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Texas Utils Co 1988 Anual Rept. Related Info Encl
	ML20246A935
Person / Time
Site:	Comanche Peak
Issue date:	12/31/1988
From:	Farrington J, Nye E; TEXAS UTILITIES ELECTRIC CO. (TU ELECTRIC)
To:	;
Shared Package
ML20246A924	List: ML20246A919; ML20246A935;
References
	NUDOCS 8905080367
	Download: ML20246A935 (426)
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II G H l.I G 1988 1987 Change Utility Plant * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $17,391,133,000 $15,172,994,000 14.6 %
Construction Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,562,781,000 $ 1,688,831,000 (7.5)
Electric Energy Sales in Kilowatt-hours (000's) . . . . . . . . . . . . 80,724,546 77,772,652 3.8 Peak Demand (Kilowatts)t . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,620.000 16,680,000 5.6 Operating Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,153,675,000 $ 4.082,923,000 1.7
. Fuel and Purchased Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,609,445,000 $ 1,585,610,000 1.5 Operating Expenses t . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,590,937,000 $ 1,648,430,000 (3.5)
Consolidated Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 642,671,000 $ 679,976,000 (5.5)
Earnings per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4.00 $ 4.55 (12.1)
Dividends Declared per Share . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.88 $ 2.80 2.9 Book Value per Share * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $33.38 $33.02 1.1
' Customers * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,110,527 2,094,866 0.7 Employees * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,669 16,086 (2.6) !
End ofyear 1 1988 and 1987 include 160,000 and i13,000 kilovatts ofinterruptible dernand, respectively t Ercludesfuelandpurchasedpower t k ~j $
CONTENTS ' Continuing economic mcovery seen in improving 1988 indicators, and .
given impetus by major sed.ce area relocations and projects announced ' '
Management's Letter . . . . . . . 2 . during the year. ..
System Companies . . . . . . . . . 4 System Report . . . . . . . . . . . . 5 Customers' usage sets new mcords with all-time highs in peak demand :
and kilowatt-hour requirements.'
Financial Report . . . . . . . . . . 15 .(3,,page,$,7)-
Shreholder Information . . . 40
1988 results reflect further gal $s in productivity as operating expenses .
Directors and Officers . . . . . . 41 and fuel costs are reduced.
r (see page 8-9)
Planning and investing to serve future customer needs are based 'on I a mix of resources that provide flexibility and diversity.
(see pages 10-11) 1
Prognss made toward a license for needed Comanche Peak. units
through NRC approved programs to effectively resolve concerns, and !
. a milestone settlement with intervenor. . T '
(see pages 12-14)
,=
Competitive rates maintained throughout 1988 as TU Electric's residen-tial bills were sixth lowest of the nation's 25 largest cities.
(see page 14) l 1
To The Shareholders 1988: A year ofsigm'ficant progress There were a number of posi- make the company a significant Regulatory Commission staff tive events for the Company asset in attracting new business favorably assessed the program d during 1988, including signifi- andindustryand wereamong the and its results. The NRC's cant progress in completing the reasons the Department of Systematic Assessment of Comanche Peak nuclear plant Energychosetolocate the Super Licensee Performance Board and obtaining an operating Collider in the service area. The also gave a positive review of the license,and encouragingsigns of company's residential rates plant,saying performancelevels a rebounding service area during 1988 remt.med sixth were abovethose needed to meet economy that promise stronger lowest amongthe 251argest eities regulatory requirements. ,
growth in the future. in the nation. During 1988,TU Electric and !
Comanche Peak is an impor- Building on efficiencies gained the intervenor in the licensing tant part of 3e Company's from the reorganization, the proceeding, Citizens Association investment in the future of its System continued to improve for Sound Energy, reached an ,l service area. The population of productivity, serving 480,000 unprecedented agreement under 1 Texas is expected to grow at more customers at the end of which CASE withdrewits inter-more than twice thenationalrate 1988 than in 1981 with the same vention and accepted an ongoing through the next 35 years, and number of employees. The role,throughmembershiponthe i the plant willbe essentialto con- Mining Company reduced the plant's Operations Review Com-tinue providing our customers cost oflignite to thelowest level mittee,in the resolution of tech- !
with dependable electric service since 1984, and the Fuel Com- nicalissues and safety concerns. l and to meet this growth, pany's efforts helped cut thecost The Atomic Safetyand Licen-The need for Comanche Peak of gas forthe fourth consecutive sing Board accepted the settle-also was underscored duringthe year to the lowest price since ment, dismissed the licensing year by several major economic 1980.Thesecontinuingeffortsto proceedingsand disbanded.While announcements. lower costs and improve effi- all remaining issues must be Theserviceareawaschosenas ciency will help keep TU Elec- resolved to the satisfaction of the the location for the Supercon- tric's rates competitive. NRC, dismissal of the licensing ducting Super Collider, which, The System's commitment to case removed someuncertainties pending funding by Congress, providing reliable, low-cost ser- that could haveadversely affect-will be one of the nation's most viceisreflectedinits 10-year plan ed the plant's cost and schedule.
important science researchinstal- for meeting growth and helping Because of thecomprehensive lations, bringing thousands of support economic development reinspection and design valida-new jobs to the Dallas-Fort in theservice aretthrough a mix tion programs, Comanche Peak Worth Metroplex. The reloca- of available energy resources. will offer the highest degree of tion to the area of two major These include combustion tur- safety assurance, and manage-corporate facilities - GTE bines, cogeneration, load mentis confident that allrequire-Telephone Operations and a management, threelignite gener- rants for an operating license Fujitsu America Inc. telecom- ating units scheduled for service will be met.
munications manufacturing and in the mid to late 1990s and the Comanche Peak Unit 1 is research complex - also will Comanche Peak nuclear plant. expected to be in commercial boost employment. In addition, Significant progress was made operation before the summer construction began on a new in 1988 toward licensing peak season of 1990. Construc- i U.S. Treasury Printing Plant and Comanche Peak and placingitin tion of Unit 2 was suspended in !
on Alliance Airport,amajorall- operation.The reinspection and the spring of 1988, and it is l industrial airport complex, design validation program was expected to be resumed in 1 The low rates and reliable completed successfully, and mid-1989, with commercial service offered by TU Electric during the year the Nuclear operation before the summer 2
I i
peak season of 1992. The balance of theCompany's During 1988, TU Electric cash requirements came from agreed to repurchase the 6.2 long-term fm' ancing, including percent interest in Comanche about $430 million from sales of 4 Peak owned by the Texas
~
common stock. $151 million of Municipal Power Agency and this amount was from par-the 3.8 percent owned by Brazos ticipation in the dividend ; ;
Electric Power Cooperative,Inc. reinvestment and employee '
and settle pendinglitigation with savings plans. .x -
the parties.This additional 10% In February 1989, the Board -
interest will be needed to help raised the regular quarterly divi-meet growth in customers' use dend from 72 cents per share to of electricity. 73 cents.The new quarterly rate Because of theuniquecircum- is payable on April 3. Dividends . . . . _ . . . . . . . . . .
stances of its construction, declared on the common stock .
Comanche Peak's cost is more have been increased for 42 JERRYFARRINGTON than had been anticipated. Even consecutive years.
so, the plant willbe oflong-term The System hasacommitment Chairman of the Board beneff' to TU Electric's cus- to the communities it serves to tomers and the economic health provide the reliable, low-cost j of the servicearea.Theareamust electric service they need to !
continue to have a sound utility support long-term economic !
infrastructure to attract and keep growth. Weareableto carry out I new businesses, industry and that commitment because of the jobs for a growing population, hard work of our employees, i Comanche Peak, with its long- who continue to reduce costs, . J term fuel diversity and fuel cost improve productivity and pro-
]
stability, is vital to the reliable vide a high quality of service to l electricity supply needed to customers. Through their
~
, 1 ..
i support economic development, efforts, we are making a sound 4 -1 y andit can beplacedin service for investment in the economic 4 IQ a reasonable rate increase. future of the area we serve. The '
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TheCompany's 1988 earnings dedication of employees and the .-
were affected by the temporary continuedinterest and supportof -
, I discontinuance of the accrualof our shareholders are sincerely l Allowance for Funds Used appreciated. )
During Construction on .;
Comanche Peak Unit 2 during -
the suspension of construction.
February 17,1989 RMME However, some of the impact President was offset by a 3.8 percent increase in energy sales and the Company's continuing produc- O.
tivityefforts. Earnings per share of common stock were $4.00, compared to $4.55 in 1987.
Construction expenditures during the year totalled $1.56 billion. Cash flows from opera-tions after common dividends were paid, provided 15.6 percent of1988 constructionexpenditures.
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Economic Outlook Brightens New projects to increase investment in future of area The area of Texas served by at year-end. This is lower than In November, a location the System has a diversified the 6.2Wo level for the State and about 35 miles south of the economy with continuing expan- slightly less than the December Metroplex was selected for the sion and strong potential for 1987 rate of 5.590. In the Dallas / S5.4 billion Superconducting future growth. Rich in energy Fort Werth Metroplex the year- Super Collider,whichis expected and other resources,it also has a end 1938 rate of 4.9% was down to have 3,000 permanent em-broad mix of industries, cor- from 5.3% a year earlier. ployees.The federal project, the porate headquarters and com- Several major relocations, largest to come to Texas since mercial activities. newindustries and projects were NASA,willmaketheareaoneof Key factors in the area's announced or moved to the the nation'sleadingresearch and development are its strategic service area in 1988. In the scientific centers.
location, a favorable business spring, J.C. Penney Company Some forty other industries and political climate and a movedits nationalheadquarters and facilities were announced vigorous, skilled work force. and some 3,800 jobs to the during 1988 for service area Added impetus to growth is Metroplex. Later in the year, locations, with a potential for being provided by the newly GTE announced that its tele- thousands of additional jobs.
created State Department of phone operations headquarters, Construction has already begun Commerce, a new statewide with 4,000 jobs,would be moving in the Fod Worth area on a new Texas Chamber of Commerce to Irving. Fujitsu America,Inc., U.S. Treasury Bureau of and increased economic selected Richardson for a major Engraving and Printing plant development efforts by TU telecommunications manufac- and on Alliance Airport,theonly Electric personnel, turing and research complex. airport designed and built by the During 1988, the outlook for Fujitsu's long-range plans Federal Aviation Administration the service area improved, with project employment of 5,000 at strictly for industrial and an unemployment rate of 5.2% the site by the year 2000, business use.
Commitment to Service ca = paar mee's record customer demand Employees' efforts Tu Electric customers broke
. the hourly peak load record on re[/eCled M reCordper[orManCe the hottest day of the summer, August 8, with a demand of 17,620,000 kilowatts. This sur-Providing dependable electric favorableopinion wasat arecord passed the August 1987 pea ~k by service at reasonable rates is a 92%, compared to a national 5.6%. The new peak included basic commitment of the Texas average of about 78%. 160,000 kilowatts of interrup-Utilities System. Through the The number of customers tible service.
efforts of its capable and served continues toincrease,with Customers aiso set a record on experienced employees, the almost 16,000 added in 1988. August 8 for 24-hour electric l System has a long record of This growth and an improving usage of 337,423,000 kilo-success in carrying out its com- economyhelpedincrease electric watt-hours.
l energy sales to a new record, The System's diverse mix of i mitment to service.
This performance is reflected nearly 81 billion kilowatt-hours resources and strong power
, in customers' satisfaction with or 3.8% over 1987. Industrial system, bolstered by new gener-their electric serviceas measured sales, which grew at a rate of 4%, ating capacity and cogeneration in System-widecustomer opinion were an indication of the purchases, helped the company surveys. At the end of 1988, economic recovery. meet summer requirements.
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SOURCES OF KILOWATf-HOURS motion of energy-saving homes Percent Kwh by and equipment. Specialcontacts Fuel and Purchases were made with more than 1300 1988 1987 1986 majorindustrialand commercial ,
customers to more efficiently Fuel use:
42 % 43 % 44 % serve their needs and provide Gas / Oil * . . . . . . . . . . . . . . . . . . . . . . . . .
Lignite . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 44 50 them with helpful information.
To t a l . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 87 94 Employees set national TO AL[.((.[.$..$..... 1 % % %
safety recolo,
oilless than IWo Employees' attention to safety resulted in outstanding overall performance in 1988. TU Nine new combustion turbines time of the peak was 20,115,000 Electric Generating Division with a totalof 585,000 kilowatts kilowatts and thereserve margin emplovees set a new electric in-were added before the summer was 15.2%. dus- ecord in July when they peak of 1988. Three of the new The availability and flexibility reach.d 10 million employee-units arelocated at the Permian of generating and fuel resources hours without alost-timeinjury.
Basin plant in far West Texas and the performance of em- Several other work groups and six are at the Morgan Creek ployees throughout the System achieved safety milestones, plant near Colorado City. The were instrumental in meeting broke System records and turbines which can use both gas the needs of customers through- received distinguished safety and oil, are well-suited for peak out 1988. awards during 1988.
demand periods becausetheycan In early 1989, employees in be started quickly when needed. nuclear engineering and opera-Long- and short-term pur- Marketing programs tions completed 10 million safe i chased power was also available. underway hours, the second-best record I At the time of the peak,850,000 The more aggressive market- ever attained by such a nuclear l kilowatts of short-term and ing effort begun in 1987 power plant group.
744,000 kilowatts of long-term continued during the year. Employees' efforts and pro-cogeneration capacity and Marketing activities aimed at grams to ensure a safe working i 132,000 kilowatts of other maximizing TU Electric's effi- environment contributed signifi-purchases were under contract. ciency and competitive position cantly to the System's effective-With these purchases, the included economic and agricul- ness in carrying out its System's net capability at the tural development and the pro- commitment to service.
N Employee spirit of service recognized System employees have a long-standing record of involvement in f ,
.r the communities where they work and live. Special recognition was k given in 1988 to the volunteer efforts of employees who demonstrated a spirit of service beyond their commitment to customers.
In ceremonies at the White House, President Reagan presented TU Electric employees one of 30 Presidential Awards for private sector volunteer accomplishments.
Employees also received a number of other honors, including the Governor's Volunteer Award for the efforts of 4,000 employees in l more than 100 " Paint the Town" projects. These involve painting, i repairing and other improvements to homes of the elderly or dis- I advantaged and similar worthwhile community projects. :
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Productivity Improvements Continue Consolidations, cost-cutting hold down expenses Ongoing productivity and Fuel costs reduced Maximizing productivity:
efficiency improvements are Efficiencies and savingsin fuel goal of.many System long-term inv,estments that costs, the largest single operating . activities l contribute significantly to the expensein the production of elec- .
System's ability to continue tricity, help hold down the cost Many projects, objectives and providing quality service at activities throughout the System of electric service to customers.
reasonable rates- are directed at achieving greater In 1988, the Mining Com-Since the 1984 merger of,four pany, the nation's fourth largest efficiency and contribute to System companies into a single coal miner, produced 29.1 mil. I wer operating and main-utility - TU Electric - the lion tons of lignite coal, com. tenance co,sts.
organiretion has continued to pared to 28.4 million tons in Marketmg programs that evolve, making additional 1987. Mining efficiencies helped reduce the growth in peak efficiencies and savings possible, reduce the cost oflignitebymore demand and increase off-peak including: than 10% compared to 1987. energy sales delay the need ,for Contributingto thesesavingswas investment in new generatmg o Furtherimprove.mentsinthe coordination and efficiency the operation of the Big Brown capacityan,dincrease th,e produc-tivity of existing facilities. Load of the power system and in cross-pit spreader,which enables economic recovery of deep management efforts lowered fuel economies through a new System Operations deposits.The 19881 ignite cost of pe d g owth yal ost 9OO o Center 95 cents,per milhon Btu was the o Centralizat,oni of data lowest smce 1984. T.he total reduction over thelast Thecost ofligniteremainsless eight years is nearly 920,000 processing functions and kilowatts, more than a large their broader applications to thanone-half the cost of natural lignite generatmg unit.
achieve greater efficiencies, gas andits useover theyears has Research and development includingthedevelopment of saved customers morethan four ong e n an a, unique CustomerInforma- billion dollars compared to what pgQ ;ha l tion System th,ey would have paid for elec- paid dividends in better service tricity from higher-priced o Consolidationofotherareas lowercosts and advancesin other
- accounting, communica- natural gas.
The Fuel Company dehvered key areas such as safety and tions, financial, marketmg, .
environmental protection. The personneland regulatory. In 375 billion cubic feet of natural s 1ppo s th ma cr i 1988, the purchasing gro gas to TU Electricin 1988 at,the hstt Y j,e gy ee n$
were consolidated to actu,ups eve lowest cost smce 1980. Contmu-further savings by standard- ing successfulefforts by the Fuel izmg the procurement of Company to renegotiate con- con 7uct its rese ch o -
goods and services. tracts and make favorable spot '
Py,@m st visible of these The consolidations of the past market purchases helped lower the expense.
efforts is the Environmental few years and other operating Research Center at the Big efficiencies have enabled sub. The average cost for all fuels r Brownlignite-fueled plant.Over stantialreductionsin the number used by TU Electne in generat-l the last 18 years more than 60 of employees through early ing electricity in 1988 was $1.71 P.er milhon Btu, the lowest Braduate students have con-retirement and attrition. As a ducted research projects under result, the System had the same smce 1981. grants provided by the System. ;
number of e,mployees at the end FUEL COST /MILLION BTU Theseindependent studies of air, )
of 1988 as it did at the end of 3,,, 3937 3936 land,waterandplant and animal 1981, but has added more than life haveled toimprovementsin cas/ oil,. . .. s2.49. s2.57 s2.77 480,000 meters-the equivalent .g g of serving a new city larger Lignite . . . . . . .95 LO7 .98 as well as cost savings.
than Dallas with no increase Average Cost. , s1.71 $1.82 $1.84 in employees. .oit less tim v. or ruel requim .ents 5
r I
System Investing in Secure Energy Future Mix of resources provides diversity andflexibility Long-range planning has been ab e e ec r e e ce t a re so RESOURCE PLAN ADDITIONS 1989-1998
(~
able price, whenever and wher- Capability l ever it is needed. This process Resource (Kilowatts) Percent I includes the annualdevelopment of long-range and ten-year Nuclear . . . . . . . . . . . . . . . . . . . . . . . . . 2,250,000 29 %
resource plans for future gener-ating capacity and planning for Lignite . . . . . . . . . . . . . . . . . . . . . . . . . . 2,250,000 29 land, water, fuel, transmission Load management . . . . . . . . . . . . . . . . 1,314,000 17 and other facilities needed to meet customers' growing needs Combustion turbines . . . . . . . . . . . . . . 780,000 10 for electricity. Cogeneration, other parchases The resource plan for 1989- and unspecified resources . . . . . . . . . 1,118,000 15 1998 estimates demand growth at an average annual rate of 2.1%. Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,712,000 100 %
==
Based on this plan,7.7 million kilowatts of new generation will be required over the next decade Work has already started on six facility,to belocated near Paris, to serve added customer needs, Texas, will supply TU Electric
, of these units scheduled for ser-replace retiring generating units vice before the peak season of with 151,000 kilowatts beginning and exp,i ring purchased power 1990.Four areat the DeCordova in June 1989, with a total of contracts, and maimairt reserve station near Granbury and 213,000 kilowatts to be provided I capacity.The company,s efforts two at Permian Basin in far in early 1990.
to continu,e the operation of ex- West Texas. The new contract brings the isting umts beyond planned Cogeneration, other pur- totallong-term cogeneration and retirement dat,es may r, educe fu- chased power and resources to be small power purchases to ture construction requirements. specified later will make up the 1,214,000 kilowatts, of which a Conservation and load other 15% of the ten-year re- total of 746,000 kilowatts was management programs are ex- quirements. In 1988,TU Electric available at the end of 1988.
pected to reduce the need for new signed its sixth long-term Plans have been made for short-by 1,314,000 generation cogeneration contract, thi:, one term purchases to help meet kilowatts, or 17%. These pr - with TenaskaIIITexas Partners peak season needs for 1989 grams encourage efficient,use of of Omaha, Nebraska. The new through 1991.
electricity and the buildmg of energy-efficient structures.
! The major portion of the re. CONSTRUCTION SCHEDULE $
l maining 6,398,000 kilowatts will Peak I be provi,ded by nuclear and Capability Season l lignite umts.Thetwo Comanche Unit (Kilowatts) Service l Peak nuclear umts will provide 29% of the additionalcapability Comanche Peak 1 . . . . . . . . . . . . . . . . . 1,125,000* 1990 needed for the n, ext ten years. Combustion turbines . . . . . . . . . . . . . . . 390,000 1990 Thetwolignite unitsatTwin Oak and the Forest Grovelignite unit Comanche Peak 2 . . . . . . . . . . . . . . . . . 1,125,000* 1992 will also supply 29% of the Twin Oak 1 : . . . . . . . . . . . . . . . . . . . . . . 750,000 1994 l capacity: Twin Oak 2 . . . . . . . . . . . . . . . . . . . . . 750,000 1995 Additional combustion tur- l bine generatmg umts will provide Forest Grove 1 - 750>000 1997 10% of the capacity required. ' Net capability to TU Electric (97-5/6% of plant) m 10
[ l ,
Fuel supplies assured lI CONSTRUCTION EXPENDITURES - !
