BGS BONDABLE TRANSITION PROPERTY SALE AGREEMENT

Transition Agreement

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BGS BONDABLE TRANSITION | PSE&G TRANSITION FUNDING II LLC | PUBLIC SERVICE ELECTRIC AND GAS COMPANY

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Title: BGS BONDABLE TRANSITION PROPERTY SALE AGREEMENT
Governing Law: New Jersey Date: 10/7/2005

Exhibit 10.1

BGS BONDABLE TRANSITION PROPERTY SALE AGREEMENT

between

PSE&G TRANSITION FUNDING II LLC

Issuer

and

PUBLIC SERVICE ELECTRIC AND GAS COMPANY

Seller

Dated as of September 23, 2005

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TABLE OF CONTENTS

Page

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ARTICLE I

DEFINITIONS

Section 1.1. Definitions................................................................................... 1

Section 1.2. Other Definitional Provisions................................................................. 1

ARTICLE II

CONVEYANCE OF TRANSFERRED BGS BONDABLE TRANSITION PROPERTY

Section 2.1. Conveyance of Initial Transferred BGS Bondable Transition Property............................ 2

Section 2.2. Conditions to Conveyance of BGS Bondable Transition Property.................................. 3

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLER

Section 3.1. Organization and Good Standing................................................................ 5

Section 3.2. Due Qualification............................................................................. 5

Section 3.3. Power and Authority........................................................................... 5

Section 3.4. Binding Obligation............................................................................ 5

Section 3.5. No Violation.................................................................................. 5

Section 3.6. No Proceedings................................................................................ 5

Section 3.7. Approvals..................................................................................... 6

Section 3.8. The Transferred BGS Bondable Transition Property.............................................. 6

Section 3.9. Solvency...................................................................................... 9

ARTICLE IV

COVENANTS OF THE SELLER

Section 4.1. Seller's Existence............................................................................ 9

Section 4.2. No Liens or Conveyances....................................................................... 9

Section 4.3. Use of Proceeds............................................................................... 9

Section 4.4. Delivery of Collections....................................................................... 9

Section 4.5. Notice of Liens............................................................................... 10

Section 4.6. Compliance with Law........................................................................... 10

Section 4.7. Covenants Related to Transferred BGS Bondable Transition Property............................. 10

Section 4.8. Protection of Title........................................................................... 11

Section 4.9. Taxes......................................................................................... 12

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TABLE OF CONTENTS

(continued)

Page

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ARTICLE V

ADDITIONAL UNDERTAKINGS OF THE SELLER

Section 5.1. Liability of the Seller; Indemnities.......................................................... 12

Section 5.2. Merger or Consolidation of, or Assumption of the Obligations of, the Seller................... 13

Section 5.3. Limitation on Liability of the Seller and Others.............................................. 14

ARTICLE VI

MISCELLANEOUS PROVISIONS

Section 6.1. Amendment..................................................................................... 15

Section 6.2. Notices....................................................................................... 16

Section 6.3. Assignment by Seller.......................................................................... 17

Section 6.4. Assignment to Trustee......................................................................... 17

Section 6.5. Limitations on Rights of Others............................................................... 17

Section 6.6. Severability.................................................................................. 17

Section 6.7. Separate Counterparts......................................................................... 17

Section 6.8. Headings...................................................................................... 17

Section 6.9. Governing Law................................................................................. 17

Section 6.10. Nonpetition Covenant......................................................................... 17

EXHIBIT A - Bill of Sale.................................................................................. A-1

EXHIBIT B - Opinion of Counsel............................................................................ B-1

EXHIBIT C - Opinion of Counsel............................................................................ C-1

APPENDIX A - Master Definitions

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BGS BONDABLE TRANSITION PROPERTY SALE AGREEMENT, dated as of

September 23, 2005, by and between PSE&G TRANSITION FUNDING II LLC, a Delaware

limited liability company, as issuer (the "Issuer"), and PUBLIC SERVICE

ELECTRIC AND GAS COMPANY, a New Jersey corporation, as seller hereunder (in

such capacity, the "Seller").

