall have been amended or
supplemented by the Issuer (excluding the documents incorporated therein by
reference), to any person to whom a copy of any preliminary prospectus shall
have been delivered by or on behalf of such Underwriter and to whom any
Designated Securities shall have sold by such Underwriter, as such delivery may
be required by the Securities Act and the rules and regulations of the
Commission thereunder.
(c) Promptly after receipt by a party indemnified under this Section 8
(an "indemnified party") of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against a
party granting an indemnity under this Section 8 (the "indemnifying party"),
notify the indemnifying party in writing of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than under this
Section 8. In case any such action is brought against any indemnified party, and
it notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein, and to the extent that it may
elect by written notice delivered to the indemnified party promptly after
receiving the aforesaid notice from such indemnified party, to assume the
defense thereof (thereby conceding that the action in question is subject to
indemnification by the indemnifying party), with counsel reasonably satisfactory
to such indemnified party, and shall pay the fees and disbursements of such
counsel related to such action; provided, however, that if the defendants in any
such action include both the indemnified party and the indemnifying party and
representation of both parties would be inappropriate due to actual or potential
differing interests between them, the indemnified party or parties shall have
the right to select separate counsel. Upon receipt of notice from the
indemnifying party to such indemnified party of its election so to assume the
defense of such action and approval by the indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party under this
Section 8 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the next preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (in addition to any local counsel), approved by the
Representatives in the case of subsection (a), representing the indemnified
parties under subsection (a) who are parties to such action and that all such
fees and expenses shall be reimbursed as they are incurred) or (ii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party; and except that such liability
shall be only in respect of the counsel referred to in clause (i) or (ii). The
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement of any pending
or threatened proceeding in respect of which any indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.
(d) If the indemnification provided for in this Section 8 shall be
unenforceable under applicable law by an indemnified party, the Issuer and the
Company, jointly and severally, agree to contribute to such indemnified party
with respect to any and all losses, claims, damages and liabilities for which
such indemnification provided for in this Section 8 shall be unenforceable, in
such proportion as shall be appropriate to reflect the relative fault of the
Issuer and the Company on the one hand and the indemnified party on the other
hand in connection with the statements or omissions which have resulted in such
losses, claims, damages and liabilities, as well as any other relevant equitable
considerations; provided, however, that no indemnified party guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from the Issuer or the Company
if the Issuer or the Company, respectively, is not guilty of such fraudulent
misrepresentation. Relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Issuer or the Company or the indemnified party and
each such party's relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The Issuer,
the Company and each of the Underwriters agree that it would not be just and
equitable if contribution pursuant to this subparagraph were to be determined
solely by pro rata allocation or by any other method of allocation which does
not take account of the equitable considerations referred to above.
(e) The amount paid or payable by an indemnified party as a result of
the losses, claims, damages and liabilities referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
(f) The indemnity and contribution agreements contained in this Section
8 and the representations and warranties of the Issuer and the Company this
Agreement shall remain operative and in full force regardless of (i) any
termination of this Agreement, (ii) any investigation made by or on behalf of
any Underwriter or any person controlling any Underwriter or by or on behalf of
the Issuer or the Company, their directors or officers or any person controlling
the Issuer or the Company and (iii) acceptance of and payment for any of the
Designated Securities.
9. (a) If any Underwriter shall default in its obligation to purchase
the Designated Securities which it has agreed to purchase under the Pricing
Agreement relating to such Designated Securities, the Representatives may in
their discretion arrange for themselves or another party or other parties to
purchase such Designated Securities on the terms contained herein. If within
twenty-four hours after such default by any Underwriter the Representatives do
not arrange for the purchase of such Designated Securities, then the Issuer and
the Company shall be entitled to a further period of twenty-four hours within
which to procure another party or other parties satisfactory to the
Representatives to purchase such Designated Securities on such terms. In the
event that, within the respective prescribed period, the Representatives notify
the Issuer and the Company that they have so arranged for the purchase of such
Designated Securities, or the Issuer or the Company notifies the Representatives
that it has so arranged for the purchase of such Designated Securities, the
Representatives or the Issuer and the Company shall have the right to postpone a
Time of Delivery for a period of not more than seven days, in order to effect
whatever changes may thereby be made necessary in the Registration Statement or
the Prospectus as amended or supplemented, or in any other documents or
arrangements, and the Issuer and the Company agree to file promptly any
amendments or supplements to the Registration Statement or the Prospectus which
may be required in the opinion of counsel for the Issuer. The term "Underwriter"
as used in this Agreement shall include any person substituted under this
Section with like effect as if such person had originally been a party to the
Pricing Agreement with respect to such Designated Securities.
