EXECUTION COPY
JCP&L TRANSITION FUNDING LLC
$320,000,000 TRANSITION BONDS, SERIES 2002-A
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UNDERWRITING AGREEMENT
June 4, 2002
Goldman, Sachs & Co.
As representative of the several Underwriters
named in Schedule I hereto
85 Broad Street
New York, New York 10004
Ladies and Gentlemen:
1. Introduction. JCP&L Transition Funding LLC, a Delaware limited
liability company (the "Bond Issuer"), proposes, subject to the terms and
conditions stated herein, to issue and sell to the Underwriters named in
Schedule I hereto (the "Underwriters"), for whom you (the "Representative") are
acting as representative, an aggregate of $320,000,000 principal amount of
Transition Bonds, Series 2002-A (the "Bonds"). If the firm or firms listed in
Schedule I hereto include only the firm or firms listed in Schedule II hereto,
then the terms "Underwriters" and "Representative", as used herein, shall each
be deemed to refer to such firm or firms.
The Bond Issuer was formed as a Delaware limited liability company on
February 24, 2000 pursuant to a Certificate of Formation of the Bond Issuer, as
filed in the office of the Secretary of State of the State of Delaware on such
date and a limited liability company agreement (as such agreement may be
amended, the "Issuer Limited Liability Company Agreement") dated February 24,
2000 with JCP&L Transition, Inc., a New Jersey corporation ("JCP&L Transition"),
as sole member of the Bond Issuer. On February 19, 2002, JCP&L Transition
assigned, transferred and conveyed all of its limited liability company interest
in the Bond Issuer to Jersey Central Power & Light Company, a New Jersey
corporation ("JCP&L" or the "Seller"), and on such date JCP&L Transition ceased
to be a member of the Bond Issuer. The Bonds will be issued pursuant to an
Indenture to be dated on or about June 11, 2002 (as amended and supplemented
from time to time, including all Supplemental Indentures establishing series of
Transition Bonds, the "Indenture"), between the Bond Issuer and The Bank of New
York, a banking corporation organized under the laws of the State of New York,
as indenture trustee (the "Indenture Trustee"). The Bonds will be secured
primarily by, and payable solely from, bondable transition property (the
"Bondable Transition Property"), which is a presently existing property right
created by an order of the New Jersey Board of Public Utilities (the "BPU")
dated February 6, 2002 in Docket No. EF99080615 (the "Financing Order") in
accordance with the provisions of the New Jersey Electric Discount and Energy
Competition Act of 1999 (the "Statute"). The Financing Order authorized JCP&L to
sell, pledge or assign any or all of its interest in the Bondable Transition
Property created thereunder to the Bond Issuer. JCP&L will assign all of its
right, title and interest in, to and under such Bondable Transition Property, to
the extent JCP&L has any right, title and interest therein, thereto or
thereunder, to the Bond Issuer in a sale agreement to be dated on or about June
11, 2002 (the "Sale Agreement"). Pursuant to the Indenture, the Bond Issuer will
pledge to the Indenture Trustee, as trustee for the benefit of the Holders of
the Bonds, all of its right, title and interest in, to and under, among other
things, the Bondable Transition Property as security for the Bonds. The Bondable
Transition Property will be serviced pursuant to a servicing agreement to be
dated on or about June 11, 2002 (as amended and supplemented from time to time,
the "Servicing Agreement"), between JCP&L, as servicer, and the Bond Issuer.
JCP&L is a wholly-owned subsidiary of FirstEnergy Corp., an Ohio corporation.
Capitalized terms used and not otherwise defined herein shall have the
respective meanings given to them in the Indenture. The Financing Order provides
that Bondable Transition Property arises and constitutes a vested, presently
existing property right only upon the transfer thereof to an assignee and the
receipt of consideration therefor; nonetheless, for convenience of reference,
this Agreement refers to transfers and vesting of Bondable Transition Property
before such property may have come into existence.
2. Representations and Warranties. Each of JCP&L and the Bond Issuer
(collectively, the "Companies") represents and warrants to, and agrees with,
each Underwriter as set forth below in this Section 2. Certain terms used in
this Section 2 are defined in paragraph (c) hereof.
(a) If the offering of the Bonds is a Delayed Offering (as specified
in Schedule I hereto), paragraph (i) below is applicable and, if the offering of
the Bonds is a Non-Delayed Offering (as so specified), paragraph (ii) below is
applicable.
(i) The Bond Issuer and the Bonds meet the requirements for
the use of Form S-3 under the Securities Act of 1933 (the "Act"), and the
Bond Issuer has filed with the Securities and Exchange Commission (the
"SEC") a registration statement (file number 333-31250) on such Form,
including a base prospectus, for registration under the Act of the
offering and sale of the Bonds. The Bond Issuer may have filed one or more
amendments thereto, and may have used a Preliminary Final Prospectus, each
of which has previously been furnished to you. Such registration
statement, as so amended, and in the form heretofore delivered to you, has
become effective. The offering of the Bonds is a Delayed Offering and,
although the base prospectus may not include all the information with
respect to the Bonds and the offering thereof required by the Act and the
rules thereunder to be included in the Final Prospectus, the base
prospectus includes all such information required by the Act and the rules
thereunder to be included therein as of the Effective Date. The Bond
Issuer will next file with the SEC pursuant to Rules 415 and 424(b)(2) or
(5) a final supplement to the form of prospectus included in such
registration statement relating to the Bonds and the offering thereof. As
filed, such final prospectus supplement shall include all required
information with respect to the Bonds and the offering thereof and, except
to the extent the Representative shall agree in writing to a modification,
shall be in all substantive respects in the form furnished to you prior to
the Execution Time or, to the extent not completed at the Execution Time,
shall contain only such specific additional information and other changes
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(beyond that contained in the base prospectus and any Preliminary Final
Prospectus) as the Bond Issuer has advised you, prior to the Execution
Time, will be included or made therein.
(ii) The Bond Issuer and the Bonds meet the requirements for
the use of Form S-3 under the Act and the Bond Issuer has filed with the
SEC a registration statement (file number 333-31250) on such Form,
including a base prospectus, for registration under the Act of the
offering and sale of the Bonds. The Bond Issuer may have filed one or more
amendments thereto, including a Preliminary Final Prospectus, each of
which has previously been furnished to you. The Bond Issuer will next file
with the SEC either (x) a final prospectus supplement relating to the
Bonds in accordance with Rules 430A and 424(b)(1) or (4), or (y) prior to
the effectiveness of such registration statement, an amendment to such
registration statement, including the form of final prospectus supplement.
In the case of clause (x), the Bond Issuer has included in such
registration statement, as amended at the Effective Date, all information
(other than Rule 430A Information) required by the Act and the rules
thereunder to be included in the Final Prospectus with respect to the
Bonds and the offering thereof. As filed, such final prospectus supplement
or such amendment and form of final prospectus supplement shall contain
all Rule 430A Information, together with all other such required
information, with respect to the Bonds and the offering thereof and,
except to the extent the Representative shall agree in writing to a
modification, shall be in all substantive respects in the form furnished
to you prior to the Execution Time or, to the extent not completed at the
Execution Time, shall contain only such specific additional information
and other changes (beyond that contained in the base prospectus and any
Preliminary Final Prospectus) as the Bond Issuer has advised you, prior to
the Execution Time, will be included or made therein.
(b) On the Effective Date, the Registration Statement did or will,
and when the Final Prospectus is first filed (if required) in accordance with
Rule 424(b) and on the Closing Date (as hereinafter defined), the Final
Prospectus (and any supplement thereto) will, comply in all material respects
with the applicable requirements of the Act, the Securities Exchange Act of 1934
(the "Exchange Act") and the Trust Indenture Act of 1939 (the "Trust Indenture
Act") and the respective rules and regulations thereunder; when filed with the
SEC, the documents incorporated by reference in the Final Prospectus will comply
in all material respects with the Exchange Act and the rules and regulations
thereunder; on the Effective Date, the Registration Statement did not or will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading; on the Effective Date and on the Closing
Date, the Indenture did or will comply in all material respects with the
requirements of the Trust Indenture Act and the rules and regulations
thereunder; and, on the Effective Date, the Final Prospectus, if not filed
pursuant to Rule 424(b), did not or will not, and, on the date of any filing
pursuant to Rule 424(b) and on the Closing Date, the Final Prospectus (together
with any supplement thereto) will not, include any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that the Companies make no
representations or warranties as to (i) that part of the Registration Statement
which shall constitute the Statement of Eligibility and Qualification (Form T-1)
under the Trust Indenture Act of the Indenture Trustee (the "Form T-1") or (ii)
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the information contained in or omitted from the Registration Statement or the
Final Prospectus (or any supplement thereto) in reliance upon and in conformity
with information furnished in writing to the Bond Issuer by or on behalf of any
Underwriter through the Representative specifically for inclusion in the
Registration Statement or the Final Prospectus (or any supplement thereto). No
stop order suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been instituted or threatened.
(c) The terms which follow, when used in this Agreement, shall have
the meanings indicated. The term "the Effective Date" shall mean each date that
the Registration Statement and any post-effective amendment or amendments
thereto became or become effective and each date after the date hereof on which
a document incorporated by reference in the Registration Statement is filed.
"Execution Time" shall mean the date and time that this Agreement is executed
and delivered by the parties hereto. The term "base prospectus" shall mean the
prospectus referred to in paragraph (a) above contained in the Registration
Statement at the Effective Date including, in the case of a Non-Delayed
Offering, any Preliminary Final Prospectus. "Preliminary Final Prospectus" shall
mean any preliminary prospectus supplement or amendment to the base prospectus
which describes the Bonds and the offering thereof and is used prior to filing
of the Final Prospectus. "Final Prospectus" shall mean the prospectus supplement
relating to the Bonds that is first filed pursuant to Rule 424(b) after the
Execution Time, together with the base prospectus or, if, in the case of a
Non-Delayed Offering, no filing pursuant to Rule 424(b) is required, shall mean
the form of final prospectus relating to the Bonds, including the base
prospectus, included in the Registration Statement at the Effective Date.
"Registration Statement" shall mean the registration statement referred to in
paragraph (a) above, including all documents, exhibits and financial statements
incorporated therein by reference, as amended at the Execution Time (or, if not
effective at the Execution Time, in the form in which it shall become effective)
and, in the event any post-effective amendment thereto becomes effective prior
to the Closing Date, shall also mean such registration statement as so amended.
Such term shall include any Rule 430A Information deemed to be included therein
at the Effective Date as provided by Rule 430A. "Rule 415", "Rule 424", "Rule
430A" and "Regulation S-K" refer to such rules or regulation under the Act.
"Rule 430A Information" means information with respect to the Bonds and the
offering thereof permitted to be omitted from the Registration Statement when it
becomes effective pursuant to Rule 430A. Any reference herein to the
Registration Statement, the base prospectus, any Preliminary Final Prospectus or
the Final Prospectus shall be deemed to refer to and include all documents
incorporated by reference therein pursuant to Item 12 of Form S-3 which were
filed under the Exchange Act on or before the Effective Date of the Registration
Statement or the issue date of the base prospectus, any Preliminary Final
Prospectus or the Final Prospectus, as the case may be; and any reference herein
to the terms "amend", "amendment" or "supplement" with respect to the
Registration Statement, the base prospectus, any Preliminary Final Prospectus or
the Final Prospectus shall be deemed to refer to and include the filing of any
document under the Exchange Act after the Effective Date of the Registration
Statement or the issue date of the base prospectus, any Preliminary Final
Prospectus or the Final Prospectus, as the case may be, deemed to be
incorporated therein by reference. A "Non-Delayed Offering" shall mean an
offering of Bonds which is intended to commence promptly after the effective
date of a registration statement, with the result that, pursuant to Rule 430A,
all information (other than Rule 430A Information) with respect to the Bonds so
offered must be included in such registration statement at the effective date
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thereof. A "Delayed Offering" shall mean an offering of Bonds pursuant to Rule
415 which does not commence promptly after the effective date of a registration
statement, with the result that only information required pursuant to Rule 415
need be included in such registration statement at the effective date thereof
with respect to the Bonds so offered. Whether the offering of the Bonds is a
Non-Delayed Offering or a Delayed Offering shall be set forth in Schedule I
hereto.
