Exhibit 2.2
PURCHASE AND SALE AGREEMENT
by and between
AEP TEXAS CENTRAL COMPANY
and
CITY OF SAN ANTONIO
ACTING BY AND THROUGH
THE CITY PUBLIC SERVICE BOARD
OF SAN ANTONIO
and
TEXAS ▇▇▇▇▇, ▇.▇.
Dated as of September 3, 2004
TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS.............................................................................. 2
Section 1.1 Certain Defined Terms............................................................... 2
Section 1.2 Certain Interpretive Matters........................................................ 26
ARTICLE 2 PURCHASE AND SALE........................................................................ 27
Section 2.1 Purchased Assets.................................................................... 27
Section 2.2 Excluded Assets..................................................................... 30
Section 2.3 Assumption of Liabilities........................................................... 32
Section 2.4 Excluded Liabilities................................................................ 35
Section 2.5 Control of Litigation............................................................... 36
Section 2.6 No Assignment If Breach............................................................. 36
Section 2.7 Termination of AEP-Cameco PSA....................................................... 37
Section 2.8 STP Participation Agreement Matters................................................. 38
ARTICLE 3 CLOSINGS; PURCHASE PRICE................................................................. 38
Section 3.1 Closing............................................................................. 38
Section 3.2 Initial Purchase Price.............................................................. 40
Section 3.3 Adjustment to Initial Purchase Price................................................ 40
Section 3.4 Prorations.......................................................................... 43
Section 3.5 Procedures for Closing and Post-Closing Adjustments................................. 44
Section 3.6 Procedures for Certain Purchase Price Adjustments................................... 50
Section 3.7 Allocation of Purchase Price........................................................ 51
Section 3.8 Payment of Sales Tax................................................................ 53
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SELLER................................................. 54
Section 4.1 Organization and Existence.......................................................... 54
Section 4.2 Execution, Delivery and Enforceability.............................................. 54
Section 4.3 No Violation........................................................................ 55
Section 4.4 Compliance with Laws................................................................ 56
Section 4.5 Permits............................................................................. 56
Section 4.6 Litigation.......................................................................... 56
Section 4.7 Qualified Decommissioning Funds..................................................... 57
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TABLE OF CONTENTS
(continued)
PAGE
Section 4.8 Non-Qualified Decommissioning Fund.................................................. 58
Section 4.9 Generation Facility Contracts....................................................... 59
Section 4.10 Personal Property................................................................... 60
Section 4.11 Real Property....................................................................... 60
Section 4.12 Leased Real and Personal Property................................................... 60
Section 4.13 Intellectual Property............................................................... 60
Section 4.14 Brokers............................................................................. 61
Section 4.15 Environmental Matters............................................................... 61
Section 4.16 Labor Matters....................................................................... 62
Section 4.17 Employee Benefit Plans.............................................................. 62
Section 4.18 [Intentionally left blank].......................................................... 62
Section 4.19 No Undisclosed Material Liabilities................................................. 62
Section 4.20 NRC Licenses........................................................................ 63
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF CPS.................................................... 63
Section 5.1 Organization and Existence.......................................................... 63
Section 5.2 Execution, Delivery and Enforceability.............................................. 63
Section 5.3 No Violation........................................................................ 63
Section 5.4 Litigation.......................................................................... 64
Section 5.5 [Intentionally left blank.]......................................................... 64
Section 5.6 Brokers............................................................................. 64
Section 5.7 Financing........................................................................... 64
Section 5.8 CPS Qualifications.................................................................. 65
Section 5.9 "As Is" Sale........................................................................ 65
Section 5.10 No Knowledge of Seller's Breach..................................................... 65
Section 5.11 CPS Financial Statements............................................................ 65
Section 5.12 Inspection.......................................................................... 66
Section 5.13 CPS's ERCOT Generation.............................................................. 66
Section 5.14 HSR Act............................................................................. 66
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF TEXAS GENCO............................................ 66
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TABLE OF CONTENTS
(continued)
PAGE
Section 6.1 Organization and Existence.......................................................... 66
Section 6.2 Execution, Delivery and Enforceability.............................................. 66
Section 6.3 No Violation........................................................................ 67
Section 6.4 Litigation.......................................................................... 68
Section 6.5 Texas Genco's Qualified Decommissioning Funds....................................... 68
Section 6.6 Brokers............................................................................. 68
Section 6.7 Financing........................................................................... 68
Section 6.8 Texas Genco Qualifications.......................................................... 68
Section 6.9 "As Is" Sale........................................................................ 69
Section 6.10 No Knowledge of Seller's Breach..................................................... 69
Section 6.11 Texas Genco Holdings Financial Statements........................................... 69
Section 6.12 Inspection.......................................................................... 70
Section 6.13 Texas Genco's ERCOT Generation...................................................... 70
ARTICLE 7 COVENANTS OF EACH PARTY.................................................................. 70
Section 7.1 Efforts to Close.................................................................... 70
Section 7.2 Expenses............................................................................ 71
Section 7.3 Updating............................................................................ 71
Section 7.4 Conduct Pending Closing............................................................. 72
Section 7.5 Regulatory Approvals................................................................ 74
Section 7.6 Tax Matters......................................................................... 76
Section 7.7 Risk of Loss........................................................................ 78
Section 7.8 Decommissioning Funds............................................................... 78
Section 7.9 Insurance........................................................................... 80
Section 7.10 Announcements; Confidentiality...................................................... 83
Section 7.11 Post Closing - Further Assurances................................................... 83
Section 7.12 Pre-Closing and Post-Closing - Information, Records and Access...................... 83
Section 7.13 Release............................................................................. 84
Section 7.14 Use of AEP Marks.................................................................... 85
Section 7.15 Additional Covenants of Purchasers.................................................. 85
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TABLE OF CONTENTS
(continued)
PAGE
Section 7.16 [Intentionally left blank].......................................................... 86
Section 7.17 Emission Allowances................................................................. 86
Section 7.18 Tax Exempt Financing................................................................ 86
Section 7.19 Certain STP Matters................................................................. 88
Section 7.20 Acceptable Credit Support........................................................... 89
ARTICLE 8 INDEMNIFICATION.......................................................................... 91
Section 8.1 Exclusivity......................................................................... 91
Section 8.2 Indemnification by Seller........................................................... 91
Section 8.3 Indemnification by Purchasers....................................................... 92
Section 8.4 Notice of Claim..................................................................... 94
Section 8.5 Defense of Third Party Claims....................................................... 94
Section 8.6 Cooperation......................................................................... 95
Section 8.7 Mitigation and Limitation of Claims................................................. 95
Section 8.8 Specific Performance................................................................ 96
ARTICLE 9 CPS'S CONDITIONS TO CLOSING.............................................................. 96
Section 9.1 Compliance with Provisions.......................................................... 96
Section 9.2 [Intentionally left blank].......................................................... 96
Section 9.3 No Restraint........................................................................ 96
Section 9.4 Required Regulatory Approvals and Consents.......................................... 96
Section 9.5 Representations and Warranties...................................................... 97
Section 9.6 Title Insurance..................................................................... 97
Section 9.7 Officer's Certificate............................................................... 97
Section 9.8 [Intentionally left blank].......................................................... 98
Section 9.9 Material Adverse Effect............................................................. 98
Section 9.10 IRS Letter Ruling................................................................... 98
Section 9.11 Legal Opinion....................................................................... 98
Section 9.12 No Termination...................................................................... 98
Section 9.13 Termination of AEP-Cameco PSA....................................................... 98
Section 9.14 Receipt of Other Documents.......................................................... 98
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TABLE OF CONTENTS
(continued)
PAGE
ARTICLE 10 TEXAS GENCO'S CONDITIONS TO CLOSING...................................................... 99
Section 10.1 Compliance with Provisions.......................................................... 99
Section 10.2 HSR Act............................................................................. 99
Section 10.3 No Restraint........................................................................ 99
Section 10.4 Required Regulatory Approvals and Consents.......................................... 100
Section 10.5 Representations and Warranties...................................................... 100
Section 10.6 Title Insurance..................................................................... 100
Section 10.7 Officer's Certificate............................................................... 101
Section 10.8 [Intentionally left blank].......................................................... 101
Section 10.9 Material Adverse Effect............................................................. 101
Section 10.10 IRS Letter Ruling................................................................... 101
Section 10.11 Legal Opinion....................................................................... 101
Section 10.12 No Termination...................................................................... 101
Section 10.13 Termination of AEP-Cameco PSA....................................................... 101
Section 10.14 Receipt of Other Documents.......................................................... 101
ARTICLE 11 SELLER'S CONDITIONS TO CLOSING........................................................... 102
Section 11.1 Compliance with Provisions.......................................................... 102
Section 11.2 HSR Act............................................................................. 103
Section 11.3 No Restraint........................................................................ 103
Section 11.4 Required Regulatory Approvals and Consents.......................................... 103
Section 11.5 Representations and Warranties...................................................... 103
Section 11.6 Officer's Certificate............................................................... 104
Section 11.7 Legal Opinion....................................................................... 104
Section 11.8 No Termination...................................................................... 104
Section 11.9 IRS Letter Ruling................................................................... 104
Section 11.10 Receipt of Other Documents.......................................................... 104
ARTICLE 12 TERMINATION.............................................................................. 105
Section 12.1 Rights to Terminate................................................................. 105
Section 12.2 Effect of Termination............................................................... 107
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TABLE OF CONTENTS
(continued)
PAGE
ARTICLE 13 GENERAL PROVISIONS....................................................................... 108
Section 13.1 Entire Document..................................................................... 108
Section 13.2 Schedules........................................................................... 108
Section 13.3 Counterparts........................................................................ 108
Section 13.4 Severability........................................................................ 108
Section 13.5 Assignment.......................................................................... 108
Section 13.6 Captions............................................................................ 109
Section 13.7 Governing Law....................................................................... 109
Section 13.8 Dispute Resolution.................................................................. 109
Section 13.9 Notices............................................................................. 110
Section 13.10 No Third Party Beneficiaries........................................................ 112
Section 13.11 Several Obligations; No Joint Venture............................................... 113
Section 13.12 Construction of Agreement........................................................... 113
Section 13.13 Closing Over Breaches or Unsatisfied Conditions..................................... 113
Section 13.14 Waiver of Compliance................................................................ 113
Section 13.15 Survival............................................................................ 114
Section 13.16 Waiver of Jury Trial; Submission to Jurisdiction.................................... 114
Section 13.17 Expedited Dispute Resolution........................................................ 115
ARTICLE 14 NOTICES.................................................................................. 118
Section 14.1 Notice Regarding Possible Annexation................................................ 118
Section 14.2 Notice of Additional Tax Liability.................................................. 118
Section 14.3 Notice Regarding Underground Storage Tanks.......................................... 119
Section 14.4 Coastal Area Property Notice........................................................ 119
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EXHIBITS AND SCHEDULES
ITEM DESCRIPTION
Exhibit A Generation Facility
Exhibit B-1 Form of Acceptable Letter of Credit (Payment of Purchase Price)
Exhibit B-2 Form of Acceptable Letter of Credit (After Payment of Purchase Price)
Exhibit C Form of Assignment and Assumption Agreement (STP Interest)
Exhibit D Form of Assignment and Conveyance
Exhibit E Form of ▇▇▇▇ of Sale
Exhibit F Form of Decommissioning Adjustment Escrow Agreement
Exhibit G Form of Decommissioning Funds Collection Agreement
Exhibit H Form of Deed
Exhibit I Form of Escrow Agreement
Exhibit J Form of Guaranty
Exhibit K Tax Adjustment Model
Schedule 1.1A CPS's Required Consents
Schedule 1.1B CPS's Required Regulatory Approvals
Schedule 1.1C Due Diligence Materials
Schedule 1.1D Purchased Inventory
Schedule 1.1E Persons with Seller's Knowledge
Schedule 1.1F Persons with Purchasers' Knowledge
Schedule 1.1G Certain Permitted Encumbrances
Schedule 1.1H Pollution Control Facilities
Schedule 1.1I Preliminary Title Commitments
Schedule 1.1J Seller's Required Consents
Schedule 1.1K Seller's Required Regulatory Approvals
Schedule 1.1L Texas Genco's Required Consents
Schedule 1.1M Texas Genco's Required Regulatory Approvals
Schedule 2.1(a) Owned Real Property
Schedule 2.1(b) Purchased Equipment
Schedule 2.1(f) Purchased Generation Facility Contracts
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ITEM DESCRIPTION
Schedule 2.1(o) Miscellaneous Purchased Assets
Schedule 2.2(a) Certain Excluded Assets
Schedule 2.2(k) Excluded Intellectual Property
Schedule 3.3(b) Capital Expenditures
Schedule 3.3(c) Inventory
Schedule 3.3(d) Nuclear Fuel Inventory
Schedule 3.5(c) MAE Adjustment Amount Computation
Schedule 4.3 No Violation
Schedule 4.4 Compliance With Laws
Schedule 4.5 Permits
Schedule 4.6 Litigation
Schedule 4.7 Certain Qualified Decommissioning Fund Matters
Schedule 4.8 Certain Non-Qualified Decommissioning Fund Matters
Schedule 4.9 Generation Facility Contracts
Schedule 4.10 Personal Property
Schedule 4.11 Real Property
Schedule 4.12 Leased Real and Personal Property
Schedule 4.15 Environmental Matters
Schedule 4.17(a) Employee Benefit Plans
Schedule 4.19 Undisclosed Material Liabilities
Schedule 5.10 No Knowledge of Seller's Breach (CPS)
Schedule 5.13 CPS's Generation and Transmission
Schedule 6.10 No Knowledge of Seller's Breach (Texas Genco)
Schedule 6.13 Texas Genco's Generation and Transmission
Schedule 7.4 Exceptions to Conduct Pending Closing
Schedule 7.8(b) Decommissioning Fund
Schedule 7.9(a) Generation Facility Insurance Policies
Schedule 9.6 Certain Title Insurance Exceptions
Schedule 9.11 Legal Opinion of Seller's Counsel (for delivery to CPS)
Schedule 10.6 Certain Title Insurance Exceptions
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ITEM DESCRIPTION
Schedule 10.11 Legal Opinion of Seller's Counsel (for delivery to Texas Genco)
Schedule 11.7(a) Legal Opinion of CPS's Counsel
Schedule 11.7(b) Legal Opinion of Texas Genco's Counsel
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PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT ("Agreement"), dated as of September
3, 2004, is made and entered into by and between AEP TEXAS CENTRAL COMPANY, a
Texas corporation f/k/a Central Power and Light Company ("Seller"), the CITY OF
SAN ANTONIO, a municipal corporation and a subdivision of the State of Texas
(the "City"), acting by and through the City Public Service Board of San Antonio
(the "Board") (as used hereinafter, the term "CPS" shall mean the City, acting
by and through the Board), and TEXAS ▇▇▇▇▇, ▇.▇., a Texas limited partnership
("Texas Genco"). CPS and Texas Genco being sometimes hereinafter referred to
individually as a "Purchaser" and collectively as the "Purchasers."
RECITALS
A. Seller owns an undivided ownership interest as tenant in
common in the Generation Facility (as defined in Section 1.1) that represents
25.2% of all such undivided ownership interests therein (the "STP Interest").
B. By letter dated March 1, 2004, Seller notified the STP Owners
that it had received a bona fide offer (the "Original Offer"), pursuant to the
AEP-Cameco PSA (as defined in Section 1.1) for the entire STP Interest.
C. By letter dated May 28, 2004, CPS served notice upon Seller
(and the other STP Owners), pursuant to the provisions of Section 17 of the STP
Participation Agreement, of CPS's exercise of its right of first refusal set
forth in Section 17 of the STP Participation Agreement to purchase the portion
of the STP Interest that represents 12.0% of all the undivided ownership
interests of the STP Owners (as defined in Section 1.1) as tenants in common in
the Generation Facility, and CPS reserved its right to acquire an additional
portion of the STP Interest as provided for in Section 17 of the STP
Participation Agreement.
D. By letter dated May 28, 2004, Texas Genco served notice upon
Seller (and the other STP Owners), pursuant to the provisions of Section 17 of
the STP Participation Agreement, of Texas Genco's exercise of its right of first
refusal set forth in Section 17 of the STP Participation Agreement to purchase
the entire STP Interest.
E. As a result of the oversubscription by Participants exercising
their respective rights of first refusal, pursuant to Section 17.4 of the STP
Participation Agreement, Seller desires to sell and assign the STP Interest to
those STP Owners exercising their respective rights of first refusal in
proportion to the ratio that each STP Owner's current undivided ownership
interest in the Generation Facility bears to the STP Interest, as follows:
1. To CPS: (a) Seller's right, title and interest in, to and
under CPS's Proportionate Share of the STP Interest (the "CPS Purchased
Interest"), and (b) Seller's right, title and interest in, to and under
certain properties and assets associated therewith or ancillary
thereto, and all liabilities, to the extent related thereto, on the
terms and subject to the conditions hereinafter set forth; and
2. To Texas Genco: (a) Seller's right, title and interest in,
to and under Texas Genco's Proportionate Share of the STP Interest (the
"Texas Genco Purchased Interest"), and (b) Seller's right, title and
interest in, to and under certain properties and assets associated
therewith or ancillary thereto, and all liabilities, to the extent
related thereto, on the terms and subject to the conditions hereinafter
set forth.
F. The Parties further desire that: (a) in the event that there
is a CPS Termination Event, Texas Genco shall purchase all of the STP Interest
and the Texas Genco Purchased Interest (and its Proportionate Share) shall equal
100% of the STP Interest; and (b) in the event that there is a Texas Genco
Termination Event, CPS shall purchase all of the STP Interest and the CPS
Purchased Interest (and its Proportionate Share) shall equal 100% of the STP
Interest.
G. The Parties further desire that the term "Proportionate Share"
shall mean (i) with respect to the ownership interest as a tenant in common in
the Generation Facility, (A) in respect of CPS, a 12.0% undivided ownership
interest as tenant in common in the Generation Facility, unless there shall have
occurred a Texas Genco Termination Event, in which case it shall mean a 25.2%
undivided ownership interest as tenant in common in the Generation Facility, and
(B) in respect of Texas Genco, a 13.2% undivided ownership interest as tenant in
common in the Generation Facility, unless there shall have occurred a CPS
Termination Event, in which case it shall mean a 25.2% undivided ownership
interest as tenant in common in the Generation Facility; and (ii) otherwise, as
the context may require, (A) in respect of CPS, a percentage share equal to
12.0/25.2 (expressed as a percentage) unless there shall have occurred a Texas
Genco Termination Event, in which case it shall mean 100%, and (B) in respect of
Texas Genco, a percentage share equal to 13.2/25.2 (expressed as a percentage)
unless there shall have occurred a CPS Termination Event, in which case it shall
mean 100%.
H. Seller and CPS, on one hand, and Seller and Texas Genco, on
the other hand, are entering into this Agreement to evidence their respective
and several duties, obligations and responsibilities in respect of the purchases
and sales of the CPS Purchased Interest and the Texas Genco Purchased Interest,
respectively, and related transactions contemplated hereby (each such separate
purchase and sale and related transactions contemplated hereby may be referred
to herein as the "CPS Transactions" or the "Texas Genco Transactions," or
collectively as the "Transactions").
NOW, THEREFORE, in consideration of the foregoing recitals and the
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties, intending
to be legally bound, do hereby agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1 CERTAIN DEFINED TERMS. The following terms when used in
this Agreement (or in the Schedules and Exhibits to this Agreement) with initial
letters capitalized have the meanings set forth below:
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"AAA" means the American Arbitration Association.
"Acceptable Credit Support" means, in respect each Purchaser, (a) an
Acceptable Letter of Credit, (b) an Acceptable Guaranty or (c) other collateral
security in form and amount acceptable to Seller in its sole discretion.
"Acceptable Guarantor" means, in respect of each Purchaser, a Person
(a) with a rating of its long-term senior unsecured debt obligations of not less
than BBB- by S&P or Baa3 by ▇▇▇▇▇'▇ and (b) which, directly or indirectly, owns
a majority of the outstanding shares of capital stock or other equity interests
in such Purchaser.
"Acceptable Guaranty" means, in respect of each Purchaser, a Guaranty
issued by an Acceptable Guarantor.
"Acceptable Letter of Credit" means, in respect of each Purchaser, an
irrevocable, unconditional standby letter of credit (a) issued by an Eligible
Financial Institution for the benefit of Seller, (b) having a stated expiration
date of not earlier than 360 days after the date of original issuance or any
renewal thereof (determined without reference, however to any "events of
default", "early termination event" or other occurrences relating thereto that
may give rise to an early termination thereof), (c) having an initial drawing
amount which shall be at least equal to the sum of the Initial Purchase Price
applicable to such Purchaser and its Proportionate Share of Fifteen Million
Dollars ($15,000,000), provided, that upon indefeasible payment of the Purchase
Price applicable to such Purchaser, (i) the initial drawing amount shall be as
provided in Section 7.20(e) and (ii) upon delivery by such Purchaser of a
replacement Acceptable Letter of Credit having a drawing amount as provided in
Section 7.20(e) in substantially the form of Exhibit B-2, Seller shall surrender
to such Purchaser the original letter of credit in the form of Exhibit B-1, (d)
that is payable or negotiable at an office of the Issuing Bank (or a
corresponding bank thereof) in New York City or such other place as shall be
acceptable to Seller upon the occurrence and continuation of a Drawing Event,
(e) which is payable in U.S. dollars in immediately available funds, and (f)
that is governed by the Uniform Customs and Practice for Documentary Credit
(1993 revision), International Chamber of Commerce Publication No. 500, and any
amendments or revisions thereto, and, to the extent not governed thereby, that
is governed by the Laws of the State of New York, or otherwise containing terms
and conditions that are reasonably acceptable to Seller, in substantially the
form of Exhibit B-1 or Exhibit B-2, as applicable.
"Act of Bankruptcy" means, in respect of each Purchaser, the filing of
a petition in bankruptcy (or other commencement of a bankruptcy or similar
proceeding) by or against such Purchaser under the Bankruptcy Code or other
applicable bankruptcy, insolvency or similar Law, whether federal or state, as
now or hereafter in effect.
"Actual Tax Adjustment Amount" means an amount that corresponds to the
Initial Tax Adjustment Amount and will be determined by the Tax Adjustment
Model, and calculated as of the Closing Date, by changing the assumptions and
instructions used in the Tax Adjustment Model for the calculation of the Initial
Tax Adjustment Amount as necessary to reflect that the IRS PLR Effective Date
has occurred, provided that if the IRS PLR Effective Date is the Closing Date
the Actual Tax Adjustment Amount shall be zero.
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"AEP" American Electric Power Company, a New York corporation and an
Affiliate of Seller.
"AEP-Cameco PSA" has the meaning set forth in Section 2.7.
"AEP Marks" means the names and marks "AEP," "American Electric Power,"
"CSW," and "Central and South West" and all other trade names, trademarks and
service marks (whether or not registered) owned by Seller or any of its
Affiliates.
"AEPSC" means American Electric Power Service Corporation, a New York
corporation and an Affiliate of Seller.
"ANI" means American Nuclear Insurers.
"Acid Rain Requirement" means all requirements imposed under Title IV
of the Clean Air Act Amendments of 1990, 42 U.S.C. Section 7651 et seq., and the
regulations of the USEPA adopted pursuant thereto, 40 C.F.R. Parts 72-78.
"Adjustment Sections" has the meaning set forth in Section 3.3.
"Affiliate" of a specified Person means any other Person that directly
or indirectly, through one or more intermediaries, controls, is controlled by or
is under common control with the specified Person; provided that neither Seller
nor either Purchaser shall be deemed to control, be controlled by or be under
common control with the Operating Agent. For the purposes of this definition,
"control," when used with respect to any specified Person, means the possession
of the power to direct the management or policies of the specified Person,
directly or indirectly, whether through the ownership of voting securities,
partnership or limited liability company interests, by contract or otherwise.
"Agreement" means this Purchase and Sale Agreement, together with the
Schedules and Exhibits hereto.
"Allocation" has the meaning set forth in Section 3.7(b).
"Ancillary Agreements" means, in respect of each Purchaser, any
additional agreements and instruments necessary or appropriate to consummate the
Transactions that may be executed or delivered by either of the Purchasers or
Seller or any Affiliate thereof at the Closing, including (i) the Guaranty or
Letter of Credit, (ii) the ▇▇▇▇ of Sale, (iii) the Assignment and Assumption
Agreement (STP Interest), (iv) Assignment and Conveyance, (v) the Deed, (vi)
Decommissioning Funds Collection Agreement, and (vii) the Escrow Agreement.
"Applicable Tax Law" has the meaning set forth in Section 3.7(a).
"Assignment and Assumption Agreement (STP Interest)" means, as to each
Purchaser, that certain Assignment and Assumption Agreement, substantially in
the form of Exhibit C, to be Executed and delivered by Seller and such Purchaser
at Closing.
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"Assignment and Conveyance" means, as to each Purchaser, that certain
Special Warranty Assignment and Conveyance, substantially in the form of Exhibit
D, to be Executed and delivered by Seller and such Purchaser at Closing.
"Assumed Liabilities" has, in respect of each Purchaser, the meaning
set forth in Section 2.3.
"Atomic Energy Act" means the Atomic Energy Act of 1954, 42 U.S.C.
Section 2011 et seq., as amended from time to time.
"Auction" means the procedures employed by AEPSC through which the
Purchased Assets and the Other TCC Generation Assets were offered for sale.
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy", or any successor statute.
"▇▇▇▇ of Sale" means, in respect of each Purchaser, that certain ▇▇▇▇
of Sale and Assignment, substantially in the form of Exhibit E, to be Executed
and delivered by Seller to such Purchaser at Closing.
"Board" has the meaning set forth in the introductory paragraph of this
Agreement.
"Bond Counsel" has the meaning set forth in Section 7.18(b)(iii).
"Business Day" means a day other than Saturday, Sunday or a day on
which banks are authorized to be closed for business in the State of New York or
the State of Texas.
"Byproduct Material" means any radioactive material (except Special
Nuclear Material) yielded in, or made radioactive by, exposure to radiation in
the process of producing or utilizing Special Nuclear Material.
"Capital Expenditure" means any improvement or addition to or
replacement of property, plant or equipment of the Generation Facility.
"Closing" has, in respect of each Purchaser, the meaning set forth in
Section 3.1.
"Closing Adjustment" has, in respect of each Purchaser, the meaning set
forth in Section 3.5(a).
"Closing Date" has, in respect of each Purchaser, the meaning set forth
in Section 3.1.
"Code" means the Internal Revenue Code of 1986, or any successor law,
and regulations issued by the IRS pursuant to the Internal Revenue Code of 1986,
or any successor regulation.
"Commercially Reasonable Efforts" means efforts that are reasonably
within the contemplation of the Parties at the time of entering into this
Agreement and that do not require the performing Party to expend funds or incur
obligations other than expenditures that are
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customary and reasonable in transactions of the kind and nature contemplated by
this Agreement in order for the performing Party to satisfy its obligations
hereunder.
"CPS" has the meaning set forth in the introductory paragraph of this
Agreement.
"CPS Financial Statements" has the meaning set forth in Section 5.11.
"CPS Group" means CPS and each of its and their officers, directors,
employees, attorneys, agents and successors and assigns.
"CPS Purchased Interest" has the meaning set forth in the Recitals to
this Agreement.
"CPS's Required Consents" means the consent, waiver, agreement or
release of any Person other than a Governmental Authority, or other action or
event, necessary for CPS to consummate the applicable Transactions, as specified
in Schedule 1.1A.
"CPS's Required Regulatory Approvals" means (i) the approval of the
applicable Transactions by any Governmental Authority of competent jurisdiction
over any of the Parties or the Generation Facility that is required for CPS to
consummate the applicable Transactions as specified on Part I of Schedule 1.1B
and (ii) the notice to, filing with, or consent, approval or authorization of,
any Governmental Authority as specified on Part II of Schedule 1.1B.
"CPS Termination Event" means that CPS shall no longer be obligated to
purchase the CPS Purchased Interest as contemplated hereby, or this Agreement
shall otherwise have been terminated in respect of CPS, as specified in a notice
from Seller to Texas Genco.
"CSTP" has the meaning set forth in Section 10.12.
"Decommissioning" as to each STP Unit means the complete retirement and
removal from service such STP Unit, in whole or in part, and the restoration of
all or any portion of the related Site in accordance with applicable Laws, as
well as any planning and administrative activities incidental thereto, including
but not limited to (i) the dismantlement, decontamination, storage and/or
entombment of the STP Unit, in whole or in part, and any reduction or removal,
whether before or after termination of the NRC Licenses for the STP Unit, of
radioactivity at the Generation Facility, and (ii) all activities necessary for
the retirement, dismantlement and decontamination of the STP Unit to comply with
all applicable Laws, including applicable Nuclear Laws and Environmental Laws,
including the applicable requirements of the Atomic Energy Act and the NRC's
rules, regulations, orders and pronouncements thereunder, the NRC Operating
License and any related decommissioning plan.
"Decommissioning Adjustment Amount" means, in respect of each
Purchaser, to the extent that the Decommissioning Rule is not Equivalent to the
Proposed Rule, the net present value (calculated using a discount rate of 12%)
of the amount of any prospective losses, net of insurance coverages,
indemnifications and other benefits, that such Purchaser is reasonably likely to
incur as a result of the failure of the Decommissioning Rule to be Equivalent to
the Proposed Rule.
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"Decommissioning Adjustment Escrow Agreement" means, in respect of each
Purchaser, one or more escrow agreements, substantially in the form of Exhibit F
with such changes that the Decommissioning Escrow Agent may reasonably request
and that are mutually acceptable to the affected Parties, to be Executed and
delivered by Seller, such Purchaser and the Decommissioning Escrow Agent(s) if
required pursuant to Section 3.3(f) or Section 3.5(d).
"Decommissioning Adjustment Reserve" means an amount equal to ten
million dollars ($10,000,000).
"Decommissioning and Decontamination Fees" means all fees related to
the Department of Energy's special assessment of utilities for the Uranium
Enrichment Decontamination and Decommissioning Fund pursuant to Sections 1801,
1802 and 1803 of the Atomic Energy Act (42 U.S.C. 2297g et seq.), and the
Department of Energy's implementing regulations at 10 CFR Part 766, and any
similar fees assessed under amended or superseding statutes or regulations
applicable to separative work units purchased from the Department of Energy in
order to decontaminate and decommission the Department of Energy's gaseous
diffusion enrichment facilities.
"Decommissioning Collections" has the meaning set forth in the
Decommissioning Funds Collection Agreement.
"Decommissioning Escrow" means, in respect of each Purchaser, an escrow
established pursuant to the terms of the applicable Decommissioning Adjustment
Escrow Agreement.
"Decommissioning Escrow Agent" means, in respect of each Purchaser,
Bank of America N.A. or another banking or financial institution acceptable to
Seller and such Purchaser.
"Decommissioning Funds Collection Agreement" means, in respect of each
Purchaser, that certain Decommissioning Funds Collection Agreement,
substantially in the Form of Exhibit G, to be Executed and delivered by Seller
and the respective Purchaser at Closing; provided, however, that in the event
that (i) a Decommissioning Rule has not been adopted by the PUCT as of the
Closing Date or (ii) a Decommissioning Rule has been adopted by the PUCT as of
the Closing Date, but is not Equivalent to the Proposed Rule, as determined in
accordance with Section 3.3(f)(ii), each such Decommissioning Funds Collection
Agreement shall be substantially in the Form of Exhibit G, with mutually agreed
upon modifications that are necessary or otherwise reasonable to make in light
of the foregoing events described in clauses (i) or (ii).
"Decommissioning Rule" means any rule adopted by the PUCT after the
Effective Date which addresses the substantive rights and obligations of a
transferor and transferee in respect of Decommissioning (including trust funds
created for purposes of Decommissioning) following the sale or transfer of
nuclear generating assets.
"Decommissioning Trust Agreement" means the Trust Agreement, dated June
25, 1990, as amended, by and between Seller and Mellon Bank, N.A. a national
banking association having trust powers, as Trustee.
"Deductible Amount" has the meaning set forth in Section 8.7(c).
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"Deed" means, in respect of each Purchaser, that certain Special
Warranty Deed, substantially in the form of Exhibit H, to be Executed and
delivered by Seller to such Purchaser at Closing.
"Deferred Purchase Price Amount" means an amount calculated by the
following formula:
DPPA = (ITAA - ATAA) + I
Where:
DPPA means the Deferred Purchase Price Amount
ITAA means the Initial Tax Adjustment Amount
ATAA means the Actual Tax Adjustment Amount
I means interest accrued (or deemed to have accrued) on (ITAA - ATAA)
at an interest rate of eight percent (8%) per annum, compounded annually, from
but not including the Closing Date to and including the date of payment of the
Deferred Purchase Price Amount
"Designated Representative" means a designated representative or
alternative designated representative appointed by an entity pursuant to 40
C.F.R. Section 72.20, et seq.
"Dispute" has the meaning set forth in Section 13.8.
"DOE Standard Contract" means the Contract for Disposal of Spent
Nuclear Fuel and/or ▇▇▇▇-▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇. ▇▇-▇▇▇▇-▇▇▇▇▇▇▇▇▇, dated
February 26, 1987, between the Department of Energy and the STP Owners.
"Drawing Event" means, in respect of each Purchaser, the occurrence and
continuance of (a) an Act of Bankruptcy, or (b) the failure of such Purchaser
(x) to replace or renew (when required pursuant to Section 7.20) an Acceptable
Letter of Credit at least thirty (30) days prior to the expiration of the
Acceptable Letter of Credit being replaced or renewed or (y) to replace (when
required pursuant to Section 7.20) an Acceptable Letter of Credit within ten
(10) days after the earlier of the day on which such Purchaser shall (A) have
been given notice by Seller that the long-term, senior unsecured debt
obligations of the Issuing Bank shall cease to have a rating of not less than A
by S&P or ▇▇▇▇▇'▇ or (B) have Knowledge of such cessation.
"Due Diligence Materials" means, in respect of each Purchaser, (i) due
diligence materials distributed in written or digital form by or on behalf of
Seller or an Affiliate of Seller to such Purchaser, including the Information
Memorandum, (ii) all written answers to questions provided to such Purchaser,
and (iii) all materials listed on Schedule 1.1C.
"Effective Date" means, in respect of each Purchaser, the date on which
this Agreement has been Executed and delivered by Seller and such Purchaser.
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"Eligible Financial Institution" means a banking or other financial
institution, the long-term senior unsecured debt obligations of which are rated
at least A by S&P or A2 by ▇▇▇▇▇'▇.
"Emission Allowances" means all authorizations to emit specified units
of pollutants or Hazardous Substances from the Generation Facility, which units
are established by the Governmental Authority with jurisdiction over the
Generation Facility under (i) an air pollution control and emission reduction
program designed to mitigate interstate or intrastate transport of air
pollutants, (ii) a program designed to mitigate impairment of surface waters,
watersheds, or groundwater, or (iii) any pollution reduction program with a
similar purpose, in each case regardless of whether the Governmental Authority
establishing such authorizations designates such authorizations by a name other
than "allowances."
"Employees" means the employees of Seller or any of its Affiliates who
are employed in positions at or, if employed at another location, perform
substantially all their work in support of the Generation Facility.
"Employee Plan" has the meaning set forth in Section 4.17(a).
"Encumbrances" means any and all mortgages, pledges, claims, liens,
security interests, options, warrants, purchase rights, conditional and
installment sales agreements, easements, activity and use restrictions and
limitations, title exceptions, rights-of-way, deed restrictions, defects or
imperfections of title, encumbrances and charges of any kind.
"Environmental Condition" means the presence of Hazardous Substances or
a Release to the environment, wherever occurring, at the Generation Facility,
including any migration of Hazardous Substances through air, soil or groundwater
at, to or from the Generation Facility, regardless of when such presence or
Release occurred or is discovered.
"Environmental Laws" means all federal, state and local civil and
criminal laws, statutes, regulations, rules, ordinances, codes, decrees,
judgments, or judicial or administrative orders or common law relating to
pollution or protection of the environment, natural resources or human health
and safety, as the same may be amended or adopted, including, without
limitation, Laws relating to Releases or threatened Releases or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
transport, disposal or handling of Hazardous Substances, including, but not
limited to: the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. Section 9601 et seq.; the Resource Conservation and Recovery Act,
42 U.S.C. Section 6901 et seq.; the Federal Water Pollution Control Act, 33
U.S.C. Section 1251 et seq.; the Clean Air Act, 42 U.S.C. Section 7401 et seq.;
the Hazardous Materials Transportation Act, 49 U.S.C. Section 5101 et seq.; the
Toxic Substances Control Act, 15 U.S.C. Sections 2601 through 2629; the Oil
Pollution Act, 33 U.S.C. Section 2701 et seq.; the Emergency Planning and
Community Right-to-Know Act, 42 U.S.C. Section 11001 et seq.; the Safe Drinking
Water Act, 42 U.S.C. Sections 300f through 300j; the Occupational Safety and
Health Act, 29 U.S.C. Section 651 et seq.; the Surface Mining Control and
Reclamation Act of 1977, 30 U.S.C. Section 1201 et seq.; any similar laws of the
State of Texas or of any other Governmental Authority having jurisdiction over
the site at which the Generation Facility is located or otherwise applicable to
the Generation Facility or its owners or operators; and regulations implementing
the foregoing; provided that the term "Environmental Laws" shall not include
Nuclear Laws.
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"Equivalent" has the meaning set forth in Section 3.3(f)(ii).
"ERCOT" means the Electric Reliability Council of Texas, Inc., a Texas
non-profit corporation that has been certified by the PUCT as the Independent
Organization (as defined in Section 39.151 of PURA) for the ERCOT Region, or any
successor thereto.
"ERCOT Region" means the geographic area within the State of Texas
served by electric utilities, municipally owned utilities, electric cooperatives
and retail electric providers that are not synchronously interconnected with
electric transmission systems outside the State of Texas.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"Escrow Agent" means, in respect of each Purchaser, Bank of America
N.A. or another banking or financial institution acceptable to such Purchaser
and Seller.
"Escrow Agreement" means, in respect of each Purchaser, an escrow
agreement, substantially in the form of Exhibit I with such changes that the
Escrow Agent may reasonably request and that are mutually acceptable to the
Parties, to be Executed and delivered by Seller, such Purchaser and the Escrow
Agent at Closing if required pursuant to Section 3.5(c).
"Estimated Closing Adjustment" has, in respect of each Purchaser, the
meaning set forth in Section 3.5(a).
"Estimated Closing Statement" has, in respect of each Purchaser, the
meaning set forth in Section 3.5(a).
"Executed" and the correlative term "Execution" mean, in respect of any
agreement or instrument or other document, that the signatures of authorized
representatives of all parties thereto or makers thereof have been affixed
thereto, and where required (for recording or otherwise) the same shall have
been properly verified, notarized or witnessed.
"Excluded Assets" has the meaning set forth in Section 2.2.
"Excluded Liabilities" has the meaning set forth in Section 2.4.
"FERC" means the Federal Energy Regulatory Commission or any successor
thereto.
"Final Allocation" has, in respect of each Purchaser, the meaning set
forth in Section 3.7(b).
"Final Determination" means, with respect to any issue, (a) a decision,
judgment, decree or other order by any court of competent jurisdiction, which
decision, judgment, decree or other order has become final and not subject to
further appeal; (b) a closing agreement entered into under Section 7121 of the
Code or any other binding settlement agreement entered into in connection with
or in contemplation of an administrative judicial proceeding; or (c) the
completion of the highest level of administrative proceedings if a judicial
contest is not, or is no longer, available.
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"GAAP" means, in respect of Texas Genco, United States generally
accepted accounting principles and, in respect of CPS, United States generally
accepted accounting principle for proprietary funds of governmental entities, in
each case, as in effect from time to time.
"Generation Facility" means the electrical energy generation facility
named South Texas Project, as more particularly described on Exhibit A, together
with all related personal property and real property and interests therein,
including electrical generating units, electrical interconnections, associated
materials and ancillary structures, equipment and systems, but excluding the STP
Transmission Facilities (as defined in the STP Interim Restructuring Agreement).
"Generation Facility Contracts" has the meaning set forth in Section
2.1(f).
"Generation Facility Insurance Policies" means all insurance policies
carried by or for the benefit of Seller or any Affiliate thereof relating to the
ownership of the STP Interest or the operation or maintenance of the Generation
Facility including all liability, Nuclear Liability, property damage, self
insurance arrangements, retrospective assessments and business interruption
policies in respect thereof. Without limiting the generality of the foregoing,
the term "Generation Facility Insurance Policies" includes all policies issued
or administered by ▇▇▇▇ or ANI, as specified in Schedule 7.9(a).
"Good Utility Practices" means, with respect to the Generation
Facility, any of the practices, methods and acts generally engaged in or
approved by a significant portion of the electric utility industry in the United
States for similarly situated facilities in the United States during a
particular time period, or any of such practices, methods, and acts, which, in
the exercise of reasonable judgment in light of the facts known or that
reasonably should be known at the time a decision is made, could have been
expected to accomplish the desired result at a reasonable cost consistent with
good business practices, reliability, safety, and expedition. "Good Utility
Practices" are not intended to be limited to the optimum practices, methods or
acts, to the exclusion of all others, but rather to be acceptable practices,
methods, or acts generally acceptable in the electric utility industry region
during the relevant period in light of the circumstances.
"Governmental Authority" means any federal, state, local, or other
government; any governmental, regulatory or administrative agency, commission,
body or other authority or other governmental or political subdivision thereof
exercising or entitled to exercise any administrative, executive, judicial,
legislative, police, regulatory or taxing authority or power; any court or
governmental tribunal; but does not include either Purchaser, Seller, any
Affiliate of either Purchaser or Seller, or any of their respective successors
in interest or any owner or operator of the Generation Facility (if otherwise a
Governmental Authority).
"Guarantor" means, in respect of each Purchaser, any Acceptable
Guarantor which issues an Acceptable Guaranty after the Effective Date pursuant
to Section 7.20.
"Guaranty" means, in respect of Texas Genco, that certain Guaranty,
substantially in the form of Exhibit J that was Executed by Guarantor and
delivered by Texas Genco on or before the Effective Date or, in respect of each
Purchaser, any replacement Guaranty, substantially in such
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form, Executed by an Acceptable Guarantor and delivered by such Purchaser to
Seller after the Effective Date pursuant to Section 7.20.
"Hazardous Substances" means any chemical, material or substance in any
form, whether solid, liquid, gaseous, semisolid, or any combination thereof,
whether waste material, raw material, chemical, finished product, byproduct, or
any other material or article, that is listed or regulated under applicable
Environmental Laws as a "hazardous" or "toxic" substance or waste, or as a
"contaminant," or is otherwise listed or regulated under applicable
Environmental Laws because it poses a hazard to human health or the environment;
including without limitation, hazardous substances as defined in 40 CFR Part
302, petroleum products, asbestos, urea formaldehyde foam insulation, and
lead-containing paints or coatings, but shall not include Nuclear Material to
the extent regulated under Nuclear Laws.
"High-Level Waste" means (i) irradiated nuclear reactor fuel, (ii)
liquid wastes resulting from the operation of the first cycle solvent extraction
system, or its equivalent, and the concentrated wastes from subsequent
extraction cycles, or their equivalent, in a facility for reprocessing
irradiated reactor fuel and, (iii) solids into which such liquid wastes have
been converted.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976.
"Income Tax" means any Tax imposed by any Governmental Authority (i)
based upon, measured by or calculated with respect to gross or net income,
profits or receipts (including municipal gross receipt Taxes, capital gains
Taxes and minimum Taxes) or (ii) based upon, measured by or calculated with
respect to multiple bases (including corporate franchise Taxes) if one or more
of such bases is described in clause (i), in each case together with any
interest, penalties or additions attributable to such Tax.
"Indemnifiable Claim" has the meaning set forth in Section 8.7.
"Indemnitee" has the meaning set forth in Section 8.4.
"Indemnitor" has the meaning set forth in Section 8.4.