(b) If, after giving effect to any arrangements for the purchase of the
Designated Securities of a defaulting Underwriter or Underwriters by the
Representatives and the Issuer and the Company as provided in subsection (a)
above, the aggregate principal amount of such Designated Securities which
remains unpurchased does not exceed one-eleventh of the aggregate principal
amount of the Designated Securities to be purchased at the respective Time of
Delivery, then the Issuer and the Company shall have the right to require each
non-defaulting Underwriter to purchase the principal amount of Designated
Securities which such Underwriter agreed to purchase under the Pricing Agreement
relating to such Designated Securities and, in addition, to require each
non-defaulting Underwriter to purchase its pro rata share (based on the
principal amount of Designated Securities which such Underwriter agreed to
purchase under such Pricing Agreement) of the Designated Securities of such
defaulting Underwriter or Underwriters for which such arrangements have not been
made; but nothing herein shall relieve a defaulting Underwriter from liability
for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Designated Securities of a defaulting Underwriter or Underwriters by the
Representatives and the Issuer and the Company as provided in subsection (a)
above, the aggregate principal amount of Designated Securities which remains
unpurchased exceeds one-eleventh of the aggregate principal amount of Designated
Securities to be purchased at the respective Time of Delivery, as referred to in
subsection (b) above, or if the Issuer and the Company shall not exercise the
right described in subsection (b) above to require non-defaulting Underwriters
to purchase Designated Securities of a defaulting Underwriter or Underwriters,
then the Pricing Agreement relating to such Designated Securities shall
thereupon terminate, without liability on the part of any non-defaulting
Underwriter, the Issuer or the Company, except for the expenses to be borne by
the Company and the Issuer as provided in Section 6 hereof and the indemnity and
contribution agreements in Section 8 hereof; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Issuer, the Company and the several Underwriters, as
set forth in this Agreement or made by or on behalf of them, respectively,
pursuant to this Agreement, shall remain in full force and effect, regardless of
any investigation (or any statement as to the results thereof) made by or on
behalf of any Underwriter or any controlling person of any Underwriter, or the
Issuer, the Company or any officer, trustee or director or controlling person of
the Issuer or the Company, and shall survive delivery of and payment for the
Securities.
11. If any Pricing Agreement shall be terminated pursuant to Section 9
hereof, neither the Issuer nor the Company shall then be under any liability to
any Underwriter with respect to the Designated Securities with respect to which
such Pricing Agreement shall have been terminated except as provided in Sections
6 and 8 hereof; but, if any Pricing Agreement shall be terminated by the
Underwriters, or any of them, because of any failure or refusal on the part of
the Issuer or the Company to comply with the terms or to fulfill any of the
conditions of the Pricing Agreement (excluding those conditions set forth in
Section 7(m) hereof), or if for any reason the Issuer or the Company shall be
unable to perform its obligations under the Pricing Agreement, the Issuer and
the Company will reimburse the Underwriters or such Underwriters who have so
terminated the Pricing Agreement with respect to themselves, severally, for all
out-of-pocket expenses reasonably incurred by such Underwriters in connection
with the Pricing Agreement or the offering contemplated thereunder. Neither the
Issuer nor the Company shall in any event be liable to any of the Underwriters
for damages on account of loss of anticipated profits.
12. In all dealings hereunder, the Representatives of the Underwriters
of Designated Securities shall act on behalf of each of such Underwriters, and
the parties hereto shall be entitled to act and rely upon any statement,
request, notice or agreement on behalf of any Underwriter made or given by such
Representatives jointly or by such of the Representatives, if any, as may be
designated for such purpose in the Pricing Agreement.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Representatives as set forth in the
Pricing Agreement; and if to the Issuer or the Company shall be delivered or
sent by mail, telex or facsimile transmission to the address of the Issuer or
the Company, respectively, set forth in the Registration Statement, Attention:
Secretary; provided, however that any notice to an Underwriter pursuant to
Section 8(c) hereof shall be delivered or sent by mail, telex or facsimile
transmission to such Underwriter at its address set forth in its Underwriters'
Questionnaire, or telex constituting such Questionnaire, which address will be
supplied to the Issuer and the Company by the Representatives upon request. Any
such statements, requests, notices or agreements shall take effect upon receipt
thereof.
