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Exhibit 10.1
TRANSITION PROPERTY SALE AGREEMENT
between
CENTERPOINT ENERGY TRANSITION BOND COMPANY II, LLC
Issuer
and
CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC
Seller
Dated as of December 16, 2005
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TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS............................................................................
1
Section 1.01
Definitions................................................................
1
Section 1.02
Other Definitional
Provisions..............................................
1
ARTICLE II CONVEYANCE OF THE TRANSITION
PROPERTY.................................................
2
Section 2.01
Conveyance of the Transition
Property...................................... 2
Section 2.02
Conditions to Conveyance of the Transition
Property........................ 3
ARTICLE III REPRESENTATIONS AND WARRANTIES
OF SELLER............................................. 4
Section 3.01
Organization and Good
Standing............................................. 4
Section 3.02 Due
Qualification..........................................................
4
Section 3.03
Power and
Authority........................................................
4
Section 3.04
Binding
Obligation.........................................................
4
Section 3.05 No
Violation...............................................................
4
Section 3.06 No
Proceedings.............................................................
5
Section 3.07
Approvals..................................................................
5
Section 3.08 The
Transition
Property....................................................
5
Section 3.09
Solvency...................................................................
6
Section 3.10 The
Financing
Order........................................................
7
Section 3.11
State
Action...............................................................
7
Section 3.12 No
Court
Order.............................................................
8
Section 3.13
Approvals Concerning the Transition
Property............................... 8
Section 3.14
Assumptions................................................................
8
Section 3.15
Creation of the Transition
Property........................................ 8
Section 3.16
Prospectus.................................................................
9
Section 3.17
Nature of Representations and
Warranties................................... 9
ARTICLE IV COVENANTS OF THE
SELLER...............................................................
9
Section 4.01
Seller's
Existence.........................................................
9
Section 4.02 No
Liens or
Conveyances....................................................
9
Section 4.03
Delivery of
Collections....................................................
10
Section 4.04
Notice of
Liens............................................................
10
Section 4.05
Compliance With
Law........................................................
10
Section 4.06
Covenants Related to the Transition
Property............................... 10
Section 4.07
Protection of
Title........................................................
11
Section 4.08
Taxes......................................................................
12
Section 4.09
Filings Pursuant to Financing
Order........................................ 12
ARTICLE V ADDITIONAL UNDERTAKINGS OF
SELLER......................................................
12
Section 5.01 Liability of the Seller;
Indemnities....................................... 12
Section 5.02
Merger or Consolidation of, or Assumption of the Obligations of,
the Seller
14
Section 5.03
Limitation on Liability of the Seller And
Others........................... 16
ARTICLE VI MISCELLANEOUS
PROVISIONS..............................................................
16
Section 6.01
Amendment..................................................................
16
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Section 6.02
Notices....................................................................
17
Section 6.03
Assignment by the
Seller...................................................
18
Section 6.04
Assignment to the Indenture
Trustee........................................ 18
Section 6.05
Limitations on Rights of
Others............................................ 18
Section 6.06
Severability...............................................................
18
Section 6.07
Separate
Counterparts......................................................
18
Section 6.08
Headings...................................................................
19
Section 6.09
Governing
Law..............................................................
19
Section 6.10
Nonpetition
Covenants......................................................
19
APPENDIX A
DEFINITIONS
SCHEDULE 1
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TRANSITION
PROPERTY SALE AGREEMENT (this "Agreement") dated as of December
16, 2005, between CENTERPOINT ENERGY
TRANSITION BOND COMPANY II, LLC, a Delaware
limited liability company (the "Issuer"),
and CENTERPOINT ENERGY HOUSTON
ELECTRIC, LLC, a Texas limited liability
company, as seller (the "Seller").