(d) PricewaterhouseCoopers LLP, the accountants who certified
certain financial statements of the Bond Issuer included in the Final
Prospectus, are independent public accountants as required by the Act and the
rules and regulations of the SEC thereunder.
(e) The financial statements included in the Final Prospectus
present fairly the financial position of the Bond Issuer as at the dates and for
the periods specified and, except as otherwise stated in the Final Prospectus,
such financial statements have been prepared in conformity with accounting
principles generally accepted in the United States applied on a consistent basis
during the periods involved. The Bond Issuer has no material contingent
obligation which is not disclosed in the Final Prospectus.
(f) JCP&L has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of New Jersey with
corporate power and authority to own, lease or operate its properties and
conduct its business as described in the Final Prospectus.
(g) JCP&L has no significant subsidiary, as defined in Rule 1-02 of
Regulation S-X of the SEC.
(h) JCP&L is not in violation of or default under its articles or
certificate of incorporation, by-laws or other organizational documents, or in
default in the performance or observance of any material obligation, agreement,
covenant or condition contained in any mortgage or any material contract, lease,
bond or other instrument to which it is a party or by which it may be bound, or
materially in violation of any law, administrative regulation or administrative,
arbitration or court order, which conflict, breach, violation or default could
be material to the issuance and sale of the Bonds; and the execution and
delivery of this Agreement, the Sale Agreement, and the Servicing Agreement, the
incurrence of the obligations set forth herein and therein and the consummation
of the transactions herein and therein contemplated will not conflict with or
constitute a breach of, or default under, the articles or certificate of
incorporation or by-laws of JCP&L or any mortgage, contract, lease, bond or
other instrument to which JCP&L is a party or by which it may be bound, or any
law, administrative regulation or administrative, arbitration or court order,
which conflict, breach, violation or default could be material to the issuance
and sale of the Bonds or have a material adverse effect on the business,
properties or condition, financial or otherwise, of, or on the earnings or
business prospects of, JCP&L or the Bond Issuer required to be disclosed that
has not been disclosed in the Final Prospectus.
(i) The Bond Issuer has been duly formed and is validly existing as
a Delaware limited liability company and is in good standing under the laws of
the State of Delaware, with full power and authority to execute, deliver and
perform its obligations under this Agreement, the Sale Agreement, the Servicing
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Agreement, the administration agreement to be dated on or about June 11, 2002
between GPU Service, Inc. and the Bond Issuer (the "Administration Agreement"),
the Indenture and the Bonds.
(j) The Bond Issuer is not in violation of or default under its
Certificate of Formation, the Issuer Limited Liability Company Agreement or
other organizational documents or any material contract, lease, bond or other
instrument to which it is a party or by which it may be bound, or materially in
violation of any law, administrative regulation or administrative, arbitration
or court order, except in each case to such extent as may be set forth in the
Final Prospectus; and the execution and delivery of this Agreement, the Sale
Agreement, the Servicing Agreement, the Administration Agreement, the Indenture
and the Bonds, the incurrence of the obligations set forth herein and therein
and the consummation of the transactions herein and therein contemplated will
not conflict with or constitute a breach of, or default under, any mortgage,
contract, lease, bond or other instrument to which the Bond Issuer is a party or
by which it may be bound, or any law, administrative regulation or
administrative, arbitration or court order.
(k) Except as set forth in any filings made by JCP&L with the SEC
under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act ("Exchange Act
Reports") prior to the Execution Time, there is no pending or, to the knowledge
of the Bond Issuer and JCP&L, threatened suit or proceeding before any court or
governmental agency, authority or body or any arbitration involving JCP&L or the
Bond Issuer or any of their respective properties which, if determined adversely
to JCP&L or the Bond Issuer, could be material to the issuance and sale of the
Bonds or would individually or in the aggregate have a material adverse effect
on the business, properties or condition, financial or otherwise, or on the
earnings or business prospects of JCP&L or the Bond Issuer.
(l) This Agreement has been duly authorized, executed and delivered
by JCP&L and the Bond Issuer.
(m) Each of the Sale Agreement and the Servicing Agreement has been
duly authorized by JCP&L and, when executed and delivered by JCP&L, will
constitute a legal, valid and binding instrument enforceable against JCP&L in
accordance with its terms (subject to applicable bankruptcy, reorganization,
insolvency, moratorium, fraudulent transfer or other similar laws or equitable
principles affecting the enforcement of creditors' rights generally from time to
time in effect).
(n) The Sale Agreement, the Servicing Agreement, the Indenture and
the Administration Agreement have been duly authorized by the Bond Issuer and,
when executed and delivered by the Bond Issuer, will constitute legal, valid and
binding instruments enforceable against the Bond Issuer in accordance with their
terms (subject to applicable bankruptcy, reorganization, insolvency, moratorium,
fraudulent transfer or other similar laws or equitable principles affecting the
enforcement of creditors' rights generally from time to time in effect).
(o) The issuance and sale of the Bonds in accordance with the terms
of this Agreement have been duly and validly authorized by the necessary action
of the Bond Issuer; the Bonds, when duly executed, authenticated and delivered
against payment of the agreed consideration therefor, will be entitled to the
benefits provided by the Indenture and will constitute valid and enforceable
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obligations in accordance with their terms (subject to applicable bankruptcy,
reorganization, insolvency, moratorium, fraudulent transfer or other similar
laws or equitable principles affecting the enforcement of creditors' rights
generally from time to time in effect); and the Bonds and the Indenture conform
to the descriptions thereof contained in the Final Prospectus.
(p) No consent, approval, authorization or other order of any
governmental authority is legally required for the execution, delivery and
performance of this Agreement by the Bond Issuer and JCP&L and the consummation
of the transactions contemplated hereby, except such as have been obtained under
the Act and the Statute and are expected to be obtained under the Public Utility
Holding Company Act of 1935, and such as may be required under the "Blue Sky"
laws of any jurisdiction in connection with the purchase and distribution of the
Bonds by the Underwriters.
Any certificate signed by any officer of any of the Companies and
delivered to you or to counsel for the Underwriters shall be deemed a
representation and warranty by such Company to each Underwriter as to the
matters covered thereby.
3. Purchase and Sale. Subject to the terms and conditions and in reliance
upon the representations and warranties herein set forth, the Bond Issuer agrees
to issue and sell to each Underwriter, and each Underwriter agrees, severally
and not jointly, to purchase from the Bond Issuer, at the purchase price
percentage for each class of Bonds set forth on Schedule II hereto, the
respective principal amount of each class of Bonds set forth opposite the name
of each Underwriter on Schedule II hereto.
4. Delivery and Payment. Delivery of and payment for the Bonds shall be
made at 10:00 a.m. (New York City time) on June 11, 2002 (or such later date not
later than five business days after such specified date as the Representative
shall designate), which date and time may be postponed by agreement between the
Representative and the Bond Issuer or as provided in Section 10 hereof (such
date and time of delivery and payment for the Bonds being herein called the
"Closing Date"). Delivery of the Bonds shall be made to the Representative for
the respective accounts of the several Underwriters against payment by the
several Underwriters through the Representative of the purchase price thereof to
the Bond Issuer by wire transfer of immediately available funds. Delivery of the
Bonds shall be made at such location as the Representative shall reasonably
designate at least one business day in advance of the Closing Date. The Bonds to
be so delivered shall be initially represented by Bonds registered in the name
of Cede & Co., as nominee of The Depository Trust Company ("DTC"). The interests
of beneficial owners of the Bonds will be represented by book entries on the
records of DTC and participating members thereof. Definitive Bonds will be
available only under limited circumstances described in the Final Prospectus.
The Bond Issuer agrees to have the Bonds available for inspection,
checking and packaging by the Representative in New York, New York, not later
than 1:00 p.m. on the business day prior to the Closing Date.
5. Covenants.
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(a) Covenants of the Bond Issuer. The Bond Issuer covenants and
agrees with the several Underwriters that:
(i) The Bond Issuer will use its best efforts to cause the
Registration Statement, if not effective at the Execution Time, and any
amendment thereto, to become effective. Prior to the termination of the
offering of the Bonds, the Bond Issuer will not file any amendment of the
Registration Statement or supplement (including the Final Prospectus or
any Preliminary Final Prospectus) to the base prospectus unless the Bond
Issuer has furnished to you a copy for your review prior to filing and
will not file any such proposed amendment or supplement to which you
reasonably object. Subject to the foregoing sentence, the Bond Issuer will
cause the Final Prospectus, properly completed in a form approved by you,
and any supplement thereto to be filed with the SEC pursuant to the
applicable paragraph of Rule 424(b) within the prescribed period and will
provide evidence satisfactory to the Representative of such timely filing.
During the period from the Execution Time until the time when a prospectus
relating to the Bonds is no longer required to be delivered under the Act,
the Bond Issuer will promptly advise the Representative (i) when the
Registration Statement, if not effective at the Execution Time, and any
amendment thereto, shall have become effective, (ii) when the Final
Prospectus, and any supplement thereto, shall have been filed with the SEC
pursuant to Rule 424(b), (iii) when, prior to termination of the offering
of the Bonds, any amendment to the Registration Statement shall have been
filed or become effective, (iv) of any request by the SEC for any
amendment of the Registration Statement or supplement to the Final
Prospectus or for any additional information, (v) of the issuance by the
SEC of any stop order suspending the effectiveness of the Registration
Statement or the institution or threatening of any proceeding for that
purpose and (vi) of the receipt by the Bond Issuer of any notification
with respect to the suspension of the qualification of the Bonds for sale
in any jurisdiction or the initiation or threatening of any proceeding for
such purpose. The Bond Issuer will use its best efforts to prevent the
issuance of any such stop order and, if issued, to obtain as soon as
possible the withdrawal thereof.
(ii) If, at any time when a prospectus relating to the Bonds
is required to be delivered under the Act, any event occurs as a result of
which the Final Prospectus as then supplemented would include any untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein in the light of the circumstances under
which they were made not misleading, or if it shall be necessary to amend
the Registration Statement or supplement the Final Prospectus to comply
with the Act or the Exchange Act or the respective rules thereunder, the
Bond Issuer promptly will (i) prepare and file with the SEC, subject to
the second sentence of paragraph (a)(i) of this Section 5, an amendment or
supplement which will correct such statement or omission or effect such
compliance and (ii) supply any supplemented prospectus to you in such
quantities as you may reasonably request.
(iii) As soon as practicable but no later than 18 months after
the effective date of the Registration Statement (as defined in Rule
158(c) under the Act), the Bond Issuer will make generally available to
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the holders of the Bonds and to the Representative an earnings statement
or statements of the Bond Issuer which will satisfy the provisions of
Section 11(a) of the Act and Rule 158 under the Act.
(iv) The Bond Issuer will furnish to each of the Representative
and counsel for the Underwriters, without charge, one executed copy of the
Registration Statement and of the Form T-1 (including exhibits thereto)
and, so long as delivery of a prospectus by an Underwriter or dealer may
be required by the Act, as many copies of any Preliminary Final Prospectus
and the Final Prospectus and any supplement thereto as the Representative
may reasonably request. The Final Prospectus shall be delivered to the
Representative prior to 10:00 a.m. (New York City time) on the second
business day succeeding the Execution Date. The Bond Issuer shall cause
the proceeds of the issuance and sale of the Bonds to be applied for the
purposes described in the Final Prospectus and shall comply with Rule 463
under the Act. The Bond Issuer will pay the expenses of printing or other
production of all documents relating to the offering.
(v) The Bond Issuer will arrange for the qualification of the
Bonds for sale under the laws of such jurisdictions as the Representative
may designate, will maintain such qualifications in effect so long as
required for the distribution of the Bonds and will arrange for the
determination of the legality of the Bonds for purchase by institutional
investors; provided, that in no event shall the Bond Issuer be obliged to
qualify to do business in any jurisdiction where it is not now so
qualified or to take any action that would subject it to service of
process in suits, other than those arising out of the offering or sale of
the Bonds, in any jurisdiction where it is not now so subject.
(vi) Until 90 days after the Closing Date, the Bond Issuer
will not, without the written consent of the Representative, offer, sell
or contract to sell, participate in the sale or offering of, or otherwise
dispose of, directly or indirectly, or announce the offering of, any
asset-backed securities of a trust or other special purpose vehicle (other
than the Bonds).
