HomeMy WebLinkAboutOrdinances (O-08-1700)-11/18/2008ORDINANCE 0-08-1700
AN ORDINANCE OF THE CITY OF COLLEYVILLE, TEXAS APPROVING AN
ELECTRIC POWER CONTRACT WITH CITIES AGGREGATION POWER PROJECT,
INC. (CAPP) FOR ELECTRIC CAPACITY AND ENERGY, PROVIDING CAPACITY
PAYMENTS AS PUBLIC PROPERTY FINANCE CONTRACTUAL OBLIGATIONS OF
THE CITY, PLEDGING AND LEVYING AN AD VALOREM TAX TO SUCH
PAYMENTS, PROVIDING FOR ENERGY PAYMENTS FOR ELECTRIC ENERGY
SUBJECT TO ANNUAL APPROPRIATION BY THE CITY, PROVIDING FOR THE
ASSIGNMENT OF SUCH CAPACITY PAYMENTS TO SUPPORT DEBT ISSUED BY
CAPP INCURRED TO ACQUIRE ELECTRIC CAPACITY RIGHTS FROM LUMINANT
GENERATION COMPANY AND RELATED ENTITIES PURSUANT TO A 24-YEAR
POWER PURCHASE AGREEMENT ("PPA"); AUTHORIZING THE CITY MANAGER
TO EXECUTE AND DELIVER THE MEMBER CONTRACT; ACKNOWLEDGING THE
MEMBER CONTRACT REQUIRES CERTAIN CAPACITY PAYMENTS PAYABLE BY
THE CITY WILL BE PUBLIC PROPERTY FINANCE CONTRACTUAL OBLIGATIONS
PURSUANT TO TEXAS LOCAL GOVERNMENT CODE CHAPTER 271,
SUBCHAPTER A, ADOPTING A SAVINGS CLAUSE
WHEREAS, the City of Colleyville must purchase electricity in order to perform its
proprietary and governmental functions; and
WHEREAS, the price of power sold in the deregulated retail market in Texas has been
directly linked to the daily fluctuations for natural gas futures prices,
regardless of the type of generation fuel; and
WHEREAS, natural gas prices are extremely volatile, resulting in an upward cost trend
and significant electric price instability; and
WHEREAS, the City is a member of the non-profit political subdivision corporation
Cities Aggregation Power Project, Inc. ("CAPP"), which has the legal
authority to contract for the purchase of electricity on behalf of more than
100 political subdivision members; and
WHEREAS, CAPP has endeavored to provide its members with the most favorable
energy pricing available in the market, delivering more than $100 million in
savings for its members since 2002; and
WHEREAS, the CAPP Board of Directors is a voluntary ten-member board comprised
entirely of city employees and city officials that directs the activities of
CAPP's legal and energy advisors; and
WHEREAS, the CAPP Board of Directors has investigated potential long-term
contracting options to both lower and stabilize electric prices for member
political subdivisions that must prepare annual budgets and require cost
predictability for essential services like electricity; and
Ordinance 0-08-1700
Page 2 of 5
WHEREAS, CAPP negotiated a Purchase Power Agreement ("PPA") with owners of
non-gas fired generation for the long-term, fixed price supply of power,
which will allow participating CAPP members to meet a portion of energy ',
needs (approximately 60 percent) at a stable, known price fora 24-year ~~
period; and
WHEREAS,
the PPA calls for CAPP to contract with Luminant Generation Company
LLC, Big Brown Power Company, LLC and Oak Grove Management ~~
Company, LLC (collectively, "Luminant") for approximately 150 MW of
base load power supplied by seven different units over 24 years and pre-
paying aportion of the capacity costs associated with power purchased
pursuant to the long-term contract; and
WHEREAS, the City wishes to acquire a portion of its future electric energy pursuant to
the PPA between CAPP and Luminant; and
WHEREAS, to acquire power pursuant to the PPA, the City must enter into an electric
power contract, the Energy Sales Contract between CAPP and the City of
Colleyville (the "Member Contract"), substantially in the form attached
hereto; and
WHEREAS, CAPP will issue general revenue bonds, with the bond proceeds used to
pre-pay a portion of the 24-year capacity commitment pursuant to the PPA
', on behalf of the City and all participating CAPP members; and
WHEREAS, bonds issued by CAPP will be backed by the individual Member Contracts
of each participating CAPP city committing to pay a capacity payment
equal to its proportionate amount of the debt service obligation associated
with CAPP's prepayment of PPA capacity costs; and
', WHEREAS, the City's allocated total maximum capacity payment will not exceed
$1,666,000.00 (total maximum monthly capacity payment is $12,000.00);
and
WHEREAS, the Member Contract requires that certain capacity payments payable by
each participating CAPP member will be public property finance
contractual obligations pursuant to Texas Local Government Code
Chapter 271, Subchapter A, secured by a pledge of such member's ad
valorem taxes, which will be assigned to support debt issued by CAPP to
pay the capacity costs of the PPA; and
WHEREAS, the fixed capacity component constitutes along-term, general obligation
tax debt of each participating member that is secured by a pledge of the
member's ad valorem taxes; and
Ordinance 0-08-1700
Page3of5
WHEREAS, CAPP must secure an additional "wrap" agreement to arrange for power',
deliveries when needed to meet the remaining portion of the City's energy
needs in excess of the base load power provided under the Member
Contract, with said wrap agreement needing ratification/approval of the
City; and
WHEREAS, the resulting power supply blend adds to both stability and savings for the'..,
City; and ',
WHEREAS, the total capacity and energy to be purchased under the long-term PPA
cannot be known until all CAPP members have acted on their opportunity
to participate in the transaction; and
WHEREAS, a change in total capacity and energy obligated under the PPA will change
the cost of the transaction and may change the percentage of debt service
obligation and energy assigned to participating CAPP members; and
WHEREAS, the PPA is an effort, initiated by CAPP pursuant to direction and support of
its participating members, including the City, to diversify fuel sources and
minimize the risk associated with complete reliance upon electric pricing
linked to natural gas costs that are influenced by unpredictable weather,
geo-political and global economic factors, but nonetheless the PPA
involves a number of somewhat unique risks and uncertainties; and
WHEREAS, CAPP has prepared and distributed a Disclosure Statement dated
September 10, 2008, in the form attached hereto that identifies and
describes certain risks (but may not describe all risks) associated with the
transactions contemplated by the Member Contract and the PPA; and
WHEREAS, the Disclosure Statement is to be acknowledged, signed, and returned to
CAPP, prior to pricing of CAPP's bonds, if the Member Contract is
approved; and
WHEREAS, it is hereby officially found and determined that the meeting at which this
ordinance was passed was open to the public, and public notice of the
time, place and purpose of said meeting was given, all as required by
Chapter 551, Texas Government Code.
NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF
COLLEYVILLE, TEXAS:
Sec. 1. THAT the CAPP Member Contract, attached hereto as Exhibit "A" and
incorporated herein for all ,purposes is deemed necessary and desirable
for the City to meet its proprietary functions and basic governmental
responsibilities and is hereby approved.
Ordinance 0-08-1700
Page 4 of 5
Sec. 2. THAT the City acknowledges that the Member Contract requires that
certain capacity payments payable by the City will be public property
finance contractual obligations pursuant to Texas Local Government Code
Chapter 271, Subchapter A, secured by a pledge of such member's ad
valorem taxes, which will be assigned to support debt issued by CAPP to
pay the capacity costs of the PPA; and the City further acknowledges that
the fixed capacity component constitutes along-term, general obligation
tax debt of the City that is secured by a pledge of the City's ad valorem
taxes.
Sec. 3. The City of Colleyville hereby acknowledges that it has reviewed the
Member Contract and the Disclosure Statement dated September 10,
2008, and the City Manager is authorized and directed to sign, date, and
return by December 17, 2008, to CAPP both the Member Contract and
such Disclosure Statement.
Sec. 4. THAT the City Manager is authorized to approve modifications and
corrections to the Member Contract that are necessary to conform to
changes to the assigned cost in the PPA after all CAPP members have
made decisions regarding participation in the long-term PPA, so long as
no such changes increase the City's capacity payment obligations in any
year from the amounts reflected in the Member Contract attached hereto.
Sec. 5. THAT the City Manager is authorized to sign additional agreements
arranged by CAPP for the provision of electricity during the period 2009-
2011 that are necessary to meet the City's power needs that exceed the
power arranged through the Member Contract with CAPP, with the
understanding that any agreement for energy beyond 2009 is subject to
the right of annual appropriation.
Sec. 6. THAT the City Manager is hereby authorized, empowered and directed
from time to time and at any time to do and perform all such acts and ~
things and to execute, acknowledge and deliver in the name and under
the corporate seal and on behalf of the City all such instruments, whether
or not herein mentioned, as may be necessary or desirable in order to
carry out the terms and provisions of this ordinance, the Member Contract
and the Disclosure.
Sec. 7. THAT the City Manager is hereby authorized and directed to approve any
changes or corrections necessary to this ordinance, the Member Contract
or any ancillary agreement, certificate or document, prior to the initial
delivery of the Member Contract in order to (i) correct any ambiguity or'
mistake or properly or more completely document the transactions
contemplated and approved by this ordinance, (ii) approve any changes to
the Member Contract as contemplated in the recitals hereto and Section 3
Ordinance 0-08-1700
Page 5 of 5
hereto, or (iii) obtain the approval of the Member Contract (and the debt
issued by CAPP relating to the PPA) by the Texas Attorney General's
office.
Sec. 8. THAT in case any officer of the City whose signature shall appear on the
Member Contract shall cease to be such officer before the delivery of such
Member Contract, such signature shall nevertheless be valid and sufficient
for all purposes the same as if such officer had remained in office until
such delivery.
Sec. 9. THAT if any one or more sections or clauses of this ordinance is adjudged
to be unconstitutional or invalid, such judgment shall not affect, impair or
invalidate the remaining provisions of this ordinance and the remaining
provisions of the ordinance shall be interpreted as if the offending section
or clause never existed.
Sec. 10. THAT the City hereby finds that the statements set forth in the recitals of
this ordinance are true and correct, and the City hereby incorporates such
recitals as a part of this ordinance.
AND IT IS SO ORDERED.
The first reading and public hearing being conducted on the
2008.
~~
day of
The second reading and p blic hearing being conducted on the ,l8 ~ day of
2008.
ATTEST:
~~~
Cynthia Singleton, TRMC, CMC
City Secretary
CITY OF COLLEYVILLE
Jon Ayers
Mayor Pro Tem
APPROVED AS TO FORM AND LEGALITY:
<`~~-
Michael Kallas
City Attorney
Exhibit "A"
ENERGY SALES CONTRACT
BETWEEN
CITIES AGGREGATION POWER PROJECT
AND
CITY OF ,TEXAS
ENERGY SALES CONTRACT
BETWEEN
CITIES AGGREGATION POWER PROJECT
AND
CITY OF ,TEXAS
TABLE OF CONTENTS
Table of Contents
Page
ARTICLE 1 DEFINITIONS AND PRINCIPLES OF INTERPRETATION ....................4
1.1 Definitions ...........................................................................................................4
1.2 Principles of Interpretation ............................................................................... 11
ARTICLE 2 CAPP'S OBLIGATIONS CONTINGENT UPON PERFORMANCE BY
FACILITY OWNERS UNDER THE PPA; ASSUMPTION BY MEMBER.......12
2.1 Nature of CAPP's obligations to Member ......................................................... 12
2.2 CAPP's duty to exercise remedies under the PPA and Guaranty; power
coupled with an interest ..................................... ........
....................................... 12
2.3 Assumption of PPA by Member ....................................................................... 12
ARTICLE 3 TERM OF CONTRACT AND DELIVERY OF PRODUCTS .................... 13
3.1 Term .................................................................................................................. 13
3.2 Delivery of Products ......................................................................................... 13
ARTICLE 4 PAYMENT OF CAPACITY PREPAYMENT TO FACILITY
OWNERS ............................................................................................................... 13
ARTICLE 5 DELIVERY OF CONTRACT ENERGY ..................................................... 13
5.1 Acquisition and Delivery of Product ................................................................ 13
5.2 Title and Risk of Loss ....................................................................................... 14
5.3 Member's Failure to Accept Product ................................................................ 14
5.4 Failure of Facility Owners to Schedule or Deliver Product to LAPP ............... 14
ARTICLE 6 PRICING OF AND PAYMENT FOR ENERGY ....................................... 14
6.1 Payment of Member's Monthly Aggregated Energy Payment ......................... 14
6.2 Payments through Retail Electric Provider and Designated Agent(s)..........
6 3 Payments from Available Funds
.... 17
17
18
18
18
6.4 Intent to Continue Payments .............................................................................
6.5 Failure to Appropriate Available Funds ...........................................................
6.6 Assignment Upon Failure to Appropriate .....................................................
6.7 Appropriated Energy Payments to be Unconditional ...................................
6.8 CAPP as Third Party Beneficiary .................................................................
6.9 Member's Default of the Energy Payment Covenants and CAPP's
Remedies .......................................................................................................
ARTICLE 7 CAPACITY PREPAYMENT, MEMBER' S MONTHLY CAPACITY
PAYMENT AND PLEDGE OF AD VALOREM TAXES BY MEMBER.....