"Independent Accounting Firm" means, in respect of each Purchaser, such
recognized (on a national or regional basis), independent accounting firm as is
mutually appointed by Seller and such Purchaser for purposes of this Agreement
and, for purposes of any determination pursuant to Section 13.17, such firm
shall not then be serving as the primary auditor for AEP, Guarantor, Texas Genco
Holdings, the City, CPS or the Operating Agent and shall not have a direct or
indirect interest in any Party or the subject matter of the dispute. Such
independent accounting firm shall either be mutually agreed upon by Seller and
such Purchaser within ten (10) days after written notice from a Party to another
Party requesting or otherwise requiring a determination by the Independent
Accounting Firm, or failing agreement, such independent accounting firm having
the qualifications set forth in the preceding sentence shall be selected as
provided in the next sentence. Within five (5) days of the failure to mutually
agree upon the selection of such independent accounting firm, each of Seller and
such Purchaser shall designate a representative and the designated
representatives shall meet in Dallas, Texas or another mutually acceptable
location and deliver to each other a list of three (3) potential independent
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accounting firms, all of whom shall have the qualifications set forth in the
first sentence of this definition, the designated representatives shall then
determine by coin toss which Party's representative shall take the first turn in
striking the name of one (1) potential independent accounting firm from the
combined list of six (6) potential independent accounting firms, the
representative of the Party who wins the coin toss shall take the first turn in
striking one (1) name from the combined list, the representatives of the Parties
shall then alternate turns striking the name of one (1) independent accounting
firm from the combined list until the name of only one (1) potential independent
accounting firm remains, which shall be the Independent Accounting Firm.
"Information Memorandum" means the Confidential Information Memorandum
for the Sale of AEP Texas Central Company's Generation Assets, dated July 2003,
copies of which were furnished or made available to each Purchaser.
"Initial Purchase Price" has, in respect of each Purchaser, the meaning
set forth in Section 3.2.
"Initial Tax Adjustment Amount" means each Purchaser's Proportionate
Share of Seventeen Million Nine Hundred Fifty-Seven Thousand Seven Hundred
Seventy-Six Dollars (U.S. $17,957,776) or, in the event that, after the
Effective Date and prior to the Closing Date, the PUCT has issued an order that
changes the amount of Decommissioning Collections that Seller is authorized to
collect, each Purchaser's Proportionate Share of such other amount as is
mutually acceptable to the Parties, acting reasonably, and is determined in
accordance with the Tax Adjustment Model, calculated as of the Closing Date and
giving effect to the then current amount of Decommissioning Collections that
Seller is authorized to collect. The Initial Tax Adjustment Amount shall only be
applicable as a reduction to the Initial Purchase Price if: (i) with respect to
Texas Genco, (a) Texas Genco or, to the extent applicable, any other Person
succeeding to the rights of such Purchaser hereunder as to all or any part of
the STP Interest , would, in the absence of the IRS PLR (Texas Genco
Decommissioning Collections) or an IRS PLR Equivalent, otherwise be subject to
materially less favorable Tax treatment with respect to Decommissioning
Collections than the tax treatment currently accorded to Seller with respect to
Decommissioning Collections, and, (b) on or before the Closing Date, the IRS PLR
(Texas Genco Decommissioning Collections) shall not have been issued by the IRS
and no IRS PLR Equivalent shall have become effective; and (ii) with respect to
CPS, (a) CPS or, to the extent applicable, any other Person succeeding to the
rights of such Purchaser hereunder as to all or any part of the STP Interest,
would, in the absence of the IRS PLR (CPS Decommissioning Collections) or an IRS
PLR Equivalent, otherwise be subject to materially less favorable Tax treatment
with respect to Decommissioning Collections than the tax treatment currently
accorded to Seller with respect to Decommissioning Collections, and, (b) on or
before the Closing Date, the IRS PLR (CPS Decommissioning Collections) shall not
have been issued by the IRS and no IRS PLR Equivalent shall have become
effective.
"Intercompany Arrangements" has the meaning set forth in Section
2.2(q).
"Inventory" means the STP Ownership Share of the following items
intended to be used or consumed at the Generation Facility in the ordinary
course of business that, as of the Closing, are on hand at the Generation
Facility or listed on Schedule 1.1D: spare, replacement or other
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parts; tools, equipment, lubricants, chemicals, fluids, lubricating oils,
supplies, filters, fittings, connectors, seals, gaskets, hardware, wire and
other similar materials; maintenance, shop and office supplies; diesel fuel
associated with back-up or emergency generators; and other similar items of
personal property in existence as of the Closing, but excluding Nuclear Fuel
Inventory.
"Inventory Threshold" has the meaning set forth in Section 3.3(c).
"Inventory Value" has the meaning set forth in Section 3.3(c).
"IRS" means the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"IRS PLR (CPS Decommissioning Collections)" means, in respect of CPS, a
favorable private letter ruling from the IRS to the effect that neither CPS nor
its Nonqualified Decommissioning Fund will recognize any gain or loss, or
otherwise take into account any income or deduction, by reason of the receipt of
nuclear decommissioning costs collected by Seller, in a nonbypassable charge to
retail customers, and remitted to CPS or its Nonqualified Decommissioning Fund
pursuant to the Decommissioning Funds Collection Agreement.
"IRS PLR (Decommissioning Funds Transfer)" means a favorable private
letter ruling from the IRS as described in Schedule 7.8(b).
"IRS PLR (Texas Genco Decommissioning Collections)" means, in respect
of Texas Genco, a favorable private letter ruling from the IRS to the effect
that: (i) Texas Genco will be treated as the "eligible taxpayer" and the
"electing taxpayer" for purposes of Section 468A of the Code and the Treasury
Regulations thereunder with respect to Texas Genco's Qualified Decommissioning
Fund and, therefore, Texas Genco may make deductible contributions to its
Qualified Decommissioning Fund consisting of nuclear decommissioning costs
collected by Seller, in a nonbypassable charge to retail customers, on behalf of
Texas Genco and remitted to Texas Genco or its Decommissioning Fund pursuant to
the Decommissioning Funds Collection Agreement, and (ii) this amount will be
treated as an amount of nuclear decommissioning costs allocable to the Texas
Genco's Qualified Decommissioning Fund which is included in Purchaser's cost of
service for ratemaking purposes within the meaning of Section 468A(b)(1) of the
Code.
"IRS PLR Effective Date" means, as applicable to each Purchaser, the
first day of the calendar month following the calendar month in which the IRS
PLR (Texas Genco Decommissioning Collections), IRS PLR (CPS Decommissioning
Collections), or an IRS PLR Equivalent, as applicable, becomes effective
(whether on a prospective or retroactive basis) or, in the event that such IRS
PLR (Texas Genco Decommissioning Collections), IRS PLR (CPS Decommissioning
Collections), or the IRS PLR Equivalent shall have become effective on a
retroactive basis as of a date earlier than the Closing Date, the Closing Date.
"IRS PLR Equivalent" means any Law adopted, promulgated or issued by a
Governmental Authority (including but not limited to a rate order of the PUCT)
that: (i) with respect to Texas Genco (a) provides for or results in Tax
treatment of the amounts remitted to Texas Genco pursuant to the Decommissioning
Funds Collection Agreement that is substantially the same, in all material
respects, as the Tax treatment of such amounts that would have resulted
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from the issuance by the IRS of the IRS PLR (Texas Genco Decommissioning
Collections) from and after the IRS PLR Effective Date or (b) otherwise results
in no net, after-Tax, economic cost to Texas Genco of any difference between the
Tax treatment of such amounts then in effect and the Tax treatment of such
amounts that would have resulted from the issuance by the IRS of the IRS PLR
(Texas Genco Decommissioning Collections) from and after the IRS PLR Effective
Date, and (ii) with respect to CPS (a) provides for or results in Tax treatment
of the amounts remitted to CPS pursuant to the Decommissioning Funds Collection
Agreement that is substantially the same, in all material respects, as the Tax
treatment of such amounts that would have resulted from the issuance by the IRS
of the IRS PLR (CPS Decommissioning Collections) from and after the IRS PLR
Effective Date or (b) otherwise results in no net, after-Tax, economic cost to
CPS of any difference between the Tax treatment of such amounts then in effect
and the Tax treatment of such amounts that would have resulted from the issuance
by the IRS of the IRS PLR (CPS Decommissioning Collections) from and after the
IRS PLR Effective Date.
"Issuing Bank" means any Eligible Financial Institution that issues an
Acceptable Letter of Credit.
"Knowledge" or similar terms used in this Agreement with respect to a
Party means: (a) in the case of Seller, the extent of the actual and current
knowledge as of the Effective Date (or, with respect to the certificate
delivered pursuant to Section 9.7 or Section 10.7, as applicable, the date of
delivery of the certificate) of (i) any of the Persons listed on Part I of
Schedule 1.1E, the chief executive officer, the chief financial officer, the
chief operating officer, the chief accounting officer and the chief legal
officer or general counsel of Seller, without any implication of verification or
investigation concerning such knowledge, and (ii) any of the Persons listed on
Part II of Schedule 1.1E, after reasonable inquiry by them of the Persons listed
on Part III of Schedule 1.1E, and without any implication of verification or
investigation, other than such reasonable inquiry, concerning such knowledge;
and (b) in the case of each Purchaser, the extent of the actual and current
knowledge as of the Effective Date (or, with respect to the certificate
delivered pursuant to Section 11.6, the date of delivery of the certificate) of
any of the Persons listed on Schedule 1.1F, as to such Purchaser, the chief
executive officer, the chief financial officer, the chief operating officer, the
chief accounting officer and the chief legal officer or general counsel of such
Purchaser and Guarantor, without any implication of verification or
investigation concerning such knowledge. For purposes of clause (a)(ii) of this
definition, "reasonable inquiry" means that each of the Persons listed on Part
II of Schedule 1.1E (a) as to such Purchaser reviewed the representations and
warranties of Seller in ARTICLE 4, including the Schedules thereto or the
portion thereof indicated for such Person in Part II of Schedule 1.1E, and
participated (in person or by teleconference) in one or more meetings with the
Persons listed in Part III of Schedule 1.1E and counsel to Seller for the
purpose of reviewing and confirming the accuracy of the representations and
warranties of Seller in ARTICLE 4 and the Schedules thereto, with the
understanding that each of the Persons listed in Schedule 1.1E would be expected
to confirm in writing that such Person has reviewed such representations,
warranties and Schedules (or the portion thereof indicated for such person in
Part II of Schedule 1.1E) and that, to the best of such Person's knowledge, the
same are true and complete.
"Laws" means all statutes, rules, regulations, ordinances, orders and
codes of federal, state and local Governmental Authorities.
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"Litigated Dispute" means any claim, counterclaim, demand, cause of
action, dispute, and controversy arising out of or relating to this Agreement
(or any Ancillary Agreement or any other document delivered in connection with
this Agreement) or in any way relating to the subject matter of this Agreement
involving two or more of the Parties or their representatives, that involves one
or more claims or demands for money damages of Three Million Dollars (U.S.
$3,000,000) or more, individually or in the aggregate, or which involves a
Seller Claim for a breach of this Agreement that results in a termination of
this Agreement or other failure to consummate the Transactions; provided
however, that Litigated Disputes exclude any Special Process Dispute.
"Losses" has, in respect of each Purchaser, the meaning set forth in
Section 8.2(a) or Section 8.2(b), as applicable.
"Low-Level Waste" means radioactive material that (i) is not High-Level
Waste, Mixed Waste, Spent Nuclear Fuel or byproduct material as defined in
section 11e.(2) of the Atomic Energy Act (40 U.S.C. 2014(e)(2)), and (ii) the
NRC classifies as low-level radioactive waste.
"MAE Adjustment Amount" means, in respect of each Purchaser, the sum of
the net present value (calculated using a discount rate of 12%) of the following
(each as determined by the express written agreement of Seller and such
Purchaser, or, failing such express written agreement, upon a determination made
in accordance with Section 3.5(c) and/or Section 13.17): (i) the expenditures
reasonably likely to be required by such Purchaser as a result of any Material
Adverse Effect occurring or first manifested on or after the Effective Date and
prior to the Closing Date, expressed as an amount equal to such Purchaser's
Proportionate Share of the STP Ownership Share of expenditures reasonably likely
to be required to be made by or on behalf of the STP Owners resulting from such
Material Adverse Effect, net of actual insurance recoveries, other offsets, and
any cost-savings reasonably likely to be realized from such expenditures (each
as set forth in the final report of the Operating Agent or, absent agreement of
the Parties thereon within three (3) Business Days after delivery of the
Operating Agent's final report, as determined pursuant to Section 13.17) and
(ii) the reasonably likely revenue loss to such Purchaser (net of any operating
expenses not expended as a result of such Material Adverse Effect) as a result
of such Material Adverse Effect, such revenue loss to be computed based on the
factors set forth on Schedule 3.5(c) and the projected net decrease in
generating capacity of the Generation Facility and projected timing and duration
of any forced or unplanned outages of any STP Unit due to such Material Adverse
Effect, as set forth in the final report of the Operating Agent or, absent
agreement of the affected Parties thereon within three (3) Business Days after
delivery of the Operating Agent's final report, as determined pursuant to
Section 13.17.
"Material Adverse Effect" means any change (or changes taken together)
in, or effect on, the operations or physical condition of the Generation
Facility that is (are) materially adverse to the operations or physical
condition of the Generation Facility, including but not limited to (a) an
actual, or clearly imminent, forced or unplanned outage of any STP Unit, or any
event that causes any STP Unit to operate at a reduced generating capacity, (b)
any action taken by the STP Owners, including a vote under the STP Project
Documents, to shut down or reduce the generating capacity of the Generation
Facility (other than with respect to planned outages), (c) any action, or
inaction, on the part of any STP Owner or the Operating Agent that violates, or
might reasonably be expected to violate, the NRC Licenses, (d) the occurrence of
any nuclear
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incident or accident that would give rise to liability under the ▇▇▇▇▇-▇▇▇▇▇▇▇▇
Act (Pub. L. No. 85-256, 71 Stat. 576 (1957)), or (e) any labor strike, dispute
or other work stoppages affecting the Generation Facility (except to the extent
any such labor strike, dispute or work stoppage involves employees of or
contractors providing services or goods to a Purchaser or any Affiliate of such
Purchaser), and that is (are) reasonably likely to require the expenditure by,
or result in a loss of revenue (net of expenses saved) to, such Purchaser within
one (1) year following the Closing Date of in excess of $2,000,000 individually
or in excess of $10,000,000 in the aggregate, but excluding (1) any change (or
changes taken together) or effect generally affecting the international,
national, regional or local electric industry as a whole and not affecting the
Generation Facility materially differently from other like facilities, (2) any
change (or changes taken together) or effect resulting from changes in the
international, national, regional or local wholesale or retail markets for
electric power, (3) any change (or changes taken together) or effect resulting
from the international, national, regional or local markets for fuel used at the
Generation Facility, (4) any change (or changes taken together) in or effect on
the North American, national, regional or local transmission system, (5) any
change (or changes taken together) or effect which is cured (including by the
payment of money) before the earlier of the Closing or the termination of this
Agreement under Section 12.1, (6) any order of or action by any Governmental
Authority applicable to providers of generation, transmission or distribution of
electricity generally that imposes restrictions, regulations or other
requirements thereon, or (7) any change (or changes taken together) or effect
resulting from action or inaction by a Governmental Authority with respect to a
regional transmission operator, an independent system operator or retail access
in Texas. Any determination as to whether any condition or other matter has a
Material Adverse Effect shall be made only after taking into account all
effective insurance coverages and effective indemnifications with respect to
such condition or matter.
"Mixed Waste" means waste that (a) contains both a hazardous waste
component regulated under the Resource Conservation and Recovery Act (42 U.S.C.
Section 6901 et seq.) and a radioactive component of Source Material, Byproduct
Material or Special Nuclear Material, and (b) the NRC classifies as mixed waste
or that constitutes "mixed waste" as defined in 42 U.S.C. Section 6903(41).
"Moody's" means ▇▇▇▇▇'▇ Investors Services, Inc.
"▇▇▇▇" means Nuclear Electric Insurance Limited.
"▇▇▇▇ Accidental Outage Policy" means the ▇▇▇▇ Accidental Outage
Insurance Policy in effect from time to time, including the Declarations and
Endorsements attached thereto and made a part thereof.
"Notice of Claim" has the meaning set forth in Section 8.4.
"NRC" means the Nuclear Regulatory Commission, as established by
Section 201 of the Energy Reorganization Act of 1974, 42 U.S.C. Section 5841, as
amended, and any successor agency thereto.
"NRC Approvals" means, in respect of each Purchaser, the consent of the
NRC pursuant to Section 184 of the Atomic Energy Act and 10 C.F.R. Section 50.80
to the transfer of the Purchased
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Assets from Seller to such Purchaser, NRC approval of all conforming
administrative license amendments associated with such transfer, NRC consent to
the transfer of, and approval of any related amendments to, any Nuclear
Materials licenses associated with such transfer and any other reviews or
approvals required under the Nuclear Laws in connection with the consummation of
the applicable Transactions.
"NRC Licenses" means, together, operating licenses granted in NRC
Docket No. 50-498 and Docket No. 50-499, with respect to STP Units 1 and 2,
respectively, issued by the NRC to the STP Owners, as amended.
"Nuclear Fuel in Process" means the nuclear fuel constituents in all
stages of the fuel cycle, which are in the process of mining, milling,
conversion, enrichment or fabrication.
"Nuclear Fuel Inventory" means the nuclear fuel assemblies in the
reactor core, unenriched and enriched uranium in any physical or chemical form,
together with any related consumable supplies and chemical and gas inventories
relating to the operation of the Generation Facility under contract, or in
inventory and located at, or in transit to, the Generation Facility, including
Nuclear Fuel in Process.
"Nuclear Fuel Inventory Threshold" has the meaning set forth in Section
3.3(d).
"Nuclear Fuel Inventory Value" has the meaning set forth in Section
3.3(d).
"Nuclear Laws" means, collectively, (i) all Laws relating to: the
regulation of nuclear power plants, Nuclear Materials and the transportation and
storage of Nuclear Materials; the regulation of nuclear fuel; the enrichment of
uranium; the disposal and storage of High-Level Waste, and Spent Nuclear Fuel,
and contracts for and payments into the Nuclear Waste Fund; (ii) the Atomic
Energy Act of 1954 (42 U.S.C.Section 2011 et seq.); (iii) the Energy
Reorganization Act of 1974 (42 U.S.C.Section 5801 et seq.); (iv) the Convention
on the Physical Protection of Nuclear Material Implementation Act of 1982
(Public Law 97-351; 96 STAT. 1663); (v) the Foreign Assistance Act of 1961 (22
U.S.C.Section 2429 et seq.); (vi) the Nuclear Non-Proliferation Act of 1978 (22
U.S.C.Section 3201); (vii) the Low-Level Radioactive Waste Policy Act (42
U.S.C.Section 2021b et seq.); (viii) the Nuclear Waste Policy Act of 1982 (42
U.S.C.Section 10101 et seq.); (ix) the Low-Level Radioactive Waste Policy
Amendments Act of 1985 (42 U.S.C.Section 2021d, 471); (x) the Energy Policy Act
of 1992 (42 U.S.C.Section 13201 et seq.); (xi) the Price ▇▇▇▇▇▇▇▇ Act (Pub. L.
No. 85-256, 71 Stat. 576 (1957)); and (xii) any state or local laws analogous to
the foregoing. The term "Nuclear Laws" does not include Environmental Laws.
"Nuclear Liability" means any liability or obligation arising out of or
resulting from the radioactive, toxic, explosive, or other hazardous properties
of Nuclear Materials.
"Nuclear Material" means Source Material, Special Nuclear Material,
Low-Level Waste, High-Level Waste, the radioactive component of Mixed Waste,
Byproduct Material and Spent Nuclear Fuel.
"Off-Site Location" means any real property other than the Owned Real
Property.
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"Operating Agent" means STP Nuclear Operating Company, a Texas
non-profit corporation, as operating agent under the STP Participation Agreement
and the STP Operating Agreement, or its successor in interest.
"Original Offer" has the meaning set forth in the Recitals to this
Agreement.
"Owned Real Property" has the meaning set forth in Section 2.1(a).
"Party" means each of Seller, CPS or Texas Genco, as the context
requires; "Parties" means, collectively, Seller and one or both Purchasers, as
the context requires.
"Permits" has the meaning set forth in Section 4.5.
"Permitted Encumbrances" means (i) liens for Property Taxes and other
governmental charges and assessments which are not yet due and payable or the
validity of which is being contested in good faith by appropriate proceedings,
(ii) all exceptions set forth in the Preliminary Title Commitment which are not
otherwise a Permitted Encumbrance under another clause of this definition, (iii)
all exceptions, restrictions, easements, charges, rights-of-way and monetary and
non-monetary Encumbrances which are set forth in any Permit, (iv) inchoate
mechanics', materialmen's, laborers', carriers', workers', repairers' and other
similar liens and the rights of customers, suppliers, contractors and
subcontractors arising or incurred in the ordinary course of business, (v)
purchase money security interests in respect of personal property arising or
incurred in the ordinary course of business, (vi) zoning, entitlement,
conservation restrictions and other land use and environmental regulations of
any Governmental Authority, (vii) Encumbrances, easements or other restrictions
created or reserved pursuant to or contemplated by this Agreement, any Ancillary
Agreement or any Surviving Intercompany Arrangement, (viii) Encumbrances of
record and such Encumbrances or state of facts as an examination and/or accurate
survey of the relevant Owned Real Property would reveal (other than Encumbrances
securing indebtedness of Seller for money borrowed which are not otherwise a
Permitted Encumbrance under another clause of this definition), (ix)
restrictions and regulations imposed by any Governmental Authority or any local,
state, regional, national or international reliability council, including ERCOT,
(x) Encumbrances with respect to any of the Purchased Assets created by or
resulting from the acts or omissions of either Purchaser or the Operating Agent,
(xi) liens, charges, claims, pledges, security interests, equities and other
Encumbrances arising under the Generation Facility Contracts, or which will be
and are discharged or released either prior to, or simultaneously with, the
Closing, (xii) Encumbrances that do not apply only and exclusively to Seller or
the STP Interest but that also apply to, or constitute Encumbrances upon the
interests of, the other STP Owners in common or the Operating Agent as agent for
the STP Owners, (xiii) Encumbrances listed on Schedule 1.1G, (xiv) Seller's
Required Regulatory Approvals and Seller's Required Consents and Encumbrances
that are the subject matter thereof, (xv) CPS's Required Regulatory Approvals
and CPS's Required Consents and Encumbrances that are the subject matter
thereof, (xvi) Texas Genco's Required Regulatory Approvals and Texas Genco's
Required Consents and Encumbrances that are the subject matter thereof and
(xvii) such other Encumbrances or imperfections in or failures of title that,
individually or in the aggregate, are not reasonably likely to have a Material
Adverse Effect.
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"Person" means an individual, partnership, joint venture, corporation,
limited liability company, trust, association or unincorporated organization,
any Governmental Authority, or any other entity.
"Personal Property" has the meaning set forth in Section 4.10(a).
"Pollution Control Facilities" means those facilities listed in
Schedule 1.1H, which constitute one or more portions of the Generation Facility
(as indicated in such Schedule).
"Post-Closing Adjustment" has, in respect of each Purchaser, the
meaning set forth in Section 3.5(b).
"Post-Closing Statement" has, in respect of each Purchaser, the meaning
set forth in Section 3.5(b).
"Potential MAE Notice" has, in respect of each Purchaser, the meaning
set forth in Section 3.5(c).
"Preliminary Title Commitment" means the preliminary title insurance
commitment relating to the Generation Facility as described in Schedule 1.1I,
copies of which have been delivered or made available to each Purchaser prior to
the Effective Date.
"Property Allocation" has, in respect of each Purchaser, the meaning
set forth in Section 3.7(a).
"Property Tax" means any Tax resulting from and relating to the
assessment of real or personal property by any Governmental Authority.
"Proportionate Share" has the meaning set forth in the Recitals to this
Agreement.
"Proposed Post-Closing Adjustment" has, in respect of each Purchaser,
the meaning set forth in Section 3.5(b).
"Proposed Rule" means that certain proposed rule entitled, "Section
25.303. Nuclear Decommissioning following the Sale or Transfer of Nuclear
Generating Assets," filed in PUCT Project # 29169 on May 14, 2004, as amended,
supplemented or otherwise modified by any amendment, supplement or modification
thereto filed in said Project to which Seller and Purchasers expressly consent
in a writing duly signed by the Parties.
"PUCT" means the Public Utility Commission of Texas.
"PUHCA" means the Public Utility Holding Company Act of 1935.
"PURA" means Title 2 of the Texas Utilities Code, Tex. Util. Code ▇▇▇.
Sections 11.001- 64.159.
"Purchase Price" has, in respect of each Purchaser, the meaning set
forth in Section 3.3.
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"Purchased Assets" has, in respect of each Purchaser, the meaning set
forth in Section 2.1.
"Purchaser" and "Purchasers" have the meanings set forth in the
introductory paragraph of this Agreement.
"Purchaser Claims" has, in respect of each Purchaser, the meaning set
forth in Section 8.2(a) or Section 8.2(b), as applicable.
"Purchaser's Decommissioning Funds" has, in respect of each Purchaser,
the meaning set forth in Section 7.8(c).
"Purchaser's Nonqualified Decommissioning Fund" has, in respect of each
Purchaser, the meaning set forth in Section 7.8(c). Collectively, these funds
are referred to as "Purchasers' Nonqualified Decommissioning Funds."
"Purchaser's Qualified Decommissioning Fund" has, in respect of each
Purchaser, the meaning set forth in Section 7.8(c). Collectively, these funds
are referred to as "Purchasers' Qualified Decommissioning Funds."
"Purchaser's Required Consents" means, in respect of CPS, CPS's
Required Consents and, in respect of Texas Genco, Texas Genco's Required
Consents.
"Purchaser's Schedules" means, in respect of CPS, Schedule 5.10 and, in
respect of Texas Genco, Schedule 6.10.
"Purchaser's Required Regulatory Approvals" means, in respect of CPS,
CPS's Required Regulatory Approvals and, in respect of Texas Genco, Texas
Genco's Required Regulatory Approvals.
"Qualified Annexed Area" has the meaning defined by Section 141(d)(3)
of the Code.
"Qualified Service Area" has the meaning defined by Section 141(d)(3)
of the Code.
"Release" means any release, spill, leak, discharge, abandonment,
disposal, pumping, pouring, emitting, emptying, injecting, leaching, dumping,
depositing, dispersing, allowing to escape or migrate into or through the
environment (including ambient air, surface water, ground water, wetlands, land
surface and subsurface strata or within any building, structure, facility or
fixture) of any Hazardous Substance, including the abandonment or discarding of
Hazardous Substances in barrels, drums, or other containers.
"Remediation" means any action of any kind to address an Environmental
Condition or Release or threatened Release or the presence of Hazardous
Substances on or in the air, soil or groundwater, at the Generation Facility or
any Off-Site Location including the following: (i) monitoring, investigation,
assessment, treatment, cleanup, containment, remediation, removal, mitigation,
response or restoration work; (ii) obtaining any permits, consents, approvals or
authorizations of any Governmental Authority necessary to conduct any such work;
(iii) preparing and implementing any plans or studies for such work; (iv)
obtaining a written notice
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from a Governmental Authority with jurisdiction under applicable Environmental
Laws that no material additional work is required by such Governmental
Authority; (v) any response to, or preparation for, any inquiry, order, hearing
or other proceeding by or before any Governmental Authority with respect to any
such Environmental Condition, Release or threatened Release or presence of
Hazardous Substances, and (vi) any other activities reasonably determined by the
Operating Agent or Seller to be necessary or appropriate or required under
Environmental Laws to address an Environmental Condition, the presence of or
Release of Hazardous Substances in the air, soil or groundwater, at the
Generation Facility or any Off-Site Location.
"Revenue Bonds" has the meaning set forth in Section 7.18(a)(i).
"S&P" means Standard & Poor's Ratings Services.
"Sales Tax Determination Letter" has the meaning set forth in Section
3.8(a).
"Scheduled Adjustment Date" has the meaning set forth in Section 3.6.
"Seller" has the meaning set forth in the introductory paragraph of
this Agreement.
"Seller Claims" has in respect of each Purchaser, the meaning set forth
in Section 8.3(a) or Section 8.3(b), as applicable.
"Seller Financial Statements" means the financial statements of Seller,
including the notes thereto, included in the most recent annual report on Form
10-K and all subsequent quarterly reports on Form 10-Q that Seller has filed
with the Securities and Exchange Commission.
"Seller Group" means Seller, its Affiliates and each of its and their
respective officers, directors, employees, attorneys, agents and successors and
assigns.
"Seller's Decommissioning Funds" means Seller's Qualified
Decommissioning Funds and Seller's Non-Qualified Decommissioning Funds, in each
case relating to the Generation Facility.
"Seller's Non-Qualified Decommissioning Funds" means the external trust
funds that do not (or funds that do not) meet the requirements of Code Section
468A and Treasury Reg. Section 1.468A-5, each maintained by Seller with respect
to an STP Unit prior to the Closing pursuant to the Decommissioning Trust
Agreement.
"Seller's Qualified Decommissioning Funds" means the external trust
funds (Federal tax identification nos. ▇▇-▇▇▇▇▇▇▇ and ▇▇-▇▇▇▇▇▇▇) that are
intended to meet the requirements of Code Section 468A and Treas. Reg. Section
1.468A-5, each as a "nuclear decommissioning reserve fund", and each maintained
by Seller with respect to an STP Unit prior to the Closing pursuant to the
Decommissioning Trust Agreement.
"Seller's Required Consents" means the consent, waiver, agreement or
release of any Person other than a Governmental Authority, or other action or
event, necessary for Seller to consummate the Transactions, as specified on
Schedule 1.1J.
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"Seller's Required Regulatory Approvals" means (i) the approval of the
Transactions by any Governmental Authority of competent jurisdiction over either
of the Parties or the Generation Facility that is required for Seller to
consummate the Transactions as specified on Part I of Schedule 1.1K and (ii) the
notice to, filing with, or consent, approval or authorization of, any
Governmental Authority as specified on Part II of Schedule 1.1.K.
"Seller's Schedules" means Schedule 2.1(f) and any of the Schedules to
ARTICLE 4 (or any Part of any such Schedule).
"Site" means the parcels of land and improvements forming a part of the
Generation Facility, or used in connection therewith and included in the
Purchased Assets. Any reference to the Site shall include, by definition, the
surface and subsurface interests, including the soils and groundwater present at
the Site, and any reference to items "at the Site" shall include all items "at,
on, in, upon, over, across, under and within" the Site.
"Source Material" means (a) uranium or thorium, or any combination
thereof, in any physical or chemical form or (b) ores that contain by weight
one-twentieth of one percent (0.05%) or more of (i) uranium, (ii) thorium, or
(iii) any combination thereof. Source Material does not include Special Nuclear
Material.
"Special Process Dispute" means any dispute the resolution of which is
covered by Section 3.6, Section 3.7, Section 7.6, or Section 13.17.
"Special Nuclear Material" means plutonium, uranium-233, uranium
enriched in the isotope-233 or in the isotope-235, and any other material that
the NRC determines to be "Special Nuclear Material." Special Nuclear Material
also refers to any material artificially enriched by any of the foregoing
materials or isotopes. Special Nuclear Material does not include Source
Material.
"Spent Nuclear Fuel" means fuel that has been withdrawn from a nuclear
reactor following irradiation, and has not been chemically separated into its
constituent elements by reprocessing. Spent Nuclear Fuel includes Special
Nuclear Material, Byproduct Material, Source Material and other radioactive
materials associated with nuclear fuel assemblies.
"SPP" means Southwest Power Pool Inc., an Arkansas not-for-profit
corporation.
"SPP Region" means the North American Electric Reliability Council
region served by the members of SPP.
"STP Interest" has the meaning set forth in the Recitals to this
Agreement.
"STP Interim Restructuring Agreement" means that certain Interim
Restructuring Agreement, dated August 15, 2002, by and among the City of San
Antonio, acting through the City Public Service Board of San Antonio, Central
Power and Light Company, Houston Lighting & Power Company, a division of Reliant
Energy, Incorporated, the City of Austin, CenterPoint Energy Houston Electric,
LLC and Texas ▇▇▇▇▇, ▇▇.
-23-
"STP Operating Agreement" means that certain South Texas Project
Operating Agreement, dated effective as of November 17, 1997, by and among the
City of San Antonio, acting through the City Public Service Board of San
Antonio, Central Power and Light Company, Houston Lighting & Power Company, a
division of Houston Industries Incorporated, City of Austin, and STP Nuclear
Operating Company.
"STP Owner" means each Person who, as of the relevant time, is a
"Participant" (as "Participant" is defined in the STP Participation Agreement")
under the STP Participation Agreement, which, as of the date of this Agreement,
means CPS, Seller, CenterPoint Energy Houston Electric, LLC, a Texas limited
liability company, Texas ▇▇▇▇▇, ▇▇, a Texas limited partnership, and the City of
Austin, in each case in such Person's capacity as such a Participant.
"STP Owners Licenses" has the meaning set forth in Section 4.15(b).
"STP Ownership Share" means the STP Interest expressed as a percentage
of the undivided ownership interests, as tenants in common, of the STP Owners in
the Generation Facility, which is 25.2%.
"STP Participation Agreement" means that certain Amended and Restated
South Texas Project Participation Agreement, dated effective as of November 17,
1997, by and among City of San Antonio, acting through the City Public Service
Board of San Antonio, Central Power and Light Company, Houston Lighting & Power
Company, a division of Houston Industries Incorporated, and City of Austin.
"STP Project Documents" means, collectively, the Project Agreements
listed on Schedule 2.1(f).
"STP Statements" means, collectively, the South Texas Project Electric
Generating Station and South Texas Project Nuclear Operating Company combined
statements of owners' assets, combined balance sheets, combined statements of
expenses and miscellaneous income (deductions), combined statements of selected
cash flows and combined statements of owners' liabilities as of and for the
years ended December 31, 2003, 2002 and 2001, together with the related
independent auditors' report of Deloitte & Touche LLP.
"STP Unit" means either of the two nuclear steam electric generating
units comprising the Generation Facility, as more particularly described on
Exhibit A.
"Surviving Intercompany Arrangements" means the Generation Facility
Contracts listed or described under the heading "Surviving Intercompany
Arrangements" on Part I of Schedule 4.9.
"Tax" or "Taxes" means any federal, state, local or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
Section 59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property (including
assessments, fees or other charges based on the use or ownership of real
property), personal property, transactional, use, transfer, registration, value
added, alternative or add-on minimum, estimated tax, or other tax of any kind
whatsoever, including any interest,
-24-
penalty or addition thereto, whether disputed or not, including, without
limitation, any item for which liability arises as a transferee or
successor-in-interest.
"Tax Adjustment Model" means the financial model agreed upon by Seller,
Texas Genco, and CPS for the purposes of calculating the net present value
(calculated using a discount rate of 12%) of the amount of the adverse tax
consequence that Texas Genco and CPS are reasonably likely to incur as a direct
result of the IRS not issuing the IRS PLR (Texas Genco Decommissioning
Collections), the IRS PLR (CPS Decommissioning Collections), or an IRS PLR
Equivalent not becoming effective, including the instructions related thereto, a
copy of which (in the form of a CD-ROM labeled "AEP TCC/TGLP PSA Tax Adjustment
Model (08/23/2004)") is attached as Exhibit K.
"Tax Return" means any return, report, information return, rendition
form, declaration, claim for refund, or other document, together with all
amendments and supplements thereto (including all related or supporting
information), required to be supplied to any Governmental Authority responsible
for the administration of Laws governing Taxes.
"Taxing Authority" has the meaning set forth in Section 3.8(d).
"TCEQ" means the Texas Commission on Environmental Quality.
"Termination Date" has the meaning set forth in Section 12.1(e).
"Texas Genco Group" means Texas Genco, its Affiliates, and each of its
and their officers, directors, employees, attorneys, agents and successors and
assigns
"Texas Genco Holdings" means Texas Genco Holdings, Inc. a Texas
Corporation.
"Texas Genco Holdings Financial Statements" has the meaning set forth
in Section 6.11.
"Texas Genco Purchased Interest" has the meaning set forth in the
Recitals to this Agreement.
"Texas Genco's Required Consents" means the consent, waiver, agreement
or release of any Person other than a Governmental Authority, or other action or
event, necessary for Texas Genco to consummate the applicable Transactions, as
specified in Schedule 1.1L.
"Texas Genco's Required Regulatory Approvals" means (i) the approval of
the applicable Transactions by any Governmental Authority of competent
jurisdiction over any of the Parties or the Generation Facility that is required
for Texas Genco to consummate the applicable Transactions as specified on Part I
of Schedule 1.1M and (ii) the notice to, filing with, or consent, approval or
authorization of, any Governmental Authority as specified on Part II of Schedule
1.1M.
"Texas Genco Termination Event" means that Texas Genco shall no longer
be obligated to purchase the Texas Genco Purchased Interest as contemplated
hereby, or this Agreement shall otherwise have been terminated in respect of
Texas Genco, as specified in a notice from Seller to CPS.
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"Third Party Claim" means a claim by a Person that is not a member of
the Seller Group, the CPS Group or the Texas Genco Group, including any claim
for the costs of conducting Remediation, or seeking an order or demanding that a
Person undertake Remediation.
"Title Agent" has the meaning set forth in Section 9.6 and Section
10.6.
"Title Insurer" has the meaning set forth in Section 9.6 and Section
10.6.
"Title Policy" has the meaning set forth in Section 9.6 and Section
10.6.
"Transactions" has the meaning set forth in the Recitals.
"Transfer Tax" means any sales Tax, transfer Tax, transaction Tax,
conveyance fee, use Tax, stamp Tax, stock transfer Tax or other similar Tax,
including any related penalties, interest and additions thereto.
"Transferable Permits" means all those Permits and Seller Licenses
relating to the Generation Facility (and all applications pertaining thereto),
including the NRC Licenses, that are transferable under applicable Law from
Seller to each Purchaser with or without a filing with, notice to, or consent or
approval of any Governmental Authority.
"USEPA" means the United States Environmental Protection Agency.
SECTION 1.2 CERTAIN INTERPRETIVE MATTERS. In this Agreement, unless the
context otherwise requires:
(a) the singular number includes the plural number and vice
versa;
(b) reference to any Person includes such Person's successors
and assigns but, if applicable, only if such successors and assigns are
permitted by this Agreement, and reference to a Person in a particular capacity
excludes such Person in any other capacity;
(c) reference to any gender includes each other gender;
(d) reference to any agreement (including this Agreement),
document or instrument means such agreement, document or instrument as amended
or modified and in effect from time to time in accordance with the terms thereof
and, if applicable, the terms hereof;
(e) reference to any Article, Section, Schedule or Exhibit
means such Article, Section, Schedule or Exhibit of or to this Agreement, and
references in any Article, Section, Schedule, Exhibit or definition to any
clause means such clause of such Article, Section, Schedule, Exhibit or
definition;
(f) any accounting term used and not otherwise defined in this
Agreement or any Ancillary Agreement has the meaning assigned to such term in
accordance with GAAP;
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(g) "hereunder," "hereof," "hereto" and words of similar
import are references to this Agreement as a whole and not to any particular
Section or other provision hereof or thereof;
(h) "including" (and with correlative meaning "include") means
including without limiting the generality of any description preceding such
term;
(i) relative to the determination of any period of time,
"from" means "from and including," "to" means "to but excluding" and "through"
means "through and including;"
(j) reference to any Law (including statutes and ordinances)
means such Law as amended, modified codified or reenacted, in whole or in part,
and in effect from time to time, including rules and regulations promulgated
thereunder (other than the Proposed Rule);
(k) "dollars," "U.S. dollars," or "$" means lawful currency of
the United States of America;
(l) any agreement, instrument, insurance policy, statute,
regulation, rule or order defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement, instrument,
insurance policy, statute, regulation, rule or order as from time to time
amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes, regulations,
rules or orders) by succession of comparable successor statutes, regulations,
rules or orders and references to all attachments thereto and instruments
incorporated therein; and
(m) any defined term shall be construed, as the context
requires, as applying or referring to either of the Purchasers individually, or
to both of the Purchasers collectively, subject to Section 13.11.
ARTICLE 2
PURCHASE AND SALE
SECTION 2.1 PURCHASED ASSETS. Upon the terms and subject to the
conditions contained in this Agreement, at the Closing, Seller shall (i) sell,
convey, assign, transfer and deliver to Texas Genco, and Texas Genco will
purchase and acquire from Seller, all of Seller's right, title and interest in,
to and under the Texas Genco Purchased Interest, and Texas Genco's Proportionate
Share of Seller's right, title and interest in, to and under other assets,
interests, properties, facilities, rights, licenses or contracts used, or held
for use, primarily (or, to the extent set forth below, exclusively) in
connection with Seller's ownership of the STP Interest (and, to the extent set
forth below, customarily located at the Generation Facility or identified or
described on a Schedule hereto), each as in existence on the Closing Date,
including Texas Genco's Proportionate Share of Seller's right, title and
interest in, to and under the assets, interests, properties, facilities, rights,
licenses or contracts described in clauses (a)-(r) below, but excluding all
Excluded Assets; and (ii) sell, convey, assign, transfer and deliver to CPS, and
CPS will purchase and acquire from Seller, all of Seller's right, title and
interest in, to and under the CPS Purchased Interest, and CPS's Proportionate
Share of Seller's right, title and interest in, to and under other assets,
interests, properties, facilities, rights, licenses or contracts used, or held
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for use, primarily (or, to the extent set forth below, exclusively) in
connection with Seller's ownership of the STP Interest (and, to the extent set
forth below, customarily located at the Generation Facility or identified or
described on a Schedule hereto), each as in existence on the Closing Date,
including CPS's Proportionate Share of Seller's right, title and interest in, to
and under the assets, interests, properties, facilities, rights, licenses or
contracts described in clauses (a)-(r) below, but excluding all Excluded Assets
(in respect of each Purchaser, as to its respective Proportionate Share,
collectively, the "Purchased Assets"):
(a) The parcels of real property owned by Seller, or by the
Operating Agent on behalf of Seller as one of the STP Owners, relating
exclusively to the Generation Facility and described on Schedule 2.1(a), and all
appurtenances thereto, together with all buildings, facilities, fixtures and
other real property improvements thereon and thereto, including all construction
work in progress (the "Owned Real Property");
(b) The machinery, mobile or otherwise, equipment, vehicles,
tools, fixtures, furniture and furnishings, and other tangible personal property
related to or used, or useful, in the operation of the Generation Facility that
(i) are not Inventory, (ii) as of the Closing, are licensed, owned or leased by
Seller, or by the Operating Agent on behalf of the STP Owners or on behalf of
Seller as one of the STP Owners, and (iii) are used primarily in the operation
of the Generation Facility, and are listed on Part I of Schedule 2.1(b) or in
the ordinary course of business are customarily located at the Generation
Facility, including any electrical upgrade, interconnection or similar equipment
listed on Part II of Schedule 2.1(b);
(c) The Nuclear Fuel Inventory;
(d) The Inventory;
(e) The Transferable Permits and any other permits, licenses,
approvals, registrations, franchises, certificates, other authorizations and
consents of Governmental Authorities or other Persons relating to the ownership,
lease, maintenance or operation of the Generation Facility that, in each case,
as of the Closing are in favor of Seller or the STP Owners or the Operating
Agent, as agent for the STP Owners, except for and to the extent that any of the
Transferable Permits relates to any of the Excluded Assets;
(f) The contracts, agreements, arrangements, licenses and
leases of any nature to which Seller is a party, or to which the Operating
Agent, on behalf of the STP Owners or on behalf of Seller, as one of the STP
Owners, is a party, and by or to which Seller is or the STP Owners are bound or
subject, including those listed or described on Schedule 2.1(f), in each case to
the extent exclusively relating (in whole or in part) to the ownership, lease,
maintenance or operation of the Generation Facility (the "Generation Facility
Contracts");
(g) Except to the extent such materials are subject to
confidentiality, nondisclosure or similar agreements in favor of third parties
whose consent to transfer is not obtained, the non-privileged books, records,
documents, drawings, reports, operating data, operating safety and maintenance
manuals, inspection reports, engineering design plans, blueprints,
specifications and procedures and similar items, (i) located at and relating
exclusively to the Generation Facility, or (ii) otherwise in Seller's possession
and exclusively relating to the
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Generation Facility or Purchased Assets if specifically identified and
reasonably requested by a Purchaser; provided, however, that Seller shall have
the right prior to Closing to make copies of such documents and to make
non-exclusive use of them thereafter to the extent such non-exclusive use is not
prohibited by the terms of such document or any other contract by which Seller
is bound;
(h) Unexpired, transferable warranties and guarantees from
third parties to the extent relating to any of the Purchased Assets;
(i) Subject to Section 2.2(i) and Section 2.2(j), rights in,
to and under (i) any claims or causes of action against any third parties that
are not members of the Seller Group (including indemnification and contribution
claims) to the extent relating exclusively to any of the Purchased Assets,
Seller's Decommissioning Funds and/or the assets therein, or the Assumed
Liabilities, whether accruing prior to, on or after the Closing, if any,
including any claims for refunds, prepayments, offsets, recoupment, judgments
and the like, whether received as payment or credit against future liabilities,
relating to the Generation Facility, and (ii) any actual or potential claim or
cause of action as an STP Owner against the Operating Agent, whether known or
unknown, contingent or accrued, arising prior to and in existence at the
Closing;
(j) All Spent Nuclear Fuel presently stored at the Generation
Facility (including any such fuel which may have been used in connection with
generating Seller's share of electricity at Generation Facility);
(k) Rights relating to or pertaining to any defaults by the
Department of Energy under the DOE Standard Contract (including any claims for
failure by the Department of Energy to take Spent Nuclear Fuel) accrued prior
to, on or after the Closing Date, whether relating to periods prior to, on or
after the Closing Date, and all other rights of Seller against the Department of
Energy, with respect to, arising out of or in connection with the Generation
Facility;
(l) Subject to Section 3.4, advance payments, prepayments,
prepaid expenses, deposits and the like (i) made by Seller or the Operating
Agent on Seller's behalf in the ordinary course of business prior to the
Closing, specifically with respect to the Generation Facility, (ii) which exist
as of the Closing, and (iii) with respect to which a Purchaser will receive the
benefit after the Closing;
(m) Claims relating to or pertaining to any refund or credit
received on or after the Closing Date by a Purchaser of all or any part of
Department of Energy Decommissioning and Decontamination Fees paid by or on
behalf of a Purchaser on or after the Closing Date in respect of the Generation
Facility;
(n) Any renewable energy credits, renewable energy credit
offsets (to the extent of Seller's right, title or interest in, to or under the
same, if any) or any similar "green credits" (other than Emission Allowances)
existing under applicable Law, including Environmental Laws, to the extent
relating to the Generation Facility.