The System owns or has under lease supplies of lignite for the Estimated fuelrequirements of existing and planned lignite units. Estimated 1988 1989 1990 1991 rcserves of proven recoverable Millions ofDollars lignite totalled some 760 million Electric property:,
tons at year-end 1988. The Sys- Production . . . . . . . . . . . . $ - 908 $ 879 $ 492 $ 569 tem has an acquisition program Transmission . . . . . . . . . . 44 51 64 54 to obtain additional deposits of Distribution . . . . . . . . . . . 194 180 217 224 lignite that will be beneficial in General . . . . . . . . . . . . . . . 10 19 22 21 J providing future lignite genera- l tion to customers. Other utility property . . . . . . 20'- 35 11 54 The FuelCompany owns and Total . . . . . . . . . . . . . . . . . . . 1,176 1,164 8% 922 operates a 2,1,00-mile network o,f AFUDC* . . . . . . . . . . . . . . . 387 436' 194 .78 naturalgas pipehnes that givesit .
access to the major gas-pro. Tot 61 construction . .
ducing areas of thestate.During expenditures . . . . . . . . . $1,563 $1,600 $1'000 _ $1,000 ,
1988, the company further in- Such expenditures do not creased its flexibility in acquiring include amounts for the gas supplies by receiving ap- resumption of AFUDC proval from the Federal Energy on Unit 2 of Comanche Regulatory Commission to pur- Peak or the following:
chase some out-of-state gas - Nuclear fuel . . . . . . . . . . . $5 $ l' $8 .$ 2 without affectingits status as an . Non-uillity property . . . . . 33~ 46 58 68-intrastate system.
The Fuel Company also has ,
All wance f r funds used during construction.
underground gas storage reser.
voirs with a usable capacity of construction expenditures do not include amounts for the 1988 and 1990 com- !
bustion turbine generating facilities. TU Electric has entered into an operating about 27 billion cubic feet. lease arrangement covermg the 1988 combustion turbines. Turnkey construc-l Coupled wil.an active program tion of the 1990 combustion turbines is undetway, and TU Electric expects to' of gas fuel management and ac- . then enter into an operating lease agreement, quisition, these resources place the companyin a strong position to meet future gas requirements reliably and economically.
The use of nuclear fuel at western New Mexico. Chaco Comanche Peak will further Energy Companywas organized diversify the System's energy as a nonutility subsidiary of j sources and provideanotherlow- Texas Utilities Company to
",," = = - cost dependable supplyof abun- develop, manage and mine these
'--- dant fuel. Fuelassemblies for the and other fuel resources. Since initial operation of Unit I are 1981, the Company and Chaco
> stored on site, ready for loading have been involved in a lawsuit
/~ M' into the reactor when an oper- filed against Santa FeIndustries, 1 ating license is received. Fuel Inc., and two ofits subsidiaries. J
(' assemblies for the initial opera- Thesuit seeksto haveagreements !
tion of Unit 2arein storage at the for the coalobtained from these vendor's fabrication facility and defendants declared void and un- .
, additional supplies of fuel are enforceable, because of viola- (
under contract. tions of antitrust laws and other "
In 1977, the System signed unlawful conduct alleged by the agreements for more than 320 Company and Chaco. A trialis million tons of coal in north- expected to take place in 1990.
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Comanche Peak Vital to Serve Customers Will add needed capacity and low-cost, stablefuel supply Future growth in the area theNRC.TheSystematic Assess- in the resolution of technical served byTU Electricdepends on ment of Licensee Performance issues and safety concerns.
a reliable supply of electricity. Board,after a thorough studyof TU Electric must still resolve The Comanche Peak nuclear the plant, said performance all remaining issues and ques-plant,with the fueldiversity and levels at Comanche Peak ex- tions to the satisfaction of the long-term fuel price stability it ceeded those needed to meet NRC staff beforethestaff makes offers, represents a key part of regulatory requirements in all a licensing recommendation to the company'sinvestmentin the areas reviewed. Accordingtothe the NRC commissioners.
area's continued development. board's report," Performance at However, dismissalof thelicen-In 1984,whenconstruction of Comanche Peak over the past sing proceedings has removed Unit I was essentially complete, year has been generally charac- some uncertainties that could Comanche Peak encountered a terized by strong programs, have adversely affected unique set of circumstances, active managementinvolvement Comanche Peak's cost and leading to a level of regulatory and adedication to ensuringthat schedule.
review unprecedented in the the correction of construction A citizens group opposing nuclear industry, with the plant deficiencies and preparation for Comanche Peak, Citizens for bcingheld to newand morestrin- operations are executed Fair Utility Regulation, filed a gent standards. thoroughly and conservatively." petition in August 1988, asking To meet the new and higher The NRC staff also issued the NRC to allowit tointervene standards that wereimposed on seven Supplemental Safety in alicensing proceedingin place Comanche Peak and to provide Evaluation Reports during 1988, of CASE. In December, the the greater level of safety assur- oneofwhichincluded thestaff's NRC denied the request, and in ance sought by the Nuclear favorable assessment of the February 1989 the group Regulatory Commission, TU implementation of the CPRT's appealedtotheU.S.Fifth Ciremt Electric established the review activities related to design, Court of Appeals.
Comanche Peak ResponseTeam construction, construction and related programs. Early in quality assurance and testing. Cost and scheduleestimates 1988, the NRC staff announced The other reports affirmed the its approval of the CPRT's adequacyof the reanalysis of the
ised effort. During the year, the Comanche Peak design. Revised cost and schedule reinspection and design valida- estimates for Comanche Peak Licensing hearingsdismissed were announcedinMarch 1988.
tion program was completed, all necessaryreportswere submitted In anagreement thatis the first Unit I was estimated to begin and significant progress was ofits kind in the nuclear indus- operation at the end of 1989, made toward completing con- try, TU Electric, the NRC and based onthegrantingof an oper-struction and obtaining an the intervenor in the licensing ating license and fuel load in operating license. process, Citizens Association for mid-1989. Construction and the i in March 1988,the NRCstaff Sound Energy,in July 1988, filed accrual of allowance for funds '
concluded that TU Electric's a joint stipulation and joint used duringconstruction on Unit programs addressing all piping motion for dismissal of the 2weretemporarilysuspended for and pipe support issues are suf- licensing proceedings before the about one year, beginning in ficient to ensure that licensing Atomic Safety and Licensing April 1988, to allow concentra-commitments on theseissues are Board. The ASLB accepted the tion of resources on Unit 1.
satisfied. The intervenor in the stipulation, dismissed the InFebruary 1989, Unit I con-operatinglicenseproceedinglater hearings and disbanded. structionwasabout threemonths agreed that therewas noneed for Under terms of thesettlement, behind schedule. A correspond-hearings on piping and pipe sup- the president of CASE was ing delayin fuelload and opera-port design, thereby resolving a appointed a full member of the tion of Unit I and in the major issue in the proceedings. Comanche Peak Operations resumption of construction on In the fall of 1988, another Review Committee and in that Unit 2 was expected. The delay favorable report was issued by capacitywillbedirectlyinvolved will not affect the peak season 11
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During 1988, TU Electric Competitive Rates aPriority .
agreed to repurchasethe6.2 per- Economies, fuelsavings to help cent interest in Comanche Peah . .
owned by the Texas Municipal MG ntainfavorablePOsillOH Power Agency and the 3.8 per-cent owned by Brazos Electric Cooperative, Inc., and to settle Overtheyears, theSystemhas at approximately the same level
. pending litigation with the two providedits customers with qual- as in 1982.
joint owners. The purchases, ity service at competitive rates. The company's effective ef-which wereapproved byregula- Incomparison withresidential fortstoimproveproductivityand tory authorities and finalized, rates charged by other major controlcosts willenableit tohold bring TU Electric's share of the electric utilities, TU Electric rateincreasesin connection with plant to 97-5/6 percent. The re- rankei Othlowest of the suppli- theoperationofeachComanche maining 2-1/6 percent is owned ers serwngthe25 largest citiesin Peak unit to about 10%. The by Tex-La Electrie Cooperative thenation forthe 12monthsend- first of these increases, which of Texas,Inc, with whomlitiga- ing December 1988. Commercial would not be placed in effect -
tion continues. andindustrialrate comparisons before sometimein 1990,'would Based on the estimated oper- of 23 electric utilities show that return ratesto about 19841evels.
ating scheduleandincluding the TU Electric's rates are second TU Electric's rates would stillbe interests purchased fromTMPA lowest in those customer competitively positioned below
! and Brazos, TU Electric's share categories. the 1988 averageof the25 largest of Comanche Peak, without al- cities.
lowance for funds used during Rates at 1982 levels The company believes that it construction,isestimated tocost TU Electric's current base can demonstratein rate proceed-
$6.7 billion; and with' AFUDC rates were set by the Public Util- ingsthatit has acted prudentlyin
$8.9 billion, or about $3,950 per ityCommission ofTexasin 1984. the construction and manage-kilowatt. Because of uncertainty Sincethat time,aggressiveefforts ment of Comanche Peak,partic-about the commercialoperation to take advantage of declining ularlyin light of the unique and dateof Unit 2,thecost projection natural gas prices have resulted unpredictable circumstances that does not include estimates for in two decreases in the fuel it faced and the exceptional re-AFUDC after con;truction on factor,in 1986 and 1987, for an quirements that havebeenmetin the unit resumes. overall reduction in rates of the course of the project.
The three-month delay in 10.3%. As a result, rates are now completion of the plant is not i expected to raise its cost mater- :
ially in relation to its total cost. ,
RESIDENTIAL ELECTRIC SERVICE BILLI However, no assurances can be 4 COMPARISON-1A00 KWHC given that further delays willnot y M. 4 q ;25 LARGEST U.S. CITIESi , , (,
occur and increase financing g e n;7- _ -; 7 m *2"
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requirements. The construction u a- a.e : _ . - - - - - -
-_ = - amm - J
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tain about $300million and $100 d;n ;77 n 4 ]
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mdlion, respectively, as a con- y& _
tingency to provide for the M%p._
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NI nageme s Discussion and _ Analysis of Finanial ;~ 3
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I .g - Qond' ; n and 'Results.cf Operations q . . . . .;. . . . . . . . 16-19, - .
! ; .nement of Consolidated. ..Income . . ... . . . . . . . . . . . . . . 20 i' - . .
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l 8 .. ~ l- 1 .[- , . Notes.to Financial statements c . . . . : . . . . . . . . . . . . . . . 24-34 fa s-
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f TEXAS UTILITIES COMPANYAND SUBSIDIARIES I II '\ l I Liquidity and Capital Resources The primary capital requirements of Texas Utilities Company (Company) for 1988 and as estimated for I 1989 through 1991 are as follows: 1988 1989 1990 1991 Thousands ofDollars Cash construction expenditures (excluding allowance for equity funds used during construction) . . . . . . . . . $1,343,000 $1,315,000 $ 893,000 $ 957,000 Nuclear fuel and non-utility property . . . . . . . . . . . . . . . 38,000 47,000 66,000 70,000 Purchase of minority ownership interests in Comanche Peak . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,000 - - - Maturities of long-term debt and sinking fund requirements (including early redemptions of preferred stock in 1988 of $3,761,000) . . . . . . . . . . . . 60,000 110,000 199,000 117,000 l Total . . . . . . . . . . . . . . . ........ ..... . .. $1,561,000 $1,472,000 $1,158,000 $1,144,000 l l For detail concerning major construction work now in progress or contemplated by the Texas Utilities l Company System (System Companies) and commitments with respect thereto, see page 11. The System Companies have generated cash from operations sufficient to meet operating needs, pay dividends on capital stock and finance a portion of capital requirements. This cash is derived principally from consolidated net income, depreciation and deferred taxes. Factors affecting the ability of Texas Utilities Electric Company (TU Electric) to continue to fund a portion of its capital requirements from operations include adequate rate relief and regulatory practices allowing recovery of capitalinvestment, adequate depreci-ation rates, normalization of federalincome taxes, recovery of the cost of fuel and purchased power and the opportunity to earn competitive rates of return required in the capital markets. Prior to the comple-tion of the Comanche Peak nuclear generating station (Comanche Peak) and its inclusion in rate base, a decreasing percentage of capital requirements may be generated from operations. For 1988, approximately 16% of the cash needed for construction expenditures was generated from operations. External funds of a permanent or long-term nature are obtained through the sale of common stock by the Company, and the sales of preferred stock and long-terin debt by the System Companies. The capital. ization ratios of the Company and its subsidiaries at December 31,1988 consisted of approximately 48% long-term debt,9% preferred stock and 43% common stock equity. These ratios were affected in 1988 by the financing activities described below and similar ratios hre expected to be maintained in the future, assuming adequate rate relief and recovery of capital investment. For information regarding bank lines of credit and short-term borrowings of the Company, see Note 2 to Financial Statements. Financings in 1988 by TU Electric and the Company included the following: Long-Term Debt (TU Electric): Principal Month Amount Description April $100,000,000 9%% Collateralized Pollution Control Revenue Bonds due 2018 May 150,000,000 10X% First Mortgage and Collateral Trust Bonds due 1998 May 150,000,000 11%% First Mortgage and Collateral Trust Bonds due 2018 September 66,000,000 Secured Medium-Term Notes, Series A October 79.000,000 Secured Medium Term Notes, Series A November 150,000,000 10.44% First Mortgage and Collateral Trust Bonds due 2008 November 8,500,000 Secitred Medium-Term Notes. Series A December 53,000,000 Secured Medium-Term Notes, Series A Total .s756,500,000 1 1 I
TEXAS UTillTIES COMPANYAND SUBSIDIARIES II l Ll Preferred Stock (TU Electric): Month Shares Net Proceeds Description November 1.000,000 $99,432,000 $9.64 series Cumulative Preferred Stock; Subject to Mandatory Redemption Common Stock (the Company): Month Shares Net Proceeds Description April 5,000,000 $124,830,Ca Com . ion Stock sale to the public l october 5,750,000 154,324,000 Common Stock sale to the public ! Total $279,154,000 In August 1988 and December 1988, TU Electric finalized agreements to purchase the ownership interests of the Texas Municipal Power Agency (TMPA) and the Brazos Electric Power Cooperative, Inc. (BEPC), respectively, in Comanche Peak. Under the terms of the agreement with TMPA, TU Electric recorded
$355,000,000 principal amount oflong-term debt as an obligation for purck :e of utility plant. Under the terms of the agreement with BEPC, TU Electric issued a promissory note a the amount of $194,458,000 for purchase of utility plant.
Early redemptions of preferred stock by TU Electric in 1988 included the following: Redemption Month Shares Cost Description April 25,750 $2,317,000 $9.48 series Cumulative Preferred Stock; Subject to Mandatory Redemption April 15.000 1,444,000 $10.08 series Cumulative Preferred Stock; Subject to Mandatory Redemption Total $3,761,000 Additional early redemptions of long-term debt and preferred stock may occur from time to time in amounts presently undetermined. In February 1989, the Brazos River Authority issued $100,000,000 principal amount of pollution control revenue bonds to finance costs of certain pollution control facilities of TU Electric. These bonds are collateralized by the issuance of an equal principal amount of TU Electric's first mortgage and collateral I trust bonds. The System Companies expect to sell securities as needed, including the possible future sale by TU I.lectric of up to $93,500,000 principal amount of secured medium-term notes and up to 1,000,000 shares of cumulative preferred stock, both currently registered with the Securities and Exchange Commis-sion for offering pursuant to Rule 415 under the Securities Act of 1933, sales of additional shares of common stock of the Company pursuant to various plans described in Note 3 to Financial Statements and sales of additional securities from time to time, in amounts and of types presently undetermined. I The Tax Reform Act of 1986 (TRA), among other things, repealed the investment tax credit, lengthened / depreciation lives, created an alternative minimum tax and lowered the corporate tax rate subject to certain transition rules. Other tax accounting changes were required, including the capitalization of items previously expensed and a change in the timing of income recognition for certain items. Substantially all of the tax changes, with the exception of the rate reduction, resulted in the Company paying more taxes currently and eliminated sources of internally generated cash for the Company, thereby increasing financing require-ments. The TRA did not have a material effect on the periods presented in the financial statements of the Company. Akhough TU Electric cannot predict future regulatory practices, the extent of any further delays in the licensing of Comanche Peak or any changes in economic and securities market conditions, no changes are expected in trends or commitments which might significantly aher its basic financial position or ability to finance capisaliequirements. However, TU Electric has indicated that it does not currently plan to imple-ment increased electric service rates which reflect any additional Comanche Peak costs antil Unit 1 is ready for commercial operation and TU Electric coutinues to believe, based upon current cost estimates and using acceptable rate mnking approeches and assumption:, that t he rate increase, when Unit 1 goes into service, can be held to about 10*c. See Financial Statistics for additional information. 17
TEXAS UTILITIES COMPANY AND SUBSIDIARIES I N I l' IT Results of Operations Operating revenues increased $70,752,000 and $150,878,000 for 1988 and 1987, respectively. The following table details the factors contributing to the increases: Increase (Decrease) Factors 1988 1987 Thousands of Dollars Fuel revenue . . . . . . . . . . . . . .. . . ... . $(12,433) $ 73,589 Power cost recovery factor revenue .. . .. . . . 35,445 32,485 Increased energy sales. .... .. . . .. .. .. 57,338 51,954 (- h Other . . . . .. .. .. ...... ... . . ... . . (9,598) (7,150) j Total. . .... .. . .. .. ..... .. . . ... $ 70,752 5150E8 The increase in operating revenues for 1988 was attributable to increased purchased power revenue and increased energy sales, offset in part by decreased fuel revenue. The increase in operating revenues for 1987 was due primarily to increased fuel and purchased power revenue and increased energy sales. Energy sales increased 3.8% for 1988 and 3.3% for 1987 as a result of increased customers and customer usage. See Operating Statistics. Fuel and purchased power expense increased $23,f535,000 in 1988 and $106,397,000 in 1987. The increases for 1988 and 1987 were due primarily to incrwd off-system power purchases partially offset by lower fuel costs. L. ower fuel expense for 1988 reflecu decreases in the unit costs of lignite from $1.07 per million Stu in 1987 to $0.95 per million Btu in 1988 and gas from $2.56 per million Btu in 1987 to $2 47 per million Btu in 1988. Lower fuel expense for 1987 reflects the decrease in unit cost of gas from $2.77 per million Btu in 1986 to $2.56 per million Btu in 1987. See Operating Statistics. Operation expense decreased $9,633,000 for 1988 and increased $66,115,000 for 1987. The decrease for 1988 was primarily the result of a special early retirement program in 1987 and the resulting reduction in labor costs in 1988. The increase for 1987 was affected by increases in the cost of labor, liability and property insurance and the special early retirement program. (See Note 8 to Financial Statements.) Maintenance expense decreased $5,662,000 and $18,619,000 for 1988 and 1987, respectively. The decreases for both years were due primarily to a reduction in unscheduled power plant outages and revisions in the - scope of certain power plant scheduled overhauls. . Taxes other than income increased $15,056,000 for 1988 and $13,755,000 for 1987. The increase for 1988 resulted primarily from increases in revenue and property based taxes. The increase for 1987 was the result of increased franchise and property based taxes. Allowance for funds used during construction (AFUDC) decreased $439,000 for 1988 and increased
$83,297,000 in 1987 and was affected in all years by the ongoing construction work in progress of TU Electric not included in rate base. The decrease for 1988 was due to the reduction in the AFUDC rates (see Note i to Financial Statements) and the temporary suspension of AFUDC on the Twin Oak (Twin Oak) and Forest Grove (Forest Grove) generating stations in October 1987 and on Unit 2 of Comanche Peak in April 1988 (see Suspension of Capitalization of AFUDC below).