7.1 Capacity Prepayrnent ....................................................................................
7.2 Capacity Payment .........................................................•---............................
.... 19
.... 19
....19
.....21
.... 21
.... 21
7.3 Interest and Sinking Fund; Tax Levy for Monthly Capacity Payments........... 22
7.4 Prepayments based upon Early Termination under the PPA ......................... ... 22
7.5 LAPP and Trustee as Third Parry Beneficiaries ............................................ ... 22
7.7 Member's Default on Capacity Prepayment and CAPP's Remedies ............ ... 23
ARTICL E 8 BILLING AND PAYMENT ..................................................................... ....24
8.1 Invoice and Payment Schedules ..................................................................... ... 24
8.2 Method of Payment ........................................................................................ ... 24
8.3 Netting ...............................................................................................................25
8.4 Disputed Charges .............................................................................................. 25
8.5 Audits ................................................................................................................26
8.6 ERCOT Barred Issue ..................................................................................... ... 26
ARTICL E 9 DESIGNATION OF MEMBER'S DELIVERY POINTS ............................26
9.1 Designation of Member's Delivery Points ........................................................ 26
ARTICL F, 10 SECURITY ............................................................................................. ....26
10.1 Security from Facilities Owners ....................................................................... 26
10.2 Collateral Assignment of the Contract to "l,rustee for Bonds ......................... ... 27
ARTICL E 11 DEFAULT ..................................................................................................27
11.1 Defaults by Facility Owners; Defaults by Participating Members ................ ... 27
11.2 Default by CAPP ............................................................................................... 27
11.3 Default by Member ........................................................................................... 27
11.4 Remedies of LAPP in the event of default by Member .................................... 28
11.5 Remedies of Member in the Event of Default by CAPP .................................. 29
11.6 No Waiver in Event of Default ......................................................................... 30
ARTICL E 12 INDEMNIFICATION; LIMITATION OF LIABILITY ........................ ....30
12.1 Member's Indemnification of CAPP ................................................................ 30
12.2 Claims arising on Facility Owners side of the Facility Owners' Delivery
Point .................................................................................................................. 3 0
12.3 Indemnified Claims ........................................................................................... 31
12.4 Limitation of Remedies, Liability and Damages .......................................... .... 31
ARTICL E 13 REPRESENTATIONS ................................................................................32
13.1 Mutual representations and warranties .......................................................... ... 32
ARTICL E 14 NOTICES ....................................................................................................33
14.1 Notices ..............................................................................................................33
ARTICLE 15 CONFIDENTIALITY .................................................................................34
15.1 Confidential Information ..................................................................................34
ARTICLE 16 ASSIGNMENT ...........................................................................................34
16.1 Assignment ................................................................................................... ....34
ARTICLE 17 CONTINUING DISCLOSURE ..................................................................34
17.1 Continuing Disclosure Undertaking of Members ............................................. 34
17.2 Financial Statements ......................................................................................... 34
17.3 Change of Fiscal Year ....................................................................................... 35
17.4 Failure to Provide Continuing Disclosure ......................................................... 35
17.5 Amendment of Continuing Disclosure ............................................................. 35
ARTICLE 18TAX-EXEMPT BONDS .............................................................................36
18.1 Tax-Exempt Bonds ....................................................................•-------........... .... 36
18.2 Agreement to Pay Benef ciary .......................................................................... 36
ii
18.3 Financing ...........................................................................................................37
ARTICLE 19 MISCELLANEOUS ...................................................................................37
19.1 Applicable Law ................................................................................................. 37
19.2 Counterparts ......................................................................................................37
19.3 Waiver ...............................................................................................................37
19.4 Modification ......................................................................................................37
19.5 Severability ....................................................................................................... 37
19.6 Requirements ....................................................................................................38
19.7 Entirety ..............................................................................................................38
19.8 Captions, Titles and Headings .......................................................................... 38
19.9 Forward Contract .............................................................................................. 38
l 9.10 Further Assurances ............................................................................................ 3 8
19.11 Survival .............................................................................................................38
iii
ENERGY SALES CONTRACT
BETWEEN
CITIES AGGREGATION POWER PROJECT
AND
CITY OF ,TEXAS
This Energy Sales Contract ("Contract") is executed on the date set opposite each
signature below, effective, however, on December , 2008 ("Effective Date"), by and
between the Cities Aggregation Power Project, Inc. ("LAPP"), a political subdivision
corporation incorporated in the State of Texas, and the City of
("Member"). CAPP and Member are collectively referred to herein as the "Parties", and
individually as a "Party".
RECITALS:
Capitalized terms used herein not otherwise defined shall have the meanings set
forth in Article 1 hereof.
Member is a political subdivision of the State of Texas.
Member is a member of LAPP.
As the result of adoption of Senate Bill 7, enacted as Chapter 405, Acts of the 76t"
Legislature, Regular Session, 1999, municipalities now have the opportunity to
competitively acquire electricity on more advantageous teams. This opportunity was the
impetus for the creation of CAPP. LAPP was created to assist Member and the
Participating Members in obtaining electricity used in such Members' own buildings and
facilities by aggregating each Participating Member's electric load, and negotiating the
best electric price based on the aggregated load.
Recognizing that all retail sales in the Texas deregulated electric market have
been based on the price of natural gas on the Nymex Futures Market, Member desires to
diversify the sources of its electric supplies in order to mitigate potential price volatility
associated with a single fuel source supply of electric energy.
Member has a need for reliable electric energy at favorable and stable rates to
fulfill its proprietary needs and govenunental responsibilities in said buildings and
facilities.
Member desires to increase its bargaining power in the deregulated market for
Energy by relying upon and combining with other participating LAPP member cities
("Participating Members") to negotiate for future sources of electricity. The
Participating Members are listed on Exhibit "A" attached hereto and incorporated by this
reference herein for all purposes.
Member has determined to utilize the CAPP aggregation method of electric
energy procurement for meeting the electric energy needs of goveintnental facilities that
are located within its deregulated jurisdictional boundaries, as provided in this Contract.
CAPP has identified a source of Energy from selected units in the Big Brown
generating station in Freestone County, Texas ("Big Brorvn Facility"), Martin Lake
generating station located in Rusk County, Texas ("Martin Lake Facility"), and Oak
Grove generating station located in Robertson County, Texas ("Oak Grove Facility") that
are owned, respectively, by Big Brown Power Company, LLC, Luminant Generation
Company LLC and Oak Grove Management Company, LLC (collectively, the "Facility
Owners"), and that CAPP believes will assist Member in (i) mitigating potential price
volatility of Energy, and (ii) accessing a wholesale power supply to meet the base load
requirements of Member and Participating Members for twenty-four (24) years,
commencing on January 1, 2009 at l 2:00:00 a.m. CPT ("Service Commencement Date")
and ending at one minute before 12:01 a.m. on January 1, 2033 unless the agreement for
the procurement of such Energy is terminated sooner as therein provided ("Term"). The
Big Brown Facility, Martin Lake Facility, and Oak Grove Faci}ity are collectively called
the "Facilities".
CAPP has entered into a Power Purchase Agreement with the Facility Owners in
substantially the form attached hereto as Exhibit "B" and incorporated by this reference
herein for all purposes ("PPA"), pursuant to which PPA, CAPP will contract to obtain
150 megawatts of Contract Capacity ("Contract Capacity") in the Facilities and access to
wholesale power supplies to meet base load Energy needs of Member and Participating
Members throughout the Term of the PPA.
Certain obligations of the Facility Owners under the PPA have been partially
guaranteed by Texas Competitive Electric Holdings Company, LLC ("TCEH") through
execution of a Guaranty substantially in the form attached to the PPA, and TCEH and its
subsidiaries have guaranteed the original leveraged buyout ("LBO") documents and the
PPA is a secured obligation under such LBO documents and as such is subject to the
guaranty provided therein.
Member desires to acquire its Member Contract Energy Allocation in the Project
from CAPP ("Member Capacity").
All Participating Members, including Member, have collectively contracted for
and reserved the full Contract Capacity in the Facilities from CAPP. The PPA provides
the terms for CAPP's purchase of all Contract Capacity from the Facility Owners for the
benefit and on behalf of Member and Participating Members.
As a result of negotiations with the Facility Owners it has been determined that
substantial savings in energy costs based upon today's energy market and current
forecasts of future market prices can be realized by purchasing capacity rights in the
Facilities from the Facility Owners as provided in the PPA on or before the Service
Commencement Date.
2
CAPP has determined that it is in the best interests of Member and the
Participating Members to prepay Facility Owners for Contract Capacity in the Facilities
("Capacity Prepayment") out of the proceeds of Bonds issued for such purpose by CAPP.
Member and each of the other Participating Members in their respective Participant
Contracts, agree to pay Member's Energy Allocation Percentage of the costs incurred by
CAPP to issue the Bonds, pay the Capacity Prepayment to the Facility Owners, pay
interest costs, establish a reserve, and pay all other costs, fees and charges that CAPP
incurs under the Bonds directly to the Trustee, as hereinafter defined, until the Bonds are
paid in full according to the payment schedule set forth in the Bonds. The Bonds shall be
secured by the collateral assigmnent of this Contract and all Participant Contracts, as
provided in this Contract, including all rights of collection thereon, to the Trustee. A
copy of the payment schedule is attached hereto as Exhibit "C" and incorporated by this
reference herein for all purposes.
Member acknowledges that CAPP shall additionally provide to Member at
Member's expense, tlu•ough Designated Agent(s), all services required and necessary to
deliver the Energy from the Facility Owners Delivery Point to Member`s Delivery Points,
including all costs of transmission, distribution, and including all necessary tariffs, and
fees as provided herein.
Member agrees to the terms of this Contract, and consents to the terms of the
PPA. In reliance thereon, and in reliance upon the acceptance and agreement of ail other
Participating Members, CAPP (i) has entered or shall enter the
PPA for the benefit of Member and Participating Members, (ii) shall cause the Bonds to
be issued, and (iii) shall cause the Capacity Prepayment to be paid to the Facility Owners
as provided in the PPA.
Accordingly, CAPP and Member have determined that it is in their mutual best
interests to enter into this Contract as the means of providing Member with the Member
Contract Energy Allocation for its base load needs during the Delivery Period described
in Section 3.2, below. Other Participating Members have respectively entered or have
committed to enter into contracts with CAPP that, when aggregated with this Contract,
collectively account for all Contract Energy associated with the Contract Capacity in the
Facilities during the Delivery Period that has or will be acquired by CAPP for the benefit
of all Participating Members under the PPA.
The Public Property Finance Act, Subchapter A, Chapter 271, Local Govenunent
Code, as amended (the "Act"), authorizes Member to execute, perform and make
payments under contracts with any person for the use, acquisition or purchase of personal
property as described in the Act, including the electricity provided for in this Contract.
The Act permits the governing body of Member to execute contracts in any form
deemed appropriate by said governing body in connection with the use, acquisition or
purchase of personal property.
3
Member desires to acquire electricity property pursuant to this Contract as
described herein from CAPP, and such personal property is deemed by the governing
body of Member to be necessary, useful, and/or appropriate for the purposes of Member
as contemplated by Section 304.001, Government Code, as amended.
In consideration of the mutual undertakings contained herein, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged and confessed, the Parties agree as follows:
ARTICLE 1
DEFINITIONS AND
PRINCIPLES OF INTERPRETATION
1.1 Definitions. The following capitalized teams shall have the following meanings
assigned to them under this Contract unless the context shall clearly indicate otherwise:
"Aggregated ~Ypenses" shall mean the sum of charges to LAPP that are payable
under the PPA to the Facility Owners and under a Wrap Contract for: (a)
adjustments to the Capacity Prepayment under Section 4.2(b) of the PPA, (b)
sums charged to CAPP under Section 3.3 of the PPA, (c) the amount of Disputed
Charges that are payable by CAPP under Section 8.3 of the PPA or as a result of
an Audit under Section 8.4 of the PPA, (d) sums payable by CAPP under Article
10 of the PPA, (e) sums, if any, required for the indenuuty of the Facility Ovv~iers
under Section 13.1 of the PPA, (f) Governmental Charges payable by CAPP
pursuant to Section 20.1 of the PPA, (g) New Governmental Charges payable by
CAPP pursuant to Section 20.2 of the PPA, (h) the cost of environmental
improvements that are required to be paid by CAPP under the PPA, (i) any
unforeseen non-recurring expenses approved by CAPP, and (j) the amount of any
Seller Termination Payment due by CAPP to the Facility Owners pursuant to
Article 12 of the PPA. The amount of Aggregated Expenses shall be reduced by
(i} credits to the Capacity Prepayment under Section 4.2(a) of the PPA, (ii) credits
under Section 3.4 of the PPA on account of the failure of the Facility Owners to
deliver the Products to CAPP, and (iii) the amount of Disputed Charges that are
payable by the Facility Owners to CAPP under Section 8.3 of the PPA or as a
result of an Audit under Section 8.4 of the PPA.
"Alternate Energy" has the meaning set forth in the PPA.