13. This Agreement and each Pricing Agreement shall be binding upon,
and inure solely to the benefit of, the Underwriters, the Issuer, the Company
and, to the extent provided in Sections 8 and 10 hereof, the officers, trustees
and directors of the Company and the Issuer and each person who controls the
Issuer, the Company or any Underwriter, and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement or any such Pricing
Agreement. No purchaser of any of the Securities from any Underwriter shall be
deemed a successor or assign by reason merely of such purchase.
14. Time shall be of the essence of each Pricing Agreement. As used
herein, the term "business day" shall mean any day when the Commission's office
in Washington, D.C. is open for business.
15. This Agreement and each Pricing Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
16. This Agreement and each Pricing Agreement may be executed by any
one or more of the parties hereto and thereto in any number of counterparts,
each of which shall be deemed to be an original, but all such respective
counterparts shall together constitute one and the same instrument.
<PAGE>
If the foregoing is in accordance with your understanding,
please sign and return to us [eight] counterparts hereof.
Very truly yours,
CPL Transition Funding LLC
By: Central Power and Light Company, as Sole Member
By:
Name:
Title:
Central Power and Light Company
By:
Name:
Title:
Accepted as of the date hereof:
___________________________________
[Name of Co-Representatives]
By: ______________________________
(__________________________)
On behalf of each of the Underwriters
<PAGE>
ANNEX I
Pricing Agreement
__________________________________
[Name of Co-Representatives]
As Representatives of the several
Underwriters named in Schedule I hereto,
c/o ___________________,
___________________
___________________
Ladies and Gentlemen:
CPL Transition Funding LLC, a limited liability company formed under
the laws of the State of Delaware (the "Issuer") and Central Power and Light
Company, a Texas corporation (the "Company"), each propose, subject to the terms
and conditions stated herein and in the Underwriting Agreement, dated ________,
2000 (the "Underwriting Agreement"), among the Issuer and the Company on the one
hand and _______________ [and (names of Co-Representatives named therein)] on
the other hand, that the Issuer issue and sell to the Underwriters named in
Schedule I hereto (the "Underwriters") the Securities specified in Schedule II
hereto (the "Designated Securities"). Each of the provisions of the Underwriting
Agreement is incorporated herein by reference in its entirety, and shall be
deemed to be a part of this Agreement to the same extent as if such provisions
had been set forth in full herein; and each of the representations and
warranties set forth therein shall be deemed to have been made at and as of the
date of this Pricing Agreement, except that each representation and warranty
which refers to the Prospectus in Section 2 of the Underwriting Agreement shall
be deemed to be a representation or warranty as of the date of the Underwriting
Agreement in relation to the Prospectus (as therein defined), and also a
representation and warranty as of the date of this Pricing Agreement in relation
to the Prospectus as amended or supplemented relating to the Designated
Securities which are the subject of this Pricing Agreement. Each reference to
the Representatives herein and in the provisions of the Underwriting Agreement
so incorporated by reference shall be deemed to refer to you. Unless otherwise
defined herein, terms defined in the Underwriting Agreement are used herein as
therein defined. The Representatives designated to act on behalf of the
Representatives and on behalf of each of the Underwriters of the Designated
Securities pursuant to Section 12 of the Underwriting Agreement and the address
of the Representatives referred to in such Section 12 are set forth in Schedule
II hereto.
An amendment to the Registration Statement, or a supplement to the
Prospectus, as the case may be, relating to the Designated Securities, in the
form heretofore delivered to you is now proposed to be filed with the
Commission.
Subject to the terms and conditions set forth herein and in the
Underwriting Agreement incorporated herein by reference, the Issuer agrees to
issue and sell to each of the Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from the Issuer, at the time and place
and at the purchase price to the Underwriters set forth in Schedule II hereto,
the respective principal amount of each class of Designated Securities set forth
opposite the name of such Underwriter in Schedule I hereto.