Other income and deductions - net decreased $15,126,000 for 1988 and increased $9,359,000 for 1987. The decrease for 1988 was attributable to the loss resulting from the discounting to present value of the expected future recovery of costs associated with the abandonment of the Martin Lake generating station Unit 4 (Martin Lake Unit 4)(see Note 11 to Financial Statements), the gain on the disposition of certain properties experienced in 1987 and decreased interest on temporary cash investments. The increase for 1987 was due primarily to increased interest on temporary cash investments. l 18
TEXAS UTILITIES COMPANY AND SUBSIDIARIES 1I I I II i Interest on mortgage bonds increased in both periods due to new issues sold during such years and i annualized interest of issues sold in prior years, partially offset by retirements and redemptions of certain higher interest rate issues during 1987 and 1986. Interest on other long-term debt increased in 1988 as a result ofinterest paid in cormection with the purchase of minority ownership interests in Comanche Peak from TMPA and BEPC. Other interest charges increased $2,642,000 for 1988 and decreased $16,347,000 for 1987. The increase for 1988 was due primarily to increased interest cost on over-recovered fuel revenue and short-term borrowings. The decrease for 1987 reflects decreased interest cost on over-recovered fuel revenue and short-term borrowings. Preferred stock dividends increased $5,855,000 and $10,663,000 in 1988 and 1987, respectively, due to new issues sold during these years and the full year's effect of prior year issuances. Consolidated net income decreased $37,305,000in 1988 and increased $53,125,000in 1987 which represents a culmination of the factors described above. The suspensions of AFUDC reduced consolidated net income for 1988 and 1987 by approximately $160,000,000 and $10,000,000, respectively. Estimated Effect of Pending Accounting Change In December 1987, the Financial Accounting Standards Board (Board) issued Statement of Financial Accounting Standards No. 96, " Accounting for Income Taxes" which was to become effective for fiscal years beginning after December 15,1988. In December 1988, the Board extended the effective date by one year. The Statement, among other things, requires the liability method of recognition for all temporary differences, requires that deferred tax liabilities and assets be adjusted for an enacted change in tax laws or rates and prohibits net-of-tax accounting and reporting. Certain provisions of the Statement provide that regulated enterprises are permitted to recognize such adjustments as regulatory assets or liabilities if it is probable that such amounts will be recovered from or returned to customers in future rates. Although the application of the Statement willincrease both total assets and liabilities, these requirements are not expected to have a material effect on the Company's f'mancial position or results of operations. Suspension of Capitalization of AFUDC In September 1987, TU Electric announced the suspension of construction on Twin Oak and Forest Grove. i Therefore, capitalization of AFUDC was suspended in October 1987 until active construction resumes. Expenditures not included in rate base as of December 31,1988 and 1987, applicable to these stations, totaled j approximately $492,000,000 and $468,000,000, respectively. Construction on Twin Oak and Forest Grove ' is not expected to resume until after 1989. In March 1988, TU Electric announced the temporary suspension of construction on Unit 2 of Comanche Peak for an anticipated period o one year. Therefore, beginning in April 1988, capitalization of AFUDC - was suspended until active construction resumes. Expenditures not included in rate base as of December 31, 1988 and 1987, applicable to this unit, totaled approximately $2,068,000,000 and $1,513,000,000, respec-tively. Construction on Unit 2 of Comanche Peak is expected to resume in mid-1989. l i i l ___-___-_______-_-__-____a
r TEXAS UTILITIES COMPANY AND SUBSIDIARIES "I \ I 10153T Oli('ONSOI.I Year Ended December 31, 1988 1987 1986 Thousands ofDollars OPERATING REVENUES. . . . . . . . . .... . .. .... ... .. $4,153,675 $4,082,923 $3,932,045 OPERATING EXPENSES Fuel and purchased power . . . . . . . . . . . . . . . . . . . . ..... 1,609,445 1,585,610 1,479,213 Operat i o n . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 614,420 624,053 557,938 Maintenar e . . . ... ............... . .. . .... 294,789 300,451 319,070 Deprecia- . . . ... ...... ... ...... . . 242,286 234,139 220,381 t Federal income taxes (Note 7) . . . . . . . . . . . . . . . . . . . . . . . . . 129,059 194,460 264,311 Taxes other than income . . .. .. .. . . .. 310,383 295,327 281,572 Total operating expenses . . . . . . ...... . ... 3,200,382 3,234,040 3,122,485 OPERATING INCOME . . . . . . . . . . . ....... ....... 953,293 848,883 809,560 OTHER INCOME Allowance for equity funds used during construction . . . . . 262,834 283,061 231,880 Other income and deductions-net . . . .. .. (755) 14,371 5,012 Federal income taxes (Note 7) . . . . . . . . . . . . . . . . .. . 3,%8 (232) 3,034 Total other income . . ..... ... . . .. 265,147 297,200 239,926 l TOTAL INCOME ... . .............. . ... 1,218,440 1,146,083 1,049,486 INTEREST CHARGES Interest on mortgage bonds . . . . . . . . . . . ........ ... .. 469,888 402,389 317,978 Interest on other long-term debt . . .. ..... . ....... 121,388 67,934 71,073 Other interest . . ...... . . .. .. . . ... 13,450 10,808 27,155 Allowance for borrowed funds used during construction . . . . (123,850) (104,062) (71,946) Totalinterest charges . . . ... .. . 480,876 377,069 344,260 PREFERRED STOCK DIVIDENDS OF SUBSIDIARY . . . . . . 94,893 89,038 78,375 CONSOLIDATED NET INCOME . . . . .. . .... $ 642,671 $ 679,976 $ 626,851 Average shares of common stock outstanding (thousands) . . . . . . . 160,561 149,449 140,982 Earnings and dividends per share of common stock: Earnings (on average shares outstanding) . . . . . . . ...... .. $4.00 $4.55 $4.45 Dividends declared . .. . .. . . 2.88 2.80 2.68 T ATEMENT Oli ('ONSOI.I Year Ended December 31, 1988 1987 1986 Thousands of Dollars BALANCE AT BEGINNING OF YEAR , . ..... $2,438,851 $2,180,293 $1,931,307 ADD-Consolidated net income . . ....... ..... . . . 642,671 679,976 626,851 Total . ........ ..... .. . ... .. . ... 3,081,522 2,860,269 2,558,158 DEDUCT-Dividends declared on common stock (for amounts per share, see Statement of Consol: dated Incorr.e) ..... . 463,786 J21,418 377,865 BALANCE AT END OF YEAR (Note 4) . . .. . .. $2,617.736 52,438,851 $2,180,293 See accompanying Notes to Financial Statements. 20
TEXAS UTILITIES COAfPANY AND SUBSIDIARIES Year Ended December 31, 1988 198,7 1986 'j Thousands of Dollars CASil FLOWS FROM OPERATING ACTIVITIES: Consolidated net income. . .. ..... .. $ 642,671 5 679,976 5 626,851 Adjustments to reconcile consolidated net income to cash provided by operating activities: Depreciation (including amounts charged to fuel) . . 264,789 260,808 248,329 Deferred federal income taxes-net . . . 32,382 48,912 140,479 Federalinvestment tax credits-net . . .. . (18,481) 56,012 66,302 , Allowance for equity funds used during construction . (262,834) (283,061) (231,880) l Cash flows from operations . . 658,527 762,647 850,081 J Changes in assets and liabilities: Receivables-net . . . . . 10,549 (65,644) 53,742 Inventories . . . .... ... . 5,303 12,976 9,397 Accounts payable-net . . . . . . . 20,107 9.066 (3,621) Interest and taxes accrued . 98,451 (4,195) (31,708) Other working capital . . ..... . 10,652 37,986 (37,251) Over/under-recovered fuel revenue . . . . . . 75,834 (107,713) (22,794) Deferred taxes on over/under-recovered fuel revenue . .. (28,399) 46,879 10,485 Other-net . . . .. . 16,329 33,812 3,107 Net cash flows from operating activities . . . 867,353 725,814 831,438 CASH FLOWS FROM FINANCING ACTIVITIES: Sales of securities: First mortgage bonds. . . . . 767,945 1,058,852 970,000 Preferred stock. . .. .. . 99,432 98,215 197,728 Common stock. . . .. .. . 429,880 312,952 145,171 Retirement oflong-term debt and preferred stock . . . . (59,9(M) (182,324) (311,792) Notes payable. ... . .
- (11,300) 11,300 Common stock dividends paid . . . .
(448,7%) (410,409) (369,164) Debt premium, discount and financing expenses . .. (6,276) (39.237) (43,630) Net cash flows from financing activities . . .. 782,279 826.749 599,613 CASH FLOWS FROM INVESTING ACTIVITIES: Construction expenditures . (1,562,781) (1,688,831) (1,519,619) Allowance for equity funds used during construction . . 262,834 283,061 231,880 Construction receivables /payables-net . . . (43,123) 26,236 46,154 Cash construction expenditures . . . . (1,343,070) (1,379,534) (1,241,585) Non-utility property-net . . (32,302) (28,232) (20,880) Nuclear fuel . . . .... . . (5,075) (797) 2,760 Purchase of minority ownership interests in Comanche Peak (Note 11) . . . . .. . . (120,355) - -
~
Other investments . . .. . . .... (28,237) (55,064) (42,001) Net cash flows from investing activities. . . . . (1,529,039) (1,463,627) (1,301,706) NET CHANGE IN CASH AND CASH EQUIVALENTS . 120,593 88,936 129,345 CASH AND CASH EQUIVALENTS-BEGINNING BALANCE . 279,630 190,694 _ 61,349 I CASH AND CASH EQUIVALENTS-ENDING BALANCE. . $ 400,223 $ 279,630 $ 190,694 ) SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Purchase of minority ownership interests in Comanche Peak: Purchase of production and transmission plant . .. . . $ 667,294 $ - $ - Purchase of nuclear fuel . . . .. .. 45,446 - - Reimbursement of certain expenses (deferred debits) and working funds advanced . 41,574 - Total purchase price . . . 754,614 - - ' Less amount, due fro:n minority cwners .. . 84,801 -. - } Less fromissory n ate and obligation for purchase of utilit) plint . 549,458 - - l Cash paid on the purchase . . . , , ,
$_120,355 $ -
See accompanying Notes to Financial St:tements. 2:
TEXAS UTILITIES COMPANY AND SUBSIDIARIES 0%OljD STED H \l AM E S EET 2 December 31, 1988 1987 Thousands of Dollars ASSETS UTILITY PLANT in service:
$ 3,968,345 )
Prod uction . . . . . . . . . . . . . . . . . . . . . .. . . .. $ 3,988,977 t Transmission . .. ... .. .. .. ... . . .... 1,277,098 1,214,642 Distribution . . . . . . . . . . . .... . .... . . ... 2,882,086 2,696,523 < General . . . . . . ... .... . . .. .. . .. . 397,350 377,590 Tot al . . . . . . . . . . . . . . . ...... ... ... ..... ... 8,545,511 8,257,100 Construction work in progress (Notes 10 and 11) . . . ..... . .. 8,517,833 6,642,707 Nuclear fuel . ........ .... . .. . .. . .. 303,282 252,761 ! Held for future use . . . . . . . . . .. . . . . ... 24,507 20,426 Total utility plant .. . . . .. . .. 17,391,133 15,172,994 ; l Less accumulated depreciation . ... . ... . ..... . 2,931,590 2,718,328 Utility plant, less accumulated depreciation . . .... .. 14,459,543 12,454,666 ; 1 INVESTMENTS Non-utility property (Note 11) . . . . . . . . . . . 267,149 234,847 Other investments (Note 1) . . ..... ... . . ... . .. 21,804 22,107 Total investments . . . . . . .. . .. .. .. .......... 288,953 256,954 CURRENT ASSETS Cash in banks (Note 2) . .. ..... ... ....... .. .... ... .. 4,709 7,230 Temporary cash investments-at cost . . . . .. . ... ... . .. 395,514 272,400 Cash and cash equivalents . . . .. ... . ...... .. . 400,223 279,630 Special deposits . . . . . . . . ... . . . .... .. 38,107 38,114 Accounts receivable: Customers . . . .. . . .. . .. ..... . . . .. 246,885 250,684 Minority owners of Comanche Peak (Notes 10 and 11) . .. . 51,116 109,284 Other ... ..... . . . .. . .. . .. . . .. ... 57,849 66,522 Allowance for uncollectible accounts . . . .. . . (13,012) (13,243) Inventories-at average cost: Materials and supplies . . . .. .. .... . . ... 136,921 130,941 Fuel stock . . . . . . .. . .. .... . . . .. . . .. . 149,330 160,613 Deferred federal income taxes (over-recovered fuel revenue) . . 10,774 - Other current assets . .. .. .. ... . . . 48,866 47,867 Total current assets . . . . . . . .. . . . .. .... . 1,127,059 1,070,412 1 DEFERRED DEBITS Under-recovered fuel revenue . .. . .. .. .. - 44,119 Unamortized loss on reacquired debt (Note 6). . . . . . . . . .... 67,956 70,967 Cancelled lignite unit costs (Note 11) .. . .. . 31,848 37,246 Other deferred debits . . . . . . . . . . . . . . . ... . 82,221 51,896 Total deferred debits. . . . . . ... .. . 182,025 204,228 Total . . . . .. . . .. . $16,057,580 $13,986,260 See accompanying Notes to F7nancial Statements. 22
1988 1987 Thousands of Dollars CAPITALIZATION AND LIABILITIES CAPITALIZATION Common stock without par value (Note 3): Authorized shares-250,000,000 Outstanding shares-1988,169,009,473; 1987,152,408,942. . . .. $ 3,023,360 $ 2,593,480 Retained earnings (Note 4) . ... .... .... . .. . ... . 2,617,736 2,438,851 Total common stock equity . . . . . .. . . . ... . 5,641,096 5,032,331 Preferred stock (Note 5): Not subject to mandatory redemption . . . . . .. . . . 909,582 909,633 Subject to mandatory redemption . . . .. . . . . . . . 328,770 232,906 Long-term debt, less amounts due currently (Note 6) . . ... . 6,342,513 5,141,491 Total capitalization . . . . .. . . . .. .. 13,221, % 1 11,316,361 i l CURRENT LI ABILITIES Long-term debt due currently (to be refinanced) . . . . .. 110,236 54,980 Accounts payable . . . . . . . .......... .... .. ... . 319,312 347,478 l Dividends declared .. . . . ... ... . ... ... . . 146,508 130,365 Customers' deposits . . .. .. ... . . .. .. . . 52,415 51,259 Taxes accrued ... .. . . . . . .. .... 178,118 106,587 Interest accrued . . . ... . ... . . ... ....... 166,142 139,222 Over-recovered fuel revenue. . . .. . 31,715 - Other current liabilities . . . . . . . .. . . 42,355 33,021 Total current liabilities . .. ... . . .. . 1,046,801 862,912 DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES Accumulated deferred federalincome taxes . . . . . . . . 1,013,233 998,476 Unamortized federal investment tax credits . . . 749,708 768,203 Other deferred credits and noncurrent liabilities . . . .. .. . . 25,877 40,308 Total deferred credits and other noncurrent liabilities . . 1,788,818 1,806,987 ) ) COMMITMENTS AND CONTINGENCIES (Notes 10 and 11) Total . . .. .... . .. . . $16,057,580 $13,986,260 See accompanying Notes to Iinancial Statements. 23
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
~
OTES TO F ANCI AL STATEMENTS . .
1. - .
December 31,
1. Significant Accounting Policies Comolidation-The consolidated financial statements include Texas Utilities Company (Company) and all of its subsidiaries; all significant intercompany items and transactions have been eliminated in consolidation.
Utility Plant-Utility plant is stated at original cost. The cost of property additions charged to utility plant includes labor and materials, applicable overhead and payroll-related costs and an allowance for funds used during construction. AIlowanceForFunds UsedDuring Construction-Allowance for funds used during construction (AFUDC) is a cost accounting procedure whereby amounts based upon interest charges on borrowed funds and a return on equity capital used to finance construction are charged to utility plant. The accrual of AFUDC is in accord with generally accepted accounting principles for the industry, but does not represent current cash income. Texas Utilities Electric Company (TU Electric)is capitalizing AFUDC, compounded semi-annually, on expenditures for ongoing construction work in progress (CWIP) not otherwise allowed in rate base by regulatory authorities. In 1986, AFUDC was capitalized using a net-of-tax rate of 9 % %. In 1987, pursuant to the provisions of the Tax Reform Act of 1986 (TRA), TU Electric began using a comparable gross capital-ization rate on projects commenced after March 1,1986. Beginning July 1,1987, a net-of-tax rate of 9% and a gross rate of 10 M % have been used. All such rates were determined on the basis of, but are less than, the cost of capital used to finance the construction program. Depreciation-Depreciation is based upon an amortization of the original cost of depreciable properties on a straight-line basis over the estimated service lives of the properties. Depreciation as a percent of average depreciable property approximated 3.3% for 1988 and 3.4% for 1987 and 1986. Other Investments-The difference of $14,439,000 between the amount at which the investment in a subsidiary is carried by the Company and the underlying book equity of such subsidiary at the respective dates of acquisition is included in other investments. Revenues-Revenues include billings under approved rates (including a fixed fuel factor) applied to meter readings each month on a cycle basis and an amount for under or over recovery of fuel revenue representing the difference between actual fuel cost and billings on the approved fixed fuel factor. Pursuant to a rule adopted in July 1986 by the Public Utility Commission of Texas (PUC), TU Electric is required to refund over-recovered fuel revenue if the amount of over recovery, including interest, exceeds the lesser of $40 million or 4% ofits annual known or reasonably predictable fuel costs most recently approved by the PUC.
~ Reconbiliati'5n~6f fuel c6sts is to be tYiuUe iliEgeneral tatredse or n recon 111atioil prDcteding. Reconciliate tion may be requested only if it has either been over one year since the utility's last final reconciliation or the utility has materially under-recovered its known or reasonably predictable fuel costs.
Federa/ Income Taxes-The Company and its subsidiaries (System Companies) file a consolidated federal income tax return, and federal income taxes are allocated to all subsidiary companies based upon their taxable income or loss. Deferred federalincome taxes are currently provided for timing differences between book and taxable income; such differences result primarily from the use of liberalized depreciation and cost recovery deductions allowable under the Internal Revenue Code, the under or over recovery of fuel revenue and unbilled revenues accrued for tax purposes. Cumulative timing differences in earlier years for which deferred federalincome taxes were not provided approximated $234,000,000 at December 31,1988. Investment tax credits are being amortized to income over the estimated service lives of the properties. In December 1987, the Financial Accounting Standards Board (Board) issued Staternent of Financial Aa:ounting Standards No. 96 " Accounting for Income Taxes" which becomes effective for fiscal years beginning after December 15,1988. In December 1988, the Board extended the effective date by one year. The Statement, among other things, requires the liability method of recognition for all temporary differences, requires that deferred tax liabilities and assets be adjusted for an enacted change in tax laws or rates and prohibits net-of-tax accounting and reporting. Certain provisions of the Statement provide that regulated enterprises are permitted to recognize such adjustments as regulatory assets or liabilities if it is probable that such amounts will be recovered from or returned to customers in future rates. Although the applica-tion of the Statement willincrease both total assets and liabilities, these requirements are not expected to have a material effect on the Company's financial position or results of opemtions. i M
TEXAS UTILITIES COMPANY AND SUBSIDIARIES i
'OTES TO F N ANCI AL f Statement of Consolidated Cash Flows-In November 1987, the Board issued S~ement of Financial Accounting Standards No. 95, " Statement of Cash Flows", which supersedes APB Opinion No.19, " Reporting Changes in Financial Position" and establishes a statement of cash flows and standards for j cash flow reporting. Accordingly, the Company has adopted the Statement for 1988 and the statement !
of consolidated source of funds for construction previously presented in 1987 and 1986 have been restated to conform with the Statement. For purposes of reporting cash flows, cash equivalents are considered to be temporary cash investments purchased with a maturity of three months or less. Supplemental information regarding cash payments for each of the three years in the period ended December 31,1988 is provided below: Year Ended December 31, 1983 1987 1986 Thousands ofDollars Interest (net of amounts capitalized) , , $446,791 $350,093 $351,531 Income taxes . . . .. .. 78,532 89,689 93,791
2. Bank Balances and Short-Term Borrowings At December 31,1988, the Company had lines of credit aggregating $1,025,000,000 under a credit facility agreement with a group of commercial banks. The facility, for which the Company pays a fee, will be reduced in 1993,1994 and 1995 by $325,000,000, $350,000,000 and $350,000,000, respectively.
This credit facility may be used to finance new construction, as backup for commercial paper and for general corporate purposes. The total amount of borrowings authorized by the Board of Directors of the Company from banks or other lenders at December 31,1988 was $1,075,000,000.
3. Common Stock The Company issued and sold shares of its authorized but unissued common stock during the years 1988, 1987 and 1986 as follows:
Automatic Dividend Reinvestment and Employees' Thrift Plan Common Stock and Employee Public Offering Purchase Plan Stock Ownership Plan Total Year Shares Amount Shares Amount Shares Amount Shares Amount 1988 10,750,000 $279,154,000 4,644,322 $118,334,000 1,206,209 $32,392,000 16,600,531 $429,880,000 1987 5,000,000 170,452,000 3,633,187 111,184,000 970,549 31,316,000 9,603,736 312,952,000 1986 - - 3,826,687 115,148,000 935,357 30,023,000 4,762,044 145,171,000 At December 31,1988,6,465,3% shares of the authorized but unissued common stock of the Company were reserved for issuance and sale pursuant to the above plans. In November 1988, the Company's Board of Directors voted to terminate the Company's employee stock ownership plan. During 1988,335,770 shares were issued in connection with this plan. The Company has 50,000,000 authorized shares of serial preference stock having a par value of $25 a share, none of which has been issued.
4. Retained Earnings The articles of incorporation, the mortgages, as supplemented, and the debenture agreements of TU Electric contain provisions which, under certain conditions, restrict distributions on or acquisitions of its common stock. At December 31,1988, $150,556,000 of retained earnings of TU Electric were thus restricted as a result of the provisions of such articles ofincorpor ation. Retained earnings at such date also included
$431,243,000, representing the Company's equity in undistributed earnings since acquisition included in transfers by TU Electric from its retained earnings to stated value of common stock, making a total of retained earnings which was restricted of $581,799,000 at December 31,1988.
21
TEXAS UTILITIES COMPANY AND SUBSIDIARIES O'I I.5 I O t/IN W :I \I. S I ATIGil{N I N m, nom,ni,
5. Preferred Stock of TU Electric (cumulative, without par value, entitled upon liquidation to $ 100 a share) !
Redempdos Price Per share shares outstanding Amount (before adding accumulated dividends) series Groups December 31 December 31, Current Eventual Minimen From To 1988 1987 1988 1987 ;ront To From To Thousands ofDollan Not subject to Maadstory Redemption
$4.00 $ 4.84 . . . . ,, . , 1,142,942 1,142,942 $114,588 $114,588 $101.79 $112.00 $101.79 $112.00 5.08 7.80 . . . . 1,629,675 1,629,675 163,270 163,270 102.40 103.60 102.40 103.60 8.16 8.92 . . 1,999,475 1,999,475 198,642 198,642 103.44 106.13 101.00 103.60 9.32 11.32 .. . .. 1,550,000 1,550,000 153,205 153,205 IN.66 108.19* 100.00 102.73 Adjustable rate (a). . . . , . . . , 1,850,000 1,850,000 181,713 181,713 - -
100.00 100.00 stated rate auction (b) . 1,000,000 1,000,000 98,164 98,215 - - 100.00 100.00 Total . . . .. 9,172,092 9,172,092 $909,582 $909,633 subject to Mandatory Redempden (c)(d)
$11.92 $ 9.48 . . . 1,474,250 1,500,000 $146,421 $148,610 $108.92* $109.48* $100.00 $100.00 9.64 10.08 . . .. ., 1,835,000 350,000 182,349 84,2 % 107.56* 110.00* 100.00 100.00 Total . . 3,309,250 2,350,000 $328,770 $232,906
Redemimn may not be effa:ted currently through certain refundmg opranons.