W I T N E S S E T H:

WHEREAS the Issuer desires to purchase from time to time BGS Bondable

Transition Property created pursuant to the Competition Act and the Financing

Order;

WHEREAS the Seller is willing to sell BGS Bondable Transition

Property to the Issuer;

WHEREAS the Issuer, in order to finance the purchase of the

Transferred BGS Bondable Transition Property, will from time to time issue BGS

Transition Bonds under the Indenture; and

WHEREAS the Issuer, to secure its obligations under the BGS

Transition Bonds and the Indenture, will pledge its right, title and interest

in, to and under the Transferred BGS Bondable Transition Property to the

Trustee for the benefit of the BGS Transition Bondholders.

NOW, THEREFORE, in consideration of the premises and the mutual

covenants herein contained and other good and valuable consideration, the

receipt and sufficiency of which are hereby acknowledged, and intending to be

legally bound hereby, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1. Definitions. Capitalized terms used herein and not

otherwise defined herein have the meanings assigned to them in Appendix A

hereto.

Section 1.2. Other Definitional Provisions.

(a) "Agreement" means this BGS Bondable Transition Property Sale

Agreement, as the same may be amended, supplemented or otherwise modified from

time to time.

(b) Non-capitalized terms used herein which are defined in the

Competition Act, as the context requires, have the meanings assigned to such

terms in the Competition Act, but without giving effect to amendments to the

Competition Act after the date hereof which have a material adverse effect on

the Issuer or the BGS Transition Bondholders.

when used in any certificate or other document made or delivered pursuant

hereto unless otherwise defined therein.

(d) The words "hereof," "herein," "hereunder" and words of similar

import when used in this Agreement refer to this Agreement as a whole and not

to any particular provision of this Agreement; Section, Schedule and Exhibit

references contained in this Agreement are

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references to Sections, Schedules and Exhibits in or to this Agreement unless

otherwise specified; and the term "including" means "including without

limitation."

(e) The definitions contained in this Agreement are applicable to the

singular as well as the plural forms of such terms.

ARTICLE II

CONVEYANCE OF TRANSFERRED BGS BONDABLE TRANSITION PROPERTY

Section 2.1. Conveyance of Initial Transferred BGS Bondable

Transition Property.

(a) In consideration of the Issuer's payment to or upon the order of

the Seller of $102,700,000, net of the underwriting discount and the original

issue discount for the BGS Transition Bonds in the aggregate amount of

$520,479.25, or $102,179,520.75 (the "Initial Purchase Price") by wire

transfer of funds immediately available on the date hereof to Seller's account

no. 5000000016439, Attn: CT-2800 for further credit to PSE&G Release Fund at

Wachovia Bank, National Association, routing transit ABA# 053000219, subject

to the conditions specified in Section 2.2, the Seller does hereby irrevocably

sell, transfer, assign and otherwise convey to the Issuer, without recourse

(subject to the obligations of the Seller herein), all right, title and

interest of the Seller in, to and under the Initial Transferred BGS Bondable

Transition Property identified in the Bill of Sale delivered pursuant to

Section 2.2(a) on or prior to the Initial Transfer Date (such sale, transfer,

assignment and conveyance of the Initial Transferred BGS Bondable Transition

Property to include, to the fullest extent permitted by the Competition Act,

the New Jersey UCC and the Delaware UCC, the assignment of all revenues,

collections, claims, rights, payments, money and proceeds of or arising from

the BGS Transition Bond Charges related to the Initial Transferred BGS

Bondable Transition Property, as the same may be adjusted from time to time).

Such sale, transfer, assignment and conveyance of the Initial Transferred BGS

Bondable Transition Property is hereby expressly stated to be a sale or other

absolute transfer and, pursuant to Section 23.a. of the Competition Act, shall

constitute a sale or other absolute transfer of all of the Seller's right,

title and interest, in, to and under and not a borrowing secured by, the

Initial Transferred BGS Bondable Transition Property. The preceding sentence

is the statement referred to in Section 23.a. of the Competition Act. The

Seller agrees and confirms that upon payment of the Initial Purchase Price and

the execution and delivery of this Agreement and the related Bill of Sale, the

Seller shall have no right, title or interest in, to or under the Initial

Transferred BGS Bondable Transition Property.

(b) Subject to the conditions specified in Section 2.2, the Issuer

does hereby purchase the Initial Transferred BGS Bondable Transition Property

from the Seller for the consideration set forth in paragraph (a) above.

purchase price for the Initial Transferred BGS Bondable Transition Property

sold pursuant to this Agreement is equal to its fair market value at the time

of sale.