WHEREAS,
the Issuer desires to purchase the Transition Property created
pursuant to the Texas Electric Choice Plan
and the Financing Order;
WHEREAS,
the Seller is willing to sell its rights and interests under
the
Financing Order to the Issuer whereupon
such rights and interests will become
the Transition Property;
WHEREAS,
the Issuer, in order to finance the purchase of the Transition
Property, will issue the Transition Bonds
under the Indenture; and
WHEREAS,
the Issuer, to secure its obligations under the Transition
Bonds
and the Indenture, will pledge its right,
title and interest in the Transition
Property and this Agreement to the
Indenture Trustee for the benefit of the
Transition Bondholders.
NOW,
THEREFORE, in consideration of the premises and the mutual
covenants
herein contained and intending to be
legally bound hereby, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
Section
1.01 Definitions. Capitalized terms used herein and not
otherwise
defined herein have the meanings assigned
to them in Appendix A to this
Agreement.
Section
1.02 Other Definitional Provisions.
(a) "Agreement" means this Transition Property Sale Agreement,
as
the same
may be amended and supplemented from time to time.
(b) Non-capitalized terms used herein which are defined in the
Texas
Electric
Choice Plan, as the context requires, have the meanings
assigned
to such
terms in the Texas Electric Choice Plan, but without giving
effect
to
amendments to the Texas Electric Choice Plan after the date
hereof
which have
a material adverse effect on the Issuer or the Transition
Bondholders.
(c) All terms defined in this Agreement shall have such defined
meanings
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 shall 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
references
to
Sections, Schedules and Exhibits in or to
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this
Agreement unless otherwise specified; and the term "including"
shall
mean
"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 THE TRANSITION PROPERTY
Section
2.01 Conveyance of the Transition Property.
(a) In consideration of the Issuer's payment to or upon the order
of
the Seller
of $1,837,990,612 (the "Purchase Price"), subject to the
satisfaction or waiver of the conditions specified in Section 2.02,
the
Seller
does hereby irrevocably sell, transfer, assign, set over and
otherwise
convey to the Issuer, without recourse (subject to the
obligations of the Seller herein) or warranty, except as set forth
herein,
all right,
title and interest of the Seller in, to and under the Financing
Order as
identified in the Bill of Sale delivered pursuant to Section
2.02(i) on
or prior to the Transfer Date whereupon such rights and
interests
under the Financing Order shall become the Transition Property
(such
sale, transfer, assignment, setting over and conveyance of the
Transition
Property to include, to the fullest extent permitted by the
Texas
Electric Choice Plan, the right to impose, collect and receive
the
Transition
Charges, as the same may be adjusted from time to time). Such
sale,
transfer, assignment, setting over and conveyance of the
Transition
Property
is hereby expressly stated to be a sale or other absolute
transfer
and, pursuant to Section 39.308 of the Texas Electric Choice
Plan
and other
applicable law, is a true sale and is not a secured transaction
and title,
legal and equitable, has passed to the Issuer. The preceding
sentence
is the statement referred to in Section 39.308 of the Texas
Electric
Choice Plan. The Seller agrees and confirms that upon payment
of
the
Purchase Price and the execution and delivery of this Agreement
and
the Bill
of Sale, the sale, transfer and assignment hereunder shall be
effective and the Seller
shall have no right, title or interest in, to or
under the
Transition Property.
(b) Subject to the satisfaction or waiver of conditions specified
in
Section
2.02, the Issuer does hereby purchase the Transition Property
from
the Seller
for the consideration set forth in paragraph (a) above.
(c) The Seller and the Issuer each acknowledge and agree that
the
purchase
price for the Transition Property sold pursuant to this
Agreement
is equal to its fair
market value at the time of sale.