(a) Adjunable rate series A bears a dividend rate for the period ended January 31.1989 of 6.60'/s per annum and adjustable rate series B bears a dividend rate for tir period ended Da: ember 31,1988 of 7.45% per annum, both of whidi are based on a fixed liquidation price of $100.00 per share. The series are not ruleemable prior to June 1,1999 and June 1,1990, respectively. (b) Stacd rate attian series A bears a dividmd rate of 8.24% per annurn for the fixed dividend period through September 30,1992. 'lhe dividend rate for cadi 49 day dividend period thereafter will be determmed on the baas of certain auction procedures. 7he maximum rate determined by the auction may range from 110% to 200% of the 60 day "AA" cxxnposite commeraal paper rare index. All redernpuans are at a price of $100.00 per share plus accumulated dmdends. The shares are nas redeensbie prior to Sepember 29,1992. (c) TU Da:tric is required to redeem a spaifud minimum number of sharts annuaDy or semi, annually conunendng on the initial dates shown below, except for the $8.92 series whidi does not haw a sinking fund provision. These redeemable shares may be callat, pun:hmed or otherwise s6: quired. TU Dectric may annually call for redernpuun, at its option, an aspegate of up to twice the number of shares shown below for each series at a price of $100.00 per share plus accumulated dividends, except for the $9M series whidi may be redeemed in a rmnimum amount of 10.000 shares at any time at a price of $100.00 per share plus asrumukued dividends phs a cornpanent at a variable price per share whidi is dessned to maintain the expated yield at imuance: Mh=== Dab ===hia Inhial Date of Series mares M==d=aary Rednapskin
$10.08 14,000 annually 4/t/89 9.48 66,700 annually 4/1/92 10.00 20.000 annually 7/1/92 9.64 125,000 semi-annuaDy 5/1/95 8.92 AD outstandmg shares 7/1/96 The carrying value of preferred acek subjas to mandatory redanption is being increasal perxxhcally to equal the redonreion amounts at the mandatory redauption dates r
with a w,e ug increane in preferred acek dmdmds. (d) Under certain druanstanas relating to a change in federal tax law govermng the dividends raxived dalucuan apphcable to eligible corporations, the dividend rate of the 59.64 series may increase to a maximum of $10.74. In April 1988, TU Electric redeemed 25,750 shares ofits $9.48 series cumulative prefe:Ted stock whichis subject to annual mandatory redemption commencing on April 1,1992, and 15,000 shares ofits $10.08 series cumula-tive preferred stock which is subject to annual mandatory redemption commencing on April 1,1989. TU Electric issued and sold shares of its authorized preferred stock as follows: November 1988,1,000,000 shares of $9.64 series cumulative preferred stock, subject to mandatory redemption, for $99,432,000; July 1987, 1,000,000 shares of stated rate auction series A for $98,215,000; July 1986,500,000 shares of $10.00 series cumulative 1 preferred stock, subject to mandatory redemption, for $49,413,000; July 1986, 500,000 shares of $8.92 series I cumulative preferred stock, subject to mandatory redemption, for $49,437,000; and February 1986,1,000,000 shares of $9.48 series emnulative preferred stock, subject to mandatory redemption, for $98,878,000. ; l i t I
7EXAS UTILITIES COMPANYAND SUBSIDIARIES 1 l
6. Long-Term Debt of Subsidiaries,less amounts due currently December 31, Maturity Groups Interest Rate Groups 1988 1987 From To From To Thousands ofDollars First mortgage bonds:
1989 1993 4%% 4%%........................... $ 69,000 $ 69,000 l 1994 1998 4K 10% ...... ........... .. ...... 474,000 324,000 1999 2003 7% 9% .............. ... . ...... 365,000 365,000 2004 2008 8% 10.44 ............................ 850,000 700,000 2009 2013 9% 12% ...... ..................... 375,000 375,000 2014 2018 9% 13% .. ... .. ........ ......... 2,225,000 2,075,000 Pollution control series: 2007 2018 7% 10 ............................ 689,000 589,000 Funds on deposit with trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,704) (20,148) Sinking fund debentures: 1989 1994 4% 7% ............................ 30,570 49,589 Secured medium-term notes, series A: 1994 2003 9% 10% ........................ 206,500 - Total ......... ...... ....................... ...... .. 5,275,366 4,526,441 Pollution control revenue bonds: 2004 2009 5.70 7% ............................ 160,000 160,000 Promissory note and obligation for purchase of utility plant: 1990 2021 9.50 9.50 . . ........ ......... .. 489,556 - Senior notes: 1990 1999 8.50 12.20 ........... ................ 469,900 502,380 Unamortized premium and discount . . . . . . . . . . . . . . . . . . . . . . . .... (52,309) (47,330) Total long-term debt less amounts due currently . . . . . . . . . . . . $6,342,513 $5,141,491 Sinking fund and maturity requirements for the years 1989 through 1993 under long-term debt instruments in effect at December 31,1988, were as follows: Sinking Minimum Cash Year Fund (a) Maturity Requirement (b) Thousands of Dollars 1989 ............ .... ............ $109,439 $ 17,854 $110,236 1990 ........ .. ..... . .. . I16,301 100,000 198,525 1991 ............... .. ........ .... 123,072 12,000 117,476 1992 .. .. ............ . ........ 131,567 - 113,971 1993 ........ ........ .. ..... .... 139,144 73,653 195,626 (a) Excluding requirements satisfied prior to December 31.1988: 51.833,000 for 1989. 5763.000 for 1990. $460.000 for 1991 and 5320,000 for 1992. (b) Other requirements may be satisfied by certification of property additions at the rate of 167Ve of such requirements except for eighteen issues at 1004e. From time to time, various principal amounts of first mortgage bonds were redeemed by TU Electric prior to maturity. Pursuant to expected regulatory treatment, th: losses on reacquired debt have been deferred and are being amortized over the remaining lives of the bonds retired. Utility plant of TU Electric is generally subject to the liens of its mortgages. I l i 2"/
p TEXAS UTILITIES COMPANYAND SUBSIDIARIES
7. FederalIncome Taxes The details of federal income taxes are as follows:
Year Ended December 31, 1988 1987 1986 Thousands ofDollars Charged (credited) to operating expenses: Current . . . . . . ..... .............................. $143,177 .$ 54,909 $ $5,545 Deferred-net: Differences between depreciation methods and lives . . . 49,279 64,115 79,148 Certain capitalized construction costs . . . . . . ..... (8,921) (2,010) 19,320 Over/under-recovered fuel revenue . . . . . . . . . . . . . . . . . (28,344) 46,856 11,935 Cancelled lignite unit . . . . . . . . . . . . . . . . . . ......... - (971) 12,293 Early redemptions of long-term debt . . . ... .. (1,320) 6,091 10,763 Prepaid (accrued) pension cost . . . . . . ........ .... 1,165 (12,443) 6,181 Unbilled revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11,820) (17,367) (322) Minority owners settlement . . . . . . . . . . ... .. . ... 13,719 - - Alternative minimum tax . . . . . . . . . .. .. . . (3,195) (1,388) - Ot her . . . . . . . . . . . . . . . . . . . . .... . . .. .. . (6,200) 656 3,146 Total .... .... .. ... .... . . ..... .. 4,363 83,539 142,464 Investment tax credits-net . . . . ... ..... .. .. ... .. (18,481) 56,012 66,302 Total to operating expens:s . . ...... .... 129,059 194,460 264,311 Charged (credited) to other income: Current . . ... . . ...... ...... ....... .......... (2,688) (12,020) (11,535) Deferred-net: Alternative minimum tax . . . . . . . . . . . . . . . . . . . . . (9,886) (1,934) - Advance royalties . . . . . . . . . . . . . . . . . ... ... 11,541 12,328 10,879 Ot her . . . . . . . . . . . . . .... .... ...... .... (2,035) 1,858 (2,378) Total . . . . . . . . . . . . . .. . ....... ....... (380) 12,252 8,501 Total to other income . ...... ...... . (3,068) 232 (3,034) Total federal L.come taxes . . . . . . . . $125,991 $194,692 $261,277 Federal income taxes were less than the amount competed by applying the federal statutory rate to pre-tax book income as follows: Year Ended December 31, 1988 1987 1986 Thousands ofDollars Federalincome taxes at statutory rate (3490 for 1988, 39.95Vo for 1987 and 46To for 1986) . . . . . . . . . . . . . . . . . . . . $293,609 $385,001 $444,591 Reductions in federalincome taxes resulting from: Allowance for funds used during construction . . . . . . . . . 130,176 152,816 139,760 Depletion allowance. . . . . . . . . . . . . .. .. 22,764 26,437 24,006 Amortization of investment tax credits . . . . . . . . . . . . . . . 15,499 15,432 14,982 Other . . . ......... . . . ..... . . . . . . . (821) (4,376) 4,566 Total red uctions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167,618 190,309 183,314 Total federal income taxes . . . . . . . . . $125,991 $194,692 $261,277 Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 14.6Vo 20.2Vo 27.0Vo 28
r-I TEXAS UTILITIES COMPANY AND SUBSIDIARIES l
8. Retirement Plans and Other Postretirement Benefits The System Companies have uniform retirement plans covering substantially all employees. The benefits are based on years of accredited service and the employee's average annual earnings received during the 1 three years of highest earnings. The costs of the plans are determined by independent actuaries. Contribu- )
tions to the plans were determined using the frozen attained age method which is one of the several actuarial I methods allowed by the Employee Retirement Income Security Act of 1974. Beginning in 1986, pension cost for financial reporting purposes has be+ Ntermined using the projected unit credit actuarial method, in accordance with the provisions of the hm J ., Statement of Financial Accounting Standards No. 87,
" Employers' Accounting for Pensions." The cumulative difference between pension cost as determined for financial reporting purposes and contributions to the plans is recorded either as prepaid pension cost or as accrued pension liability.
In 1987, the Company offered a special early retirement program to certain eligible employees which was recorded in accordance with the Board's Statement of Financial Accounting Standards No. 88,
" Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits."
The following table sets forth the plans' funded status and amount recognized in the Company's consolidated balance sheet: December 31, 1988 1987 Thousands ofDouars Actuarial present value of accumulated benefits: Accumulated benefit obligation (including vested benefits of $503,536,000 for 1988 and $500,019,000 for 1987) . .. $(561,648) 3
${$661 238)
Projected benefit obligation for service rendered to date. . . .. . . $(730,160) $(738,359) Plan assets at fair value, primarily equity investments, government bonds and corporate bonds . . . . 839,700 732,713 Plan assets in excess of(less than) projected benefit obligation . 109,540 (5,646) Unrecognized net loss (gain) from past experience different from that assumed and effects of changes in assumptions .. (115,443) (2,801) Prior service cost not yet recognized in net periodic pension expense. 15,257 16,149 Unrecognized plan assets in excess of projected benefit obligation at initial application. . . . . . . . . . (18,603) (19,738) Prepaid pension cost (accrued pension liability) . . . . . $ (9,249) $ (12,036) Assumptions used for 1988 included a discount rate of 8.5% and an expected long-term rate of return on assets of 8.75%. Assumptions used for 1987 and 1986 included a discount rate of 8.0% and an expected long-term rate of return on assets of 8.0%. Assumptions for increases in compensation levels for 1982 1987 and 1986 were 5.3%,5.3% and 6.3%, respectively. Effective January 1,1989, vesting in the retirement plan was reduced from 10 years to 5 years. Total pension costs, including amounts charged to fuel cost and capitalized, were comprised of the following components: December 31, 1988 1987 1986 Thousands ofDoHars Service cost-benefits earned during the period . . . . . . $ 30,991 $ 30,120 $ 32,752 Interest cost on projected benefit obligation . 57,609 54,515 46,295 Actual return on plan assets . , , , . . (115,512) (347) (100,188)
- Net amortization and deferral . .. .
58,176 (58,66_4) 51,303 Net periodic pension cost . . 31,453 25,624 30.062 Termination cost . . , ..
- 38,650 -
Total pension rost . .. . .
$ 31,463 $ 64,274 ! 30,062 In addition to retirement plans, the Sy stem Companies offer certain her,lt h care and life insurance benefits )
to active and retired employees. The costs of such benefits are generally recognized as claims are paid, The l costs of providing such benefits to retired employees, net of employee contributions, approximated
$11,666,000 for 1988, $8,367,000 for 1987 and $6,759,000 for 1986.
i
)
1 1 2!
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
NTS imunnedi , 34' J D I IN TO FIS AN(I AI. STATIO ,

9. Leases The System Companies have entered into operating leases covering various facilities and properties including such items as transportation and mining equipment, data processing equipment, office space and combustion turbines. The lease covering the combustion turbine generating facilities was entered into in i late 1987 with an initial lease term of approximately 27 years. Lease costs charged to operation expense for the years ended December 31,1988,1987 and 1986 were $70,315,000, $46,732,000 and $40,466,000, respectively.
The Company's future minimum lease commitments under such operating leases that have initial or remaining noncancellable lease terms in excess of one year as of December 31,1988 were as follows: Combustion Turbines other Total Thousands ofDollars par 1989. , , $ 16,511 $ 46,832 $ 63,343 1990. 16,521 34,737 51,258 1991. . . 16,521 22,594 39,115 1992, , . 16,521 14,693 31,214 1993... . . . 16,521 12,918 29,439 Thereafter , 429,152 14,918 444,070 Total minimum lease commitments . , s511,747 $146,692 s658,439
10. Comanche Peak Nuclear Generating Station TU Electric is constructing two nuclear-fueled generating units at the Comanche Peak nuclear generating station (Comanche Peak), each of which is designed for a capability of 1,150 megawatts. This project is subject to the jurisdiction of the Nuclear Regulatory Commission (NRC). NRC regulations govern the granting oflicenses for the construction and operation of nuclear power plants and sub:ect such plants to coatinuing review and regulation. After giving effect to the acquisition of all of the intereas of the Texas Municipal Power Agency (TMPA) and the Brazos Electric Power Cooperative, Inc. (BEPC), TU Electric's ownership share in each unit is 1,125 megawatts, or 97%%. The other participant in the facility is Tex-La Electric Cooperative of Texas, Inc. (Tex-La), which owns the remaining 2%% interest.
Licenses The NRC has been reviewing TU Electric's application for operating licenses for the Comanche Peak units. In March 1984, the NRC established a task force to consolidate and carry out the various reviews necessary for the NRC Staff to reach its decision regarding the operating licenses. This effort involved the establishment of a Technical Review Team (TRT), which conducted an intensive onsite investigation and subsequently issued reports that requested afditional information from TU Electric with respect to several functional areas of the plant's construction program and described deficiencies that had been found, primarily in the area of quality assurance / quality control. TU Electric then formed a special team, the Comanche Peak Response Team, which included a number of independent experts in each area addressed by the TRT, and submitted a Program Plan to the NRC to respond to the questions raised. Such Program Plan, which was revised in June 1985, substantially revised and reissued in January 1986, and further revised in July 1987, is presently being implemented. It provides for a complete design review of virtually all safety related systems in the plant and the development of a corrective action program for design and construction issues as required. In February 1987, in order to carry out the NRC Staff review, the NRC created an Office of Special Projects to manage all aspects of the NRC's licensing and inspection efforts for Comanche Peak and certain other miclear power plants. In January 1988, the NRC Staff approved the Program Plan and corrective action program as the basis to resolve outstanding issues. Until July 1988, an Atomic Safety and Licensing Board ( ASLB) was involved in the NRC's review process. Proceedings on various issues had been ongoing before this ASLB since December 1981 and an ir.tervenor was actively invoh ed in such proceedings. In July 1988, these ASLB proceedings were dismissed pursuant to a Joint Stipulation and a Joint Motion for Dismissal filed by TU Electric, the intervenor and the NRC Staff. Under the terms of this Motion for Dismissal, TU Electric will continue to implement its corrective action program and a representative of the intervenor has been appointed as a member of the Operations Review Committee for Comanche Peak (O RC) and will be actively involved in the corrective action process. The ORC is required by the Conunche Peak technical specifications an:i reviews operational and other safety related matters. The dismissal of the ASLB proceedings was part of an overall settlement between 30
TEXAS UTILITIES COMPANY AND SUBSIDIARIES yANC LSTA E h ldN f S u ht M [ M . i
10. Comanche Peak Nuclear Generating Station (continued) the intervenor and TU Electric. In addition, TU Electric has resolved claims by wor kers formerly employed at Comanche Peak who had employment discrimination claims or suits against TU Electric or its contractors, and it has reimbursed the intervenor for expenses incurred by the intervenor in connection with its activities relating to the licensing of Comanche Peak. TU Electric must still, however, resolve remaining issues to the satisfaction of the NRC Staff before the Staff can make a recommendation for licensing to the NRC.
In making its decision, the NRC is expected to rely largely on detailed technicalinspections conducted by the Staff at Comanche Peak, and also the TRT inspection. In August 1988, after the dismissal of the ASLB licensing proceedings discussed above, a request for hearing and petition for leave to intervene was filed with the NRC by another group seeking intervenor status. Such request asked the NRC to reopen the licensing hearings, in December 1988, the NRC issued a Memorandum and Order denying this petition. This decision has been appealed by this group to the United States Court of Appeals for the Fifth Circuit. At various times in the past, TU Electric has paid civil penalties to the NRC relating to the findings of the TRT, allegations of harassment and intimidation at Comanche Peak and violations of TU Electric's reinspection and corrective action effort. The construction permit for Comanche Peak Unit 1 has been extended until a " latest date for completion" l of August 1,1991, and the construction permit for Unit 2 has been extended until a " latest date for ! completion" of August 1,1992. Litigation TU Electric and Tex-La are owners of undivided interests in Comanche Peak under the terms of a Joint Ownership Agreement (Agreement) which provides that TU Electric is the Project Manager for Comanche Peak. Since May 1986, Tex-La has failed to make payments to TU Electric for its portion of Comanche Peak. Accounts receivable at December 31,1988 included $51,116,000 due from Tex-La. In May 1986, TU Electric filed suit in the 14th Judicial District Court of Dallas County, Texas against Tex-La because of controversies which exist under the Agreement with respect to the obligations of the parties. TU Electric sought recovery of damages against Tex-La for its anticipatory breach of the Agreement and asked for a declaratory judgment against Tex-La, declaring among other things that it was obligated to pay its share of the remaining costs of construction of Comanche Peak and that TU Electric has not failed to use prudent utility practices in constructing Comanche Peak in accordance with the Agreement. Tex-La filed a cross-action in such suit against TU Electric and the Company asserting various causes of action, including a number of alleged breaches of the Agreement by TU Electric and violations of the Texas Deceptive Trade Practices Act (DTPA). In September 1986, the Court in this suit ruled in favor of TU Electric with regard to a plea of Tex-La attempting to change the venue of such suit; and in July 1988 it dismissed the DTPA claims. In June 1986, Tex-La filed suit in the 98th Judicial District Court of Travis County, Texas against TU Electric and the Company. The petition asserted various causes of action, including a number of alleged breaches of the Agreement by TU Electric and violations of the DTPA, and asked for rescission and modification of the Agreement and payment for damages, including treble damages based upon violations of the DTPA. TU Electric and the Company intend to vigorously contest this suit, which has been stayed l as a result of the September 1986 ruling in the Dallas County suit. TU Electric and Tex-La are currently involved in settlement negotiations and thus have agreed to a temporary stand-still in the legal proceedings. It is expected that the Dallas County suit will be tried in the late spring of 1989 if the current discussions do not result in a settlement agreement. TU Electric cannot predict the outcome of either the discussions or the suits at this time. l TMPA and the BEPC previously had also owned undivided interests in Comanche Peak. In August 1988 l and December 1988, TU Electric finalized agreements to purchase the minority ownership interests of TMPA i and BEPC, respectively,in Comaoche Peak. (See Note 11 concerning the f erms of these agreements.) TMPA i and BEPC were also defendants in the Dallas County suit raentioned above and had also filed suits in Travis l County, Texas against TU Electric and its affiliates, in conjunction with Tex-La in the case of TMPA, l and separately, but in a similar suit in the can of BEPC. Pursuant to the foregoing agreements, all claims , in these suits between TU Electric and its affiliates, and TMPA and BEPC have been dismissed. l l l l _ _ _ _ _ _ - - _ _ 1
TEXAS UTILITIES COMPANYAND SUBSIDIARIES
10. Comanche Peak Nuclear Generating Station (concluded)
Cost and Schedule Estimates In March 1988, TU Electric announced tha: following its review of the cost and schedule for Comanche Peak, commercial operation of Unit I was anticipated at the end of 1989. All Unit I corrective action actisities were scheduled for completion to permit fuelloading in mid 1989._ TU Electric also announced the temporary suspension of construction activities and accrual of AFUDC on Unit 2 beginning in April 1988 for a period of approximately one year. Unit 2 was not expected to be ready for commercial operation until after the 1991 peak season. The delay of Unit ? was implemented to allow TU Electric to concentrate its resources on the completion of Unit 1, thereb; reducing the duplication of effort that would be required to maintain the previous timing between the two s nits and strengthen TU Electric's ability to manage construction and start-up activities for both units more efficiently with fewer personnel. Additionally, such delay will allow time to make a more complete determination of any modifications that may be required for Unit 2 based upon the knowledge gained from the reinspection and corrective action program applied to Unit 1. The delay of Unit 2 will also permit TU Electric time to implement rates for Unit 1 prior to the final completion and operation of Unit 2. Although construction on Unit 2 has been temporarily suspended, there are some ongoing expenditures required to maintain the unit until construction is resumed. Additionally, to the extent the work necessary to place Unit 1 into ser ice affects various common systems, some capital expenditures - are associated with Unit 2. Based upon this schedule, the total cost of TU Electric's 97%% share of the plant, excluding AFUDC, would be $6.69 billion. The estimated cost of TU Electric's share, including AFUDC, would be $8.90 billion or about $3,950 per kilowatt. Because of the uncertainty regarding the date of commercial operation of Unit 2, no provision has been included in such amount for reestablishing the accrual of AFUDC on Unit 2 after construction resumes. In February 1989, the construction of Unit 1 is approximately three months behind the schedule announced in March 1988, which will delay the fuelloading and commercial operation dates for Unit I and the restart of construction of Unit 2 for a corresponding period. Such delay will not affect the peak season in-service dates of 1990 for Unit I and 1992 for Unit 2. Although a new cost estimate has not been developed, a three-month delay will increase the estimated project cost; however, such increase should not be material in relation i to the total cost of the project. Due to numerous uncertainties, no assurance can be given that further slippage in the schedule will not occur or that the estimated completion cost will not be exceeded which would likely increase financing requirements. Because of the three-month delay and the other uncertainties, estimated construction expenditures (Electric Property - Production) for 1989 and 1990 include approximately $300 million and
$100 million, respectively, as a contingency to provide for such events. At Dccember 31,1988 and 1987, TU Electric's investment in Comanche Peak, including AFUDC, was $7,688,000,000 and $5,808,000,000, respectively, of which $1,284,000,000 has been allowed in rate base by regulatory authorities. TU Electric has indicated that it does not currently plan to implement increased electric service rates which reflect any additional Comanche Peak costs until Unit 1 is ready for commercial operation. TU Ele:tric continues to believe, based upon revised cost estimates and using acceptable ratemaking approache; and assump -
tions, that the rate increase, when Unit I goes into service, can be held to about 10%. Such rate application will be subject to challenge with respect to the prudence of certain costs, for which an estimate is not presently determinable. Accordingly, no provision for loss, if any, has been made in the financial statements of the Company. 32-
TEXAS UTILITIES COMPANYAND SUBSIDIARIES
11. Commitments and Contingencies Constmetion Program l For major construction work now in progress or contemplated by the System Companies, and commit-ments with respect thereto, see pages 10,11, and 13.