(vii) For a period from the date of this Agreement until the
retirement of the Bonds, or until such time as no Underwriter acts as a
market-maker in the Bonds, whichever occurs first, the Bond Issuer will
deliver to the Representative the annual statements of compliance and the
annual independent auditor's servicing report furnished to the Bond Issuer
or the Indenture Trustee pursuant to the Servicing Agreement or the
Indenture, as applicable, as soon as such statements and report are
furnished to the Bond Issuer or the Indenture Trustee.
(viii) So long as any of the Bonds are outstanding, or until such
time as no Underwriter acts as a market-maker in the Bonds, whichever
occurs first, the Bond Issuer will furnish to the Representative (i) as
soon as available, a copy of each report filed by it with the SEC under
the Exchange Act, or mailed to Holders of the Bonds, (ii) a copy of any
filings with the BPU pursuant to the Financing Order, and (iii) from time
to time, any information concerning JCP&L or the Bond Issuer, as the
Representative may reasonably request.
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(ix) To the extent, if any, that any rating necessary to
satisfy the condition set forth in Section 7(k) hereof is conditioned upon
the furnishing of documents or the taking of other actions by the Bond
Issuer on or after the Closing Date, the Bond Issuer shall furnish such
documents and take such other actions.
(x) The Bond Issuer will file with the SEC a report on Form
8-K setting forth all Computational Materials and ABS Term Sheets (as such
terms are hereinafter defined) provided to the Bond Issuer by any
Underwriter and identified by it as such within the time period allotted
for such filing pursuant to the No-Action Letters (as hereinafter
defined); provided, however, that, prior to any filing of the
Computational Materials and ABS Term Sheets by the Bond Issuer, such
Underwriter must comply with its obligations pursuant to Section 6 hereof,
and the Bond Issuer must receive, prior to the Closing, a letter from
PricewaterhouseCoopers LLP, certified public accountants, satisfactory in
form and substance to the Bond Issuer and such Underwriter, to the effect
that such accountants have performed specified procedures, all of which
have been agreed to by the Bond Issuer and such Underwriter, as a result
of which they have determined that the information included in the
Computational Materials and ABS Term Sheets (if any), provided by such
Underwriter to the Bond Issuer for filing on Form 8-K pursuant to said
Section 6 and this Section 5(a)(x), and which the accountants have
examined in accordance with such agreed upon procedures, is accurate
except as to such matters that are not deemed by the Bond Issuer and such
Underwriter to be material. The Bond Issuer shall file any corrected
Computational Materials or ABS Terms Sheets described in Section 6(a)(iv)
hereof as soon as practicable following receipt thereof.
(b) Covenants of JCP&L. JCP&L covenants and agrees with the several
Underwriters that, to the extent that the Bond Issuer has not already performed
such act pursuant to Section 5(a) hereof:
(i) JCP&L will use its best efforts to cause the Registration
Statement, if not effective at the Execution Time, and any amendment
thereto, to become effective. JCP&L will use its best efforts to prevent
the issuance by the SEC of any stop order suspending the effectiveness of
the Registration Statement and, if issued, to obtain as soon as possible
the withdrawal thereof.
(ii) JCP&L will cause the proceeds of the issuance and sale of
the Bonds to be applied for the purposes described in the Final
Prospectus.
(iii) Until 90 days after the Closing Date, JCP&L will not,
without the written consent of the Representative, offer, sell or contract
to sell, participate in the sale or offering of, or otherwise dispose of,
directly or indirectly, or announce the offering of, any asset-backed
securities of a trust or other special purpose vehicle (other than the
Bonds).
(iv) So long as any of the Bonds are outstanding, or until such
time as no Underwriter acts as a market-maker in the Bonds, whichever
occurs first, and JCP&L is the Servicer, JCP&L will furnish to the
Representative (i) as soon as available, a copy of each report of JCP&L
filed with the SEC under the Exchange Act, or mailed to holders of the
10
Bonds, (ii) a copy of any filings with the BPU pursuant to the Financing
Order, and (iii) from time to time, any information concerning JCP&L and
the Bond Issuer, as the Representative may reasonably request.
(v) To the extent, if any, that any rating necessary to
satisfy the condition set forth in Section 7(k) hereof is conditioned upon
the furnishing of documents or the taking of other actions by JCP&L on or
after the Closing Date, JCP&L shall furnish such documents and take such
other actions.
(vi) If, at any time when a prospectus relating to the Bonds is
required to be delivered under the Act, any event occurs as a result of
which the Final Prospectus as then supplemented would include any untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein in the light of the circumstances under
which they were made not misleading, or if, during the period from the
Execution Time until the time when a prospectus relating to the Bonds is
no longer required to be delivered under the Act, it shall be necessary to
amend the Registration Statement or supplement the Final Prospectus to
comply with the Act or the Exchange Act or the respective rules
thereunder, JCP&L promptly will (i) prepare and file with the SEC, subject
to the second sentence of paragraph (a)(i) of this Section 5, an amendment
or supplement which will correct such statement or omission or effect such
compliance and (ii) supply any supplemented prospectus to the
Representative in such quantities as the Representative may reasonably
request.
6. Offering by Underwriters.
(a) In connection with the offering of the Bonds, each Underwriter
may prepare and provide to prospective investors (x) items similar to
computational materials ("Computational Materials"), as defined in the no-action
letter of May 20, 1994 issued by the SEC to Kidder, Peabody Acceptance
Corporation I, Kidder, Peabody & Co. Incorporated and Kidder Structured Asset
Corporation, as made applicable to other issuers and underwriters by the SEC in
response to the request of the Public Securities Association dated May 24, 1994,
as well as the no-action letter of February 17, 1995 issued by the SEC to the
Public Securities Association (the "PSA Letter") (collectively, the "No-Action
Letters") and (y) items similar to ABS term sheets ("ABS Term Sheets") as
defined in the PSA Letter, subject to the following conditions:
(i) All Computational Materials and ABS Term Sheets provided
to prospective investors that are required to be filed pursuant to the
No-Action Letters shall bear a legend substantially in the form attached
hereto as Schedule III. The Bond Issuer shall have the right to require
additional specific legends or notations to appear on any Computational
Materials or ABS Term Sheets, the right to require changes regarding the
use of terminology and the right to determine the types of information
appearing therein. Notwithstanding the foregoing, this Section 6(a)(i)
will be satisfied if all Computational Materials and ABS Term Sheets
referred to herein bear a legend in a form previously approved in writing
by the Bond Issuer.
11
(ii) Such Underwriter shall provide to the Bond Issuer, for
approval by the Bond Issuer, representative forms of all Computational
Materials and ABS Term Sheets prior to their first use, to the extent such
forms have not previously been approved by the Bond Issuer for use by such
Underwriter. Such Underwriter shall provide to the Bond Issuer, for filing
on Form 8-K as provided in Section 5(a)(x) hereof, copies (in such format
as required by the Bond Issuer) of all Computational Materials and ABS
Term Sheets that are required to be filed with the SEC pursuant to the
No-Action Letters. Such Underwriter may provide copies of the foregoing in
a consolidated or aggregated form including all information required to be
filed if filing in such format is permitted by the No-Action Letters. All
Computational Materials and ABS Term Sheets described in this Section
6(a)(ii) must be provided to the Bond Issuer not later than 10:00 a.m. New
York City time one business day before filing thereof is required pursuant
to the terms of this Agreement. Such Underwriter shall not provide to any
investor or prospective investor in the Bonds any Computational Materials
or ABS Term Sheets on or after the day on which Computational Materials or
ABS Term Sheets are required to be provided to the Bond Issuer pursuant to
this Section 6(a)(ii) (other than copies of Computational Materials or ABS
Term Sheets previously submitted to the Bond Issuer in accordance with
this Section 6(a)(ii) for filing pursuant to Section 5(a)(x) hereof),
unless such Computational Materials or ABS Term Sheets are preceded or
accompanied by the delivery of a Final Prospectus to such investor or
prospective investor.
(iii) All information included in the Computational Materials
and ABS Term Sheets shall be generated based on substantially the same
methodology and assumptions that are used to generate the information in
the Registration Statement as set forth therein. However, the
Computational Materials and ABS Term Sheets may include information based
on alternative methodologies or assumptions if specified therein. If any
Computational Materials or ABS Term Sheets are based on assumptions with
respect to the information, whether in written or electronic format or
otherwise, regarding the Bondable Transition Property provided to the
Underwriters by or on behalf of the Seller or the Bond Issuer (the
"Bondable Transition Property Information") that differ from the final
Bondable Transition Property Information in any material respect or on
Bond structuring terms that were revised in any material respect prior to
the printing of the Final Prospectus, the Underwriters shall prepare
revised Computational Materials or ABS Term Sheets, as the case may be,
based on the final Bondable Transition Property Information and
structuring assumptions, deliver with the Final Prospectus such revised
Computational Materials and ABS Term Sheets to each recipient of the
preliminary versions thereof that indicated orally to any Underwriter that
such recipient would purchase all or any portion of the Bonds, and include
such revised Computational Materials and ABS Term Sheets (marked "AS
REVISED") in the materials delivered to the Bond Issuer pursuant to
Section 6(a)(ii) hereof. The expenses of each Underwriter relating to the
preparation and transmission of its Computational Materials and ABS Term
Sheets, including, without limitation, fees and expenses of accountants,
shall be the responsibility of the Bond Issuer.
(iv) The Bond Issuer shall not be obligated to file any
Computational Materials or ABS Term Sheets that have been determined to
contain any material error or omission; provided, that, at the request of
any Underwriter, the Bond Issuer will file Computational Materials or ABS
12
Term Sheets that contain a material error or omission if clearly marked
"SUPERSEDED BY MATERIALS DATED __________" and accompanied by corrected
Computational Materials or ABS Term Sheets that are marked "MATERIAL
PREVIOUSLY DATED __________ AS CORRECTED". If, within the period during
which a prospectus relating to the Bonds is required to be delivered under
the Act, any Computational Materials or ABS Term Sheets are determined, in
the reasonable judgment of the Bond Issuer or such Underwriter, to contain
a material error or omission, such Underwriter shall prepare a corrected
version of such Computational Materials or ABS Term Sheets, shall
circulate such corrected Computational Materials or ABS Term Sheets to all
recipients of the prior versions thereof that either indicated orally to
such Underwriter they would purchase all or any portion of the Bonds, or
actually purchased all or any portion thereof, and shall deliver copies of
such corrected Computational Materials or ABS Term Sheets (marked "AS
CORRECTED") to the Bond Issuer for filing with the SEC in a subsequent
Form 8-K submission (subject to the Bond Issuer's obtaining an
accountant's comfort letter in respect of such corrected Computational
Materials and ABS Term Sheets, which the parties acknowledge shall be at
the expense of the Bond Issuer).
(v) Each Underwriter shall be deemed to have represented, as
of the Closing Date, that, except for Computational Materials and ABS Term
Sheets provided to the Bond Issuer pursuant to Section 6(a)(ii) hereof,
such Underwriter did not provide any prospective investors with any
information in written or electronic form in connection with the offering
of the Bonds that is required to be filed with the SEC in accordance with
the No-Action Letters.
(vi) In the event any delay in the delivery by any Underwriter
to the Bond Issuer of all Computational Materials and ABS Term Sheets
required to be delivered in accordance with Section 6(a)(ii) hereof, or in
the delivery of the accountant's comfort letter in respect thereof
pursuant to Section 5(a)(x) hereof, the Bond Issuer shall have the right
to delay the release of the Final Prospectus to investors or to any
Underwriter, to delay the Closing Date and to take other appropriate
actions, in each case set forth in Section 5(a)(x) hereof, to file the
Computational Materials and ABS Term Sheets by the time specified therein.
(vii) Each Underwriter represents that it has in place, and
covenants that it shall maintain, internal controls and procedures that it
reasonably believes to be sufficient to ensure full compliance with all
applicable legal requirements of the No-Action Letters with respect to the
generation and use of Computational Materials and ABS Term Sheets in
connection with the offering of the Bonds.
(b) Each Underwriter further represents and warrants that, if and to
the extent it has provided any prospective investors with any Computational
Materials or ABS Term Sheets prior to the date hereof in connection with the
offering of the Bonds, all of the conditions set forth in Section 6(a) hereof
have been satisfied with respect thereto.