If the foregoing is in accordance with your understanding, please sign
and return to us [eight] counterparts hereof, and upon acceptance hereof by you,
on behalf of each of the Underwriters, this letter and such acceptance hereof,
including the provisions of the Underwriting Agreement incorporated herein by
reference, shall constitute a binding agreement between each of the Underwriters
and the Issuer and the Company, duly authorized, executed and delivered by the
Company and the Issuer. It is understood that your acceptance of this letter on
behalf of each of the Underwriters is or will be pursuant to the authority set
forth in a form of Agreement among Underwriters, the form of which shall be
submitted to the Issuer and the Company for examination but without warranty on
the part of the Representatives as to the authority of the signers thereof.
Very truly yours,
CPL Transition Funding LLC
By: Central Power and Light Company, as Sole Member
By:
Name:
Title:
Central Power and Light Company
By:
Name:
Title:
Accepted as of the date hereof:
_______________________________
[Name of Co-Representatives]
By:
(_____________________)
On behalf of each of the Underwriters
<PAGE>
SCHEDULE I
Amount of Designated
Underwriter Securities to be Purchased
Class [ ] Class [ ] Class [ ]
____________________________
[Names of other Underwriters]
Total
<PAGE>
SCHEDULE II
Title of Designated Securities:
Amount of Designated Securities:
Class [ ]:
Class [ ]:
Class [ ]:
Initial Offering Price to Public:
[$___ per Transition Bond] [formula]
Purchase Price by Underwriters:
[$____ per Transition Bond][formula]
[Commission Payable to Underwriters:
$_________ per Transition Bond in Federal (same day) Funds [by wire transfer]]
Form of Designated Securities:
Book-entry only form represented by one or more global securities deposited with
The Depository Trust Company ("DTC") or its designated custodian for trading in
the Same Day Funds Settlement System of DTC, and to be made available for
checking by the Representatives at least twenty-four hours prior to the Time of
Delivery at the office of DTC. Definitive Designated Securities will be
available only under limited circumstances described in the Prospectus as
amended or supplemented.
Specified Funds for Payment of Purchase Price:
[Immediately available funds]]
[Describe any blackout provisions with respect to the Designated Securities]
Time of Delivery:
10:00 a.m. (New York City time), _________, 2000 (or such later date not later
than five business days after such specified date as the Representatives shall
designate)
Closing Location:
Milbank, Tweed, Hadley & McCloy LLP
1 Chase Manhattan Plaza
New York, New York 10005
Names and addresses of Representatives:
Designated Representatives
Address for Notices, etc.:
[Other Terms]*:
- --------------------------
* A description of particular tax, accounting or other unusual features
(including any event risk provisions) of the Designated Securities should
be set forth, or referenced to an attached or accompanying description, if
necessary, to ensure agreement as to the terms of the Designated Securities
to be purchased and sold. Such a description might appropriately be in the
form in which such features will be described in the Prospectus Supplement
for the offering.
<PAGE>
ANNEX II
Form of Various Opinions of Counsel
[TO COME]
<PAGE>
ANNEX III
Form of letter of Arthur Andersen LLP
to be delivered pursuant to Section 7(j)
[TO COME]
- --------
1This is an initial draft Underwriting Agreement. It is subject to negotiation
by the parties and to any changes necessary to reflect the final Financing
Order to be issued by the Public Utilities Commission of Texas.