Cooling Water Contracts TU Electric has entered into contracts with public agencies to purchase cooling water for use in the gener-ation of electric energy and has agreed, in effect, to guarantee the principal, $46,630,000 at December 31, 1988, and interest on bonds issued to finance the reservoirs from which the water is supplied. The bonds mature at various dates through 2011 and have interest rates ranging from SX% to 9%. TU Electric is required j to make periodic payments equal to such principal and interest for the years 1989 through 1993 as follows: -
$4,396,000 for 1989, $4,423,000 for 1990, $4,435,000 for 1991, $4,430,000 for 1992 and $4,392,000 for 1993. In addition, TU Electric is obligated to pay certain variable costs of operating and maintaining the reservoirs. Total payments, including amounts capitalized, mder such contracts for 1988,1987 and 1986 were $4,404,000, $4,400,000 and $4,833,000, respectively. "U Electric has assigned to a municipality all contract rights and obligations of TU Electric in connection with $98,260,000 remaining principal amount of bonds at December 31,1988 issued for similar purposes which had previously been guaranteed by TU Electric; TU Electric is, however, contingently liable in the es ent of default by the municipality.
Chaco CoalProperties Chaco Energy Company (Chaco) entered into an agreement in 1977 for the rights to over 200 million tons of surface mineable coal located in New Mexico. The agreement provides, subject to certain limita-tions, for advance royalty payments, payable over a period of approximately 35 years, which are based upon annual quantities ranging from approximately 6.4 mulion tons in 1989 to a maximum of approxi-mately 8.3 million tons in 1993. Such payments approximated $6.69 per ton in 1988 and are subject to escalation in the future due to inflation. In connection with the foregoing, the Company entered into a surety agreement pursuant to which it has undertaken to assure the performance by Chaco with respect to this agreement. Non-utility property at December 31,1988 and 1987 included $179,891,000 and
$145,900,000, respectively, of minimum advance royalties paid by Chaco under the terms of this agreement.
Capacity and Energy Purchase TU Electric entered into an agreement in 1982 with Tex-La, a 2%% owner of Comanche Peak, whereby TU Electric agreed to purchase an assignment of portions of Tex-La's entitlement to capacity and energy from Comanche Peak in declining amounts over the first eight years of commercial operation of each generating unit. Under the agreement, TU Electric is required to make annual payments to Tex-La comprising a pro rata share of operating costs plus a capital charge on Tex-La's net investment applicable to the portion of Tex-La's entitlement assigned. (See Note 10 concerning litigation proceedings regarding Tex-La's participation in Comanche Peak.) Martin Lake Unit 4 Construction Cancellation In November 1986, TU Electric announced that it was not economically feasible to construct a fourth . unit at the Martin Lake generating station (Martin Lake Unit 4) and cancelled the project which was scheduled for service in 1994. Pursuant to expected regulatory treatment, the present value of expected future recovery of costs of approximately $31,848,000, including contractor termination costs, have been recorded as a deferred asset to be amortized as approved by regulatory authorities. The application in 1988 of the Board's Statement of Financial Accounting Standards No. 90, " Regulated Enterprises - Accounting for Abandonments and Disallowances of Plant Costs" to the accounting for the abandonment of Martin Lake Unit 4 did not have a material effect on the Company's financial statements. l l l i l l l
~ l 31 l t
TEXAS UTillTIES COMPANY AND SUBSIDIARIES O I ES I O I/IN W 'ITI. STAT.E\lIG I S m nauen ,,
11. Commitments and Contingencies (concluded)
Purchase ofMinority Ownership Interests in Comanche Peak In February 1988, TU Electric entered into an agreement with TMPA to purchase TMPA's ownership interest in Comanche Peak and an initial closing of the transaction occurred in August 1988. The purchase price, totaling approximately $456.9 million, is based on TU Electric's incurred cost per kilowatt, including AFUDC, for its existing share plus payment for TMPA's interest in the nuclear fuel for Comanche Peak, certain transmission facilities associated with Comanche Peak and certain expenses. In connection with the purchase of TMPA's ownership interest by TU Electric, all outstanding claims and pending lawsuits between TMPA and TU Electric and the Company have been settled and terminated. Payments of approximately $101.9 million plus interest were made by TU Electric in 1988. Under the terms of the agreement, beginning in February 1989, TU Electric will pay the remaining $355.0 million in ten equal semi-annual payments including interest, each in the amount of approximately $45.0 million, for the balance of the purchase. For accounting purposes, the transaction is treated as a completed purchase of utility plant; however, under the terms of the agreement, legal title to the purchased assets pues to TU Electric at the time of, and in proportion to, each payment made. The Company has unconditionally guaranteed these payments. In July 1988, TU Electric entered into an agreement with BEPC to purchase BEPC's ownership interest in Comanche Peak and finahzation of the agreement occurred in December 1988. The purchase price, totaling approximately $297.7 million, is based on TU Electric's incurred cost per kilowatt, including AFUDC, for its existing share plus payment for BEPC's interest in the nuclear fuel for Comanche Peak, certain trans-mission facilities associated with Comanche Peak and certain expenses. In connection with the purchase of BEPC's ownership interest by TU Electric, all outstanding claims and pending lawsuits between BEPC and TU Electric, the Company, Texas Utilities Mining Company and Texas Utilities Services Inc. have been settled and terminated. Under the terms of the agreement, TU Electric made initial payments of approximately $18.4 million plus interest, applied accounts receivable from BEPC of approximately $84.8 million, and issued a promissory note in the amount of $194.5 million payable to BEPC over approximately 33 years. General In addition to the above, the Company and its subsidiaries are involved in various legal and administrative proceedings which, in the opinion of the Company, should not have a material effect upon its financial position or results of operations.
12. Supplementary Financial information (Unaudited)
In the opinion of the Company, the following information includes all adjustments (constituting only normal recurring accruals) necessary to a fair statement of such amounts; quarterly results are not necessarily indicative of expectations for a full year's operations because of seasonal and other factors, including rate changes, variations in maintenance and other operating expense patterns and the impact of the suspension of AFUDC accruals. Earnings Per Share of Consolidated Common Operating Revenues Operating Income Net Income Stock Quarter Ended 1988 1987 1988 1987 1988 1987 1988 1987 Thousands of Dollars (except per share amounM March 31. , 5 943,076 $ 870,525 5204.970 $172,941 51s3.771 $130,198 31.01 $J.90 Jw 30 . . . , 944,418 1,010.889 209,339 199,646 126,798 159,083 0.79 1.07 September 30, , 1,311,751 1,269,525 355,035 299,980 259,917 258,5 % 1.60 171 December 31. M4,430 931,984 183,949 116,3 t6 130,145 131,099 9.60 0.87 Total . . 54,153,675 $4,082,923 $953,293 $848.883 5641,671 $679,976 54.00 $4J l
)
l 34 .
STATEN 'NT OF RE PONS 1 IM ; The management of Texas Utilities Company is responsible for the preparation, integrity and objectivity of the consolidated financial statements of the Company and its subsidiaries and other information included in this report. The consolidated financial statements have been prepared in conformity with generally accepted accounting principles. As appropriate, the statements include amounts based on informed estimates and judgments of management. The management of the Company has established and maintains a system of internal control designed to provide reasonable assurance, on a cost-effective basis, that assets are safeguarded, transactions are executed in accordance with management's authorization and financial records are reliable for preparing consolidated financial statements. Management believes that the system of control provides reasonable assurance that errors or irregularities that could be material to the consolidated financial statements are prevented or would be detected within a timely period. Key elements in this system include the effective communication of established written policies and procedures, selection and training of qualified personnel and organizational arrangements that provide an appropriate division of responsibility. This system of control is augmented by an ongoing internal audit program designed to evaluate its adequacy and effectiveness. Management considers the recommendations of the internal auditors and independent certified public accountants concerning the Company's system ofinternal control and takes appropriate actions which are cost-effective in the circumstances. Management believes that, as of December 31,1988, the Company's system of internal control was adequate to accomplish the objectives discussed herein. The Board of Directors of the Company addresses its oversight responsibility for the consolidated financial statements through its Audit Committee, which is composed of directors who are not employees of the Company. The Audit Committee meets regularly with the Company's management, internal auditors and independent certified public accountants to review matters relating to financial reporting, auditing and internal controls. To ensure auditor independence, both the internal auditors and independent certified public accountants have full and free access to the Audit Committee. The independent certified public accounting firm of Deloitte Haskins & Sells is engaged to audit, in accordance with generally accepted auditing standards, the consolidated financial statements of the Company and its subs' Tries and t issue their report thereon.
% arringt n ,Cliairmanof e Board and Chief Executiveof6cer 0.
Erle Nye, Presi ent \ l 4 / . f T. L. Baker. Vice President and Principal Financial officer f $. % Igd, Co/ roller and Principal Accounting officer i DELOITFE II ASKINS & SELLS ; CERTIFIED PUBLIC ACCOUNTANTS l To the Shareholders of Texas Utilities Company: We have audited the consolidated balance sheet of Texas Utilities Company and subsidiaries as of 8 December 31,1988 and 1987 and the related consolidated statements ofincome, retained earnings and cash l flows for each of the three years in the period ended December 31,1988. These consolidated financial state-ments are the responsibility of the Company's management. Our responsibility is to express an opinion i on these finantial statements based on our audits. We conducted our au. fits in accordance with generally accepted auditing standards. Those standards ! require that we plan and perform the audit to obtain reasonable assurance about whether the financial state- j ments are free of material misstatetnem. An audit includes examining, on a test basis, evidence supporting 1 the amounts and disclosures in the financial statements. An audit also includes assessing the accounting l v principles ustd and significant estimates made by management, as weh as evaluating the overall financial statemcat presentation We believe that oar audits provide a reasonable basis for our opinion, j In our opinion the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the companies at December 31,1988 and 1987, and the results of their f operations and their cash flows for each of the three years in the period ended Dece.mber 31,1988,in con-l i formity with generally accepted accounting principles. l l Dallas, Texas DELOITIE HASKINS & SLLLs Fioruary 17,1989 35
l TEXAS UTILITIES COMPANY AND SUBSIDIARIES IN \NCI \l. S I ATISTICS l 1988 1987 1986 TOTAL ASSETS end of year (thousands) .. ....... . .... .. . . .. . $16,057,580 $13,986,260 $12,318,192 UTILITY PLANT end of year (thousands) . . .. . $17,391,133 $15,172,994 $13,566,133 Accumulated depreciation end of year . . .. ... . . . 2,931,590 2,718,328 2,522,016 Construction expenditures (including allowance for funds used during construction) . .. . .. . . . 1,562,781 1,688,831 1,519,619 CAPITALIZATION end of year (thousands) Long-term debt . . . .. . . .. .. . . . . $ 6,342,513 $ 5,141,491 $4,283,791 Preferred stock: 1 Subject to mandatory redemption . . . . . . . . . . 328,770 232,906 232,424 Not subject to mandatory redemption. . . , . .. . 909,582 909,633 'd11,418 Common stock equity . . . . . . .... . ... . . .. .... 5,641,096 5,032,331 4,460,821 Total . . . . . . . . . . . . ... .. .. . . $13,221,%I $11,316,361 $9,788.454 1 CAPITALIZATION RATIOS end of year Long-term debt . .. .. .. . .. . .. 48.0Vo 45.4 % 43.7 % Preferred stock. . . . .. . .. . 9.4 10.1 10.7 Common stock equity . . . . . . . 42.6 44.5 45.6 Total . . . . ... . .. .. . .. .. 100.0 % 100.0 % 100.0 % EMBEDDED INTEREST COST ON LONG-TERM DEBT end of year . . 10.0 % 9.9% 10.0Vo EMBEDDED DIVIDEND COST ON PREFERRED STOCK end of year , . 8.3% 8.3'/o 8.1 % CONSOLIDATED NET INCOME (thousands) . .. $642,671 $679,976 $626,851 DIVIDENDS DECLARED ON COMMON STOCK (thousands) . $463,T86 $421,418 $377,865 COMMON STOCK DATA Shares outstanding-average . . .. . . . ... .. 160,561,430 149,449,134 140,981,671 Shares outstanding-end of year . . .. . 169,009,473 152,408,942 142,805,206 Earnings per average share . . . . $4.00 $4.55 $4.45 Dividends declared per share . . . . . $2.88 $2.80 $2.68 Book value per share-end of year . ... . .. . $33.38 $33.02 $31.24 Return on average common stock equity . .. 12.0 % 14.3 % 14.7 % ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION AS PERCENT OF CONSOLIDATED NET INCOME . . . 60.2 % 56.9 % 48.5 % CASH FLOWS FROM OPERATIONS (less common stock dividends paid) AS PERCENT OF CASH CONSTRUCTION i EXPENDITURES * . . .... . . . 15.6 % 25.5 % 38.7 % ! l l
' Prior periods have been restated pursuant to the adopion in 1988 of the StaterNr.t of Cash Flows. j I
1 1
. l I l 36
1935 1984 1983 1982 1981 1980 1979 1978
$10,867,022 $9,759,149 $8,780,954 $8,021,407 $7,306,658 $6,552,972 $5,821,933 $5,161,808 $12,144,563 $11,031,699 $9,%7,653 $9,051,442 $8,194,803 $7,438,877 $6,631,618 $5,862,0%
2,331,783 . 2,143,863 1,958,103 1,758,156 1,560,754 1,378,654 1,213,927 1,057,068 i I 1,108,G61 951,323 906,910 891,560 792,268 807,008 8'a,916 737,353
$3,615,669 $3,322,925 $3,103,452 $2,973,253 $2,713,863 $2,527,716 $2,368,612 $2,038,654 34,6 % 34,6 % 34,6 % - - - - -
311,418' 727,911 629,779 600,109 600,109 600,109 535,824 506,233 4,066,664 3,573,103 3,235,375 2,810,195 2,421,864 2,090,520 1,830,472 1,624,298
$3,328,447 $7,658,635 $7,003,302 $6,383,557 $5,735,836 S5,218,345 $4,734,908 $4,169,185 42.4 % 43.4 % 44.3 % 46.6 % 47.3 % 48.4 % 50.0% 48.9 % l 9.9 10.0 9.5 9.4 10.5 11.5 11.3 12.1 l
47.7 46.6 - 46.2 44.0 42.2 40.1 38.7 39.0 i 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % ! 10.3 % 10.1 % 9.7% 9.5% 9.0% 8.3% 7.9% 7.5% 0.2% 8.3% 8.0% 7.7% 7.7% 7.7 % 7.4% 7.3%
$587,758 $526,041 $461,468 $428,646 $359,398 $297,844 $211,151 $200,738 $343,364 $298,878 $262,659 $227,076 $192,306 $164,527 $142,262 $119,945 135,266,534 126,626,241 !!8,454,666 111,356,815 102,292,239 93,719,257 86,319,3 % 79,026,787 130,043,162 128,585,669 123,685,058 114,182,319 105,236,301 % ,088,645 87,985,098 80,665,889 $4.35 $4.15 $3.90 $3.85 $3.51 $3.18 $2.45 $2.54 $2.52 $2.36 $2.20 $2.04 $1.88 $1.76 51.64 $1.52 . $29.46 $27.79 $26.16 $24.61 $23.01 $21.76 $20.80 $20.14 15.4 % 15.5 % 15.3 % 16.4 % 15.9 % 15.2 % 12.2 % 13.1 %
39.1 % 32.7 % 34.4 % 31.7 % 26.1 % 26.2 % 28.2 % 26.9 % 55.8 % 61.4 % 57.5 % 63.1 % 61.1 % 54.9 % 42.1 % 46.8 % I 1 37 i
TEXAS UTILITIES COMPANY AND SUBSIDIARIES y . . . . . .. . .. ; . . . c . - . '.- -
, ; w-~. . 'y
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ll' . . 1988 1987 1986 ELECTRIC ENERGY GENERATED AND PURCHASED (mwh) G:nerated-net station output . . 73,493,397 71,878,925 75,467,871 Purchased and net interchange , 12,095,385 11,019,037 4,712,082 Total generated and purchased . 85,588,782 82,897,962 80,179,953 Company use, losses and unaccounted for , , 4,864.236 5,125,310 4,925,178 Total electric energy sales . 80,724,546 77,772,652 75,254,775 ELECTRIC ENERGY SALES (mwh) Residential 26,634,150 25,716,080 24,6N,109 Commercial 23,187,122 22,324,328 21,453,435 Industrial. 22,287,732 21,420,705 21,013,278 Government and municipal. . 2,613,600 2,499,981 2,385,168 Total general business . . 74,722,604 71,%1,094 69,455,990 Other electric utilities . 6,001,942 5,811,558 5,798,785 Total electric energy sales , 80,724,546 77,772,652 75,254,775 OPERATING REVENUES (thousands) Residential $1,697,787 $1,603,446 $1,530,258 Commercial 1,248,460 1,166,832 1,137,944 Industrial 852,035 800,635 822,831 Government and municipal . , 149,942 140,291 134,927 Total general business . 3,948,224 3,711,204 3,625,960 Other electric utilities . . 239,937 221,413 222,644 Total from electric energy sales 4,188,161 3,932,617 3,848,6N Other operating revenues (including over/under-recovered fuel revenue) (34,486) 150,306 83,441 Total operating revenues . $4,153,675 $4,082,923 $3,932,045 ELECTRIC CUSTOMERS end of year Residential 1,853,128 1,838,467 1,820,381 Commercial 219,508 218,641 217,232 Industrial. 23,799 24,006 23,912 Government and municipal. 14.028 13,690 13,180 Total general business . 2,110,463 2,094,804 2,074,705 Other electric utilities . 64 62 61 Total electric customers . 2,110,527 2,094,866 2,074,766 RESIDENTIAL STATISTICS (excludes master-metered customers, mwh sales and revenues) Average kwh per customer . 13,498 13,147 12,749 Average revenue per kwh 6.48c 6.33c 6.31c Industrial classification includes service to Alcoa-Sandow: Electric energy sales (mwh) . 3,525,416 3,409,332 3,092,6 % Operating revenues (thousands) $56,608 $62,630 $65,664 l l l 38 1
1985 1984 1983 1982 1981 1980 1979 1978 76,355,3 % 72,582,637 67,706,594 64,224,726 62,447,413 62,865,641 58,051,429 57,1 % ,077 2,057,490 382,651 343,581 371,190 91,091 56,388 75,695 79,688 78,412,886 72,%5,288 68,050,175 64,595,916 62,538,504 62,922,029 58,127,124 57,275,765 5,042,990 3,839,517 5,340,248 4,215,774 4,166,327 4,422,762 4,001,684 4,041,486 73,369,C% 69,125,771 62,709,927 60,380,142 58,372,177 58,499,267 54,125,440 53,234,279 i 24,300,783 22,693,290 20,162,506 19,945,087 18,676,240 19,844,409 17,394,402 17,943,224 i 20,349,334 19,026,267 17,366,563 16,475,253 15,383,162 14,683,104 13,264,436 13,117,202 20,921,530 20,343,558 18,690,077 17,526,412 17,992,261 17,581,265 17,275,859 16,469,636 2,324,785 1,920,420 1,790,476 1,730,273 1,692,106 1,7 % ,988 1,669,726 1,728,056 67,8 % ,437 63,983,535 58,009,622 55,677,025 53,743,769 53,905,766 49,604,423 49,258,118 5,473,459 5,142,236 4,700,305 4,703,117 4,628,408 4,593,501 4,521,017 3,976,161 l 73,369,8% 69,125,771 62,709,927 60,380,142 58,372.177 58,499,267 54,125,440 53,234,279
$1,673,370 $1,546,081 $1,306,912 $1,237,632 $1,044,761 5 877,555 $ 672,340 $ 640,611 1,207,784 1,127,766 998,362 911,487 778,008 590,921 488,170 439,146 935,849 893,531 808,016 745,243 659,678 482,919 419,224 373,456 145,256 117,793 104,730 95,673 83,077 68,3 % 54,565 49,623 3, % 2,267 3,685,171 3,218,020 2,990,035 2,565,524 2,019,791 1,634,299 1,502,836 250,857 233,2 % 202,387 190,727 161,998 123,188 105,306 87,592 4,213,124 3,918,467 3,420,407 3,180,762 2,727,522 2,142,979 1,739,605 1,590,428 (42,%7) 13,768 67,509 57.263 10,855 31,574 16,684 13,928 $4,170,157 $3,932,235 $3,487,916 $3,238,025 52,738,377 $2,174,553 $1,756,289 $1,604,356 1,764,346 1,669,735 1,556,760 1,477,097 1,421,273 1,356,651 1,287,701 1,221,468 214,386 208,477 198,548 187,065 177,269 171,495 164,291 160,170 24,148 24,058 22,761 21,478 20,692 19,590 18,654 17,953 12,000 11,455 10,210 10,148 10,263 10,488 11,257 11,260 2,014,963 1,913,725 1,788,279 1,695,788 1,629,497 1,558,224 1,481,903 1,410,851 63 66 68 75 78 80 80 g 2,015,023 1,913,791 1,788,347 1,695,863 1,629,575 1,558,304 1,481,983 1,410,9', '
13, % 2 12,887 12,073 12,320 11,862 13,125 11,897 12,747 6.99c 6.93c 6.60c 6.34e 5.72e 4.54c 3.98e 3.70e 2,061,454 2,989,272 2,660,564 2,316,308 2,848,997 2,918,794 3,076,399 2,891,259
$68,946 $70,825 568,121 $68,035 564,016 $48,813 $48,400 $41,572
KREl Quarterly Market Price Ranges and Dividends L1989 Annual Meeting ~ Paid Per Share of Common Stock . . TheAnnualMeetingof'Shate :
, holders of the Company willbe~
Quarter Ended Price Range Dividends Paid held at 9:30 a.m.: on Friday, : 1988 1987 1988 1987 May 19,1989,in the Plaza Ball-; High Low High Low . room at the Plaza of the Ameri-cas Hotel,650 North PearlStreet - March 31. . .. ....... $30% $24% $36% $31% $0.70 $0.67 Dallas, .'lhxas.' Shareholders are June 30 . . . ... .. 27% 24% 33% 30 0.72 0.70
- coltlially invited to be present at -
September 30 .. ... .. 29% 26% 34% 30% 0.72 0.70
. the annual meeting; Those un- -
December 31. . . . . . . . . . . 29% 27% 31% 25% 0.72 0.70 able to attend att urged to exer- <
$2.86 $2.77 ' cise their right to vote by proxy.