(o) Except for Excluded Assets, miscellaneous assets
necessary, useful or used in or ancillary to operating the Generation Facility
and primarily utilized in connection
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therewith, but not otherwise enumerated above, and that (i) in the ordinary
course of business are typically located at the Generation Facility or (ii) are
owned, operated, maintained or under the control of the Operating Agent or one
of its Affiliates, or are listed or described on Schedule 2.1(o);
(p) All Emission Allowances specifically allocated by the
USEPA or any other applicable Governmental Authority with jurisdiction over the
Generation Facility to any of the Purchased Assets for any calendar year
subsequent to the calendar year in which the Closing occurs;
(q) All Emission Allowances specifically allocated by the
USEPA or any other applicable Governmental Authority with jurisdiction over the
Generation Facility to any of the Purchased Assets for the calendar year in
which the Closing occurs; and
(r) Any Emission Allowances that (i) were specifically
allocated by the USEPA or any other applicable Governmental Authority with
jurisdiction over the Generation Facility to any of the Purchased Assets for any
calendar year prior to the calendar year in which the Closing occurs and (ii)
have not been consumed.
SECTION 2.2 EXCLUDED ASSETS. Consistent with the provisions of Section
13.1, nothing in this Agreement will constitute or be construed as conferring on
either Purchaser, and neither Purchaser shall be entitled to purchase or
acquire, any right, title or interest in, to or under the following assets,
interests, properties, facilities, rights, licenses or contracts (the "Excluded
Assets"), except to the extent Seller owns an interest in such assets,
interests, properties, facilities, rights, licenses or contracts as a tenant in
common with the other STP Owners, in which event and to such extent, Seller's
undivided interest in such assets, interests, properties, rights, licenses and
contracts shall constitute Purchased Assets. The following are the Excluded
Assets:
(a) The assets listed or described on Schedule 2.2(a), which
are related to the Purchased Assets but are specifically excluded from the
Transactions;
(b) Certificates of deposit, shares of stock, securities,
bonds, debentures, evidences of indebtedness, and interests in joint ventures,
partnerships, limited liability companies and other entities, except the assets
comprising Seller's Decommissioning Funds to the extent assignable hereunder;
(c) Cash, cash equivalents, bank deposits, accounts and notes
receivable (trade or otherwise), and similar working capital items, except for
(i) such assets on deposit with, or under the control of, the Operating Agent
and (ii) the assets comprising Seller's Decommissioning Funds;
(d) Any and all data and information pertaining to customers
of Seller or any of its Affiliates, whether or not located at the Generation
Facility;
(e) Rights in, to and under all contracts, agreements,
arrangements or commitments of any nature to the extent not assigned to a
Purchaser, or the obligations of which are not assumed by a Purchaser, under the
terms of this Agreement;
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(f) All trade accounts receivable, notes, bonds and other
evidences of indebtedness and any other rights to receive payments accrued or
arising out of sales from the Generation Facility prior to the Closing and the
security arrangements, if any, related thereto, including any rights with
respect to any third party collection procedures or any other actions or
proceedings which have been commenced in connection therewith;
(g) Rights arising under this Agreement or any instrument or
document Executed and delivered pursuant to the terms hereof;
(h) Any and all books and records not described in Section
2.1(g);
(i) All of Seller's rights under any Generation Facility
Insurance Policies in respect to any and all claims made against Seller or any
of Seller's Affiliates under such policies whether such claims are asserted
before, on or after the Closing Date and all rights to any proceeds payable in
respect of such claims under any such policy;
(j) Any claims or causes of action, choses in action, rights
of recovery, rights of set-off, rights to refunds and similar rights, including
but not limited to claims for refunds, prepayments, offsets, recoupments, and
insurance proceeds, condemnation awards, judgments and the like and rights in,
to or under any insurance policy or refund of Taxes, relating to or arising out
of the period prior to Closing, (i) that do not arise from events,
circumstances, occurrences or conditions that create a liability for which a
Purchaser is responsible hereunder as an Assumed Liability, and (ii) in respect
of which Seller or any of its Affiliates has incurred out-of- pocket costs or
losses on the basis of which such claims, choses in action, rights of recovery,
rights of set-off, rights to refunds or similar rights may be asserted, but only
to the extent of such costs and losses incurred prior to Closing;
(k) All privileged or proprietary materials, documents,
information, media, methods and processes, except to the extent owned by the STP
Owners in common or by the Operating Agent on behalf of the STP Owners or on
behalf of Seller as one of the STP Owners, and any and all rights to use the
same, including the AEP Marks and other intangible assets of an intellectual
property nature, and computer software that is proprietary to Seller or any of
its Affiliates, or the use of which under the pertinent license therefor is
limited to operation by Seller or any of its Affiliates or on equipment owned by
Seller or any of its Affiliates, including those listed or described on Schedule
2.2(k);
(l) The right to receive mail and other communications
relating to any of the Excluded Assets or Excluded Liabilities, all of which
mail and other communications, to the extent received by a Purchaser, shall
promptly be forwarded by such Purchaser to Seller;
(m) Claims relating to or pertaining to any refund or credit
on or after the Closing Date of all or any part of Department of Energy
Decommissioning and Decontamination Fees paid by or on behalf of Seller in
respect of the Generation Facility;
(n) Seller's notional account balance at ▇▇▇▇ attributable to
any Generation Facility Insurance Policy, including ▇▇▇▇ Accidental Outage
Policy coverage with respect to the STP Interest or the Generation Facility, and
all policyholder distributions in the future in respect of same;
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(o) All tariffs, agreements and arrangements to which Seller
is a party for the purchase or sale of electric capacity and/or energy or for
the purchase of transmission or ancillary services, except for tariffs,
agreements or arrangements to which Seller is a party because such tariffs,
agreements or arrangements were entered into by the STP Owners in common or by
the Operating Agent as agent for the STP Owners;
(p) All electrical transmission or distribution assets (as
opposed to generation facilities or other assets) of Seller or any of its
Affiliates located at or forming a part of the Generation Facility, including
all switchyard facilities, substation facilities and support equipment and the
easements to use the real property on which they are located, if any, as
contemplated in the STP Interim Restructuring Agreement, as well as all
easements, permits, contracts, warranties, rights and entitlements, to the
extent they relate to or benefit such transmission or distribution assets (other
than any electrical transformation, interconnection or similar equipment
identified on Schedule 2.1(b), all of which is included as Purchased Assets);
(q) Any contract, agreement, arrangement or commitment of any
nature in respect of any intercompany transaction between Seller, on the one
hand, and any Affiliate thereof, on the other hand, whether or not such
transaction relates to any contribution to capital, loan, the provision of goods
or services, tax sharing arrangements, payment arrangements, intercompany
advances, charges or balances, or the like, excluding the Ancillary Agreements
and the Surviving Intercompany Arrangements (collectively, the "Intercompany
Arrangements"); and
(r) Assets, interests, properties, facilities, rights,
licenses or contracts of Seller that are not used or held for use primarily in
connection with the ownership of the STP Interest or operation of the Generation
Facility.
At any time or from time to time, up to ninety (90) days following the Closing,
any and all of the Excluded Assets may be removed from the Generation Facility
by Seller (at no expense to a Purchaser, but without charge by a Purchaser for
temporary storage), provided that Seller shall do so in a manner that does not
unduly or unnecessarily disrupt normal business activities at the Generation
Facility, and provided further that Excluded Assets may be retained at the
Generation Facility to the extent permitted by easements, licenses, agreements
or similar arrangements in favor of Seller or any of its Affiliates.
SECTION 2.3 ASSUMPTION OF LIABILITIES. Upon the Closing, each Purchaser
will assume its respective Proportionate Share of, and will pay, perform and
discharge when due (in accordance with each Purchaser's Proportionate Share),
all of Seller's obligations and liabilities of any kind or nature whatsoever
related to, arising from or associated with any of the following to the extent
relating to any of the Purchased Assets, except for the Excluded Liabilities (in
respect of each Purchaser, as to its respective Proportionate Share,
collectively, the "Assumed Liabilities"):
(a) Except for the payment obligations prorated to Seller
under Section 3.4, all liabilities and obligations under all contracts,
agreements, arrangements, commitments, undertakings, and licenses assigned to a
Purchaser under this Agreement, including the Generation Facility Contracts and
the Transferable Permits, except in each case to the extent
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such liabilities and obligations, but for a material breach or default by Seller
or a related waiver or extension obtained by Seller, would have been paid,
performed or otherwise discharged on or prior to the Closing Date or to the
extent the same arise out of any such material breach or default by Seller or
obtained related waiver or extension obtained by Seller; provided that, for
purposes of the foregoing, no such breach, default, waiver or extension shall
include or consist of any such breach, default, waiver or extension that is or
has been also engaged in, obtained by or agreed to by the STP Owners in common
or by the Operating Agent acting on behalf of any STP Owner, including Seller;
(b) All liabilities or obligations of Seller arising under or
relating to the following: (i) the costs for corrective actions associated with
any violation or alleged violation of Environmental Laws with respect to the
ownership, lease, maintenance or operation of any of the Purchased Assets, on or
after the Closing Date, regardless of when events giving rise to corrective
action occurred; (ii) any fines or penalties arising in connection with any
violation or alleged violation of Environmental Laws with respect to the
ownership, lease, maintenance or operation of any of the Purchased Assets, on or
after the Closing Date; (iii) loss of life, injury to Persons or property or
damage to natural resources (whether or not such loss, injury or damage arose or
was made manifest before the Closing Date or arises or becomes manifest on or
after the Closing Date), in each case caused (or allegedly caused) by any
Environmental Condition or the presence or Release of Hazardous Substances at,
on, in, under, or migrating from or to any of the Purchased Assets prior to, on
or after the Closing Date, including any Environmental Condition or Hazardous
Substances contained in building materials at any of the Purchased Assets (or in
environmental media at adjacent properties to the extent that such Hazardous
Substances have migrated from the Purchased Assets) or in the soil, surface
water, sediments, groundwater, landfill cells, or in other environmental media
at any of the Purchased Assets (or in environmental media at adjacent properties
to the extent that such Hazardous Substances have migrated from the Purchased
Assets); and (iv) the investigation or Remediation (whether or not such
investigation or Remediation commenced before the Closing Date or commences on
or after the Closing Date) of any Environmental Condition or Hazardous
Substances that are present or have been Released prior to, on or after the
Closing Date at, on, in, under or migrating from or to any of the Purchased
Assets or in the soil, surface water, sediments, groundwater, landfill cells or
in other environmental media at the Purchased Assets (or in environmental media
at adjacent properties to the extent that such Hazardous Substances have
migrated from the Purchased Assets); provided that nothing set forth in this
Section 2.3(b) shall require a Purchaser to assume any liabilities or
obligations that are Excluded Liabilities pursuant to Section 2.4(h) or Section
2.4(i);
(c) Any liabilities or obligations of Seller in respect of
Decommissioning and the Decommissioning costs related thereto, whether arising
prior to, on or after the Closing Date;
(d) Subject to the proration provisions of Section 3.4, all
liabilities and obligations for any Department of Energy Decommissioning and
Decontamination Fees due and payable on or after the Closing Date and any
additional Decommissioning and Decontamination Fees that become effective on or
after the Closing Date, whether assessed with respect to any period occurring
prior to, on or after the Closing Date;
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(e) Other than the liabilities and obligations of Seller in
respect of Decommissioning, which are addressed in Section 2.3(c) or in respect
of Decommissioning and Decontamination Fees which are addressed in Section
2.3(d), all liabilities and obligations of Seller arising under or relating to
Nuclear Laws, and all liabilities and obligations of Seller arising under or
relating to Nuclear Materials or any claim in respect thereof, whether based on
Nuclear Laws, Environmental Laws, common law or otherwise (including liabilities
and obligations for Department of Energy Decommissioning and Decontamination
Fees due for periods following the Closing), whether such liabilities or
obligations are known or unknown, contingent or accrued, in each case, arising
or occurring prior to, on or after the Closing Date, including:
(i) all asserted or unasserted liabilities or
obligations to third parties (including employees of the Operating
Agent) for personal injury or tort, or any other theory of liability,
arising out of the ownership, lease, maintenance or operation of any of
the Purchased Assets prior to, on or after the Closing Date;
(ii) all liabilities and obligations arising out of
or resulting from the transportation, treatment, storage or disposal of
any Nuclear Materials; and
(iii) all liabilities and obligations arising out of
or resulting from a "nuclear incident" or "precautionary evacuation"
(as such terms are defined in the Atomic Energy Act) at the Generation
Facility, or any other licensed nuclear reactor site in the United
States, or in the course of the transportation of Nuclear Materials to
or from the Generation Facility, or any other such site prior to, on or
after the Closing Date, together with any and all liabilities for
deferred premiums assessed in connection with such a nuclear incident
or precautionary evacuation under any applicable NRC or industry
retrospective rating plan or insurance policy, including any mutual
insurance pools established in compliance with the requirements imposed
under Section 170 of the Atomic Energy Act and 10 C.F.R. Part 140 or 10
C.F.R. Section 50.54(w) and, subject to Section 3.4, all liabilities
and obligations of Seller for retrospective premium obligations under
the Generation Facility Insurance Policies;
(f) Any and all liabilities and obligations respecting any
changes or improvements needed to the Purchased Assets, if any, for them to be
in material compliance with respect to safety, building, fire, land use, access
(including the Americans With Disabilities Act) or similar Laws respecting the
physical condition of the Purchased Assets;
(g) Without limiting the representations and warranties of
Seller contained herein or a Purchaser's rights for a breach thereof, any and
all liabilities, obligations, claims, fines, penalties and expenses not
otherwise enumerated above which in any way arise out of or are related to or
associated with the ownership, possession, use or operation of any of the
Purchased Assets before or after the Closing, including any of the foregoing
arising out of or resulting from any change in Law or decision or order of any
Governmental Authority; and
(h) All other liabilities or obligations expressly allocated
to a Purchaser in this Agreement or in any of the Ancillary Agreements.
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SECTION 2.4 EXCLUDED LIABILITIES. Consistent with the provisions of
Section 13.1, neither Purchaser shall assume or be obligated to pay, perform or
otherwise discharge the following liabilities or obligations (collectively, the
"Excluded Liabilities"):
(a) Any liabilities or obligations of Seller relating
primarily to any Excluded Assets or other assets which are not Purchased Assets
and the ownership, operation and conduct of any business in connection therewith
or therefrom, including any amounts due from Seller under or arising from any of
the Intercompany Arrangements, except to the extent caused by any acts or
omissions of Purchaser or any of its Affiliates or Purchaser's ownership,
possession, use or operation of any of the Purchased Assets;
(b) Any liabilities or obligations of Seller in respect of
costs determined to be the responsibility of Seller under Section 3.4, any Taxes
for which Seller is liable under Section 7.6 and Taxes attributable to the
ownership, operation or use of any of the Purchased Assets on or before the
Closing Date (except for Taxes for which Purchaser is liable pursuant to Section
3.4 or Section 7.6 hereof);
(c) Except as otherwise specifically set forth in Section 2.3,
liabilities or obligations arising prior to the Closing Date from the material
breach by Seller of or material default by Seller under any term, covenant or
provision of any of the contracts, agreements, arrangements or commitments
assumed by a Purchaser under this Agreement, including the Generation Facility
Contracts, that would have been, but for such breach or default, paid, performed
or otherwise discharged on or prior to the Closing Date or to the extent the
same arise out of any such material breach or default or related waiver or
extension obtained by Seller; provided that, for purposes of the foregoing, no
such breach, default, waiver or extension shall include or consist of any
breach, default, waiver or extension that is or has been also engaged in,
obtained by or agreed to by the STP Owners in common or by the Operating Agent
acting on behalf of any STP Owner, including Seller;
(d) Liabilities or obligations under the Generation Facility
Contracts which would be included in any of the Purchased Assets but for the
provisions of Section 2.6, except to the extent a Purchaser is provided with the
benefits thereunder as contemplated by such Section;
(e) Any liability of Seller arising out of a breach by Seller
of any of its obligations under this Agreement or any of the Ancillary
Agreements;
(f) Judgments, fines, and other penalties levied by a
Governmental Authority and due prior to the Closing;
(g) Any liability representing indebtedness for money borrowed
(and any refinancing thereof), including the Revenue Bonds and Seller's
liability with respect thereto;
(h) All liabilities and obligations arising in connection with
loss of life, injury to persons or property or damage to natural resources
(whether or not such loss, injury or damage arose or was made manifest before
the Closing Date or arises or becomes manifest on or after the Closing Date) as
a result of (or allegedly as a result of) the transportation of or arranging for
the transportation of any Hazardous Substances that have been generated in
connection with the Purchased Assets and transported to any Off-Site Location,
prior to the Closing Date;
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(i) All liabilities and obligations arising in connection with
the investigation or Remediation (whether or not such investigation or
Remediation commenced before the Closing Date or commences on or after the
Closing Date) of Environmental Conditions related to the transportation of or
arranging for the transportation of any Hazardous Substances that have been
generated in connection with the Purchased Assets to any Off-Site Location,
prior to the Closing Date; and
(j) Subject to the proration provisions of Section 3.4, all
liabilities and obligations of Seller, to the extent of its interest in the
Generation Facility, for Department of Energy Decommissioning and
Decontamination Fees due and payable prior to the Closing Date.
SECTION 2.5 CONTROL OF LITIGATION.
(a) Subject to Section 8.5 and Section 8.6, the Parties
acknowledge and agree that, from and after the Closing Date, as between Seller
and a Purchaser, Seller shall be entitled exclusively to control, defend and
settle any suit, action or proceeding, and any investigation arising out of or
related to any Excluded Assets or Excluded Liabilities, and such Purchaser
agrees to cooperate reasonably in connection therewith, it being understood that
such Purchaser shall not be required to incur any cost in connection with any
such settlement but may be required to provide a release to a third party
claimant in respect of the specific matters involved in such suit, action,
proceeding or investigation; provided, however, that Seller shall reimburse such
Purchaser for all reasonable costs and expenses incurred by such Purchaser in
providing such cooperation to Seller and shall not unreasonably interfere with
operations at the Generation Facility in connection with any such control,
defense or settlement.
(b) Subject to Section 8.5 and Section 8.6, the Parties
acknowledge and agree that, from and after the Closing Date, as between Seller
and a Purchaser, such Purchaser shall be entitled exclusively (except as
otherwise described in subsection (c) of this Section 2.5) to control, defend
and settle any suit, action or proceeding, and any investigation arising out of
or related to any Purchased Assets or Assumed Liabilities, such Purchaser and
Seller agree to cooperate reasonably in connection therewith, and Seller agrees
to cooperate reasonably in connection therewith, it being understood that Seller
shall not be required to incur any cost in connection with any such settlement
but may be required to provide a release to a third party claimant in respect of
the specific matters involved in such suit, action, proceeding, or
investigation; provided, however, that such Purchaser shall reimburse Seller (in
accordance with such Purchaser's Proportionate Share) for all reasonable costs
and expenses incurred in providing such cooperation to such Purchaser and shall
not unreasonably interfere with Seller's or any of its Affiliates' operations.
(c) Subject to Section 7.6, Section 8.5 and Section 8.6, the
Parties acknowledge and agree that, from and after the Closing Date, Seller
shall be entitled exclusively to control, defend and settle any action or
proceeding associated with any Tax and related audit, appeals process or
litigation for taxable periods occurring prior to the Closing Date.
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SECTION 2.6 NO ASSIGNMENT IF BREACH.
(a) Notwithstanding anything contained in this Agreement to
the contrary, this Agreement shall not constitute an agreement to assign any
Purchased Asset, or assume any Assumed Liability, if the attempted assignment or
assumption of the same, as a result of the absence of the consent or
authorization of a third party or failure of a right of first refusal or notice
period to expire, would constitute a breach or default under any contract,
agreement, arrangement or commitment, would violate any applicable Law or would
in any way adversely affect the rights, or increase the obligations, of any
Party to this Agreement with respect thereto. If any such consent or
authorization is not obtained, or if an attempted assignment or assumption would
be ineffective or would adversely affect the rights or increase the obligations
of any Party to this Agreement or any of its Affiliates with respect to any such
contract, agreement, arrangement or commitment, so that a Purchaser would not,
in fact, receive its Proportionate Share of the rights, or assume its
Proportionate Share of the obligations with respect thereto as the same exist
prior to such attempted assignment or assumption, then, (i) in the case of an
ineffective assignment of any Purchased Asset described in Section 2.1(k)
resulting from a ruling of a court of competent jurisdiction as described in
Section 2.6(b), the provisions of Section 2.6(b) shall apply, and (ii) in all
other cases, Seller and such Purchaser shall enter into such reasonable
cooperative arrangements as may be reasonably acceptable to such Parties to this
Agreement (including sublease, agency, management, indemnity or payment
arrangements and enforcement at the cost and for the benefit of such Purchaser
of any and all rights against an involved third party) to provide for or impose
upon such Purchaser the benefits of such Purchased Asset or the obligations of
such Assumed Liability, as the case may be, and any transfer or assignment to
such Purchaser of any such Purchased Asset, or any assumption by such Purchaser
of any such Assumed Liability, which shall require such consent or authorization
of a third party that is not obtained, shall be made subject to such consent or
authorization being obtained. If Seller and such Purchaser cannot agree on any
such arrangement, or any such arrangement would not be reasonably practicable,
to provide such Purchaser with all the material benefits of such Purchased Asset
or all the material obligations of such Assumed Liability, then such Purchased
Asset or Assumed Liability, as the case may be, shall be excluded from the
Transactions and shall be deemed to be an Excluded Asset or an Excluded
Liability, as the case may be, with respect to such Purchaser, and the Parties
hereto shall negotiate in good faith an equitable adjustment in such Purchaser's
Purchase Price or resolve any disagreement respecting such adjustment in
accordance with the procedures of Section 3.6.
(b) If, for any reason any rights described in Section 2.1(k)
are not transferable, any Purchaser which would otherwise have had any claims of
default against the Department of Energy as assignee of such rights may pursue
such claims of default against the Department of Energy, at such Purchaser's
expense, as the agent of Seller, with Seller remaining a named Plaintiff in any
related litigation, and, with respect to such claims, such Purchaser shall have
the right to represent, assert claims and make arguments on behalf of Seller. If
as a result of such action, the Department of Energy settles with or pays
damages to Seller, Seller shall deliver to such Purchaser, according to such
Purchaser's Proportionate Share, an amount equal to the value of the settlement
or damage award received by Seller within ten (10) days of the date Seller
receives such settlement or damage award.
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SECTION 2.7 TERMINATION OF AEP-CAMECO PSA. Seller and each Purchaser
acknowledge that the Execution and delivery of this Agreement constitutes an
effective exercise of rights of first refusal under Section 17 of the
Participation Agreement. Promptly following the Effective Date, if not sooner
terminated, within ten (10) Business Days following Execution of this Agreement
Seller shall terminate the Purchase and Sale Agreement as of February 27, 2004
(the "AEP-Cameco PSA") between Seller and Cameco South Texas Project, LP
("CSTP") and deliver to each Purchaser a copy of the notice of termination.
SECTION 2.8 STP PARTICIPATION AGREEMENT MATTERS. In accordance with the
provisions of the STP Participation Agreement, CPS is hereby exercising its
right to purchase all of the STP Interest in the event Texas Genco shall not
purchase the Texas Genco Purchased Interest, and each of CPS and Texas Genco
consents and agrees to the Transactions and the ratable allocation of the STP
Interest provided for herein.
ARTICLE 3
CLOSINGS; PURCHASE PRICE
SECTION 3.1 CLOSING. Subject to the terms and conditions hereof,
proceedings for the consummation of the Transactions in respect of each
Purchaser (as to such Purchaser, as the context requires, the "Closing") will
take place at the offices of ▇▇▇▇▇ Day, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇ at 10:00 a.m. local time, on a date that is mutually acceptable to Seller
and such Purchaser within five (5) Business Days following the date on which the
conditions set forth in ARTICLE 9, in the case of the Closing with CPS, or
ARTICLE 10, in the case of a Closing with Texas Genco, and in any case the
conditions set forth in ARTICLE 11, other than those conditions that by their
nature are to be satisfied at the Closing, have been either satisfied or waived
by the Party for whose benefit such conditions exist, or at such other time and
place as Seller and such Purchaser may mutually agree; provided that, in respect
of Texas Genco, if a CPS Termination Event shall have occurred, the term
"Closing" shall also include, if necessary, the subsequent proceedings, which
shall not in the absence of mutual agreement of Seller and Texas Genco be less
than thirty (30) days after notice of the CPS Termination Event, for the
consummation of the Transactions in respect of the Texas Genco Purchased
Interest that, taking into account the earlier consummation of the Transactions
in respect of the Texas Genco Purchased Interest, result in Texas Genco's
purchase, in the aggregate, of 100% of the STP Interest; and provided that, in
respect of CPS, if a Texas Genco Termination Event shall have occurred, the term
"Closing" shall also include, if necessary, the subsequent proceedings, which
shall not in the absence of mutual agreement of Seller and CPS be less than
thirty (30) days after notice of the Texas Genco Termination Event, for the
consummation of the Transactions in respect of the CPS Purchased Interest that,
taking into account the earlier consummation of the Transactions in respect of
the CPS Purchased Interest, result in CPS's purchase, in the aggregate, of 100%
of the STP Interest. The date on which such proceedings take effect,
notwithstanding when they actually occur, is referred to herein in respect of
the applicable Purchaser, as the context requires, as the "Closing Date." In the
event that there are two Closings on the same day, unless expressly agreed by
the Parties, the Closing as between each Purchaser and Seller shall be
considered simultaneous, notwithstanding the actual order thereof. The Closing
shall be effective for all purposes immediately after 12:01 a.m., Central
prevailing time, on the Closing Date. At the Closing, and subject to the terms
and conditions hereof, the following will occur:
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(a) Deliveries by Seller. At Closing, Seller shall execute and
deliver, or cause to be Executed and delivered, to the applicable Purchaser the
following:
(i) instruments of transfer and conveyance, properly
Executed and acknowledged by Seller in such customary form as is
reasonably acceptable to both Seller and such Purchaser, that are
necessary to transfer to and vest in such Purchaser the CPS Purchased
Interest or the Texas Genco Purchased Interest, as the case may be,
and, in respect of such Purchaser, all of Seller's right, title and
interest in and to such Purchaser's other Purchased Assets, or which
may otherwise be required by the Title Insurer or the Title Agent,
including:
(A) a ▇▇▇▇ of Sale;
(B) an Assignment and Assumption Agreement (STP
Interest);
(C) an Assignment and Conveyance; and
(D) a Deed;
(ii) The assets comprising such Purchaser's
Proportionate Share of Seller's Decommissioning Funds, it being
understood that such assets shall be delivered to each of the
Decommissioning Funds established by such Purchaser and designated by
such Purchaser to Seller prior to the Closing Date pursuant to Section
7.8(c);
(iii) those documents required to be delivered to
such Purchaser by Seller pursuant to ARTICLE 9 or in accordance with
the provisions of any Ancillary Agreement;
(iv) all consents, waivers or approvals obtained by
Seller with respect to the sale and purchase of the Purchased Assets,
the transfer of any Transferable Permit or the consummation of the
applicable Transactions contemplated by this Agreement and the
Ancillary Agreements, to the extent specifically required hereunder or
thereunder;
(v) evidence, in form and substance reasonably
satisfactory to such Purchaser, demonstrating that Seller has obtained
Seller's Required Regulatory Approvals; and
(vi) any other documents or instruments reasonably
required by such Purchaser to consummate the Transactions and
reasonably requested of Seller prior to the Closing Date.
(b) Deliveries by the Applicable Purchaser. At Closing, the
applicable Purchaser shall deliver, or cause to be delivered, to Seller the
following:
(i) the Initial Purchase Price in respect of such
Purchaser as adjusted by the applicable Closing Adjustment, by wire
transfer of immediately available funds to an account or accounts
designated by Seller in writing prior to the Closing Date;
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(ii) instruments of assumption, properly Executed and
acknowledged by such Purchaser in such customary form as is reasonably
acceptable to both Seller and such Purchaser, that are necessary for
such Purchaser to assume the Assumed Liabilities, including the
Assignment and Assumption Agreement (STP Interest);
(iii) those documents required to be delivered to
Seller by such Purchaser pursuant to ARTICLE 10 or in accordance with
the provisions of any Ancillary Agreement;
(iv) all consents, waivers or approvals obtained by
such Purchaser with respect to its purchase of the Purchased Assets,
the transfer of any Transferable Permit or the consummation of the
Transactions contemplated by this Agreement and the Ancillary
Agreements, to the extent specifically required hereunder or
thereunder;
(v) evidence, in form and substance reasonably
satisfactory to Seller, demonstrating that such Purchaser has obtained
such Purchaser's Required Regulatory Approvals; and
(vi) any other documents or instruments reasonably
required by Seller to consummate the Transactions and reasonably
requested of such Purchaser prior to the Closing Date.
(c) Ancillary Agreements. The Parties acknowledge that Texas
Genco caused a Guaranty to be Executed and delivered to Seller prior to or
concurrently with the Execution and delivery of this Agreement. Subject to the
consummation of and contemporaneously with the Closing, each Party will execute
and deliver, or cause to be Executed and delivered, such of the Ancillary
Agreements which such Party is required to execute and deliver, or cause to be
Executed and delivered, as applicable, at or upon the Closing and which such
Party has not previously Executed and delivered, or caused to be Executed and
delivered, as applicable.
SECTION 3.2 INITIAL PURCHASE PRICE. The initial purchase price for the
Purchased Assets being sold to each Purchaser shall be such Purchaser's
Proportionate Share of Three Hundred Thirty-Two Million Six Hundred Thirty-Five
Thousand Eight Hundred Forty Dollars (U.S. $332,635,840) (the "Initial Purchase
Price").
SECTION 3.3 ADJUSTMENT TO INITIAL PURCHASE PRICE. Each Purchaser's
Initial Purchase Price shall be subject to such adjustments as are specified in
this Section 3.3, as may occur under the provisions of Section 3.5 (this Section
3.3 and such other Section being referred to as the "Adjustment Sections," and
each Purchaser's Initial Purchase Price as so adjusted is herein referred to as
such Purchaser's "Purchase Price").
(a) Adjustments from Prorations. Each Purchaser's Initial
Purchase Price shall be adjusted to account for the items prorated with respect
to such Purchaser as of the Closing Date pursuant to Section 3.4(a).
(b) Capital Expenditures. Each Purchaser's Initial Purchase
Price shall be increased (in accordance with such Purchaser's Proportionate
Share) by the amount expended by Seller or any of its Affiliates between January
1, 2004, and the Closing Date for Capital
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Expenditures less accumulated depreciation thereon as of the Closing Date, to
the extent that such amounts expended by Seller or any of its Affiliates in the
aggregate do not exceed One Million Nine Hundred Fifteen Thousand Two Hundred
Dollars (U.S. $1,915,200). Nothing in this Section 3.3(b) should be construed to
limit any rights of Seller to make or cause to be made all Capital Expenditures
necessary to comply with any Generation Facility Contract, the NRC Licenses or
any other Permit, or to approve, vote for or otherwise support any Capital
Expenditure in respect of the Generation Facility.
(c) Inventory. The Parties agree that the aggregate Initial
Purchase Price assumes a quantity of Inventory, in the aggregate, and value
thereof as of the Closing, which is represented by Twenty-Two Million Three
Hundred Seventy-Eight Thousand Four Hundred Fourteen Dollars (U.S. $22,378,414)
(the "Inventory Threshold") of book value, and the Parties further acknowledge
and agree that the Inventory Threshold is composed of the quantities of
Inventory for the Generation Facility listed on, and book values thereof as set
forth on Schedule 3.3(c). Accordingly, the Parties agree that each Purchaser's
Initial Purchase Price shall be further adjusted (in accordance with such
Purchaser's Proportionate Share) by the difference between the Inventory
Threshold and the book value of Inventory as of the Closing (determined in the
same manner as the initial valuation of the Inventory for determining the
Inventory Threshold) (the "Inventory Value"). Each Purchaser's Initial Purchase
Price (in accordance with such Purchaser's Proportionate Share) shall be (i)
increased by the amount by which the Inventory Value exceeds the Inventory
Threshold, or (ii) decreased by the amount by which the Inventory Value is less
than the Inventory Threshold. Notwithstanding anything to the contrary herein,
for purposes of this Section 3.3(c), the Inventory Value at Closing shall be
calculated by subtracting the STP Ownership Share of any Inventory payables
incurred or accrued and unpaid as of the Closing Date.
(d) Nuclear Fuel. The Parties agree that the aggregate Initial
Purchase Price assumes a quantity of the STP Ownership Share of Nuclear Fuel
Inventory to be included in the Purchased Assets, and value thereof as of the
Closing, which is represented by Thirty-One Million Nine Hundred Forty-Nine
Thousand Six Hundred Seventy-Seven Dollars (U.S. $31,949,677) (the "Nuclear Fuel
Inventory Threshold") of book value thereof as set forth on Schedule 3.3(d).
Accordingly, the Parties agree that each Purchaser's Initial Purchase Price
shall be further adjusted (in accordance with such Purchaser's Proportionate
Share) by the difference between the Nuclear Fuel Inventory Threshold and the
book value of the STP Ownership Share of Nuclear Fuel Inventory as of the
Closing less accumulated amortization thereon (determined in the same manner as
the initial valuation of the Nuclear Fuel Inventory for determining the Nuclear
Fuel Inventory Threshold) (the "Nuclear Fuel Inventory Value"). Each Purchaser's
Initial Purchase Price (in accordance with such Purchaser's Proportionate Share)
shall be (i) increased by the amount by which the Nuclear Fuel Inventory Value
exceeds the Nuclear Fuel Inventory Threshold, or (ii) decreased by the amount by
which the Nuclear Fuel Inventory Value is less than the Nuclear Fuel Inventory
Threshold. Notwithstanding anything to the contrary herein, for purposes of this
Section 3.3(d), the Nuclear Fuel Inventory Value at Closing shall be calculated
by subtracting the STP Ownership Share of any Nuclear Fuel Inventory payables
incurred or accrued and unpaid as of the Closing Date.
(e) Material Adverse Effect. In the event a Material Adverse
Effect occurs or is first manifest subsequent to the Effective Date (as
determined by the express written
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agreement of Seller and Purchasers, or, failing such express written agreement,
upon a determination made in accordance with Section 3.5(c) and/or Section 13.17
hereof) and has not been cured as of the Closing Date, each Purchaser's Initial
Purchase Price shall be reduced (in accordance with each Purchaser's
Proportionate Share) by the MAE Adjustment Amount, provided that the maximum
reduction of each Purchaser's Initial Purchase Price pursuant to this Section
3.3(e) is such Purchaser's Proportionate Share of Fifty Million Dollars (U.S.
$50,000,000).
(f) Decommissioning Rule.
(i) In the event that a Decommissioning Rule has not
been adopted by PUCT as of the Closing Date, each Purchaser's Initial
Purchase Price shall be decreased by such Purchaser's Proportionate
Share of the Decommissioning Adjustment Reserve. The affected Parties
and the Escrow Agent shall execute and deliver the Decommissioning
Adjustment Escrow Agreement at the Closing and such Decommissioning
Adjustment Reserve shall be deposited into the Decommissioning Escrow.
(ii) If, prior to the Closing Date, a Purchaser
acquires Knowledge that a Decommissioning Rule has been adopted by
PUCT, such Purchaser may, within twenty (20) Business Days after
acquiring such Knowledge, provide notice to Seller to the effect that
the Decommissioning Rule is, with respect to substance, and in a manner
that is, or could reasonably be expected to be, materially adverse to
such Purchaser, not substantially consistent with ("Equivalent") the
Proposed Rule, and giving such Purchaser's estimate of the
Decommissioning Adjustment Amount. Promptly after delivery of such
notice, and in no event later than twenty (20) Business Days
thereafter, Seller shall deliver notice to such Purchaser indicating
whether Seller believes that the Decommissioning Rule is Equivalent to
the Proposed Rule, and to the extent Seller believes that the
Decommissioning Rule is not Equivalent to the Proposed Rule, Seller's
estimate of the Decommissioning Adjustment Amount. To the extent that
the affected Parties agree, or it shall have been determined in
accordance with the provisions of Section 13.8 as set forth below, that
the Decommissioning Rule is Equivalent to the Proposed Rule, there
shall be no adjustment to the Initial Purchase Price. To the extent
that the affected Parties cannot agree as to whether the
Decommissioning Rule is Equivalent to the Proposed Rule or upon the
amount, if any, of the Decommissioning Adjustment Amount within ten
(10) Business Days after delivery of Seller's notice, the affected
Parties shall resolve such dispute in accordance with the provisions of
Section 13.8; provided that if any such dispute is required to be
determined in accordance with Section 13.8 and, as of the Closing Date,
has not been finally determined in accordance with Section 13.8, the
amount (if any) of the Decommissioning Adjustment Amount shall be
treated as a post-Closing adjustment to the Initial Purchase Price upon
final determination.
(g) IRS PLR (Texas Genco Decommissioning Collections). If, on
or before the Closing Date, the IRS PLR (Texas Genco Decommissioning
Collections) shall not have been issued by the IRS and no IRS PLR Equivalent
shall have become effective, the Texas Genco
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Initial Purchase Price shall be reduced by the Initial Tax Adjustment Amount, if
applicable as provided in the definition of such term.
(h) IRS PLR (CPS Decommissioning Collections). If, on or
before the Closing Date, the IRS PLR (CPS Decommissioning Collections) shall not
have been issued by the IRS and no IRS PLR Equivalent shall have become
effective, the CPS Initial Purchase Price shall be reduced by the Initial Tax
Adjustment Amount, if applicable as provided in the definition of such term.
SECTION 3.4 PRORATIONS.
(a) Each Purchaser and Seller agree that, except as otherwise
specifically provided in this Agreement, all of the ordinary, and recurring
items normally accrued or charged to the STP Owners or otherwise normally
accrued or incurred by Seller, including those listed below (but excluding all
Taxes), relating to the business and operation of the Generation Facility, shall
be prorated and charged as of the Closing Date, without any duplication of
payment under the Generation Facility Contracts, with Seller to be responsible
for such items of operating expense and to receive the benefit of such items of
operating revenue to the extent such items relate (or are apportionable) to any
time periods prior to the Closing Date, and each Purchaser to be responsible for
its Proportionate Share of such items of operating expense and to receive the
benefit of its Proportionate Share of such items of operating revenue to the
extent such items relate to periods from and after the Closing Date (measured in
the same units used to compute the item in question and otherwise measured by
calendar days); provided that notwithstanding anything to the contrary herein,
no Purchaser shall pay any amount under this Section 3.4 that constitutes an
Excluded Liability:
(i) the fees assessed on electricity generated at the
Generation Facility pursuant to the DOE Standard Contract, as provided
in Section 302 of the Nuclear Waste Policy Act and 10 C.F.R. Part 961,
as amended from time to time, for the applicable period during which
the Closing occurs;
(ii) subject to and without limiting the generality
of Section 2.3(d) and Section 2.4(j), Department of Energy
Decommissioning and Decontamination Fees for the applicable period
during which the Closing occurs;
(iii) retrospective adjustments and policyholder
distributions for the applicable period during which the Closing occurs
with respect to any Generation Facility Insurance Policies to the
extent such adjustments occur or distributions are made within twelve
(12) months of Closing or, if earlier, ninety (90) days after the end
of the applicable policy year that includes the Closing Date; and
(iv) documented operating, maintenance and other
expenses incurred or accrued in any period prior to the Closing Date
(not including Capital Expenditures or any Excluded Liabilities), but
only to the extent that the amount of such expenses is determined
within twelve (12) months of Closing or, if earlier, ninety (90) days
after the end of the calendar year during which the Closing occurs.
(b) Notwithstanding any other provision of this Agreement,
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(i) Texas Genco and Seller agree that Property Taxes
(excluding all other Taxes) assessed on Texas Genco's Purchased
Interest for the calendar year in which the Closing occurs shall be
prorated as between Texas Genco and Seller based upon the ratio of the
number of days in the calendar year in which the Closing occurs
beginning with January 1 through the day prior to the Closing Date
divided by the total number of days in such calendar year multiplied by
the amount of Property Taxes paid (or to be paid) by Texas Genco for
the calendar year in which Closing occurs. Property Taxes prorated
under this Section shall be based upon the status of the property as
used by Seller. If Texas Genco or any successor-in-interest to Texas
Genco changes the usage of such property after Closing and such change
in usage results in additional Property Tax liabilities attributable to
such property (as described in Section 14.2 of this Agreement or
otherwise), such additional Property Tax liabilities will not be
subject to proration hereunder and Texas Genco (or its
successor-in-interest) shall be responsible for the payment thereof;
and
(ii) CPS and Seller agree that Property Taxes
(excluding all other Taxes) assessed on the Purchased Assets for the
calendar year in which the Closing occurs shall be prorated to Seller
based upon the ratio of the number of days in the calendar year in
which the Closing occurs beginning with January 1 through the day prior
to the Closing Date divided by the total number of days in such
calendar year multiplied by the amount of Property Taxes required by
applicable Law to be paid by either Party for the calendar year in
which Closing occurs. Notwithstanding the previous sentence, if the
provisions of Title 1, Texas Tax Code Section 26.11 apply to CPS for
the calendar year in which the Closing occurs, Property Taxes will be
apportioned to Seller in accordance with Section 26.11(a) of this code.
Property Taxes prorated under this section shall be based upon the
status of the property as used by Seller. If CPS or any
successor-in-interest to CPS changes the usage of such property after
Closing and such change in usage results in additional Property Tax
liabilities attributable to such property (as described in Section 14.2
of this Agreement or otherwise), such additional Property Tax
liabilities will not be subject to proration hereunder and CPS (or its
successor-in-interest) shall be responsible for the payment thereof.
Seller will cooperate with CPS in obtaining Tax treatment available to
CPS under the applicable laws and regulations.
(c) In connection with the prorations referred to in Section
3.4(a) above as used in the determination of any amount pursuant to this
Agreement (including any amounts determined pursuant to the provisions of
Section 3.5), in the event that actual figures are not available on the Closing
Date, the proration shall be based upon the applicable amounts properly accrued
or would have been accrued as of the beginning of the Closing Date.
SECTION 3.5 PROCEDURES FOR CLOSING AND POST-CLOSING ADJUSTMENTS.