7. Conditions to the Obligations of the Underwriters. The obligations of
the Underwriters to purchase the Bonds shall be subject to (i) the accuracy of
the respective representations and warranties (A) on the part of the Companies
13
contained herein as of the Execution Time and the Closing Date, (B) on the part
of JCP&L contained in Article III of the Sale Agreement and (C) on the part of
JCP&L, in its capacity as Servicer, contained in Section 5.01 of the Servicing
Agreement, all as of the Closing Date, (ii) the accuracy of the statements of
the Bond Issuer and JCP&L made in any certificate pursuant to the provisions
hereof, (iii) the performance by the Companies of their respective obligations
hereunder and (iv) the following additional conditions:
(a) If the Registration Statement has not become effective prior to
the Execution Time, unless the Representative agrees in writing to a later time,
the Registration Statement will become effective not later than (i) 6:00 p.m.
(New York City time), on the date of determination of the public offering price,
if such determination occurred at or prior to 3:00 p.m. (New York City time) on
such date, or (ii) 12:00 Noon (New York City time) on the business day following
the day on which the public offering price was determined, if such determination
occurred after 3:00 p.m. (New York City time) on such date; if filing of the
Final Prospectus, or any supplement thereto, is required pursuant to Rule
424(b), the Final Prospectus, and any such supplement, shall have been filed in
the manner and within the time period required by Rule 424(b) and shall have
been delivered to the Representative as required by Section 5(a)(iv) hereof; and
no stop order suspending the effectiveness of the Registration Statement shall
have been issued and no proceedings for that purpose shall have been instituted
or threatened.
(b) The Representative and the Rating Agencies shall have received
opinions from Thelen Reid & Priest LLP, counsel to each of the Companies, dated
the Closing Date, in form and substance satisfactory to the Representative, to
the effect or in the forms set forth in Exhibits A-N hereto.
(c) The Representative and the Rating Agencies shall have received
an opinion from Richards, Layton & Finger, P.A., special Delaware counsel for
the Bond Issuer, dated the Closing Date, in form and substance satisfactory to
the Representative, to the effect set forth in Exhibit O hereto.
(d) The Representative and the Rating Agencies shall have received
an opinion of Seward & Kissel LLP, counsel to the Indenture Trustee, dated the
Closing Date, in form and substance reasonably satisfactory to the
Representative, to the effect that:
(i) the Indenture Trustee is validly existing as a banking
corporation in good standing under the laws of the State of New York;
(ii) the Indenture has been duly authorized, executed and
delivered by the Indenture Trustee and constitutes a legal, valid and
binding instrument enforceable against the Indenture Trustee in accordance
with its terms, except to the extent enforceability may be limited by
bankruptcy, reorganization, insolvency, fraudulent conveyance, moratorium
or other similar laws affecting the enforcement of creditors' rights
generally and by the effect of general principles of equity (regardless of
whether enforceability is considered in a proceeding in equity or at law);
and
14
(iii) the Bonds have been duly authenticated by the Indenture
Trustee.
(e) The Representative and the Rating Agencies shall have received
the opinion of Carter, Ledyard & Milburn, special tax counsel for the Companies,
dated the Closing Date, in form and substance reasonably satisfactory to the
Representative, to the effect that:
(i) for United States federal income tax purposes, the Bonds
will be treated as debt obligations of the Seller, and the Bond Issuer
will not be subject to tax as an entity separate from the Seller; and
(ii) such counsel confirms as its opinion all other statements
as to matters of law and legal conclusions contained in the Final
Prospectus under the heading "Material Income Tax Matters for the Holders
of the Transition Bonds" and "ERISA Considerations".
In rendering such opinion, such counsel may rely as to matters of fact, to
the extent deemed proper, on certificates of public officials and of responsible
officers of the Companies.
(f) The Representative and the Rating Agencies shall have received
the opinion of Thelen Reid & Priest LLP, special New Jersey tax counsel for the
Companies, dated the Closing Date, in form and substance reasonably satisfactory
to the Representative, to the effect that:
(i) for New Jersey State income tax purposes, the Bonds will
be treated as debt obligations of the Seller, and the Bond Issuer will not
be subject to tax as an entity separate from the Seller;
(ii) interest on the Bonds received by a person who is not
otherwise subject to corporate or personal income tax in the State of New
Jersey will not be subject to these taxes; and
(iii) neither the State of New Jersey nor any of its political
subdivisions currently imposes intangible personal property taxes.
In rendering such opinion, such counsel may rely as to matters of fact, to
the extent deemed proper, on certificates of public officials and of responsible
officers of the Companies.
(g) The Representative shall have received from Pillsbury Winthrop
LLP, counsel for the Underwriters, such opinion, dated the Closing Date, with
respect to the issuance and sale of the Bonds, the Indenture, the Registration
Statement and other related matters as the Representative may reasonably
require; each of the Companies shall have furnished to such counsel such
documents as they request for the purpose of enabling them to pass upon such
matters.
In rendering such opinion, such counsel may (A) assume the validity and
continued effectiveness of the Statute, (B) rely, as to matters involving the
application of laws of any jurisdiction other than the States of New York or
(except as otherwise provided herein) Delaware or the United States, to the
15
extent deemed proper and specified in such opinion, upon the opinion of other
counsel of good standing believed to be reliable and who are satisfactory to
counsel for the Underwriters and (C) rely as to matters of fact, to the extent
deemed proper, on certificates of public officials and of responsible officers
of the Companies. References to the Final Prospectus in this paragraph (g)
include any supplements thereto at the Closing Date.
(h) The Representative and the Indenture Trustee shall have received
a certificate of each of the Companies signed by each Company's Chairman,
President or a Vice President and the Treasurer or the principal financial or
accounting officer, dated the Closing Date, to the effect that the signers of
such certificate have carefully examined the Registration Statement, the Final
Prospectus, any supplement to the Final Prospectus and this Agreement (and, in
the case of JCP&L, JCP&L's 2001 Annual Report on Form 10-K and all Exchange Act
Reports filed subsequent thereto) and that:
(i) the representations and warranties of such Company in this
Agreement, the Sale Agreement, the Servicing Agreement, the Indenture and
the Administration Agreement, as the case may be and if such Company is a
party thereto, are true and correct on and as of the Closing Date with the
same effect as if made on the Closing Date, and such Company has complied
with all the agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to the Closing Date; the Indenture has
been duly qualified under the Trust Indenture Act;
(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose
have been instituted or, to such Company's knowledge, threatened; and
(iii) since the date as of which information is given in (x) the
most recent Exchange Act Report filed by JCP&L prior to the Execution Time
(in the case of JCP&L) or (y) the Final Prospectus (exclusive of any
supplement thereto) (in the case of the Bond Issuer), there has been no
material adverse change or, in the reasonable judgment of JCP&L or the
Bond Issuer, as applicable, any development involving a prospective
material adverse change, in (A) the condition (financial or otherwise),
prospects, earnings, business or properties of such Company and its
subsidiaries, if any, taken as a whole, whether or not arising from
transactions in the ordinary course of business, or (B) the Bondable
Transition Property, except as set forth in or contemplated in (1) the
Exchange Act Reports filed by JCP&L prior to the Execution Time (in the
case of JCP&L) or (2) the Final Prospectus (exclusive of any supplement
thereto) (in the case of the Bond Issuer).
(i) At the Closing Date, PricewaterhouseCoopers LLP, independent
public accountants, shall have furnished to the Representative a letter or
letters (which may refer to letters previously delivered to one or more of the
Representative), dated as of the Closing Date, in form and substance
satisfactory to the Representative, confirming that they are independent
accountants within the meaning of the Act and the applicable rules and
regulations adopted by the SEC thereunder and stating in effect that they have
performed certain specified procedures as a result of which they determined that
certain information of an accounting, financial or statistical nature (which is
limited to accounting, financial or statistical information derived from the
16
general accounting records of JCP&L and the Bond Issuer) specified by the
Underwriters and set forth or incorporated by reference in the Registration
Statement and the Final Prospectus, agrees with the accounting records of such
Companies, excluding any questions of legal interpretation.
Reference to the Final Prospectus in this paragraph (i) includes any
supplement thereto at the date of the letter.
In addition, except as provided in Schedule I hereto, at the
Execution Time, PricewaterhouseCoopers LLP shall have furnished to the
Representative a letter or letters, dated as of the Execution Time, in form and
substance satisfactory to the Representative, to the effect set forth above.
(j) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the (i) 2001 Annual Report on Form 10-K filed by
JCP&L (in the case of JCP&L) and (ii) Registration Statement (exclusive of any
amendment thereof filed after the Execution Time) and the Final Prospectus
(exclusive of any supplement thereto) (in the case of the Bond Issuer), there
shall not have been any change, or any development involving a prospective
change, in or affecting (A) the prospects, earnings, business, properties or
condition, financial or otherwise, of either of the Companies, (B) the capital
stock or long term debt of the Bond Issuer or (C) the Bondable Transition
Property, the Bonds, the Financing Order or the Statute, the effect of which is,
in the judgment of the Representative, so material and adverse as to make it
impractical or inadvisable to proceed with the offering or delivery of the Bonds
as contemplated by the Registration Statement (exclusive of any amendment
thereof) and the Final Prospectus (exclusive of any supplement thereto).
(k) The Bonds shall have been rated in the highest long-term rating
category by each of the Rating Agencies and, on or after the date hereof, (i) no
downgrading shall have occurred in the rating accorded the Bonds or the debt
securities of JCP&L by any Rating Agency and (ii) no such organization shall
have publicly announced that it has under surveillance or review, with possible
negative implications, its rating of any of the Bonds or JCP&L's debt
securities.
(l) On or prior to the Closing Date, the Bond Issuer shall have
delivered to the Representative evidence, in form and substance reasonably
satisfactory to the Representative, that appropriate filings have been made in
accordance with the Statute and other applicable law, rules and regulations
reflecting the grant of a security interest by the Bond Issuer in the Bondable
Transition Property (and any other collateral for the Bonds) to the Indenture
Trustee, including the filing of the U.C.C. financing statements in the office
of the Secretary of State of the State of New Jersey.
(m) On or prior to the Closing Date, the Bond Issuer shall have
delivered to the Representative evidence, in form and substance satisfactory to
the Representative, of the BPU's issuance of the Financing Order relating to the
Bondable Transition Property.
17
(n) Prior to the Closing Date, the Companies shall have furnished to
the Representative such further information, certificates, opinions and
documents as the Representative may reasonably request.
If any of the conditions specified in this Section 7 shall not have been
fulfilled 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 Representative and counsel
for the Underwriters, this Agreement and all obligations of the Underwriters
hereunder may be canceled at, or at any time prior to, the Closing Date by the
Representative. Notice of such cancellation shall be given to the Bond Issuer in
writing or by telephone or telegraph confirmed in writing.
8. Reimbursement of Underwriters' Expenses.
(a) Whether or not the transactions contemplated hereunder are
consummated or this Agreement is terminated, the Bond Issuer and JCP&L will pay,
or cause to be paid, all costs and expenses incident to the performance of the
obligations of JCP&L and the Bond Issuer hereunder, including, without limiting
the generality of the foregoing, (i) all costs, taxes and expenses incident to
the issue and delivery of the Bonds to the Underwriters, (ii) all fees,
disbursements and expenses of JCP&L's and the Bond Issuer's counsel and
accountants, (iii) all costs and expenses incident to the preparation, printing
and filing of the Registration Statement (including all exhibits thereto), any
preliminary prospectus, the base prospectus, any Preliminary Final Prospectus,
the Final Prospectus and any amendments thereof or supplements thereto (except
the cost of amending or supplementing the Final Prospectus after nine months
following the Closing Date, which shall be at the expense of the Underwriters
requesting same), (iv) all costs and expenses (including fees of counsel not
exceeding $10,000, filing fees and other disbursements) incurred in connection
with "Blue Sky" qualifications, examining the legality of the Bonds for the
investment and the rating of the Bonds, (v) all costs and expenses of the
Indenture Trustee, (vi) all costs and expenses incurred in the acquisition or
preparation of documents required to be delivered by JCP&L or the Bond Issuer in
connection with the closing of the transactions contemplated hereby, (vii) all
costs and expenses required in connection with any filing with the National
Association of Securities Dealers in connection with the transactions
contemplated hereby and (viii) all costs and expenses of the printing and
distribution of all documents in connection with the Bonds. Except as provided
in this Section 8 and Section 9 hereof, the Underwriters will pay all their own
costs and expenses, including any advertising expenses in connection with any
offer they may make of the Bonds, but excluding reasonable fees and expenses of
Pillsbury Winthrop LLP, counsel to the Underwriters, which fees and expenses of
counsel shall be included in, and become part of, the Underwriters' fees and
expenses to be paid by JCP&L.