"Appropriate", "Appropriated", and/or "Appropriation" means, with respect to
any Energy Payment that Member is obligated to make under this Contract during
a Fiscal Year, the adoption by the governing body of Member of a budget for such
Fiscal Year that includes such payment.
"Available Funds" means, when used to describe funds of Member, those funds
of the Member which have been lawfully Appropriated, within the sole and
4
uncontestable discretion of the Member, from current revenues and which may be
expended, during the Fiscal Year for which Appropriated, for the purpose
expressed in such Appropriation.
"Ba~tkrupt" means a Party that: (i) files a petition or otherwise commences,
authorizes or acquiesces in the commencement of a proceeding or cause of action
under any bankruptcy, insolvency, reorganization or similar law, or has any such
petition filed or commenced against it, (ii) makes an assignment or any general
arrangement for the benefit of creditors, (iii) otherwise becomes bankrupt or
insolvent (however evidenced and regardless of whether the bankruptcy or
insolvency is voluntary or involuntary), (iv} has a liquidator, administrator,
receiver, trustee, conservator or similar official appointed with respect to it or any
substantial portion of its property or assets, or (v) is generally unable to pay its
debts as they fall due.
"Base Year" means an annual period determined by CAPP as of the Effective
Date to be representative of the typical total current Energy requirements of all
Participating Members.
"Big Brown Facility" means Unit 1 and Unit 2 of the Big Brown generating
station located in Freestone County, Texas, with an appropriate cumulative Net
Rated Capacity of 1203 megawatts as of the Effective Date.
"Bonds" shall mean all contract revenue bonds issued by CAPP for the purpose
of prepaying and funding the Capacity Prepayment plus cost of issuance of and
reserve funds required to be maintained under such contract revenue bonds, said
bonds to be secured by the pledge and assignment by CAPP to a trustee, pursuant
to a trust agreement between CAPP and such trustee of the Capacity Prepayment
Component of each Participating Member's contract, it being stipulated and
agreed that this Contract and each Participant Contract constitutes a contract
under Subchapter A of Chapter 271, Local Government Code, State of Texas, as
amended, payable from such respective Participating Member's ad valorem taxes
within the limits prescribed by law.
"Business Day" means any Day except a Saturday, Sunday, or a Federal Reserve
Bank holiday. A Business Day shall open at 8:00 a.m. CPT and close at 5:00 p.m.
CPT.
"Capacity Prepayment" has the meaning set forth in Section 7.1, below.
"CAPP" shall mean the Cities Aggregation Power Project, a political subdivision
corporation in Texas organized pursuant to Local Government Code Chapter 304
for the purpose of contracting for electric power for Participating Members and
for assisting in procurement of REP and QSE services for governmental electric
accounts of Participating Members.
5
"Code" means Texas Local Government Code, Title 7, Chapter 271, Subchapter
1, Sections 271.151 through 271.160.
"Contract" shall mean this Energy Sales Contract and all related exhibits, as
same may be amended from time to time by the mutual written agreement of the
Parties.
"Contract Capacity" means 150 megawatts, being the Contract Capacity acquired
by CAPP in the Facilities under the PPA on behalf of Member and the
Participating Members.
"Contract Energy" has the meaning set forth in the PPA. Additionally, the
Parties understand that if, in any Settlement Interval, the output of one or more of
the Facilities is less than its I~Tet Rated Capacity, due to a Planned Outage or
Forced Outage as provided in the PPA, the Contract Energy may be reduced. In
such an event, CAPP shall only receive a share of the output as provided in the
PPA. In such event, the reduced amount of output received by CAPP will be
delivered to and apportioned between Member and the other Participating
Members based on their respective Member's Energy Allocation Percentages.
"Co~ztract Price" has the meaning set forth in Section 6.1.
"CP7" means central prevailing time.
"Day" means the consecutive twenty-four (24) hour period beginning at 12:00:00
a.m. CPT on any calendar day and ending at 12:00:00 p.m. CPT on such calendar
day.
"Default" has the meaning set forth in Article 11 hereof.
"Defaulting Member" shall mean one or more Participating Members that default
under a Participant Contract that has been collaterally assigned in whole or in part
as security for the repayment of the Bonds.
"Delivery Montlz" has the meaning set forth in the PPA.
"Delivery Period" means that period of time in which Energy shall be delivered to
CAPP as agent for Member as the Energy is delivered by the Facility Owners
under the PPA, commencing on January 1, 2009 at 12:01:00 a.m. CPT and ending
on the earlier of: (i) 12:01:00 a.m. CPT on January 1, 2033, (ii) the date and time
that the PPA is terminated in accordance with its terms, or (iii) the date and time
that this Contract is rightfully terminated in accordance with its terms.
"Designated Agent(s)" means service providers such as, but not limited to, REPs,
QSEs, and other market service product providers that are engaged from time-to-
time by CAPP to act as agents for and representatives of CAPP, Member, andlor
6
Participating Members for the purposes of: (i) receiving and accounting for
Products delivered by Facility Owners under the PPA, and Energy that is
delivered to Member and Participating Members under this Contract and
Participant Contracts, (ii) remitting payments, including payments of ERGOT
fees, transmission fees, congestion fees, QSE fees, REP charges, and tariffs, (iii)
allocating costs between Member and Participating Members, and/or (iv) billing,
netting, and collecting sums due under this Contract.
"Effective Date" has the meaning set forth in the preamble of this Contract.
"Energy" has the meaning set forth in the PPA.
Energy Payment" means the product of the Energy Price times the number of
megawatt hours delivered to Member .
"Energy Price" has the meaning set forth in Section 6.1(a)(i).
"ERGOT" shall mean the Electric Reliability Council of Texas, or its successor in
function.
"ERGOT Guides" means the then-current ERGOT Operating Guides, Market
Guides, Protocols, Nodal Protocols, Transaction Guides, and/or ISO procedures,
as they may be amended from time to time.
"ESI-IDs" shall mean Electric Service Identifiers as defined in ERGOT
Protocols, or their successor in function, same being the basic identifier assigned
to each service delivery point used in the registration and settlement systems
managed by ERGOT.
"Facilities" means the Big Brown Facility, Martin Lake Facility, and upon COD
of the Oak Grove Unit 1 and Oak Grove Unit 2, the Oak Grove Facility as defined
and described in the PPA, including, with respect to each, the land, structures,
fixtures, equipment, machinery, lignite, and related auxiliary equipment required
to operate each such facility.
"Facility Owner Delivery Points" means the point at a Facility at which Contract
Energy is capable of being injected for the credit of CAPP into the ERGOT high
voltage transmission system with Member and other Participating Members being
fully responsible for reimbursing CAPP for any and all charges and assessments
by ERGOT related to delivery of energy from the Facility Owner's Delivery
Points into the ERGOT high voltage transmission system.
"Facility Owners" shall mean Big Brown Power Company, LLC, Oak Grove
Management Company, LLC, Luminant Generation Company, LLC, and their
respective successors and assigns.
7
"Fiscal Year" means the fiscal year of Member.
"Forced Outage" has the meanng set forth in the PPA.
"Governmental Authority" has the meaning set forth in the PPA.
"Governmental Charges" has the meaning set forth in the PPA and which are
charged to or payable by CAPP; including those Governmental Charges that
survive the termination of the PPA.
"Guarantor" shall mean Texas Competitive Electric Holdings Company, LLC, a
Delaware limited liability company.
"Guaranty" shall mean that certain Guaranty Agreement executed by Guarantor
and delivered to CAPP at closing.
"Interest and Sinking Furtd" means that a special fund or account designated as
the "City of Electric Public Property Finance Contractual
Obligation Interest and Sinking Fund ", authorized, established and maintained
in a depository bank of the Member, so long as the contractual obligation to make
Monthly Capacity Payments hereunder are outstanding and unpaid.
"kW' means kilowatt(s).
"Law" means (i) any law, legislation, statute, act, rule, ordinance, decree, treaty,
regulation, order, judgment, or other similar legal requirement, and (ii) any legally
binding announcement, directive or published practice or interpretation thereof,
including but not limited to, ERCOT Guides, enacted, issued or promulgated by
any Governmental Authority having jurisdiction over this Contract, the Facilities,
and the delivery of Energy pursuant to this Contract.
"Martin Lake Facility" means Unit 1, Unit 2, and Unit 3 of the Martin Lake
generating station located in Rusk County, Texas, with an approximate
cumulative Net Rated Capacity of 2,345 megawatts as of the Effective Date of the
PPA.
"Member Contract Energy Allocation" shall equal the product of the Member's
Energy Allocation Percentage and the Contract Energy during each Delivery
Month of the Delivery Period.
"Member's Monthly Aggregated Energy Payment" has the meaning set forth in
Section 6.1(a).
"Member's Energy Allocation Percentage" is %, being calculated by
multiplying 100 by a fraction, the numerator of which is Member estimated
energy required during the Base Year, and the denominator of which is the
8
estimated total energy requirement of all Participating Members during the Base
Yeax.
"Member's Delivery Points" shall be all ESI-IDs accounts that Member has for
receipt of energy to the revenue meters of such Member that are metered and the
light fixtures for street/outdoor lights or other accounts of such Member that are
not metered.
"Member's Unique Delivery Costs" shall have the meaning set forth in Section
6.1(b) hereof.
"Monthly Capacity Payment" shall have the meaning set forth in Article 7 below.
"Monthly Energy Payment" means the product of the Monthly Energy Price
times Member's Energy Allocation Percentage times the megawatt hours
delivered to CAPP by the Facility Owners during the Delivery Month.
"Monthly Energy Price" means the price per megawatt hour as set forth in the
PPA.
"MTV' means megawatt.
"MWh" means megawatt hour.
"New Governmental Charges" means (i) any Governmental Charges enacted and
effective after the Effective Date, including without limitation, that portion of any
Governmental Charges or New Governmental Charges that constitutes an increase
or that cause the Facility or Facilities to incur additional or new expenses less
Governmental Charges enacted or imposed prior to the Effective Date that are
replaced by the New Governmental Charge and that become payable by CAPP
under the PPA, (ii) any Law or interpretation thereof, enacted and effective after
the Effective Date resulting in a new or additional expense to the Facility or the
Facilities or the application of any Governmental Charges to a new or different
class of parties and that become payable by CAPP under the PPA.
"Oak Grove Facility" means, when the first commercial operation date is
reached, Oak Grove Unit 1 and Oak Grove Unit 2 of the lignite coal- fired power
generation facility known as the Uak Grove Generating Station located in
Robertson County, Texas.
"Ordered Backdown" has the meaning set forth in Section 5.2 of the PPA.
"Participant Contracts" means those individual contracts between CAPP and a
Participating Member under which such Participating Member is acquiring a
portion of the Contract Energy that CAPP is acquiring for the benefit of all
9
Members under the PPA. Such terns has the same meaning as the term "Member
Output Contract" in the PPA. This Contract is one of the Participant Contracts.
"Participating Members" shall mean those members of CAPP that enter into
contracts with LAPP for the procurement of electric energy from the Facilities. A
list of Participating Members is attached to this Contract as Exhibit "A" and
incorporated by this reference herein for all purposes. Member is one of the
Participating Members.
"Person" means a natural person, corporation, electric cooperative, partnership,
trust, association, joint venture, real estate investment trust or business trust
(including any beneficiary thereof), unincorporated association, Governmental
Authority, and any other forni of business or legal entity.
"Planned Dutage" has the meaning set forth in Section 6.1 of the PPA.
"PPA" shall mean that certain Power Purchase Agreement between CAPP and the
Facility Owners, a copy of which is attached hereto as Exhibit "B" and
incorporated by this reference herein for all purposes.
"Product" or "Products" means Contract Capacity, Contract Energy and
Alternate Energy, if any, received by CAPP from the Facility Owners under the
PPA.
"QSE" means the entity which is responsible for performing the responsibilities
defined for a Qualified Scheduling Entity under the ERCOT Guides, or their
successor in function.
"Regulatory Authorities" has the meaning found in the Utilities Code Vernon's
Texas Codes Annotated.
"REP" means Retail Electric Provider, as defined in ERCOT Protocols.
"REP Services" shall mean all services that a REP provides that are associated
with the provision of electric service to a retail customer by a REP in ERCOT.
"Replacement Price" has the meaning in the PPA.
"Resale Price" has the meaning in the PPA.
"Service Commencement Date" has the meaning set forth in Section 3.2 hereof
and shall be one minute before 12:01 a.m. CPT on January 1, 2009.
"Settlement IntervaP' has the meaning as set forth in the ERCOT Guides.
"Term" has the meaning set forth in Section 3.1 hereof.
10
"Transmission Losses" means losses associated with the transmission of Energy
under this Contract and under the PPA from resources used by (a) the Facility
Owners to the Delivery Points for the respective Facility Owners, and (b) the
Designated Agent(s) from the Facility Owners' Delivery Point to Member's
Delivery Points as determined in accordance with the ERCOT Guides.
"Transmission Service Provider" has the meaning found in the Utilities Code.
"Trustee" means the trustee related to the Bonds pursuant to an indenture of tilist
with CAPP.
"Unit" means each of the generating units at the Big Brown Facility, the Oak
Grove Facility and the Martin Lake Facility that are then the subject of the PPA.