(a) At least fifteen (15) calendar days prior to the
anticipated Closing Date, Seller, with the assistance and participation of, and
in consultation with, the applicable Purchaser, shall prepare and deliver to
such Purchaser an estimated closing statement (in respect of such Purchaser, as
the context requires, the "Estimated Closing Statement") that shall set forth
Seller's best estimate of all estimated adjustments to such Purchaser's Initial
Purchase Price required by this Agreement to be made as of the Closing (in
respect of such Purchaser, as the
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context requires, the "Estimated Closing Adjustment"). The applicable
Purchaser's Estimated Closing Adjustment, (i) to the extent relating to the
adjustments provided for in Section 3.3(c) and Section 3.3(d), will be based on
a count and valuation of Inventory and Nuclear Fuel Inventory conducted within
thirty (30) days prior to the Closing Date consistent with the current inventory
practices of the Operating Agent and (ii) to the extent relating to the
adjustments provided for in Section 3.3(e), will be determined in accordance
with the provisions of Section 3.5(c). Within eight (8) calendar days after the
delivery of the Estimated Closing Statement by Seller to such Purchaser, such
Purchaser may object in good faith to its Estimated Closing Adjustment in
writing. If such Purchaser objects to the Estimated Closing Adjustment within
such eight (8) calendar day period, the Parties shall attempt to resolve their
differences by negotiation. If the Parties are unable to do so prior to the
Closing Date (or if such Purchaser does not object to the Estimated Closing
Adjustment), such Purchaser's Initial Purchase Price shall be adjusted (in
respect of such Purchaser, as the context requires, the "Closing Adjustment") at
the Closing by the amount of the Estimated Closing Adjustment not in dispute.
The disputed portion shall be resolved in accordance with the provisions of
Section 3.6 or to the extent relating to the adjustments provided for in Section
3.3(e), in accordance with the provisions of Section 3.5(c) and Section 13.17,
as applicable.
(b) Within sixty (60) days after the Closing Date, Seller,
with the assistance and participation of, and in consultation with, each
Purchaser shall prepare and deliver to such Purchaser a final closing statement
(in respect of such Purchaser, as the context requires, the "Post-Closing
Statement") that shall set forth all adjustments to such Purchaser's Initial
Purchase Price proposed by Seller to be required by this Agreement to be made as
of the Closing to the extent not previously effected by the Closing Adjustment
(in respect of such Purchaser, as the context requires, the "Proposed Post-
Closing Adjustment"). To the extent applicable, the Post-Closing Statement shall
be prepared using the same accounting principles, policies and methods as the
Operating Agent has historically used in connection with the calculation of the
items reflected on the Post-Closing Statement. Within thirty (30) days after the
delivery of the Post-Closing Statement by Seller to each Purchaser, such
Purchaser may object in good faith to its Proposed Post-Closing Adjustment in
writing, stating in reasonable detail its objections thereto. To the extent any
amounts are undisputed, such Purchaser's Initial Purchase Price shall be further
adjusted (in respect of such Purchaser, as the context requires, the
"Post-Closing Adjustment") by the amount of the Proposed Post-Closing Adjustment
not in dispute, effective as of the earlier of the date Seller receives such
Purchaser's written objections to the Proposed Post-Closing Statement or the
date such objections are due, and the Post-Closing Adjustment shall be
effectuated within (2) Business Days thereafter as provided in Section 3.6. Each
Purchaser and Seller agree to cooperate to exchange information used to prepare
the applicable Post-Closing Statement and information relating thereto. If a
Purchaser objects to its Proposed Post-Closing Adjustment, the affected Parties
shall attempt to resolve such dispute by negotiation, and to the extent these
Parties are unable to resolve any such dispute, then the disputed portion of the
Proposed Post-Closing Adjustment shall be resolved in accordance with the
provisions of Section 3.6. Notwithstanding the foregoing, and wholly between
Seller and Texas Genco, if the final property tax assessments and tax rates are
not available by sixty (60) days after the Closing Date, Seller will pay Texas
Genco any deficiency with respect to Seller's share of Property Taxes, or Texas
Genco shall refund any overage paid by Seller at Closing with respect to
Seller's share of Property Taxes, in accordance with Section 7.6.
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(c) If a Purchaser receives written notice from Seller
pursuant to Section 7.4(j) or otherwise acquires Knowledge of any event,
circumstance or condition that it believes could reasonably be expected to
constitute or result in a Material Adverse Effect, such Purchaser shall
promptly, and in no event later than thirty (30) Business Days after receipt of
such notice or otherwise acquiring such Knowledge, provide written notice to the
other Purchaser and Seller specifying in reasonable detail (based on Purchaser's
Knowledge) such event, circumstance or condition, the fact that Purchaser
believes the same could reasonably be expected to constitute or result in a
Material Adverse Effect, together with Purchaser's estimate of the MAE
Adjustment Amount, without regard to any right of termination or the aggregate
$50 million limitation on the adjustment under Section 3.3(e) and assuming for
purposes of such estimate that the Closing Date is the date of such Purchaser's
notice, and Purchaser's computation thereof (a "Potential MAE Notice"). Promptly
after Seller's receipt of any Potential MAE Notice, the Parties shall consult
with each other concerning the event, circumstance or condition that is the
subject of such Potential MAE Notice and shall refer the same to the Operating
Agent by delivering a copy of such Potential MAE Notice, redacted, if necessary,
to omit and, in any case, without disclosing to the Operating Agent, such
Purchaser's estimate or computation of the MAE Adjustment Amount to the extent
not obtained from the Operating Agent, or in such manner as shall otherwise be
mutually acceptable, and shall request the Operating Agent to evaluate, and
report to Seller and such Purchaser, consistent with the practices and methods
used by the Operating Agent to evaluate and report to the STP Owners similar
events, circumstances or conditions affecting the Generation Facility, the
Operating Agent's assessment of the change or effect on the physical condition
or operations of the Generation Facility that has resulted or could reasonably
be expected to result from the event, circumstance or condition that is the
subject of such Potential MAE Notice, including the Operating Agent's estimates
of the amount(s) of and timing for the potential expenditures reasonably likely
to be required to be made by or on behalf of the STP Owners, the projected
timing for and duration of any reasonably likely forced or unplanned outage of
any STP Unit, and the projected timing for and amount and duration of any
reasonably likely reduction of generating capacity of any STP Unit, resulting
from or that could reasonably be expected to result from, such event,
circumstance or condition, and such other matters relevant thereto as Seller and
such Purchaser or either of them may reasonably request. If and to the extent
the Operating Agent has not undertaken and, absent any such request of Seller
and such Purchaser would not undertake, the requested evaluation of such event,
circumstance or condition or report of the Operating Agent's assessment thereof
in the ordinary course of the Operating Agent's performance of its duties and
obligations to the STP Owners, the costs and expenses incurred by the Operating
Agent in performing the requested evaluation or preparing or furnishing the
requested report shall be borne equally by such Purchaser and Seller, and each
such Party involved shall timely pay or reimburse the Operating Agent for one
half of such costs and expenses. If and to the extent that Seller disagrees with
such Purchaser's estimate of the MAE Adjustment Amount, or any other estimate or
conclusion expressed in any Potential MAE Notice the subject of which shall have
been submitted to the Operating Agent, Seller shall promptly notify such
Purchaser of such disagreement and Seller and such Purchaser shall attempt to
resolve their differences by negotiation as promptly as practicable and in any
event prior to the finalization of the Operating Agent's requested evaluation
thereof and report thereon. Within five (5) Business Days after delivery of
Seller's notice of disagreement, Seller shall designate a senior vice president
of Seller or of AEP, such Purchaser shall designate a senior vice president of
Guarantor or other authorized official of such Purchaser, as applicable, as its
primary
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representative for purposes of such negotiation and each such Party shall
deliver to the other written notice setting forth (i) a statement of such
Party's position and a summary of arguments and information supporting that
position with respect to the disputed matters and (ii) the name and title of
such Party's primary representative. Within seven (7) Business Days thereafter
the primary representatives shall meet at least once in Dallas, Texas or another
mutually acceptable location, and negotiate in good faith for a period of five
(5) consecutive Business Days in an effort to resolve the dispute. All
reasonable requests for information made by one Party to the other will be
honored. If the dispute has not been resolved within five (5) consecutive
Business Days, each Party shall by further notice to the other designate a
successor primary representative for purposes of further negotiation to resolve
the dispute, who shall be an executive vice president or the president of Seller
or TCC, in the case of Seller, or of Guarantor or Purchaser, as applicable, in
the case of such Purchaser. Within seven (7) Business Days thereafter the
successor representatives shall meet at least once in Dallas, Texas or another
mutually acceptable location, and negotiate in good faith until the Operating
Agent shall have delivered its final report to the Parties relating to the
disputed matters. If the dispute shall not have been resolved by negotiation
within three (3) Business Days after the delivery of such final report to the
Parties, or if either such Party objects to the Operating Agent's final report
within three (3) Business Days after delivery thereof, the dispute shall be
resolved pursuant to Section 13.17. For purposes of this Agreement, any report
of the Operating Agent requested pursuant to this Section 3.5(c) shall be deemed
final after the board of directors of the Operating Agent has reviewed and
approved such report, unless the Operating Agent determines that review of such
report is not necessary or appropriate, in which even such report shall be
deemed final for purposes of this Agreement at such time as the Operating Agent
shall have delivered it to the Parties in the form considered to be final by the
Operating Agent. If and to the extent that, as of the Closing Date, such
Purchaser agrees with Seller that, or it shall have been determined in
accordance with this Section 3.5(c) and/or Section 13.17 that, such Purchaser's
Initial Purchase Price is required to be adjusted pursuant to Section 3.3(e) but
the MAE Adjustment Amount (not exceeding such Purchaser's Proportionate Share of
$50 million) shall not have been agreed upon by such Purchaser and Seller or
determined pursuant to this Section 3.5(c) and/or Section 13.17, such Purchaser
may withhold the disputed portion of the MAE Adjustment Amount from such
Purchaser's payment of its Initial Purchase Price, as adjusted by the Closing
Adjustment. The withheld funds shall be deposited in escrow, pursuant to the
Escrow Agreement, which shall be Executed and delivered by such Purchaser,
Seller, and the Escrow Agent at Closing. The amount shall be held in escrow
pending resolution of the dispute pursuant to Section 13.17. The amount not in
dispute shall be included in the Closing Adjustment. Within three (3) Business
Days after agreement by Seller and such Purchaser upon or determination pursuant
to this Section 3.5(c) and/or Section 13.17 of the MAE Adjustment Amount, Seller
and such Purchaser shall jointly instruct the Escrow Agent, by joint written
notice furnished in accordance with the Escrow Agreement, to disburse the
disputed portion of the MAE Adjustment Amount in accordance with such agreement
or determination. If and to the extent that, as of the anticipated Closing Date
or the day prior to the Termination Date, such Purchaser asserts that the MAE
Adjustment Amount exceeds its Proportionate Share of $50 million and the MAE
Adjustment Amount shall not have been agreed upon by the Parties or determined
in accordance with this Section 3.5(c) and/or Section 13.17, the anticipated
Closing Date and the Termination Date shall be extended, pending such agreement
of the Parties or determination of the MAE Adjustment Amount.
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(d) To the extent that a Decommissioning Rule shall not have
been adopted prior to the Closing Date, if, after the Closing Date and prior to
the second anniversary of the Closing Date, a Purchaser acquires Knowledge that
a Decommissioning Rule shall have been adopted by PUCT, such Purchaser may,
within twenty (20) Business Days after acquiring such Knowledge, provide notice
to Seller to the effect that the Decommissioning Rule is not Equivalent to the
Proposed Rule, and giving such Purchaser's estimate of the Decommissioning
Adjustment Amount. Promptly after delivery of such notice, and in no event later
than twenty (20) Business Days thereafter, Seller shall deliver notice to such
Purchaser indicating whether Seller believes that the Decommissioning Rule is
Equivalent to the Proposed Rule, and to the extent Seller believes that the
Decommissioning Rule is not Equivalent to the Proposed Rule, Seller's estimate
of the Decommissioning Adjustment Amount. To the extent that Seller and such
Purchaser agree, or it shall have been determined in accordance with the
provisions of Section 13.8 as set forth below, that the Decommissioning Rule is
Equivalent to the Proposed Rule, Seller and such Purchaser shall instruct the
Decommissioning Escrow Agent, by joint written notice furnished in accordance
with the Decommissioning Adjustment Escrow Agreement, to disburse the
Decommissioning Adjustment Reserve (plus all accrued interest thereon) from the
Decommissioning Escrow to Seller. To the extent that Seller and such Purchaser
cannot agree as to whether the Decommissioning Rule is Equivalent to the
Proposed Rule or upon the amount, if any, of the Decommissioning Adjustment
Amount within ten (10) Business Days after delivery of Seller's notice, Seller
and such Purchaser shall resolve such dispute in accordance with the provisions
of Section 13.8. If the arbitrators determine that any Decommissioning
Adjustment Amount shall apply, Seller and such Purchaser shall instruct the
Decommissioning Escrow Agent, by joint written notice furnished in accordance
with the Decommissioning Adjustment Escrow Agreement, to disburse the
Decommissioning Adjustment Amount from the Decommissioning Escrow to such
Purchaser and to disburse any remaining amounts (plus interest accrued thereon)
to Seller; provided however, that to the extent that the Decommissioning
Adjustment Amount is greater than the Decommissioning Adjustment Reserve, Seller
and such Purchaser shall instruct the Decommissioning Escrow Agent, by joint
written notice furnished in accordance with the Decommissioning Adjustment
Escrow Agreement, to disburse all amounts (including accrued interest) from the
Decommissioning Escrow to such Purchaser, and Seller shall pay such Purchaser
the amount of any deficiency. In the event that a Decommissioning Rule has not
been adopted by PUCT as of the second anniversary of the Closing Date, Seller
and such Purchaser shall instruct the Decommissioning Escrow Agent, by joint
written notice furnished in accordance with the Decommissioning Adjustment
Escrow Agreement, to disburse the Decommissioning Adjustment Reserve (including
accrued interest) from the Decommissioning Escrow to such Purchaser. In the
event a Decommissioning Rule has not been adopted on or before the second
anniversary of the Closing Date, Seller and such Purchaser hereby acknowledge
that (i) such Purchaser's actual losses resulting therefrom are likely to be
difficult or impossible to determine, (ii) the Decommissioning Adjustment
Reserve shall be deemed an appropriate and reasonable approximation of such
Purchaser's actual losses, (iii) payment of the Decommissioning Adjustment
Reserve shall be deemed not to be a penalty, and (iv) the Decommissioning
Adjustment Reserve shall constitute such Purchaser's sole and exclusive remedy
under this Agreement or otherwise at law or in equity for losses resulting from
the failure of the Decommissioning Rule to have been adopted.
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(e) If Texas Genco shall have reduced the Initial Purchase
Price by the Initial Tax Adjustment Amount, (i) at the Closing, Texas Genco
shall deliver to Seller an Acceptable Letter of Credit, which shall be
maintained pursuant to the terms of Section 7.20(b) and Section 7.20(e), having
a drawing amount which shall be at least equal to the sum of the Initial Tax
Adjustment Amount and Texas Genco shall be obliged to pay the Deferred Purchase
Price Amount pursuant to this Section 3.5(e), (ii) from and after the Closing
until the payment of the Deferred Purchase Price Amount or such time as Seller
shall no longer be obligated to remit any amounts to Texas Genco pursuant to the
Decommissioning Funds Collection Agreement, Texas Genco shall deliver to Seller,
promptly after the filing thereof, copies of all Tax Returns that include or
reflect any payments intended to be compensated by the Initial Tax Adjustment
Amount, together with documentation supporting the computation of the amount of
such payments as Seller may reasonably request. If the Initial Purchase Price
shall have been reduced by the Initial Tax Adjustment Amount and, at any time
after the Closing until such time as Seller shall no longer be obligated to
remit any amounts to Texas Genco pursuant to the Decommissioning Funds
Collection Agreement, the IRS issues the IRS PLR (Texas Genco Decommissioning
Collections) or an IRS PLR Equivalent becomes effective, Texas Genco shall
promptly, and in no event later than fifteen (15) Business Days thereafter, (i)
provide written notice to Seller setting forth in reasonable detail Texas
Genco's calculation of the Deferred Purchase Price Amount and (ii) pay the
Deferred Purchase Price Amount to (or to the order of) Seller. If after the
payment of the Deferred Purchase Price Amount, Texas Genco (or any of its
Affiliates) receives a refund of any tax payments for which the Actual Tax
Adjustment Amount was intended to compensate Texas Genco, then Texas Genco shall
promptly pay to Seller (or to the order of Seller) an amount equal to such tax
refund plus any interest received thereon, less the net present value of the tax
deductions Texas Genco (or its Affiliate) would have had as a result of making
such tax payments. Such net present value shall be calculated using a 12%
discount rate and on the assumption that such deductions would have been used in
2027. Texas Genco shall make such payment promptly, and in any event within
thirty (30) days after receiving such tax refund and shall provide Seller with
its calculations of the amount of such payment prior to or concurrently with
such payment. If the Deferred Purchase Price Amount becomes payable, Texas Genco
shall consult and cooperate with Seller at Seller's reasonable request for
purposes of obtaining, and Texas Genco shall use its Commercially Reasonable
Efforts to obtain from the applicable Governmental Authority for Seller's
benefit (or the benefit of retail customers of Seller), any refund of any
payments of Tax included in the Actual Tax Adjustment Amount (together with any
interest on any such refund), to which Texas Genco or any of its Affiliates is,
or is reasonably likely to be, entitled to receive.
(f) If CPS shall have reduced the Initial Purchase Price by
the Initial Tax Adjustment Amount, (i) CPS shall be obligated to pay the
Deferred Purchase Price Amount pursuant to this Section 3.5(f), and, if CPS's
long-term senior unsecured debt obligations shall no longer be rated at least
BBB- by S&P or Baa3 by ▇▇▇▇▇'▇, shall establish and maintain Acceptable Credit
Support in respect of such obligation, (ii) from and after the Closing until the
payment of the Deferred Purchase Price Amount or such time as Seller shall no
longer be obligated to remit any amounts to CPS pursuant to the Decommissioning
Funds Collection Agreement, CPS shall timely file all Tax Returns necessary or
appropriate to report as taxable income the amounts received by CPS from Seller
pursuant to the Decommissioning Funds Collection Agreement and pay the Taxes
payable in respect of such reported taxable income. CPS will deliver to Seller,
promptly after the filing thereof, copies of all such Tax Returns,
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together with documentation supporting the computation of the amount of such
payments as Seller may reasonably request. At the request and expense of Seller,
CPS will, promptly after the first payment of such Tax, request a refund thereof
and if denied by the relevant Taxing Authority(ies), contest such denial to the
fullest extent permitted, using counsel reasonably acceptable to Seller and
taking into account Seller's directions in connection with such contest and the
related proceedings. If CPS shall receive a refund of such Tax and there is a
Final Determination with respect to the refund, then CPS shall promptly and in
any event within thirty (30) days after such Final Determination, pay to TCC an
amount equal to the sum of (1) such Tax refund and any interest thereon received
from the relevant Taxing Authority(ies), (2) the Initial Tax Adjustment Amount
less the amounts(s) of any Tax paid therefrom, and (3) interest on the amount
described in clause (2) at an interest rate of eight percent (8%) per annum from
the Closing Date to the date of such payment and interest on the amount
described in clause (1) at an interest rate of eight percent (8%) per annum from
the date CPS received the refund until the refund is paid to Seller. If the
Initial Purchase Price shall have been reduced by the Initial Tax Adjustment
Amount and there shall not have been a payment to TCC pursuant to the preceding
sentence and, at any time after the Closing until such time as Seller shall no
longer be obligated to remit any amounts to CPS pursuant to the Decommissioning
Funds Collection Agreement, the IRS issues the IRS PLR (CPS Decommissioning
Collections) or an IRS PLR Equivalent becomes effective, CPS shall promptly, and
in no event later than fifteen (15) Business Days thereafter, (i) provide
written notice to Seller setting forth in reasonable detail CPS's calculation of
the Deferred Purchase Price Amount and (ii) pay the Deferred Purchase Price
Amount to (or to the order of) Seller. If after the payment of the Deferred
Purchase Price Amount, CPS (or any of its Affiliates) receives a refund of any
tax payments for which the Actual Tax Adjustment Amount was intended to
compensate CPS, then CPS shall promptly pay to Seller (or to the order of
Seller) an amount equal to such tax refund plus any interest received thereon,
less the net present value of the tax deductions CPS would have had as a result
of making such tax payments. Such net present value shall be calculated using a
12% discount rate and on the assumption that such deductions would have been
used in 2027. CPS shall make such payment promptly, and in any event within
thirty (30) days after receiving such tax refund and shall provide Seller with
its calculations of the amount of such payment prior to or concurrently with
such payment. If the Deferred Purchase Price Amount becomes payable, CPS shall
consult and cooperate with Seller at Seller's reasonable request for purposes of
obtaining, and CPS shall use its Commercially Reasonable Efforts to obtain from
the applicable Governmental Authority for Seller's benefit (or the benefit of
retail customers of Seller), any refund of any payments of Tax included in the
Actual Tax Adjustment Amount (together with any interest on any such refund), to
which CPS is, or is reasonably likely to be, entitled to receive.
SECTION 3.6 PROCEDURES FOR CERTAIN PURCHASE PRICE ADJUSTMENTS. If
circumstances exist that result in any disagreement in respect of an adjustment
to the Initial Purchase Price or the Purchase Price pursuant to the provisions
of Section 3.3(e), then and in any such event, such negotiations, and the
resolution of disagreements, shall be conducted, as between Seller and the
disagreeing Purchaser, in accordance with the provisions of Section 3.5(c) and
Section 13.17. If circumstances exist that result in any disagreement in respect
of an adjustment to the Initial Purchase Price or the Purchase Price pursuant to
any of the provisions of the Adjustment Sections other than Section 3.3(e),
Section 3.3(f) or Section 3.3(g) then and in any such event, such negotiations,
and the resolution of disagreements, shall be conducted in accordance with the
provisions of this Section 3.6. Seller and such Purchaser shall negotiate such
adjustment of the
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Purchase Price in good faith prior to the date such adjustment is otherwise
scheduled to become effective (each, a "Scheduled Adjustment Date"). If Seller
and such Purchaser are unable to agree upon an adjustment by the fifth (5th)
Business Day prior to such date, then such Scheduled Adjustment Date (but not
the Closing Date or the Termination Date) shall be extended to the fifth (5th)
Business Day following completion of the procedure described in this Section 3.6
and the determination of the pertinent adjustment, to provide for the
opportunity to resolve such disagreement pursuant to the provisions of this
Section 3.6. On the day the Scheduled Adjustment Date would have occurred but
for the absence of agreement between Seller and such Purchaser, Seller and such
Purchaser shall submit to the Independent Accounting Firm in writing, its
proposed adjustments of the Purchase Price which were to occur on such Scheduled
Adjustment Date. Such proposals shall be materially in accordance with the last
proposals made by Seller or such Purchaser to the other during the course of the
aforementioned good faith negotiations between Seller and such Purchaser. Seller
and such Purchaser shall additionally submit such memoranda, arguments, briefs
and evidence in support of their respective positions, and in accordance with
such procedures, as the Independent Accounting Firm may determine. Within five
(5) Business Days following the due date of such submissions, as to each
adjustment of the Purchase Price that was to occur on the Scheduled Adjustment
Date concerning which there exists disagreement, the Independent Accounting Firm
shall select, on an individual basis, a proposed adjustment of the Purchase
Price proposed by Seller or such Purchaser, it being agreed that the Independent
Accounting Firm shall have no authority to alter any such proposal in any way.
Such determination by the Independent Accounting Firm shall be final and binding
between Seller and such Purchaser as to such adjustments of the Purchase Price
and shall not be subject to further challenge by Seller and such Purchaser
pursuant to Section 13.8 hereof or otherwise. Upon the determination of the
appropriate adjustments, Seller and such Purchaser shall, subject to the terms
and conditions of this Agreement, effectuate such adjustments by including them
in the payments to occur at the Closing or, if such adjustments result in
payments being due from Seller or such Purchaser to the other after the Closing,
by Seller or such Purchaser from whom such payment is due delivering the payment
to the other no later than two (2) Business Days after such determination, in
immediately available funds or in any other manner as reasonably requested by
the payee, together with interest thereon from the Scheduled Adjustment Date to
the date of payment at a variable rate of interest equal to the "prime rate" as
published in The Wall Street Journal from time to time during the applicable
period. Subject to the foregoing, the Independent Accounting Firm may determine
the issues in dispute following such procedures, consistent with the provisions
of this Agreement, as it deems appropriate to the circumstances and with
reference to the amounts in issue. Seller and such Purchaser do not intend to
impose any particular procedures upon the Independent Accounting Firm, it being
the desire of Seller and such Purchaser that any such disagreement shall be
resolved as expeditiously and inexpensively as reasonably practicable. The
Independent Accounting Firm shall have no liability to Seller and such Purchaser
in connection with such services, and Seller and such Purchaser shall provide
such indemnities against liability to the Independent Accounting Firm as it
shall reasonably request, except liability for acts of bad faith, willful
misconduct or gross negligence. The fees and disbursements of the Independent
Accounting Firm attributable to such services shall be paid one-half by Seller
and one-half by such Purchaser.
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SECTION 3.7 ALLOCATION OF PURCHASE PRICE.
(a) The Parties will, at their own cost, file all Tax Returns
consistently with the allocation of the Purchase Price determined in accordance
with this Section 3.7. The allocation of the Purchase Price will be negotiated
by the Parties in accordance with Applicable Tax Law, it being agreed that for
Tax purposes no part of the Purchase Price shall be allocable to the assets of
Seller's Qualified Decommissioning Fund (subject to the receipt of a favorable
IRS letter ruling allowing such non-allocation). Seller shall include with the
Estimated Closing Statement, or deliver to each Purchaser prior to delivery of
the Estimated Closing Statement, Seller's proposed allocation of the Purchase
Price to property included in the Purchased Assets (the "Property Allocation").
The Property Allocation shall be consistent with Code Section 1060 and the
regulations thereunder ("Applicable Tax Law") and shall be prepared in a manner
which facilitates Property Tax reporting and sales/use Tax reporting. Within
eight (8) calendar days after delivery of the Property Allocation by Seller to
each Purchaser, each Purchaser may object in good faith to the Property
Allocation in writing. If such Purchaser so objects to the Property Allocation
within such eight (8) day period, the Parties shall attempt to resolve their
differences by negotiation prior to the Closing Date. If the Parties are unable
to do so, the disputed objections and the Property Allocation shall be referred
to the Independent Accounting Firm for final determination within seven (7)
calendar days from the date of referral, the Independent Accounting Firm shall
be instructed to deliver to such Purchaser and Seller a written determination of
the proper allocation of such disputed items within seven (7) calendar days from
the date of referral thereof to the Independent Accounting Firm, the Property
Allocation shall be adjusted in accordance with such determination and the
Closing Date shall be postponed until the Independent Accounting Firm shall have
rendered such determination.
(b) Contemporaneous with agreement by Seller and such
Purchaser to the Post-Closing Statement as provided by Section 3.5(b), but no
later than ninety (90) days after the Closing Date, such Purchaser shall propose
and deliver to Seller a preliminary allocation of the Purchase Price, which
shall include the final Property Allocation and not change any amount allocated
to the Owned Real Property or any other immovable personal property included in
the Purchased Assets (the "Allocation"). The Allocation shall be consistent with
Applicable Tax Law and shall be prepared in a manner that facilitates both
Property Tax reporting and sales/use Tax reporting. Seller shall within thirty
(30) days thereafter propose any changes to the Allocation. Within thirty (30)
days following delivery of such proposed changes, each Purchaser may provide
Seller with a statement of any objections to such proposed changes, together
with a reasonably detailed explanation of the reasons therefor. If Seller and
such Purchaser are unable to resolve any disputed objections within ten (10)
days thereafter, such objections shall be referred to the Independent Accounting
Firm, which shall determine the Allocation (including any valuations). The
Independent Accounting Firm shall be instructed to deliver to Seller and such
Purchaser a written determination of the proper allocation of such disputed
items within twenty (20) Business Days from the date of referral thereof to the
Independent Accounting Firm, and the Allocation shall be so adjusted in
accordance with such determination (such allocation, including the adjustment,
if any, to be referred to as the "Final Allocation"). In the event that there is
any further adjustment to the Purchase Price subsequent to the determination of
the Final Allocation, then within thirty (30) days following any such
adjustment, the Parties shall agree to any resulting adjustments to the Final
Allocation or, if they cannot agree within thirty (30) days, shall submit the
disagreement to the Independent Accounting Firm for resolution in accordance
-52-
with the foregoing provisions. For purposes of this Section 3.7 and wherever the
Independent Accounting Firm is retained to resolve a dispute between the
Parties, the Independent Accounting Firm may determine the issues in dispute
following such procedures, consistent with the provisions of this Agreement, as
it deems appropriate in the circumstances and with reference to the amounts in
issue. The Parties do not intend to impose any particular procedures upon the
Independent Accounting Firm, it being the desire of the Parties that any such
disagreement shall be resolved as expeditiously and inexpensively as reasonably
practicable. The Independent Accounting Firm shall have no liability to the
Parties in connection with such services except for acts of bad faith, willful
misconduct or gross negligence, and the Parties shall provide such indemnities
against liability to the Independent Accounting Firm as it may reasonably
request, except liability for acts of bad faith, willful misconduct or gross
negligence. The finding of such Independent Accounting Firm shall be binding on
the Parties hereto. The fees and disbursements of the Independent Accounting
Firm attributable to such services shall be paid one-half by Seller and one-half
by such Purchaser.
(c) Each Purchaser and Seller agree to file timely Internal
Revenue Service Form 8594, if necessary, and all Tax Returns in accordance with
the Final Allocation determined under Section 3.7(b) and to report the
Transactions for federal Income and all other Tax purposes required of Seller
and each Purchaser in a manner consistent with such allocation. Each Party
agrees promptly to provide the other with any additional information and
reasonable assistance required to complete Form 8594, if necessary, or to
compute Taxes arising in connection with (or otherwise affected by) the
Transactions.
(d) Pursuant to the provisions of Section 7.6(c), each
Purchaser and Seller agrees to notify the other in the event that there is any
change in the Final Allocation as a result of any audit by a Taxing Authority.
SECTION 3.8 PAYMENT OF SALES TAX. Notwithstanding the provisions of
Section 7.6(d), the payment or refund of any Transfer Taxes in connection with
or relating to the Transactions shall be solely addressed in and governed by
this Section 3.8.
(a) At Closing and in addition to the Initial Purchase Price
as adjusted by the Closing Adjustment, each Purchaser will deliver to Seller (in
the same manner as described in Section 3.1(b)(i)), any sales tax due on its
Purchased Assets. Such sales tax shall be determined under applicable sales tax
law and based upon the Property Allocation determined in accordance with Section
3.7(a). The applicable sales tax due at Closing shall be estimated by Seller and
each Purchaser in good faith based on applicable sales tax law, rulings of the
Taxing Authority, including that certain Sales Tax Determination Letter, dated
January 7, 2004, from the Texas Comptroller of Public Accounts to Mr. ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ of ▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ (the "Sales Tax Determination Letter"), and
controlling judicial opinions. Seller will cooperate with CPS in obtaining Tax
treatment available to CPS under the applicable laws and regulations. The
Parties will cooperate in obtaining such tax exemptions as are available under
the applicable laws and regulations.
(b) After Closing and subject to the Final Allocation of
Purchase Price determined under Section 3.7(b), each Purchaser shall pay to
Seller within ten (10) calendar days of the Final Allocation any additional
sales Tax due based either upon rulings of the Taxing
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Authority, including the Sales Tax Determination Letter, or the Final Allocation
as determined under Section 3.7(b). If a refund is due, Seller will file for a
refund of overpaid sales Tax within twenty (20) days of agreement upon the Final
Allocation in accordance with the provisions of Section 3.7(b) and will pay to
such Purchaser the refund amount within ten (10) days of receipt of such refund
from the Taxing Authority.
(c) In the event that there is a further adjustment to the
Purchase Price subsequent to the determination of the Final Allocation and the
Final Allocation has been revised pursuant to the requirements of Section 3.7(b)
and if either Purchaser has additional liability for sales Tax, such Purchaser
shall pay to Seller the additional sales tax within ten (10) calendar days of
the determination of the revised Final Allocation. If pursuant to this Section
3.8(c), either Purchaser is due a refund of sales Tax, Seller will file for a
refund of overpaid sales Tax with twenty (20) days of agreement upon the Final
Allocation in accordance with the provisions of Section 3.7(b) and will pay to
such Purchaser the overpayment within ten (10) days of receipt of such refund
from the Taxing Authority.
(d) All Transfer Taxes incurred in connection with this
Agreement and the Ancillary Agreements and the transactions contemplated hereby
and thereby (whether imposed on Seller or Purchaser) shall be paid by each
Purchaser, when due. Seller will cooperate with CPS in obtaining Tax treatment
available to CPS under the applicable laws and regulations. Seller will timely
prepare and file, to the extent required by applicable Law, all necessary Tax
Returns and other documentation with respect to all such Transfer Taxes. Prior
to the Closing Date, each Purchaser will provide to Seller, to the extent
possible, an appropriate exemption certificate in connection with this Agreement
and the Transactions contemplated hereby, with respect to each applicable
Governmental Authority responsible for the imposition or administration of Taxes
(the "Taxing Authority").
(e) Notwithstanding any other provision of this Section 3.8,
the payment of any Transfer Tax on the value of any vehicles transferred to each
Purchaser under the provisions of this Agreement will be paid by such Purchaser
to the county Tax office when the title and registration for such vehicles are
transferred to such Purchaser. Each Purchaser shall record such title transfer
and registration in a timely manner.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents, warrants and, where specified, disclaims to CPS, with respect
to the CPS Purchased Interest, and to Texas Genco, with respect to the Texas
Genco Purchased Interest, as of the Effective Date and as of the Closing Date,
as follows:
SECTION 4.1 ORGANIZATION AND EXISTENCE. Seller is a corporation, duly
organized, validly existing and in good standing under the laws of the State of
Texas and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
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SECTION 4.2 EXECUTION, DELIVERY AND ENFORCEABILITY. Seller has all
requisite corporate power and authority to execute and deliver, and perform its
obligations under, this Agreement and the Ancillary Agreements to which it is or
becomes a party and to consummate the transactions contemplated hereby and
thereby. The Execution, delivery and performance by Seller of this Agreement and
of the Ancillary Agreements to which it is or becomes a party, and the
consummation of the transactions contemplated hereby and thereby, have been duly
and validly authorized by all necessary corporate action required on the part of
Seller and no other corporate proceedings on its part are necessary to authorize
this Agreement and the Ancillary Agreements to which Seller is or becomes a
party or to consummate the transactions contemplated hereby and thereby.
Assuming the due authorization, Execution and delivery by such Purchaser of this
Agreement and the due authorization, Execution and delivery by such Purchaser
and Guarantor of the Ancillary Agreements to which it is or becomes a party when
Executed by such Purchaser (or Guarantor, in the case of a Guaranty), this
Agreement constitutes, and the Ancillary Agreements to which Seller is or
becomes a party when Executed and delivered by it will constitute, the valid and
legally binding obligations of Seller, enforceable against Seller in accordance
with its and their respective terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws of general application relating to or affecting the enforcement of
creditors' rights and by general equitable principles.
SECTION 4.3 NO VIOLATION.
(a) Subject to Seller obtaining Seller's Required Consents and
Seller's Required Regulatory Approvals, and except for compliance with the
requirements of the HSR Act, none of the Execution and delivery by Seller of
this Agreement or any of the Ancillary Agreements to which it is or becomes a
party, or Seller's performance or compliance with any provision hereof or
thereof or consummation of the transactions contemplated hereby or thereby will:
(i) violate, or conflict with, or result in a breach
of any provisions of the articles of incorporation or bylaws of Seller;
(ii) result in a default (or give rise to any right
of termination, cancellation or acceleration) under, or conflict with
any of the terms, conditions or provisions of, any material note, bond,
mortgage, indenture, license or agreement or other material instrument
or obligation to which Seller is a party or by which Seller or any of
the Purchased Assets is bound, except for such defaults (or rights of
termination, cancellation or acceleration) (A) with respect to which
requisite waivers or consents have been, or prior to the Closing will
have been, obtained or (B) that, individually or in the aggregate, are
not reasonably likely to have a Material Adverse Effect or materially
impair Seller's authority, right or ability to consummate the
Transactions;
(iii) violate any Law, rule, regulation, order, writ,
injunction or decree, applicable to Seller or the Purchased Assets,
except such violations that, individually or in the aggregate, are not
reasonably likely to have a Material Adverse Effect or materially
impair Seller's authority, right or ability to consummate the
Transactions and do not
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affect the validity or enforceability of this Agreement or the
Ancillary Agreements or the validity of the transactions contemplated
hereby or thereby;
(iv) require the consent, approval or authorization
of, filing with, or notice to any Person which, if not obtained, would
prevent Seller from performing its obligations hereunder; or
(v) be rendered void or ineffective by or under any
of the terms, conditions or provisions of any agreement, instrument or
obligation to which Seller is a party or by which Seller is bound or to
which any of the Purchased Assets is subject.
(b) Except as set forth in the STP Project Documents, there
are no (i) restrictions on the transfer of Seller's ownership interests in the
STP Interest or the other Purchased Assets, subject to obtaining Seller's
Required Regulatory Approvals and Seller's Required Consents, or (ii) except as
described on Schedule 4.3, options or other rights of any third party to acquire
Seller's ownership interests in the STP Interest or the other Purchased Assets.
Except as set forth in the STP Project Documents or as described on Schedule
4.3, none of the Execution and delivery by Seller of this Agreement or any of
the Ancillary Agreements to which it is or becomes a party, or Seller's
performance of or compliance with any provision hereof or thereof or
consummation of the transactions contemplated hereby or thereby, will entitle
any third party to exercise any purchase options, rights of first refusal or
similar rights with respect to the STP Interest or the other Purchased Assets.
As of the Closing Date, Seller will have complied in all material respects with
its obligations under, or obtained any requisite waivers of non-compliance with
its obligations under, the right of first refusal provisions of Section 17 of
the STP Participation Agreement or any similar obligations of Seller described
on Schedule 4.3.
SECTION 4.4 COMPLIANCE WITH LAWS. Except as set forth on Schedule 4.4,
to Seller's Knowledge, there is no uncured violation by Seller with respect to
any of the Purchased Assets of any applicable Law or judgment of any
Governmental Authority in existence as of the Effective Date (excluding any
Environmental Law, in respect of which Seller's sole representations and
warranties are set forth in Section 4.15), except for (a) violations or alleged
violations by the STP Owners in common, or by the Operating Agent acting on
their behalf, or (b) violations or alleged violations that, individually or in
the aggregate, are not reasonably likely to have a Material Adverse Effect or
materially impair Seller's authority, right or ability to consummate the
Transactions.
SECTION 4.5 PERMITS. Except as set forth on Schedule 4.5, as of the
Closing Date, Seller will hold, all permits, registrations, franchises,
certificates, licenses and other authorizations, consents and approvals of all
Governmental Authorities, including the NRC, required under applicable Laws
(excluding any of the foregoing required under any Environmental Law, in respect
of which Seller's sole representations and warranties are set forth in Section
4.15) for Seller's ownership of the STP Interest and participation in the
operation of the Generation Facility (collectively, "Permits"), except for such
failures to hold such Permits that are also failures of the other STP Owners or
that, individually or in the aggregate, are not reasonably likely to have a
Material Adverse Effect or materially impair Seller's authority, right or
ability to consummate the Transactions.
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SECTION 4.6 LITIGATION. Except as set forth on Schedule 4.6, there is
no claim, action, proceeding or investigation pending against Seller or, to
Seller's Knowledge, threatened against Seller or relating to the Purchased
Assets, before any court, arbitrator or Governmental Authority, or any judgment,
decree or order of any court, arbitrator or Governmental Authority that,
individually or in the aggregate, (a) is reasonably likely to result, or has
resulted, in (i) the institution of legal proceedings to prohibit or restrain
the performance by Seller of this Agreement or any of the Ancillary Agreements
to which it is a party, or the consummation of the transactions contemplated
hereby or thereby, (ii) a claim against such Purchaser or any of its Affiliates
for damages as a result of Seller entering into this Agreement or any of the
Ancillary Agreements to which it is a party, or the consummation of the
transactions contemplated hereby or thereby, or (iii) a material impairment of
the ability of Seller to perform its obligations under this Agreement or any of
the Ancillary Agreements to which it is a party; or (b) is reasonably likely to
have a Material Adverse Effect or materially impair Seller's authority, right or
ability to consummate the Transactions.
SECTION 4.7 QUALIFIED DECOMMISSIONING FUNDS.
(a) Seller's Qualified Decommissioning Funds are held in a
trust validly existing and in good standing under the laws of the State of Texas
with all requisite authority to conduct its affairs as it now does, subject to
applicable regulatory requirements. Seller has heretofore delivered to each
Purchaser a copy of the trust agreement that governs Seller's Qualified
Decommissioning Funds as in effect on the date of this Agreement. Seller's
Qualified Decommissioning Funds satisfy the requirements necessary for them to
be treated as "Nuclear Decommissioning Reserve Funds" within the meaning of Code
Section 468A(a) and as "nuclear decommissioning funds" and "qualified nuclear
decommissioning funds" within the meaning of Treas. Reg. Section 1.468A-1(b)(3).
Seller's Qualified Decommissioning Funds are in compliance in all material
respects with all applicable rules and regulations of the NRC, the PUCT and the
IRS, and Seller's Qualified Decommissioning Funds have not engaged in any acts
of "self-dealing" as defined in Treas. Reg. Section 1.468A-5(b)(2). No "excess
contribution," as defined in Treas. Reg. Section 1.468A-5(c)(2)(ii), has been
made to Seller's Qualified Decommissioning Funds that has not been withdrawn
within the period provided under Treas. Reg. Section 1.468A-5(c)(2)(i). Seller
has made timely and valid elections to make monthly contributions to Seller's
Qualified Decommissioning Funds since the date of the creation of Seller's
Qualified Decommissioning Funds.
(b) Subject only to obtaining Seller's Required Regulatory
Approvals, Seller and the trustee have, or as of the Closing will have, all
requisite authority to cause each Purchaser's Proportionate Share of the assets
of Seller's Qualified Decommissioning Funds to be transferred to such
Purchaser's Qualified Decommissioning Funds or such Purchaser's Nonqualified
Decommissioning Funds, as the case may be, in accordance with the provisions of
this Agreement.
(c) Seller and/or the trustee of Seller's Qualified
Decommissioning Funds has/have filed or caused to be filed (or will file or
cause to be filed in a timely manner) with the NRC, the IRS and any relevant
state or local authority all material forms, Tax Returns, private letter rulings
which set forth ruling amounts, statements, reports and documents (including all
exhibits, amendments and supplements thereto) required to be filed by either of
them. Subject
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only to obtaining Seller's Required Regulatory Approvals, Seller has delivered,
or will deliver, to each Purchaser copies of the most recent schedules of ruling
amounts contained in private letter rulings issued by the IRS for Seller's
Qualified Decommissioning Funds, copies of the requests that were filed to
obtain such schedules of ruling amounts and copies of any pending request for
revised ruling amounts, in each case together with all exhibits, amendments and
supplements thereto. Any amounts contributed to Seller's Qualified
Decommissioning Funds while any such request is pending before the IRS and which
turn out to exceed the applicable amounts provided in the schedule of ruling
amounts issued by the IRS will be withdrawn from Seller's Qualified
Decommissioning Funds within the period provided under Treas. Reg. Section
1.468A-5(c)(2)(i). There are no interim rate orders that may be retroactively
adjusted or retroactive adjustments in interim rate orders that may materially
affect amounts that each Purchaser may contribute to its Proportionate Share of
Seller's Qualified Decommissioning Funds or may require distributions to be made
from Seller's Qualified Decommissioning Funds.
(d) Seller (i) has made available to each Purchaser a
statement of assets verified by the trustee for Seller's Qualified
Decommissioning Funds as of December 31, 2003, and (ii) will make available to
each Purchaser on or before the last Business Day prior to the Closing Date a
statement of assets verified by the trustee for Seller's Qualified
Decommissioning Funds as of the second Business Day before the Closing Date,
which statements of assets present fairly, or when made available will present
fairly, in all material respects, the financial position of Seller's Qualified
Decommissioning Funds as of the dates thereof. Seller will make available to
each Purchaser available information from which each Purchaser can reasonably
determine the tax basis of its Proportionate Share of all assets in Seller's
Qualified Decommissioning Funds as of the last Business Day before Closing.