Securities and Exchange Commission
March 31, 2000
Page 1
Exhibit F-1
Sidley & Austin
Bank One Plaza
Chicago, Illinois 60603
March 31, 2000
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Central and South West Corporation;
Central Power and Light Company
Application-Declaration on Form U-1
File No. 70-9107
Ladies and Gentlemen:
We have acted as special counsel for Central and South West
Corporation, a Delaware corporation ("CSW"), and Central Power and Light
Company, a Texas corporation ("CPL"), in connection with Post Effective
Amendment No. 3 (the "Amendment") to the Application-Declaration on Form U-1, as
amended, File No. 70-9107 (the "Application"), filed with the Securities and
Exchange Commission (the "Commission") under the Public Utility Holding Company
Act of 1935, as amended (the "Act"). We refer to the Amendment which seeks a
supplemental order to the existing order (the "Order") issued by the Commission
with respect to the Application. Capitalized terms used in this opinion letter
and not defined herein shall have the meanings assigned thereto in the
Amendment. In the Amendment, CSW and CPL request authority under the Act for CPL
to engage in the following financing and related transactions (the "Proposed
Transactions") through December 31, 2002:
(a) form one or more new wholly-owned entities to carry out the
transactions contemplated by the Amendment (each a "Special
Purpose Issuer") which are expected to be any one of the
following: a trust, corporation, limited liability company or
partnership;
(b) acquire all the equity securities issued by each Special
Purpose Issuer to establish its ownership of that Special
Purpose Issuer;
(c) cause any Special Purpose Issuer to issue and sell transition
bonds ("Transition Bonds") from time to time in an aggregate
amount of up to $800,000,000 and as authorized and approved by
the Public Utility Commission of Texas ("PUCT") pursuant to
the terms and conditions of a PUCT financing order (a
"Financing Order") and in accordance with the Texas Public
Utility Regulatory Act, Section 39 (the "Statute") (the
principal amount of Transition Bonds so issued shall not
reduce the amount of external financings previously authorized
by the Order);
(d) enter into or cause any Special Purpose Issuer to enter into
interest rate swaps, interest rate hedging programs and credit
enhancement arrangements to reduce interest rate risks with
respect to, and to facilitate the offering of, Transition
Bonds;
(e) enter into a Servicing Agreement pursuant to which CPL or its
affiliates will perform services for the Special Purpose
Issuer and be paid compensation determined on an "arms length"
basis, rather than the "at-cost" standard of Section 13(b) of
the Act;
(f) apply the proceeds received from the sale of the Transition
Bonds as authorized by the Statute and the Financing Order,
including the acquisition, redemption, retirement and
defeasance of certain of CPL's outstanding debt and equity
securities; and
(g) engage in certain related transactions specifically described in
the Amendment.
For the purposes of this opinion letter, we have relied, as to various
questions of fact material to the opinions set forth below, upon certificates of
officers of CSW or CPL and other appropriate persons and statements contained in
the Application and the Amendment. We also have examined originals, or copies
certified to our satisfaction, of such documents, certificates and corporate and
other records of CSW, CPL and any Special Purpose Issuer and statements of
government officials, have examined such questions of law and have satisfied
ourselves as to such matters of fact as we deem relevant and necessary as a
basis of such opinions. We have assumed the authenticity of all documents
submitted to us as originals, the genuineness of all signatures, the legal
capacity of all natural persons and the conformity to the original documents of
any copies thereof submitted to us for examination.
The opinions expressed below in respect of the Proposed Transactions
are subject to the following assumptions and conditions:
(a) The Special Purpose Issuer will be CPL Transition Funding,
LLC, a Delaware limited liability company.
(b) The acquisition by CPL of the equity securities of the Special
Purpose Issuer, the sale of Transition Property and TCs by CPL
to the Special Purpose Issuer, the purchase thereof by the
Special Purpose Issuer and the authorization and issuance of
Transition Bonds by the Special Purpose Issuer and the other
aspects of the Proposed Transactions shall have been duly
authorized to the extent required by state law by the Board of
Directors of CPL and by the governing body of the Special
Purpose Issuer.
(c) All further amendments necessary to complete the Application
as amended by the Amendment will be filed with the Commission.
(d) The Commission shall have duly entered an appropriate order or
orders with respect to the Proposed Transactions as described
in the Amendment to the Application granting and permitting
the Amendment to the Application to become effective under the
Act and the rules and regulations thereunder.
(e) The Financing Order expected to be issued with respect
relating to the Proposed Transactions (PUCT Docket No. 21528)
(the "2000 Financing Order") shall have been issued by the
PUCT in accordance with the Statute and be in full force and
effect and the time for appeal of the 2000 Financing Order
shall have expired and all conditions precedent to the
consummation of the Proposed Transactions contained in the
2000 Financing Order shall have been satisfied.
(f) The Statute is constitutional and remains valid and in full force
and effect.
(g) The Proposed Transactions shall be consummated in accordance
with any required approvals, authorizations, consents,
certificates and orders of any state commission or regulatory
authority and all such required approvals, authorizations,
consents, certificates and orders shall have been obtained and
remain in effect.
(h) No act or event other than as described herein shall have
occurred subsequent to the date hereof which would change the
opinions expressed below.
(i) The consummation of the Proposed Transactions shall be
conducted with our involvement and all legal matters incident
to the Proposed Transactions shall be satisfactory to us,
including the receipt in form and substance satisfactory to us
of opinions of other counsel qualified to practice in
jurisdictions pertaining to the Proposed Transactions in which
we are not admitted to practice.