Notice of. meeting'and proxy 1 statement and form ofproxywill . : bemailed shortlyafterMarch20, - The Company has declared holders of record on March 6. the record date for the meeting. common, stock dividends payable Dividends are paid in cash to Following the meeting, a report m cash in, eac,h year since its shareholders who are not of the: proceedings will be. l Incorporation in 1945 and has participating in the Automatic prepared? and distributed 101 ' l
continued its record of annual Dividend Reinvestment and . all shareholders.
dividend increases, which com- Common Stock Purchase Plan; menced in 1948. At its February all dividends are reportable for 1989 meeting the Board of federal income tax purposes as Directory Directors raised the quarterly ordinary dividend income. TRANSFER AGEN1S AND dividend by one cent per share, Reference is made to Note 4 to REGISTRARS from 72 cents to 73 cents. This Financial Statements regarding MRust Corp, N.A.
""*T**^*
regular quarterly dividendis pay- limitations upon payment of M '8*" Shareholder Services Dust able April 3,1989, to share- dividends on common stock. oy p,n New York, New York DIVIDEND DISBURSING AGENT Morgan Shareholder Services Trust DIVIDENDS DECLARED Company PER SHARE 30 West Broadway New York, New York 10007-2192 AGENT FOR PARTICIPAN'IS AUTOMATIC DIVIDEND REINVESTMENT AND COMMON SIOCK PURCHASE PLAN 2.00 Morgan Shareholder Services T ust Company Dividend Reinvestment Plans l P.O. Box 3506, Church Street Station i New York, New York 10008-3506 ' STOCK EXCHANGE LISTINGS New York Stock Exchange, Inc. New York, New York g Midv.est Stock Exchange, Incorporated 2 46- 50 SE 60 35 75 80 85 88- Chicago, Illinois j The Pacific Stock Exchsage incorporated ,
s
NmCAM RATE . Im Anycle a sd San Francisco, CQfornia j
' ~
Ticer Symb A TXU l The AnnualReport has been preparedfbr ]?.ms Utilitia Company distriinta a booklet Requests for copics or other shareholder thepurpuse ofprovidmg shamholders wth containing detailed System financial and istformation should be directed to: infor,twtion <nnarning the Company and cperating data which have been compi!ed Sharholder Relations not in connxtion with amsoie orpurchase for the com:enienx offinancial analysts; a Ibxas Utdi;ics Compaq ; of,' or any offer orsolici:ation ofan offer to copy willbefurnished t pon request. 2001 bycn 1bwer 1 buy or se!!, any securities. Dallas Texas 732fd l A copy qf the A nnual}kprt to the Securitsw (214) 812 4 16 1 andEuhan;e Commission, Form 10E, will refurnished by the Company upon request. 40
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DIRECTORS AND OFFICERS
,Im .g.
J . . " :- J
~
2.. JAMES K. DODEY ' i MARGARET N. MAXEY JERRY FARRINGTON
Aptos California .
Austin, Texas Chairman of the Board and
.. )tetenedChairmen of the . Director.of the Chair'of Fire - ChiefExecutiw - 'Bonind, Wegs Fargo 4 - .- Enterprise and Professor, Conqpany - - BiomedicalEngineering a . ggyy yyy Pmgram, College of Q .i . y;g,,
[ ACK W NS f,fy,,, ,4,f T at Austin T.L.BAKElW, '
' N of the Board and' ' ERLE NYE . Vice President ./. Decutise Offker Dallas, Texas .- ^ ,ef .
Companies, Inc. . President of the Company
- CHARLES R. PERRY . W.H. GOODENOUGH.
4
. JERRY FARRINGTON Odessa, Texas . . Tesurer and.phtant
i. Danas, . Imerests
' investments,- Mand Gas ' : N'"U M dthTexis l board . ' ~ ~ ' "- - - # #" S S. SWIGER ~ . -
CHARfES N. PROTHRO C "'* ###
"1 Y ^
Wichita Falls, Texas
' Owner, Perkins-Pmthro - ' WILLIAM.M. GRIFFIN .
Company - PETER B. TINKHAM Mprtford, Connecticut WILLIAM H. SEAY "'I ""# A###"' lamstments . Dallas, Texas
. Tasus - \ Investments, Retired .. \ .: SURL R. HULSEY, JR. I ' Chairman and Chief . Fort Worth, Texas - -
Ehrutiw Officer of . . ,
^' ' Renned. Vior Chairman of ' Southmstern L{fe Insutance ^ . - . Company, ~ .theBoond of tN Contpany ;' [
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f l t l AGREEMENT between TEX-LA ELECTRIC COOPERATWE OF TEXAS,INC. Ter-La and TEXAS UTILfrIES ELECTRIC COMPANY TU Electric Dated as of March 23,1989 l i 1 I l i j
9, j k l l l TABLE OP CONTENTS i PAGE D E FIN ITI O N S . . . . . _ . . . . . . . . . . . . . . . . . . . . . . . . . 1 l RECITALS . ............................... 9 i A RTICLE I, S ALE AN D P URCH ASE . . . . . . . . . . . . . . . . . . . . . . 10 1.1 Properties and Assets Sold and Purchased ............. 10 1
1. 2 C losi ng . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 j 1.3 Transfer of Purchased Assets . . . . . . . . . . . . . . . . . . .
11
]
1.4 Enforceability of Agreement . . ................. 11 j 1.5 Method of Payment . . . .................... 11 i 1.6 Payment of Total Payment . . . ................. 11 j (a) Payment Upon Signing . . . . . . . . . . . . . . . . . . . . . 12 i (b) Payment at the Closing. . . . . . . . . . . . . . . . . . . . . - . 12 i (c) Deferred Payment . . ..................... 12 i ARTICLE II, REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF TEX-LA 14 ; 1 2.1 L egal S tat us . . . . . . . . . . . . . . . . . . . . . . . . . . 14 . 2.2 Authority for Agreement. . . . ................. 14
2. 3 A ppro vals . . . . . . . . . . . . . . . . . . . . . . . . . . . IS 2.4 Liabiliti es . . . . . . . . . . . . . . . . . . . . . . ..... 16

2. 5 T a xes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 2.6 Title to Rea1 Property . . . . . . . . . . . . . . . . . . . . . . 17 2.7 Title to Personal Property . . . . . . . . . . . . . . . . . . . . 18

2. 8 Liti ga tion . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

2. 9 Contra c u . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 2.10 Exclusion of Implied Warranties . . . . . . . . . . . . . . . . . . 20 2.11 Accuracy of Representations and Warranties . . . . . . . . . . . . 20 ARTICLE III, REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF T U ELE CT RI C . . . . . . . . . . . . . . . . . . . . . . . . . . 20 3.1 C orporat e S tat us . . . . . . . . . . . . . . . . . . . . . . . . 20 3.2 Authority for Agreement. . . . . . . . . . . . . . . ...... 20

3. 3 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 ;
3.4 Authority for TUC Guaranty . . . . . . . . . . . . . . . . . . . 22 , 3.5 Accuracy of Representations and Warranties . . . . . . . . . . . . 22 ARTICLE IV, PRE-CLOSING OBLIGATIONS . . . . . . . . . . . . . . .. 22 4.1 ~ Representations, Warranties and Covenants. . . . . . . . . . . . . 23 . 4.2 Abatement of Participation in Pending Litigation . . . . . . . . . . 23 4.3 Agreement to Obtain Approvals . . . . . . . . . . . . . . . . . . 26 , I l L _ _ - _ _ _ _ _
1 ARTICLE V, CONDITIONS TO OBLIGATIONS TO CLOSE. . . . . . . . . . .. 27 5.1 Conditions to Obligation of Tex-La to Close ............ 27 (a) Representations and Warranties . ................ 27 (b) Compliance With Agreement .................. 28 (c) Receipt of Payment . . . . .................. 28 (d) Receipt of Closing Documents. ................. 28 (e) Receipt of IRS Ruling . . . .................. 28 5.2 Conditions to Obligation of TU Electric to Close .......... 28 (a) Representations and Warranties . ................ 28 (b) Compliance with Agreement .................. 28 (c) Delivery of Pending Litigation Documentation. . . . . . . . . . . 29 (d) Receipt of Closing Documents. . . . . . . . . . . . . . . . . . 29 5.3 Conditions to Obligation of Both Parties to Close . . . . . . . . . . 29 (a) No Adverse Proceeding . . . . . . . . . . . . . . . . . . . . . 29 (b) Approval by PUC . . . . . .............. ... 29 (c) Approval by N RC . . . . . . . . . . . . . . . . . . . . . . . 31 (d) A pproval of RE A , CF C and F F B . . . . . . . . . . . . . . . . . 32 (e) Execution of Amended and Restated Power Supply Agreement, Amended and Restated Transmission Agreement and Amended and Restated Distribution Service Agreement. ........... 33 (f) Consents of Mem bers. . . . . . . . . . . . . . . . . . . . . . 34 ARTICLE VI, CLOSING DOCUMENTS FROM TEX-LA . . . . . . . . . . . . . 35 6.1 Deeds and Transfers, etc. . . .................. 35 6.2 Lien Search . . . . . . . . ............... .. 35 6.3 Certificate of Secretarial Officer . ................ 35 6.4 Counsel Opinion . . . . . . .................. 35 ARTICLE VII, CLOSING DOCUMENTS FROM TU ELECTRIC . . . . . . . . . . 36 7.1 Proof of Payment. . . . . . .................. 36 7.2 Other Instruments. . . . . . . . . . . . . . . . . . . . . . . . 36 7.3 Certificate of Secretarial Officer . . . . . . . . . . . . . . . . . 36 7.4 Counsel's O pinion . . . . . . . . . . . . . . . . . . . . . . . . 36 ARTICLE VIII, CLOSING AND INDEMNIFICATION .............. 37 8.1 Indemnification by Tex-La . . . . . . . . . . . . . . . . . . . . 37 8.2 Indemnification by TU Electric . . . . . . . . . . . . . . . . . . 37 8.3 Survival of Representation and Warranties . . . . . . . . . . . . . 38 8.4 Notice and Opportunity to Partleipate in Defense . . . . . . . . . . 38 ARTICLE IX, SETTLEMENT OP PENDING LITIGATION . . . . . . . . . . . . 38 9.1 Tex-La Releai : . .. . .. .................. 38 9.2 Tex-La Coven / nt Not to Sue . . . . . . . . . . . . . . . . . . . 40 9.3 T U Elec tric Release . . . . . . . . . . . . . . . . . . . . . . . 46 9.4 TU Electric Covenant Not to Sue. . . . . . . . . . . . . . . . . . 48 9.5 Assumption of Liabilities and Obligations and Indemnification. . . . . 52 9.6 Covenant of Cooperation. . . . . . . . . . . . . . . . . . . . . 54 l 9.7 Termination of Participation . . . . . . . . . . . . . . . . . . . 54 l 9.8 TU Electric Actions and Litigation Costs. , . . . . . . . . . . . . 56 l 9.9 Termination of Joint Ownership Agreement and Other Agreements .. 57
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L ( I I ARTICLE X, TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . 58 3 10.1 Termination of Agreement by TU Electric . . . . . . . . . . . . . 58 10.2 Termination of Agreement by Tex-La . . . . . . . . . . . . . . . 58 10.3 Autom atic Termination . . . . . . . . . . . . . . . . . . . . . 59 10.4 Waiver of Conditions ...................... 59 10.5 Cancellation of Comanche Peak. . . . . . . . . . . . . . . . . . 59 ARTICLE XI, MISCELLANEOUS PROVISIONS ................ 60 1 1.1 B ulk Sal es L aw W al ve r . . . . . . . . . . . . . . . . . . . . . . 60 ll.2 Further Assurance ....................... 60 11.3 Prepayment of Tex-La Comanche Peak Debt . ........... 60 1 11.4 No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . 60 11.5 Default ............................ 61 11.6 Property and Transfer Taxes . . . . . . . . . . . . . . . . . . . 61 (a) P rope r t y T axes . . . . . . . . . . . . . . . . . . . . . . . . 61
] )
(b) Transf er Taxes . . . . . . . . . . . . . . . . . . . . . . . . 61 ! 1 1.7 Expe ns es . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 I 11.8 Governing L aw . . . . . . . . . . . . . . . . . ....-.... 62 11.9 A nnounce m ents . . . . . . . . . . . . . . . . . . . . . . . . . 62 11.10 Entire Agreement, Amendments ................. 62 . l I 1.1 1 A ssi gns , e t c. . . . . . . . . . . . . . . . . . . . . . . . . . . 62 1 1.12 Noti ces . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 1 1.13 H eadi ngs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 11.14 Execution and Counterparts ................... 64 ll.15 Interest on Past Due Payments . . . . . . . . . . . . . . . . . . 64 11.16 Use of Representations or Recitals . . . . . . . . . . . . . . . . 64 l l .17 Separate Litigation . . . . . . . . . . . . . . . . . . . . . . . 64 11.18 Construction of Comanche Peak ................. 64 l l .19 Severabili ty. . . . . . . . . . . . . . . . . . . . . . . . . . . 64 ll.20 Time of the Essence. ...................... 65 i i i I 1 1 t l
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LIST OF EXHIBffS PAGE Exhibit A - Assignment Agreement 1 Exhibit B - Guaranty Agreement 3 Exhibit C - Electric Cooperatives that are Members of Tex-La Electric Cooperative of Texas,Inc. 3 Exhibit D - Deed of Trust and Security Agreement 4 Exhibit E .- Promissory Note 4 Exhibit F - Special Warranty Deed With Vendor's Lien and Bill of Sale 8 Exhibit G - Amended and Restated Power Supply Agreement 33 Exhibit H - Amended and Restated Transmission Agreement 33 Exhibit I - Amended and Restated Distribution Service Agreement 34 Exhibit J - Heron, Burchette, Ruckert & Rothwell Opinion 35 Exhibit K - Worsham, Forsythe, Sampels & Wooldridge Opinion 36 4 Exhibit L - Tex-La Release 40 Exhibit M - Tex-La Covenant Not to Sue 45 Exhibit N'- TU Electric Release 48 ' Exhibit O - TU Electric Covenant Not to Sue 50 Exhibit P - TU Electric Assumption andIndemnity Agreement 53 Exhibit Q - Tex-LaIndemnity Agreement 54 1 1 I 1 l
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THIS AGREEMENT is made and entered into this 23rd day of March,1989 by and between the following parties: TEX-LA ELECTRIC COOPERATIVE OF TEXAS, D(C., a Texas non-profit electric cooperative corporation, having its principal office at 2905 Westward Drive, Nacogdoches, Nacogdoches County, Texas (" Tex-La"), and TEXAS LTITLITIES ELECTRIC COMPANY, a Texas corporation, having its principal office at 2001 Bryan Street, Suite 1900, Dallas, Dallas County, Texas ('TU Electric", and where appropriate in the context of this Agreement, TU Electric may include TU Electric's corporate predecessors, Dallas Power
& Light Company, Texas Electric Service Company and Texas Power & Light Company).
DEFINITIONS As used in this Agreement and in the Exhibits attached hereto, unless otherwise specified therein, the following terms s'all have the following meanings: (a) " Agreement" means this Agreement and the Schedule and all Exhibits attached to this Agreement. (b) " Assignment Agreement" means the Assignment Agreement attached hereto as Exhibit A.
~(c) "Brazos" means Brazos Electric Power Cooperative, Inc.