(b) If the sale of the Bonds provided for herein is not consummated
because any condition to the obligations of the Underwriters set forth in
Section 7 hereof is not satisfied, because of any termination pursuant to
Section 11 hereof or because of any refusal, inability or failure on the part of
any of the Companies to perform any agreement herein or comply with any
provision hereof other than by reason of a default (including under Section 10
hereof) by any of the Underwriters, the Companies will, jointly and severally,
reimburse the Underwriters upon demand for all reasonable out-of-pocket expenses
(including reasonable fees and disbursements of their counsel) that shall have
18
been incurred by the Underwriters in connection with the proposed purchase and
sale of the Bonds.
9. Indemnification and Contribution.
(a) Each of the Companies will, jointly and severally, indemnify and
hold harmless each Underwriter, the directors, officers, members and employees
of each Underwriter and each person, if any, who controls any Underwriter within
the meaning of either Section 15 of the Act or Section 20 of the Exchange Act
against any and all losses, claims, damages or liabilities, joint or several, to
which they or any of them may become subject under the Act, the Exchange Act or
other federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement for
the registration of the Bonds as originally filed or in any amendment thereof,
or any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
any untrue statement or alleged untrue statement of a material fact contained in
the base prospectus, any Preliminary Final Prospectus or the Final Prospectus,
or any amendment thereof or supplement thereof, or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or (ii) any untrue statement or
alleged untrue statement of a material fact contained in the Bondable Transition
Property Information and the Computational Materials and ABS Term Sheets
delivered to investors by any Underwriter, 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 will reimburse each such
indemnified party, as incurred, for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that none of the
Companies will be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information furnished to
the Bond Issuer or JCP&L by or on behalf of any Underwriter through the
Representative specifically for inclusion therein; provided, further, that the
foregoing indemnity with respect to the base prospectus or any Preliminary Final
Prospectus shall not inure to the benefit of an Underwriter if a copy of the
Final Prospectus as amended or supplemented had not been sent or given by or on
behalf of such Underwriter to the person asserting such losses, claims, damages
or liabilities concurrently with or prior to the delivery of the written
confirmation of the sale of the Bonds to such person and the untrue statement or
omission of a material fact contained in the base prospectus or such Preliminary
Final Prospectus was corrected in the Final Prospectus, as amended or
supplemented. This indemnity agreement will be in addition to any liability
which any of the Companies may otherwise have. The Companies and the
Underwriters hereby acknowledge and agree that the statements set forth in the
second through fifth sentences of the second paragraph, the second sentence of
the third paragraph, and the entire fourth through sixth paragraphs under the
heading "Underwriting the Series 2002-A Transition Bonds" in any Preliminary
Final Prospectus or the Final Prospectus constitute the only written information
furnished to JCP&L or the Bond Issuer by or on behalf of any Underwriter
specifically for inclusion in any document referenced in clauses (a)(i) or
(a)(ii) above.
19
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Companies, JCP&L's directors, the Bond Issuer's Managers, each of the Bond
Issuer's officers who signs the Registration Statement, and each person who
controls the Companies within the meaning of either Section 15 of the Act or
Section 20 of the Exchange Act, to the same extent as the foregoing indemnity
from the Companies to each Underwriter pursuant to Section 9(a)(i) hereof, but
only with reference to written information relating to such Underwriter
furnished to the Bond Issuer or JCP&L by or on behalf of such Underwriter
through the Representative specifically for inclusion in the documents referred
to in the foregoing indemnity. This indemnity agreement will be in addition to
any liability which any Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 9 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 9, notify the indemnifying party in writing of the
commencement thereof; but the failure to so notify the indemnifying party (i)
will not relieve it from liability under paragraph (a) or (b) above unless and
to the extent it did not otherwise learn of such action and such failure results
in the forfeiture by the indemnifying party of substantial rights and defenses
and (ii) will not, in any event, relieve the indemnifying party from any
obligations to any indemnified party other than the indemnification obligation
provided in paragraph (a) or (b) above. The indemnifying party shall be entitled
to appoint counsel of the indemnifying party's choice at the indemnifying
party's expense to represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be reasonably satisfactory to the
indemnified party (and shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party). Notwithstanding the indemnifying
party's election to appoint counsel to represent the indemnified party in an
action, the indemnified party shall have the right to employ separate counsel
(including local counsel), and the indemnifying party shall bear the reasonable
fees, costs and expenses of such separate counsel only if (i) the use of counsel
chosen by the indemnifying party to represent the indemnified party would
present such counsel with a conflict of interest, (ii) the actual or potential
defendants in, or targets of, any such action include both the indemnified party
and the indemnifying party and the indemnified party shall have reasonably
concluded that there are legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnified party, (iii) the indemnifying party shall not have employed counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of the institution of such action or
(iv) the indemnifying party shall authorize the indemnified party to employ
separate counsel at the expense of the indemnifying party. It is understood that
the indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the reasonable fees and
expenses of more than one separate firm for all such indemnified parties. An
indemnifying party will not, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
(i) includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding and (ii) does
20
not include a statement as to or an admission of fault, culpability or failure
to act, by or on behalf of any indemnified party. The indemnifying party shall
not be liable for any settlement of any proceeding effected without its written
consent, which consent shall not be unreasonably withheld.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 9 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, each of the Companies and the Underwriters
agree to contribute to the aggregate losses, claims, damages and liabilities
(including legal or other expenses reasonably incurred in connection with
investigating or defending same) (collectively "Losses") to which any of the
Companies or any of the Underwriters may be subject in such proportions that
each Underwriter is responsible for that portion of the Losses represented by
the percentage that the total commissions and underwriting discounts received by
such Underwriter bears to the total sale price received by the Bond Issuer from
the offering of the Bonds (before deducting expenses), and the Bond Issuer is
responsible for the balance; provided, however, that in no case shall any
Underwriter (except as may be provided in any agreement among underwriters
relating to the offering of the Bonds) be responsible for any amount in excess
of the underwriting discount or commission applicable to the Bonds purchased by
such Underwriter hereunder. If the allocation provided by the immediately
preceding sentence is unavailable for any reason, the Companies and the
Underwriters shall contribute in such proportion as is appropriate to reflect
not only the relative amounts received from the offering of the Bonds as
discussed in the preceding sentence but also the relative fault of the Companies
and of the Underwriters in connection with the statements or omissions which
resulted in such Losses as well as any other relevant equitable considerations.
Relative fault shall be determined by reference to whether any alleged untrue
statement or omission relates to information provided by any of the Companies or
by the Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Companies and the Underwriters agree that it would not be just and equitable
if contribution were determined by pro rata allocation or any other method of
allocation which does not take account of the equitable considerations referred
to above. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof) referred
to above in this paragraph (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this paragraph (d), no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 9, each person who controls an
Underwriter within the meaning of either the Act or the Exchange Act and each
director, officer, member and employee of an Underwriter shall have the same
rights to contribution as such Underwriter, and each person who controls the
Bond Issuer or JCP&L within the meaning of either the Act or the Exchange Act,
each officer of the Bond Issuer who shall have signed the Registration Statement
and each director of JCP&L or Manager of the Bond Issuer shall have the same
rights to contribution as the Bond Issuer or JCP&L, subject in each case to the
applicable terms and conditions of this paragraph (d). The Underwriters'
obligations in this paragraph (d) to contribute are several in proportion to
their respective underwriting obligations and not joint.
21
10. Default by an Underwriter. If any one or more Underwriters shall fail
to purchase and pay for any of the Bonds agreed to be purchased by such
Underwriter or Underwriters hereunder, the Representative may in its discretion
arrange for the nondefaulting Underwriters or another party or other parties to
purchase such Bonds on the terms contained herein. If within 36 hours after such
default by any Underwriter the Representative does not arrange for the purchase
of such Bonds, the nondefaulting Underwriters shall be obligated severally to
take up and pay for (in the respective proportions which the amount of Bonds set
forth opposite the names of all the remaining Underwriters) the Bonds which the
defaulting Underwriter or Underwriters agreed but failed to purchase; provided,
however, that in the event that the aggregate amount of Bonds which the
defaulting Underwriter or Underwriters agreed but failed to purchase shall
exceed 10% of the aggregate amount of Bonds set forth in Schedule II hereto, the
nondefaulting Underwriters shall have the right to purchase all, but shall not
be under any obligation to purchase any, of the Bonds, and if such nondefaulting
Underwriters do not purchase all the Bonds, this Agreement will terminate
without liability to any nondefaulting Underwriter or any of the Companies. In
the event of a default by any Underwriter as set forth in this Section 10, the
Closing Date shall be postponed for such period, not exceeding seven days, as
the Representative shall determine in order that the required changes in the
Registration Statement and the Final Prospectus or in any other documents or
arrangements may be effected. Nothing contained in this Agreement shall relieve
any defaulting Underwriter of its liability, if any, to any of the Companies and
any nondefaulting Underwriter for damages occasioned by its default hereunder.
11. Termination. This Agreement shall be subject to termination in the
absolute discretion of the Representative, by notice given to the Bond Issuer
and JCP&L prior to delivery of and payment for the Bonds, if prior to such time
there shall have occurred (i) any change, or any development involving a
prospective change, in or affecting the Bondable Transition Property, the Bonds,
the Financing Order or the Statute, the effect of which, in the judgment of the
Representative, materially impairs the investment quality of the Bonds or makes
it impractical or inadvisable to market the Bonds, (ii) a suspension or material
limitation in trading in securities generally on the New York Stock Exchange,
(iii) a suspension or material limitation in trading in the securities of JCP&L,
(iv) the declaration of a general moratorium on commercial banking activities by
federal, New York State or New Jersey State authorities or a material disruption
in commercial banking or securities settlement or clearance services in the
United States, (v) any outbreak or escalation of hostilities involving the
United States or the declaration by the United States of a national emergency or
war or (vi) any other calamity or crisis or any change in financial conditions
in the United States or elsewhere, the effect of which on financial markets is
such as to make it, in the judgment of the Representative, impracticable or
inadvisable to proceed with the offering or delivery of the Bonds as
contemplated by the Final Prospectus (exclusive of any supplement thereto).
12. Representations and Indemnities to Survive. The respective agreements,
representations, warranties, indemnities and other statements of each of the
Companies or their respective officers, and of the Underwriters set forth in or
made pursuant to this Agreement will remain in full force and effect, regardless
of any investigation made by or on behalf of any Underwriter or of any of the
Companies or any of the officers, directors or controlling persons referred to
in Section 9 hereof, and will survive delivery of and payment for the Bonds. The
provisions of Sections 8 and 9 hereof shall survive the termination or
cancellation of this Agreement and, to the fullest extent permitted by
22
applicable law, the invalidation (for any reason) of the Statute or the
Financing Order.
13. Notices. All communications hereunder will be in writing and may be
given by United States mail, courier service, telegram, telex, telemessage,
telecopy, telefax, cable or facsimile (confirmed by telephone or in writing in
the case of notice by telegram, telex, telemessage, telecopy, telefax, cable or
facsimile) or any other customary means of communication, and any such
communication shall be effective when delivered, or if mailed, three days after
deposit in the United States mail with proper postage for ordinary mail prepaid,
and if sent to the Representative, to it at the address specified in Schedule I
hereto; and if sent to any of the Companies, to it c/o GPU Service, Inc., 76
South Main Street, Akron, Ohio 44308-1890, Telecopy: (330) 384-3772. The parties
hereto, by notice to the others, may designate additional or different addresses
for subsequent communications.
14. Successors. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors and the officers and
directors and controlling persons referred to in Section 9 hereof, and no other
person will have any right or obligation hereunder.
15. Applicable Law. This Agreement will be governed by and construed in
accordance with the laws of the State of New York.
16. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be deemed an original, which taken together
shall constitute one and the same instrument.