There are no liabilities (whether absolute, accrued, contingent or otherwise and
whether due or to become due), including, without limitation, agency or other
legal proceedings, that may materially affect the financial position of Seller's
Qualified Decommissioning Funds other than those that are described in such
statement made available to each Purchaser prior to the Effective Date or on
Schedule 4.7.
(e) Seller has made available to each Purchaser all material
contracts and agreements to which the trustee of Seller's Qualified
Decommissioning Funds, in its capacity as such, is a party.
(f) Seller's Qualified Decommissioning Funds have filed all
Tax Returns required to be filed and all Taxes shown to be due on such Tax
Returns have been paid in full. No notice of deficiency or assessment has been
received by Seller from any taxing authority with respect to liability for Taxes
of Seller's Qualified Decommissioning Funds which has not been fully paid or
finally settled or is not being contested in good faith through appropriate
proceedings.
(g) To the extent Seller has pooled the assets of Seller's
Qualified Decommissioning Funds for investment purposes in periods prior to
Closing, such pooling arrangement is not taxable as a corporation for federal
income tax purposes.
SECTION 4.8 NON-QUALIFIED DECOMMISSIONING FUND.
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(a) Seller's Non-Qualified Decommissioning Funds are a trust
validly existing and in good standing under the laws of the State of Texas with
all requisite authority to conduct its affairs as it now does, subject to
applicable regulatory requirements. Seller's Non-Qualified Decommissioning Funds
are in compliance in all material respects with all applicable rules and
regulations of the NRC, the PUCT and any other Governmental Authority having
jurisdiction.
(b) Subject only to obtaining Seller's Required Regulatory
Approvals, Seller and/or the trustee has/have, or as of the Closing will have,
all requisite authority to cause the assets of Sellers' Non-Qualified
Decommissioning Funds to be transferred in accordance with the provisions of
this Agreement.
(c) Seller and the trustee of Seller's Non-Qualified
Decommissioning Funds have timely filed or caused to be timely filed with the
NRC, the IRS and any relevant state or local authority all material forms,
statements, Tax Returns, reports and documents (including all exhibits,
amendments and supplements thereto) required to be filed by either of them.
(d) Seller (i) has made available to each Purchaser a
statement of assets verified by the trustee for Seller's Non-Qualified
Decommissioning Funds as of December 31, 2003, and (ii) will make available to
each Purchaser on or before the last Business Day prior to the Closing Date a
statement of assets verified by the trustee for Seller's Non-Qualified
Decommissioning Funds as of the second Business Day before the Closing Date,
which statements of assets present fairly, or when made available will present
fairly, in all material respects, the financial position of Seller's
Non-Qualified Decommissioning Funds as of the dates thereof. There are no
liabilities (whether absolute, accrued, contingent or otherwise and whether due
or to become due), including, without limitation, agency or other legal
proceedings, that may materially affect the financial position of Seller's
Non-Qualified Decommissioning Funds other than those that are described in such
statement made available to each Purchaser prior to the Effective Date or on
Schedule 4.8.
(e) Seller has made available to each Purchaser all material
contracts and agreements to which the trustee of Seller's Non-Qualified
Decommissioning Funds, in its capacity as such, is a party.
(f) To the extent Seller has pooled the assets of Seller's
Non-Qualified Decommissioning Funds in periods ending on or prior to the Closing
Date, such pooling arrangement is not taxable as a corporation for federal
income tax purposes.
SECTION 4.9 GENERATION FACILITY CONTRACTS.
(a) Except for (i) any Generation Facility Contract listed on
Schedule 2.1(f), (ii) any Generation Facility Contract that will expire or be
fully performed on or before the date that is one hundred eighty (180) days
after the Closing Date, or that may be terminated by Seller or any of its
Affiliates without material penalty upon one hundred eighty (180) days' notice
or less, or (iii) any Generation Facility Contract that does not require known
or liquidated expenditures or payments by Seller in excess of Five Hundred
Thousand Dollars (U.S. $500,000), Seller is not a party to or bound by any
Generation Facility Contract and, to Seller's Knowledge, the Operating Agent, on
behalf of the STP Owners or on behalf of Seller as one of
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the STP Owners, is not a party to or bound by any Generation Facility Contract
by which Seller is bound, except for Generation Facility Contracts entered into
in the ordinary course of business or not reasonably likely to have a Material
Adverse Effect;
(b) Except as set forth on Part I of Schedule 4.9, to Seller's
Knowledge, there is not, under the Generation Facility Contracts required to be
listed on Schedule 2.1(f), any default or event which, with notice or lapse of
time or both, would constitute a default by Seller or, to Seller's Knowledge, by
the Operating Agent, except for such defaults, events of default and other
events as to which requisite waivers have been, or prior to Closing will have
been, obtained or are not, individually or in the aggregate, reasonably likely
to have a Material Adverse Effect or materially impair Seller's authority, right
or ability to consummate the Transactions; and
(c) Except as set forth on Part II of Schedule 4.9, no claim,
action, proceeding or investigation, is pending or, to Seller's Knowledge,
threatened against Seller challenging the enforceability of the Generation
Facility Contracts specified on Schedule 2.1(f), except for challenges to the
enforceability of such Generation Facility Contracts against the STP Owners in
common, or challenges which are not, individually or in the aggregate,
reasonably likely to have a Material Adverse Effect or materially impair
Seller's authority, right or ability to consummate the Transactions.
SECTION 4.10 PERSONAL PROPERTY.
(a) Schedule 4.10 lists each item of tangible personal
property included in the Purchased Assets with a value of U.S. $100,000 or
greater owned by Seller (as a 25.2% co-tenant) (the "Personal Property"), and
Seller has good and valid title (as a 25.2% co-tenant) to owned Personal
Property, free and clear of all Encumbrances, except Permitted Encumbrances.
(b) As of the Closing Date, there will not have been any
Material Adverse Effect in the physical condition of any of the Personal
Property since February 9, 2004, except (i) ordinary wear and tear, (ii) matters
resulting from acts or omissions of a Purchaser or any of its Affiliates or
representatives, and (iii) matters the subject of one or more notices to a
Purchaser from Seller pursuant to Section 7.4(j).
SECTION 4.11 REAL PROPERTY. Seller does not own any material parcels of
real property or interests therein that are part of, or used primarily in
connection with, the Generation Facility, except the Owned Real Property, which
is described on Schedule 4.11 and the Excluded Assets. To Seller's Knowledge,
(i) the Owned Real Property is owned of record by Seller (as a 25.2% co-tenant)
free and clear of all Encumbrances, except Permitted Encumbrances, (ii) Seller
has not received written notice of any violations of any easements, restrictions
or other Encumbrances on or relating to the Owned Real Property, and (iii) there
are no improvements that have been made or authorized by any Governmental
Authority, the costs of which are to be assessed as special Taxes or charges
against any of the Owned Real Property.
SECTION 4.12 LEASED REAL AND PERSONAL PROPERTY. Except as set forth on
Schedule 4.12, Seller does not lease, as lessee, any material parcels of real
property or any tangible
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Personal Property pursuant to any Generation Facility Contract that is required
to be listed on Schedule 2.1(f).
SECTION 4.13 INTELLECTUAL PROPERTY. Seller does not own or otherwise
possess any rights to use any patents, copyrights, trademarks, service marks,
technology, know-how, computer software programs and applications, databases and
tangible or intangible proprietary information or materials that are currently
used in connection with and necessary for the operation of the Generation
Facility except as may be included in the Purchased Assets or licensed to the
STP Owners or the Operating Agent acting on behalf of the STP Owners.
SECTION 4.14 BROKERS. All negotiations relating to this Agreement and
the Transactions have been carried on by Seller and in such a manner as not to
give rise to any valid claim against either Purchaser (by reason of Seller's
actions) for a brokerage commission, finder's fee or other like payment to any
Person.
SECTION 4.15 ENVIRONMENTAL MATTERS. Except as set forth on Schedule
4.15:
(a) To Seller's Knowledge, Seller and the other STP Owners are
currently in compliance with all Environmental Laws that govern the Generation
Facility, except as, individually or in the aggregate, not reasonably likely to
have a Material Adverse Effect or materially impair Seller's authority, right or
ability to consummate the Transactions;
(b) To Seller's Knowledge, except as, individually or in the
aggregate, not reasonably likely to have a Material Adverse Effect or materially
impair Seller's authority, right or ability to consummate the Transactions, the
STP Owners hold all registrations, licenses, permits, authorizations and other
consents or approvals of Governmental Authorities required under the
Environmental Laws for their ownership of the Generation Facility ("STP Owners
Licenses"), are in compliance with all such STP Owners Licenses they hold, and
have not received any written notice that: (i) any such existing STP Owners
License will be revoked; or (ii) any pending application for any new such STP
Owners License or renewal of any existing STP Owners License will be denied. To
Seller's Knowledge, except as, individually or in the aggregate, not reasonably
likely to have a Material Adverse Effect or materially impair Seller's
authority, right or ability to consummate the Transactions, with respect to any
such STP Owners Licenses for which the date for filing a renewal application
will have passed by the Closing Date, the Generation Facility Owners have filed
or the Operating Agent on their behalf has filed (or the STP Owners or the
Operating Agent on their behalf will have filed by the Closing Date) all
applications necessary to renew such STP Owners Licenses in a timely fashion;
(c) To Seller's Knowledge, except as, individually or in the
aggregate, not reasonably likely to have a Material Adverse Effect or materially
impair Seller's authority, right or ability to consummate the Transactions, the
Operating Agent has not received any currently outstanding written notice of any
proceeding, action or other claim or liability arising under any Environmental
Laws (including, without limitation, notice of potentially responsible party
status under the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. Sections 9601 et seq. or any state counterpart) or
relating to Hazardous Substances from any Person or Governmental Authority
regarding activities at or the operation of the Generation Facility;
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(d) To Seller's Knowledge, except as, individually or in the
aggregate, not reasonably likely to have a Material Adverse Effect or materially
impair Seller's authority, right or ability to consummate the Transactions,
there has not been a Release at the Generation Facility that currently imposes
any clean-up or remediation obligations on Seller under any Environmental Law;
(e) To Seller's Knowledge, the Operating Agent has not, and
the STP Owners have not, entered into or agreed to any consent decree or order
under any Environmental Law relating to the Generation Facility and the
Operating Agent is not, and the STP Owners are not, subject to any outstanding
judgment, decree, or order relating to compliance with any Environmental Law or
to the investigation or Remediation of Hazardous Substances under any
Environmental Law relating to the Generation Facility; and
(f) There are no underground storage tanks located at any
Site, other than those identified in Section 14.3.
SECTION 4.16 LABOR MATTERS. Neither Seller nor any of its Affiliates is
a party to or is bound by any collective bargaining agreement with respect to
any Employees and, to Seller's Knowledge, no present union organizing efforts
are underway with respect to any Employees and no claim has been made by any
union as to the representation of any Employees.
SECTION 4.17 EMPLOYEE BENEFIT PLANS.
(a) Schedule 4.17(a) sets forth a true and complete list of
(i) all "employee benefits plans" as defined in Section 3(3) of ERISA, (ii) all
other severance pay, stay pay, salary continuation, bonus, incentive, stock
option, retirement, pension, profit sharing or deferred compensation plans,
contracts, programs, funds, or similar arrangements, and (iii) all other
employee benefit plans, contracts, programs, funds or similar arrangements,
whether written or oral, qualified or nonqualified, funded or unfunded, foreign
or domestic, which Seller or any of its Affiliates (excluding the Operating
Agent) sponsor or make available for the benefit of Employees (hereinafter
individually or collectively referred to as "Employee Plan" or "Employee Plans,"
respectively). Seller has no liability with respect to Employees under any plan,
arrangement or practice of the type described in the preceding sentence other
than the Employee Plans.
(b) Copies of the following materials have been delivered or
made available to each Purchaser: (i) all current plan documents for each
Employee Plan, or in the case of an unwritten Employee Plan, a written
description thereof; (ii) all current summary plan descriptions and summaries of
material modifications for each Employee Plan; and (iii) any other document,
form or other instrument relating to any Employee Plan reasonably requested by a
Purchaser.
SECTION 4.18 [INTENTIONALLY LEFT BLANK]
SECTION 4.19 NO UNDISCLOSED MATERIAL LIABILITIES. Except as set forth
on Schedule 4.19, the STP Statements or the Seller Financial Statements, the
Purchased Assets are not subject to any liability or obligation required to be
set forth on a balance sheet of Seller prepared in accordance with GAAP, other
than:
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(a) Liabilities and obligations under this Agreement;
(b) Liabilities and obligations incurred since the date of the
most recent Seller Financial Statements in the ordinary course of business not
in violation of any of the provisions of this Agreement; and
(c) Liabilities and obligations related to the AEP-Cameco PSA,
which shall be terminated by Seller, if not sooner terminated, pursuant to
Section 2.7.
SECTION 4.20 NRC LICENSES. Seller has all licenses, permits and other
consents and approvals issued by the NRC necessary to own the Purchased Assets,
including the STP Interest, and, to Seller's Knowledge, the Operating Agent has
all licenses, permits and other consents and approvals issued by the NRC
necessary to operate the Generating Facility as presently operated, pursuant to
the requirements of all Nuclear Laws.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF CPS
CPS represents, warrants and, where specified, disclaims to Seller, as of the
Effective Date and as of the Closing Date, as follows:
SECTION 5.1 ORGANIZATION AND EXISTENCE. The City is a municipal
corporation, duly organized and validly existing under the laws of the State of
Texas. CPS is a duly organized and validly existing municipally-owned utility
formed under the laws of the State of Texas as provided for under Ch.1502 of the
Texas Government Code, and has all requisite power and authority to own, lease
and operate its properties and to carry on its business as now being conducted.
SECTION 5.2 EXECUTION, DELIVERY AND ENFORCEABILITY. CPS has all
requisite power and authority to execute and deliver, and to perform its
obligations under, this Agreement and the Ancillary Agreements to which CPS is
or becomes a party and to consummate the transactions contemplated hereby and
thereby. The Execution, delivery and performance by CPS of this Agreement and of
the Ancillary Agreements to which CPS is or becomes a party, and the
consummation of the transactions contemplated hereby and thereby, have been duly
and validly authorized by all necessary action required on the part of CPS and
no other proceedings on the part of CPS is necessary to authorize this Agreement
and the Ancillary Agreements to which CPS is or becomes a party or to consummate
the transactions contemplated hereby and thereby. Assuming the due
authorization, Execution and delivery by Seller of this Agreement and the
Ancillary Agreements to which Seller is or becomes a party when Executed by
Seller, this Agreement constitutes, and the Ancillary Agreements to which CPS is
or becomes a party when Executed and delivered by CPS will constitute, the valid
and legally binding obligations of CPS, enforceable against CPS in accordance
with its and their respective terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws of general application relating to or affecting the enforcement of
creditors' rights and by general equitable principles.
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SECTION 5.3 NO VIOLATION. Subject to CPS obtaining CPS's Required
Regulatory Approvals and CPS's Required Consents, none of the Execution and
delivery by CPS of this Agreement or any of the Ancillary Agreements to which
CPS is or becomes a party, CPS's compliance with any provision hereof or
thereof, or CPS's consummation of the transactions contemplated hereby or
thereby will:
(a) violate, or conflict with, or result in a breach of any
provisions of the charter or similar constitutive documents of the City or CPS;
(b) result in a default (or give rise to any right of
termination, cancellation or acceleration) under or conflict with any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, license
or agreement or other instrument or obligation to which CPS is a party or by
which CPS may be bound, except for such defaults (or rights of termination,
cancellation or acceleration) (i) with respect to which requisite waivers or
consents have been, or prior to the Closing will have been, obtained or (ii)
that, individually or in the aggregate, are not reasonably likely to have a
Material Adverse Effect;
(c) violate any Law, rule, regulation, order, writ, injunction
or decree, applicable to CPS or any of CPS's assets, except such violations
that, individually or in the aggregate, are not reasonably likely to have a
Material Adverse Effect and do not affect the validity or enforceability of this
Agreement or the Ancillary Agreements or the validity of the transactions
contemplated hereby or thereby;
(d) require the consent, approval or authorization of, filing
with, or notice to any Person which, if not obtained, would prevent CPS from
performing its obligations hereunder; or
(e) be rendered void or ineffective by or under any of the
terms, conditions or provisions of any agreement, instrument or obligation to
which CPS is a party or by which CPS is bound.
SECTION 5.4 LITIGATION. There is no claim, action, proceeding or
investigation pending or, to CPS's Knowledge, threatened against or relating to
the CPS before any court, arbitrator or Governmental Authority, or any judgment,
decree or order of any court, arbitrator or Governmental Authority that,
individually or in the aggregate, (a) is reasonably likely to result, or has
resulted, in (i) the institution of legal proceedings to prohibit or restrain
the performance by CPS of this Agreement or any of the Ancillary Agreements to
which CPS is or becomes a party, or the consummation of the transactions
contemplated hereby or thereby, (ii) a claim against Seller or any of its
Affiliates for damages as a result of CPS entering into this Agreement or CPS
entering into any of the Ancillary Agreements to which it is or becomes a party
or the consummation by CPS of the transactions contemplated hereby or thereby,
or (iii) a material impairment of CPS's ability to perform its obligations under
this Agreement or the ability of CPS to perform its obligations under any of the
Ancillary Agreements to which it is or becomes a party; or (b) is reasonably
likely to have a Material Adverse Effect.
SECTION 5.5 [INTENTIONALLY LEFT BLANK.]
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SECTION 5.6 BROKERS. All negotiations relating to this Agreement and
the Transactions have been carried on by CPS in such a manner as not to give
rise to any valid claim against Seller or any of its Affiliates (by reason of
CPS's actions) for a brokerage commission, finder's fee or other like payment to
any Person.
SECTION 5.7 FINANCING. CPS has now and shall at all times until payment
of same at Closing continuously have liquid capital or committed sources
therefor sufficient to permit CPS to perform timely its obligations hereunder
and under the Ancillary Agreements to which CPS is or becomes a party.
SECTION 5.8 CPS QUALIFICATIONS. To CPS's Knowledge, CPS is qualified to
obtain CPS's Required Regulatory Approvals and CPS's Required Consents and there
are no conditions in existence that could reasonably be expected to delay,
impede or condition the receipt by CPS of any of CPS's Required Regulatory
Approvals or CPS's Required Consents.
SECTION 5.9 "AS IS" SALE. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES
OF SELLER SET FORTH IN THIS AGREEMENT OR ANY ANCILLARY AGREEMENT, CPS
UNDERSTANDS AND AGREES THAT THE PURCHASED ASSETS, INCLUDING, THE STP INTEREST,
ARE BEING ACQUIRED, "AS IS, WHERE IS" ON THE CLOSING DATE, AND IN THEIR
CONDITION ON THE CLOSING DATE "WITH ALL FAULTS," AND THAT CPS IS RELYING ON ITS
OWN EXAMINATION OF THE PURCHASED ASSETS. WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING AND EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES OF SELLER EXPRESSLY
SET FORTH IN THIS AGREEMENT OR ANY ANCILLARY AGREEMENT, CPS UNDERSTANDS AND
AGREES THAT SELLER EXPRESSLY DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES AS TO
LIABILITIES, OPERATION OF THE PURCHASED ASSETS, INCLUDING THE GENERATION
FACILITY, TITLE, CONDITION, VALUE OR QUALITY OF THE PURCHASED ASSETS OR THE
PROSPECTS, RISKS AND OTHER INCIDENTS OF THE PURCHASED ASSETS AND ANY
REPRESENTATION OR WARRANTY OF MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR
ANY PARTICULAR PURPOSE WITH RESPECT TO THE PURCHASED ASSETS OR ANY PART THEREOF,
OR AS TO THE WORKMANSHIP THEREOF OR THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER
LATENT OR PATENT. CPS FURTHER AGREES THAT, EXCEPT FOR THE REPRESENTATIONS AND
WARRANTIES OF SELLER EXPRESSLY SET FORTH IN THIS AGREEMENT OR ANY ANCILLARY
AGREEMENT, NO DUE DILIGENCE MATERIALS OR OTHER INFORMATION OR MATERIAL PROVIDED
BY, OR COMMUNICATION MADE BY, SELLER OR ANY REPRESENTATIVE OF SELLER WILL
CONSTITUTE, CREATE OR OTHERWISE CAUSE TO EXIST ANY REPRESENTATION OR WARRANTY
WHATSOEVER, WHETHER OR NOT EXPRESSLY DISCLAIMED BY THE FOREGOING.
SECTION 5.10 NO KNOWLEDGE OF SELLER'S BREACH. Except as set forth on
Schedule 5.10, CPS has no Knowledge of any breach of any representation or
warranty by Seller or of any other condition or circumstance that would excuse
CPS from its timely performance of its obligations hereunder.
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SECTION 5.11 CPS FINANCIAL STATEMENTS. CPS has provided Seller with
true and correct copies of its balance sheet, income statement and statement of
changes in cash flows for each of that CPS's last three completed fiscal years,
together with the related reports of its independent accountants (collectively,
the "CPS Financial Statements"). The CPS Financial Statements have been prepared
in accordance with GAAP (and, except in the case of quarterly CPS Financial
Statements, set forth adjustments and disclosures required in order to conform
to GAAP) consistently applied and present fairly, in all material respects, the
financial position of CPS as of the dates thereof and the results of operations
and cash flow of CPS for the periods then ended.
SECTION 5.12 INSPECTION. CPS is an experienced and knowledgeable
investor in the Texas power generation business. Prior to entering into this
Agreement, CPS was advised by its counsel, accountants, financial advisors and
such other Persons as it has deemed appropriate concerning this Agreement and
the Transactions and CPS has relied solely on Seller's representations and
warranties expressly contained herein and an independent investigation and
evaluation of, and appraisal and judgment with respect to, the Purchased Assets,
the Generation Facility and the Assumed Liabilities. CPS (i) acknowledges that,
prior to its Execution of this Agreement, it has been afforded access to and the
opportunity to inspect the Generation Facility, and has been or will be deemed
for all purposes to have been afforded access to and the opportunity to inspect
the Generation Facility Contracts and all other Due Diligence Materials, (ii)
has inspected the Generation Facility and reviewed the Generation Facility
Contracts and the Due Diligence Materials, and as of the Closing Date, it will
have inspected the Generation Facility and reviewed the Generation Facility
Contracts and all other Due Diligence Materials, to the extent it deems
necessary or advisable, and (iii) is relying solely upon Seller's
representations and warranties expressly contained herein and its own
inspections and investigation in order to satisfy itself as to the condition and
suitability of the Purchased Assets and the Generation Facility.
SECTION 5.13 CPS'S ERCOT GENERATION. Schedule 5.13 sets forth a
complete listing of the generating assets directly or indirectly owned,
controlled or under construction by CPS and located in the ERCOT Region and
CPS's firm transmission reservations over the HVDC transmission lines
interconnecting the ERCOT Region and the SPP Region.
SECTION 5.14 HSR ACT. CPS is, and at all times prior to the Closing
Purchaser will continue to be, a political subdivision of a State of the United
States (other than a corporation engaged in commerce) within the meaning of 16
C.F.R. Section 801.1(a)(2) and thus CPS is not, and at all times prior to the
Closing CPS will not be, an "entity" (as defined in 16 C.F.R. Section
801.1(a)(2)) that is subject to the HSR Act.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF TEXAS GENCO
Texas Genco represents, warrants and, where specified, disclaims to Seller, as
of the Effective Date and as of the Closing Date, as follows:
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SECTION 6.1 ORGANIZATION AND EXISTENCE. Texas Genco is a limited
partnership duly organized, validly existing and in good standing under the laws
of Texas, and has all requisite partnership power and authority to own, lease
and operate its properties and to carry on its business as now being conducted.
SECTION 6.2 EXECUTION, DELIVERY AND ENFORCEABILITY. Texas Genco has all
requisite partnership power and authority to execute and deliver, and to perform
its obligations under, this Agreement and the Ancillary Agreements to which
Texas Genco is or becomes a party and to consummate the transactions
contemplated hereby and thereby. The Execution, delivery and performance by
Texas Genco of this Agreement and of the Ancillary Agreements to which Texas
Genco is or becomes a party, and the consummation of the transactions
contemplated hereby and thereby, has been duly and validly authorized by all
necessary action required on the part of Texas Genco and/or its general and
limited partners, and no other proceedings on its general and limited partners'
part are necessary to authorize this Agreement and the Ancillary Agreements to
which Texas Genco is or becomes a party or to consummate the transactions
contemplated hereby and thereby. Assuming the due authorization, Execution and
delivery by Seller of this Agreement and the Ancillary Agreements to which
Seller is or becomes a party when Executed by Seller, this Agreement
constitutes, and the Ancillary Agreements to which Texas Genco is or becomes a
party when Executed and delivered by Texas Genco will constitute, the valid and
legally binding obligations of such Texas Genco, enforceable against such Texas
Genco in accordance with its and their respective terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws of general application relating to or affecting
the enforcement of creditors' rights and by general equitable principles.
SECTION 6.3 NO VIOLATION. Subject to Texas Genco obtaining Texas
Genco's Required Regulatory Approvals and Texas Genco's Required Consents,
except for its compliance with the requirements of the HSR Act, none of the
Execution and delivery by Texas Genco of this Agreement or any of the Ancillary
Agreements to which Texas Genco is or becomes a party, Texas Genco's compliance
with any provision hereof or thereof, or Texas Genco's consummation of the
transactions contemplated hereby or thereby will:
(a) violate, or conflict with, or result in a breach of any
provisions of the certificate of limited partnership or the partnership
agreement of Texas Genco or similar constitutive documents of any partner of
Texas Genco;
(b) result in a default (or give rise to any right of
termination, cancellation or acceleration) under or conflict with any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, license
or agreement or other instrument or obligation to which Texas Genco is a party
or by which Texas Genco may be bound, except for such defaults (or rights of
termination, cancellation or acceleration) (i) with respect to which requisite
waivers or consents have been, or prior to the Closing will have been, obtained
or (ii) that, individually or in the aggregate, are not reasonably likely to
have a Material Adverse Effect;
(c) violate any Law, rule, regulation, order, writ, injunction
or decree, applicable to Texas Genco or any of its assets, except such
violations that, individually or in the aggregate, are not reasonably likely to
have a Material Adverse Effect and do not affect the
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validity or enforceability of this Agreement or the Ancillary Agreements or the
validity of the transactions contemplated hereby or thereby;
(d) require the consent, approval or authorization of, filing
with, or notice to any Person which, if not obtained, would prevent Texas Genco
from performing its obligations hereunder; or
(e) be rendered void or ineffective by or under any of the
terms, conditions or provisions of any agreement, instrument or obligation to
which Texas Genco is a party or by which Texas Genco is bound.
SECTION 6.4 LITIGATION. There is no claim, action, proceeding or
investigation pending or, to Texas Genco's Knowledge, threatened against or
relating to Texas Genco or its Affiliates before any court, arbitrator or
Governmental Authority, or any judgment, decree or order of any court,
arbitrator or Governmental Authority that, individually or in the aggregate, (a)
is reasonably likely to result, or has resulted, in (i) the institution of legal
proceedings to prohibit or restrain the performance by Texas Genco of this
Agreement or any of the Ancillary Agreements to which Texas Genco is or becomes
a party, or the consummation of the transactions contemplated hereby or thereby,
(ii) a claim against Seller or any of its Affiliates for damages as a result of
Texas Genco entering into this Agreement or Texas Genco entering into any of the
Ancillary Agreements to which it is or becomes a party or the consummation by
Texas Genco of the transactions contemplated hereby or thereby, or (iii) a
material impairment of Texas Genco's ability to perform its obligations under
this Agreement or the ability of Texas Genco to perform its obligations under
any of the Ancillary Agreements to which it is or becomes a party; or (b) is
reasonably likely to have a Material Adverse Effect.
SECTION 6.5 TEXAS GENCO'S QUALIFIED DECOMMISSIONING FUNDS. There has
been and will be no failure on Texas Genco's part to comply with regulations of
any Governmental Authority that will result in the transfer of Texas Genco's
Proportionate Share of Seller's Qualified Decommissioning Funds not qualifying
for the tax consequences specified in Treasury Reg. Section 1.468A-6(c). As of
the Closing Date, all of Texas Genco's Qualified Decommissioning Funds shall
have been established for the exclusive purpose of providing funds for the
Decommissioning of the Generation Facility within the meaning of Treas. Reg.
Section 1.468A-5(a) and, assuming the accuracy of Seller's representations and
warranties in Section 4.7 and satisfaction of the condition set forth in Section
10.9, Texas Genco's Qualified Decommissioning Funds will satisfy the
requirements necessary for it to be treated as a "Nuclear Decommissioning
Reserve Fund" within the meaning of Code Section 468A(a) and as a "nuclear
decommissioning fund" and a "qualified nuclear decommissioning fund" within the
meaning of Treas. Reg. Section 1.468A-1(b)(3).
SECTION 6.6 BROKERS. All negotiations relating to this Agreement and
the Transactions have been carried on by Texas Genco in such a manner as not to
give rise to any valid claim against Seller or any of its Affiliates (by reason
of Texas Genco's actions) for a brokerage commission, finder's fee or other like
payment to any Person.
SECTION 6.7 FINANCING. Texas Genco has now and shall at all times until
payment of same at Closing continuously have liquid capital or committed sources
therefor sufficient to
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permit Texas Genco to perform timely its obligations hereunder and under the
Ancillary Agreements to which said Texas Genco is or becomes a party.
SECTION 6.8 TEXAS GENCO QUALIFICATIONS. To Texas Genco's Knowledge,
Texas Genco is qualified to obtain Texas Genco's Required Regulatory Approvals
and Texas Genco's Required Consents and there are no conditions in existence
which could reasonably be expected to delay, impede or condition the receipt by
Texas Genco of any of Texas Genco's Required Regulatory Approvals and Texas
Genco's Required Consents. Guarantor is an Acceptable Guarantor as of the
Effective Date and, as of the Closing Date, either Guarantor is an Acceptable
Guarantor or Texas Genco has delivered to Seller an Acceptable Letter of Credit
issued by an Eligible Financial Institution.
SECTION 6.9 "AS IS" SALE. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES
OF SELLER SET FORTH IN THIS AGREEMENT OR ANY ANCILLARY AGREEMENT, TEXAS GENCO
UNDERSTANDS AND AGREES THAT THE PURCHASED ASSETS, INCLUDING, THE STP INTEREST,
ARE BEING ACQUIRED, "AS IS, WHERE IS" ON THE CLOSING DATE, AND IN THEIR
CONDITION ON THE CLOSING DATE "WITH ALL FAULTS," AND THAT TEXAS GENCO IS RELYING
ON ITS OWN EXAMINATION OF THE PURCHASED ASSETS. WITHOUT LIMITING THE GENERALITY
OF THE FOREGOING AND EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES OF SELLER
EXPRESSLY SET FORTH IN THIS AGREEMENT OR ANY ANCILLARY AGREEMENT, TEXAS GENCO
UNDERSTANDS AND AGREES THAT SELLER EXPRESSLY DISCLAIMS ANY REPRESENTATIONS OR
WARRANTIES AS TO LIABILITIES, OPERATION OF THE PURCHASED ASSETS, INCLUDING THE
GENERATION FACILITY, TITLE, CONDITION, VALUE OR QUALITY OF THE PURCHASED ASSETS
OR THE PROSPECTS, RISKS AND OTHER INCIDENTS OF THE PURCHASED ASSETS AND ANY
REPRESENTATION OR WARRANTY OF MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR
ANY PARTICULAR PURPOSE WITH RESPECT TO THE PURCHASED ASSETS OR ANY PART THEREOF,
OR AS TO THE WORKMANSHIP THEREOF OR THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER
LATENT OR PATENT. TEXAS GENCO FURTHER AGREES THAT, EXCEPT FOR THE
REPRESENTATIONS AND WARRANTIES OF SELLER EXPRESSLY SET FORTH IN THIS AGREEMENT
OR ANY ANCILLARY AGREEMENT, NO DUE DILIGENCE MATERIALS OR OTHER INFORMATION OR
MATERIAL PROVIDED BY, OR COMMUNICATION MADE BY, SELLER OR ANY REPRESENTATIVE OF
SELLER WILL CONSTITUTE, CREATE OR OTHERWISE CAUSE TO EXIST ANY REPRESENTATION OR
WARRANTY WHATSOEVER, WHETHER OR NOT EXPRESSLY DISCLAIMED BY THE FOREGOING.
SECTION 6.10 NO KNOWLEDGE OF SELLER'S BREACH. Except as set forth on
Schedule 6.10, neither Texas Genco nor any of its Affiliates or representatives
has Knowledge of any breach of any representation or warranty by Seller or of
any other condition or circumstance that would excuse Texas Genco from its
timely performance of its obligations hereunder.
SECTION 6.11 TEXAS GENCO HOLDINGS FINANCIAL STATEMENTS. Texas Genco has
provided Seller with true and correct copies of Texas Genco Holdings' balance
sheet, income statement and statement of changes in cash flows for each of Texas
Genco Holdings' last three
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completed fiscal years, together with the related reports of its independent
accountants, each as filed with the Securities and Exchange Commission
(collectively, the "Texas Genco Holdings Financial Statements"). The Texas Genco
Holdings Financial Statements have been prepared in accordance with GAAP (and,
except in the case of quarterly Texas Genco Financial Statements, set forth
adjustments and disclosures required in order to conform to GAAP) consistently
applied and present fairly, in all material respects, the financial position of
Texas Genco Holdings as of the dates thereof and the results of operations and
cash flow of Texas Genco Holdings for the periods then ended.
SECTION 6.12 INSPECTION. Texas Genco is an experienced and
knowledgeable investor in the North American power generation business. Prior to
entering into this Agreement, Texas Genco was advised by its counsel,
accountants, financial advisors and such other Persons as it has deemed
appropriate concerning this Agreement and the Transactions and Texas Genco has
relied solely on Seller's representations and warranties expressly contained
herein and an independent investigation and evaluation of, and appraisal and
judgment with respect to, the Purchased Assets, the Generation Facility and the
Assumed Liabilities. Texas Genco (i) acknowledges that, prior to its Execution
of this Agreement, it has been afforded access to and the opportunity to inspect
the Generation Facility, and has been or will be deemed for all purposes to have
been afforded access to and the opportunity to inspect the Generation Facility
Contracts and all other Due Diligence Materials, (ii) has inspected the
Generation Facility and reviewed the Generation Facility Contracts and the Due
Diligence Materials, and as of the Closing Date, it will have inspected the
Generation Facility and reviewed the Generation Facility Contracts and all other
Due Diligence Materials, to the extent it deems necessary or advisable, and
(iii) is relying solely upon Seller's representations and warranties expressly
contained herein and its own inspections and investigation in order to satisfy
itself as to the condition and suitability of the Purchased Assets and the
Generation Facility.
SECTION 6.13 TEXAS GENCO'S ERCOT GENERATION. Schedule 6.13 sets forth a
complete listing of the generating assets directly or indirectly owned,
controlled or under construction by Texas Genco and located in the ERCOT Region
and Texas Genco's firm transmission reservations over the HVDC transmission
lines interconnecting the ERCOT Region and the SPP Region.
ARTICLE 7
COVENANTS OF EACH PARTY
SECTION 7.1 EFFORTS TO CLOSE. Subject to the terms and conditions
herein, each of the Parties hereto shall use their Commercially Reasonable
Efforts to consummate and make effective, as soon as reasonably practicable, and
in any event prior to the Termination Date, the Transactions, including the
satisfaction of all conditions thereto set forth herein, and, if and to the
extent practicable, to do so at a single Closing. Such actions shall include,
without limitation, exercising its Commercially Reasonable Efforts to obtain
each of the consents, authorizations and approvals of any Governmental Authority
or other Person which is reasonably necessary to effectuate the Transactions,
including, in the case of Seller, Seller's Required Regulatory Approvals and
Seller's Required Consents, in the case of CPS, CPS's Required Regulatory
Approvals and CPS's Required Consents, and in the case of Texas Genco, Texas
Genco's
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Required Regulatory Approvals and Texas Genco's Required Consents, and effecting
all other necessary registrations and filings, including, without limitation,
filings under applicable Laws, including the HSR Act and all other necessary
filings with any Governmental Authority. Any appearances, presentations, briefs,
filings, and proposals made or submitted by or on behalf of two or more Parties
jointly seeking a Required Regulatory Approval or by a Party before any
Governmental Authority to support another Party seeking a Required Regulatory
Approval hereunder shall be subject to the joint approval or disapproval in
advance and the joint control of each involved Party, acting with the advice of
their respective counsel, and each involved Party will consult and fully
cooperate with the other Party or Parties, and consider in good faith the views
of the other Party or Parties, in connection with any such appearance,
presentation, brief, or proposal, provided that nothing will prevent a Party
from responding to a subpoena or other legal process as required by Law or
submitting factual information in response to a request therefor. Each Party
will provide the other with copies of all written communications from
Governmental Authorities relating to any of its Required Regulatory Approvals or
with respect to a Party's supporting filing for another Party's Required
Regulatory Approvals.
SECTION 7.2 EXPENSES. Whether or not the Transactions are consummated,
except as otherwise provided in the Adjustment Sections or any other provision
of this Agreement, all costs and expenses incurred in connection with this
Agreement and the Transactions shall be paid by the Party incurring such
expenses. Notwithstanding the foregoing, (i) the costs and expenses of obtaining
the Title Policy and any survey with respect to the Owned Real Property required
to obtain the Title Policy shall be paid by Seller, (ii) the cost of recording
each Purchaser's Deed and any amendments to recorded memoranda of leases shall
be paid by such Purchaser, (iii) the cost of recording any deeds of trust or
other loan documents shall be paid by such Purchaser, (iv) all Transfer Taxes,
other than Transfer Taxes described in Section 3.8(e), incurred in connection
with this Agreement and the Transactions shall be paid by such Purchaser as
provided in Section 3.8(d), (v) all Transfer Taxes described in Section 3.8(e)
incurred in connection with this Agreement and the Transactions shall be paid by
such Purchaser as provided in Section 3.8(e), (vi) fees (other than legal fees),
costs and expenses associated with the IRS ruling request described in Section
7.8(b) shall be borne one-third by each Party and (vii) except as otherwise
specifically set forth in Section 7.6, all fees, charges and costs of economists
and other experts, if any, jointly retained by such Purchaser and Seller in
connection with submissions made to any Governmental Authority and advice in
connection therewith respecting approval of the Transactions, and all escrow
fees, will be borne one-half by such Purchaser and one-half by Seller. All such
charges and expenses shall be promptly settled between the Parties at the
Closing or upon termination or expiration of further proceedings under this
Agreement, or with respect to such charges and expenses not determined as of
such time, as soon thereafter as is reasonably practicable.
SECTION 7.3 UPDATING.
(a) Seller shall notify each Purchaser in writing of the
existence of any matter of which Seller acquires Knowledge and which, if in
existence on the Effective Date or the Closing Date could reasonably be expected
to cause (i) any of the representations or warranties of Seller set forth in
ARTICLE 4 that are qualified with respect to materiality (whether by reference
to Material Adverse Effect or otherwise) to be untrue or incorrect or (ii) any
of the representations or warranties of Seller set forth in ARTICLE 4 that are
not so qualified to be
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untrue or incorrect in any material respect. The written notice pursuant to this
Section 7.3(a) shall be set forth on an amended Seller's Schedule or Seller's
Schedules which shall be deemed to replace the original Seller's Schedule or
Seller's Schedules as of the Effective Date and the Closing Date, to have
qualified the relevant representations and warranties of Seller set forth in
ARTICLE 4 as of the Effective Date and the Closing Date, and to have cured any
misrepresentation or breach of warranty that otherwise might have existed
hereunder by reason of the existence of such matter.
(b) Each Purchaser shall notify Seller in writing of the
existence of any matter of which such Purchaser acquires Knowledge and which, if
in existence on the Effective Date or the Closing Date, could reasonably be
expected to cause (i) any of the representations or warranties of such Purchaser
set forth in ARTICLE 5 or ARTICLE 6, as applicable, that are qualified with
respect to materiality (whether by reference to Material Adverse Effect or
otherwise) to be untrue or incorrect or (ii) any of the representations or
warranties of such Purchaser set forth in ARTICLE 5 or ARTICLE 6, as applicable,
that are not so qualified to be untrue or incorrect in any material respect. The
written notice pursuant to this Section 7.3(b) shall be set forth on each
Purchaser's amended Purchasers' schedule which shall be deemed to replace the
original Purchaser's schedule as of the Effective Date and the Closing Date, to
have qualified the representations and warranties contained in ARTICLE 5 or
ARTICLE 6, as applicable, as of the Effective Date and the Closing Date, and to
have cured any misrepresentation or breach of warranty that otherwise might have
existed hereunder by reason of the existence of such matter.
(c) Without limiting the generality of the foregoing, (i)
Seller shall notify each Purchaser promptly of the occurrence of (A) any
material casualty, physical damage, destruction or physical loss respecting, or
any material adverse change in the physical condition of, the Generation
Facility, subject to ordinary wear and tear and to routine maintenance,
reasonably likely to result in a Material Adverse Effect of which Seller has
Knowledge, and (B) any other material event reasonably likely to impair Seller's
ability to perform its obligations under this Agreement, if the occurrence is
one of which Seller has Knowledge, and (ii) each Purchaser shall notify Seller
promptly of (A) any breach of any representation or warranty by Seller or of any
other condition or circumstance of which such Purchaser has Knowledge that would
excuse such Purchaser from its timely performance of its obligations hereunder
and (B) any other material event reasonably likely to impair such Purchaser's
ability to perform its obligations under this Agreement, if the occurrence is
one of which such Purchaser has Knowledge.
SECTION 7.4 CONDUCT PENDING CLOSING. Prior to consummation of the
Transactions or the termination or expiration of this Agreement pursuant to its
terms, unless each Purchaser shall otherwise consent in writing, which consent
shall not be unreasonably withheld, conditioned or delayed, and except (i) for
actions previously approved by both CPS and Texas Genco as current STP Owners,
(ii) for actions which are required by Law, (iii) for reasonable actions taken
in connection with any emergency or other force majeure event, (iv) for actions
which arise from or are related to any of the Excluded Assets or the Excluded
Liabilities or the anticipated transfer of the Purchased Assets or the Assumed
Liabilities, (v) as otherwise contemplated by this Agreement or disclosed on
Schedule 7.4 or another Schedule to this Agreement, or (vi) for actions not
reasonably likely to have a Material Adverse Effect or materially impair
Seller's authority, right or ability to consummate the Transactions, Seller
shall, in its capacity as an STP
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Owner, exercise its rights and discharge its obligations under the STP Project
Documents in good faith, taking into account (but not being bound by) each
Purchaser's views on matters to be voted upon by the STP Owners, and in such a
manner so as to endeavor to cause the STP Owners, and the Operating Agent, as
the case may be, to:
(a) Operate and maintain the Generation Facility, or cause the
Generation Facility to be operated and maintained, in all material respects in
accordance with the ordinary course of business consistent with past practices
and Good Utility Practices;
(b) Except as required by their terms, not amend, terminate,
renew, or renegotiate in any material respect any existing Generation Facility
Contract required to be listed on Schedule 2.1(f) or enter into any new
Generation Facility Contract that would (if it existed on the date hereof) have
been required to be listed on Schedule 2.1(f), except in the ordinary course of
business consistent with past practices, or default (or take or omit to take any
action that with or without the giving of notice or passage of time, would
constitute a default) under any of the STP Owners' or the Operating Agent's
obligations, as applicable, under any such Generation Facility Contract;
(c) Other than pursuant to the requirements of any existing
Generation Facility Contract, not sell, lease, transfer or dispose of, or make
any contract for the sale, lease, transfer or disposition of, any material
assets or properties which would be included in the Purchased Assets, except
sales, leases, transfers or dispositions in the ordinary course of business
consistent with past practices and Good Utility Practices;
(d) Not (i) incur any obligations for borrowed money or
guarantee or otherwise become liable for the obligations of, or make any loans
or advances to, any Person, except as would after the Closing constitute an
Excluded Liability or (ii) delay the payment or discharge of any liability
which, upon Closing, would be an Assumed Liability, because of the Transactions;
(e) Except as otherwise required by the terms of the Employee
Plans or applicable Law, not (i) materially increase the salaries or wages of
Employees prior to the Closing, (ii) take any action prior to the Closing to
effect a material change in the Employee Plans, (iii) take any action prior to
the Closing to materially increase the aggregate benefits payable to Employees,
or (iv) hire at, or transfer to the Generation Facility, any new employees prior
to the Closing, other than to fill vacancies in existing positions in the
reasonable discretion of Seller;
(f) Not grant any express Encumbrance on any Purchased Assets,
except Permitted Encumbrances or to the extent (i) required or permitted
incident to the operation of the Purchased Assets, or (ii) required or evidenced
by any existing Generation Facility Contract;
(g) Maintain or cause to be maintained in force and effect the
material property and liability insurance policies related to the Generation
Facility;
(h) Not make any material change in the levels of Inventory
maintained at the Generation Facility except in accordance with the ordinary
course of business consistent with
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past practices or except for such material changes which are consistent with
Good Utility Practices;
(i) Use Commercially Reasonable Efforts to maintain customary
business relationships with any lessor, licensor, customer or supplier of
Seller, each in accordance with the ordinary course of business consistent with
past practices; and
(j) Promptly give notice to each Purchaser upon acquiring
Knowledge of the occurrence or impending occurrence of any event which could
reasonably be expected to (i) cause any of the representations and warranties of
Seller contained herein to be untrue in any material respect, (ii) constitute a
breach of any of the covenants of Seller contained in this Agreement, or (iii)
cause a Material Adverse Effect, including any damage, destruction or casualty
loss affecting the Generation Facility, whether or not covered by insurance,
that would cause a Material Adverse Effect and that has not been otherwise
disclosed to each Purchaser; provided that notice will be deemed given pursuant
to this Section 7.4(j) of any event disclosed at any meeting of the Owners
Committee (as such term is defined in the STP Participation Agreement) at which
one or more representatives of each Purchaser is in attendance; and
(k) Provided, however, that nothing in this Section 7.4 shall
(i) obligate Seller to make expenditures other than in the ordinary course of
business consistent with past practices, Good Utility Practices or applicable
Law or to otherwise suffer any economic detriment, (ii) preclude Seller from
paying, prepaying or otherwise satisfying any liability which, if outstanding as
of the Closing Date, would be an Assumed Liability or an Excluded Liability,
(iii) preclude Seller from incurring any liabilities or obligations to any third
party in connection with obtaining such Party's consent to any transaction
contemplated by this Agreement or the Ancillary Agreements provided that such
liabilities and obligations incurred under this clause (iii) shall be Excluded
Liabilities pursuant to Section 2.4 hereof if not approved in advance by each
Purchaser (which approval shall not be unreasonably withheld, conditioned or
delayed) or (iv) preclude Seller from instituting, participating in or
completing any program designed to promote compliance or comply with Laws or
Good Utility Practices with respect to the Generation Facility or Purchased
Assets.