(d) " Business Day" means a day on which banks in Dallas, Texas are open for regular banking btainess. (e) "CFC" means the National Rural Utilities Cooperative Finance Corporation, or its successor. (f) " Closing" means the consummation, pursuant to this Agreement, of the sale of the Purchased Assets by Tex-La to TU Electric and the purchase of the Purchased Assets by TU Elaetric from Tex-La, as described herein. 1 (g) " Closing Date" means such date as may be agreed upon by the parties for the Closing, which date shall be within thirty (30) days after the last to occur of l \' - _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - _ - _ _ _ _ _ _
the NRC' Affirmative Date, the PUC Affirmative Date, the granting of the necessery approvals of the REA, the CFC and the FFB with respect to the Tex-La Comanche Peak Debt referred to in Section 5.3(d) hereof or the IRS l Ruling Date, but in no event shall the Closing Date be earlier than August 31, 1989. (h) " Closing Payment" means the sum of Five Million Six Hundred Seve'1ty Three Thousand Sixty Five Dollars ($5,673,065) plus interest thereon at the rate of 10.5% per annum from September 1,1989 to the Closing Date less the sum of Four Hundred Seventy One Thousand Eight Hundred Sixty Four Dollars I ($471,864) plus the transfer 'at Closing by TU Electric to Tex-La of all of TU Electric's right, title and interest, free and clear of all liens ' and encumbrances, in and to the Central Heights substation, the Fitze substation and the Fitze-Central Heights 69 kV line (approximately 12 miles in length) and real property, land rights and appurtenances related thereto, as further described in the offer to sell Fitze Facilities dated May 21,1987 addressed to Juan D. Nichols (all of said facilities being referred to as the "Fitze Facilities") subject to the approval of the PUC of said transfer and provided that if the PUC refuses to approve said transfer prior to Closing, then TU Electric shall pay to Tex-La said additional sum of Four Hundred Seventy-One Thousand Eight Hundred Sixty-Four Dollars ($471,864) at Closing. (i) " Comanche Peak" means the nuclear-fueled electric generating facility under construction on certain lands situated in Hood and Somervell Counties, Texas, and consisting of two units having a nominal capacity of 1,150 megawatts each, and related properties, and is the aggregate and combination of the Station, Fuel and Transmission Facilities, and all other rights and interests associated with or relating to all of the same. (j) " Deferred Payment" shall have the meaning set out in Section 1.6(c) hereof. 1
(k) "FFB" means the Federal Financing Bank, or its successor. (1) " Fuel" means the Comanche Peak nuclear fuel, irrespective of chemical and/or physical form, and the rights and interests related thereto. (m) " IRS" means the Internal Revenue Service. (n) " IRS Ruling Date" shall have the meaning set cat in Section 5.1(e) hereof. (o) " Guaranty" means the form of Guaranty Agreement of TUC attached hereto as Exhibit B. (p) " Joint Ownership Agreement" means that certain bstrument entitled on the cover page thereof " Joint Ownership Agreement Between Dallas Power & Light Company, Texas Electric Service Company, Texas Power & Light Company, Texas Utilities Generating Company, Texas Municipal Power Agency and Brazos Electric Power Cooperative, Inc. for Comanche Peak 'i Steam Electric Station," executed on January 2,1979, together with and as modified by that certain instrument entitled on the cover page thereof
" Modification of Joint Ownership Agreement Between Dallas Power & Light Company, Texas Electric Service Company, Texas Power & Light Company, Texas Utilities Generating Company, Texas Municipal Power Agency and Brazos Electric Power Cooperative, Inc. For Comanche Peak Steam Electric Station," executed on June 1,1979, together with and as amended by (i) the Amendment of Joint Ownership Agreement, executed on December 9,1980, between Dallas Power & Light Company, Texas Electric Service Company, Texas Power & Light Company, Texas Utilities Generating Company, TMPA, Brazos and Tex-La, together with and as amended by (11) the Second i
Amendment of Joint Ownership Agreement, executed on February 12, 1982, l between Dallas Power & Light Company, Texas Electric Service Company, Texas Power & Light Company, Texas Utilities Generating Company, TMPA,
, Brazos and Tex-La. )
r_ - _ _ _ _ ____ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ . _ - - - _ . - . - _ _ . - - - - . _ _ _ _ _ _ _ _ _ _ _ _ _ _ (q) " Members" means the seven (7) Texas non-profit electric cooperative corporations that are the members of Tex-La, as set out in Exhibit C attached hereto. (r) " Mortgage" means the purchase money mortgage in the form of the Deed of Trust and Security Agreement attached hereto as Exhibit D creating a first lien and granting to Tex-La a first and prior security interest in the Purchased Assets to secure payment of the Note. (s) "New Lawsuit" means the lawsuit that, pursuant to Section 4.2(f) of this Agreement, may be filed by Tex-La or TU Electric, and if filed will be filed in Dallas County, Texas, in the event that nonsults are taken by Tex-La and TU Electric in the Pending Dallas Suit pursuant to Section 4.2(d) of this Agreement or this Agreement is terminated under Article X hereof. (t) " Note" means the non-negotiable promissory note, in the form attached hereto as Exhibit E, to be made and delivered at Closing by TU Electric as provided in Section 1.6(c) of this Agreement. (u) "NRC" means the United States Nuclear Regulatory Commission, or its successor. (v) "NRC Affirmative Date" shall have the meaning set out in Section 5.3(c) ; l hereof. l (w) " Owners" means collectively TMPA, TU Electric, Tex-La and Brazos, as owners of Comanche Peak in accordance with the terms of the Joint Ownership Agreement, or singularly any of such porties. (x) "Pending Austin Suit" means Cause No. 399,336 - Tex-La Electric ) Cooperative of Tes:as, Inc. v. Texas Utilities and Texas Utilities Electric l Company, - in the District Court of Travis County, Texas, 98th Judicial l District. ]
e (y) ' Pending Dallas Suit means Cause No. 86-6809-A - Texas Utilities Electric Company v. Tex-La Electric Cooperative of Texas, Inc. - in the District Court of Dallas County, Texas,14th Judicial District. (z) "Pending Houston Suit" means Cause No. 83-29889 - Charles A. Atchison, et al v. Brown & Root, Inc., et al, - in the District Court of Harris County, Texas, 215th Judicial District, removed in April,1988, to the United States District Court for the Southern District of Texas, Houston Division, and numbered Civil Action No. H-88-1409. (aa) "Pending Litigation" means the idending Dallas Suit and the Pending Austin Suit. (bb) "Pending Somervell County Suit" means Cause No. 2692 - Clementine Mathews and her htsband Dolphin Mathews v. Comanche Peak Electric Steam Station, et al., - in the District' Court of Somervell County, Texas,18th Judicial District. (ce) " Permitted Exceptions" means Matters affecting Tex-La's title to all or any part of the Purchased Assets existing immediately prior to the time the same were acquired by Tex-La from or through TU Electric or TU Electric's predecessors-in-title; Matters affecting Tex-La's title to all or any part of the Purchased Assets created by the acts or omissions of (i) all parties owning interests in Comanche Peak at the time involved acting collectively, or (11) the Project Manager or TU Electric or both; The lien for unpaid taxes and assessments relating to taxes and assessments unpaid by parties otheir than Tex-La or imposed with respect to' the periods prior to which Tex-La owned the property interest involved and after the Closing;
l The rights of third parties in and to the Purchased Assets created by the acts or omissions of parties other than Tex-La and not arising by, through or under Tex-La; The Joint Ownership Agreement and all licenses, permits, leases, franchises and contracts relating to the Purchased Assets applied for, obtained or created by the acts or omissions of (i) any Owner other than Tex-La, (ii) all parties owning interests in Comanche Peak at the time involved acting collectively, or (iii) the Project Manager or TU Electric , 1 or both; and l I Liens (existing or inchoate) in favor of mechanics, materialmen, laborers i and suppliers of materials, goods, services, equipment, inventory (of J l subcontractors) and labor to or for the Station, the. Fuel or the j l Transmission Facilities created by the acts or omissions of (i) any Owner j other than Tex-La, (ii) all parties owning interests in Comanche Peak at l the time involved acting collectively, or (iii) the Project Manager or TU Electric or both. (dd) " Project Manager" means TU Electrie designated and acting as such in accordance (or purportedly in accordance) with the terms of the Joint
. Ownership Agreement.
(ee) "PUC" means the Public Utility Commission of Texas, or its successor. (ff) "PUC Affirmative D.te" shall have the meaning set out in Section 5.3(b) hereof. (gg) " Purchased Assets" means the aggregate of all that part of Comanche Peak (as i Comanche Peak exists and is constituted on the Closing Date) owned by Tex-La or to which Tex-La has a right, title or interest, including without limitation the following, to the extent of Tex-La's ownership interest therein: all real property and rights appurtenant thereto, and improvements thereon
)
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and fixtures thereto; that portion of Tex-La's Certificate of Convenience and Necessity. heretofore issued by the PUC relative to Tex-La's ownership interest in the Station and the Transmission Facilities; all personal property and rights therein, tangible or intangible, including all machinery, equipmen+., furniture and vehicles; all rights and entitlement to electric power and energy that may hereafter be generated at Comanche Peak; all rights or claims with respect to charges, payments or prepaid items; all warranties and claims and proceeds therefrom; all rights under all agreements, permits, licenses,- franchises and authorizations; all intellectual property rights; all. computer hardware and software and related rights and interests in the possession of the Project Manager or otherwise owned by all of the Owners in combination; all books records, documents and other written material in the possession of the Project Manager or otherwise owned by all of the Owners in combination; the Fuel; the Transmission Facilities; and all other properties and assets pertaining to Comanche Peak; excluding, however, all documents and other written material in the possession of Tex-La or its representatives pertaining to Comanche Peak which were received or developed by Tex-La in connection with its ownership of a portion of Comanche Peak, including written material pertaining to or involving the Pending Litigation. (hh) "REA" means the Rural Electrification Administration of the United States Department of Agriculture, or its successor. . (ii) " Signing Payment" means the sum of Eighteen Million Dollars ($18,000,000). (jj) " Site" means approximately 7,669 acres owned (in fee or other estate or interest) by the Owners, as tenants in common, and located in Hood and - i Somervell Cotaties, Texas, and more particularly described on the Schedule attached hereto. d
I i (kk) "Special Warranty Deed with Vendor's Lien and Bill of Sale" means the form 'of Special Warranty Deed with Vendor's Lien and Bill of Sale attached hereto as Exhibit F. (11) " Station" means the Sl*2, all improvements thereon (including Squaw Creek 1 Lake and Park) and all fixtures and attachments thereto, as well as (i) all ' personal property thereon and associated therewith or related thereto' and , owned by the Owners, and (11) all rights (tangible or intangible), and all j l easements and other interests of any nature associated therewith or related ) thereto and owned by the Owners, excluding, however, the Fuel and l l Transmission Facilities, l (mm)" Subject Claims" means any and all claims, actions, controversies, causes of I l action, disputes, demands and complaints of whatsoever kind or nature and whether known or unknown. . (nn) ' Tex-La Comanche Peak Debt" means the aggregate of the indebtedness of 4 Tex-La to the REA, the CFC and the FFB which has been guaranteed by the REA, with respect only to Comanche Peak, which at the date hereof is the unpaid principal amount of Two Hundred Five Million, Nine Hundred Ninety Two Thousand, Two Hundred Seventy Six and 67/100 Dollars ($205,992,276.67), and is evidenced and represented by documentation delivered by Tex-La to i TU Electric by letter of March 21, 1989. The term does not include Tex-La's q line of credit from the CFC evidenced by an April 27,1987 promissory note to the CFC, which line of credit is not guaranteed by the REA. ) (oo) "TMPA" means the Texas Municipal Power Agency.
]
(pp) " Total Payment" means the amount to be paid by TU Electric to Tex-La hereunder in connection with the purchase of the Purchased Assets and in connection with the settlement of the Pending Litigation; which shall be the 1 1
~
total of (1) the Signing Payment, (ii) the Closing Payment and (iii) the Deferred Payment, as described in Section l.6 hereof. (qq)' " Transmission Facilities" means the Comanche Peak - Cleburne Junction and Cleburne Junction-Everman 345 kV electrical transmission lines, aggregating approximately 51.5 miles in length, and associated rights-of-way, equipment, fixtures and personal property. (rr) "TUC" means Texas Utilities Company, a Texas corporation, which is the corporate parent of TU Electrie. i RECITAIA A. TU Electric is an investor-owned utility which, pursuant to a statutory merger that occurred on January 1,1984, succeeded to all the rights, title and interests and assumed and became Dble for all obligations of Dallas Power & Light Company,- Texas Electric Service Company, Texas Power & Light Company, and Texas Utilities Generating Company under the Joint Ownership Agreement, and is engaged in the generation, purchase, transmission and sale of electric energy within the State of Texas. B. Tex-La is a Texas non-profit cooperative corporation, established pursuant to Tex. Rev. Civ. Stat. Ann. art.1528b, which is origaged in the purchase, transmission and sale of electric energy within the State of Texas. C. Tex-La and TU Electrie have previously entered into the Joint Ownership Agreement. D. Tex-La and TU Electric each owns an undivided interest in Comanche Peak, which in tne case of Tex-La consists of such interest in the Station and Fuel (stated to be an undivided 2-1/6% interest in the conveyance involved) that was conveyed and transferred to Tex-La by TU Electric (or its predecessors) and such interest in the Transmission Facilities (stated to be an undivided 6.02% interest in the relevant _g. L___1_ _ ____ _ ___ _ _ _ _ - . _ _ _ _ _ _ j
instrument but is subject to adjustment) that was conveyed and transferred or i agreed to be conveyed and transferred to Tex-La by TU Electric (or its predecessors). E. . Tex-La and TU Electric have been involved in the Pending Litigation and would like i to settle their disputes involved in the Pending Litigation and otherwise and Tex-La : i would like to sell its interest in Comanche Peak and be relieved of its obligations j under the Joint Ownership Agreement and TU Electric would like to acquire such interest and is willing to relieve Tex-La of such obligations under the Joint ! Ownership Agreement. F. Tex-La and TU Electric have concluded this Agreement in order to provide for the sale by Tex-La and the purchase by TU Electric of all of Tex-La's right, title and interest in Comanche Peak and the settlement of all Subject Claims between Tex-La and TU Electric and between Tex-La and TU Electric's affiliates pertaining to Comanche Peak, the Pending Litigation, and otherwise, and all matters in ! connection therewith, upon and subject to the terms and conditions set out herein. ARTICLE I SALE AND PURCHASE 1.1 Properties and Assets Sold and Purchased. Subject to the terms and conditions of this Agreement, Tex-La hereby agrees to sell, transfer, assign, convey and deliver to TU Electric and TU Electric hereby agrees to purchase from Tex-La, and pay Tex-La for, the Purchased Assets in the manner and at the times hereinafter described.
)
1.2 Closing. The Closing will occur at 10:00 a.m., Dallas, Texas time, on the j Closing Date. The Closing will be held at the offices of Worsham, Forsythe, Sampels & Wooldridge, 2001 Bryan Street, Suite 3200, Dallas, Dallas County, Texas or at such other address as the parties may agree. The fact that the Closing is or was intended to be held 1 in Dallas County shall not be used by TU Elaetric as evidence for venue purposes in any ! I proceeding related to a Subject Claim arising out of or under this Agreement. l
1.3 Transfer of Purchased Assets. At the Closing, Tex-La will sell, convey, assign and transfer to TU Electric, and TU Electric will purchase, under and pursuant to a form of the Special Warranty Deed with Vendor's Lien and Bill of Sale, the Purchased Assets. 1.4 Enforceability of Agreement. Subject to Article X and fulfillment of the conditions set forth in Article V of this Agreement, upon execution of this Agreement, Tex-La and TU Electric shall be obligated to carry out the transaction contemplated by this Agreement. 1.5 Method of Payment. All payments made by TU Electric to Tex-La under this Agreement shall be made by wire transfer of immediately available funds through the federal reserve system _to Tex-La's bank designated in writing to TU Electric. If the due l 1 date of any payment under this Agreement falls on a day that is not a Business Day, such payment shall be paid on the first Business Day following the date on which such payment is due. 1.6 Payment of Total Payment. TU Electric shall pay to Tex-La the Total Payment as follows: (a) Payment Upon Signing. On the date of execution of this Agreement, TU Electric will pay to Tex-La the Signing Payment. The Signing Payment shall be held in a separately segregated trust account, in a bank designated by
. Tex-La reasonably satisfactory to TU Electric (CFC being a reasonably satisfactory bank) until Closing, but Tex-La may invest same in its sole ,
discretion. After the date hereof, Tex-La may use the Signing Payment (including principal and interest) from the separately segregated trust account to pay principal and interest falling due on the Comanche Peak Debt, and also to pay any amount outstanding under the CFC line of credit referred to in definition (nn), but for no other purpose, provided that prior to any such use Tex-La establishes security for the funds withdrawn by delivering to TU Electric an irrevocable letter of credit in favor of TU Electric in form and f substance satisfactory to TU Electric issued by a bank, with capital of at least
$100,000,000 (which may include CFC if it has such capital), such letter of credit to be in the amount of the funds withdrawn plus an incremental amount 1 1
calculated from the date of withdrawal of such funds to a date nine (9) months af ter the date.of this Agreement at the rate of 9.03% per annum. Such letter of credit shall provide that TU Electric may withdraw the funds thereunder (including the part of the aforementioned incremental amount computed to the date of termination)in the event of termination of this Agreement pursuant to Article X. Upon the Closing, the Signing Payment (including any portion withdrawn by Tex-La) will be deemed a part of the Total Payment. Absent a Closing, the Signing Payment will be subject to refund as provided in Article X. (b) Payment at the Closing. At the Closing, TU Electric will pay to Tex-La the I Closing Payment. (c)- Deferred Payment. (i) At the Closing, TU Electric will execute and deliver to Tex-La in payment of the remaining portion of the Total Payment, the Note in ) l the_ original principal amount of $157,000,000 less any principal payments I made by TU Electric between August 31, 1989 and the Closing Date in either 4
. of the manners set forth hereinafter in clause (iii) hereof. At the Closing, the portion of Exhibit A attached to the Note applicable to the period after the Closing Date shall become the amortization schedule of principal and interest payments, and prepayment premiums, payable under the Note, provided that at the Closing TU Electric also shall pay Tex-La any principal and interest payments listed on Exhibit A for the period prior to the Closing which for any reason TU Electric did not previously pay under clause (iii) herecf. (11) The payment of the Note will be secured by the Mortgage given as a purchase money mortgage and the vendors lien provided for in the Special Warranty l Deed with Vendors Lien and Bill of Sale, it being understood and agreed that l
l l l ________._.-__m- _ - - - - - - - - - - - -
e Tex-La will contemporaneously therewith assign and transfer the Note and the Mortgage together with the vendors lien retained in the Special Warranty Deed with Vendors Lien and Bill of Sale to the REA pursuant to and in accordance ' with the Assignment Agreement as a mechanism for partial payment of the Tex-La Comanche Peak Debt. (iii) Subsequent to August 31,1989, but prior to . l the Closing Date, TU Electric will make the payments listed under the headings of principal and interest on such Exhibit A to the Note to Tex-La at least one' (1) Business Day prior to the dates shown on such Exhibit A (and Tex-La shall then timely apply such payments to its Comanche Peak Debt),if, and only if, prior to the making of any such payments Tex-La shall have , delivered to TU Electric an irrevocable letter of credit in favor of TU Electric in form and substance satisfactory to TU Electric issued by a bank with capital of at least $100,000,000 (which may include CPC if it has such capital), such letter of credit to be in the amount of any such payments to be made by TU Electric plus an incremental amount based on the amount of such payments calculated from the date of such payment by TU Electric to a date nine'(9) months after the date of this Agreement at the rate of 10.5% per annum. Such letter of credit shall provide that TU Electric may withdraw the funds j thereunder in the event of termination of this Agreement pursuant to Article l X hereof in an amount equal to the payments TU Electric has made plus an incremental amount based on the amount of such payments calculated from the time of payment of such funds by TU Electric to the date of termination i' at the rate of 10.5% per annum. In the event Tex-La fails for any reason to deliver any such letter of credit to TU Electric, TU Electric shall not make I f any such payment to Tex-La. In lieu thereof, if Tex-La shall make a payment on the underlying Tex-La Comanche Peak Debt of at least the amount of principal and interest shown on Exhibit A to be payable at such time, L ! L
I TU Electric contemporaneously therewith will deposit the amount of principal and interest shown on such Exhibit A to be payable at such time into a j l separately segregated trust account, in a bank designated by Tex-La ! reasonably satisfactory to TU Electric (CFC being a reasonably satisfactory 1 bank), which amount may be invested t.y Tex-La in its sole discretion. Such I funds shall thereaf ter be held in such separately segregated trust account until i the Closing at which time they (including any interest earned thereon) shall be , released to Tex-La in reimbursement of the payments on Exhibit A to which such funds related. If, however, this Agreement is thereafter terminated l pursuant to Article X hereof, the funds deposited by TU Electric in such separately segregated trust account shall be paid to TU Electric, together with ! such portion of the interest earned thereon, and, if necessary, such additional funds payable by Tex-La, as shall together equal an incremental amount based on the amount of such deposit calculated from the date of deposit of such funds into trust by TU Electric to the date of payment thereof to TU Electric at the rate of 10.5% per annum. ARTICLE H REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF TEX-LA Tex-La represents and warrants to, and agrees with, TU Electric as follows: 2.1 Legal Status. Tex-La is a non-profit electric cooperative corporation, duly organized, validly existing and in good standing under the laws of the State of Texas, with full, requisite corporate power and authority to carry on its business as now conducted and to own, sell and transfer the Purchased Assets as provided for in this Agreement. 2.2 Authority for Agreement. Tex-La has full, requisite corporate power and authority to execute, deliver and perform this Agreement, the Special Warranty Deed 1 with Vendor's Lien and Bill of Sale and each other agreement and instrument to be f l executed and delivered in connection with this Agreement, and to carry out its obligations hereunder and thereunder. Tex-La has full, requisite corporate power and authority to act for itself and the other persons or entities acting by, through and under Tex-La for . 1 which it has the right and standing under law to act, in connection with this Agreement, the Special Warranty Deed with Vendor's Lien and Bill of Sale and the other agreements and instruments to be executed and delivered by it pursuant hereto. This Agreement has been, and at the time of the Closing, the Special Warranty Deed with Vendor's Lien and l Bill of Sale ar.d such other agreements and instruments as are delivered by Tex-La will have been, duly authorized, executed and delivered by Tex-La and this Agreement does, and at the time of Closing, the Special Warranty Deed with Vendor's Lien and Bill of Sale and such other agreements and instruments as are delivered by Tex-La will, constitute valid and legally binding obligations of Tex-La and the other persons or entitles acting by, through and under Tex-La for which it has the right and standing under law to act, enforceable against such parties in accordance with their respective terms. Except for the approvals set out in Section 2.3, the execution, delivery and performance of this Agreement, the Special Warranty Deed with Vendor's Lien and Bill of Sale and such other agreements and instruments will not conflict with or result in any violation of, or constitute a default under, (i) the Articles of Incorporation or by-laws of Tex-La, or (ii) any material provision of any mortgage, indenture, lease, agreement or other instrument, including any evidence of indebtedness, including without limitation the Tex-La Comanche Peak Debt, to which Tex-La, or any of Tex-La's properties or assets, is subject or a party, or (111) any permit, concession, grant, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation appilcable to Tex-La or any of its property, including the Purchased Assets; or with the passage of time or the giving of notice or the taking of any action by any third party, have any of the effects described herein, except no representation is made with respect to any instrument, permit, concession, grant, franchise or license (and the laws and regulations with respect thereto) ' made or obtained by TU Electric or the Project Manager on behalf of the Owners. 1 2.3 Approvals. Tex-La has obtained all necessary consents, approvals, orders and authorizations of, and made all necessary registrations, declarations and filings with, each governmental authority or other entity required in connection with the execution, delivery, and performance by Tex-La of this Agreement, the Special Warranty Deed with Vendor's Lien and Bill of Sale and the other agreements and instruments to be executed and delivered by Tex-La hereunder, except (i) for any such required to be obtained by the Project Manager, (ii) for any such required to be effected from the PUC and NRC referenced in Sections 5.3(b) and (c) hereof, (iii) those that must be obtained from the REA, the CFC and the FFB referenced in Section 5.3(d) and (iv) the consents of Tex-La's Members referenced in Section 5.3(f) hereof. No other filing or registration with, and no other consent, approval, authorization, permit, certificate or order of any court, tribunal or governmental agency or authority, Federal, state, county or municipal, or any other entity is or will be required by any applicable statute or other law or by any judgment, order or decree or any rule or regulation of any court, tribunal or governmental agency or authority, Federal, state, county or municipal, or agreement with any other entity to permit Tex-La to execute, deliver and perform this Agreement, the Special Warranty Deed with Vendor's Lien and Bill of Sale or any agreement or instrument required hereby to be executed and delivered by it at the Closing. 2.4 Liabilities. There are no obligations or liabilities or other obligations or other ) evidence of indebtedness, of Tex-La, including without limitation the Tex-La Comanche I Peak Debt, whether accrued, absolute, contingent or otherwise, which TU Electric may become liable for or is assuming as a result of the purchase of assets provided for herein or which may apply with respect to the Purchased Assets, except such as currently exist i with respect to Comanche Peak and which were entered into or incurred by (1) all parties owning interests in Comanche Peak at the time involved acting collectively, or (ii) the Project Manager or TU Electric or both. Tex-La has no indebtedness or other similar l ( obligation relating to its interest in Comanche Peak except for the Tex-La Comanche j l