17. Miscellaneous. Time shall be of the essence of this Agreement. As used
herein, the term "business day" shall mean any day when the SEC's office in
Washington, D.C. is open for business.
23
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement among the
Companies and the several Underwriters.
Very truly yours,
JERSEY CENTRAL POWER & LIGHT COMPANY
By: /s/ Richard H. Marsh
---------------------------------
Name: Richard H. Marsh
Title: Senior Vice President & Chief
Financial Officer
JCP&L TRANSITION FUNDING LLC
By: /s/ Richard H. Marsh
---------------------------------
Name: Richard H. Marsh
Title: Senior Vice President & Chief
Financial Officer
CONFIRMED AND ACCEPTED
on behalf of each of the Underwriters
Goldman, Sachs & Co.
/s/ Goldman, Sachs & Co.
- -----------------------------------
(Goldman, Sachs & Co.)
SCHEDULE I
Name(s) of Underwriter(s):
Goldman, Sachs & Co.
Morgan Stanley & Co. Incorporated
Salomon Smith Barney Inc.
The offering of the Bonds is a Delayed Offering.
Address for Notices to Representative:
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Fax: (212) 902-3000
SCHEDULE II
-----------
CLASS A-1
----------------------------------------------------------------------
NAME OF UNDERWRITER PURCHASE PRICE PRINCIPAL AMOUNT
PERCENTAGE OF BONDS
OF BONDS
----------------------------------------------------------------------
Goldman, Sachs & Co........... 99.94493% $63,777,700
----------------------------------------------------------------------
Morgan Stanley & Co. 99.94493% 18,222,200
Incorporated..................
----------------------------------------------------------------------
Salomon Smith Barney Inc...... 99.94493% 9,111,100
----------------------------------------------------------------------
TOTAL.................... 99.94493% $91,111,000
============
----------------------------------------------------------------------
CLASS A-2
----------------------------------------------------------------------
NAME OF UNDERWRITER PURCHASE PRICE PRINCIPAL AMOUNT
PERCENTAGE OF BONDS
OF BONDS
----------------------------------------------------------------------
Goldman, Sachs & Co........... 99.93494% $36,607,900
----------------------------------------------------------------------
Morgan Stanley & Co. 99.93494% 10,459,400
Incorporated..................
----------------------------------------------------------------------
Salomon Smith Barney Inc...... 99.93494% 5,229,700
----------------------------------------------------------------------
TOTAL.................... 99.93494% $52,297,000
===========
----------------------------------------------------------------------
CLASS A-3
----------------------------------------------------------------------
NAME OF UNDERWRITER PURCHASE PRICE PRINCIPAL AMOUNT
PERCENTAGE OF BONDS
OF BONDS
----------------------------------------------------------------------
Goldman, Sachs & Co........... 99.89185% $53,952,500
----------------------------------------------------------------------
Morgan Stanley & Co. 99.89185% 15,415,000
Incorporated..................
----------------------------------------------------------------------
Salomon Smith Barney Inc...... 99.89185% 7,707,500
----------------------------------------------------------------------
TOTAL.................... 99.89185% $77,075,000
===========
----------------------------------------------------------------------
CLASS A-4
----------------------------------------------------------------------
NAME OF UNDERWRITER PURCHASE PRICE PRINCIPAL AMOUNT
PERCENTAGE OF BONDS
OF BONDS
----------------------------------------------------------------------
Goldman, Sachs & Co........... 99.92083% $69,661,900
----------------------------------------------------------------------
Morgan Stanley & Co. 99.92083% 19,903,400
Incorporated..................
----------------------------------------------------------------------
Salomon Smith Barney Inc...... 99.92083% 9,951,700
----------------------------------------------------------------------
TOTAL.................... 99.92083% $99,517,000
===========
----------------------------------------------------------------------
TOTAL FOR ALL CLASSES
----------------------------------------------------------------------
NAME OF UNDERWRITER PRINCIPAL AMOUNT
OF BONDS
----------------------------------------------------------------------
Goldman, Sachs & Co............................. $224,000,000
----------------------------------------------------------------------
Morgan Stanley & Co. Incorporated............... 64,000,000
----------------------------------------------------------------------
Salomon Smith Barney Inc........................ 32,000,000
----------------------------------------------------------------------
TOTAL...................................... $320,000,000
============
----------------------------------------------------------------------
2
SCHEDULE III
------------
All information in this Term Sheet, whether regarding the assets backing any
securities discussed herein or otherwise, is preliminary and will be superseded
by the information contained in the final Prospectus and related Prospectus
Supplement for any securities actually sold to you. This Term Sheet is furnished
to prospective investors on a confidential basis solely for the purposes of
evaluating the investment offered hereby. The information contained herein may
not be reproduced or used in whole or in part for any other purposes.
No securities are being offered by these summary materials. If the securities
described herein or other securities are ultimately offered, they will be
offered only pursuant to a definitive Prospectus and related Prospectus
Supplement, and prospective investors who consider purchasing any such
securities should make their investment decisions based only upon the
information provided therein and consultation with their own advisers. This
material is for your private information and we are not soliciting any action
based upon it. This material is not to be construed as an offer to sell or the
solicitation of any offer to buy any security in any jurisdiction where such an
offer or solicitation would be illegal. This material is based on information
that we consider reliable, but we do not represent that it is accurate or
complete and it should not be relied upon as such. By accepting this material
the recipient agrees that it will not distribute or provide the material to any
other person. The information contained in this material may not pertain to any
securities that will actually be sold. The information contained in this
material may be based on assumptions regarding market conditions and other
matters as reflected herein. We make no representations regarding the
reasonableness of such assumptions or the likelihood that any of such
assumptions will coincide with actual market conditions or events, and this
material should not be relied upon for such purposes. We and our affiliates,
officers, directors, partners and employees, including persons involved in the
preparation or issuance of this material may, from time to time, have long or
short positions in, and buy and sell, the securities mentioned therein or
derivatives thereof (including options). Information contained in this material
is current as of the date appearing on this material only. Information in this
material regarding any assets backing any securities discussed herein supersedes
all prior information regarding such assets. All information in this Term Sheet,
whether regarding the assets backing any securities discussed herein or
otherwise, is preliminary and will be superseded by the information contained in
any final Prospectus and related Prospectus Supplement for any securities
actually sold to you. Goldman Sachs does not provide accounting, tax or legal
advice. In addition, we mutually agree that, subject to applicable law, you may
disclose any and all aspects of any potential transaction or structure described
herein that are necessary to support any U.S. federal income tax benefits,
without Goldman Sachs imposing limitation of any kind.
EXHIBIT A
---------
[Opinion Regarding Security Interest Matters]
1. The provisions of the Sale Agreement together with the Bill of Sale are
effective to create, in favor of the Bond Issuer, a valid security interest
(as such term is defined in Section 1-201 of the Uniform Commercial Code in
the State of New Jersey (the "New Jersey UCC")) in the Seller's rights in
Bondable Transition Property (the "Transferred Bondable Transition
Property") described in the Bill of Sale.
2. Upon the filing of the financing statement naming the Seller as debtor and
the Bond Issuer as secured party, describing the Transferred Bondable
Transition Property as the collateral and referring to the Financing Order
(the "JCP&L Financing Statement"), the security interest in favor of the
Bond Issuer in the Seller's rights in the Transferred Bondable Transition
Property was perfected.
3. No other security interest of any other creditor of the Seller is equal or
prior to the security interest of the Bond Issuer in the Seller's rights in
the Transferred Bondable Transition Property.
4. The provisions of the Indenture are effective to create, in favor of the
Indenture Trustee for the benefit of the Transition Bondholders to secure
the obligations of the Bond Issuer under the Indenture to the Transition
Bondholders, a valid security interest in all of the Bond Issuer's rights,
title and interest in, to and under the Transferred Bondable Transition
Property and that portion of the Collateral (i) in which a security interest
may be created under Article 9 of the New Jersey UCC and (ii) which is
described in the Indenture as subject to the security interest of the
Indenture.
5. Upon the filing of the financing statements naming the Bond Issuer as debtor
and the Indenture Trustee for the benefit of the Transition Bondholders as
secured party, describing the Transferred Bondable Transition Property as
collateral and referring to the Financing Order (the "Issuer Financing
Statements"), the security interest in favor of the Indenture Trustee for
the benefit of the Transition Bondholders in the Bond Issuer's rights in the
Transferred Bondable Transition Property and in the Bond Issuer's rights in
that portion of the Collateral in which a security interest can be perfected
by filing a financing statement in the office of the Delaware Secretary of
State (the "DE Filing Office") and the office of the New Jersey Secretary of
State (the "NJ Filing Office") was perfected.
6. No other security interest of any other creditor of the Bond Issuer is equal
or prior to the security interest of the Indenture Trustee for the benefit
of the Transition Bondholders in the Transferred Bondable Transition
Property.
7. The provisions of the Indenture are effective to create a valid security
interest in favor of the Indenture Trustee for the benefit of the Transition
Bondholders to secure the obligations of the Bond Issuer under the Indenture
to the Transition Bondholders in the Bond Issuer's rights in all Security
Entitlements. The provisions of the Indenture are effective to perfect such
security interest of the Indenture Trustee for the benefit of the Transition
Bondholders in the Security Entitlements. No other security interest of any
other creditor of the Bond Issuer is equal or prior to such security
interest of the Indenture Trustee for the benefit of the Transition
Bondholders in the Security Entitlements. As used herein: (i) "Securities
Intermediary" means The Bank of New York solely in its capacity as a
"securities intermediary" as defined in the New Jersey UCC, the Uniform
Commercial Code in the State of New York (the "New York UCC") or the Uniform
Commercial Code in the State of Delaware (the "Delaware UCC"), as
appropriate (the "Relevant UCC") and the Federal Book-Entry Regulations;
(ii) "Securities Account" means account number __________ established at the
Securities Intermediary in the name of JCP&L Transition Funding LLC, subject
to the lien of the Indenture Trustee for the benefit of the Transition
Bondholders, which we have been informed is the Collection Account
established pursuant to the Indenture; (iii) "Security Entitlements" means
"security entitlements" (as defined in Section 8-102(a)(17) of the Relevant
UCC) with respect to "financial assets" (as defined in Section 8-102(a)(9)
of the Relevant UCC) now or hereafter credited to the Securities Account
and, with respect to Federal Book-Entry Securities (as hereinafter defined),
"security entitlements" within the meaning of the Federal Book-Entry
Regulations with respect to Federal Book-Entry Securities now or hereafter
credited to the Securities Account; (iv) "Federal Book-Entry Regulations"
means the United States Department of the Treasury's regulations governing
the transfer and pledge of Treasury bills, notes and bonds issued by the
U.S. Treasury and maintained in the form of entries in the TRADES book-entry
system in the records of the federal reserve banks and set forth in 61 Fed.
Reg. 43626 (1996) (codified at 31 C.F.R. Part 357) and the United States
Department of Housing and Urban Development's regulations governing the
transfer and pledge of securities issued by the Federal National Mortgage
Association ("FNMA") or the Federal Home Loan Mortgage Corporation ("FHLMC")
in each case maintained in the form of entries in the records of federal
reserve banks and set forth in 62 Fed. Reg. 28975 (1997) (codified at 24
C.F.R. Part 81); and (v) "Federal Book-Entry Securities" means securities
issued in book-entry form by the United States Treasury, FNMA or FHLMC which
are subject to the Federal Book-Entry Regulations.
8. You have asked under the New Jersey UCC what law governs perfection of the
security interest of the Bond Issuer and the Indenture Trustee in the
Transferred Bondable Transition Property. Pursuant to Section 9-301(a) of
the New Jersey UCC, the law of the State of New Jersey governs the
perfection of the security interest granted by the Seller in favor of the
Bond Issuer and the law of the State of Delaware governs the perfection of
the security interest granted by the Bond Issuer in favor of the Indenture
Trustee in the Transferred Bondable Transition Property.