(d) Notwithstanding the foregoing, in the event that the sale,
transfer,
assignment, setting over and conveyance of the Transition
Property
is determined by any court of competent jurisdiction not to be
a
true sale
as contemplated by the parties and as provided in Section
39.308
of the
Texas Electric Choice Plan, then such sale, transfer,
assignment,
setting
over and conveyance shall be treated as a pledge of and grant of
a
security
interest in the Transition Property under Section 39.309 of the
Texas
Electric
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Choice
Plan and under Articles 8 and 9 of the Uniform Commercial Code
as
enacted in
the State of Texas and each other applicable jurisdiction (the
"UCC"),
and the Seller shall be deemed to have granted, and does hereby
grant, as
of the date hereof, a security interest to the Issuer on behalf
of itself
and the Indenture Trustee in the Transition Property to secure
a
payment
obligation incurred by the Seller in the amount paid by the
Issuer
for the
Transition Property.
Section
2.02 Conditions to Conveyance of the Transition Property . The
obligation of the Seller to sell, and the
obligation of the Issuer to purchase
the Transition Property on the Transfer
Date shall be subject to and conditioned
upon the satisfaction or waiver of each of
the following conditions:
(i) on or prior to the Transfer Date, the Seller shall deliver
to
the Issuer
a duly executed Bill of Sale identifying the Transition
Property,
substantially in the form of Exhibit A hereto;
(ii) as of the Transfer Date, the representations and warranties
of
the Seller
in this Agreement shall be true and correct in all material
respects
and no material breach by the Seller of its covenants in this
Agreement
shall exist and the Seller shall have delivered to the Issuer
and the
Indenture Trustee an Officer's Certificate to such effect and
no
Servicer
Default shall have occurred and be continuing;
(iii) as of the Transfer Date:
(A) the Issuer shall have sufficient funds available to pay
the purchase price for
the Transition Property to be purchased on
such date, and
(B) all conditions set forth in the Indenture to the issuance
of the Transition Bonds intended to provide such funds shall
have
been satisfied or waived;
(iv) on or prior to the Transfer Date, the Seller shall have
taken
all
actions required under the Texas Electric Choice Plan, the
Financing
Order and
other applicable law for the Issuer to have ownership of the
Transition
Property, free and clear of all Liens other than Liens created
by the
Issuer pursuant to the Indenture; and the Issuer, or the
Servicer
on behalf
of the Issuer, shall have taken any action required for the
Issuer to
grant the Indenture Trustee a first priority perfected security
interest
in the Trust Estate and maintain such security interest as of
such date
(including all actions required under the Texas Electric Choice
Plan, the
Financing Order and the UCC);
(v) the Seller shall have delivered to each Rating Agency and to
the
Issuer any
Opinions of Counsel requested by the Rating Agencies;
(vi) the Seller shall have delivered to the Indenture Trustee
and
the Issuer an
Officer's Certificate confirming the satisfaction of each
relevant
condition precedent specified in this Section 2.02; and
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(vii) the Seller shall have received the Purchase Price in
funds
immediately available on the 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 the
Transition Property. The following
representations and warranties are made under
existing law as in effect 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,
including by means of legislative enactment,
constitutional amendment or voter
initiative. The representations and warranties
shall survive the sale of the Transition
Property to the Issuer and the pledge
thereof on the Transfer Date to the
Indenture Trustee pursuant to the Indenture.
Section
3.01 Organization and Good Standing. The Seller is a limited
liability company duly organized and in
good standing under the laws of the
State of Texas, with limited liability
company power and authority to own its
properties and to conduct its business as
currently owned or conducted.
Section
3.02 Due Qualification. The Seller is duly qualified to do
business as a foreign limited liability
company 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 or
obtain such licenses and approvals would
not be reasonably likely to have a
material adverse effect on the Seller's
business, operations, assets, revenues
or properties).
Section
3.03 Power and Authority. The Seller has the limited liability
company power and authority to obtain the
Financing Order and to execute and
deliver this Agreement and to carry out its
terms; the Seller has the limited
liability company power and authority to
own the rights and interests under the
Financing Order, and to sell and assign the
rights and interests under the
Financing Order to the Issuer, whereupon
(subject to the effectiveness of the
Issuance Advice Letter) such rights and
interests will become the Transition
Property; and the execution, delivery and
performance of this Agreement have
been duly authorized by the Seller by all
necessary limited liability company
action.