Based on the foregoing and subject to the assumptions and conditions
set forth herein, and having regard to legal considerations which we deem
relevant, we are of the opinion that, in the event the Proposed Transactions are
consummated in accordance with the Application as amended by the Amendment:
1. All state laws applicable to the Proposed Transactions as
described in the Amendment (other than state securities or
"blue sky" laws as to which we express no opinion) will have
been complied with.
2. The Special Purpose Issuer has been duly formed and is validly
existing as a limited liability company under the laws of the
State of Delaware.
3. Any Transition Bonds issued as contemplated in the Application
as amended by the Amendment will be valid and binding
obligations of the Special Purpose Issuer in accordance with
their terms, except to the extent enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer or other similar laws of general
applicability relating to or affecting the enforcement of
creditors' rights and by the effect of general principles of
equity (regardless of whether enforceability is considered in
a proceeding in equity or at law).
4. The Special Purpose Issuer will legally acquire the Transition
Property from CPL and CPL will legally acquire the equity
securities of the Special Purpose Issuer.
5. The consummation of the Proposed Transactions will not violate
the legal rights of the holders of any outstanding securities
issued by CSW, CPL or any "associate company" (as defined in
the Act) thereof.
Except as otherwise stated in the next succeeding sentence of this
paragraph, this opinion letter is limited to the laws of the State of New York
and the federal laws of the United States of America. In giving this opinion
letter, we have relied as to certain matters governed by the laws of the State
of Texas covered by this opinion letter on the opinion letter of even date of
Vinson & Elkins L.L.P. and as to certain matters of Delaware law on the opinion
letter of even date of Richards, Layton & Finger, subject to the assumptions,
exceptions, qualifications and limitations expressed in such opinion letters.
Copies of these opinion letters are attached hereto.
We hereby consent to the use of this opinion letter in connection with
the Application as amended by the Amendment.
Very truly yours,
/s/ Sidley & Austin
Sidley & Austin
Exhibit F-1
Vinson & Elkins L.L.P.
3700 Trammell Crow Center
2001 Ross
Dallas, Texas 75201
March 31, 2000
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Central and South West Corporation;
Central Power and Light Company
Application-Declaration on Form U-1
File No. 70-9107
Ladies and Gentlemen:
We have acted as local Texas counsel for Central and South West
Corporation, a Delaware corporation ("CSW"), and Central Power and Light
Company, a Texas corporation ("CPL"), in connection with certain aspects of the
transactions contemplated by Post Effective Amendment No. 3 (the "Amendment") to
the Application-Declaration on Form U-1, as amended, File No. 70-9107 (the
"Application"), filed with the Securities and Exchange Commission (the
"Commission") under the Public Utility Holding Company Act of 1935, as amended
(the "Act"). We refer to the Amendment which seeks a supplemental order to the
existing order (the "Order") issued by the Commission with respect to the
Application. Capitalized terms used in this opinion letter and not defined
herein shall have the meanings assigned thereto in the Amendment. In the
Amendment, CSW and CPL request authority under the Act for CPL to engage in the
following financing and related transactions (the "Proposed Transactions")
through December 31, 2002:
(a) form one or more new wholly-owned entities to carry out the
transactions contemplated by the Amendment (each a "Special
Purpose Issuer") which are expected to be any one of the
following: a trust, corporation, limited liability company or
partnership;
(b) acquire all the equity securities issued by each Special
Purpose Issuer to establish its ownership of that Special
Purpose Issuer;
(c) cause any Special Purpose Issuer to issue and sell transition
bonds ("Transition Bonds") from time to time in an aggregate
amount of up to $800,000,000 and as authorized and approved by
the Public Utility Commission of Texas ("PUCT") pursuant to
the terms and conditions of a PUCT financing order (a
"Financing Order") and in accordance with the Texas Public
Utility Regulatory Act, Section 39 (the "Statute") (the
principal amount of Transition Bonds so issued shall not
reduce the amount of external financings previously authorized
by the Order);
(d) enter into or cause any Special Purpose Issuer to enter into
interest rate swaps, interest rate hedging programs and credit
enhancement arrangements to reduce interest rate risks with
respect to, and to facilitate the offering of, Transition
Bonds;
(e) enter into a Servicing Agreement pursuant to which CPL or its
affiliates will perform services for the Special Purpose
Issuer and be paid compensation determined on an "arms length"
basis, rather than the "at-cost" standard of Section 13(b) of
the Act;
(f) apply the proceeds received from the sale of the Transition
Bonds as authorized by the Statute and the Financing Order,
including the acquisition, redemption, retirement and
defeasance of certain of CPL's outstanding debt and equity
securities; and
(g) engage in certain related transactions specifically described in
the Amendment.