2
EXHIBIT B
---------
[Opinion Regarding True Sale Nature of the Transfer of
Bondable Transition Property Under the Statute]
1. Upon the delivery of the fully executed Sale Agreement and the Bill of Sale
to the Bond Issuer and the receipt by the Seller of consideration as
specified therein, (A) the Transferred Bondable Transition Property
constituted a vested, presently existing property right and the transfer of
the Transferred Bondable Transition Property by the Seller to the Bond
Issuer pursuant to the Sale Agreement conveyed all of the Seller's right,
title and interest in, to and under the Transferred Bondable Transition
Property to the Bond Issuer and (B) the Transferred Bondable Transition
Property was vested ab initio in the Bond Issuer pursuant to the Sale
Agreement.
2. The provisions of the Sale Agreement and the Bill of Sale are effective to
constitute a sale or other absolute transfer to the Bond Issuer of all of
the Seller's right, title and interest in, to and under the Transferred
Bondable Transition Property, and not a borrowing secured by the Transferred
Bondable Transition Property, other than for federal, state and local tax
purposes and financial accounting purposes.
3. The JCP&L Financing Statement is in an appropriate form for filing in the NJ
Filing Office. Upon the proper filing of the JCP&L Financing Statement in
the NJ Filing Office, together with the tender of the required filing fee,
the transfer by the Seller of the Transferred Bondable Transition Property
to the Bond Issuer was perfected as against third persons.
4. The transfer by the Seller of the Transferred Bondable Transition Property
to the Bond Issuer has been perfected as against third persons by the
issuance of the Financing Order by the BPU, the execution and delivery of
the Sale Agreement and the Bill of Sale by the parties thereto and the
filing of the JCP&L Financing Statement in accordance with the Statute.
5. The transfer by the Seller of the Transferred Bondable Transition Property
to the Bond Issuer has priority over any other assignment of the Transferred
Bondable Transition Property by the Seller and is subject to no liens
created prior to such transfer as provided in the Statute.
EXHIBIT C
---------
[Certain Bankruptcy and Creditors' Rights Issues
Involving the Issuer Limited Liability Company Agreement]
In a properly presented and argued case, as a legal matter, and under existing
law, a bankruptcy court would hold that:
1. The bankruptcy or dissolution of the Seller would not, by itself, cause the
Bond Issuer to be dissolved or its affairs to be wound up.
2. A judgment creditor of the Seller may not satisfy its claims against the
Seller by asserting these claims directly against the assets of the Bond
Issuer.
3. (A) The Bond Issuer is a separate legal entity.
(B) The existence of the Bond Issuer as a separate legal entity will
continue until the cancellation of the Issuer Certificate of Formation.
EXHIBIT D
---------
[Delaware LLC Bankruptcy Issues]
In a properly presented and argued case, as a legal matter, and based upon
existing case law, a bankruptcy court would hold that compliance with those
provisions of the Issuer Limited Liability Company Agreement requiring the prior
unanimous written consent of the Bond Issuer's Managers to commence a voluntary
case under Title 11 of the United States Code (a "Voluntary Case") is necessary
in order to commence a Voluntary Case.
EXHIBIT E
---------
[Jersey Central Power & Light Company Certain Corporate Matters]
1. Each of the Basic Documents and Bonds to which the Seller is a party (other
than the Underwriting Agreement) constitutes the valid and legally binding
obligation of the Seller, enforceable against the Seller in accordance with
its terms under the laws of the State of New Jersey.
2. The Underwriting Agreement constitutes the valid and binding obligation of
the Seller, enforceable against the Seller in accordance with its terms
under the laws of the State of New York.
EXHIBIT F
---------
[Jersey Central Power & Light Company Corporate Matters]
1. The Seller has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of New Jersey, and
is duly qualified to do business in each jurisdiction (and is in good
standing under the laws of all such jurisdictions) where the nature of the
Seller's business requires such qualification to the extent such
qualification and good standing is necessary for the validity and
enforceability of the Underwriting Agreement, the Basic Documents and the
Bonds (the "Transaction Documents"). The Seller has all requisite corporate
power and authority to execute, deliver and perform its obligations under
the Transaction Documents to which the Seller is a party and to own, lease
or operate its properties and conduct its business as described in the
Registration Statement and the Final Prospectus.
2. The execution, delivery and performance by the Seller of the Transaction
Documents to which the Seller is a party and the consummation by the Seller
of the transactions contemplated thereby have been duly authorized by all
requisite corporate action on the part of the Seller, and each of the
Transaction Documents to which the Seller is a party has been duly executed
and delivered by the Seller.
3. All consents, approvals and authorizations of, or filings or registrations
with, any governmental body, authority or agency applicable to the Seller
and required as a condition to the validity of the Transaction Documents to
which the Seller is a party or in connection with the execution, delivery
and performance by the Seller of the Transaction Documents to which the
Seller is a party have been obtained or made.
4. The execution, delivery and performance by the Seller of the Transaction
Documents to which the Seller is a party, each in accordance with its terms,
do not and will not: (a) conflict with or breach any of the material terms
or provisions of, or constitute (with or without notice or lapse of time) a
default under, the restated certificate of incorporation or by-laws of the
Seller; (b) conflict with or breach any of the material terms or provisions
of, or constitute (with or without notice or lapse of time) a default under,
any indenture or material agreement or other instrument known to us to which
the Seller is a party or by which the Seller or any of its property is
bound; (c) result in the creation or imposition of any security interest or
lien on any properties of the Seller, pursuant to the terms of any such
indenture, agreement or instrument known to us (other than as contemplated
by the Transaction Documents, the Financing Order and Section 22 of the
Statute (N.J.S.A. ss.48:3-71)); or (d) violate any law or any consent, order
(including the Financing Order), rule, regulation or decree, known to us, of
any court or of any federal or state regulatory body, administrative agency
or other governmental authority having jurisdiction over the Seller or any
of its properties.
5. There is no pending or, to our knowledge, threatened action, suit or
proceeding before any court or governmental agency, authority or body or any
arbitrator involving the Seller or involving or relating to the Financing
Order or the Restructuring Order or the collection of the Transition Bond
Charge or the use and enjoyment of the Transferred Bondable Transition
Property under the Statute, or challenging the validity or enforceability of
the Sale Agreement, the Indenture, the Bonds, the Servicing Agreement or the
Administration Agreement, in each case which is of a character required to
be disclosed in the Registration Statement or the Final Prospectus that is
not adequately disclosed in the Registration Statement or the Final
Prospectus as required, and there is no contract or other document of a
character required to be described in the Registration Statement or the
Final Prospectus or filed as an exhibit to the Registration Statement that
is not described or filed as required.
2
EXHIBIT G
---------
[Regulatory Issues under the Statute]
1. The Restructuring Order and the Financing Order have been duly authorized
and issued by the BPU in accordance with all applicable laws, rules and
regulations, including the Statute; the Restructuring Order and the
Financing Order and the process by which they were issued comply with all
applicable laws, rules and regulations, including the Statute; and the
Restructuring Order (insofar as it relates to the transaction contemplated
by the Transaction Documents (the "Transaction")) and the Financing Order
are in full force and effect and are final and nonappealable.
2. The Statute has been duly enacted by the Legislature of the State of New
Jersey in accordance with all applicable laws, is in full force and effect
and the effectiveness or constitutionality of the Statute (insofar as it
relates to the Transaction), to the best of our knowledge, is not the
subject of any pending appeal or litigation. The provisions of the Statute
relating to the Bonds are constitutional under the Constitutions of the
United States and the State of New Jersey.
3. Section 16.b of the Statute, which provides that neither the BPU nor any
other governmental entity has the authority, directly or indirectly, legally
or equitably to (A) rescind, alter, repeal, modify or amend the Financing
Order, (B) revalue, reevaluate or revise the amount of the Bondable Stranded
Costs, (C) determine that the Transition Bond Charge or the revenues
required to recover Bondable Stranded Costs are unjust or unreasonable, or
(D) in any way reduce the value of the Transferred Bondable Transition
Property, applies to the Transaction.
4. The Bonds are "transition bonds" within the meaning of Section 3 of the
Statute, and the Bonds are entitled to the protections provided under the
Statute.
5. The Bond Issuer is a "financing entity" within the meaning of Section 3 of
the Statute.
6. There presently is no judicial, statutory or constitutional authority in the
State of New Jersey for a voter initiative or referendum for the purpose of
amending or repealing the Statute.
7. The provisions of the Statute are severable, such that if any provision of
the Statute or its application to any person or circumstance is held invalid
by any court of competent jurisdiction, the invalidity shall not affect any
other provision or the applications of the Statute which can be given effect
without the invalid provision or application.
8. The Transaction, as contemplated by the Underwriting Agreement and the Final
Prospectus, conforms to the terms of the Financing Order.
9. The Financing Order authorizes the issuance of the Bonds, the transfer of
the Transferred Bondable Transition Property to the Bond Issuer, the
imposition of the Transition Bond Charge and the periodic adjustments of the
Transition Bond Charge. The sections of the Financing Order authorizing the
foregoing are irrevocable.
EXHIBIT H
---------
[Constitutional Issues - Contract Clause]
While there is no case law which considers the application of the United States
or New Jersey Contract Clauses specifically to the Statute, we have considered
existing case law concerning the application of the Contract Clause of the
United States Constitution and parallel state constitutional provisions to
legislation which reduces or eliminates taxes, public charges or other sources
of revenues which support bonds issued by public instrumentalities or private
issuers, or which otherwise reduces or eliminates the security for bonds. Based
on interpretation of existing case law, under the Contract Clauses of the United
States Constitution and the New Jersey Constitution, the State of New Jersey,
including the BPU, could not, absent a demonstration that such action was
necessary to serve a significant and legitimate public purpose, repeal or amend
the Statute by means of the legislative process or take or refuse to take
(through the BPU or otherwise) any action required under the pledge and
agreement contained in Section 17.a of the Statute, or take or refuse to take
any other action, if any such repeal or amendment or the action or inaction
would substantially impair the rights of the owners of the Transferred Bondable
Transition Property or the Transition Bondholders or otherwise limit, alter,
impair or reduce the value or amount of the Transferred Bondable Transition
Property, unless that action is a reasonable exercise of the State of New
Jersey's sovereign powers and of a character reasonable and appropriate to the
public purpose justifying that action.
EXHIBIT I
---------
[Constitutional Issues - Takings Clause]
A reviewing court would conclude that the repeal of the Statute by the New
Jersey Legislature or any other action taken by the New Jersey Legislature,
including by amending the Statute, that substantially impairs the rights of the
owners of Transferred Bondable Transition Property or the Transition Bondholders
or otherwise substantially limits, alters, impairs or reduces the value or
amount of the Transferred Bondable Transition Property, without paying just
compensation under the Takings Clauses of the United States Constitution and the
New Jersey Constitution (any such repeal or action is referred to as an
"Impairment Action") constituted a compensable taking under the Takings Clauses
of the United States and New Jersey Constitutions if it determined: (A) that the
Transferred Bondable Transition Property is property of a type protected by the
Federal Takings Clause or the New Jersey Takings Clause; and (B) that the
Impairment Action effected a regulatory taking of the Transferred Bondable
Transition Property. To determine whether a compensable taking had occurred, the
court would determine whether to apply principles developed in the real property
context to an analysis of the Impairment Action. Those principles would require
a determination of whether the Impairment Action denied the Transition
Bondholders all economically or productive use of the Transferred Bondable
Transition Property, under circumstances such as a legislative ban on the use of
the Transferred Bondable Transition Property for the timely payments of
principal and interest on the Bonds. If all economically beneficial or
productive use of the Transferred Bondable Transition Property were not denied,
the court would undertake an ad hoc factual inquiry by considering the factors
enumerated in Penn Central Transp. Co. v. New York City, 438 U.S. 104, 124
(1978), to an analysis of the Impairment Action, in which event the court would
assess: (1) the character of the government action, including whether the
government action substantially advanced legitimate government interests; (2)
the economic impact of the regulation, including whether the State of New
Jersey's action would prevent timely payment of the Bonds; and (3) the extent to
which the regulation interfered with reasonable investment-backed expectations.
EXHIBIT J
---------
[Mortgage Opinion]
Based on the reasoned analysis of the Statute and the Indenture of the Seller to
The Bank of New York (successor to United States Trust Company of New York),
dated as of March 1, 1946, as amended and supplemented by 54 Supplemental
Indentures (as so amended and supplemented, the "Mortgage"), the Transferred
Bondable Transition Property is not subject to the lien of the Mortgage.