Section
3.04 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 and other laws
relating to or affecting creditors' or
secured parties' rights generally from time
to time in effect and to general
principles of equity (including concepts of
materiality, reasonableness, good
faith and fair dealing), regardless of
whether considered in a proceeding in
equity or at law.
Section
3.05 No Violation. The consummation of the transactions
contemplated by this Agreement and the
fulfillment of the terms hereof do not:
(i) conflict with or result in any breach
of any of the terms and provisions of,
or constitute (with or without notice or
lapse of time) a
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default under, the articles of organization
or limited liability company
regulations of the Seller, or any
indenture, mortgage, credit agreement or other
agreement or instrument to which the Seller
is a party or by which it or its
properties is bound; (ii) result in the
creation or imposition of any Lien upon
any of the Seller's properties pursuant to
the terms of any such indenture,
agreement or other instrument (except for
any Lien created in favor of the
Transition Bondholders pursuant to Section
39.309 of the Texas Electric Choice
Plan or any Lien created by the Issuer
under the Basic Documents); or (iii)
violate any existing law or any existing
order, rule or regulation applicable to
the Seller of any Governmental Authority
having jurisdiction over the Seller or
its properties.
Section
3.06 No Proceedings. Except as disclosed in the Issuer's
prospectus dated December 6, 2005 and the
related prospectus supplement dated
December 9, 2005 relating to the Transition
Bonds (together, the "Prospectus"),
there are no proceedings pending and, to
the Seller's knowledge, (x) there are
no proceedings threatened and (y) there are
no investigations pending or
threatened before any Governmental
Authority having jurisdiction over the Seller
or its properties involving or relating to
the Seller or the Issuer or, to the
Seller's knowledge, any other Person:
(i) asserting the invalidity of this Agreement, any of the
other
Basic
Documents, the Transition Bonds, the Texas Electric Choice Plan
or
the
Financing Order;
(ii) seeking to prevent the issuance of the Transition Bonds or
the
consummation of any of the transactions contemplated by this
Agreement or
any of the
other Basic Documents;
(iii) 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, this
Agreement,
any of the other Basic Documents or the Transition Bonds; or
(iv) challenging the Seller's treatment of the Transition Bonds
as
debt of
CenterPoint Energy, Inc. for federal or state income, gross
receipts
or franchise tax purposes.
Section 3.07 Approvals. Except for
filings under the UCC and the Texas
Electric Choice Plan, no approval,
authorization, consent, order or other action
of, or filing with, any Governmental
Authority is required under an applicable
law, rule or regulation 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 and
those that the Seller, in its capacity
as Servicer under the Servicing Agreement,
is required to make in the future
pursuant to the Servicing Agreement.
Section
3.08 The Transition Property.
(a) Information. Subject to Section 3.14, all written
information,
as amended
or supplemented from time to time prior to the date this
representation is made, provided by the Seller to the Issuer with
respect
to the
Transition Property (including the Financing Order and the
Issuance
Advice Letter) is
correct in all material respects.
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(b) Effect of Transfer. It is the intention of the parties
hereto
that
(other than for United States federal income tax purposes and, to
the
extent
consistent with applicable state tax laws, state income and
franchise
tax purposes) the sale, transfer, assignment, setting over 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
Financing Order from the Seller to the Issuer whereupon (subject
to
the
effectiveness of the Issuance Advice Letter) such rights and
interests
shall
become the Transition Property; upon execution and delivery of
this
Agreement
and the Bill of Sale and payment of the Purchase Price, the
Seller
will have no right, title or interest in, to or under the
Transition
Property; and that such Transition Property would not be a part
of the
estate of the Seller as debtor in the event of the filing of a
bankruptcy
petition by or against the Seller under any bankruptcy law.
(c) Transfer Filings.
(i) The Seller is the sole owner of the rights and interests
under the Financing Order to be sold to the Issuer on the
Transfer
Date.