(d) The Seller and the Issuer further agree that from time to time

the Seller may offer to sell, and the Issuer may purchase, Subsequent

Transferred BGS Bondable Transition Property

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as of Subsequent Transfer Dates, subject to the conditions specified in

Section 2.2, in exchange for consideration to be agreed upon (the "Subsequent

Purchase Price"). The Seller and the Issuer hereby agree that each such sale,

transfer, assignment and conveyance of any Subsequent Transferred BGS Bondable

Transition Property shall include, to the fullest extent permitted by the

Competition Act, the New Jersey UCC and the Delaware UCC, the assignment of

all revenues, collections, claims, rights, payments, money and proceeds of or

arising from the BGS Transition Bond Charges related to the Subsequent

Transferred BGS Bondable Transition Property, as the same may be adjusted from

time to time. Such sale, transfer, assignment and conveyance of the Subsequent

Transferred BGS Bondable Transition Property is hereby expressly stated to be

a sale or other absolute transfer and, pursuant to Section 23.a. of the

Competition Act, shall constitute a sale or other absolute transfer of all of

the Seller's right, title and interest, in, to and under and not a borrowing

secured by, the Subsequent Transferred BGS Bondable Transition Property. The

preceding sentence is the statement referred to in Section 23.a. of the

Competition Act. The Seller agrees and confirms that after giving effect to

any sale contemplated by this paragraph (d) and the execution and delivery of

the related Bill of Sale, it shall have no right, title or interest in, to or

under the Subsequent Transferred BGS Bondable Transition Property.

(e) Notwithstanding the foregoing, in the event that any sale,

transfer, assignment and conveyance of any Transferred BGS Bondable Transition

Property is determined by a court of competent jurisdiction not to be a true

and absolute sale as contemplated by the parties hereto and by the Competition

Act, then such sale, transfer, assignment and conveyance shall be treated as a

pledge of such Transferred BGS Bondable Transition Property and the Seller

shall be deemed to have granted, and does hereby grant, as of the date hereof

a security interest to the Issuer in such Transferred BGS Bondable Transition

Property to secure a payment obligation incurred by the Seller in the amount

paid by the Issuer for the Transferred BGS Bondable Transition Property.

Section 2.2. Conditions to Conveyance of BGS Bondable Transition

Property. The obligation of the Seller to sell, and the obligation of the

Issuer to purchase BGS Bondable Transition Property upon any Transfer Date

shall be subject to and conditioned upon the satisfaction or waiver of each of

the following conditions:

(a) on or prior to the Transfer Date, the Seller shall

deliver to the Issuer a duly executed Bill of Sale identifying the

BGS Bondable Transition Property to be conveyed as of that date,

substantially in the form of Exhibit A hereto;

(b) as of the Transfer Date, no breach by the Seller of its

representations, warranties or covenants in this Agreement shall

exist and the Seller shall have delivered to the Issuer and the

Trustee an Officers' Certificate to such effect and no Servicer

Default shall have occurred and be continuing;

(i) the Issuer shall have sufficient funds

available to pay the purchase price for the Transferred BGS

Bondable Transition Property to be conveyed on such date,

and

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(ii) all conditions set forth in the Indenture to

the issuance of one or more Series of BGS Transition Bonds

intended to provide such funds shall have been satisfied or

waived;

(d) on or prior to the Transfer Date, the Seller shall have

taken all actions required under the Competition Act, the Financing

Order, the New Jersey UCC and the Delaware UCC, including, without

limitation, filings under the New Jersey UCC and the Delaware UCC, to

transfer to the Issuer ownership of the Transferred BGS Bondable

Transition Property to be conveyed on such date, free and clear of

all Liens other than Liens created by the Issuer pursuant to the

Indenture and to perfect such transfer and the Issuer shall have

taken any action required for the Issuer to grant to the Trustee a

first priority perfected security interest in the Collateral and

maintain such security interest as of such date, including, without

limitation, filings under the New Jersey UCC and the Delaware UCC;

(e) in the case of any sale of Subsequent Transferred BGS

Bondable Transition Property only, the Seller shall have provided the

Issuer and each Rating Agency with a notice specifying the Subsequent

Transfer Date for the Subsequent Transferred BGS Bondable Transition

Property not later than 10 days prior to the Subsequent Transfer

Date;