"Unit Contingent Energy" means the Contract Energy supplied to CAPP for
delivery to Participating Members from the Facilities under the terms of the PPA,
for which non-delivery is excused if: (i} a Facility is unavailable as a result of a
Forced Outage or a Planned Outage; (ii) CAPP fails to perform any of its
obligations under the PPA; or (iii) an event of Force Majetu•e prevents delivery of
such Energy to CAPP.
"Wrap Contract" means any energy service contract executed by CAPP on behalf
of Participating Members for electrical service requirements in addition to the
PPA and other associated and ancillary services necessary to fulfill the full
requirements for each of the Members electric power needs.
1.2 Principles of Interpretation. Unless the context requires otherwise, any
reference in this Contract to any document means such document and all schedules,
exhibits, and attachments thereto as amended aild in effect from time to time. Unless
otherwise stated, any reference in this Contract to any Person or Party includes its
permitted successors and assigns and, in the case of any Governmental Authority, any
Person succeeding to its functions and capacities. The words "hereof ', "herein" and
"hereunder" and words of similar import when used in this Contract, unless otherwise
expressly specified, refers to this Contract as a whole and not to any particular provision
of this Contract. The singular includes the plural, and the masculine includes the
feminine and neuter genders. Whenever the term "including" is used herein in
connection with a listing of items included within a prior reference, such listing shall be
interpreted to be illustrative only, and shall not be interpreted as a limitation on or
exclusive listing of the items included within the prior reference. The language used in
this Contract is deemed to be the language chosen by the Parties to express their mutual
intent, and no rule of strict construction shall be applied against any Party. All times set
forth in this Contract shall be construed to be CPT.
11
ARTICLE 2
CAPP'S OBLIGATIONS CONTINGENT UPON
PERFORMANCE BY FACILITY OWNERS UNDER THE PPA;
ASSUMPTION BY MEMBER
2.1 Nature of CAPP's obligations to Member. Member agrees and understands that
CAPP has entered or shall enter the PPA on behalf of Member and all Participant
Members for the purpose of achieving the benefits set forth in the Recitals, above,
including contracting for less than market prices for energy. Member understands that
CAPP is not a power provider or power deliverer. Member agrees and understands that
CAPP's obligation to perfoi7n its covenants under this Contract is absolutely contingent
upon the performance of obligations of the Facility Owners and Guarantor to CAPP
under the PPA, including, but not limited to, timely delivery of the Products in the
quantities required under the PPA.
2.2 CAPP's duty to exercise remedies under the PPA and Guaranty; power
coupled with an interest. In the event that the Facility Owners, without an excuse or
right permitted under the PPA, fail to deliver the Products and/or fail to perform their
obligations to CAPP as required under the PPA and Guaranty, then CAPP, on behalf of
itself, Member, and the Participating Members, may exercise one or more of the remedies
available to it under the PPA, the Guaranty, or both, as the Board of Directors of CAPP
shall determine in its sole judgment and discretion. To the fullest extent necessary,
Member hereby irrevocably appoints CAPP as its agent and attorney-in-fact to exercise
such of the remedies available to CAPP under the PPA, that CAPP, in the sole judgment
and discretion of its Board of Directors, believes to be the best interests of the Parties and
Participating Members. Member agrees and understands that the power granted by it to
CAPP in this Section 2.2 is and shall be construed to be a power coupled with an interest
that cannot be revoked during the Term of this Contract. It is further agreed and
understood that Member's obligation to pay the sums set forth in Article 6 and Article 7
on the dates set forth in Article 8, below, shall not be excused, offset, or mitigated on
account of a default by Facility Owners under the PPA or by the failure of Facility
Owners to deliver the Products.
2.3 Assumption of PPA by Member. Member agrees and understands that CAPP
has entered or will enter into the PPA for the benefit of Member and Participating
Members to the extent of their respective Member's Energy Allocation Percentages. For
the consideration set forth in this Contract, Member assumes CAPP's obligations under
the PPA, to the extent of Member's Energy Allocation Percentage, provided, however,
that such rights and obligations shall be exercised on Member's behalf as the Board of
Directors of CAPP shall determine in its sole and absolute discretion.
12
ARTICLE 3
TERM OF CONTRACT AND DELIVERY OF PRODUCTS
3.1 Term. The term ("Term") of this Contract shall commence on the Effective
Date, and shall continue until the later of: (a) January 1, 2033 at 12:00:00 a.m., or (b) the
date that the Bonds have been repaid in full and alI covenants required to be perforned
and all interest and costs required to be paid by LAPP under the Bonds have been
performed and paid in full by CAPP.
3.2 Delivery of Products. A Member's Contract Energy Allocation of the Products
shall be provided by CAPP to Member as set forth herein at 12:00:00 a.m. CPT on
January 1, 2009 (the "Service Commencement Date") provided that the Products are then
commenced to be delivered by Facility Owners to CAPP under the PPA. Thereafter, the
Products shall be received by CAPP or its Designated Agent(s) for the benefit of and as
agent for Member as the Products are delivered by Facility Owners under the PPA until
the earlier of: (a) one second following 11:59:59 p.m. CPT on December 31, 2032, (b)
the date that the PPA is terminated in accordance with its terms, or (c) the date that this
Contract is terminated in accordance with its terms ("Delivery Period"). In the event that
the Facility Owners fail to deliver all of the Products they are required to deliver under
the PPA, Member shall be entitled to receive only Member's Energy Allocation
Percentage of the Products actually delivered to and received by LAPP, net of
Transmission Losses
ARTICLE 4
PAYMENT OF CAPACITY
PREPAYMENT TO FACILITY OWNERS
Provided that the PPA has not been terminated by CAPP or by the Facility
Owners prior to the Service Commencement Date pursuant to Article l l of the PPA,
CAPP shall pay or cause the Capacity Prepayment to be paid to Facility Owners on or
before the date described in said Section 4.1(b) of the PPA. CAPP and Member stipulate
and agree that the Capacity Prepayment shall be paid to the Facility Owners as required
by the PPA, in whole or in part, from the proceeds of the Bonds, interest earned while
such Bond proceeds are escrowed, and, as CAPP may elect, fiends paid to CAPP by
Member and Participating Members.
ARTICLE 5
DELIVERY OF CONTRACT ENERGY
5.1 Acquisition and Delivery of Product. Upon the Service Commencement Date,
CAPP shall require (i) Facility Owners to provide and deliver the Contract Energy
described in the PPA to the Designated Agent(s) at the Facility Owners' Delivery Point,
and (ii) the Designated Agent(s) to deliver Energy to Member at the Member's Delivery
Points, in both cases from Products generated from the Facilities or acquired by the
13
Facility Owners for delivery under the PPA as Alternate Energy pursuant to Section 5.3
of the PPA.
5.2 Title and Risk of Loss. Risk of loss of the Energy provided in accordance with
this Contract shall transfer to CAPP as agent for Member and Participating Members at
the Facility Owners' Delivery Points. Title to the Energy (subject to loss) shall be held
by CAPP as agent for Member and Participating Members between the Facility Owners'
Delivery Points and Member's Delivery Points.
5.3 Member's Failure to Accept Product. If Mernber fails to accept all or part of
the Product under this Contract and such failure is not excused under the terms of this
Contract or by failure of the Facility Owners to deliver same under the PPA, then
Member shall pay to LAPP or to the Designated Agent(s) from time-to-time designated
by CAPP, on the date payment would otherwise be due with respect to the month in
which the failure occurred, an amount for each MWh of such deficiency equal to the
positive difference, if any, obtained by subtracting the Resale Price from the Contract
Price. The invoice for such amount shall include reasonable detail as to the calculation of
such amount.
5.4 Failure of Facility Owners to Schedule or Deliver Product to CAPP. If one or
more of the Facility Owners fail to schedule and/or deliver all or part of the Product as
required by it under the PPA, and such failure is not excused under the terms of the PPA
or by CAPP's failure to perform, then CAPP or the then-designated Designated Agent(s)
shall, on behalf of all Participating Members, at the expense of and in the proportion of
their respective Member's Energy Allocation Percentages, seek to collect sums from the
Facility Owners that are recoverable pursuant to Section 3.4 of the PPA; provided,
however, that any obligation by CAPP or by the Designated Agent(s), as the case may be,
to pay Member in such event is limited to the amount that LAPP or the Designated
Agent(s) actually collect from the Facility Owners and the Guarantor, net of costs of
collection. For the avoidance of doubt, CAPP shall not be required to pay damages under
this Section 5.4 when the failure to schedule and/or deliver is excused under the
definition of Unit Contingent Energy.
ARTICLE 6
PRICING OF AND
PAYMENT FOR ENERGY
6.1 Payment of Member's Monthly Aggregated Energy Payment. In
consideration for the Energy received by it under this Contract, Member shall pay
Member's Monthly Aggregated Energy Payment to CAPP, or to the Designated Agent(s),
as the case may be, on or before the dates for payment set forth in Article 8, below, and
calculated as follows:
14
(a) Calculation of Member's Monthly Energy Payment. Commencing
on the Service Commencement Date, and continuing during each Delivery Month during
the Term, but subject to annual appropriation therefore by Member during such Member's
Fiscal Year, Member shall pay to CAPP, or to the Designated Agent(s) from time-to-time
designated by it, the Member's Monthly Energy Payment, as computed monthly pursuant
to the provisions of this Section 6.1(a). The Member's Monthly Energy Payment shall be
the sum of (i) the Energy Component of Member's Energy Payment and (ii) the
Aggregated Expenses Component of Member's Energy Payment, both determined as
follows:
(i) Ener~y Component of Member's Monthly Encray
Payment. The price of Energy deliverable to LAPP under the PPA at the
Facility Owners' respective Delivery Points during the Delivery Month as
provided in the PPA is set forth in the schedule attached hereto as Exhibit
"D" and incorporated herein by reference herein for all purposes. The
Parties recognize that the PPA calls for the Contract Energy to be
delivered to LAPP at the Facility Owners' respective Delivery Points at
which points the Energy Payment is measured and calculated pursuant to
Section 4.1(a) of the PPA. The Wrap Contracts shall provide that the cost
of energy delivered to Member will be measured at Member's Delivery
Points. The price of energy deliverable to CAPP under the Wrap
Contracts shall be at a price determined by negotiations at that time.
Member recognizes that the Energy Component in the monthly invoices
will reflect a blended rate per MWh taking into account the Energy
provided to all Participating Members under all energy procurement
contracts and shall include (1) the cost of Contract Energy; (2) ancillary
services under Section 3.5 of the PPA; (3) the cost of engaging a QSE
under Section 7.1 of the PPA or under any Wrap Contracts; (4) the cost of
engaging a REP under the PPA or under any Wrap Contracts; (5) the cost
of delivering the Contract Energy to the Delivery Points of all
Participating Members from the Facility Owners' respective Delivery
Points; and (6) the cost of energy and other expenses associated with one
or more Wrap Contract. The Energy Component of Member's Monthly
Energy Payment shall be computed as the product of such blended rate
and the total Energy delivered to Member's Points of Delivery during the
billing month.
(ii) Aggregated Expenses Component of Member's Monthly
Energy Payment. The total Aggregated Expenses for each Delivery
Month shall be allocated and apportioned between Member and each of
the other Participating Members based upon each Member's Energy
Allocation Percentage. The total amount so allocated to Member shall be
billed to Member on a monthly basis by LAPP or its Designated Agent(s)
as they shall determine appropriate.
15
(b) Member's Unique Delivery Costs. The Parties further recognize
that Member and each of the Participating Members require delivery of the Energy by the
Designated Agent(s) from the Facility Owners Delivery Point to their respective
Member's Delivery Points, the cost of which may vary between Participating Members
based on a number of factors, including, but not limited to, distance from the Facility
Owners Point of Delivery, differing zones into which Energy shall be delivered, different
tariffs that may change from time to time as ordered by Regulatory Authorities, loss of
Energy during transmission, and differing contractual arrangements that must be made to
effect the delivery of Energy to the required points of delivery. In this connection, CAPP
shall, as agent for Participating Members (including Member) (i) enter into one or more
contracts with Designated Agents} for delivery of the Products to all Participating
Members from the Facility Owners Delivery Point to each of their respective Member's
Delivery Points, and (ii) require the Designated Agent(s) to separately account to and bill
each Participating Member for the unique costs that are associated with delivery of the
Energy from the Facility Owners Point of Delivery. Commencing on the Service
Commencement Date, and continuing during each Delivery Month during the Term, but
subject to annual appropriation therefore by Member during such Member's Fiscal Year,
Member shall pay to CAPP or to the Designated Agent(s) from time-to-time designated
by it the Member's Unique Delivery Costs. The Mernbcr's Unique Delivery Costs shall
be due and payable at the same time that the Member's Aggregated Monthly Energy
Payment is due.