(ii) On the Transfer Date, immediately upon the sale
hereunder, the Transition Property will have been validly sold,
assigned, transferred, set over and conveyed to the Issuer free
and
clear of all Liens (except for any Lien created in favor of the
Transition Bondholders pursuant to Section 39.309 of the Texas
Electric Choice Plan
or any Lien created by the Issuer under the
Basic Documents).
(iii) All actions or filings (including filings with the Texas
Secretary of State in accordance with the rules prescribed under
the
Texas Electric Choice Plan and the UCC) necessary in any
jurisdiction to give the Issuer a perfected ownership interest
(subject to any Lien created in favor of the Transition
Bondholders
pursuant to Section 39.309 of the Texas Electric Choice Plan or
any
Lien created by the Issuer under the Basic Documents) in the
Transition Property and to grant to the Indenture Trustee a
first
priority perfected security interest in the Transition
Property,
free and clear of all Liens of the Seller or anyone else (except
for
any Lien created in favor of the Transition Bondholders pursuant
to
Section 39.309 of the Texas Electric Choice Plan or any Lien
created
by the Issuer under the Basic Documents), have been taken or
made.
Section
3.09 Solvency. After giving effect to the sale of the
Transition
Property hereunder, the Seller:
(i) is solvent and expects to remain solvent,
(ii) is adequately capitalized to conduct its business and
affairs
considering its size and the nature of its business and intended
purposes,
(iii) is not engaged and does not expect to engage in a business
for
which its
remaining property represents an unreasonably small portion of
its
capital,
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(iv) reasonably believes that it will be able to pay its debts
as
they come
due, and
(v) is able to pay its debts as they come due and does not intend
to
incur, or
believe that it will incur, indebtedness that it will not be
able to
repay at its maturity.
Section
3.10 The Financing Order.
(a) The Financing Order was issued by the Texas Commission on
March
16, 2005
in accordance with the Texas Electric Choice Plan; the
Financing
Order and
the process by which it was issued comply with all applicable
laws,
rules and regulations of the State of Texas and the federal laws
of
the United
States, and the Financing Order is final, non-appealable and in
full force
and effect.
(b) As of the date of issuance of the Transition Bonds, the
Transition
Bonds will be entitled to the protections provided by the Texas
Electric
Choice Plan and the Financing Order, and the Financing Order
and
the
Transition Charges authorized therein will have become irrevocable
and
not
subject to reduction, impairment or adjustment by further action
of
the Texas
Commission, except as permitted by Section 39.307 of the Texas
Electric
Choice Plan, and the Issuance Advice Letter has been filed in
accordance
with the Financing Order. The Texas Commission has not issued
any order
prior to noon on the fourth business day after submission of
the
Issuance
Advice Letter that the Transition Bonds do not comply with
Ordering
Paragraph Four of the Financing Order and the initial
Transition
Charges
and the final terms of the Transition Bonds set forth in the
Issuance
Advice Letter have become effective.
Section
3.11 State Action.
(a) Under the Texas Electric Choice Plan, the State of Texas
has
pledged
that it will not take or permit any action that would impair
the
value of
the Transition Property or, except as permitted in Section
39.307
of the
Texas Electric Choice Plan, reduce, alter or impair the
Transition
Charges
until the principal, interest and premium, if any, and any
other
charges
incurred and contracts to be performed in connection with the
Transition
Bonds, have been paid and performed in full.