SECTION 7.5 REGULATORY APPROVALS.
(a) Subject to Section 7.1, promptly after the Effective Date,
but taking into account the anticipated Closing Date, Seller and Texas Genco
shall each file or cause to be filed with the Federal Trade Commission and the
Department of Justice all notifications required to be filed under the HSR Act
and the rules and regulations promulgated thereunder with respect to the
Transactions. Seller and Texas Genco shall consult with each other as to the
appropriate time of filing such notifications and shall agree in good faith upon
the timing of such filings, respond promptly to any requests for additional
information made by either of such agencies, and use Commercially Reasonable
Efforts to cause the waiting periods under the HSR Act to terminate or expire at
the earliest possible date after the date of filing.
(b) Subject to Section 7.1, promptly after the Effective Date,
Purchasers and Seller shall jointly submit applications to the NRC requesting
the NRC Approvals, and the Parties shall respond promptly to any requests for
additional information made by the NRC,
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cooperate in connection with any presentation or proceeding associated with such
NRC application and use their respective Commercially Reasonable Efforts to
cause the NRC Approvals to be obtained at the earliest possible date after the
date of filing. The Parties shall consult with each other as to the appropriate
time of filing such applications and shall agree in good faith upon the timing
of such applications. Each Party will bear its own costs of the preparation of
any such filing, and Purchasers (ratably in accordance with their Proportionate
Shares), on the one hand, and Seller, on the other hand, will share equally the
cost of all filing fees with respect to any NRC filings required to consummate
the Transactions.
(c) Without limiting the generality of Texas Genco's
undertakings pursuant to Section 7.5(a), each Purchaser shall:
(i) take promptly any or all of the following actions
to the extent necessary to eliminate any concerns on the part of any
Governmental Authority regarding the legality under any Law of such
Purchaser's acquisition of the Purchased Assets: entering into
negotiations, providing information, making proposals, entering into
and performing agreements or submitting to judicial or administrative
orders, holding separate (through the establishment of a trust or
otherwise) particular assets or categories of assets, or businesses, of
such Purchaser or its Affiliates, or agreeing to dispose of one or more
assets or properties (whether owned by such Purchaser or its
Affiliates) whether before or after the Closing; provided, however,
that nothing in this Agreement shall require such Purchaser or its
Affiliates to dispose of or sell assets or properties, hold separate
particular assets or categories of assets, or businesses, or agree to
dispose of or hold separate one or more assets or properties, except
that Texas Genco or its Affiliates shall, if required, agree to dispose
of or sell assets or properties with an aggregate fair market value of
U.S. $10 million or less and agree to such reasonable undertakings
necessary to consummate such dispositions or sales as a condition to
eliminating a Governmental Authority's concerns regarding the legality
under any Law of such Purchaser's acquisition of the Purchased Assets;
(ii) use Commercially Reasonable Efforts (including
taking the steps contemplated by Section 7.5(c)(i)) to prevent the
entry in a judicial or administrative proceeding brought under any Law
by any Governmental Authority or any other party for a permanent or
preliminary injunction or other order that would make consummation of
the Transactions unlawful or that would prevent or delay such
consummation;
(iii) take promptly, in the event that such an
injunction or order has been issued in such a proceeding, any and all
Commercially Reasonable Efforts, including the appeal thereof or the
posting of a bond or the steps contemplated by Section 7.5(c)(i)
necessary to vacate, modify or suspend such injunction or order so as
to permit such consummation on a schedule as close as possible to that
contemplated by this Agreement;
(iv) subject to Section 7.1, have the primary
responsibility for securing the transfer, reissuance, procurement or
modification, as applicable, of the Permits, Seller Licenses and STP
Owners Licenses included in Purchaser's Required Regulatory Approvals
effective as of the Closing Date. Seller shall use Commercially
Reasonable
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Efforts to cooperate with each Purchaser's efforts in this regard and
assist in any transfer of Transferable Permits;
(v) take such actions, if required under the Acid
Rain Requirements, to notify the USEPA, TCEQ and any other Governmental
Authority of the change of ownership of the STP Interest and the
appointment by each Purchaser of one or more replacement Designated
Representative(s), effective at 12:00 a.m. on the day following the
Closing Date; and
(vi) take, along with Seller, all Commercially
Reasonable Efforts, including executing any required forms or providing
appropriate notices to Governmental Authorities, in a timely fashion,
for each Purchaser to obtain all, or the rights to all, Emission
Allowances that are to be transferred to it pursuant to Section 2.1(p),
Section 2.1(q) and Section 2.1(r), including the right to receive such
Emission Allowances that are to be allocated or issued in the future.
Each Purchaser and Seller further acknowledge and agree that such actions may be
required prior to, on or after the Closing Date.
SECTION 7.6 TAX MATTERS.
(a) With respect to Property Taxes to be prorated in
accordance with Section 3.4 of this Agreement:
(i) Texas Genco and CPS shall prepare and timely file
all Tax Returns required of each to be filed after the Closing with
respect to their separately acquired Purchased Assets, if any, and
shall duly and timely pay all such Taxes arising from the filing of
such Tax Returns. Texas Genco and CPS's preparation of any such Tax
Returns shall be subject to Seller's approval, which approval shall not
be unreasonably withheld or delayed. Texas Genco and CPS shall make
such Tax Returns available for Seller's review and approval (which
approval shall not be unreasonably withheld or delayed) no later than
fifteen (15) Business Days prior to the due date for filing any such
Tax Returns, it being understood that Seller's failure to approve any
such Tax Returns shall not limit Texas Genco and CPS's individual
obligation to timely file any such Tax Returns and duly and timely pay
all Taxes due as a result of filing such Tax Returns.
(ii) Notwithstanding the provisions of Section
7.6(a)(i), if the provisions of Title 1, Texas Tax Code Section 26.11
apply for the calendar year in which the Closing occurs with respect to
Purchased Assets purchased by CPS, Seller shall prepare and timely file
all Tax Returns required to be filed after the Closing, if any, and
shall duly and timely pay all such Taxes arising from the filing of
such Tax Returns. Seller will cooperate with CPS in obtaining Tax
treatment available to CPS under the applicable laws and regulations.
CPS will cooperate with Seller in the preparation of any required Tax
Returns.
(iii) Seller shall prepare and timely file all Tax
Returns required to be filed prior to the Closing with respect to the
Purchased Assets, if any, and shall duly and
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timely pay (if prior to Closing) all such Taxes arising from the filing
of such Tax Returns. Seller's preparation of any such Tax Return shall
be subject to Purchasers' approval, which approval shall not be
unreasonably withheld or delayed. Seller shall make such Tax Returns
available for Purchasers' review and approval (which approval shall not
be unreasonably withheld or delayed) no later than fifteen (15)
Business Days prior to the due date for filing such Tax Returns, it
being understood that Purchasers' failure to approve any such Tax
Returns shall not limit Seller's obligation to timely file any such Tax
Returns and duly and timely pay all Taxes due as a result of filing
such returns.
(iv) Upon the receipt of Property Tax notices
(bills), Purchasers shall provide a copy of each such notice to Seller.
Prior to payment of Property Taxes subject to proration as determined
under Section 3.4(b), each Purchaser shall provide a schedule of the
payments and a calculation of the prorated Property Taxes allocated to
Seller. If the amount of prorated Property Taxes allocated to Seller
under Section 3.4(b) and previously used as an adjustment to the
Purchase Price is greater than the Property Taxes allocated on such
Purchaser's schedule, such Purchaser will pay to Seller the difference
five (5) days prior to payment of the Property Taxes to the Taxing
Authority. If the amount of prorated Property Taxes allocated to Seller
under Section 3.4(b) and previously used as an adjustment to the
Purchase Price is less than the Property Taxes allocated on such
Purchaser's schedule, Seller will pay to such Purchaser the difference
five (5) days after receipt of the schedule from such Purchaser.
(b) Each Purchaser and Seller shall provide the other Parties
with such assistance as may reasonably be requested by the other Parties in
connection with the preparation of any Tax Return, any audit or other
examination by any Taxing Authority, or any judicial or administrative
proceedings relating to liability for Taxes, and each will retain and provide
the requesting Party with any records or information which may be relevant to
such return, audit or examination, proceedings or determination. Likewise, each
Purchaser and Seller shall promptly notify each other of any proposed audit
adjustment by any Taxing Authority that would result in an adjustment to the
Purchase Price and/or such Purchaser's or Seller's liability for Transfer Taxes.
Any information obtained pursuant to this Section 7.6 or pursuant to any other
Section hereof providing for the sharing of information relating to or review of
any Tax Return or other schedule relating to Taxes shall be kept confidential by
the Parties hereto in accordance with Section 7.10.
(c) Except as provided in Section 7.8(f) with respect to the
Final Tax Returns of Seller's Qualified Decommissioning Funds, any refund of
Taxes, other than Transfer Taxes resulting from this transaction and Property
Taxes subject to the provisions of Section 7.6(f) below, paid or payable with
respect to Taxes attributable to any of the Purchased Assets shall be promptly
paid to Seller if attributable to Taxes with respect to any Tax year or portion
thereof ending before the Closing Date (or for any Tax year beginning before and
ending after the Closing Date to the extent allocable to the portion of such
period beginning before and ending prior to the Closing Date) and (ii) to the
applicable Purchaser if attributable to Taxes with respect to any Tax year or
portion thereof beginning on or after the Closing Date (or for any Tax year
beginning before and ending after the Closing Date to the extent allocable to
the portion of such period beginning on and ending after the Closing Date).
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(d) Any additional Property Tax liability(ies) for any
pre-Closing Tax period resulting from a post-Closing change in the usage of the
Purchased Assets (including but not limited to any change in usage for which
notice is provided in Section 13.2 of this Agreement) is(are) the liability of
the Purchasers and are not subject to the refund provisions of Section 7.6(c)
above.
(e) In the event that a dispute arises between Seller and one
or more Purchasers as to the amount of Taxes, the affected Parties shall attempt
in good faith to resolve such dispute, and any amount so agreed upon shall be
paid to the appropriate Party. If such dispute is not resolved within thirty
(30) days thereafter, the Parties shall submit the dispute to the Independent
Accounting Firm for resolution in accordance with the provisions of Section 3.7,
which resolution shall be final, conclusive and binding on the Parties.
Notwithstanding anything in this Agreement to the contrary, the fees and
expenses of the Independent Accounting Firm in resolving the dispute shall be
borne equally by Seller and the Purchaser party to such dispute. Any payment
required to be made as a result of the resolution of the dispute by the
Independent Accounting Firm shall be made within ten (10) days after such
resolution, together with any interest determined by the Independent Accounting
Firm to be appropriate.
SECTION 7.7 RISK OF LOSS. From the date hereof until the Closing, all
risk of loss or damage to the assets and properties included in the Purchased
Assets, including the Generation Facility, shall be borne by Seller.
SECTION 7.8 DECOMMISSIONING FUNDS.
(a) Between the Effective Date and the Closing Date, Seller
shall continue to make cash deposits to Seller's Qualified Decommissioning Funds
or Seller's Non-Qualified Decommissioning Funds of amounts of decommissioning
costs collected from customers as determined by the PUCT or FERC, and Seller
shall not withdraw any funds (except for expenses described in Code Section
468A(e)(4)(B)) from Seller's Qualified Decommissioning Funds or Seller's
Non-Qualified Decommissioning Funds.
(b) Subject to Section 7.1, as promptly as practicable after
the Effective Date of this Agreement, the applicable Purchaser and Seller shall
jointly submit a ruling request to the IRS for the IRS PLR (Decommissioning
Funds Transfer), the IRS PLR (Texas Genco Decommissioning Collections), and the
IRS PLR (CPS Decommissioning Collections). In the ruling requests for the IRS
PLR (Decommissioning Funds Transfer) the Parties shall request the rulings as
described in Schedule 7.8(b). All proceedings in connection with such ruling
requests shall be subject to Section 7.1, and without limiting the generality of
the foregoing, all appearances, presentations, briefs, and proposals made or
submitted by or on behalf of any Party before the IRS in connection with such
ruling requests and rulings shall be subject to the joint approval or
disapproval in advance and the joint control of the applicable Purchaser and
Seller, it being the intent that the Parties will consult and cooperate with one
another, and consider in good faith the views of one another, in connection with
any such appearance, presentation, brief, and proposal. Subject to Section 7.1,
the Parties shall respond reasonably promptly to any requests for additional
information made by the IRS and use their respective Commercially Reasonable
Efforts to cause the IRS to issue the requested rulings at the earliest possible
date after the request and in any event, in the case of the IRS PLR
(Decommissioning Funds
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Transfer), prior to the Closing Date. If the IRS PLR (Texas Genco
Decommissioning Collections) or the IRS PLR (CPS Decommissioning Collections)
shall not have been issued on or before the Closing Date and the applicable
Purchaser's Initial Purchase Price shall have been reduced by the Initial Tax
Adjustment Amount, the Parties shall thereafter continue to use Commercially
Reasonable Efforts to cause the IRS to issue the IRS PLR (Texas Genco
Decommissioning Collections) or the IRS PLR (CPS Decommissioning Collections) at
the earliest possible date.
(c) Prior to the Closing Date, each Purchaser shall have
established and designated to Seller by written notice (i) if applicable, a
qualified decommissioning trust fund or subaccounts thereof (each, a
"Purchaser's Qualified Decommissioning Fund") for each STP Unit and (ii) a
nonqualified decommissioning trust fund (each, a "Purchaser's Nonqualified
Decommissioning Fund" for each STP Unit, together with Purchaser's Qualified
Decommissioning Fund referred to as "Purchaser's Decommissioning Funds"), with
respect to the Generation Facility and the STP Interest.
(d) At the Closing, (i) Seller shall assign and transfer or
cause to be assigned and transferred (1) to Texas Genco's Qualified
Decommissioning Fund or subaccounts thereof for the applicable STP Unit the
applicable Proportionate Share of the assets comprising Seller's Qualified
Decommissioning Fund, including all income, interest and other earnings accrued
thereon, net of expenses accrued in the ordinary course of business, and (2) to
Texas Genco's Nonqualified Decommissioning Fund for the applicable STP Unit the
Proportionate Share of the assets comprising Seller's Nonqualified
Decommissioning Fund, which shall have been converted to cash prior to Closing,
including all income, interest and other earnings accrued thereon, net of
expenses accrued in the ordinary course of business (other than income taxes),
and (ii) Seller shall assign and transfer or cause to be assigned and
transferred to CPS's Nonqualified Decommissioning Fund for the applicable STP
Unit (1) the applicable Proportionate Share of the assets comprising Seller's
Qualified Decommissioning Fund, including all income, interest and other
earnings accrued thereon, net of expenses accrued in the ordinary course of
business, and (2) the Proportionate Share of the assets comprising Seller's
Nonqualified Decommissioning Fund, which shall have been converted to cash prior
to Closing, including all income, interest and other earnings accrued thereon,
net of expenses accrued in the ordinary course of business (other than income
taxes). Between the Effective Date and the Closing Date, and subject to the
terms and conditions hereof, Seller and such Purchaser shall work cooperatively
and exercise their respective Commercially Reasonable Efforts to accomplish such
assignments and transfers from such Persons empowered to execute the same,
including the adoption of any and all amendments to the governing instruments of
Seller's Decommissioning Funds necessary to achieve such result.
(e) At the Closing, Seller and each Purchaser shall execute
and deliver the Decommissioning Funds Collection Agreement.
(f) Seller shall be responsible for causing the Trustee of
Seller's Qualified Decommissioning Funds to file any final Income Tax returns
("Final Tax Returns") and to determine any final Income Tax liability or Income
Tax refund for the Seller's Qualified Decommissioning Funds. Seller shall cause
the Trustee of Seller's Qualified Decommissioning Funds to notify each Purchaser
in writing of any such Income Tax due or any such refund on the
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Final Tax Returns. If Income Tax is due on the Final Tax Returns, the affected
Purchaser will direct the trustee of its Decommissioning Funds to pay such Tax
out of the assets of its Decommissioning Funds. Such Purchaser agrees to ensure
that its trust agreements allow for the payment of the applicable Proportionate
Share of such final Income Tax liability of Seller's Qualified Decommissioning
Funds. Seller further agrees that any Income Tax refund received on or after the
Closing Date by the Trustee of Seller's Qualified Decommissioning Funds or by
Seller in respect of Seller's Qualified Decommissioning Funds is property of
such Purchaser's Decommissioning Funds for the benefit of such Purchaser's
Decommissioning Funds, such refunds to be distributed in proportion to such
Purchaser's Proportionate Share.
(g) To the extent practicable before the Closing Date, Seller
shall cause the Trustee of Seller's Decommissioning Funds to pay: (i) final
expenses for trustee and investment management fees and other administrative
expenses of Seller's Decommissioning Funds, and, (ii) the IRS the estimated
amount of Tax for which Seller's Qualified Decommissioning Funds will be liable
as a result of the transfer of a proportionate amount of the assets of Seller's
Qualified Decommissioning Funds to CPS's Nonqualified Decommissioning Funds.
Seller shall cause the Trustee of Seller's Decommissioning Funds to notify the
applicable Purchaser in writing of any expenses for trustee and investment
management fees and other administrative expenses due on or after the Closing
Date. Such Purchaser agrees to direct the trustee of such Purchaser's
Decommissioning Funds to pay final expenses for trustee and investment
management fees and other administrative expenses of Seller's Decommissioning
Funds to the extent not paid before the Closing Date. Such Purchaser agrees to
ensure that its trust agreements allow for the payment of such expenses of
Seller's Decommissioning Funds. Seller further agrees that any refund of trustee
and investment management fees and other administrative expenses received on or
after the Closing Date by the Trustee of Seller's Decommissioning Funds is
property of such Purchaser's Decommissioning Funds for the benefit of such
Purchaser's Decommissioning Funds.
SECTION 7.9 INSURANCE.
(a) Each Purchaser acknowledges and agrees that the Generation
Facility Insurance Policies listed in Schedule 7.9(a) are Excluded Assets and,
except as otherwise provided in Section 7.9(b), effective upon Closing, shall be
terminated or modified to exclude coverage of the Purchased Assets and the
Generation Facility. Seller intends to retain (but shall have no obligation
hereunder to retain) ▇▇▇▇ membership and other coverages for Seller's benefit.
Promptly after the receipt thereof, each Purchaser shall disburse to Seller any
refunds received by such Purchaser of premiums actually paid by Seller with
respect to ▇▇▇▇ or ANI, and any distribution with respect to Seller's
Policyholder Insurance Record maintained by ▇▇▇▇.
(b) With respect to any of the Generation Facility Contracts
listed or required to be listed on Schedule 2.1(f) (other than the Project
Agreements), each Purchaser shall be obligated at or before Closing to continue
or obtain at its sole cost and expense replacement insurance for any insurance
required to be maintained by or for the benefit of Seller or any of its
Affiliates under any of the Generation Facility Contracts listed or required to
be listed on Schedule 2.1(f), as described (i) in the case of any insurance
required under any such Generation Facility Contract entered into on or before
the Effective Date, in a written notice provided by Seller to each Purchaser
within ninety (90) days after the Effective Date and (ii) in the case of
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any insurance required under any such Generation Facility Contract entered into
after the Effective Date, in a written notice provided by Seller to each
Purchaser promptly after Seller acquires Knowledge that such Generation Facility
Contract has been entered into. Each Purchaser further acknowledges and agrees
that such Purchaser may need to provide to certain Governmental Authorities and
the counterparty(ies) to any such Generation Facility Contracts evidence of such
replacement or substitute insurance coverage for the continued operation of the
Purchased Assets or the Generation Facility following the Closing.
Notwithstanding Section 2.2(i), but subject to the last sentence of this Section
7.9(b), if any claims are made or losses are incurred arising from events that
occur after the Effective Date and prior to the Closing Date that do not arise
out of damage to or destruction of the Generation Facility and that relate
solely to the Purchased Assets and such claims, or the claims associated with
such losses, may be made against the policies maintained by Seller or its
Affiliates prior to the Closing or under policies otherwise retained by Seller
or its Affiliates after the Closing, then Seller shall, if required by such
Purchaser, use its Commercially Reasonable Efforts so that such Purchaser can
file, notice, and otherwise continue to pursue such claims and recover proceeds
under the terms of such policies. Seller and its Affiliates shall be reimbursed
by such Purchaser (or otherwise indemnified and held harmless) for any Losses or
other costs incurred by Seller or its Affiliates (including by way of any
reduction in, or loss of, available insurance to cover other insurable losses or
associated expenses of Seller or its Affiliates) arising out of claims under the
Generation Facility Insurance Policies, provided that such Losses or other costs
shall be agreed upon by such Purchaser and Seller before filing any such claim
under the Generation Facility Insurance Policies, and in the absence of such
agreement no such claim is required to be made by Seller.
(c) As provided in the STP Participation Agreement, each
Purchaser shall be obliged to support the maintenance by the Operating Agent of
policies of liability and property insurance with respect to the Purchased
Assets and the ownership, operation, and maintenance of the Generation Facility
which shall afford protection against the insurable hazards and risks with
respect to which units of similar size and type customarily maintain insurance,
and which meets the requirements of 10 C.F.R. 50.54(w) and 10 C.F.R. Part 140.
Such coverage shall include nuclear liability insurance, in such form and in
such amount as will meet the financial protection requirements of the Atomic
Energy Act, and an agreement of indemnification as contemplated by Section 170
of the Atomic Energy Act. In the event that the nuclear liability protection
system contemplated by Section 170 of the Atomic Energy Act is repealed or
changed, each Purchaser shall obtain and maintain, to the maximum extent and in
the maximum amount available on commercially reasonable terms but in no event
less than the amount required for units of similar size and type by Nuclear
Laws, alternate protection against Nuclear Liability. Each Purchaser shall
cooperate in retaining Seller as a named or additional insured under existing
insurance contracts; provided, however, the Seller shall pay any increased costs
associated with remaining a named or additional insured under such insurance
policies. In addition, each Purchaser shall be able to provide the financial
assurance consistent with the requirements of 10 CFR Section 140.21 that it will
be able to pay the retrospective premiums for the Generation Facility as
prescribed by Section 170 of the Atomic Energy Act.
SECTION 7.10 ANNOUNCEMENTS; CONFIDENTIALITY. Subject to Section 7.1,
prior to the Closing Date, no press or other public announcement, or public
statement or comment in response to any inquiry, relating to the Transactions
shall be issued or made by either Purchaser
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or Seller without first consulting with the other Parties concerning the content
and timing of any such announcement and taking into account any reasonably
requested modifications as to the content or timing thereof; provided that a
press release or other public announcement, regulatory filing, statement or
comment made without such prior consultation shall not be in violation of this
Section 7.10 if it is made in order for the disclosing Party or any of its
Affiliates to comply with applicable Laws or stock exchange rules and in the
reasonable judgment of the Party making such release or announcement, based upon
advice of counsel, prior consultation, despite reasonable efforts to obtain the
same, would prevent dissemination of such release or announcement in a
sufficiently timely fashion to comply with such Laws or rules; and provided
further that in all instances prompt notice from one Party to the other shall be
given with respect to any such release, announcement, statement or comment. In
respect of information (i) obtained from the other either before or after the
date of this Agreement or (ii) related to any Purchaser's proposed purchase of
the Purchased Assets, Seller's proposed sale of the Purchased Assets, the
contents of this Agreement or any of the Ancillary Agreements or the negotiation
of this Agreement or any of the Ancillary Agreements, each Party shall (A) keep
confidential all such information not otherwise available to such Party as a
result of being a STP Owner, and none of the Parties shall reveal such
information to, nor produce copies of any written information for, any Person
outside its management group or its professional advisors (including lenders and
prospective financing sources) without the prior written consent of the other
Parties and (B) keep confidential all such information available to such Party
as a result of being a current STP Owner to the same extent and in accordance
with the confidentiality provisions in the applicable STP Project Documents;
provided, however, that a Party may disclose information if compelled by
judicial or administrative process or by any other requirements of Law, or
disclosure is reasonably necessary to obtain the approval of any Governmental
Authority or third party necessary to consummate the Transactions. If the
Transactions in respect of any Purchaser should fail to close for any reason,
each of Seller and such Purchaser shall return to the other as soon as
practicable all originals and copies of written or recorded information provided
to such Party by or on behalf of the other Party and none of such information
shall be used by such Party, or its employees, agents or representatives, in the
business or operations of any Person. Notwithstanding the foregoing, (w) Texas
Genco may provide copies of this Agreement to GC Power Acquisition LLC and any
of its officers, directors, employees, representatives or agents (it being
understood that GC Power Acquisition LLC shall be informed by Texas Genco of the
confidential nature of such information and shall be directed by Texas Genco,
and shall expressly agree, to treat such information confidentially in
accordance with this Agreement), (x) after the Effective Date, Seller may
provide copies of this Agreement to Cameco Corporation, any of Cameco
Corporation's subsidiaries, including Cameco South Texas Project LP, and any of
its or their officers, directors, employees, representatives or agents, (y) each
Party's obligations under this Section 7.10 shall not apply to any information
or document insofar as it is or becomes the subject of a subpoena or other legal
process or otherwise is or becomes available to the public other than as a
result of a disclosure by the other Party in violation of this Agreement or
other obligation of confidentiality under which such information may be held or
becomes available to the Party on a non-confidential basis from a source other
than the other Party or its officers, directors, employees, representatives or
agents and (z) except as may be required by Law, the Parties shall seek
appropriate protective orders or confidential treatment for the Schedules to
this Agreement in connection with any filing with or disclosure to any
Governmental Authority. The Parties' obligations under this Section 7.10 shall
survive for
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seven (7) years following the Closing Date or the Termination Date, as
applicable; provided that, from and after the Closing Date at which the
Transactions in respect of all of the STP Interest shall have been consummated,
the obligations of each Purchaser under this Section 7.10, to the extent
relating to any Due Diligence Materials, shall be deemed to be governed by the
applicable provisions of the STP Project Documents and shall no longer be
governed by the provisions of this Section 7.10.
SECTION 7.11 POST CLOSING - FURTHER ASSURANCES. At any time or from
time to time after the Closing, each Party will, upon the reasonable request of
another Party, execute and deliver any further instruments or documents, and
exercise Commercially Reasonable Efforts to take such further actions as may
reasonably be required, to fulfill and implement the terms of this Agreement.
After the Closing, and upon prior reasonable request, each Party shall exercise
Commercially Reasonable Efforts to cooperate with the other Parties, at the
requesting Party's expense (including out-of-pocket expenses to third parties
incurred by any Party or its Affiliates and the reasonable value of the time
expended by its personnel or the personnel of any of its Affiliates, including
the wages or other benefits paid or payable to its officers, directors or
employees, that are reasonably attributable to furnishing assistance requested
by either Purchaser hereunder), in furnishing non-privileged records,
information, testimony and other assistance in connection with any inquiries,
actions, audits, proceedings, including any "true-up" proceeding before the PUCT
involving Seller, or disputes involving any of the Parties hereto (other than in
connection with disputes between the Parties hereto) and based upon contracts,
arrangements or acts of Seller, a Purchaser, the other STP Owners or the
Operating Agent on behalf of one or more of the STP Owners, which were in effect
or occurred on, prior to, or after the Closing and which relate to the Purchased
Assets or the Transactions, including, without limitation, arranging discussions
with (and calling as a witness) officers, directors, employees, agents and
representatives of either Purchaser or Seller, including either or both of
Seller's Employees.
SECTION 7.12 PRE-CLOSING AND POST-CLOSING - INFORMATION, RECORDS AND
ACCESS.
(a) For a period of seven (7) years after the Closing Date,
each Purchaser will not dispose of any books, records, documents or information
reasonably relating to the Purchased Assets delivered to it by Seller without
first giving thirty (30) days prior written notice to Seller thereof and
permitting Seller (at its cost) to retain or copy such books and records as it
may select. During such period, each Purchaser (i) will permit Seller to examine
and make copies, at Seller's expense, of such books, records, documents and
information for any reasonable purpose, including any litigation now pending or
hereafter commenced against Seller or its Affiliates, or the preparation of
income or other Tax Returns and (ii) will provide to Seller, upon reasonable
notice, such reasonable access to the Generation Facility and all individuals
who regularly work at or in support of the Generation Facility during normal
business hours as Seller may request in any such notice for any reasonable
purpose; provided, however, that all such examinations by Seller shall occur and
all such access shall be provided to Seller at times and places reasonably set
by each Purchaser, and in no event shall Seller interfere with the Operating
Agent's operation of the Generation Facility or the conduct of its business.
(b) During such seven (7) year time period, each Purchaser
will provide to Seller, at Seller's expense, copies of such books, records,
documents and information reasonably relating to the Purchased Assets delivered
to it by Seller for any reasonable purpose, including
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any litigation now pending or hereafter commenced against Seller or its
Affiliates by any Person (including a Purchaser). Seller will provide reasonable
notice to such Purchaser of its need to access such books, records, documents or
other information. After the expiration of such seven (7) year time period, each
Purchaser will not dispose of any of the books, records, documents or
information which are subject to this Section 7.12 without providing at least
thirty (30) days' prior notice to Seller describing in reasonable detail the
books, records, documents or information such Purchaser intends to dispose of
and specifying the date such Purchaser intends to dispose of the same. If
requested in writing by Seller at any time prior to the date specified in such
notice, such Purchaser shall deliver or cause to be delivered to Seller (or to
any location designated by Seller in such written request), at Seller's expense,
the books, records, documents and information described in such notice.
(c) If privileged and/or attorney work product documents or
information, including communications between any Party and its counsel, are
disclosed to another Party in the books, records, documents or other information
delivered by the disclosing Party, the receiving Party agrees (i) such
disclosure is inadvertent, (ii) such disclosure will not constitute a waiver, in
whole or in part, of any privilege or work product, (iii) such information will
constitute confidential information subject to the provisions of Section 7.10,
and (iv) it will promptly return to the disclosing Party all copies of such
books, records, documents or other information in the possession of such Party
or its Affiliates, agents, employees or representatives (including lenders and
financial advisors).
SECTION 7.13 RELEASE. Except for the Excluded Liabilities (including
any Excluded Liabilities described in Section 2.4(c) arising under the STP
Project Documents) and Seller's obligations hereunder or under any Ancillary
Agreement (as applicable), including, without limitation, under ARTICLE 8,
except for obligations and liabilities of the Operating Agent or any STP Owner
other than Seller under the STP Project Documents, and except for intentional
fraud, each Purchaser on behalf of itself and each of its Affiliates, and on
behalf of each of its and their successors and assigns, hereby waives its right
to recover from Seller or from any Affiliate of Seller or any Person acting on
behalf of Seller or any such Affiliate, and forever releases and discharges each
of Seller and each such Affiliate and each such other Person, from any and all
damages, claims, losses, liabilities, penalties, fines, liens, judgments, costs
or expenses whatsoever (including, without limitation, attorneys' fees and
costs), whether direct or indirect, known or unknown, foreseen or unforeseen,
that may arise on account of or in any way be connected with the Assumed
Liabilities or the Purchased Assets, including without limitation,
(a) all liabilities or obligations under or related to
Environmental Laws including the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section 9601 et seq. or relating to
any claim in respect of Environmental Conditions or Hazardous Substances arising
under Laws, including Environmental Laws, and
(b) all liabilities that in any way arise out of or are
related to or associated with the ownership, possession, use or operation of any
of the Purchased Assets, including the STP Interest, or the Generation Facility,
before or after the Closing. In this regard, each Purchaser, on behalf of itself
and each of its parent, subsidiary and sister entities, and each of its and
their successors and assigns, expressly waives any and all rights and benefits
that it now has or they now have, or in the future may have, conferred upon it
or them by virtue of any statute or
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common law principle which provides that a general release does not extend to
claims which a party does not know or suspect to exist in its favor at the time
of executing the release, if knowledge of such claims would have materially
affected such party's settlement with the obligor. Each Purchaser, on behalf of
itself and each of its parent, subsidiary and sister entities, and each of its
and their successors and assigns, hereby further acknowledges that it is aware
that factual matters now unknown to it or them may have given or may hereafter
give rise to claims, losses and liabilities that are presently unknown,
unanticipated and unsuspected, that the release contained herein has been
negotiated and agreed upon in light of such awareness, and that it nevertheless
hereby intends to be bound and to bind each of its parent, subsidiary and sister
entities, and each of its and their successors and assigns, to the release set
forth above.
SECTION 7.14 USE OF AEP MARKS. AEP Marks will appear on some of the
Purchased Assets, including on supplies, materials, stationery, brochures,
advertising materials, manuals and similar consumable items located at the
Generation Facility. Each Purchaser acknowledges and agrees that it has and,
upon consummation of the Transactions shall have, no right, title, interest,
license, or any other right whatsoever to use the AEP Marks. Each Purchaser
shall, (i) within ninety (90) days after the Closing Date, remove the AEP Marks
from the Purchased Assets, and provide written verification thereof to Seller
promptly after completing such removal and (ii) within two (2) weeks after the
Closing Date, return or destroy (with proof of destruction) all other Purchased
Assets that contain any AEP Marks that are not removable; provided, however,
that neither Purchaser shall be required to redact AEP Marks from any
documentation obtained in connection with the Transactions to the extent such
Purchaser retains such documentation solely for archival purposes. Each
Purchaser agrees never to challenge Seller's or any of Seller's Affiliates'
ownership of the AEP Marks or any application for registration thereof or any
registration thereof or any rights of any of Seller or any of its Affiliates
therein as a result, directly or indirectly, of its ownership of the Purchased
Assets including the STP Interest. Each Purchaser will not conduct any business
or offer any goods or services under any AEP Marks. Each Purchaser will not
send, or cause to be sent, any correspondence or other materials to any Person
on any stationery that contains any AEP Marks or otherwise operate any of the
Purchased Assets in any manner which would or might reasonably be expected to
confuse any Person into believing that such Purchaser has any right, title,
interest or license to use any AEP Marks.
SECTION 7.15 ADDITIONAL COVENANTS OF PURCHASERS. Each Purchaser hereby
agrees with and covenants to Seller that:
(a) Each Purchaser hereby waives compliance by Seller with the
requirements, if any, of Article 6 of the Uniform Commercial Code as in force in
any state in which any of the Purchased Assets are located and all other similar
Laws applicable to bulk sales and transfers.
(b) Each Purchaser hereby agrees to indemnify and hold
harmless Seller and each of its Affiliates, in accordance with the provisions of
Section 8.3(a)(i), against any and all Losses, as incurred, arising out of the
offer or sale of securities by such Purchaser, except to the extent that such
Losses arise from any untrue statement or alleged untrue statement of a material
fact contained in any such securities offering materials or prospectus used by
such Purchaser or any of its representatives, or from the omission or alleged
omission therefrom of a material fact necessary to make the statements therein,
in light of the circumstances under which they were
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made, not misleading, which untrue or alleged untrue statement or omission or
alleged omission is made in reliance upon and in conformity with written
information furnished to such Purchaser by Seller under a cover letter from
Seller's counsel stating that such information is expressly for use in such
offering materials or prospectus.
(c) Without the prior written consent of Deloitte & Touche
LLP, neither Purchaser shall, and shall cause its Affiliates not to, (i)
publish, reproduce, include or incorporate by reference the independent
auditors' report of Deloitte & Touche LLP related to the STP Statements for the
years ended December 31, 2002 and 2001 in any document or electronic site or
(ii) otherwise make reference to Deloitte & Touche LLP in a document or on an
electronic site that contains other information in addition to the STP
Statements, thereby associating Deloitte & Touche LLP with such document.
SECTION 7.16 [INTENTIONALLY LEFT BLANK]
SECTION 7.17 EMISSION ALLOWANCES. Notwithstanding anything to the
contrary herein, each Purchaser and Seller shall take all necessary actions,
including executing any required forms or providing appropriate notices to
Governmental Authorities, in a timely fashion, to ensure that each Purchasers
will obtain all, or the rights to all, Emission Allowances that are to be
transferred pursuant to Section 2.1(p), Section 2.1(q) and Section 2.1(r)
hereof, including the right to receive such Emission Allowances that are to be
allocated or issued by a Governmental Authority in the future. Each Purchaser
and Seller further acknowledge and agree that such actions may be required
before, on or after the Closing Date.
SECTION 7.18 TAX EXEMPT FINANCING.
(a) Each Purchaser understands and agrees that:
(i) the Pollution Control Facilities have been
financed, and refinanced, in whole or in part, with the proceeds of the
issuance and sale by various Governmental Authorities of industrial
development revenue bonds or private activity bonds (collectively, the
"Revenue Bonds") the interest on which, with certain exceptions, is
excluded from gross income for purposes of federal income taxation; and
Seller is the economic obligor in respect of such bonds;
(ii) the basis for such exclusion is the use of the
Pollution Control Facilities for the purpose of (A) the abatement or
control of atmospheric pollution or contamination, (B) the abatement or
control of water pollution or contamination, (C) sewage disposal and/or
(D) the disposal of solid waste, such qualifying purposes being
discussed in more detail in Section 7.18(b) below;
(iii) the use of the Pollution Control Facilities for
a purpose other than a qualifying purpose indicated in subsection (ii)
above could impair (A) such exclusion from gross income of the interest
on such bonds, possibly with retroactive affect, unless appropriate
remedial action (which could include prompt redemption or defeasance of
such bonds) were taken and/or (B) the deductibility of Seller's payment
of interest based on the restrictions in Section 150(b) of the Code;
and
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(iv) any breach by such Purchaser of its obligations
under this Section 7.18 could result in the incurrence by Seller of
additional costs and expenses, including without limitation, increased
interest costs, loss of the interest deduction for tax purposes and
transaction costs relating to any refinancing redemption and/or
defeasance of all or part of the Revenue Bonds, and such Purchaser
shall be liable to Seller for such additional costs and expenses.
(b) Each Purchaser agrees that it shall not use, or permit the
use of, any of the Pollution Control Facilities for any purpose other than:
(i) abating or controlling atmospheric or water
pollution or contamination by removing, altering, disposing of or
storing pollutants, contaminants, waste or heat, all as contemplated in
U.S. Treasury Regulations Section 1.103-8(g);
(ii) the collection, storage, treatment, utilization,
processing or final disposal of solid waste, all as contemplated in
U.S. Treasury Regulations Section 1.103-8(f); or
(iii) the collection, storage, treatment,
utilization, processing or final disposal of sewage, all as
contemplated in U.S. Treasury Regulations Section 1.103-8(f); unless,
in each such case, such Purchaser has obtained and delivered to Seller
at such Purchaser's expense an opinion addressed to Seller of
nationally recognized bond counsel reasonably acceptable to Seller
("Bond Counsel") that such use will not impair (x) the exclusion from
gross income of the interest on any issue of Revenue Bonds for federal
income tax purposes or (y) the deductibility of Seller's payments of
interest based on the restrictions in Section 150(b) of the Code. Each
Purchaser reasonably expect, as of the Effective Date and as of the
Closing Date, that the Pollution Control Facilities will continue to be
used for the qualifying purposes set forth in subsection (i) above, and
for no other purpose, for the remainder of their useful lives. Each
Purchaser covenants (i) to refrain from using the Pollution Control
Facilities in a manner that would result in the Revenue Bonds not being
"exempt facility bonds" within the meaning of Section 103(b)(4) of the
Internal Revenue Code of 1954, and (ii) to refrain from taking any
action that would result in the Revenue Bonds being "federally
guaranteed" within the meaning of Section 149(b) of the Code.
(c) It is expressly understood and agreed that the provisions
of Section 7.18(b) above shall not prohibit either Purchaser from suspending the
operation of the Pollution Control Facilities on a temporary basis, or from
terminating the operation of the Pollution Control Facilities on a permanent
basis and shutting down, retiring, abandoning and/or decommissioning the
Pollution Control Facilities; provided, however, that if the Pollution Control
Facilities, in whole or in part, are dismantled and sold, including any sale for
scrap, and if the operation of the Generation Facility shall not theretofore
have been, and is not then being, terminated on a permanent basis, then the
proceeds of such sale of the Pollution Control Facilities shall, within six
months from the date of sale, be expended to acquire replacement property to be
used for the same qualifying purpose as the Pollution Control Facilities so
sold, unless such Purchaser has obtained and delivered to Seller, at such
Purchaser's expense, an opinion addressed to Seller of Bond Counsel that the
failure to take this action will not impair (x) the exclusion from gross
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income of the interest on any issue of Revenue Bonds for federal income tax
purposes or (y) the deductibility of Seller's payments of interest based on the
restrictions in Section 150(b) of the Code. Each Purchaser covenants to maintain
such records as will enable Seller to fulfill its responsibilities under Section
148 of the Code and to retain such records for at least six years following the
actual final payment of principal and interest on the Revenue Bonds.
(d) Texas Genco agrees that it shall not issue, or have issued
on its behalf, any tax-exempt bonds to finance or refinance its acquisition of
the Pollution Control Facilities; provided that it is expressly understood and
agreed that this Section 7.18(d) shall not prohibit the use of tax-exempt bonds
to finance or refinance any improvement to the Pollution Control Facilities made
after the date of acquisition or to any assets other than the Pollution Control
Facilities.
(e) CPS agrees that it shall not issue, or have issued on
behalf of the City of San Antonio or CPS, any tax-exempt bonds, other than any
"State or local bond" (as defined in Section 103(c)(1) of the Code) that is not
a "private activity bond" (within the meaning of Section 141 of the Code), to
finance or refinance its acquisition of the Pollution Control Facilities;
provided that it is expressly understood and agreed that this Section 7.18(d)
shall not prohibit the use of tax-exempt bonds to finance or refinance any
improvement to the Pollution Control Facilities made after the date of
acquisition or to any assets other than the Pollution Control Facilities.
(f) Each Purchaser agrees that it shall give Seller at least
180 days' prior written notice of any suspension or termination of the operation
of any of the Pollution Control Facilities, or any part thereof, and of any
sale, exchange, transfer or other disposition of the Pollution Control
Facilities, or any part thereof, including, but not limited to, a sale for
scrap.