As to any facts material to our opinions, we have made no
independent investigation of such facts and have relied, to the extent
we deem such reliance proper, upon certificates of officers of CSW or
CPL and other appropriate persons and statements contained in the
Application and the Amendment. We also have examined originals, or
copies certified to our satisfaction, of such documents, certificates
and corporate and other records of CSW, CPL and any Special Purpose
Issuer and statements of government officials, have examined such
questions of law and have satisfied ourselves as to such matters of
fact as we deem relevant and necessary as a basis of such opinions. 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 facsimile, certified or
photostatic copies and the authenticity of the originals of such latter
documents. In making our examination of such documents, for purposes of
this opinion we have assumed that all parties thereto had the requisite
power, corporate or other, to enter into and perform all obligations
thereunder and have also assumed the due authorization thereof by all
requisite action, corporate or other, the execution and delivery by
such parties of such documents, the validity and binding effect thereof
and that such documents are enforceable against such parties.
The opinions expressed below in respect of the Proposed Transactions
are subject to the following assumptions and conditions:
(a) The Special Purpose Issuer will be CPL Transition Funding,
LLC, a Delaware limited liability company.
(b) The acquisition by CPL of the equity securities of the Special
Purpose Issuer, the sale of Transition Property and TCs by CPL
to the Special Purpose Issuer, the purchase thereof by the
Special Purpose Issuer and the authorization and issuance of
Transition Bonds by the Special Purpose Issuer and the other
aspects of the Proposed Transactions shall have been duly
authorized to the extent required by state law by the Board of
Directors of CPL and by the governing body of the Special
Purpose Issuer.
(c) All further amendments necessary to complete the Application
as amended by the Amendment will be filed with the Commission.
(d) The Commission shall have duly entered an appropriate order or
orders with respect to the Proposed Transactions as described
in the Amendment to the Application granting and permitting
the Amendment to the Application to become effective under the
Act and the rules and regulations thereunder.
(e) The Financing Order expected to be issued with respect to the
Proposed Transactions (PUCT Docket Number 21528) (the "2000
Financing Order") shall have been issued by the PUCT in
accordance with the Statute, the time for appeal of the 2000
Financing Order shall have expired and all conditions
precedent to the consummation of the Proposed Transactions
contained in the 2000 Financing Order shall have been
satisfied.
(f) The Statute is constitutional and remains valid and in full force
and effect.
(g) The Proposed Transactions shall be consummated in accordance
with any required approvals, authorizations, consents,
certificates and orders of any state commission or regulatory
authority (including, without limitation, the 2000 Financing
Order relating to such Proposed Transactions) and all such
required approvals, authorizations, consents, certificates and
orders shall have been obtained and remain in effect.
(h) No act or event other than as described herein shall have
occurred subsequent to the date hereof which would change the
opinions expressed below.
(i) The consummation of the Proposed Transactions shall be
conducted with our involvement and all legal matters incident
to the Proposed Transactions shall be satisfactory to us.
Based on the foregoing and subject to the assumptions and conditions
set forth herein, and having regard to legal considerations which we deem
relevant, we are of the opinion that, in the event the Proposed Transactions are
consummated in accordance with the Application as amended by the Amendment:
1. All state laws applicable to the Proposed Transactions as
described in the Amendment (other than state securities or
"blue sky" laws as to which we express no opinion) will have
been complied with.
2. To the extent that such rights are governed by the laws of the
State of Texas, the Proposed Transactions will not violate the
legal rights of the holders of any outstanding securities
issued by CSW, CPL or any "associate company" (as defined in
the Act) thereof.
We are licensed to practice law in the State of Texas and do not hold
ourselves out to be experts on the laws of any jurisdiction other than the State
of Texas. We express no opinion with regard to any matter which may be governed
by the laws of any state or other jurisdiction (including the United States of
America) other than the State of Texas.