(f) the Seller shall have delivered to each Rating Agency

and to the Issuer:

(i) an Opinion of Counsel to the Seller with

respect to the transfer of the Transferred BGS Bondable

Transition Property then being conveyed to the Issuer

substantially in the form of Exhibit B hereto, and

(ii) an Opinion of Counsel to the Seller,

substantially in the form of Exhibit C hereto;

(g) the Seller shall have delivered to the Trustee and the

Issuer an Officers' Certificate confirming the satisfaction of each

condition precedent specified in this Section 2.2;

(h) with respect to any Subsequent Sale, the Seller shall

have taken any action necessary in order for the Rating Agency

Condition to have been satisfied; and

(i) the Seller shall have received the Initial Purchase

Price or the Subsequent Purchase Price, as applicable, in funds

immediately available on the applicable Transfer Date.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLER

As of the Transfer Date, the Seller makes the following

representations and warranties on which the Issuer has relied and will rely in

acquiring Transferred BGS Bondable Transition Property. The following

representations and warranties are made under existing law as in effect

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as of the Transfer Date. The Seller shall not be in breach of any

representation or warranty herein as a result of a change in law occurring

after the Transfer Date. The representations and warranties shall survive the

sale of Transferred BGS Bondable Transition Property to the Issuer and the

pledge thereof to the Trustee pursuant to the Indenture.

Section 3.1. Organization and Good Standing. The Seller is a

corporation duly organized and in good standing under the laws of the State of

New Jersey, with corporate power and authority to own its properties and

conduct its business as currently owned or conducted.

Section 3.2. Due Qualification. The Seller is duly qualified to do

business as a foreign corporation in good standing, and has obtained all

necessary licenses and approvals, in all jurisdictions in which the ownership

or lease of property or the conduct of its business requires such

qualifications, licenses or approvals (except where the failure to so qualify

and to obtain such licenses and approvals would not be reasonably likely to

have a material adverse effect on the Seller's business, operations, assets,

revenues, properties or prospects).

Section 3.3. Power and Authority. The Seller has the corporate power

and authority to execute and deliver this Agreement and to carry out its

terms; the Seller has full corporate power and authority to own the BGS

Bondable Transition Property and sell and assign the Transferred BGS Bondable

Transition Property to the Issuer, and the Seller has duly authorized such

sale and assignment to the Issuer by all necessary corporate action; and the

execution, delivery and performance of this Agreement has been duly authorized

by the Seller by all necessary corporate action.

Section 3.4. Binding Obligation. This Agreement constitutes a legal,

valid and binding obligation of the Seller enforceable against the Seller in

accordance with its terms subject to bankruptcy, receivership, insolvency,

reorganization, moratorium or other laws affecting creditors' rights generally

from time to time in effect and to general principles of equity (regardless of

whether considered in a proceeding in equity or at law).

Section 3.5. No Violation. The consummation of the transactions

contemplated by this Agreement and the fulfillment of the terms hereof do not

conflict with, result in any breach of any of the terms and provisions of, or

constitute (with or without notice or lapse of time) a default under, the

articles of incorporation or by-laws of the Seller, or any indenture,

agreement or other instrument to which the Seller is a party or by which it is

bound; nor result in the creation or imposition of any Lien upon any of its

properties pursuant to the terms of any such indenture, agreement or other

instrument (except as contemplated by the Basic Documents and as set forth in

Section 2.1(e) hereof); nor violate any law or any order, rule or regulation

applicable to the Seller of any court or of any federal or State regulatory

body, administrative agency or other governmental instrumentality having

jurisdiction over the Seller or its properties. The BGS Bondable Transition

Property is not subject to any Lien thereon created by the indenture, dated

August 1, 1924 (as amended and supplemented by 95 supplemental indentures), of

Public Service Electric and Gas Company to Fidelity Union Trust Company, as

successor trustee.

Section 3.6. No Proceedings. Except as disclosed in writing by the

Seller to the Issuer, there are no proceedings or investigations pending or,

to the Seller's best knowledge, threatened,

<PAGE>

before any court, federal or State regulatory body, administrative agency or

other governmental instrumentality having jurisdiction over the Seller or its

properties:

(a) asserting the invalidity of the Basic Documents, the BGS

Transition Bonds, the Competition Act or the Financing Order;

(b) seeking to prevent the issuance of the BGS Transition

Bonds or the consummation of any of the transactions contemplated by

the Basic Documents or the BGS Transition Bonds;

Bonds as debt of the Seller for federal and State income, gross

receipts or franchise tax purposes; or

(d) seeking any determination or ruling that could

reasonably be expected to materially and adversely affect the

performance by the Seller of its obligations under, or the validity

or enforceability of, the Basic Documents or the BGS Transition

Bonds.