(b) Under the laws of the State of Texas and the federal laws of
the
United
States, the State of Texas could not constitutionally take any
action of
a legislative character, including the repeal or amendment of
the Texas
Electric Choice Plan, which would substantially limit, alter or
impair the
Transition Property or other rights vested in the Transition
Bondholders pursuant to the Financing Order, or substantially
limit,
alter,
impair or reduce the value or amount of the Transition
Property,
unless
such action is a reasonable exercise of the State of Texas'
sovereign
powers and of a character reasonable and appropriate to the
important
public purpose justifying such action, and, under the takings
clauses of
the State of Texas and United States Constitutions, the State
of Texas
could not repeal or amend the Texas Electric Choice Plan or
take
any other
action in contravention of its pledge quoted above without
paying
just compensation to the Transition Bondholders, as determined by
a
court of
competent jurisdiction, if doing so
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would
constitute a permanent appropriation of a substantial property
interest
of the Transition Bondholders in the Transition Property and
deprive
the Transition Bondholders of their reasonable expectations
arising
from their investments in the Transition Bonds; however, there
is
no
assurance that, even if a court were to award just compensation,
it
would be
sufficient to pay the full amount of principal of and interest
on
the
Transition Bonds.
Section
3.12 No Court Order. There is no order by any court providing
for
the revocation, alteration, limitation or
other impairment of the Texas Electric
Choice Plan, the Financing Order, the
Issuance Advice Letter, the Transition
Property or the Transition Charges or any
rights arising under any of them or
that seeks to enjoin the performance of any
obligations under the Financing
Order.
Section
3.13 Approvals Concerning the Transition Property. Under the
laws
of the State of Texas and the federal laws
of the United States, no other
approval, authorization, consent, order or
other action of, or filing with any
Governmental Authority is required in
connection with the creation or transfer
of the Seller's rights and interests under
the Financing Order and the Issuer's
purchase of the Transition Property from
the Seller, except those that have been
obtained or made.
Section
3.14 Assumptions. Based on information available to the Seller
on
the date hereof, the assumptions used in
calculating the Transition Charges in
the Issuance Advice Letter are reasonable
and made in good faith; however,
notwithstanding the foregoing, THE SELLER
MAKES NO REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, THAT AMOUNTS ACTUALLY
COLLECTED ARISING FROM THE TRANSITION
CHARGES WILL IN FACT BE SUFFICIENT TO MEET
THE PAYMENT OBLIGATIONS ON THE
TRANSITION BONDS OR THAT THE ASSUMPTIONS
USED IN CALCULATING SUCH TRANSITION
CHARGES WILL IN FACT BE REALIZED.
Section
3.15 Creation of the Transition Property.
(a) Upon the effectiveness of the Issuance Advice Letter, the
transfer
of the Seller's rights and interests under the Financing Order
related to
the Transition Bonds and the Issuer's purchase of the
Transition
Property from the Seller pursuant to this Agreement, the
Transition
Property will constitute a present property right.
(b) Upon the effectiveness of the Issuance Advice Letter, the
transfer
of the Seller's rights and interests under the Financing Order
and the
Issuer's purchase of the Transition Property from the Seller
pursuant
to this Agreement, the Transition Property includes:
(1) the right to
impose, collect and receive the Transition
Charges, including the right to receive Transition
Charges in amounts and at times sufficient to pay
principal and interest on the Transition Bonds,
(2)
all rights and
interest of the Seller under the
Financing Order,
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(3) the rights
to file for periodic adjustments of the
Transition Charges as provided in the Financing Order,
and
(4) all revenues
and collections resulting from Transition
Charges.
(c) Upon the effectiveness of the Issuance Advice Letter, the
transfer
of the Seller's rights and interests under the Financing Order
and the
Issuer's purchase of the Transition Property from the Seller on
such
Transfer Date pursuant to this Agreement, the Transition
Property
will not
be subject to any Lien created by a previous indenture.
Section
3.16 Prospectus. As of the date hereof, the information
describing
the Seller under the caption "The Servicer
of the Transition Property" in the
Prospectus is true and correct in all
material respects.
Section
3.17 Nature of Representations and Warranties. The
representations
and warranties set forth in Section 3.08
and Section 3.10 through Section 3.16,
insofar as they involve conclusions of law,
are made not on the basis that the
Seller purports to be a legal expert or to
be rendering legal advice, but rather
to reflect the parties' good faith
understanding of the legal basis on which the
parties are entering into this Agreem