(c) Governmental Charges and New Governmental Char es. Member
shall pay or cause to be paid all Governmental Charges on or with respect to the Product
at and from the Facility Owners' Delivery Points. In the event CAPP and/or the
Designated Agent(s) are required by Law to remit or pay Governmental Charges which
are Member's responsibility hereunder, or in the event that CAPP must remit or pay to
Facility Owners for Governmental Charges that it may pass through to LAPP for
reimbursement under the PPA, CAPP shall notify Member of the amount of
Governmental Charges owed, whether such payment is to Facility Owners or to the
governmental entities that made such Governmental Charges, on Member's behalf. Such
notice shall be provided in a commercially practicable manner and may be provided by a
Designated Agent. Notwithstanding any other provision of this Contract to the contrary,
if a New Governmental Charge (as defined in the PPA) is passed through to CAPP for
reimbursement, including but not limited to New Governmental Charges imposed on all
coal and lignite generating facilities in ERGOT, including the Product, and CAPP's share
of any such New Governmental Charge is greater than the Materiality Threshold set forth
in the PPA (after taking into account the application of any entitlements and the extent of
old charges that are replaced by the New Governmental Charge), such charges shall be
treated as though they were incurred by CAPP for the benefit of all Participating
Members (including Member}. All Governmental Charges and New Governmental
Charges shall be apportioned between Member and the Participating Members as an
energy charge reflected on monthly bills from a Designated Agent. If, as, and when
CAPP pays Governmental Charges and New Governmental Charges, it shall be deemed
to have paid same on behalf of Member and all Participating Members in the proportion
stated immediately above, and Member shall pay CAPP and/or the Designated Agent(s)
16
its proportionate share, subject, however, to Appropriation by Member during Member's
Fiscal Year. The obligation to pay such Governmental Charges and New Governmental
Charges shall continue until such time as reimbursement of Facility Owners therefore are
no longer required by the PPA.
(d) Adjustments. Section 4.2 of the PPA provides for monthly
adjustments if the Equivalent Availability Factor for such month is greater or less than
90%. It is the intention of the Parties to this Contract that (i) such credits and
supplemental payments shall be allocated and passed through to Member and each of the
other Participating Members, on a pro rata basis, in the month payable or credited against
the Energy Payment based on an energy basis and (ii) the Designated Agent responsible
for billing shall net the adjustments under Section 4.2 of the PPA against other amounts
owed. It is understood that Member's obligation to pay any adjustments under this
Section 6.1(d), as part of an Energy Payment or Payments, is subject to appropriation by
Member during Member's Fiscal Year.
(e) Other Adjustments. In the event that inequities arise between
Participating Members or between Member and Participating Members in energy based
allocation of credits and supplemental charges under this or other energy contracts, the
Board of Directors of CAPP, in its sole discretion, may direct further adjustments as
necessary to preserve the integrity of the allocation process and relative economic
position of Member and Participating Members; provided, however, no adjustments shall
affect the obligation to make Capacity Payments under Article 7 of this Contract.
6.2 Payments through Retail Electric Provider and Designated Agent(s). CAPP
reserves the right to bill and invoice Member and Participating Members for the Contract
Price, collect sums due by Member and Participating Members under Article 6, pay sums
to Facility Owners that CAPP is required to pay pursuant to the terms of the PPA, collect
payments and credits due to CAPP by the Facility Owners, and allocate and distribute
credits and payments received from Facility Owners and third parties to Member and
Participating Members as their respective interests appear through a REP or through
Designated Agent(s). Notwithstanding the foregoing, it is expressly agreed and
understood that (a} the Capacity Payments required to be paid by Member pursuant to
Section 7, below, must be paid by Member directly to CAPP or the Tntstee, and (b)
payments received by CAPP or by Member from the Facility Owners, Guarantor, or any
of same as a result of Early Termination of the PPA as defined in and calculated under
Article 12 of the PPA must be paid by the recipient of such payments directly to CAPP or
the Trustee for application to the Bonds.
6.3 Payments from Available Funds. Notwithstanding any provision herein to the
contrary, the obligations of Member under this Contract to make Energy Payments shall
be payable solely from the Available Funds received in each Fiscal Year during the Term
of this Contract. The obligation of the Member to make any Energy Payments pursuant
to this Contract shall constitute a current expense of Member during each Fiscal Year and
shall not constitute an indebtedness of Member within the meaning of the laws of the
17
State of Texas. Nothing in this Contract shall constitute a pledge by the Member of any
taxes or other money, other than such funds so Appropriated and received in each Fiscal
Year during the Term of this Contract and constituting Available Funds, to the payment
of any Energy Payment due or to become due hereunder.
6.4 Intent to Continue Payments. Member presently intends to continue this
Contract for the entire Term and to pay all Energy Payments required hereunder.
Member presently intends to Appropriate, from lawfully Available Funds received in
each Fiscal Year, money sufficient to pay the Energy Payments required hereunder.
However, Member has no obligation to, and makes no representation that it will,
Appropriate or seek to Appropriate in any Fiscal Year Available Funds for the payment
of Energy Payments due pursuant to this Contract.
6.5 Failure to Appropriate Available Funds. If, for any Fiscal Year of the
Member, the Member does not Appropriate Available Funds received during such Fiscal
Year to pay the Energy Payments required under this Contract due and payable by
Member during the succeeding Fiscal Year, and if the Member provides CAPP with
written notice of such failure to Appropriate thirty (30) days prior to the expiration of
Member's then-current Fiscal Year, the obligation to take electric Energy from CAPP
under this Contract and make Energy Payments for such electric energy shall terminate
and be canceled at the end of such current Fiscal Year for the period of the next Fiscal
Year for which the Member has failed to Appropriate Available Funds. The written
notice shall be accompanied by a statement as to whether or not Member has made an
assignment to another Participating Member under Section 6.6 hereof. The Member may
Appropriate Available Funds for any subsequent Fiscal Year for Energy Payments due
during such subsequent Fiscal Year and then shall be entitled to receive electric Energy
from LAPP under this Contract for such Fiscal Year.
6.6 Assignment Upon Failure to Appropriate. For any Fiscal Year which the
Member has failed to Appropriate for Energy Payments (or portion thereof), the Member
may assign to another Participating Member all or a portion of such non-appropriating
Member's right to receive electric energy for such Fiscal Year provided the Participating
Member certifies to CAPP that the assigned electric energy will be utilized by such
Participating Member for its buildings and facilities, in compliance with the Local
Government Code Chapter 304. The Energy Payments associated to such assigned right
to such electric energy shall be calculated according to the terms of this Contract
(assuming the Member was receiving such electric energy). At such time the Member
provides written notice of its failure to Appropriate for Energy Payments for any Fiscal
Year, the Member may also give written notice to CAPP of its assignment of all or a
portion of its right to receive electric energy under this Contract, including a written
agreement between the Member and the Participating Member reflecting the terms and
conditions of such assignment. Prior to the beginning of the relevant Fiscal Year, the
assuming Participating Member must provide CAPP written notice of (i) its
Appropriation for the Energy Payments associated with the assumed electric energy for
the period of the non-appropriating member's Fiscal Year which such non-appropriation
is applicable (or portion thereof), (ii) certification that such assumed electric energy will
18
be utilized by such Participating Member for its buildings and facilities, in compliance
with the Local Govenunent Code Chapter 304 and (iii) a valid and binding assignment
agreement between the Member and the Participating Member. If the Member failing to
appropriate for Energy Payments does not assign the Energy to another Participating
Member within 30 days following the failure to Appropriate, Member shall assign the
Energy to CAPP, and CAPP shall have the right to assign to a Participating Member, or
to otherwise dispose of the Energy in a commercially practicable manner.
6.7 Appropriated Energy Payments to be Unconditional. Except as provided
herein, including Section 6.3 hereof, the obligation of Member to make Energy Payments
each Fiscal Year from fimds that have been appropriated for such purpose when due shall
be absolute and unconditional. Notwithstanding any dispute between Member and LAPP
or any other Participating Member or person, the Member shall make all Energy
Payments required hereunder when due and shall not withhold any such payments
pending final resolution of such dispute, nor shall Member assert any right of set-off or
counterclaim against its obligation to make such payments required under this Contract.
Member's obligation to make Energy Payments during the Term shall not be abated
because of accident or unforeseen circumstances. However, nothing herein shall be
construed to release CAPP from the performance of its obligations hereunder; if CAPP
should fail to perform any such obligation, Member may institute such legal action
against CAPP as Member may deem necessary to compel the performance of such
obligation. Notwithstanding anything to the contrary above, Member's obligation to pay
Energy Payments shall not require it to pay Energy Payments from any source other than
Available Funds specifically appropriated by Member for payment of the Energy
Payments.
6.8 CAPP as Third Party Beneficiary. Member acknowledges that CAPP is an
intended third party beneficiary of all Appropriations made by Member for sums
described in this Article 6. As part of the consideration for this Contract, Member grants
to LAPP and to any Designated Agent(s) appointed by CAPP all rights to enforce, by a
mandamus action against Member and its governing body, such provisions for each
Fiscal Year of Member for which there has been an Appropriation as contemplated in this
Article.
6.9 Member's Default of the Energy Payment Covenants and CAPP's Remedies.
(a) Events of Default. Each of the following occurrences or events for
the purpose of this Contract is hereby declared to be a Default:
(i) The failure to make payment of the Energy Payment when the
same becomes due and payable; or
(ii) Default in the performance or observance of any other
covenant, agreement or obligation of the Member, the failure to perform
which materially, adversely affects CAPP, including, but not limited to, its
19
prospect or ability to be repaid in accordance with this Contract, and the
continuation thereof for a period of 30 days after notice of such default is
given by CAPP or Trustee to the Member.
(b) Remedies for Default.
(i) iJpon the occurrence of a Default, then and in every case,
CAPP or an authorized representative thereof may proceed against the
Member, or any official, officer or employee of the Member in their
off cial capacity, for the purpose of protecting and enforcing the rights of
CAPP under this Contract, by mandamus or other suit, action or special
proceeding in equity or at law, in any court of competent jurisdiction, for
any relief permitted by law, including the specific performance of any
covenant or agreement contained herein, or thereby to enjoin any act or
thing that may be unlawful or in violation of any right of CAPP hereunder
or any combination of such remedies.
(ii) It is provided that all such proceedings shall be instituted and
maintained for the benefit of CAPP.
(c) Remedies Not Exclusive.
(i) No remedy herein conferred or reserved is intended to be
exclusive of any other available remedy or remedies, but each and every
such remedy shall be cumulative and shall be in addition to every other
remedy given hereunder or now or hereafter existing at law or in equity;
provided, however, that notwithstanding any other provision of this
Contract, the right to accelerate the Energy Payments shall not be
available as a remedy under this Contract.
(ii) The exercise of any remedy herein conferred or reserved shall
not be deemed a waiver of any other available remedy. The failure to
exercise a remedy upon a Default shall not be deemed to be a waiver of
the right to exercise such remedy in the future.
(iii) By accepting the delivery of Energy Payment authorized
under this Contract, CAPP agrees that the certifications required to
effectuate any covenants or representations contained in this Contract do
not and shall never constitute or give rise to a personal or pecuniary
liability or charge against the ofFcers, employees or trustees of the
Member.
(iv) No official or officer, agent, or employee of the Member,
shall be charged personally by CAPP or the Trustee with any liability, or
be held personally liable under any term or provision of this Contract, or
because of a Default or Default under this Contract.
20
ARTICLE 7
CAPACITY PREPAYMENT, MEMBER'S MONTHLY CAPACITY PAYMENT
AND PLEDGE OF All VALOREM TAXES BY MEMBER
7.1 Capacity Prepayment. In order to procure Energy at favorable rates produced in
the Facilities by the Facility Owners under the PPA, CAPP, at the request of Member and
the other Participating Members, shall (i) prepay to Facility Owners the sum of
$465,000,000.00 (the "Capacity Prepaymezzt'~ from the proceeds of the Bonds (ii)
establish a reserve fund under the Bonds as may be required for issuance of the Bonds,
and (iii) pay costs and charges associated with issuance of the Bonds, including legal
fees, accounting fees, and consultant's fees engaged by the bond issuer, bond counsel,
and CAPP. The Capacity Prepayment shall be paid to Facility Owners as provided in
Section 4.1 hereof and as provided in Section 4.1(b) of the PPA. Once the actual amount
of the Bonds and the interest rate established thereunder are known, this Contract shall be
amended by CAPP and Member to reflect such facts, and to stipulate the amount of
Member's Monthly Capacity Payment. It is the intention of the Parties that LAPP shall
receive from Member and each Participating Member through the Monthly Capacity
Payment set forth in Section 7.2(a), based upon the Member's Energy Allocation
Percentage of each, the amount sufficient to pay: (i) CAPP's costs to issue the Bonds, (ii)
the principal and redemption premium, if any, of and interest on the Bonds, (iii} trustee
and other administrative fees, and (iv) other costs associated therewith.
7.2 Capacity Payment.
(a) Member shall pay CAPP, its Designated Agent or the Trustee, as
CAPP shall direct, upon the assignment of all or a portion of this Contract by
CAPP to such trustee, a Monthly Capacity Payment for each Delivery Month
throughout the remainder of the Term, or until such earlier date as such Monthly
Capacity Payments have been prepaid or otherwise fully defeased as provided in
Section 7.4 hereof, in an amount equal to the amount shown in Exhibit "E" times
the Member Energy Allocation Percentage.