Section 3.7. Approvals. Except for the filing of financing statements

and continuation statements under the New Jersey UCC and the Delaware UCC, no

approval, authorization, consent, order or other action of, or filing with,

any court, federal or State regulatory body, administrative agency or other

governmental instrumentality is required in connection with the execution and

delivery by the Seller of this Agreement, the performance by the Seller of the

transactions contemplated hereby or the fulfillment by the Seller of the terms

hereof, except those that have been obtained or made. The Pricing Advice

Certificate (as defined in the Financing Order) has been filed in accordance

with the Financing Order and is final and incontestable in accordance with its

terms.

Section 3.8. The Transferred BGS Bondable Transition Property.

(a) Information. All information provided by the Seller to the Issuer

with respect to the Transferred BGS Bondable Transition Property is correct in

all material respects.

(b) Effect of Transfer. Each sale, transfer, assignment and

conveyance herein contemplated constitutes a sale or other absolute transfer,

of all right, title and interest of the Seller in, to and under the

Transferred BGS Bondable Transition Property from the Seller to the Issuer;

upon execution and delivery of this Agreement and the related Bill of Sale,

the Seller will have no right, title or interest in, to or under the

Transferred BGS Bondable Transition Property; and the Transferred BGS Bondable

Transition Property would not be part of the estate of the Seller as debtor in

the event of the filing of a bankruptcy petition by or against the Seller

under any bankruptcy law.

BGS Bondable Transition Property sold to the Issuer on the Transfer Date; and

the Transferred BGS Bondable Transition Property will have been validly sold,

assigned, transferred and conveyed to the Issuer free and clear of all Liens

other than Liens created by the Issuer pursuant to the Indenture. All actions

or filings, including filings with the New Jersey Division of Revenue/Office

of Commercial Recording under the New Jersey UCC and the Delaware UCC

necessary in any jurisdiction to give the Issuer a valid first priority

perfected ownership interest in the Transferred

<PAGE>

BGS Bondable Transition Property and to grant to the Trustee a first priority

perfected security interest in the Transferred BGS Bondable Transition

Property, free and clear of all Liens of the Seller or anyone else have been

taken or made.

(d) Financing Order Irrevocable; Process Valid; No Litigation; Etc.

(i) The Financing Order as issued on July 12, 2005 has been

issued by the BPU in accordance with the Competition Act, and such

order and the process by which it was issued comply with all

applicable laws, rules and regulations, including but not limited to

the due process requirements of the United States Constitution and

the New Jersey Constitution. The Financing Order has become effective

pursuant to the Competition Act and is and as of the date of issuance

of any BGS Transition Bonds will be in full force and effect and

final and non-appealable.

(ii) As of the Series Issuance Date, the BGS Transition

Bonds of the related Series will be entitled to the protections

provided by the Competition Act and, in accordance with the

Competition Act, the Financing Order and the BGS Transition Bond

Charge authorized therein have become irrevocable and each Advice

Letter is final and uncontestable.