(g) If Seller shall desire to refund any Revenue Bonds, each
Purchaser shall cooperate with Seller and with Bond Counsel with respect to the
refunding bonds and shall provide upon request any representations, agreements
or covenants that are reasonably requested concerning its compliance to such
date and/or in the future with the representations, agreements and covenants
made herein. If a Purchaser shall desire to cause an opinion of Bond Counsel to
be delivered to Seller pursuant to Section 7.18(b) or Section 7.18(c), Seller
shall cooperate with such Purchaser and with Bond Counsel and shall provide upon
request copies of documents relating to the Revenue Bonds and any
representations relating to the Revenue Bonds and Seller's prior use of the
Pollution Control Facilities and compliance with the terms of the agreements
underlying or relating to the Revenue Bonds that are reasonably requested.
(h) If a Purchaser shall sell, exchange, transfer or otherwise
dispose of any of the Pollution Control Facilities to a third party, such
Purchaser shall cause to be included in the documentation relating to such
transaction covenants and agreements on the part of such third party
substantially identical to those on the part of such Purchaser contained in this
Section 7.18.
(i) The covenants and agreements on the part of each Purchaser
contained in this Section 7.18 shall continue in effect so long as any Revenue
Bonds, including any refunding bonds issued hereafter to refund any Revenue
Bonds, shall remain outstanding. Seller shall notify each Purchaser promptly
when there shall be no Revenue Bonds outstanding.
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SECTION 7.19 CERTAIN STP MATTERS. Notwithstanding anything herein to
the contrary, (i) upon the Closing, the applicable Purchaser will assume and
will fully perform and discharge all of the obligations and liabilities of
Seller under the STP Participation Agreement and such Purchaser will agree to be
bound by the terms of the STP Operating Agreement; (ii) at the Closing, such
Purchaser shall execute and deliver to Seller and the other STP Owners the
Assignment and Assumption Agreement (STP Interest), properly Executed by such
Purchaser, and Seller shall execute and deliver to such Purchaser and the other
STP Owners the Assignment and Assumption Agreement (STP Interest), properly
Executed by Seller; (iii) within ninety (90) days of the Closing, such Purchaser
shall notify each of the other STP Owner(s) of the consummation of the transfer
of the STP Interest to such Purchaser in accordance with Section 16.4 of the STP
Participation Agreement; and (iv) at the Closing or at any time after the
Closing, such Purchaser shall furnish to any of the other STP Owners such
further evidence of the consummation of such transfer as such STP Owner may
reasonably request pursuant to Section 16.4 of the STP Participation Agreement.
SECTION 7.20 ACCEPTABLE CREDIT SUPPORT.
(a) Each Purchaser shall, at all times after the Effective
Date until the payment in full of the Purchase Price, cause an Acceptable Credit
Support to be maintained in full force and effect; provided that CPS shall be
deemed to have satisfied the foregoing obligation so long as the rating of its
Electrical and Gas Systems Revenue Bonds is not less than BBB- by S&P or Baa3 by
▇▇▇▇▇'▇. If, at any time prior to the payment in full of the Purchase Price, a
Guarantor, in respect of any Purchaser, shall cease to be an Acceptable
Guarantor, then such Purchaser shall, within ten (10) days after the earlier of
the date on which (i) such Purchaser shall have been given notice of such
cessation by Seller or (ii) such Purchaser shall have Knowledge of such
cessation, deliver to Seller, at such Purchaser's election, either (x) a
replacement Guaranty issued by an Acceptable Guarantor or (y) an Acceptable
Letter of Credit which shall be maintained pursuant to the terms of Section
7.20(b) and Section 7.20(c).
(b) If the applicable Purchaser shall have elected to deliver
an Acceptable Letter of Credit pursuant to Section 7.20(a), then at all times
thereafter until the payment in full of the Purchase Price, such Purchaser shall
maintain in full force and effect an Acceptable Letter of Credit. If, at any
time prior to the payment in full of the Purchase Price, the Issuing Bank of an
Acceptable Letter of Credit issued on behalf of a Purchaser shall cease to be an
Eligible Financial Institution, such Purchaser shall, within ten (10) days after
the earlier of the date on which (i) such Purchaser shall have been given notice
of such cessation by Seller or (ii) such Purchaser shall have Knowledge of such
cessation, deliver to Seller, at such Purchaser's election, either (x) a
replacement Acceptable Guaranty, which will be maintained pursuant to the terms
of Section 7.20(a) or (y) an Acceptable Letter of Credit to be issued by an
Issuing Bank that is an Eligible Financial Institution at such time. Upon the
delivery of a replacement Acceptable Guaranty or issuance of a replacement
Acceptable Letter of Credit, as the case may be, Seller shall surrender to the
applicable Purchaser the original of the Guaranty or letter of credit being
replaced.
(c) The applicable Purchaser shall give Seller notice of the
scheduled expiration of each Acceptable Letter of Credit not more than sixty
(60) days nor less than thirty (30) days prior to the scheduled expiration date
of such Acceptable Letter of Credit. Such
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Purchaser shall provide to Seller a copy of any written commitment for a
replacement or renewal of an existing Acceptable Letter of Credit not less than
thirty (30) days prior to the relevant scheduled expiration date and, if such
Purchaser has not secured a commitment for a replacement or renewal of an
expiring Acceptable Letter of Credit at least thirty (30) days prior to the
scheduled expiration of such Acceptable Letter of Credit, such Purchaser shall
promptly notify Seller of such fact. In addition, the applicable Purchaser shall
deliver to Seller a replacement or renewal Acceptable Letter of Credit not less
than ten (10) days prior to the scheduled expiration date of any Acceptable
Letter of Credit then held by Seller. Upon the issuance of any such replacement
or renewal Acceptable Letter of Credit, Seller shall surrender to such Purchaser
the original of the Acceptable Letter of Credit being so replaced or renewed.
(d) Each Purchaser shall, until the payment in full of the
Purchase Price or the termination of this Agreement in accordance with its terms
promptly notify Seller of any downgrade in or credit watch or similar adverse
review with respect to the credit rating of Guarantor or Issuing Bank, as
applicable, in respect of such Purchaser.
(e) From and after the payment in full of the Purchase Price
until the second anniversary of the Closing Date, (i) Texas Genco shall cause an
Acceptable Credit Support to be maintained in full force and effect, subject to
such Acceptable Credit Support being limited to a maximum of Texas Genco's
Proportionate Share of Twenty Million Dollars ($20,000,000) and (ii) CPS shall
cause an Acceptable Credit Support to be maintained in full force and effect,
subject to such Acceptable Credit Support being limited to a maximum of CPS's
Proportionate Share of Twenty Million Dollars ($20,000,000); provided that CPS
shall be deemed to have satisfied the foregoing obligation so long as the rating
of its Electrical and Gas Systems Revenue Bonds is not less than BBB- by S&P or
Baa3 by ▇▇▇▇▇'▇.
(f) From and after the Effective Date until the tenth (10th)
anniversary of the Closing Date, Texas Genco shall maintain a minimum partners'
equity, determined in accordance with GAAP, of Three Hundred Million Dollars
($300,000,000). In connection with any sale, assignment, conveyance or other
transfer (regardless of form and whether by operation of law or otherwise) by
either Purchaser of all or any portion of any of the right, title and interest
in, to and under the Texas Genco Purchased Interest or the CPS Purchased
Interest, as applicable (an "Interest Transfer"), by such Purchaser after the
Closing, such Purchaser agrees: (i) to include in the relevant agreement(s)
relating to any such Interest Transfer covenants by the transferee in favor of
such Purchaser and Seller to perform and observe all terms, conditions and
provisions of the STP Participation Agreement and the STP Operating Agreement
and a covenant on the part of such transferee to include the provisions of this
Section 7.20(f)(i), mutatis mutandis, in any agreement relating to any Interest
Transfer by such transferee (with the effect thereof being that Seller, such
Purchaser and all other predecessors in interest of each subsequent transferee
shall have the benefit of the covenants and provisions described in this Section
7.20(f)(i)); and (ii) to use Commercially Reasonable Efforts to include in the
relevant agreement(s) relating to any such Interest Transfer provisions
extending to Seller the benefits of, and making directly enforceable by Seller,
(A) a covenant by the transferee that is the same, in all material respects, as
the covenant by such Purchaser in favor of Seller set forth in the first
sentence of this Section 7.20(f), (B) any indemnities, covenants or similar
provisions that protect such Purchaser from liabilities arising from a breach of
such covenant, provided however, that, in any event, any protections afforded to
such Purchaser by the transferee with respect to credit
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support shall be expressly afforded to Seller as a third party beneficiary, and
(C) a covenant on the part of such transferee to include the provisions of this
Section 7.20(f)(ii), mutatis mutandis, in any agreement relating to any Interest
Transfer by such transferee (with the effect thereof being that Seller, such
Purchaser and all other predecessors in interest of each subsequent transferee
shall have the benefit of the covenants and provisions described in this Section
7.20(f)(ii)).
ARTICLE 8
INDEMNIFICATION
SECTION 8.1 EXCLUSIVITY. Except for intentional fraud, the rights and
remedies of Seller and members of the Seller Group, on the one hand, and the
applicable Purchaser and members of the CPS Group or the Texas Genco Group on
the other hand, for money damages under this Article are, solely as between
Seller and the Seller Group on the one hand, and such Purchaser and the CPS
Group or the Texas Genco Group on the other hand, exclusive and in lieu of any
and all other rights and remedies for money damages which each of Seller and
members of the Seller Group on the one hand, and such Purchaser and members of
the CPS Group or the Texas Genco Group on the other hand, may have under this
Agreement or under applicable Law with respect to any Indemnifiable Claim,
whether at common law or in equity.
SECTION 8.2 INDEMNIFICATION BY SELLER.
(a) CPS Claims. Seller will indemnify, defend and hold
harmless the CPS Group from and against any and all demands, suits, penalties,
obligations, damages, claims, losses, liabilities, payments, costs and expenses
("Losses"), including reasonable legal, accounting and other expenses in
connection therewith and costs and expenses incurred in connection with
investigations and settlement proceedings, which arise or result from the
following (collectively, "Purchaser Claims"), IN EACH CASE, EVEN IF SUCH LOSSES
ARE CAUSED BY THE SOLE, JOINT OR CONCURRENT NEGLIGENCE, STRICT LIABILITY OR
OTHER FAULT OF ANY PERSON INCLUDED IN THE CPS GROUP, EXCEPT TO THE EXTENT CAUSED
BY THE WILLFUL MISCONDUCT OR GROSS NEGLIGENCE OF SUCH PERSON:
(i) any breach or violation of any covenant,
obligation or agreement of Seller set forth in this Agreement;
(ii) any breach or inaccuracy of any of the
representations or warranties made, as of the Closing Date, by Seller
in this Agreement in ARTICLE 4;
(iii) if the Closing occurs as to CPS, Seller's
ownership, operation or use of the Excluded Assets;
(iv) if the Closing occurs as to CPS, the failure of
Seller to pay, discharge or perform any of the Excluded Liabilities as
and when due; or
(v) any claims or attachments of Seller or any
creditor of Seller against Seller's Decommissioning Fund after the
Closing.
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(b) Texas Genco Claims. Seller will indemnify, defend and hold
harmless the Texas Genco Group from and against any and all demands, suits,
penalties, obligations, damages, claims, losses, liabilities, payments, costs
and expenses ("Losses"), including reasonable legal, accounting and other
expenses in connection therewith and costs and expenses incurred in connection
with investigations and settlement proceedings, which arise or result from the
following (collectively, "Purchaser Claims"), IN EACH CASE, EVEN IF SUCH LOSSES
ARE CAUSED BY THE SOLE, JOINT OR CONCURRENT NEGLIGENCE, STRICT LIABILITY OR
OTHER FAULT OF ANY PERSON INCLUDED IN THE TEXAS GENCO GROUP, EXCEPT TO THE
EXTENT CAUSED BY THE WILLFUL MISCONDUCT OR GROSS NEGLIGENCE OF SUCH PERSON:
(i) any breach or violation of any covenant,
obligation or agreement of Seller set forth in this Agreement;
(ii) any breach or inaccuracy of any of the
representations or warranties made, as of the Closing Date, by Seller
in this Agreement in ARTICLE 4;
(iii) if the Closing occurs as to Texas Genco,
Seller's ownership, operation or use of the Excluded Assets;
(iv) if the Closing occurs as to Texas Genco, the
failure of Seller to pay, discharge or perform any of the Excluded
Liabilities as and when due; or
(v) any claims or attachments of Seller or any
creditor of Seller against Seller's Decommissioning Fund after the
Closing.
(c) Seller Limitations. Except for a breach by Seller of its
obligations under Section 7.10, none of CPS, Texas Genco, the CPS Group or the
Texas Genco Group will be entitled to any punitive, incidental, indirect,
special or consequential damages resulting from or arising out of any Purchaser
Claims (other than punitive, incidental, indirect, special or consequential
damages awarded against a Purchaser as a result of a Third Party Claim),
including damages for lost revenues, income, or profits, diminution in value of
the Generation Facility or any other damage or loss resulting from the
disruption to or loss of operation of the Generation Facility. The aggregate
damages to which each Purchaser will be entitled under Section 8.2(a)(ii) and
Section 8.3(a)(ii) shall be limited to such Purchaser's Proportionate Share of
Twenty Million Dollars (U.S. $20,000,000).
SECTION 8.3 INDEMNIFICATION BY PURCHASERS.
(a) Seller Claims Against CPS. CPS will indemnify, defend and
hold harmless Seller, its parents and Affiliates and each of their respective
officers, directors, employees, attorneys, agents and successors and assigns and
each Person included in the Seller Group from and against any and all Losses
which arise or result from the following (collectively, "Seller Claims"), IN
EACH CASE, EVEN IF SUCH LOSSES ARE CAUSED BY THE SOLE, JOINT OR CONCURRENT
NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OF ANY PERSON INCLUDED IN THE SELLER
GROUP, EXCEPT TO THE EXTENT CAUSED BY THE WILLFUL MISCONDUCT OR GROSS NEGLIGENCE
OF SUCH PERSON:
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(i) any breach or violation of any covenant,
obligation or agreement of CPS set forth in this Agreement;
(ii) any breach or inaccuracy of any of the
representations or warranties made, as of the Closing Date, by CPS in
this Agreement in ARTICLE 5; provided, that for purposes of determining
whether there has been a breach or inaccuracy of any such
representation or warranty, and the amount of Losses sustained or
incurred, for purposes of this Section 8.3(a), such representations and
warranties shall be interpreted without giving effect to the words
"material", "materially", "Material Adverse Effect", or words of
similar effect; or
(iii) if the Closing occurs as to CPS, the design,
construction, ownership, operation or use of any of the Purchased
Assets or the Generation Facility (but excluding the Excluded Assets),
the failure to pay, perform or discharge any Assumed Liabilities as and
when due or any other matter relating to or arising out of the
Purchased Assets or the Generation Facility, in each case whether
relating to periods of time prior to or after the Closing, to the
extent CPS is not entitled to indemnification by Seller against such
Losses under Section 8.2(a) (subject to the limitations in this
Agreement).
(b) Seller Claims Against Texas Genco. Texas Genco will
indemnify, defend and hold harmless Seller, its parents and Affiliates and each
of their respective officers, directors, employees, attorneys, agents and
successors and assigns and each Person included in the Seller Group from and
against any and all Losses which arise or result from the following
(collectively, "Seller Claims"), IN EACH CASE, EVEN IF SUCH LOSSES ARE CAUSED BY
THE SOLE, JOINT OR CONCURRENT NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OF ANY
PERSON INCLUDED IN THE SELLER GROUP, EXCEPT TO THE EXTENT CAUSED BY THE WILLFUL
MISCONDUCT OR GROSS NEGLIGENCE OF SUCH PERSON:
(i) any breach or violation of any covenant,
obligation or agreement of Texas Genco set forth in this Agreement;
(ii) any breach or inaccuracy of any of the
representations or warranties made, as of the Closing Date, by Texas
Genco in this Agreement in ARTICLE 5; provided, that for purposes of
determining whether there has been a breach or inaccuracy of any such
representation or warranty, and the amount of Losses sustained or
incurred, for purposes of this Section 8.3(b), such representations and
warranties shall be interpreted without giving effect to the words
"material", "materially", "Material Adverse Effect", or words of
similar effect; or
(iii) if the Closing occurs as to Texas Genco, the
design, construction, ownership, operation or use of any of the
Purchased Assets or the Generation Facility (but excluding the Excluded
Assets), the failure to pay, perform or discharge any Assumed
Liabilities as and when due or any other matter relating to or arising
out of the Purchased Assets or the Generation Facility, in each case
whether relating to periods of time prior to or after the Closing, to
the extent Texas Genco is not entitled to
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indemnification by Seller against such Losses under Section 8.2(b)
(subject to the limitations in this Agreement).
(c) Purchaser Limitations. Except for a breach by a Purchaser
of its obligations under Section 7.10, the Seller Group will not be entitled to
any punitive, incidental, indirect, special or consequential damages resulting
from or arising out of any Seller Claim (other than punitive, incidental,
indirect, special or consequential damages awarded against Seller as a result of
a Third Party Claim), including damages for lost revenues, income, profits, or
any other damage or loss resulting from the disruption to or loss of operation
of the Generation Facility (except to the extent otherwise provided in Section
8.7(b)). The aggregate damages to which the Seller Group will be entitled from a
Purchaser, in the aggregate, under Section 8.3(a)(ii) or Section 8.3(b)(ii), as
applicable, shall be limited to such Purchaser's Proportionate Share of Twenty
Million Dollars (U.S. $20,000,000).
SECTION 8.4 NOTICE OF CLAIM. Subject to the terms of this Agreement and
upon a receipt of notice of the assertion of a claim or of the commencement of
any suit, action or proceeding that is a Third Party Claim against CPS, Texas
Genco, or any member of the CPS Group or the Texas Genco Group or the Seller
Group entitled to indemnification under Section 8.2 or Section 8.3,
respectively, such Person entitled to indemnification hereunder (the
"Indemnitee") will promptly notify the Party against whom indemnification is
sought (the "Indemnitor") in writing of any damage, claim, loss, liability or
expense which the Indemnitee has determined has given or could give rise to a
claim under Section 8.2 or Section 8.3. Such written notice is herein referred
to as a "Notice of Claim." A Notice of Claim will specify, in reasonable detail,
the facts known to the Indemnitee regarding the claim. Subject to the terms of
this Agreement, the failure to provide (or timely provide) a Notice of Claim
will not affect the Indemnitee's rights to indemnification; provided, however,
that the Indemnitor is not obligated to indemnify the Indemnitee for the
increased amount of any claim which would otherwise have been payable to the
extent that the increase resulted from the failure to deliver timely a Notice of
Claim.
SECTION 8.5 DEFENSE OF THIRD PARTY CLAIMS. The Indemnitor will defend,
in good faith and at its expense, any claim or demand set forth in a Notice of
Claim relating to a Third Party Claim and the Indemnitee, at its expense, may
participate in the defense (recognizing, however, that such defense will be
controlled and administered by the Indemnitor). The Indemnitee may not settle or
compromise any Third Party Claim so long as the Indemnitor is defending it in
good faith. If the Indemnitor elects not to contest a Third Party Claim, the
Indemnitee may undertake its defense, and the Indemnitor will be bound by the
result obtained by the Indemnitee. The Indemnitor may at any time request the
Indemnitee to agree to the abandonment of the contest of the Third Party Claim
or to the payment or compromise by the Indemnitor of the asserted claim or
demand. If the Indemnitee does not object in writing within fifteen (15) days of
the Indemnitor's request, the Indemnitor may proceed with the action stated in
the request. If, within that fifteen (15) day period, the Indemnitee notifies
the Indemnitor in writing that it has determined that the contest should be
continued, the Indemnitor will be liable under this ARTICLE 8 only for an amount
up to the amount which the Indemnitor had proposed be accepted in payment or
compromise. This Section 8.5 is subject to the rights of any insurance carrier
of Indemnitee that is defending the Third Party Claim.
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SECTION 8.6 COOPERATION. The Party defending the Third Party Claim will
(a) consult with the other Party throughout the pendency of the Third Party
Claim regarding the investigation, defense, settlement, trial, appeal or other
resolution of the Third Party Claim and (b) afford the other Party the
opportunity to be associated in the defense of the Third Party Claim. The
Parties will cooperate in the defense of the Third Party Claim. The Indemnitee
will make available to the Indemnitor or its representatives all records and
other materials reasonably required by them for use in contesting any Third
Party Claim (subject to obtaining an agreement to maintain the confidentiality
of confidential or proprietary materials in a form reasonably acceptable to
Indemnitor and Indemnitee). If requested by the Indemnitor, the Indemnitee will
cooperate with the Indemnitor and its counsel in contesting any Third Party
Claim that the Indemnitor elects to contest or, if appropriate, in making any
counterclaim against the Person asserting the claim or demand, or any
cross-complaint against any Person. The Indemnitor will reimburse the Indemnitee
for any expenses incurred by Indemnitee in cooperating with or acting at the
request of the Indemnitor.
SECTION 8.7 MITIGATION AND LIMITATION OF CLAIMS. As used in this
Agreement, the term "Indemnifiable Claim" means any Purchaser Claim or Seller
Claim. Notwithstanding anything to the contrary contained herein:
(a) Reasonable Steps to Mitigate. The Indemnitee will take all
reasonable steps to mitigate all Losses relating to an Indemnifiable Claim,
including availing itself of any defenses, limitations, rights of contribution,
claims against third Persons and other rights at law or equity, and will provide
such evidence and documentation of the nature and extent of the Indemnifiable
Claim as may be reasonably requested by the Indemnitor. The Indemnitee's
reasonable steps include the reasonable expenditure of money to mitigate or
otherwise reduce or eliminate any Loss for which indemnification would otherwise
be due under this ARTICLE 8, and the Indemnitor will reimburse the Indemnitee
for the Indemnitee's reasonable expenditures in undertaking the mitigation,
together with interest thereon from the date of payment to the date of repayment
at a variable rate of interest equal to the "prime rate" as published in The
Wall Street Journal from time to time during the applicable period.
(b) Limitations. Any Indemnifiable Claim shall be limited to
the amount of actual damages sustained by the Indemnitee, net of insurance
recoveries, provided that a Seller Claim for a breach of this Agreement by a
Purchaser that results in a termination of this Agreement with respect to such
Purchaser or other failure to consummate the Transactions may include any excess
of the consideration to be received by Seller from such Purchaser for the
Purchased Assets under this Agreement over the consideration to be received by
Seller from the sale of the Purchased Assets to a third Person in any subsequent
transaction or over the value of the Purchased Assets if they are not
subsequently sold.
(c) Minimum Claim. If the Closing occurs, no Party shall have
any liability or obligation to indemnify under Section 8.2(a)(ii) or Section
8.3(a)(ii), as the case may be, for or with respect to any Indemnifiable Claims,
unless the aggregate amount for which such Party would be liable thereunder, but
for this provision, for or with respect to any Indemnifiable Claims exceeds Two
Million Dollars (the "Deductible Amount") and recovery shall be limited only to
such amounts as exceed the Deductible Amount. Nothing in this Section 8.7(c) is
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intended to modify or limit a Party's liability or obligation hereunder for
other Indemnifiable Claims.
SECTION 8.8 SPECIFIC PERFORMANCE. Seller acknowledges that the
Transactions are unique and that each Purchaser will be irreparably injured
should such Transactions applicable to such Purchaser not be consummated in a
timely fashion. Consequently, such Purchaser will have no adequate remedy at law
if Seller shall fail to sell the Purchased Assets when required to do so
hereunder. In such event, such Purchaser shall have the right, in addition to
any other remedy available in equity or law, to specific performance of such
obligation by Seller, subject to such Purchaser's performance of its obligations
hereunder. Each Purchaser acknowledges that the Transactions are unique and that
Seller will be irreparably injured should such Transactions not be consummated
in a timely fashion. Consequently, Seller will not have an adequate remedy at
law if such Purchaser shall fail to purchase the Purchased Assets when required
to do so hereunder. In such event, Seller shall have the right, in addition to
any other remedy available in equity or law, to specific performance of such
obligation by such Purchaser, subject to Seller's performance of its obligations
hereunder.
ARTICLE 9
CPS'S CONDITIONS TO CLOSING
The obligation of CPS to consummate the Transactions shall be subject to
fulfillment at or prior to the Closing of the following conditions, except to
the extent CPS waives such fulfillment in writing:
SECTION 9.1 COMPLIANCE WITH PROVISIONS. Seller shall have performed or
complied in all material respects with all covenants and agreements contained in
this Agreement and the Ancillary Agreements on its part required to be performed
or complied with at or prior to the Closing.
SECTION 9.2 [INTENTIONALLY LEFT BLANK]
SECTION 9.3 NO RESTRAINT. There shall be no:
(a) Injunction, restraining order or order of any nature
issued by any Governmental Authority of competent jurisdiction over the Parties
that prevents the consummation of the Transactions as herein provided; or
(b) Action taken, or Law enacted, promulgated or deemed
applicable to the Transactions, by any Governmental Authority of competent
jurisdiction over the Parties which prohibits the consummation of the
Transactions as herein provided; provided, however, that the Parties will use
their Commercially Reasonable Efforts to litigate against, and to obtain the
lifting of, any such injunction, restraining or other order, restraint,
prohibition, action, suit, Law or penalty.
SECTION 9.4 REQUIRED REGULATORY APPROVALS AND CONSENTS. Without
limiting the generality of Section 7.1 and Section 7.5, with respect to the
purchase and sale of the Purchased Assets, (a) CPS shall have received all of
CPS's Required Regulatory Approvals described in
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clause (i) of the definition thereof and all of CPS's Required Consents and (b)
Seller shall have received all of Seller's Required Regulatory Approvals
described in clause (i) of the definition thereof and the Seller's Required
Consents. In the event that any of CPS's Required Regulatory Approvals or such
Seller's Required Regulatory Approvals requires any modification to this
Agreement or any Ancillary Agreement Executed by CPS or the Transactions,
imposes any condition to the effectuation of the Transactions, or places any
restrictions upon CPS's ownership of the STP Interest, then CPS shall have
approved such modifications, conditions and restrictions to the extent that such
modifications, conditions and restrictions, if any, are not contemplated by this
Agreement and the Ancillary Agreements and, individually or in the aggregate,
are reasonably likely to be materially adverse to the business, assets,
properties, financial condition or results of operations of CPS and its
subsidiaries (if any) taken as a whole, it being agreed that CPS shall be deemed
to have approved of any such modifications, conditions or restrictions that are
not disapproved by CPS in a written notice to Seller given no later than fifteen
(15) Business Days following CPS's acquiring Knowledge of such modification,
condition or restriction.
SECTION 9.5 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Seller set forth in this Agreement that are qualified with respect
to materiality (whether by reference to Material Adverse Effect or otherwise)
shall be true and correct, except to the extent that any failure thereof to be
true and correct shall have been agreed or determined to be a Material Adverse
Effect for which CPS's Initial Purchase Price has been or will be adjusted in
accordance with Section 3.3(e), and the representations and warranties of Seller
set forth in this Agreement that are not so qualified shall be true and correct
in all material respects, on and as of the Closing Date.
SECTION 9.6 TITLE INSURANCE. Title to the Owned Real Property shall
have been evidenced by the willingness of First American Title Insurance Company
(collectively with any co-insurer or re-insurer, as applicable, the "Title
Insurer"), acting through its agent, Republic Title of Texas, Inc. (the "Title
Agent"), to issue a policy or policies of title insurance in the name of CPS on
the policy form issued in the State of Texas in amounts equal to the portion of
the Purchase Price allocated to the Owned Real Property covered by such policies
showing title to such interests in such Owned Real Property vested in Purchaser
subject only to transfer of such interest to CPS, and that will include only the
exceptions to coverage listed in the Preliminary Title Commitment, excluding
those exceptions, and including those endorsements, listed on Schedule 9.6 (the
"Title Policy"). The willingness of the Title Insurer to issue the Title Policy
shall be evidenced by the Title Insurer's delivery of marked title commitments
or pro forma title policies, dated as of the Closing Date, committing the Title
Insurer to issue the Title Policy within a reasonable time after the Closing
Date. If the Title Insurer is unwilling to issue the Title Policy, it shall be
required to provide CPS and Seller, in writing, notice setting forth the
reason(s) for such unwillingness as soon as practicable. Seller shall have the
right to seek to cure any defect which is the reason for such unwillingness, and
to extend the Closing and the Termination Date, if necessary, for a period of up
to thirty (30) days to provide to Seller the opportunity to cure.
SECTION 9.7 OFFICER'S CERTIFICATE. CPS shall have received a
certificate from Seller, Executed on its behalf by an authorized officer, dated
the Closing Date, to the effect that the
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conditions set forth in Section 11.1, Section 11.4 (to the extent relating to
Seller's Required Regulatory Approvals) and Section 11.5 have been satisfied by
Seller.
SECTION 9.8 [Intentionally left blank]
SECTION 9.9 MATERIAL ADVERSE EFFECT. Except for (a) matters the subject
of Seller's representations and warranties in ARTICLE 4 (which representations
and warranties constitute CPS's exclusive assurance with respect to the subject
matters thereof), (b) facts or circumstances of which CPS or any of its
Affiliates or representatives has knowledge on the Effective Date or disclosed
on any of the Schedules, and in either case not required to be corrected or
remediated on or before the Closing Date and (c) matters resulting from acts or
omissions of CPS or any of its Affiliates or representatives, since the
Effective Date there shall have occurred and be continuing no Material Adverse
Effect for which CPS's Initial Purchase Price has not been or will not be
adjusted in accordance with Section 3.3(e).
SECTION 9.10 IRS LETTER RULING. The IRS PLR (Decommissioning Funds
Transfer), insofar as it relates to CPS, shall have been received with no
condition or limitation thereon that is not reasonably acceptable to CPS.
SECTION 9.11 LEGAL OPINION. CPS shall have received an opinion or
opinions from Seller's counsel dated the Closing Date substantially as to the
matters set forth on Schedule 9.11, subject to the conditions and limitations
therein and to other customary conditions and limitations.
SECTION 9.12 NO TERMINATION. Neither CPS nor Seller shall have
exercised any termination right such Party is entitled to exercise pursuant to
Section 12.1.
SECTION 9.13 TERMINATION OF AEP-CAMECO PSA. The AEP-Cameco PSA shall
have been terminated by Seller as provided in Section 2.7 and Seller shall have
delivered to CPS a copy of the notice of termination.
SECTION 9.14 RECEIPT OF OTHER DOCUMENTS. CPS shall have received the
following:
(a) certificate of active status as of a recent date issued by
the Secretary of State of Texas for Seller, a certificate of good standing
issued by the Texas Comptroller of Public Accounts for Seller, and a certified
copy of the certificate of incorporation of Seller issued by the Secretary of
State of Texas;
(b) certified copies of the articles of incorporation and
bylaws of Seller, together with a certificate of the Secretary or an Assistant
Secretary of Seller that none of such documents have been amended;
(c) to the extent readily available and in Seller's
possession, originals (or if not readily available, true and correct copies) of
all the Generation Facility Contracts to which Seller has Knowledge that it is a
party and the Transferable Permits issued to Seller and of which it has
Knowledge;
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(d) copies, certified by the Secretary or an Assistant
Secretary of Seller of corporate resolutions of Seller authorizing the Execution
and delivery by Seller of this Agreement and of the Ancillary Agreements to
which it is a party and the authorization or ratification of all of the other
agreements and instruments, in each case, to be Executed and delivered by Seller
in connection herewith;
(e) a certificate of the Secretary or an Assistant Secretary
of Seller identifying the name and title and bearing the signatures of the
officers of Seller authorized to execute and deliver this Agreement and each
Ancillary Agreement to which it is a party and the other agreements and
instruments contemplated hereby;
(f) a Decommissioning Funds Collection Agreement, unless not
required pursuant to Section 7.8(e), and, if required pursuant to Section
3.5(c), the Escrow Agreement, properly Executed by Seller;
(g) if required pursuant to Section 3.5(d), the
Decommissioning Adjustment Escrow Agreement, properly Executed by Seller;
(h) a certificate of non-foreign status of Seller pursuant to
Section 1445 of the Code; and
(i) following confirmation of delivery of CPS's Initial
Purchase Price by CPS as adjusted by the Closing Adjustment, a receipt for CPS's
Initial Purchase Price as adjusted by the Closing Adjustment.
ARTICLE 10
TEXAS GENCO'S CONDITIONS TO CLOSING
The obligation of Texas Genco to consummate the Transactions shall be
subject to fulfillment at or prior to the Closing of the following conditions,
except to the extent Texas Genco waives such fulfillment in writing:
SECTION 10.1 COMPLIANCE WITH PROVISIONS. Seller shall have performed or
complied in all material respects with all covenants and agreements contained in
this Agreement and the Ancillary Agreements on its part required to be performed
or complied with at or prior to the Closing.
SECTION 10.2 HSR ACT. The waiting period under the HSR Act applicable
to the consummation of the sale of the Purchased Assets contemplated hereby
between Seller and Texas Genco shall have expired or been terminated.
SECTION 10.3 NO RESTRAINT. There shall be no:
(a) Injunction, restraining order or order of any nature
issued by any Governmental Authority of competent jurisdiction over the Parties
that prevents the consummation of the Transactions as herein provided; or
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(b) Action taken, or Law enacted, promulgated or deemed
applicable to the Transactions, by any Governmental Authority of competent
jurisdiction over the Parties which prohibits the consummation of the
Transactions as herein provided; provided, however, that the Parties will use
their Commercially Reasonable Efforts to litigate against, and to obtain the
lifting of, any such injunction, restraining or other order, restraint,
prohibition, action, suit, Law or penalty.
SECTION 10.4 REQUIRED REGULATORY APPROVALS AND CONSENTS.
Without limiting the generality of Section 7.1 and Section 7.5, with respect to
the purchase and sale of the Purchased Assets, (a) Texas Genco shall have
received all of Texas Genco's Required Regulatory Approvals described in clause
(i) of the definition thereof and all of Texas Genco's Required Consents and (b)
Seller shall have received all of Seller's Required Regulatory Approvals
described in clause (i) of the definition thereof and the Seller's Required
Consents. In the event that any of Texas Genco's Required Regulatory Approvals
or such Seller's Required Regulatory Approvals requires any modification to this
Agreement or any Ancillary Agreement Executed by Texas Genco or the
Transactions, imposes any condition to the effectuation of the Transactions, or
places any restrictions upon Texas Genco's ownership of the STP Interest, then
Texas Genco shall have approved such modifications, conditions and restrictions
to the extent that such modifications, conditions and restrictions, if any, are
not contemplated by this Agreement and the Ancillary Agreements and,
individually or in the aggregate, are reasonably likely to be materially adverse
to the business, assets, properties, financial condition or results of
operations of Texas Genco and its subsidiaries (if any) taken as a whole, it
being agreed that Texas Genco shall be deemed to have approved of any such
modifications, conditions or restrictions that are not disapproved by Texas
Genco in a written notice to Seller given no later than fifteen (15) Business
Days following Texas Genco's acquiring Knowledge of such modification, condition
or restriction.
SECTION 10.5 REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Seller set forth in this Agreement that are
qualified with respect to materiality (whether by reference to Material Adverse
Effect or otherwise) shall be true and correct, except to the extent that any
failure thereof to be true and correct shall have been agreed or determined to
be a Material Adverse Effect for which Texas Genco's Initial Purchase Price has
been or will be adjusted in accordance with Section 3.3(e), and the
representations and warranties of Seller set forth in this Agreement that are
not so qualified shall be true and correct in all material respects, on and as
of the Closing Date.
SECTION 10.6 TITLE INSURANCE. Title to the Owned Real Property
shall have been evidenced by the willingness of First American Title Insurance
Company (collectively with any co-insurer or re-insurer, as applicable, the
"Title Insurer"), acting through its agent, Republic Title of Texas, Inc. (the
"Title Agent"), at the option of Purchaser, to issue a policy or policies of
title insurance in the name of Texas Genco on the policy form issued in the
State of Texas in amounts equal to the portion of the Purchase Price allocated
to the Owned Real Property covered by such policies showing title to such
interests in such Owned Real Property vested in Purchaser subject only to
transfer of such interest to Purchaser, and that will include only the
exceptions to coverage listed in the Preliminary Title Commitment, excluding
those exceptions, and including those endorsements, listed on Schedule 9.6 (the
"Title Policy"). The willingness of the Title Insurer to issue the Title Policy
shall be evidenced by the Title Insurer's delivery of marked title
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commitments or pro forma title policies, dated as of the Closing Date,
committing the Title Insurer to issue the Title Policy within a reasonable time
after the Closing Date. If the Title Insurer is unwilling to issue the Title
Policy, it shall be required to provide Texas Genco and Seller, in writing,
notice setting forth the reason(s) for such unwillingness as soon as
practicable. Seller shall have the right to seek to cure any defect which is the
reason for such unwillingness, and to extend the Closing and the Termination
Date, if necessary, for a period of up to thirty (30) days to provide to Seller
the opportunity to cure.
SECTION 10.7 OFFICER'S CERTIFICATE. Texas Genco shall have received a
certificate from Seller, Executed on its behalf by an authorized officer, dated
the Closing Date, to the effect that the conditions set forth in Section 11.1,
Section 11.4 (to the extent relating to Seller's Required Regulatory Approvals)
and Section 11.5 have been satisfied by Seller.
SECTION 10.8 [INTENTIONALLY LEFT BLANK]
SECTION 10.9 MATERIAL ADVERSE EFFECT. Except for (a) matters the
subject of Seller's representations and warranties in ARTICLE 4 (which
representations and warranties constitute the applicable Purchaser's exclusive
assurance with respect to the subject matters thereof), (b) facts or
circumstances of which Texas Genco or any of its Affiliates or representatives
has knowledge on the Effective Date or disclosed on any of the Schedules, and in
either case not required to be corrected or remediated on or before the Closing
Date and (c) matters resulting from acts or omissions of Texas Genco or any of
its Affiliates or representatives, since the Effective Date there shall have
occurred and be continuing no Material Adverse Effect for which Texas Genco's
Initial Purchase Price has not been or will not be adjusted in accordance with
Section 3.3(e).
SECTION 10.10 IRS LETTER RULING. The IRS PLR (Decommissioning Funds
Transfer), insofar as it relates to Texas Genco, shall have been received with
no condition or limitation thereon that is not reasonably acceptable to Texas
Genco.
SECTION 10.11 LEGAL OPINION. Texas Genco shall have received an opinion
or opinions from Seller's counsel dated the Closing Date substantially as to the
matters set forth on Schedule 10.11, subject to the conditions and limitations
therein and to other customary conditions and limitations.
SECTION 10.12 NO TERMINATION. Neither Texas Genco nor Seller shall have
exercised any termination right such Party is entitled to exercise pursuant to
Section 12.1.
SECTION 10.13 TERMINATION OF AEP-CAMECO PSA. The AEP-Cameco PSA shall
have been terminated by Seller as provided in Section 2.7 and Seller shall have
delivered to Texas Genco a copy of the notice of termination.
SECTION 10.14 RECEIPT OF OTHER DOCUMENTS. Texas Genco shall have
received the following:
(a) certificate of active status as of a recent date issued by
the Secretary of State of Texas for Seller, a certificate of good standing
issued by the Texas Comptroller of
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Public Accounts for Seller, and a certified copy of the certificate of
incorporation of Seller issued by the Secretary of State of Texas;
(b) certified copies of the articles of incorporation and
bylaws of Seller, together with a certificate of the Secretary or an Assistant
Secretary of Seller that none of such documents have been amended;
(c) to the extent readily available and in Seller's
possession, originals (or if not readily available, true and correct copies) of
all the Generation Facility Contracts to which Seller has Knowledge that it is a
party and the Transferable Permits issued to Seller and of which it has
Knowledge;
(d) copies, certified by the Secretary or an Assistant
Secretary of Seller of corporate resolutions of Seller authorizing the Execution
and delivery by Seller of this Agreement and of the Ancillary Agreements to
which it is a party and the authorization or ratification of all of the other
agreements and instruments, in each case, to be Executed and delivered by Seller
in connection herewith;
(e) a certificate of the Secretary or an Assistant Secretary
of Seller identifying the name and title and bearing the signatures of the
officers of Seller authorized to execute and deliver this Agreement and each
Ancillary Agreement to which it is a party and the other agreements and
instruments contemplated hereby;
(f) a Decommissioning Funds Collection Agreement, unless not
required pursuant to Section 7.8(e), and, if required pursuant to Section
3.5(c), the Escrow Agreement, properly Executed by Seller;
(g) if required pursuant to Section 3.5(d), the
Decommissioning Adjustment Escrow Agreement, properly Executed by Seller;
(h) a certificate of non-foreign status of Seller pursuant to
Section 1445 of the Code; and
(i) following confirmation of delivery of Texas Genco's
Initial Purchase Price by Texas Genco as adjusted by the Closing Adjustment, a
receipt for Texas Genco's Initial Purchase Price as adjusted by the Closing
Adjustment.
ARTICLE 11
SELLER'S CONDITIONS TO CLOSING
The obligation of Seller to consummate the Transactions with any
Purchaser shall be subject to fulfillment at or prior to the applicable Closing
of the following conditions, except to the extent Seller waives such fulfillment
in writing:
SECTION 11.1 COMPLIANCE WITH PROVISIONS. Such Purchaser shall have
performed or complied in all material respects with all covenants and agreements
contained in this Agreement and the Ancillary Agreements to which it is a Party
on its part required to be performed or
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complied with at or prior to the Closing and, as the context requires, Guarantor
shall have performed or complied in all material respects with all covenants and
agreements contained in the Guaranty on its part that are required to be
performed or complied with at or prior to the Closing.
SECTION 11.2 HSR ACT. In the case of any Closing of the Transactions
with Texas Genco, the waiting period under the HSR Act applicable to the
consummation of the sale of the Purchased Assets contemplated hereby by Seller
to Texas Genco shall have expired or been terminated.
SECTION 11.3 NO RESTRAINT. There shall be no:
(a) Injunction, restraining order or order of any nature
issued by any Governmental Authority of competent jurisdiction over Seller and
such Purchaser that prevents the consummation of the Transactions as herein
provided; or
(b) Action taken, or Law enacted, promulgated or deemed
applicable to the Transactions, by any Governmental Authority of competent
jurisdiction over Seller and such Purchaser which prohibits the consummation of
the Transactions as herein provided; provided, however, that Seller and such
Purchaser will use their Commercially Reasonable Efforts to litigate against,
and to obtain the lifting of, any such injunction, restraining or other order,
restraint, prohibition, action, suit, Law or penalty.
SECTION 11.4 REQUIRED REGULATORY APPROVALS AND CONSENTS. Without
limiting the generality of Section 7.1 or Section 7.5, with respect to the
purchase and sale of the Purchased Assets, Seller shall have received all of
Seller's Required Regulatory Approvals described in clause (i) of the definition
thereof and all of Seller's Required Consents and such Purchaser shall have
received all of Purchaser's Required Regulatory Approvals described in clause
(i) of the definition thereof. In the event that any of such Seller's Required
Regulatory Approvals or such Purchaser's Required Regulatory Approvals requires
any modification to this Agreement or any Ancillary Agreement Executed by Seller
or to the Transactions imposes any condition to the effectuation of such
Transactions, or places any restrictions on Seller's or any of its Affiliates'
conduct of their respective businesses after the Closing, then Seller shall have
approved such modifications, conditions and restrictions to the extent that such
modifications, conditions and restrictions, if any, are not contemplated by this
Agreement and such Ancillary Agreements and individually or in the aggregate,
are reasonably likely to be materially adverse to the business, assets,
properties, financial condition or results of operations of Seller and its
subsidiaries taken as a whole or materially impair Seller's authority, right or
ability to consummate the Transactions, or otherwise materially adversely affect
Seller's or any of its Affiliates' conduct of their respective businesses after
the Closing, it being agreed that Seller shall be deemed to have approved of any
such modifications, conditions or restrictions that are not disapproved by
Seller in a written notice to such Purchaser given no later than fifteen (15)
Business Days following Seller's acquiring Knowledge of such modification,
condition or restriction.
SECTION 11.5 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of such Purchaser set forth in this Agreement and, as the context
requires, of Guarantor set forth in the Guaranty that are qualified with respect
to materiality (whether by reference to Material
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Adverse Effect or otherwise) shall be true and correct, and the representations
and warranties that are not so qualified shall be true and correct in all
material respects, on and as of the Closing Date.