EXHIBIT K
---------
[JCP&L Transition Funding LLC]
1. The Bond Issuer is duly qualified to do business in each jurisdiction (and
is in good standing under the laws of all such jurisdictions) where the
nature of the Bond Issuer's business requires such qualification to the
extent such qualification and good standing is necessary for the validity
and enforceability of the Transaction Documents.
2. Each of the Transaction Documents has been duly executed and delivered by
the Bond Issuer.
3. The issue and sale of the Bonds by the Bond Issuer and the execution,
delivery and performance by the Bond Issuer of the Transaction Documents,
each in accordance with its terms, do not and will not: (a) conflict with or
breach any of the terms or provisions of, or constitute (with or without
notice or lapse of time) a default under, any indenture or agreement or
other instrument to which the Bond Issuer is a party or by which the Bond
Issuer or any of its property is bound (the "Issuer Applicable Contracts");
(b) result in the creation or imposition of any security interest or lien on
any properties of the Bond Issuer pursuant to the terms of any of the Issuer
Applicable Contracts (other than as contemplated by the Transaction
Documents, the Financing Order and Section 22 of the Statute); (c) require
the consent or approval of, the giving of notice to, the registration with,
or the taking of any other action with respect to, any court, governmental
or regulatory authority or agency other than any such approvals, notices or
actions which have been obtained, made or taken; or (d) violate any law,
rule or regulation, or any consent, order (including the Financing Order) or
decree known to us, of any court or of any federal or state regulatory body,
administrative agency or other governmental authority having jurisdiction
over the Bond Issuer or any of its properties.
4. Each of the Transaction Documents (other than the Underwriting Agreement)
constitutes the valid and legally binding obligation of the Bond Issuer,
enforceable against the Bond Issuer in accordance with its terms.
5. The Underwriting Agreement constitutes the valid and binding obligation of
the Bond Issuer, enforceable against the Bond Issuer in accordance with its
terms under the laws of the State of New York.
6. The Bonds have been duly executed and, when authenticated in accordance with
the provisions of the Indenture and delivered to and paid for by the
Underwriters in accordance with the terms of the Underwriting Agreement,
will be duly issued and constitute the valid and legally binding obligations
of the Bond Issuer enforceable against the Bond Issuer in accordance with
their respective terms, and will be entitled to the benefits of the
Indenture.
7. The Indenture has been duly qualified under the TIA, and neither the Sale
Agreement nor the Servicing Agreement is required to be registered under the
TIA.
8. The Registration Statement has become effective under the Act; any required
filing of the base prospectus, any Preliminary Final Prospectus and the
Final Prospectus, and any supplements thereto, pursuant to Rule 424(b) under
the Act has been made in the manner and within the time period required by
Rule 424(b); to our knowledge, no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings for that
purpose have been instituted or threatened; and the Registration Statement
and the Final Prospectus (other than the financial statements and other
financial and statistical information contained therein, as to which we
express no opinion) comply as to form in all material respects with the
applicable requirements of the Act and the rules thereunder; and the
documents or portions thereof filed with the SEC pursuant to the Exchange
Act and incorporated by reference in the Registration Statement and the
Final Prospectus (other than the financial and statistical information
contained therein, as to which we express no opinion), complied as to form
when filed in all material respects with the requirements of the Exchange
Act and the rules thereunder.
9. Neither of the Companies is or, after giving effect to the offering and sale
of the Bonds and the application of the proceeds thereof as described in the
Final Prospectus, will be required to be registered as an "investment
company" as such term is defined in the Investment Company Act of 1940, as
amended.
2
EXHIBIT L
---------
[JCP&L Transition Funding LLC 10b-5/Fair Summary Matters]
1. The statements set forth in the Final Prospectus (i) under the headings "The
Competition Act", "JCP&L's Restructuring", "The BPU Financing Order and the
Transition Bond Charge", "Servicing of the Bondable Transition Property",
"JCP&L Transition Funding LLC, The Issuer", "The Transition Bonds" (other
than the statements under the subheading "Transition Bonds will be Issued in
Book-Entry Form"), "The Sale Agreement", "The Servicing Agreement", "The
Indenture", "Credit Enhancement", "Description of Bondable Transition
Property" and "The Transition Bond Charge", in each case to the extent that
such statements constitute matters of New Jersey or federal law or legal
conclusions with respect thereto, provide a fair and accurate summary of
such law or conclusions, and (ii) under the heading "How a Bankruptcy of
JCP&L or the Servicer May Affect Your Investment" fairly summarize the
matters described therein.
2. The descriptions of the Bonds, the Indenture, the Servicing Agreement and
the Sale Agreement contained in the Final Prospectus (other than, with
respect to the Bonds, the statements under the subheading "The Transition
Bonds--Transition Bonds will be Issued in Book-Entry Form") constitute
accurate summaries in all material respects of the terms of the forms of
such Bonds or documents, as the case may be.
3. The statements included in the Final Prospectus under the headings "The
Competition Act", "JCP&L's Restructuring" and "The BPU Financing Order and
the Transition Bond Charge", to the extent they purport to summarize certain
provisions of the Statute and the Financing Order, fairly summarize such
provisions.
4. Nothing has come to our attention that would lead us to believe that either
(A) the Registration Statement, as of its effective date, contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading, except that we express no view with respect to (i)
the statistical and financial information included or incorporated by
reference therein, (ii) the Indenture Trustee's Statement of Eligibility and
Qualification under the TIA on Form T-1, and (iii) the statements under the
subheading "The Transition Bonds--Transition Bonds will be Issued in
Book-Entry Form", or (B) the Final Prospectus, at the time it was filed
with, or transmitted for filing to, the SEC or on the date hereof, contained
or contains, as the case may be, any untrue statement of a material fact or
omitted or omits, as the case may be, to state a material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading, except that we express no view with respect
to (i) the statistical and other financial information included or
incorporated by reference therein, (ii) the Indenture Trustee's Statement of
Eligibility and Qualification under the TIA on Form T-1, and (iii) the
statements under the subheading "The Transition Bonds--Transition Bonds will
be Issued in Book-Entry Form".
EXHIBIT M
---------
[Opinion Regarding True Sale Nature of the Transfer
of Bondable Transition Property]
If the Seller became the debtor in a case under the United States Bankruptcy
Code (Title 11, U.S.C.) (the "Bankruptcy Code"), and the matter were properly
briefed and presented to a court, the court would hold that a transfer of
Transferred Bondable Transition Property (including the collections thereon) in
the form and manner set forth in the Sale Agreement would constitute an absolute
sale of the Transferred Bondable Transition Property (including the collections
thereon) rather than a borrowing by the Seller secured by such Transferred
Bondable Transition Property, such that the Transferred Bondable Transition
Property (including the collections thereon) would not be property of the estate
of the Seller under Section 541(a) of the Bankruptcy Code, and thus the Bond
Issuer's rights to and with respect to the Transferred Bondable Transition
Property (including the collections thereon) would not be impaired by the
operation of the automatic stay under Section 362(a) of the Bankruptcy Code.
EXHIBIT N
---------
[Substantive Nonconsolidation]
In the event the Seller were to be a debtor in a case under the Bankruptcy Code,
if the matter were properly briefed and presented to a court, the court would
not disregard the separate legal existence of the Seller and the Bond Issuer so
as to order substantive consolidation under the Bankruptcy Code of the assets
and liabilities of the Bond Issuer with the bankruptcy estate of the Seller.
EXHIBIT O
---------
[JCP&L Transition Funding LLC]
1. The Certificate of Formation of the Bond Issuer, dated as of February 24,
2000 (the "Issuer Certificate of Formation"), has been duly filed with the
Secretary of State of the State of Delaware.
2. The Bond Issuer has been duly formed and is validly existing in good
standing as a limited liability company under the laws of the State of
Delaware.
3. The Issuer Limited Liability Company Agreement constitutes a legal, valid
and binding agreement of the Seller, as the sole member of the Bond Issuer,
and is enforceable against the Seller, in accordance with its terms.
4. If properly presented to a Delaware court, a Delaware court applying
Delaware law would conclude that (i) in order for any Person to file a
voluntary bankruptcy petition on behalf of the Bond Issuer, the prior
unanimous consent of the Managers, including each of the Independent
Managers, as provided for in Section 3.04(b)(iv) of the Issuer Limited
Liability Company Agreement, is required, and (ii) such provision, contained
in Section 3.04(b)(iv) of the Issuer Limited Liability Company Agreement,
that requires the prior unanimous consent of the Managers, including each of
the Independent Managers, in order for a Person to file a voluntary
bankruptcy petition on behalf of the Bond Issuer, constitutes a legal, valid
and binding agreement of the Seller, and is enforceable against the Seller,
as the sole member of the Bond Issuer, in accordance with its terms.
5. Under the Delaware Limited Liability Company Act, 6 Del. C.ss.18-101, et
seq. (the "LLC Act"), and the Issuer Limited Liability Company Agreement,
the Bankruptcy (as defined in the Issuer Limited Liability Company
Agreement) or dissolution of the Seller will not, by itself, cause the Bond
Issuer to be dissolved or its affairs to be wound up.
6. While, under the LLC Act, on application to a court of competent
jurisdiction, a judgment creditor of the Seller may be able to charge the
Seller's share of any profits and losses of the Bond Issuer and the Seller's
right to receive distributions of the Bond Issuer's assets ("JCP&L's
Interest"), and the court may appoint a receiver of the share of the
distributions due or to become due to the Seller in respect of the Bond
Issuer, the receiver shall have only the rights of an assignee of JCP&L's
Interest. Under the LLC Act, no creditor of the Seller shall have any right
to obtain possession of, or otherwise exercise legal or equitable remedies
with respect to, the property of the Bond Issuer. Thus, under the LLC Act, a
judgment creditor of the Seller may not satisfy its claims against the
Seller by asserting a claim against the assets of the Bond Issuer.
7. Under the LLC Act, (i) the Bond Issuer is a separate legal entity and (ii)
the existence of the Bond Issuer as a separate legal entity shall continue
until the cancellation of the Issuer Certificate of Formation.
8. Under the LLC Act and the Issuer Limited Liability Company Agreement, the
Bond Issuer has all necessary limited liability company power and authority
to execute, deliver and perform its obligations under the Transaction
Documents, and to own, lease or operate its properties and conduct its
business, all as described in the Final Prospectus and the Registration
Statement.
9. Under the LLC Act and the Issuer Limited Liability Company Agreement, the
execution and delivery of the Transaction Documents, and the consummation by
the Bond Issuer of the transactions contemplated thereby, have been duly
authorized by all necessary limited liability company action on the part of
the Bond Issuer.
10. Under the LLC Act and the Issuer Limited Liability Company Agreement, the
issuance of the Bonds has been duly authorized by all necessary limited
liability company action on the part of the Bond Issuer.
11. We have reviewed the statements made in the Final Prospectus under the
caption "JCP&L Transition Funding LLC, The Issuer" and, insofar as it
contains statements of Delaware law, such statements are fairly presented.
12. The issue and sale of the Bonds by the Bond Issuer, the execution and
delivery by the Bond Issuer of each of the Underwriting Agreement and the
Basic Documents, the performance by the Bond Issuer of its obligations
hereunder and thereunder, and the performance by the Bond Issuer of its
obligations under the Issuer Limited Liability Company Agreement and the
Issuer Certificate of Formation, each in accordance with its terms, do not
(i) conflict with, result in any breach of any of the terms or provisions
of, or constitute (with or without notice or lapse of time) a default under,
the Issuer Certificate of Formation or the Issuer Limited Liability Company
Agreement, (ii) require the consent or approval of, the giving of notice to,
the registration with, or the taking of any other action with respect to,
any (A) court of the State of Delaware, (B) governmental or regulatory
authority of the State of Delaware or (C) agency of the State of Delaware,
other than any such approvals, notices or actions which have been obtained,
made or taken, or (iii) violate any law of the State of Delaware.
13. After due inquiry on June 10, 2002, limited to, and solely to the extent
disclosed thereupon, court dockets for active cases of the Court of Chancery
of the State of Delaware in and for New Castle County, Delaware, of the
Superior Court of the State of Delaware in and for New Castle County,
Delaware, of the United States District Court sitting in the State of
Delaware, and of the United States Bankruptcy Court sitting in the State of
Delaware, we are not aware of any legal or governmental proceeding pending
against the Bond Issuer.