(A) Under the Competition Act, the State of New

Jersey may not limit, alter or impair the Transferred BGS

Bondable Transition Property or other rights vested in the

Seller, the Issuer, the Trustee or the BGS Transition

Bondholders pursuant to the Financing Order until the BGS

Transition Bonds are fully paid and discharged, or in any

way limit, alter, impair or reduce the value or amount of

the Transferred BGS Bondable Transition Property; and

(B) under the Contract Clauses of the United States

Constitution and the New Jersey Constitution, the State of

New Jersey, including the BPU, could not constitutionally

take any action of a legislative character, including the

repeal or amendment of the Competition Act, which would

substantially limit, alter or impair the BGS Bondable

Transition Property or other rights vested in the BGS

Transition Bondholders pursuant to the Financing Order, or

substantially limit, alter, impair or reduce the value or

amount of the BGS Bondable Transition Property, unless such

action is a reasonable exercise of the State of New Jersey's

sovereign powers and of a character reasonable and

appropriate to the public purpose justifying such action and

under the Takings Clauses of the United States and New

Jersey Constitutions, the State of New Jersey could not

repeal or amend the Competition Act or take any other action

in contravention of its pledge and agreement quoted above

without paying just compensation to the BGS Transition

Bondholders, as determined by a court of competent

jurisdiction, if doing so would constitute a permanent

appropriation of a substantial property interest of the BGS

Transition Bondholders in the BGS Bondable Transition

Property and deprive the BGS Transition Bondholders of their

reasonable expectations arising from their investments in

the BGS Transition Bonds. There is no assurance, however,

that, even if a court were to award just compensation, it

would be

<PAGE>

sufficient to pay the full amount of principal of and

interest on the BGS Transition Bonds.

(iii) There is no order by any court providing for

the revocation, alteration, limitation or other impairment

of the Competition Act, the Financing Order, any Advice

Letter, the Transferred BGS Bondable Transition Property or

the BGS Transition Bond Charge or any rights arising under

any of them or to enjoin the performance of any obligations

under the Financing Order.

(iv) No other approval, authorization, consent,

order or other action of, or filing with, any court, federal

or State regulatory body, administrative agency or other

governmental instrumentality is required in connection with

the creation or transfer of the Transferred BGS Bondable

Transition Property, except those that have been obtained or

made.

(v) Except as disclosed by the Seller to the Issuer

in writing, there are no proceedings or investigations

pending, or to the best of the Seller's knowledge,

threatened before any court, federal or State regulatory

body, administrative agency or other governmental

instrumentality having jurisdiction over the Seller or the

Issuer or their respective properties challenging the

Competition Act or the Financing Order.

(e) Assumptions. The assumptions used in calculating the BGS

Transition Bond Charge in any Advice Letter delivered by the Issuer to the BPU

pursuant to the Financing Order are reasonable and made in good faith.

(f) Creation of Transferred BGS Bondable Transition Property.

(i) For purposes of the Competition Act, the New Jersey UCC

and the Delaware UCC, the Transferred BGS Bondable Transition

Property constitutes presently existing property;

(ii) the BGS Bondable Transition Property consists of (A)

the irrevocable right of the Seller to charge, collect and receive,

and be paid from collections of, the BGS Transition Bond Charge in

the amount necessary to provide for the full recovery of the Bondable

Stranded Costs which have been determined to be recoverable in the

Financing Order and (B) all rights of the Seller under the Financing

Order, including, without limitation, all rights to obtain periodic

adjustments of the BGS Transition Bond Charge pursuant to the

Competition Act, and (C) all revenues, collections, payments, money

and proceeds arising under, or with respect to, all of the foregoing;

(iii) the BGS Bondable Transition Property is not subject to

any lien created by a previous indenture; and

(iv) the Financing Order, including the right to collect the

BGS Transition Bond Charge, has become irrevocable.

<PAGE>

(g) Prospectus. As of the date hereof, the information describing the

Seller under the caption "The Seller and Servicer of the BGS Bondable

Transition Property" in the Prospectus is correct in all material respects.

Section 3.9. Solvency. After giving effect to the sale of any

Transferred BGS Bondable Transition Property hereunder, the Seller:

(a) is solvent and expects to remain solvent;

(b) is adequately capitalized to conduct its business and

affairs considering its size and the nature of its business and

intended purposes;

business for which its remaining property represents an unreasonably

small capital;

(d) reasonably believes that it will be able to pay its

debts as they come due; and

(e) is able to pay its debts as they mature and does not

intend to incur, or believes that it will incur, indebtedness that it

will not be able to repay at its maturity.

ARTICLE IV

COVENANTS OF THE SELLER

Section 4.1. Seller's Existence. So long as any of the BGS Transition

Bonds are outstanding, the Seller shall keep in full force and effect its

existence as a corporation and remain in good standing under the laws of the

jurisdiction of its organization, and shall obtain and preserve its

qualification to do business in each jurisdiction in which such qualification

is or will be necessary to protect the validity and enforceability of this

Agreement and each other instrument or agreement to which the Seller is a

party necessary to the proper administration of this Agreement and the

transactions contemplated hereby.