SECTION 11.6 OFFICER'S CERTIFICATE. Seller shall have received a
certificate from such Purchaser, Executed on its behalf by an authorized
officer, dated the Closing Date, to the effect that the conditions set forth in
Section 9.1 or Section 10.1, as applicable, Section 9.4 or Section 10.4 (to the
extent relating to such Purchaser's Required Regulatory Approvals), as
applicable, and Section 9.5 or Section 10.5, as applicable, have been satisfied
by such Purchaser.
SECTION 11.7 LEGAL OPINION. Seller shall have received an opinion or
opinions from such Purchaser's counsel dated the Closing Date substantially as
to the matters set forth on Schedule 11.7(a) in the case of an opinion or
opinions of CPS's counsel, or Schedule 11.7(b) in the case of an opinion or
opinions of Texas Genco's counsel, and in each case, each subject to the
conditions and limitations therein and to other customary conditions and
limitations.
SECTION 11.8 NO TERMINATION. Neither such Purchaser nor Seller shall
have exercised any termination right such Party is entitled to exercise pursuant
to Section 12.1.
SECTION 11.9 IRS LETTER RULING. The IRS PLR (Decommissioning Funds
Transfer) shall have been received with no condition or limitation thereon that
is not reasonably acceptable to Seller.
SECTION 11.10 RECEIPT OF OTHER DOCUMENTS.
(a) Seller shall have received from Texas Genco the following:
(i) a Certificate of Good Standing with respect to
Texas Genco and, as the context requires, Guarantor, as of a recent
date, issued by the pertinent government officials of its jurisdiction
of formation;
(ii) certified copies of the certificate of formation
of Texas Genco and the articles of incorporation and by-laws or similar
constitutive documents of Texas Genco and, as the context requires,
Guarantor, together with a certificate of a duly authorized officer of
Texas Genco and, as the context requires, of Guarantor that none of
such documents have been amended;
(iii) copies, certified by the appropriate officer of
Texas Genco and, as the context requires, Guarantor, of resolutions of
Texas Genco and the respective governing boards of Texas Genco and, as
the context requires, Guarantor, authorizing the Execution and delivery
by Texas Genco of this Agreement, and each of the Ancillary Agreements
to which Texas Genco is a party and the authorization or ratification
of all of the other agreements and instruments, in each case, to be
Executed and delivered by Texas Genco in connection herewith and, as
the context requires, authorizing the Execution and delivery by
Guarantor of the Guaranty;
(iv) a certificate of the appropriate officer of
Texas Genco, and, as the context requires, Guarantor, identifying the
name and title and bearing the signatures of
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the officers of Texas Genco authorized to execute and deliver this
Agreement on behalf of Texas Genco, and each Ancillary Agreement to
which Texas Genco is a party and the other agreements and instruments
contemplated hereby, and, as the context requires, identifying the name
and title and bearing the signature(s) of the officer(s) of Guarantor
authorized to execute and deliver the Guaranty, as applicable;
(v) a Decommissioning Funds Collection Agreement and,
if required pursuant to Section 3.5(c), the Escrow Agreement, properly
Executed by Texas Genco and, in the case of the Escrow Agreement, the
Escrow Agent; and
(vi) if required pursuant to Section 3.3(f), a
Decommissioning Adjustment Escrow Agreement, properly Executed by Texas
Genco and the Escrow Agent.
(b) Seller shall have received from CPS the following:
(i) Certified copies of the charter of the City and
the most recent bond ordinance for the issuance of City of San Antonio
Electric and Gas System Revenue Bonds or other documentation evidencing
official action by the City to form or establish CPS, with a
certificate of a duly authorized officer of the City that none of such
documents have been amended;
(ii) a certified copy of the CPS Required Regulatory
Approval set forth in item 3 of Part I of Schedule 1.1B;
(iii) certified copies of resolutions of CPS and its
Board authorizing CPS to execute this Agreement and take all necessary
action to acquire the CPS Purchased Interest, with a certificate of a
duly authorized officer of CPS that none of such documents have been
amended;
(iv) a certificate of the appropriate officer of CPS
identifying the name and title and bearing the signatures of the
officers of CPS authorized to execute and deliver this Agreement on
behalf of CPS, and each Ancillary Agreement to which CPS is a party and
the other agreements and instruments contemplated hereby;
(v) a Decommissioning Funds Collection Agreement and,
if required pursuant to Section 3.5(c), the Escrow Agreement, properly
Executed by CPS and, in the case of the Escrow Agreement, the Escrow
Agent; and
(vi) if required pursuant to Section 3.3(f), a
Decommissioning Adjustment Escrow Agreement, properly Executed by CPS
and the Escrow Agent.
ARTICLE 12
TERMINATION
SECTION 12.1 RIGHTS TO TERMINATE. To the extent set forth in Section
12.2, or to the extent specifically permitted herein a portion thereof, this
Agreement may be terminated by or
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with respect to a particular Purchaser according to this Section 12.1. With
respect to each Purchaser, any event, action, omission, notice or other item
giving rise to a right to terminate by Seller under this Article 12 shall be
between Seller and the Purchaser responsible for such right of termination.
Seller shall not have the right to terminate as to the other Purchaser unless
such right to terminate is directly related actions arising from or a failure to
act on the part of both Purchasers. Subject to the preceding sentence, this
Agreement may be terminated by or with respect to a particular Purchaser:
(a) At any time prior to Closing, by mutual written consent of
Seller and such Purchaser;
(b) Prior to the Closing, by Seller if there has been a
material default or breach under this Agreement by such Purchaser that is not
cured by the earlier of the Closing Date or the date thirty (30) days after
notice from Seller specifying with particularity such breach or default;
(c) Prior to the Closing, by such Purchaser upon written
notice to Seller if there has been a material default or breach under this
Agreement by Seller that is not cured by the Termination Date;
(d) Prior to the Closing, upon the written notice of such
Purchaser or Seller, in the event a Material Adverse Effect occurs or is first
manifest subsequent to the Effective Date (as determined by the express written
agreement of Seller and such Purchaser, or, failing such express written
agreement, upon a determination made in accordance with Section 3.5(c) and/or
Section 13.7 hereof) and continues without cure until the Termination Date and
the MAE Adjustment Amount (as defined in Section 3.3(e) hereof) resulting
therefrom exceeds such Purchaser's Proportionate Share of Fifty Million Dollars
(U.S. $50,000,000);
(e) By such Purchaser or Seller upon written notice to the
other: (i) at any time prior to the Closing if any court of competent
jurisdiction shall have issued an order, judgment or decree permanently
restraining, enjoining or otherwise prohibiting the Closing, and such order,
judgment or decree shall have become final without the possibility of appeal;
(ii) at any time prior to the Closing if any applicable Law shall have been
enacted or issued by any Governmental Authority having jurisdiction over the
Transactions which, directly or indirectly, prohibits the consummation of the
Transactions; or (iii) if the conditions of the terminating Party for Closing
cannot reasonably be fulfilled or have not been fulfilled or waived by 11:59
p.m. Central prevailing time on June 30, 2005 (such date or, if it shall have
been extended to a later date pursuant to the following provisions of this
Section 12.1(e), such later date to which it shall have been extended, the
"Termination Date"), unless the failure of any condition to be fulfilled is the
result of the material breach of this Agreement by the Party seeking to
terminate; provided, however, that if (A) in respect of Texas Genco, on June 30,
2005 any of the conditions set forth in Section 10.2 or Section 11.2 shall not
have been fulfilled or, in respect of each Purchaser, to the extent relating to
such Purchaser's Required Regulatory Approvals or Seller's Required Regulatory
Approvals, Section 9.4, Section 10.4 or Section 11.4, as applicable, shall not
have been fulfilled and (B) all conditions set forth in ARTICLE 9, ARTICLE 10
and ARTICLE 11, as applicable, other than those described in the preceding
clause (A) and the condition set forth in Section 9.9 or Section 10.9, as
applicable, shall have been fulfilled or waived or shall be capable
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of being fulfilled, and the condition set forth in Section 9.9 or Section 10.9,
as applicable, shall be capable of being fulfilled on or before October 31,
2005, then such Purchaser or Seller may extend the Termination Date to October
31, 2005, and provided, further, however, that Seller or either Purchaser may
extend the Termination Date to the end of the thirty (30) day period referred to
in either of the provisos set forth in the first sentence of Section 3.1 if the
Termination Date would otherwise occur prior to the end of either such thirty
(30) day period;
(f) By such Purchaser upon written notice to Seller if: (i)
Seller has within the then-previous fifteen (15) days given such Purchaser any
notice pursuant to Section 7.3(a), (ii) such Purchaser has notified Seller of
its intent to terminate pursuant to this Section 12.1(f), and (iii) the matter
that is the subject of such notice continues to exist for a period of 30 days
after such notice by such Purchaser without Seller having commenced and
diligently continued in good faith actions to cure such matter on or before the
Termination Date, or
(g) By Seller upon written notice to such Purchaser if: (i)
such Purchaser has within the then-previous fifteen (15) days given Seller any
notice pursuant to Section 7.3(b), (ii) Seller has notified such Purchaser of
its intent to terminate pursuant to this Section 12.1(g), and (iii) the matter
that is the subject of such notice continues to exist for a period of thirty
(30) days after such notice by Seller without such Purchaser having commenced
and diligently continued in good faith actions to cure such matter on or before
the Termination Date.
SECTION 12.2 EFFECT OF TERMINATION.
(a) If there has been a termination of this Agreement as to
the Purchased Interests of both Purchasers pursuant to this ARTICLE 12, all
further obligations of the Parties hereunder shall terminate, except that the
obligations set forth in Section 7.2, Section 7.10 and in ARTICLE 8 and ARTICLE
12 shall survive. In the event of such termination of this Agreement in its
entirety, then with respect to each Party, there shall be no liability for
damages on the part of such Party to any other Party under and by reason of this
Agreement or the Transactions except as set forth in ARTICLE 8 and except for
intentionally fraudulent acts by a Party, the remedies for which shall not be
limited by the provisions of this Agreement.
(b) If there has been a termination with respect to a
particular Purchaser (the "Terminated Purchaser") but not the other Purchaser,
pursuant to this ARTICLE 12, then this Agreement shall be terminated only as
between the Terminated Purchaser and Seller, except that the obligations set
forth in Section 7.2, Section 7.10 and in ARTICLE 8 and ARTICLE 12 shall survive
as to Seller and the Terminated Purchaser. In the event of termination of this
Agreement, between Seller and the Terminated Purchaser, there shall be no
liability for damages on the part of either such Party to one another under and
by reason of this Agreement or the Transactions except as set forth in ARTICLE 8
and except for intentionally fraudulent acts by either such Party, the remedies
for which shall not be limited by the provisions of this Agreement.
(c) No provision of this ARTICLE 12 shall limit or restrict
the availability of specific performance or other injunctive or equitable
relief, to the extent that specific performance or such other relief would
otherwise be available to a Party under this Agreement.
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ARTICLE 13
GENERAL PROVISIONS
SECTION 13.1 ENTIRE DOCUMENT. This Agreement (including the Exhibits
and Schedules to this Agreement) and the Ancillary Agreements contain the entire
agreement between the Parties with respect to the Transactions, and supersede
all negotiations, representations, warranties, commitments, offers, contracts
and writings (except for the STP Project Documents) prior to the Execution date
of this Agreement with respect to the Transactions, written or oral. Except to
the extent expressly provided in Article 8 of this Agreement, all other existing
agreements between Seller and Purchaser, including the STP Project Documents,
shall remain in full force and effect and all rights and obligations thereunder
shall remain unaltered. No modification or amendment of any provision of this
Agreement shall be effective unless made in writing and duly signed by the
affected Parties referring specifically to this Agreement.
SECTION 13.2 SCHEDULES. For purposes of determining whether a
Purchaser's conditions set forth in Section 9.5 or Section 10.5 or Seller's
conditions set forth in Section 11.5 have been fulfilled, the Schedules shall be
deemed to include only (i) the information contained therein on the date of this
Agreement and (ii) all information contained in any amendment thereto or amended
Schedule to the extent such information relates to periods after the as of dates
of the Schedules attached to this Agreement on the Effective Date or to the
extent such information relates to any conditions or matters that are not
reasonably likely to have a Material Adverse Effect for which the Initial
Purchase Price has not been or will not be adjusted in accordance with Section
3.3(e), but if Closing shall occur, then all matters disclosed by Seller or such
Purchaser pursuant to any such amendment or amended Schedule at or prior to the
Closing shall be deemed to be matters of which the opposite Party had Knowledge
for purposes of Section 13.13.
SECTION 13.3 COUNTERPARTS. This Agreement may be Executed in one or
more counterparts, each of which is an original, but all of which together
constitute one and the same instrument.
SECTION 13.4 SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be valid, binding and
enforceable under applicable Law, but if any provision of this Agreement is held
to be invalid, void (or voidable) or unenforceable under applicable Law, such
provision shall be ineffective only to the extent held to be invalid, void (or
voidable) or unenforceable, without affecting the remainder of such provision or
the remaining provisions of this Agreement. To the extent permitted by Law, the
Parties waive any provision of Law that renders any provision hereof prohibited
or unenforceable in any respect.
SECTION 13.5 ASSIGNMENT. The rights under this Agreement shall not be
assignable or transferable nor the duties delegable by a Purchaser or Seller
without the prior written consent of in the case of Seller, such Purchaser, and
in the case of a Purchaser, Seller, which consent may be granted or withheld in
such other Party's sole discretion; and nothing contained in this Agreement,
express or implied, is intended to confer upon any Person, other than the
Parties hereto, their permitted successors-in-interest and permitted assignees
and any Person benefiting from the indemnities provided herein, any rights or
remedies under or by reason of this
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Agreement unless so stated to the contrary. Notwithstanding the foregoing, a
Purchaser may (i) grant to its lenders a security interest in its rights under
this Agreement, (ii) assign (after Closing) its rights hereunder to any Person
or Persons acquiring the Purchased Assets, or (iii) assign all of its rights
hereunder prior to the Closing either to an Affiliate or as otherwise may be
necessary or appropriate for a lease financing or similar financing; provided
that neither the grant of any such interest, nor the foreclosure of any such
interest, shall in any way release, reduce or diminish the obligations of such
Purchaser to Seller hereunder. Any assignment shall be conditioned on the
assignee's agreement in writing to assume the assigning Party's duties and
obligations under this Agreement and the Ancillary Agreements subject to any and
all restrictions, terms and conditions of the Generation Facility Contracts. Any
assignment effected in accordance with this Section 13.5 will not relieve the
assigning Party of its obligations and liabilities under this Agreement and the
Ancillary Agreements or, as the context requires, Guarantor's duties and
obligations under the Guaranty.
SECTION 13.6 CAPTIONS. The captions of the various Articles, Sections,
Exhibits and Schedules of this Agreement have been inserted only for convenience
of reference and do not modify, explain, enlarge or restrict any of the
provisions of this Agreement.
SECTION 13.7 GOVERNING LAW. The validity, interpretation and effect of
this Agreement are governed by and will be construed in accordance with the laws
of the State of Texas without regard to conflicts of law doctrines, except to
the extent that certain matters are preempted by federal law.
SECTION 13.8 DISPUTE RESOLUTION. Except for matters that are covered by
Section 3.6, Section 3.7, Section 7.6, or Section 13.17, any claim,
counterclaim, demand, cause of action, dispute, and controversy arising out of
or relating to this Agreement (or any Ancillary Agreement or any other document
delivered in connection with this Agreement) or in any way relating to the
subject matter of this Agreement involving Seller and a Purchaser or their
representatives and that only involves one or more claims or demands for money
damages of less than Three Million Dollars (U.S. $3,000,000) individually or in
the aggregate (provided that such limitation shall not apply to any claim or
demand arising under Section 3.3(e), Section 3.3(f) or Section 3.5(d)), and does
not involve a Seller Claim for a breach of this Agreement that results in a
termination of this Agreement or other failure to consummate the Transactions
(each a "Dispute"), even if such Disputes allegedly are extra-contractual in
nature, sound in contract, tort or otherwise, or arise under state or federal
law, shall be resolved by final and binding arbitration. Arbitration shall be
conducted in accordance with the rules of arbitration of the Federal Arbitration
Act and, to the extent an issue is not addressed by the federal law on
arbitration, by the commercial arbitration rules of the AAA. The validity,
construction and interpretation of this Agreement to arbitrate, and all other
procedural aspects of the arbitration conducted pursuant hereto shall be decided
by the arbitrators. The arbitrators shall have no authority to award treble,
consequential, exemplary, or punitive damages of any type under any
circumstances whether or not such damages may be available under state or
federal law, or under the Federal Arbitration Act, or under the commercial
arbitration rules of the AAA, Seller and such Purchaser hereby waiving their
right, if any, to recover any such damages or to appeal or object to the
enforcement of any decision or award by the arbitrators. Seller and such
Purchaser agree that any arbitration award against it may be enforced in any
jurisdiction in which such Party holds or keeps assets and that judgment on any
arbitration award may be entered by any
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court having jurisdiction. The arbitration proceeding shall be conducted in
Dallas, Texas, or another mutually acceptable location. Within thirty (30) days
of the notice of initiation of the arbitration proceeding, (i) Seller and such
Purchaser shall each select one arbitrator and (ii) Seller and such Purchaser
shall deliver to the chosen arbitrators a joint letter stating each of the
issues that are the subject of the Dispute and each such Party's final position
with respect to each of such issues, directing the chosen arbitrators to select
a third arbitrator and further directing the two chosen arbitrators and the
third arbitrator to consider only the final positions of Seller and such
Purchaser set forth in such joint letter. The two chosen arbitrators shall
select a third arbitrator. The third arbitrator shall be a Person who has over
ten (10) years professional experience with the power generation business and
with transactions involving the purchase and sale of generating stations and who
is not an Affiliate of Seller or such Purchaser, and who has not previously been
employed by Seller or such Purchaser and does not have a direct or indirect
interest in Seller or such Purchaser or in any Person having an ownership
interest in Seller or such Purchaser or the subject matter of the arbitration.
While the third arbitrator shall be neutral, the two Party appointed arbitrators
are not required to be neutral, and it shall not be grounds for removal of
either of the two Party appointed arbitrators or for vacating the arbitrators'
award that either of such arbitrators has past or present minimal relationships
with the Party that appointed such arbitrator. In deciding the substance of the
Dispute, the arbitrators shall refer to the governing law and shall choose a
final position of Seller or such Purchaser as the decision of the arbitrators
upon each issue rather than effect a compromise. To the fullest extent permitted
by Law, any arbitration proceeding and the arbitrators' award shall be
maintained in confidence by Seller and such Purchaser.
SECTION 13.9 NOTICES. All notices, requests, demands and other
communications under this Agreement must be in writing and must be (i) delivered
in person, (ii) sent by facsimile transmission (with confirmation of receipt and
with a copy, which shall not be required to effect notice, to follow by mail),
or (iii) sent by overnight delivery, and, in each instance, properly addressed
as follows:
If to Seller: AEP Texas Central Company
▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
With copies to: American Electric Power Company
▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: 614-223-2014
and
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▇▇▇▇▇ Day
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: 212-755-7306
If to CPS: City Public Service
145 ▇▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
With copies to: City Public Service
145 ▇▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: N. ▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇▇ ▇▇▇▇▇, LLP
Washington Square
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
and
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc.
▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇ ▇. ▇▇▇▇
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If to Texas Genco: Texas ▇▇▇▇▇ ▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. Tees, President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to: CenterPoint Energy
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
and
CenterPoint Energy
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
and
Graves, Dougherty, ▇▇▇▇▇▇ & ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Any Party may from time to time change its address (or facsimile or telephone
number) for the purpose of notices to that Party by a similar notice specifying
a new address (or facsimile or telephone number), but no such change is
effective until it is actually received by the Party sought to be charged with
its contents. All notices and other communications required or permitted under
this Agreement which are addressed as provided in this Section 13.9 shall be
effective upon delivery, if delivered personally or by facsimile transmission or
by overnight delivery, and are effective five (5) days following deposit in the
United States mail, postage prepaid, if delivered by mail.
SECTION 13.10 NO THIRD PARTY BENEFICIARIES. Except as may be
specifically set forth in this Agreement, nothing in this Agreement, whether
express or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any Persons other than the Parties
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and their respective permitted successors and assigns, nor is anything in this
Agreement intended to relieve or discharge the obligation or liability of any
third Persons to any Party, nor give any third Persons any right of subrogation
or action against any Party.
SECTION 13.11 SEVERAL OBLIGATIONS; NO JOINT VENTURE. The Parties intend
that the purchase and sale of the CPS Purchased Interest by CPS and the related
transactions contemplated in this Agreement and the Ancillary Agreements on one
hand and the purchase and sale of the Texas Genco Purchased Interest by Texas
Genco and the related transactions contemplated in this Agreement and the
Ancillary Agreements on the other hand constitute separate Transactions. The
covenants, representations and warranties, conditions and other obligations of
each Purchaser under this Agreement and the other Ancillary Agreements are
several and not joint. Each Purchaser shall be separately liable for its own
covenants, representations and warranties, conditions and other obligations as
herein or therein provided and, in the event of a failure by a Purchaser to
perform any of its covenants, conditions or other obligations hereunder or
thereunder or any of the representation or warranty made by or on behalf of a
Purchaser in or in connection with this Agreement or any Ancillary Agreement
shall prove to have been incorrect when made or deemed made, the other Purchaser
shall have no liability under this Agreement or any Ancillary Agreement, as the
case may be, as a consequence thereof. Neither Purchaser shall be under the
control of or shall be deemed to control the other Purchaser. Neither Purchaser
as such shall be the agent of or have a right or power to bind the other
Purchaser. Nothing contained in this Agreement creates or is intended to create
an association, trust, partnership, or joint venture or impose a trust or
partnership duty, obligation, or liability on or with regard to any Party.
SECTION 13.12 CONSTRUCTION OF AGREEMENT. This Agreement and any
documents or instruments delivered pursuant hereto shall be construed without
regard to the identity of the Person who drafted the various provisions of the
same. Each and every provision of this Agreement and such other documents and
instruments shall be construed as though the Parties participated equally in the
drafting of the same. Consequently, the Parties acknowledge and agree that any
rule of construction that a document is to be construed against the drafting
party shall not be applicable either to this Agreement or such other documents
and instruments.
SECTION 13.13 CLOSING OVER BREACHES OR UNSATISFIED CONDITIONS.
Notwithstanding anything to the contrary contained in this Agreement, if Seller
or a Purchaser elects to proceed with the Closing with Knowledge by it of any
failure of any condition to be satisfied in its favor or the breach of any
representation, warranty or covenant by the other Party, the condition that is
unsatisfied or the representation, warranty or covenant which is breached at the
Closing Date will be deemed waived by such Party, and such Party will be deemed
to fully release and forever discharge the other Party(ies) on account of any
and all claims, demands or charges, known or unknown, with respect to the same.
SECTION 13.14 WAIVER OF COMPLIANCE. Subject to the provisions of
Section 13.13, to the extent permitted by applicable Law, any failure of any of
the Parties to comply with any obligation, covenant, agreement or condition set
forth herein may be waived by the Party entitled to the benefit thereof only by
a written instrument signed by such Party, but any such waiver shall not operate
as a waiver of, or estoppel with respect to, any prior or subsequent failure to
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comply therewith. The failure of a Party to this Agreement to assert any of its
rights under this Agreement or otherwise shall not constitute a waiver of such
rights.
SECTION 13.15 SURVIVAL.
(a) The representations and warranties given or made by any
Party in ARTICLE 4, ARTICLE 5 or ARTICLE 6 hereof or in any certificate or other
writing furnished in connection herewith shall survive the Closing for a period
of twenty-four (24) months after the Closing Date and shall thereafter terminate
and be of no further force or effect, except that any representation or warranty
as to which a claim (including a contingent claim) shall have been asserted
during the survival period shall continue in effect with respect to such claim
until such claim shall have been finally resolved or settled. Subject to Section
5.9, Section 5.10, Section 6.9, Section 6.10, and Section 13.13, each Party
shall be entitled to rely upon the representations and warranties of the other
Party set forth herein, notwithstanding any investigation or audit conducted
before or after the Closing or the decision of any Party to complete the
Closing.
(b) The covenants and agreements of the Parties contained in
this Agreement, including those set forth in ARTICLE 8, shall survive the
Closing indefinitely, unless otherwise specified herein.
SECTION 13.16 WAIVER OF JURY TRIAL; SUBMISSION TO JURISDICTION. EACH
PARTY HERETO HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF
RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT
ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THIS AGREEMENT OR ANY
INSTRUMENT, DOCUMENT OR AGREEMENT ENTERED INTO IN CONNECTION WITH THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY, OR ANY CLAIM, COUNTERCLAIM OR OTHER
ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS
GIVEN KNOWINGLY AND VOLUNTARILY BY EACH PARTY, AND IS INTENDED TO ENCOMPASS
INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY
JURY WOULD OTHERWISE ACCRUE. EACH PARTY IS HEREBY AUTHORIZED TO FILE A COPY OF
THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY BOTH
PARTIES. EACH PARTY HEREBY IRREVOCABLY CONSENTS TO THE EXCLUSIVE PERSONAL
JURISDICTION AND VENUE OF ANY COURT OF COMPETENT JURISDICTION SITTING IN THE
COUNTY OF DALLAS, TEXAS ("TEXAS COURT") AND AGREES NOT TO SEEK ADJUDICATION OF
ANY ACTION, CLAIM OR PROCEEDING ARISING IN CONNECTION WITH THIS AGREEMENT OR ANY
INSTRUMENT, DOCUMENT OR AGREEMENT ENTERED INTO IN CONNECTION WITH THIS AGREEMENT
OR THE TRANSACTIONS IN ANY OTHER COURT. EACH OF THE PARTIES HEREBY IRREVOCABLY
AND UNCONDITIONALLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF ANY TEXAS COURT AND
WAIVES ANY DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF ANY ACTION OR
PROCEEDING IN ANY TEXAS COURT, ANY OBJECTION TO VENUE WITH RESPECT TO ANY SUCH
ACTION OR PROCEEDING AND ANY RIGHT OF JURISDICTION ON ACCOUNT OF THE PLACE OF
RESIDENCE OR DOMICILE OF ANY PARTY HERETO. NOTWITHSTANDING THE FOREGOING, EACH
PARTY AGREES
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THAT ANY JUDGMENT AGAINST IT RENDERED BY A TEXAS COURT AND ANY ARBITRATION AWARD
AGAINST IT MAY BE ENFORCED IN ANY JURISDICTION IN WHICH SUCH PARTY HOLDS OR
KEEPS ASSETS AND THAT JUDGMENT ON ANY ARBITRATION AWARD AGAINST IT MAY BE
ENTERED BY ANY COURT HAVING JURISDICTION.
SECTION 13.17 EXPEDITED DISPUTE RESOLUTION.
(a) Any dispute or need of interpretation involving or arising
between Seller and a Purchaser under Section 3.3(e), Section 3.5(c) or Section
12.1(d) of this Agreement (an "MAE Dispute") shall be resolved pursuant to the
provisions of this Section 13.17.
(b) Within three (3) Business Days after the delivery by
Operating Agent to the Parties of any final report pursuant to Section 3.5(c),
unless Seller and such Purchaser shall have agreed upon whether any adjustment
under Section 3.3(e) is required due to the event, condition or circumstance
that is the subject of such report and, if so, the amount of such adjustment,
Seller and such Purchaser shall attempt to resolve their differences with
respect to the subject matter of such report and any related adjustment under
Section 3.3(e) by negotiation. Within such three (3) Business Days after
delivery of such final report concerning which disagreement exists, Seller shall
designate a senior vice president of Seller or of AEP, and such Purchaser shall
designate a senior vice president of such Purchaser, as its primary
representative for purposes of such negotiation and each Party shall deliver to
the other written notice setting forth (i) a statement of such Party's position
and a summary of arguments and information supporting that position with respect
to the disputed matters and (ii) the name and title of such Party's primary
representative. Within two (2) Business Days thereafter the two primary
representatives shall meet in Dallas, Texas or another mutually acceptable
location, and negotiate in good faith for a period of five (5) consecutive
Business Days in an effort to resolve the dispute. All reasonable requests for
information made by one Party to the other will be honored. If the dispute has
not been resolved within five (5) consecutive Business Days, each of Seller and
such Purchaser shall by further notice to the other designate a successor
primary representative for purposes of further negotiation to resolve the
dispute, who shall be an executive vice president of Seller or AEP, and in the
case of Seller, or a senior officer one level above the first primary
representative of such Purchaser, in the case of such Purchaser. Within three
(3) Business Days thereafter the two successor representatives shall meet at
least once in Dallas, Texas or another mutually acceptable location, and
negotiate in good faith. If the dispute shall not have been resolved by
negotiation at the conclusion of such meeting or the next Business Day,
whichever first occurs, the dispute shall be submitted to binding arbitration in
accordance with the provisions of Section 13.17(d)-(h), except to the extent
Seller and such Purchaser agree that the disputed matters solely involve
computation or valuation of the amount of expenditures reasonably likely to be
required by such Purchaser or the net present value of the reasonably
anticipated loss of revenue to such Purchaser, in which event the disputed
matters shall be referred to the Independent Accounting Firm pursuant to Section
13.17(c).
(c) If Seller and such Purchaser or the arbitrator refer any
disputed computation or valuation matters to the Independent Accounting Firm for
resolution, the Independent Accounting Firm shall be instructed to determine the
disputed matters within fifteen (15) Business Days after referral. Within ten
(10) Business Days after the date of referral, Seller
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and such Purchaser shall submit to the Independent Accounting Firm such
memoranda, arguments, briefs and evidence in support of their respective
positions, and in accordance with such procedures, as the Independent Accounting
Firm may determine. Within five (5) Business Days following the due date of such
submissions, the Independent Accounting Firm shall determine each disputed
computation or valuation referred to it. Such determination by the Independent
Accounting Firm shall be final and binding between Seller and such Purchaser and
shall not be subject to further challenge by Seller or such Purchaser pursuant
to Section 13.8 hereof or otherwise.
(d) Any arbitration pursuant to this Section 13.17 shall be
conducted by one arbitrator who has at least fifteen (15) years experience as an
attorney practicing in utility or energy matters or is a retired federal judge,
who has not previously been employed by Seller or such Purchaser, and who does
not have a direct or indirect interest in Seller or such Purchaser or the
subject matter of the arbitration. Such arbitrator shall either be mutually
agreed upon by Seller and such Purchaser within ten (10) days after written
notice from Seller or such Purchaser to the other requesting arbitration, or
failing agreement, the arbitration shall be conducted by one arbitrator having
the qualifications set forth in the preceding sentence, selected as provided in
the next sentence. Within five (5) days of the failure to mutually agree upon
one arbitrator, Seller and such Purchaser shall designate a representative and
the designated representatives shall meet in Dallas, Texas or another mutually
acceptable location and deliver to each other a list of three (3) potential
arbitrators, all of whom shall have the qualifications set forth in the first
sentence of this Section 13.17(d), the designated representatives shall then
determine by coin toss which Party's representative shall take the first turn in
striking the name of one (1) potential arbitrator from the combined list of six
(6) potential arbitrators, the representative of the party who wins the coin
toss shall take the first turn in striking one (1) name from the combined list,
the representatives of the Parties shall then alternate turns striking the name
of one (1) potential arbitrator from the combined list until the name of only
one (1) potential arbitrator remains, who shall be the selected arbitrator. The
arbitrator must agree in writing with Seller and such Purchaser to arbitrate the
dispute in accordance with the applicable provisions of this Agreement,
including this Section 13.17. Seller and such Purchaser hereby agree that the
expedited procedures of AAA's commercial arbitration rules shall apply to the
extent not inconsistent with the rules herein specified.
(e) Such arbitration shall be held in Dallas, Texas. Seller
and such Purchaser shall divide equally the cost and expense of the arbitrator,
and Seller and such Purchaser shall be responsible for its own expenses and
those of its counsel or other representative.
(f) The arbitration shall be conducted according to the
following:
(i) the arbitration hearing shall be conducted over a
period of no more than three (3) consecutive Business Days, without
continuance or adjournment, under time constraints imposed by the
arbitrator to give each Party equal time;
(ii) there shall be no pre-hearing written
interrogatories, written requests for admission or discovery
depositions;
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(iii) the arbitrator may require Seller or such
Purchaser to respond to limited and reasonable requests for pre-hearing
production of documents from the opposing Party; however, and the
arbitrator shall require such document production only where necessary
to avoid injustice, the arbitrator shall require that a Party
requesting pre-hearing production of documents reimburse the producing
Party for the costs associated with responding to such requests;
(iv) Seller and such Purchaser may submit brief
statements of their arguments, not more than ten (10) pages in length,
no later than five (5) days prior to the hearing date;
(v) to the extent mutually agreed by Seller and such
Purchaser or determined by the arbitrator that the matters in dispute
involve computation or valuation of the expenditures reasonably likely
to be required by Purchaser or the net present value of the reasonably
anticipated loss of revenue to such Purchaser, the arbitrator shall
refer the disputed matters to the Independent Accounting Firm for
determination pursuant to Section 13.17(c); and
(vi) in addition to the expedited procedures of AAA's
commercial arbitration rules, the following shall apply:
(A) unless otherwise agreed by Seller and such
Purchaser, the award shall be rendered not
later than seven (7) days from the date of
the closing of the hearing or, if oral
hearings have been waived, from the date of
Seller and such Purchaser's transmittal of
the final statements and proofs to the
arbitrator; and
(B) in cases in which a hearing is to be held,
the arbitrator shall set the date, time and
place of the hearing, to be scheduled to
take place within fifteen (15) days of
confirmation of the arbitrator's
appointment.
(g) The validity, construction and interpretation of this
agreement to arbitrate, and all procedural aspects of the arbitration conducted
pursuant hereto shall be decided by the arbitrator. In deciding the substance of
the Parties' claims, the arbitrator shall refer to the governing law referenced
in this Agreement. It is agreed that the arbitrator shall have no authority to
award treble, exemplary or punitive damages of any type under any circumstances
whether or not such damages may be available under state or federal Law, or the
rules of the AAA. The arbitrator shall have the right only to interpret and
apply the terms and conditions of this Agreement, but may not change any term or
condition of this Agreement, deprive Seller or such Purchaser of any right or
remedy expressly provided hereunder, or provide any right or remedy that has
been excluded hereunder. To the fullest extent permitted by Law, any arbitration
proceeding and subsequent arbitration award shall be maintained in confidence by
Seller and such Purchaser.
(h) Each Party understands that this Agreement contains an
agreement to arbitrate. Each Party agrees to submit any MAE Dispute to
arbitration. Any award of the
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arbitrator may be entered as a judgment and enforced by any court of competent
jurisdiction and shall not be subject to any appeal. Any award of the
arbitrators may be enforced in any court of competent jurisdiction by the Party
in whose favor such award is made. The Parties expressly waive their rights, if
any, to vacate, modify or correct any award of the arbitrator, pursuant to the
provisions of the Federal Arbitration Act, 9 U.S.C. Sec. 1, et seq., or similar
provisions of state Law. It is the express intent of Seller and such Purchaser
that any award of the arbitrator shall be enforceable immediately, and that all
potential defenses to the enforcement of any such award be waived. The Parties
also waive their rights, if any, to appeal from any judgment enforcing any award
of the arbitrator. The Parties mutually covenant that they shall take all steps
necessary for the immediate enforcement of any award of the arbitrator, and
further covenant that they shall take no steps inconsistent with this provision
(as, for example, by opposing entry of judgment on any such award, by motion to
vacate, modify or correct any such award, by appeal from a judgment enforcing
any such award, or any other steps inconsistent with immediate enforcement of
any such award).
ARTICLE 14
NOTICES
SECTION 14.1 NOTICE REGARDING POSSIBLE ANNEXATION. Pursuant to Section
5.011 of the Texas Property Code, Seller hereby provides the following notice to
Purchasers:
NOTICE REGARDING POSSIBLE ANNEXATION: IF ANY OF THE PROPERTY THAT IS
THE SUBJECT OF THIS AGREEMENT IS LOCATED OUTSIDE THE LIMITS OF A
MUNICIPALITY, SUCH PROPERTY MAY NOW OR LATER BE INCLUDED IN THE
EXTRATERRITORIAL JURISDICTION OF A MUNICIPALITY AND MAY NOW OR LATER BE
SUBJECT TO ANNEXATION BY THE MUNICIPALITY. EACH MUNICIPALITY MAINTAINS
A MAP THAT DEPICTS ITS BOUNDARIES AND EXTRATERRITORIAL JURISDICTION. TO
DETERMINE IF THE PROPERTY IS LOCATED WITHIN A MUNICIPALITY'S
EXTRATERRITORIAL JURISDICTION OR IS LIKELY TO BE LOCATED WITHIN A
MUNICIPALITY'S EXTRATERRITORIAL JURISDICTION, CONTACT ALL
MUNICIPALITIES LOCATED IN THE GENERAL PROXIMITY OF THE PROPERTY FOR
FURTHER INFORMATION.
SECTION 14.2 NOTICE OF ADDITIONAL TAX LIABILITY. Pursuant to Section
5.010 of the Texas Property Code, Seller hereby provides the following notice to
Purchasers:
NOTICE REGARDING POSSIBLE LIABILITY FOR ADDITIONAL TAXES: IF FOR THE
CURRENT AD VALOREM TAX YEAR THE TAXABLE VALUE OF THE LAND THAT IS THE
SUBJECT OF THIS AGREEMENT IS DETERMINED BY A SPECIAL APPRAISAL METHOD
THAT ALLOWS FOR APPRAISAL OF THE LAND AT LESS THAN ITS MARKET VALUE,
THE PERSON TO WHOM THE LAND IS TRANSFERRED MAY NOT BE ALLOWED TO
QUALIFY THE LAND FOR THAT SPECIAL APPRAISAL IN A SUBSEQUENT TAX YEAR
AND THE LAND MAY THEN BE APPRAISED AT ITS FULL MARKET VALUE. IN
ADDITION, THE TRANSFER OF THE LAND OR A SUBSEQUENT CHANGE IN THE USE OF
THE LAND MAY RESULT IN THE IMPOSITION OF AN ADDITIONAL TAX PLUS
INTEREST AS A PENALTY FOR THE TRANSFER OR THE CHANGE IN THE USE OF THE
LAND. THE TAXABLE VALUE OF THE LAND AND THE APPLICABLE METHOD OF
APPRAISAL FOR THE CURRENT TAX YEAR IS PUBLIC INFORMATION AND MAY BE
OBTAINED FROM THE TAX APPRAISAL DISTRICT ESTABLISHED FOR THE COUNTY IN
WHICH THE LAND IS LOCATED.
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SECTION 14.3 NOTICE REGARDING UNDERGROUND STORAGE TANKS. Pursuant to
Texas Administrative Code Title 30, Chapter 334, Seller hereby provides the
following notice to Purchasers:
NOTICE REGARDING UNDERGROUND STORAGE TANKS: THE UNDERGROUND STORAGE
TANKS INCLUDED IN THE CONVEYANCE CONTEMPLATED BY THIS AGREEMENT ARE
PRESUMED TO BE REGULATED BY THE TEXAS NATURAL RESOURCE CONSERVATION
COMMISSION (NOW KNOWN AS THE TEXAS COMMISSION ON ENVIRONMENTAL QUALITY)
AND MAY BE SUBJECT TO CERTAIN REGISTRATION, COMPLIANCE
SELF-CERTIFICATION, AND CONSTRUCTION NOTIFICATION REQUIREMENTS FOUND IN
TITLE 30 TEXAS ADMINISTRATIVE CODE, CHAPTER 334. THE NAME AND ADDRESS
OF SELLER AND PURCHASERS ARE AS SET FORTH IN SECTION 13.9 OF THIS
AGREEMENT. THE UNDERGROUND STORAGE TANKS INCLUDED IN THIS CONVEYANCE
ARE AS FOLLOWS:
SOUTH TEXAS PROJECT (GENERATION FACILITY IDENTIFICATION NUMBER
0033321-1): ONE (1) TANK:
4,000 GALLON STEEL TANK THAT PREVIOUSLY STORED DIESEL FUEL THAT HAS
BEEN CLOSED IN PLACE IN ACCORDANCE WITH 30 TAC SECTION 334.55.
IN ADDITION, EIGHT (8) OTHER UNDERGROUND STORAGE TANKS PREVIOUSLY
LOCATED AT THE SOUTH TEXAS PROJECT WERE CLOSED BY REMOVAL, SEVEN IN
ACCORDANCE WITH 30 TAC SECTION 334.55 AND ONE IN 1987, BEFORE THE
AFOREMENTIONED REGULATION WAS EFFECTIVE.
SECTION 14.4 COASTAL AREA PROPERTY NOTICE. Pursuant to Section 33.135
of the Texas Natural Resources Code, Seller hereby provides the following notice
to Purchasers:
NOTICE REGARDING COASTAL AREA PROPERTY: (1) THE OWNED REAL PROPERTY
DESCRIBED IN AND SUBJECT TO THIS AGREEMENT COMMONLY KNOWN AS THE SOUTH
TEXAS PROJECT ADJOINS AND SHARES A COMMON BOUNDARY WITH THE TIDALLY
INFLUENCED SUBMERGED LANDS OF THE STATE OF TEXAS. THE BOUNDARY IS
SUBJECT TO CHANGE AND CAN BE DETERMINED ACCURATELY ONLY BY A SURVEY ON
THE GROUND MADE BY A LICENSED STATE LAND SURVEYOR IN ACCORDANCE WITH
THE ORIGINAL GRANT FROM THE SOVEREIGN. THE OWNER OF THIS PROPERTY MAY
GAIN OR LOSE PORTIONS OF THE TRACT BECAUSE OF CHANGES IN THE BOUNDARY.
(2) THE SELLER, TRANSFEROR, OR GRANTOR HAS NO KNOWLEDGE OF ANY PRIOR
FILL AS IT RELATES TO THE PROPERTY DESCRIBED IN AND SUBJECT TO THIS
CONTRACT OTHER THAN IN CONNECTION WITH CONSTRUCTION AND SUPPORT OF THE
GENERATION FACILITY LOCATED THEREON, AS ROUTINE MAINTENANCE WITH
RESPECT TO LOW SPOTS AND DRAINAGE PROBLEMS.
(3) TEXAS STATE LAW PROHIBITS THE USE, ENCUMBRANCE, CONSTRUCTION, OR
PLACING OF ANY STRUCTURE IN, ON, OR OVER STATE-OWNED SUBMERGED LANDS
BELOW THE APPLICABLE TIDE LINE, WITHOUT PROPER PERMISSION.
(4) PURCHASERS ARE HEREBY ADVISED TO SEEK THE ADVICE OF AN ATTORNEY OR
OTHER QUALIFIED PERSON AS TO THE LEGAL NATURE AND EFFECT OF THE FACTS
SET FORTH IN THIS NOTICE ON THE PROPERTY DESCRIBED IN THIS SECTION
14.4. INFORMATION REGARDING THE LOCATION
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OF THE APPLICABLE TIDE LINE AS TO THE PROPERTY DESCRIBED IN AND SUBJECT
TO THIS SECTION 14.4 MAY BE OBTAINED FROM THE SURVEYING DIVISION OF THE
GENERAL LAND OFFICE IN AUSTIN, TEXAS.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Seller and Purchasers have Executed this Agreement
as of the date first above written.
AEP TEXAS CENTRAL COMPANY,
a Texas Corporation
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Vice President
S-1
CITY OF SAN ANTONIO,
acting by and through the City Public
Service Board, a municipal board of
the City of San Antonio
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Vice President,
Energy Supply
S-2
TEXAS ▇▇▇▇▇, ▇.▇.,
a Texas limited partnership
By: Texas ▇▇▇▇▇ ▇▇, LLC,
Its General Partner
By: /s/ ▇▇▇▇▇ ▇. Tees
---------------------------------
Name: ▇▇▇▇▇ ▇. Tees
Title: Manager and President
S-3
EXHIBIT A
GENERATION FACILITY
GENERATION
FACILITY NAME DESCRIPTION LOCATION
--------------------------------------------------------------------------------------------------------------------
South Texas Project Two (2) nuclear steam electric generating units, ▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇, each having a capacity of approximately 1250
MW; all auxiliary equipment associated with the units;
railroad strip and railroad spur and associated
facilities; administrative and service facilities; river
makeup pumping facility and all associated equipment; main
cooling reservoir discharge station and all associated
equipment; visitor center and all associated equipment;
and certain ancillary equipment and related assets.