We express no opinion as to any matters other than as are expressly set
forth above, and no opinion is or may be implied or may be inferred herefrom.
This opinion is given as of the date hereof, any we undertake no, and hereby
disclaim any, obligation to advise you of any change in any matter set forth
herein.
We consent to the reliance upon the opinions expressed herein by Sidley &
Austin. We hereby consent to the filing of this opinion letter as an exhibit to
Post-Effective Amendment No. 3 to Form U-1 Application-Declaration (File No.
70-9107).
Very truly yours,
/s/ Vinson & Elkins L.L.P.
Vinson & Elkins L.L.P.
<PAGE>
Exhibit F-1
[Letterhead of Richards, Layton & Finger, P.A.]
March 31, 2000
Sidley & Austin
Bank One Plaza
10 S. Dearborn
Chicago, Illinois 60603
Re: CPL Transition Funding LLC
Ladies and Gentlemen:
We have acted as special Delaware counsel for CPL Transition
Funding LLC, a Delaware limited liability company (the "Company"), in connection
with the matters set forth herein. At your request, this opinion is being
furnished to you.
For purposes of giving the opinions hereinafter set forth, our
examination of documents has been limited to the examination of originals or
copies of the following:
(1) The Certificate of Formation of the Company, dated as of October 28, 1999
(the "Certificate"), as filed in the office of the Secretary of State of the
State of Delaware (the "Secretary of State") on October 28, 1999;
(2) The Limited Liability Company Agreement of the Company, dated as of October
28, 1999 (the "LLC Agreement"), made and entered into by Central Power and Light
Company, a Texas corporation ("Central"); and
(3) A Certificate of Good Standing for the Company, dated March 31, 2000,
obtained from the Secretary of State.
<PAGE>
Sidley & Austin
March 31, 2000
Page 3
For purposes of this opinion, we have not reviewed any
documents other than the documents listed in paragraphs (a) through (c) above.
In particular, we have not reviewed any document (other than the documents
listed in paragraphs (a) through (c) above) that is referred to in or
incorporated by reference into the documents reviewed by us. We have assumed
that there exists no provision in any document that we have not reviewed that is
inconsistent with the opinions stated herein. We have conducted no independent
factual investigation of our own but rather have relied solely upon the
foregoing documents, the statements and information set forth therein and the
additional matters recited or assumed herein, all of which we have assumed to be
true, complete and accurate in all material respects.
With respect to all documents examined by us, we have assumed
(i) the authenticity of all documents submitted to us as authentic originals,
(ii) the conformity with the originals of all documents submitted to us as
copies or forms, and (iii) the genuineness of all signatures.
For purposes of this opinion, we have assumed (i) that the LLC
Agreement constitutes the entire agreement among the parties thereto with
respect to the subject matter thereof, including with respect to the creation,
operation and termination of the Company, and that the LLC Agreement and the
Certificate are in full force and effect and have not been amended, (ii) that
Central has been duly organized and is validly existing in good standing under
the laws of Texas, (iii) that there are no proceedings pending or contemplated
for the merger, consolidation, conversion, dissolution, liquidation or
termination of the Company, (iv) that Central has the power and authority to
execute and deliver, and to perform its obligations under, the LLC Agreement,
and (v) that Central has duly authorized, executed and delivered the LLC
Agreement.
This opinion is limited to the laws of the State of Delaware
(excluding the securities laws of the State of Delaware), and we have not
considered and express no opinion on the laws of any other jurisdiction,
including federal laws and rules and regulations relating thereto. Our opinions
are rendered only with respect to Delaware laws and rules, regulations and
orders thereunder that are currently in effect.
Based upon the foregoing, and upon our examination of such
questions of law and statutes of the State of Delaware as we have considered
necessary or appropriate, and subject to the assumptions, qualifications,
limitations and exceptions set forth herein, we are of the opinion that the
Company has been duly formed and is validly existing in good standing as a
limited liability company under the laws of the State of Delaware.
<PAGE>
We consent to your relying as to matters of Delaware law upon
this opinion in connection with the matters contained herein in connection with
opinions to be rendered by you on the date hereof relating to the Company,.
Except as stated above, without our prior written consent, this opinion may not
be furnished or quoted to, or relied upon by, any other person or entity for any
purpose.
Very truly yours,