Section 4.2. No Liens or Conveyances. Except for the conveyances

hereunder, the Seller shall not sell, pledge, assign or transfer to any other

Person, or grant, create, incur, assume or suffer to exist any Lien on, any of

the Transferred BGS Bondable Transition Property, whether now existing or

hereafter created, or any interest therein. The Seller shall not at any time

assert any Lien against or with respect to any Transferred BGS Bondable

Transition Property, and shall defend the right, title and interest of the

Issuer and the Trustee, as assignee of the Issuer, in, to and under the

Transferred BGS Bondable Transition Property, whether now existing or

hereafter created, against all claims of third parties claiming through or

under the Seller.

Section 4.3. Use of Proceeds. The Seller shall use proceeds from the

sale of the BGS Bondable Transition Property in accordance with the Financing

Order and the Competition Act.

Section 4.4. Delivery of Collections. If the Seller receives

collections of the BGS Transition Bond Charge with respect to the Transferred

BGS Bondable Transition Property or the proceeds thereof, the Seller shall pay

the Servicer all payments received by the Seller in

<PAGE>

respect thereof as soon as practicable after receipt thereof by the Seller,

but in no event later than two Business Days after such receipt.

Section 4.5. Notice of Liens. The Seller shall notify the Issuer and

the Trustee promptly after becoming aware of any Lien on any Transferred BGS

Bondable Transition Property other than the conveyances hereunder or under the

Indenture.

Section 4.6. Compliance with Law. The Seller shall comply with its

organizational or governing documents and all laws, treaties, rules,

regulations and determinations of any governmental instrumentality applicable

to the Seller, except to the extent that failure to so comply would not

adversely affect the Issuer's or the Trustee's interests in the Transferred

BGS Bondable Transition Property or under any of the Basic Documents or the

Seller's performance of its obligations hereunder.

Section 4.7. Covenants Related to Transferred BGS Bondable Transition

Property.

(a) So long as any of the BGS Transition Bonds are outstanding, the

Seller shall:

(i) treat the BGS Transition Bonds as debt of the Issuer and

not of the Seller, except for financial accounting or tax reporting

purposes;

(ii) disclose in its financial statements that it is not the

owner of the Transferred BGS Bondable Transition Property and that

the assets of the Issuer are not available to pay creditors of the

Seller or any of its Affiliates (other than the Issuer);

(iii) disclose the effects of all transactions between the

Seller and the Issuer in accordance with generally accepted

accounting principles; and

(iv) not own or purchase any BGS Transition Bonds.

(b) The Seller agrees that upon the sale by the Seller of the

Transferred BGS Bondable Transition Property to the Issuer pursuant to this

Agreement:

(i) to the fullest extent permitted by law, including the

Competition Act and applicable BPU Regulations, the Issuer shall have

all of the rights originally held by the Seller with respect to the

Transferred BGS Bondable Transition Property, including the right to

collect any amounts payable by any Customer or Third Party in respect

of such Transferred BGS Bondable Transition Property, notwithstanding

any objection or direction to the contrary by the Seller; and

(ii) any payment by any Customer or Third Party to the

Issuer shall discharge such Customer's or such Third Party's

obligations in respect of such Transferred BGS Bondable Transition

Property to the extent of such payment, notwithstanding any objection

or direction to the contrary by the Seller.

<PAGE>

(i) in all proceedings relating directly or indirectly to

the Transferred BGS Bondable Transition Property the Seller shall:

(A) affirmatively certify and confirm that it has sold the

Transferred BGS Bondable Transition Property to the Issuer (other

than for financial accounting or tax reporting purposes), and (B) not

make any statement or reference in respect of the Transferred BGS

Bondable Transition Property that is inconsistent with the ownership

thereof by the Issuer (other than for financial accounting or tax

reporting purposes); and

(ii) the Seller shall not take any action in respect of the

Transferred BGS Bondable Transition Property except as contemplated

by the Basic Documents.