(b) It is hereby certified and covenanted that the contractual obligation
to make the Monthly Capacity Payments when due, as described in subsection (a)
above, has been duly and validly authorized and delivered; that all acts, conditions
and things required or proper to be performed, exist and be done precedent to or
in the authorization and delivery of this Contract have been performed, existed
and been done in accordance with law; that the contractual obligation to make the
Monthly Capacity Payments herein is a limited tax obligation of Member; and
that annual ad valorem taxes, within the limits prescribed by law, sufficient to
provide for the payment of the Monthly Capacity Payments, as such payments
come due, have been levied and ordered to be levied against all taxable property
in Member, and have been pledged from Member's annual ad valorem
maintenance tax for such payment, within the limit prescribed by law.
21
(c) It is understood and agreed that all Monthly Capacity Payments
payable by the Member under this Article 7 are assigned by CAPP to the Trustee
for the benefit of the Owners of the Bonds. The Member assents to such
assignment.
7.3 Interest and Sinking Fund; Tax Levy for Monthly Capacity Payments. The
Interest and Sinking Fund shall be kept separate and apart from all other funds and
accounts of Member, and shall be used only for paying the Monthly Capacity Payments
when due. All ad valorem taxes levied and collected for and on account of the Monthly
Capacity Payments shall be deposited, as collected, to the credit of the Interest and
Sinking Fund. During each Fiscal Year while a Monthly Capacity Payment is
outstanding and unpaid, the governing body of the Member shall compute and ascertain a
rate and amount of ad valorem tax which together with any other lawfully available funds
that are on deposit in the Interest and Sinking Fund at the time of such levy will be
sufficient to provide and maintain a sinking fund adequate to pay the Monthly Capacity
Payments as such payments become due (but never less than 2% of the original aggregate
amount of the Monthly Capacity Payments as a sinking fund each year); and said tax
shall be based on the latest approved tax rolls of the Member, with full allowance being
made for tax delinquencies and the cost of tax collection. Said rate and amount of ad
valorem tax is hereby levied and is hereby ordered to be levied, against all taxable
property in the Member for each year while any of the Monthly Capacity Payments are
outstanding and unpaid; and said tax shall be assessed and collected each such year and
deposited to the credit of the aforesaid Interest and Sinking Fund. Said ad valorem taxes
to be sufficient to provide for the payment of the Monthly Capacity Payments, as such
payments come due, are hereby pledged for such payment, within the limit prescribed by
law.
7.4 Prepayments based upon Early Termination under the PPA. In the event that
CAPP shall receive a Buyer Termination Payment under Article 12 of the PPA, such
amount shall be assigned and paid to the Trustee for payment on the Bonds with such
payment to be applied to a prorata redemption of all outstanding maturities of such
Bonds. Such prorata redemption on the Bonds shall similarly be applied prorata to
reduce Member's Monthly Capacity Payments and the Monthly Capacity payments of
other Participating Members. If any balance of the Bonds remains unpaid after
application of the Buyer Termination Payment, then notwithstanding the obligation to
pay the Monthly Capacity Payment under Section 7.2 above, Member shall pay
Member's Energy Allocation Percentage of such balance within thirty (30) days
following receipt of notice from CAPP.
7.5 LAPP and Trustee as Third Party Beneficiaries. Member acknowledges that
LAPP and Trustee are intended third party beneficiaries of the obligation to pay Monthly
Capacity Payments and to make provision for payment from ad valorem tax revenues.
As part of the consideration for this Contract, Member grants to CAPP and to Trustee all
rights to enforce, by a mandamus action against Member and its governing body, the
provisions and obligations of this Article 7.
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7.6 Monthly Capacity Payments to be Unconditional. Except as provided herein,
including Section 6.3 hereof, the obligation of Member to make Monthly Capacity
Payments when due shall be absolute and unconditional. Notwithstanding any dispute
between Member and CAPP or any other Participating Member or person, the Member
shall make all Monthly Capacity Payments required hereunder when due and shall not
withhold any such payments pending final resolution of such dispute, nor shall Member
assert any right of set-off or counterclaim against its obligation to make such payments
required under this Contract. Member's obligation to make Monthly Capacity Payments
during the Term shall not be abated because of accident or unforeseen circumstances.
However, nothing herein shall be construed to release CAPP from the performance of its
obligations hereunder; if CAPP should fail to perform any such obligation, Member may
institute such legal action against CAPP as Member may deem necessary to compel the
performance of such obligation.
7.7 Member's Default on Capacity Prepayment and CAPP's Remedies.
(a) Events of Default. Each of the following occurrences or events for
the purpose of this Contract is hereby declared to be a Default:
(i) The failure to make payment of the Capacity Prepayment when
the same becomes due and payable; or
(ii) Default in the performance or observance of any other
covenant, agreement or obligation of the Member, the failure to perform
which adversely affects CAPP, including, but not limited to, its prospect
or ability to be repaid in accordance with this Contract, and the
continuation thereof for a period of 30 days after notice of such default is
given by CAPP or Trustee to the Member.
(b) Remedies for Default.
(i) Upon the happening of a Default, then and in every case,
CAPP or an authorized representative thereof, including, but not linuted
to, the Trustee, may proceed against the Member, or any official, officer or
employee of the Member in their official capacity, for the purpose of
protecting and enforcing the rights of CAPP under this Contract, by
mandamus or other suit, action or special proceeding in equity or at law, in
any court of competent jurisdiction, for any relief permitted by law,
including the specific performance of any covenant or agreement
contained herein, or thereby to enjoin any act or thing that may be
unlawful or in violation of any right of CAPP hereunder or any
combination of such remedies.
(ii) It is provided-that all such proceedings shall be instituted
and maintained for the benefit of CAPP and/or owners of the Bonds.
23
(c) Remedies Not Exclusive.
(i) No remedy herein conferred or reserved is intended to be
exclusive of any other available remedy or remedies, but each and every
such remedy shall be cumulative and shall be in addition to every other
remedy given hereunder or now or hereafter existing at law or in equity;
provided, however, that notwithstanding any other provision of this
Contract, the right to accelerate the PPA Capacity Payments shall not be
available as a rernedy under this Contract.
(ii) The exercise of any remedy herein conferred or reserved
shall not be deemed a waiver of any other available remedy. The failure
to exercise a remedy upon a Default shall not be deemed to be a waiver of
the right to exercise such remedy in the future.
(iii) By accepting the delivery of the Capacity Prepayment
authorized under this Contract, CAPP agrees that the certifications
required to effectuate any covenants or representations contained in this
Contract do not and shall never constitute or give rise to a personal or
pecuniary liability or charge against the officers, employees or trustees of
the Member.
(iv) No official or officer, agent, or employee of the Member,
shall be charged personally by CAPP or the Tnistee with any liability, or
be held personally liable under any term or provision of this Contract, or
because of a Default or Default under this Contract.
ARTICLE 8
BILLING AND PAYMENT
8.1 Invoice and Payment Schedules. LAPP shall cause the Designated Agent(s) to
submit invoices to Member for the Contract Price. All such invoices under this Contract
shall be due and payable in accordance with the invoice instructions of the Designated
Agent(s) consistent with ERCOT protocols, Rules of the Public Utility Commission of
Texas, and contractual agreements between CAPP and Designated Agents. CAPP will
cause the Designated Agent(s) to render to Member a separate invoice for the Contract
Price for each ESI-ID on a billing month basis. All Monthly Capacity Payment invoices
under this Contract pursuant to Article 7, shall be separately due and payable directly to
CAPP or the Trustee in accordance with the invoice instnictions of CAPP, Trustee or
Designated Agent.
8.2 Method of Payment. Each Party will make payments by electronic funds
transfer, or by other mutually agreeable method(s), to the account designated by the other
Party. Any amounts not paid by the due date will be deemed delinquent and will accrue
24
interest at the Interest Rate, such interest to be calculated from and including the due
date, but excluding the date the delinquent amount is paid in full. Because certain
charges are aggregated between Member and Participating Members, Member
understands that a failure to timely pay an invoice may result in additional costs, interest
charges, and damages that CAPP may be required to pay to Facility Owners under the
PPA and that are disproportionate to the default by Member. Member agrees, in the
event of its default, to reimburse CAPP for all costs, interest charges, and damages that it
may be required to pay to Facility Owners that result from Member's default under this
Contract. Except for Capacity Payments that are required to be paid by Member directly
to CAPP or the Trustee, CAPP may require Member to pay all or any of the payments
required to be paid by Member under this Contract to Designated Agent(s) appointed by
CAPP.
8.3 Netting. Member understands that CAPP and Facility Owners have agreed to
discharge mutual debts and payment obligations due and owing to each other on the same
payment due date pursuant to the PPA through netting, so that only the excess amount
remaining due shall be paid by the Party who owes such excess amount. All payment
obligations of the Parties and all rights to receive payment under this Contract are subject
to the netting provisions contained in the PPA. Additionally, it is understood that
Designated Agents may net credits and supplemental payments in monthly invoices of
the Contract Price.
8.4 Disputed Charges. A Party may, in good faith, dispute the correctness of any
invoice or any adjustment to an invoice, rendered under this Contract or adjust any
invoice for any arithmetic or computational error within twenty-three (23) months of the
date the invoice, or adjustment to an invoice, was rendered, except when a dispute is
limited by ERCOT protocols, Rules of the Public Utility Commission or contracts
between CAPP and Designated Agents. In the event an invoice or portion thereof, or any
other claim or adjustment arising hereunder, is disputed, payment of the undisputed
portion of the invoice shall be required to be made when due, with notice of the objection
given to the other Party. Any invoice dispute or invoice adjustment shall be in writing
and shall state the basis for the dispute or adjustment. Payment of the disputed amount
shall not be required until the dispute is resolved unless CAPP is required to pay the
disputed amount to Facility Owners under the PPA. Upon resolution of the dispute, any
required payment shall be made within five (5} Business Days of such resolution (along
with interest accrued, if any, on account thereof under the PPA). Inadvertent
overpayments shall be returned upon request or deducted by the Party receiving such
overpayment from subsequent payments, with interest accrued only to the extent it
accrues under the PPA. Any dispute with respect to an invoice is waived unless the other
Parry is notified in accordance with this Section 8.4 within twenty-three (23} months or
shorter period if required by ERCOT protocols, Rules of the Public Utility Commission
or contracts between LAPP and Designated Agents after the invoice is rendered or any
specific adjustment to the invoice is made.
25
8.5 Audits. Each Party has the right, at its sole expense and during normal working
hours, to examine copies of the relevant portions of the records of the other Party to the
extent reasonably necessary to verify the accuracy of any invoice, charge or calculation
made pursuant to tlvs Contract. If any such examination reveals any inaccuracy in any
invoice or calculation, the necessary adjustments in such invoice or calculation, and the
payment of any adjustment thereto, shall be paid, with interest at the Interest Rate
calculated from the date the overpayment or underpayment was made until paid, by the
responsible Party pursuant to the terms of the PPA, the Wrap Contract or the applicable
contract between CAPP and Designated Agents.
8.6 ERGOT Barred Issue. It is recognized by the Parties that ERGOT has some
established time periods for disputing certain matters and the Parties expressly desire to
be bound by such periods in their performance under tlus Contract. Therefore,
notwithstanding any provisions in Article 7 of this Contract to the contrary, in the event
CAPP is barred from disputing and correcting or adjusting with ERGOT any matter of
any nature whatsoever affecting any matter covered by this Contract (an "ERGOT
Barred Issue"), then Member shall be barred for all purposes from disputing any portion
of any statement, invoice, notice or other matter hereunder to the extent that CAPP is
unable to receive adjustment from or dispute such matter with ERGOT because such
statement, invoice, notice or other matter is an ERGOT Barred Issue, even if Member's
notice is given within the twenty-three (23) months' period set forth in this Article 8.
ARTICLE 9
DESIGNATION OF MEMBER'S DELIVERY POINTS
9.1 Designation of Member's Delivery Points. Member has designated its initial
Member's Delivery Points by identifying the ESI-IDs and providing that information to
CAPP's Designated Agent(s). Such Member's Delivery Points are all points of receipt
for electric service that are subject to retail choice. Member shall have a continuing
obligation to provide CAPP and Designated Agent(s) with an updated listing of ESI-IDs
by location and profile type.
ARTICLE 10
SECURITY
10.1 Security from Facilities Owners. The Facility Owners and Guarantor have
agreed under Article 9 of the PPA to provide CAPP a first lien on certain collateral on a
pari passu basis with other creditors. Member acknowledges that it has no direct right to
enforce the lien, nor does it have any individual interest in the Facilities in the event of
foreclosure of the first lien, nor may it exercise remedies available to CAPP under the
PPA. To the extent that CAPP shall determine that it is in CAPP's interest to (i) agree to
renewals, modifications, amendments, and refinancing of the first lien indebtedness
described in the PPA, (ii) exercise or fail to exercise one or more remedies available to it
under the PPA, or (iii) terminate or modify the PPA, Member irrevocably appoints the
Board of Directors of CAPP as its agent and attorney in fact to enter into agreements
26
appropriate to the situation, including, but not limited to, agreements to substitute
collateral, and agreements to release or partially release liens. 'ihe power herein granted
to CAPP and its Board of Directors by Member is a power coupled with an interest that
may not be revoked while all or any portion of the Bonds is unpaid.
10.2 Collateral Assignment of the Contract to Trustee for Bonds. This Contract
and the Participant Contracts shall be collaterally assigned to the Trustee under the Bonds
as security for the repayment of the Bonds to the extent of the Capacity Payment payable
pursuant to Article 7 of this Contract and each of Participant Contracts.
ARTICLE 11
DEFAULT
11.1 Defaults by Facility Owners; Defaults by Participating Members. In the event
of default by Facility Owners under the PPA, or in the event of a default by Member or
by a Participating Member under a Participant Contract, the Parties agree and stipulate
that decisions as to the exercise or non-exercise of remedies upon such default shall be
solely vested in CAPP, as its Board of Directors may determine from time to time.
Member acknowledges that CAPP's rights to elect remedies may be subject and
subordinate to rights granted to or reserved by the holders and owners of the Bonds or the
Trustee thereof.
11.2 Default by CAPP. Except as otherwise excused under this Contract, the
occurrence of any of the following shall constitute an event of default by LAPP:
(a) Failure of CAPP to pay the Capacity Prepayment as required under
the PPA;
(b) Failure by CAPP to timely perform its covenants under the Bonds,
including payments required by it, unless such failure is caused by the failure of
Member under this Contract or of one or more Participating Members under the
Participant Contracts to pay CAPP sums required under Article 6; or
(c) CAPP breaches any material contractual obligation under this
Contract and such breach continues for a period of thirty (30) Days after the date
on which written notice thereof is received from Member by CAPP.
11.3 Default by Member. Except as otherwise excused under this Contract, the
occurrence of any of the following shall constitute an event of default by Member:
(a) Member fails to accept delivery of the Products, or any portion
thereof from CAPP. In the event of such failure, CAPP may, in addition to other
remedies available to it under this Contract, provide the unaccepted Products to
another Participating Member or, if no Participating Member elects to accept such
27
Products, to a third party at such price as CAPP may negotiate in the marketplace.
If the price obtained in the marketplace is less than the price Member would have
been required to pay for such Products, Member shall pay CAPP and CAPP may
recover from Member (i) the positive difference, if any, obtained by subtracting
what was received from the Participating Member or third party from what would
have been received from Member had Member accepted the full delivery of
Products required of it, and (ii) all costs of collection incurred by CAPP,
including reasonable attorney's fees;
(b) Except for disputed charges arising under Section 8.4, Member
fails to pay amounts due to CAPP as and when required under this Contract,
which failure continues for a period of three (3) Business Days after the date on
which written notice of a prospective Default is received by Member from CAPP;
(c) Failure by Member to levy the rate and amount of ad valorem taxes
out of the maintenance tax of Member, and failure by Member to establish and
maintain a sinking fund for the Monthly Capacity Payments and CAPP fees as
required under Section 7.3, above;
(d) Failure by Member to pay to CAPP any sum of money required to
be paid by Member under this Contract;
(e) Member breaches any material contractual obligation under this
Contract and such breach continues for a period of twenty-eight (28) Days after
the date on which written notice thereof is received by the breaching Party;
(f) Member becomes Bankrupt.
11.4 Remedies of CAPP in the event of default by Member. Unless otherwise
limited by the terms of this Contract, in the event that Member shall default in the
performance of its obligations under this Contract, CAPP may:
(a) Suspend delivery of Products to Member, and provide such
Products to one or more Participating Members or third parties until such default
is cured;
(b) Then and in every case, LAPP or an authorized representative
thereof may proceed against the Member, or any off cial, officer or employee of the
Member in their official capacity, for the purpose of protecting and enforcing the rights
of CAPP under this Contract, by mandamus or other suit, action or special proceeding in
equity or at law, in any court of competent jurisdiction, for any relief permitted by law,
including the specific performance of any covenant or agreement contained herein, or
thereby to enjoin any act or thing that may be unlawful or in violation of any right of
CAPP hereunder or any combination of such remedies;
28
(c) Suspend performance of CAPP's obligations to Member under this
Contract until the earlier of (i) the Day the Default has been cured in accordance
with the terms of this Contract, except for Member's obligations to make Monthly
Capacity payments under Article 7 hereof which shall not be affected by any such
action;
(d) Exercise any other remedy available to CAPP at law or in equity.
In addition to all of the rights and remedies provided to CAPP by the laws of the
State of Texas, and in addition to the remedies set forth above, the Member covenants
and agrees that in the event of its default under this Contract, including failure to pay
Monthly Capacity Payments and payments under Section 7.5 when due or Energy
Payments when due after the Member has Appropriated for such payments, or, in the
event it fails to make the payments required to be made into the Interest and Sinking
Fund or defaults in the observance or performance of any other of the contracts,
covenants, conditions or obligations set forth in this Contract, the following remedies
shall also be available:
(e) CAPP, the trustee if LAPP has assigned all or part of this Contract
to a trustee for the benefit of bond owners, shall be entitled to a writ of mandamus
issued by a court of competent jurisdiction compelling and requiring Member and
the officials thereof to observe and perform all agreements, covenants, obligations
and conditions prescribed in this Contract;
(f) Any delay or omission to exercise any right or power accruing
upon any default shall not impair any such right or power nor be construed to be a
waiver of any such default or acquiescence therein, and every such right and
power may be exercised from time to time and as often as may be deemed
expedient; and
(g) Any other remedies available to CAPP at law or in equity.
11.5 Remedies of Member in the Event of Default by CAPP. Unless otherwise
limited by the terms of this Contract, in the event that CAPP shall default in the
performance of its obligations under this Contract, Member may:
(a) Then and in every case, Member may proceed against CAPP, or
any official, officer or employee of CAPP in their official capacity, Sue for the purpose
of protecting and enforcing the rights of Member under this Contract, by mandamus or
other suit, action or special proceeding in equity or at law, in any court of competent
jurisdiction, for any relief permitted by law, including the specific performance of any
covenant or agreement contained herein, or thereby to enjoin any act or thing that may be
unlawful or in violation of any right of Member hereunder or any combination of such
remedies;
29
(b) Terminate this Contract, except for Member's obligations to make
Monthly Capacity Payments under Article 7 hereof which shall survive any termination
of this Contract;
(c) Exercise any other remedies available to Member at law or in
equity.
11.6 No Waiver in Event of Default. Pursuit by either Party of any remedy for
default pursuant to Article 11 of this Contract shall not constitute a forfeiture or waiver of
any amount due by the defaulting Party or of any damages occurring by reason of the
violation of any terms, provisions, or conditions of this Contract, provided however, that
in no event shall CAPP be required to return to Member any sums paid by Member to
CAPP for Capacity Prepayment. No waiver of any default or breach of this Contract
shall be deemed or construed to constitute a waiver of any other violation or breach of
any of the terms, provisions, or conditions of this Contract. Forbearance to enforce one
or more of the remedies available upon the occurrence of an event of default shall not
constitute a waiver of that or any subsequent default or breach.
ARTICLE 12
INDEMNIFICATION; LIMITATION OF LIABILITY
12.1 Member's Indemnification of CAPP. To the extent permitted by the
Constitution and laws of the State of Texas, and with full reservation of all defenses and
immunities available under the Law, Member agrees to and shall indemnify, defend, and
hold harmless CAPP and all of CAPP's officers, directors, shareholders, representatives,
and employees, fiom and against all Indemnified Claims, including Indemnified Claims
for personal injury, death, or damages to property, occurring after the Facility Owners'
Delivery Points, arising out of or related to the Products. Notwithstanding the foregoing,
CAPP agrees and understands that Member cannot indemnify LAPP, Facility Owners, or
any individual associated with either of them from and against their own gross negligence
and willful misconduct. To the extent that CAPP has agreed to indemnify Facility
Owners pursuant to Article 13 of the PPA, then Member agrees to and shall indemnify,
defend, and hold harmless CAPP and all of CAPP's officers, directors, shareholders,
representatives, and employees, from and against all Indemnified Claims that CAPP has
made to Facility Owners, but only to the extent permitted by the Constitution and laws of
the State of Texas, and with full reservation of all defenses and immunities available
under the Law.
12.2 Claims arising on Facility Owners side of the Facility Owners' Delivery
Point. To the extent that claims for personal injury, death, or damages to
property: (a) occur at and/or before the Facility Owners' Delivery Point, (b) arise out of
or are related to the Product and Products, and (c) are covered as an Indemnified Claim
by Facility Owners for the benefit of CAPP, Member and Participating Members, and
each of their respective officers, officials, directors, and employees, then CAPP, on
behalf of itself, Member, and Participating members, agrees to enforce the indemnity and
30
duty of defense that Facility Owners have granted to CAPP and Member under Article 12
of the PPA.
12.3 Indemnified Claims. "Indemnified Claims", as used in Sections 12.1 and 12.2,
above, means all third party claims or actions, threatened or filed and, whether
groundless, false, fraudulent or otherwise, that directly or indirectly relate to the subject
matter of an indemnity, and the resulting losses, damages, expenses, attorneys' fees and
court costs, whether incurred by settlement or otherwise, and whether such claims or
actions are threatened or filed prior to or after the termination of this Contract.
12.4 Limitation of Remedies, Liability and Damages. EXCEPT AS SET FORTH
IN THIS AGREEMENT, THERE IS NO WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE, AND ANY AND ALL IMPLIED
WARRANTIES ARE DISCLAIMED. THE PARTIES CONFIRM THAT THE
EXPRESS REMEDIES AND MEASURES OF DAMAGES PROVIDED IN THIS
AGREEMENT SATISFY THE ESSENTIAL PURPOSES HEREOF. FOR BREACH
OF ANY PROVISION FOR WHICH AN EXPRESS REMEDY OR MEASURE OF
DAMAGE IS PROVIDED, SUCH EXPRESS REMEDY OR MEASURE OF
DAMAGES SHALL BE LIMITED AS SET FORTH IN SUCH PROVISION AND ALL
OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED
EXCEPT AS SET FORTH IN ARTICLE 11 OF THIS AGREEMENT. IF NO
REMEDY OR MEASURE OF DAMAGES IS EXPRESSLY PROVIDED HEREIN,
THE OBLIGOR'S LIABILITY SHALL BE LIMITED TO DIRECT ACTUAL
DAMAGES ONLY, SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE
AND EXCLUSIVE REMEDY AND ALL OTHER REMEDIES OR DAMAGES AT
LAW OR IN EQUITY ARE WAIVED. UNLESS EXPRESSLY HEREIN PROVIDED,
NEITHER PARTY SHALL BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL,
PUNITIVE, EXEMPLARY OR INDIRECT DAMAGES, LOST PROFITS OR OTHER
BUSINESS INTERRUPTION DAMAGES, BY STATUTE, IN TORT OK CONTRACT,
UNDER ANY INDEMNITY PROVISION OR OTHERWISE. IT IS THE INTENT OF
THE PARTIES THAT THE LIMITATIONS HEREIN IMPOSED ON REMEDIES AND
THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE CAUSE OR
CAUSES RELATED THERETO, INCLUDING THE NEGLIGENCE OF ANY PARTY,
WHETHER SUCH NEGLIGENCE IS SOLE, JO1NT OR CONCURRENT, OR
ACTIVE OR PASSIVE. TO THE EXTENT ANY DAMAGES REQUIRED TO BE
PAID HEREUNDER ARE LIQUIDATED, THE PARTIES ACKNOWLEDGE THAT
THE DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE, OR
OTHERWISE OBTAINING AN ADEQUATE REMEDY IS INCONVENIENT AND
THE DAMAGES CALCULATED HEREUNDER CONSTITUTE A REASONABLE
APPROXIMATION OF THE HARM OR LOSS.
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ARTICLE 13
RF,PRESENTATIONS
13.1 Mutual representations and warranties. Each Party represents and warrants to
the other Party that:
(a) Such Party has the power and authority to execute, deliver and
perform its obligations tinder this Contract. Such Party has authorized the
execution and delivery of this Contract by the person(s) executing this Contract
below.
(b) No provision contained in Member's charter or enabling
legislation, as the case may be, if any, prohibits Member from entering into this
Contract and performing the obligations required of Member under this Contract.
(c) This Contract constitutes a legal, valid and binding obligation of
such Party, except as the enforceability of this Contract may be limited by the
effect of any applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditor's rights generally and by general principles of
equity which permit the exercise of judicial discretion.
(d) Neither the execution or delivery of this Contract results in any
breach of or constitutes any default under any material agreement to which such
Party is bound or causes such Party to be in violation of any Law, regulation,
administrative or judicial order or process or decision to which such Party is a
party or by which it or its properties are bound or affected.
(e) It is not Bankrupt and there are no proceedings pending or being
contemplated by it or, to its knowledge, threatened against it which would result
in it being or becoming Bankrupt.
(f j It is duly organized and validly existing under the laws of the
jurisdiction of its organization or incorporation and, if relevant under such laws,
in good standing.
(g) All governmental and other authorizations, approvals, consents,
notices and filings that are required to have been obtained or submitted by it with
respect to this Contract or other document relating hereto or thereto to which it is
a party have been obtained or submitted and are in full force and effect and all
conditions of any such authorizations, approvals, consents, notices and filings
have been complied with.