Section 4.8. Protection of Title. The Seller shall execute and file

such filings, and cause to be executed and filed such filings, and take all

such actions, all in such manner and in such places as may be required by law

fully to preserve, maintain, protect and perfect the interests of the Issuer

and the Trustee in the Transferred BGS Bondable Transition Property, including

all filings required under the New Jersey UCC and the Delaware UCC relating to

the transfer of the ownership of the Transferred BGS Bondable Transition

Property by the Seller to the Issuer and the pledge of the Transferred BGS

Bondable Transition Property by the Issuer to the Trustee. The Seller shall

deliver (or cause to be delivered) to the Issuer and the Trustee file-stamped

copies of, or filing receipts for, any document filed as provided above, as

soon as available following such filing. The Seller shall institute any action

or proceeding necessary to compel the performance by the BPU or the State of

New Jersey of any of their obligations or duties under the Competition Act or

the Financing Order, and the Seller agrees to take such legal or

administrative actions, including defending against or instituting and

pursuing legal actions and appearing or testifying at hearings or similar

proceedings, in each case as may be reasonably necessary:

(a) to protect the Issuer and the BGS Transition Bondholders

from claims, State actions or other actions or proceedings of third

parties which, if successfully pursued, would result in a breach of

any representation set forth in Article III; or

(b) to block or overturn any attempts to cause a repeal of,

modification of or supplement to the Competition Act, the Financing

Order, any Advice Letter, or the rights of BGS Transition Bondholders

by legislative enactment or constitutional amendment that would be

adverse to the Issuer, the Trustee or the BGS Transition Bondholders.

The costs of any such actions or proceedings shall be reimbursed by

the Issuer to the Seller from amounts on deposit in the Collection Account as

an Operating Expense. The Seller's obligations pursuant to this Section 4.8

shall survive and continue notwithstanding that the payment of Operating

Expenses pursuant to the Indenture may be delayed (it being understood that

the Seller may be required to advance its own funds to satisfy its obligation

hereunder). The Seller irrevocably, and as a power coupled with an interest,

designates the Issuer as its agent and attorney-in-fact to execute any filings

of financing statements, continuation statements or other instruments required

of the Issuer pursuant to this Section, it being understood that the Issuer

shall have no obligation to execute any such instruments.

<PAGE>

Section 4.9. Taxes. So long as any of the BGS Transition Bonds are

outstanding, the Seller shall, and shall cause each of its subsidiaries to,

pay all material taxes, assessments and governmental charges imposed upon it

or any of its properties or assets or with respect to any of its franchises,

business, income or property before any penalty accrues thereon if the failure

to pay any such taxes, assessments and governmental charges would, after any

applicable grace periods, notices or other similar requirements, result in a

Lien on the Transferred BGS Bondable Transition Property; provided that no

such tax need be paid if the Seller or one of its Affiliates is contesting the

same in good faith by appropriate proceedings promptly instituted and

diligently conducted and if the Seller or such Affiliate has established

appropriate reserves as shall be required in conformity with generally

accepted accounting principles.

ARTICLE V

ADDITIONAL UNDERTAKINGS OF THE SELLER

The Seller hereby undertakes the obligations contained in this

Article V and agrees that the Issuer shall have the right to assign its rights

with respect to such obligations to the Trustee for the benefit of the BGS

Transition Bondholders.

Section 5.1. Liability of the Seller; Indemnities.

(a) The Seller shall be liable in accordance herewith only to the

extent of the obligations specifically undertaken by the Seller under this

Agreement.

(b) The Seller shall indemnify the Issuer and the Trustee, for itself

and on behalf of the BGS Transition Bondholders, and each of their respective

officers, directors, managers, employees and agents for, and defend and hold

harmless each such Person from and against, any and all taxes (other than any

taxes imposed on BGS Transition Bondholders solely as a result of their

ownership of BGS Transition Bonds) that may at any time be imposed on or

asserted against any such Person under existing law as of any Transfer Date as

a result of the sale and assignment of the Transferred BGS Bondable Transition

Property by the Seller to the Issuer, the acquisition or holding of the

Transferred BGS Bondable Transition Property by the Issuer or the issuance and

sale by the Issuer of the BGS Transition Bonds, including any sales, gross

receipts, general corporation, personal property, privilege, franchise or

license taxes, but excluding any taxes imposed as a result of a failure of

such person to properly withhold or remit taxes imposed with respect to

payments on any BGS Transition Bond, it being understood that the BGS

Transition Bondholders shall be entitled to enforce their rights against the

Seller under this Section 5.1(b) solely through a cause of action brought for

their benefit by the Trustee.

and on behalf of the BGS Transition Bondholders, and each of their respective

officers, directors, managers, employees and agents for, and defend and hold

harmless each such Person from and against, any and all amounts of principal

of and interest on the BGS Transition Bonds not paid when due

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