(h) No Default with respect to it, or event which with notice and/or
lapse of time would constitute such a Default, has occurred and is continuing and
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no such event or circumstance would occur as a result of its entering into or
performing its obligations under this Contract or other document relating hereto
or thereto to which it is a party.
There is not pending or, to its knowledge, threatened against it or any of its
Affiliates any action, suit or proceeding at law or in equity or before any court, tribunal,
governmental body, agency or official or any arbitrator that is likely to affect the legality,
validity or enforceability against it of this Contract, or other document relating hereto or
thereto to which it is a party or its ability to perform its obligations undcr the same.
ARTICLE 14
NOTICES
14.1 Notices. All notices and other communications required or permitted by this
Contract or by Law to be served upon or given to a Party by the other Party shall be
deemed duly served and given when received after being delivered by hand, or courier
service, or sent by confirmed facsimile or certified mail, return receipt requested, postage
prepaid, to the following address.
To Member:
Attention:
Telephone:
Facsimile:
To CAPP:
Attention:
Telephone:
Facsimile:
Notices shall, unless otherwise specified herein, be in writing and may be
delivered by hand delivery, United States mail, overnight courier service or facsimile.
Notice by facsimile or hand delivery shall be effective at the close of business on the Day
actually received, if received during business hours on a Business Day, and otherwise
shall be effective at the close of business on the next Business Day. Notice by overnight
33
United States mail or courier shall be effective on the next Business Day after it was sent.
A Party may change its addresses by providing notice of it in accordance herewith.
ARTICLE 15
CONFIDENTIALITY
15.1 Confidential Information. Parties to this Contract acknowledge that they are
obligated to protect the confidentiality of certain information provided by Luminant to
CAPP in the course of negotiating the PPA pursuant to Article 17 of the PPA. Member
agrees to be bound by the provisions of Article 17 of the PPA regarding any information
that counsel to CAPP indicates in writing should be kept confidential and to promptly
advise counsel to CAPP of any request for Public Information pursuant to Chapter 552 of
the Texas Government Code for public revelation of confidential information provided to
Member in its consideration of this Contract and related documents.
ARTICLE 16
ASSIGNMENT
16.1 Assignment. Except as provided otherwise in this Contract, neither Party shall
assign this Contract or its rights hereunder without the prior written consent of the other
Party, which consent shall not be unreasonably withheld or delayed; provided, however,
that the assignee is at the time of assignment a Member of CAPP. In no event shall the
assigning Party be relieved from liability under this Contract upon assignment.
ARTICLE 17
CONTINUING DISCLOSURE
17.1 Continuing Disclosure Undertaking of Members. At such time that Member's
aggregated unpaid Monthly Capacity Payments equals at least ten percent (10%) of the
outstanding principal amount of the Bonds, Member agrees to provide annually to each
Nationally Recognized Municipal Securities Information Depositories ("NRMSIR") and
any State Information Depositories ("SID") financial information and operating data with
respect to the Member of the general type hereinafter described. Subject to the foregoing
sentence Member agrees to provide, within 195 days after the end of each Fiscal Year
thereof ending in or after 2009, financial information and operating data with respect the
Member. Any financial statements so to be provided shall be prepared in accordance
with the accounting principles as Member may be required to employ from time to time
pursuant to state law or regulation.
17.2 Financial Statements. If Member is required to file financial information
pursuant to Section 17.1 and Member commissions an audit of such statements and the
audit is completed within the period during which they must be provided, the financial
statements to be provided shall be audited. If the audit of such financial statements is not
complete within such period, then Participating Member shall provide unaudited financial
statements and thereafter audited financial statements for the applicable fiscal year to
34
CAPP, each NRMSIR and any SID, when and if the audit report on such statements
become available.
17.3 Change of Fiscal Year. If Member is required to file financial information
pursuant to Section 17.1 and Member changes its Fiscal Year, it shall be the duty of such
Member to notify each NRMSIR and any SID of the change (and of the date of the new
Fiscal Year end) prior to the next date by which such Member otherwise would be
required to provide financial information and operating data pursuant to this Article. The
financial information and operating data to be provided pursuant to this Article may be
set forth in full in one or more documents or may be provided pursuant to this Article
may be set forth in full in one or more documents or may be included by specific
reference to any document (including an official statement or other offering document, if
it is available from the Municipal Securities Rulemaking Board ("MSRB") that
theretofore has been provided to each NRMSIR and any SID or filed with the SEC.
17.4 Failure to Provide Continuing Disclosure. Member shall notify CAPP, any
SID and either each NRMSIR or the MSRB , in a timely manner, of any failure of such
Member to provide financial information or operating data in accordance with this Article
by the time required thereby and hereby. No default by Member in observing or
performing its obligations as described in this Article shall constitute a breach of or
default under this Contract for purposes of any other provision of this Contract. Nothing
in this Article is intended or shall act to disclaim, waive, or otherwise limit the duties of
any Member under federal and state securities laws. If Member fails to provide such
continuing disclosure required under this Article, CAPP shall use its best efforts to obtain
relevant financial information and operating data with respect to any such Participating
Member and to provide the same annually to each NRMSIR and any SID within 195 days
after the cnd of each Fiscal Year of any such Member.
17.5 Amendment of Continuing Disclosure. Member's undertaking under this
Article may be amended by Member, with the consent of CAPP, from time to time to
adapt to changed circumstances that arise from a change in legal requirements, a change
in law, or a change in the identity, nature, status, or type of operations of any Member,
but only if (1) the undertaking, as so amended, would have permitted an underwriter to
purchase or sell Bonds in the primary offering of such Bonds in compliance with the
Rule, taking into account any amendments or interpretations of the Rule since such
offering as well as such changed circumstances and (2) either (a) the holders of a
majority in aggregate principal amount of the outstanding Bonds consent to such
amendment or (b) a person that is unaffiliated with Member (such as nationally
recognized bond counsel) determined that such amendment will not materially impair the
interest of the holders and beneficial owners of the Bonds. If Member amends its
undertaking herein, it shall include with any amended financial information or operating
data next provided in accordance with this Article an explanation, in narrative form, of
the reason for the amendment and of the impact of any change in the type of financial
information or operating data so provided.
35
Member shall be obligated to observe and perform the covenants specified in this
Article for so long as, but only for so long as, Member remains an "obligated person"
with respect to the Bonds within the meaning of the Rule. The provisions of this Article
are for the sole benefit of the holders and beneficial owners of the Bonds, and nothing in
this Article, express or implied, shall give any benefit or any legal or equitable right,
remedy, or claim hereunder to any other person.
ARTICLE 18
TAX-EXEMPT BONDS
18.1 Tax-Exempt Bonds. The Parties understand and agree that CAPP will use
commercially reasonable efforts to provide for, but will not be liable for a failure to
produce, the lowest overall debt service cost for the Bonds. In connection therewith, the
parties intend that CAPP may, with the approval of the Member, issue refunding bonds to
refund the Bonds, if possible, the interest on which is excludable from the gross income
of the owners thereof for federal income tax purposes. The Parties acknowledge that,
under current federal tax laws, such tax-exempt financing of the Capacity Prepayment is
not permitted. The Parties further acknowledge their understanding that the federal
income tax laws impose certain restrictions on the use and investment of proceeds of tax-
exempt bonds and on the use of the property financed therewith and the output produced
therefrom. Accordingly, the Parties agree and covenant that if any refunding bonds are
offered to investors with the understanding that the interest thereon will be exempt from
federal income taxation, then the Parties, their assigns and agents, will take such action to
assure, and refrain from such action which will adversely affect, the treatment of such
refunding bonds as obligations described in Section 103 of the Internal Revenue Code of
1986. Should either Party fail to comply with such covenant, the effect of which being
that such refunding bonds no longer qualify as obligations described in the Internal
Revenue Code of 1986, such defaulting party shall be liable for all costs resulting from
the loss of the tax-exempt status of such bonds. The Parties hereby agree and covenant to
comply with all of the representations and covenants relating to such exemption which
are set out in any relevant trust indenture or bond resolution. The Parties further agree
and covenant that in the event any refunding bonds issued are to be tax-exempt, they will
modify such agreements, make such filings, restrict the yield on investments, and take
such other action necessary to fulfill the applicable provisions of the Internal Revenue
Code of 1986. For these purposes, the Parties may rely on the respective opinion of any
fern of bond attorneys selected by LAPP.
18.2 Agreement to Pay Beneficiary. In the event that tax-exempt refunding bonds
are issued with the consent of the Members as provided in the immediately preceding
paragraph above, Member hereby covenants and agrees to pay its proportionate share of
any deficiency to CAPP for deposit into the appropriate rebate fund at the times and as
described in the indenture of trust related to the Bonds to comply with the provisions of
Section 148(f)(2) of the Internal Revenue Code of 1986.
36
18.3 Financing. Member agrees to cooperate with CAPP in connection with the
issuance of the Bonds. Without limiting the foregoing, CAPP and Member acknowledge
that this Contract may be an integral part of the documentation securing the Bonds. At
CAPP's request, Member shall agree to amend this Contract to include any provision
which may reasonably be requested by the issuer of the Bonds, and to include any
provision that may be required to correspond to an amendment of the PPA; provided,
however, that no such amendment shall increase the burdens or obligations of Member
hereunder with respect to the price and purchase obligations set forth herein. Upon the
request of CAPP, Member agrees to negotiate in good faith and shall execute additional
documents, opinions and instruments reasonably requested by the proposed issuer of the
Bonds including (i) a consent and agreement that provides an additional reasonable
period of time to remedy any Default, and (ii) a legal opinion of counsel for Member
affirming the enforceability of this Contract against Member and other matters
reasonably requested, subject to customary exceptions and qualifications.
ARTICLE 19
MISCELLANEOUS
19.1 Applicable Law. This Contract is governed by and shall be construed under the
Laws of the State of Texas excluding any conflict of laws rules. The Parties submit to the
exclusive jurisdiction of the state and federal courts in Dallas County, Texas in
connection with any litigation arising hereunder.
19.2 Counterparts. `T'his Contract may be executed in more than one counterpart,
each of which shall be deemed to be an original, but all of which together shall constitute
one and the same document.
19.3 Waiver. No waiver of any breach of the terms of this Contract shall be effective
unless such waiver is in writing and signed by the Party against whom such waiver is
claimed. No waiver of any breach shall be deemed to be a waiver of any subsequent
breach.
19.4 Modification. The provisions of this Contract, including any exhibits, may only
be modified by written agreement duly executed by each Party.
19.5 Severability if any provision of this Contract shall be determined to be
unenforceable, void or otherwise contrary to Law, such condition shall in no manner
operate to render any other provision of this Contract unenforceable, void or contrary to
Law, and this Contract shall continue in force in accordance with the remaining terms
and provisions hereof, unless such condition invalidates the purpose or intent of this
Contract. In the event that any of the provisions, or portions or applications thereof, of
this Contract are held unenforceable or invalid by any court of competent jurisdiction,
Buyer and Seller shall negotiate in good faith to attempt to implement an equitable
adjustment in the provisions of this Contract with a view toward effecting the purposes of
this Contract by replacing the provision that is unenforceable, void, or contrary to Law
37
with a valid provision the economic effect of which comes as close as possible to that of
the provision that has been found to he unenforceable, void, or contrary to Law.
19.6 Requirements. Each Party shall timely comply with all then-current PUCT and
ERCOT requirements (including, without limitation, the ERCOT Guides) that are
applicable to it and shall reasonably cooperate upon reasonable notice with the other
Party to the extent necessary for the other Party to timely comply with then-current
PUCT and ERCOT requirements (including, without limitation, the ERCOT Guides) that
are applicable to it.
19.7 Entirety. It is the intention of the Parties that this Contract shall contain all
terms, conditions, and protections in any way related to, or arising out of, the sale and
purchase of the Products as contemplated herein, and supersedes all prior agreements
regarding the subject matter hereof, whether written or oral.
19.8 Captions, Titles and Headings. Captions, titles and headings used in this
Contract are for ease of reference only and do not constitute a part of this Contract.
19.9 Forward Contract. The Parties acknowledge and agree that this Contract
constitutes a "forward contract" within the meaning of the United States Bankruptcy
Code.
19.10 Further Assurances. Each Party shall, from time to time, upon the written
request of any other Party, execute and deliver such further instruments and documents as
shall be necessary to perform its obligations hereunder.
19.11 Survival. The confidentiality and audit provisions, indemnities, releases from
liability, and limitations on liability or damages expressed in this Contract shall, unless
otherwise provided herein, survive without limitation the termination, cancellation or
expiration of this Contract, and shall apply whether in contract, equity, or otherwise.
Notwithstanding the foregoing, the statute of limitations for bringing any action with
respect to this Contract or either Party's performance hereunder is not extended by the
provisions of this Section 19.11.
38
IN WITNESS WHEREOF, the Parties have caused this Contract to be executed
in their respective names by their duly authorized officers.
r Zod~
to
MEMBER: ,/~
CITYOF~~/~~'" ~~'
By: ~i~,G
Printed name:
Its: ,~ , ~
NOV 18 200$
Approved
39
Colleyville City Council
CAPP:
CITIES AGGREGATION POWER
PROJECT
By:
Date
ATTEST:
Printed name:
Its:
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