Peak Debt and' the CFC line of credit referred to in definition (nn); and all mortgages, other liens, encumbrances and security interests which apply to Tex-La's interest in Comanche Peak will be released or terminated prior to or at the Closing. The documents delivered to TU Electric under cover of letter of March 21, 1989 from Heron, Burchette, Ruckert & Rothwell with regard to the Tex-La Comanche Peak Debt and said letter contain all material information with respect to the unpaid principal balances of the various segments of the Tex-La Comanche Peak Debt as of the date of said letter and the payment, prepayment and interest terms of such debt at such time and omit no material information with respect thereto. Such information will be true and correct in all material respects at the Closing Date, except for any interim changes imposed by the REA unprompted by Tex-La or changes resulting from payment of such debt in the ordinary course in the interim. Tex-La will immediately notify TU Electric in writing of any such interim changes imposed by the REA of which it may become aware. 2.5 Taxes. ' Apart from all taxes and similar charges owed by the Project Manager on behalf of all the Owners collectively, Tex-La owes no taxes or similar charges or impositions with respect, or the nonpayment of which would apply, to, or result in any lien or other encumbrance upon, the Purchased Assets to any taxing authority. No tax charge, tax expense or tax claim against the Purchased Assets originating with or caused by the action or inaction of Tex-La individually or in combination with any of the Owr.ers other than TU Elebtric or the Project Manager will attach to or affect any portion of the Purchased Assets conveyed at the Closing. 2.6 Title to Real Property. Tex-La has such title in and to the Site and all real property interests therein and the real property interests included in the Transmission Facilities as was conveyed to Tex-La by or through TU Electric or by TU Electric's predecessors-in-title. Except in combination with, or in conjunction with action by, all of ' the Owners of the Site and the real property interests included in the Transmission Facilities acting collectively either directly or through the Project Manager, Tex-La has
not encumbered the Site or any of the real property interests therein or the real property interests included in the Transmission Facilities with any mortgages, liens, claims, charges, security interests or encumbrances, except in connection with the Tex-La Comanche Peak Debt, all of which mortgages, liens, claims, charges, security interests l and encumbrances pertaining to the Site or any of the real property interests therein or the real property interests included in the Transmission Facilities will be released prior to or at the Closing. Tex-La, separately or in combination with any or all of the Owners other than TU Electric or the Project Manager, has not taken any action which would result in the structures, improvements and fixtures on such real property constituting a part of the Site not being in conformity with all applicable Federal, state and local zoning, building, health, safety and environmental laws, ordinances, rules or regulations. No notice from any governmental body, which has not otherwise been disclosed to TU Electric or the Project Manager in writing, has been served upon Tex-La claiming any violation of any such law, ordinance, rule or regulation or repiring any work, repairs, construction, alterations or installation on or in connection with such real property or the buildings, ' structures, fixtures or improvements thereon, nor to Tex-La's knowledge has any such violation, which has not otherwise been disclosed to TU Electric or the Project Manager in writing, been claimed or action with respect thereto threatened. 2.7 Title to Personal Property. Tex-La has the title to such interest as was conveyed to Tex-La by or through TU Electric or TU Electric's predecessor-in-title in all of the equipment, vehicles, fixtures, machinery and other items of personal property, tangible and intangible, to the extent the same se parts of the Purchased Assets to be conveyed at the Closing. Except in combination or in conjunction with action by TU Electric, the Project Manager or all of the Owners acting collectively, and except in connection with the Tex-La Comanche Peak Debt, the security interests, liens or other encumbrances in connection with which debt pertaining to the equipment, vehicles, j i
)
fixtures, machinery and other items of personal property, tangible and intangible, which are part of the Purchased Assets will be released prior to or at the Closing, Tex-La has not, apart from any charges owed by the Project Manager on behalf of all of the Owners collectively, encumbered the equipment, vehicles, fixtures, machinery and other items of personal property, tangible and intangible, which are part of the Purchased Assets, with any mortgage, lien, claim, charge, security interest, encumbrance or other restriction or limitation, and assuming payment by TU Electric of any and all transfer taxes that may become due on account of the transfer of the Purchased Assets contemplated by this Agreement and except for the liens for ad valorem taxes not yet due and payable. 2.8 Litigation. There are no Subject Claims, suits or proceedings, administrative or otherwise, pending (i.e. Tex-La having been served with process with respect thereto or otherwise having knowledge thereof) against Tex-La or, to the best of Tex-La's knowledge, threatened against Tex-La affecting the Purchased Assets, whether such be at law, in equity or in arbitration, or before or by any governmental department, commission, board, bureau, agency or instrumentality which, if adversely determined against Tex-La, would affect Tex-La's ability to perform its obligations under this Agreement, except the Pending Litigation, the NRC licensing docket to which TU Electric is a party, the Pending Houston Suit and the Pending Somervell County Sult; and Tex-La, separately and apart from the Owners in combination or in conjunction with action by all of the Owners acting collectively either directly or through the Project Manager (but without acknowledgment that such exists with reference to the Owners),is not in default with respect to any order, writ, injunction or decree of any court, arbitrator or governmental department, commission, board, bureau, agency or instrumentality affecting the Purchased Assets. 2.9 Contracts. There is not in effect any executory contract, agreement, order or commitment to which Tex-La is subject or a party, and to which TU Electric or the Project Manager is not a party, which would bind TU Electric after the Closing with respect to the Purchased Assets and which would adversely affect the value of the Purchased Assets after the Closing. 2.10 Exclusion of Implied Warranties. THE PURCHASED ASSETS ARE BEING SOLD "AS-IS". TEX-LA MAKES NO WARRANTIES CONCERNING THE MERCHANTABILITY OR CONDITION OF THE PURCHASED ASSETS OR OF THEIR FITNESS FOR ANY PARTICULAR PURPOSE, EXCEPT TO THE EXTENT OTHERWISE EXPRESSLY SET FORTH HEREIN. 2.11 Accuracy of Representations and Warranties. All representations - and warranties of Tex-La contained heroin are, and will be at the time c' the Closing, accurate and complete in all material respects and all documents delivered by Tex-La to TU Electric incident hereto are, and will be at such time, valid and authentic in all respects. ARTICLE III REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF TU ELECTRIC TU Electric represents and warrants to, and agrees with, Tex-La as follows: 3.1 Corporate Status. TU Electric is a corporation duly organized, validly existing and in good standing under the laws of the State of Texas with full, requisite corporate power and authority to carry on its business as now conducted and to own, buy and accept the transfer of the Purchased Assets as provided for in this Agreement. 3.2 Authority for Altreement. TU Electric has full, requisite corporate power and authority to execute, deliver and perfe# m this Agreement, to receive delivery of the Special Warranty Dead with Venoor's Lien and Bill of Sale, and to exocute, deliver and perform the Note, the Mor4*ge and each other agreement and instrument to be executed and delivered by TU Electric h. connection with this Agreement, and to carry out its obligations hereunder and thereunder. TU Electric has full, requisite corporate power and authority to act for itself and the other pectons or entities acting by, through and under TlJ Electric for which it has the right and standng under law to act in connection with
this Agreement, the Note, the Mortgage and the other agreements and instruments to be executed and delivered by it pursuant hereto. This Agreement has been, and at the time of the Closing the Note, the MortgaJe and such other agreements and instruments as are delivered by TU Electric will have been, duly authorized, executed and delivered by TU Electric, and this Agreement constitutes, and at the time of Closing the Note, the Mortgage and such other agreements and instruments will constitute, valid and legally binding obligations of TU Electric and the other persons or entities acting by, through and under TU Electric for which it has the right and standing under law to act, enforceable against ruch parties in accordance with their respective terms. The execution, delivery and performance of this Agreement, the Note, the Mortgage and such other agreements and instruments will not conflict with or result in any violation of, or constitute a default under, (i) tbs Articles of Incorporation or by-laws of TU Electric, or (ii) any material provision of any mortgage, indenture, lease, agreement w other instrument to which TU Electric is subject or a party, including any bonds or other obligation or other evidence of indebtedness, or (iii) any permit, concession, grant, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to TU Electric or any of its property, including Comanche Peak; or with the passage of time or the giving of notice or the taking of any action by any third party, have any of the effects described herein. 3.3 Approvals. TU Electric has obtained all necessary consents, approvals, orders and authorizations of, and has made all necessary registrations, declarations and filings with, each governmental authority w other entity required in connection with the execution, delivery, and performance by TU Electric of this Agreement, the Note, the Mortgage and the other agreements and instruments to be executed and delivered by I TU Electric hereunder, except for the filing? with the PUC and NRC referenced in Sections 5.3(b) and (c) of this Agreement. No other filing or registration with, and no other consent, approval, authorization, permit, certificate or order of any court, tribunal or governmental agency w authority, Federal, state, county w municipal, or other entity
l l is or will be required by any applicable statute or otherlaw or by any judgment, order or decree or any rule or regulation of any court, tribunal or governmental agency or authority, Federal, state, county or municipal, or agreement with any other entity to permit TU Electric to execute, deliver or perform this Agreement, the Note, the Mortgage or any agreement or instrument required hereby to be executed and delivered by it at the Closing, except as referred to above. 3.4 Authority for TUC Guaranty. TUC has full, requisite corporate power and authority to execute, deliver and perform the Guaranty and to carry out its obligations thereunder. At the Closing, the Guaranty will have been duly authorized, executed and delivered by TUC, and will constitute the valid and legally binding obligation of TUC enforceable against it in accordance with its terms. The execution, delivery and performance of the Guaranty will not conflict with or result in any violation of, or constitute a default under, (i) the Articles of Incorporation or by-laws of TUC, or (ii) any material provision of any mortgage, indenture, lease, agreement or other instrument to which TUC is subject or a party, or (iii) any permit, concession, grant, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to TUC or any of its property; or with the passage of time or the giving of notice or the taking of any action by any third party, have any of the effects described herein. 3.5 Accuracy of Representations and Warranties. All representations and warranties of TU Electric contained herein are, and will be at the time of the Closing, accurate and complete in all material respects and all documents delivered by TU Electric to Tex-La incident hereto are, and will be at such time, valid and authentic in all respects. ARTICLE IV PRE-CLORD:G OBIJGA'ITONS Tex-La and TU Electrie, as appropriate, covenant that between the date of this Agreement and the Closing Dates
4.1 Representations, Warranties and Covenants. Tex-La shall not take any action l which would result in the representations and warranties set forth in Article II hereof being inaccurate, incorrect or incomplete to the extent applicable as of the Closing Date and Tex-La shall take all such action as may be necessary to insure that all covenants and agreements of Tex-La set forth in this Agreement which are required to be performed by it at or prior to the Closing Date will have been so performed. TU Electric shall not take any action which would result in the representations and warranties set forth in Article III hereof being inaccurate, incorrect or incomplete to the - extent applicable as of the Closing Date and TU Electric shall take all such action as may be necessary to insure that all covenants and agreements of TU Electric set forth in this Agreement which are required to be performed by it at or prior to the Closing Date will have been so performed. 4.2 Abatement of Participation in Pending Litigation. For purposes of this Section 4.2, the term 'TU Electric" shall include not only TU Electric but -TUC and its subsidiaries, Texas Utilities Mining Company and Texas Utilities Services Inc., all of which are parties to the Pending Litigation. Immediately after the execution hereof and to the fullest extent that would not violate court orders in effect in the Pending Dallas Suit, Tex-La and TU Electric shall abate all of their voluntary activities in connection with the Pending Litigation, and any other activity adverse to each other pertaining thereto. In such regard, Tex-La and TU Electric agree that they will immediately direct any attorneys and consultants retained by them in connection with the Pending Litigation to abate their work.
" specifically with regard to the Pendhg Litigation, Tex-La and TU Electric to the extent specified herein agree to take the following actions:
(a) Tex-La and TU Electric agree to the continued abatement of the Pending Austin Suit and agree not to revive such action during the pendency of this Agreement and to take any action necessary to oppose such revival. In the
L. event the Pending Dallas Suit is nonsulted in accordance with paragraphs (c) and (d) hereof, Tex-La shall'not claim that such nonsult entitles Tex-La to revive the Pending Austin Suit; (b) Tex-La and TU Electric agree within three (3) days after the date hereof to file a joint motion requesting that the Court in the Pending Dallas Suit approve a standstill agreement with respect to the Subject Claims whereby the current scheduling order is withdrawn with respect to the Subject Claims and no new scheduling order or trial setting is made, and no discovery or any other steps to advance the litigation between Tex-La and TU Electric shall be taken unless this Agreement is terminated or the transactions contemplated hereunder to be consummated prior thereto are not consummated on or prior to the Closing Date, provided, however, any costs incurred and assessed-against Tex-La by the Court in the Pending Dallas Suit after approval of such standstill agreement shall be paid by TU Electric until such time as this Agreement is terminated or the transactions contemplated hereunder to be consummated prior thereto are not consummated on or prior to the Closing Date; (c) If for any reason the Court in the' Pending Dallas Suit refuses to approve the standstill agreement referenced above prior to the end of three (3) weeks after the date hereof, Ter.-La and TU Electric agree to immediately nonsult each of their respective Subject Claims against each other filed in the Pending Dallas Suit on such date which shall be three (3) weeks after the date hereof (or the next day the Court is open for business if such date is a holiday);
!J) If it is necessary for Tex-La and TU Electric to nonsuit the Subject Claims filed against each other in the Pending Dallas Suit, Tex-La and TU Electric agree that such nonsults will not operate to prejudice either party's position ,
I with respect to the Subject Claims they have made and legal positions they
3 have taken in the Pending Litigation. In the event this Agreement is terminated or the transactions contemplated hereunder to be consummated prior thereto are not consummated on or prior to the Closing Date, Tex-La and TU Electric agree that their Subject Claims in the Pending Dallas Suit shall be refiled in Dallas County in the New Lawsuit in the 14th Judicial District Court (and if such suit is not assigned initially to such Court, Tex-La and TU Electric agree to thereafter file a Joint Motion to transfer such suit to such Court), within five (5) Business Days after such termination of this Agreement or failure to close hereunder on the Closing Date, with TU Electric named as the plaintiff and Tex-La named as defendant and counter-plaintiff, and that Tex-La will not oppose venue in Dallas County, Texas except to the extent that Tex-La could on the date of this Agreement contest venue in Dallas County, Texas in the Pending Dallas Sult. In the event this Agreement is terminated or the transactions contemplated hereunder to be consummated
. prior thereto are not consummated on or prior to the Closing Date, Tex-La will retain, without limitation, any and all rights Tex-La may now have to appeal the order of the Court in the Pending Dallas Suit dated September 19, 1986. For all purposes, including, without limitation, (i) any statute of limitations claim, (ii) any claim concerning 516.069 of the Texas Civil Practice and Remedies Code, and (iii) any claim asserted in the Pending Austin Suit (including without limitation, any Subject Claim concerning which suit was first flied), the New Lawsuit will be considered as having been filed by TU Electric on May 29, 1986, and Tex-La's counterclaim in the New Lawsuit
, will be considered as having been flied by Tex-La on July 18, 1986. All discovery, including documents produced and depositions taken, which had been conducted in the Pending Dallas Suit up to the execution of this Agreement, shall be for all purposes considered as having been taken in the
New Lawsuit, and all orders issued by the Court in the Pending Dallas Suit up to the execution of this Agreement (except the scheduling order but including the Court's September 14, 1988 ruling on Tex-La's motion to realign the parties, the written order for which has not yet been entered) shall have the same force and effect as if they had been issued in the New Lawsuit; (e) No efforts made or cooperation given by Tex-La's or TU Electric's officers, employees, agents, consultants, experts or attorneys (including, without limitation, Heron, Burchette, Ruckert & Rothwell and Hughes & Luce,. Worsham, Forsythe, Sampels & Wooldridge, Jackson & Walker, Hunton & Williams, Ackles, Ackles & Ackles and Roy Minton) pursuant to or under any i' provision of this Agreement shall create any conflict of interest which would prevent any such employees, agents, consultants or attorneys from participating adversely to TU Electric or Tex-La, respectively, (if a conflict does not otherwise exot) in any legal proceeding brought by TU Electric against Tex-La and/or by Tex-La against TU Electric should this Agreement be terminated or should the transactions contemplated under this Agreement to be consummated prior thereto not be consummated on or before the Closing
, Date. TU Electric and Tex-La hereby waive any such conflict of interest which might exist specifically because of any such effort or cooperation; and (f) If it is necessary to nonsuit the current Subject Claims, as set forth in paragraphs (c) and (d) above, then in such event upon or at any time after the Closing, if TU Electric requests, Tex-La and TU Electric agree that their Subject Claims in the Pending Dallas Suit shall be refiled in the New Lawsuit in Dallas County and that the New Lawsuit and all such Subject Claims shall then immediately be dismissed with prejudice.
4.3 ,Agre.ement to Obtain Approvals. Tex-La shall use all reasonable efforts to obtain with respect to Tex-La and TU Electric shall use all reasonable efforts to obtain
with respect to TU Electric all necessary consents, approvals, authorizations, permits, certificates or orders of any court, tribunal or governmental agency or authority, Federal, state, county or municipal, or other entity which are required by any applicable statute or other law or by any judgment, order or decree or any rule or regulation of any court, j tribunal or governmental agency or authority, Federal, state, county or municipal, or any l agreement or other requirement to permit each of them, respectively, to execute, deliver or perform this Agreement and any agreement or instrument required hereby to be executed and delivered by either of them at the Closing. ARTICLE V CONDITIONS TO OBLIGATIONS TO CLOSE 5.1 Conditions to Obligation of Tex-La to Close. The obligation of Tex-La to consummate and close the transactions contemplated by this Agreement at the Closing is subject to the satisfaction of each of the following conditions at or prior to the Closing: (a). Representations and Warranties. The representations and warranties of TU Electric contained in this Agreement shall have been true and correct on and as of the date hereof and shall be true and correct on and as of the Closing Date in all material respects as though such representations and warranties had been made on and as of the Closing Date, and TU Electric shall have delivered to Tex-La a certificate, dated as of the Closing Date, of its Chairman of the Board, a Division President or a Vice President to the foregoing effect; (b) Compliance With Agreement. TU Electric shall have fully performed and complied with all of the covenants, agreements and conditions to be performed or complied with by it at or prior to the Closing (including without limitation Its assumption obligations with respect to the Joint Ownership Agreement), and TU Electric shall have delivered to Tex-La a certificate, dated as of the t
Closing Date, of its Chairman of the Board, a Division President or a Vice L President to the foregoing effect; (c) Receipt of Payment. TU Electric shall have delivered to Tex-La the payments referenced in paragraphs (a) and (b) of Section 1.6 hereof; (d) Receipt of Closing Documents. Tex-La shall have received the fully executed Closing documents described in Article VII hereof to be delivered at the ' Closing; .and (e) Receipt of IRS Ruling. Tex-La shall have received an IRS private letter ruling or other determination acceptable to Tex-La, that no payments to be made under this Agreement and the Note will adversely affect Tex-La's tax-exempt status under Section 501(c)(12) of the Internal Revenue Code of 1986. The date upon which TU Electric receives written notification from Tex-La of its receipt of such an IRS Ruling is referred to as the " IRS Ruling Date". 3.2 Ccnditions to Obligation of TU Electric to Close. The obligation of TU Electric to consummate the transactions contemplated by this Agreement at the Closing is subject to the satisfaction of each of the following conditions at or prior to the Closing: (a) Representations and Warranties. The representations and warranties of Tex-La contained in this Agreement shall have been true and correct on and as 1
-of the date hereof and shall be true and correct on and as of the Closing Date in all material respects as though such representations and warranties had been made on and as of the Closing Date, and Tex-La shall have delivered to TU Electrie a certificate, dated as of the Closing Date, of its President to the 1
foregoing offeet; (b)- Compliance with Agreement. Tex-La shall have fully performed and complied with all of the covenants, agreements and conditions to be performed or
. complied with by it at or prior to the Closing, and Tex-La shall have delivered to TU Electric a certificate, dated as of the Closing Date, of its President to the foregoing effect; and (c) Receipt of Closing Documents. TU Electric shall have received the fully executed Closing documents described in Article VI hereof to be delivered at the Closing.
5.3 Conditions to Obligation of Both Parties to Cicse. The obligation of each of the parties to consummate the transactions contemplated by this Agreement at the Closing Date is subject to the satisfaction of each of the following conditions at or prior to the Closing Date: (a) No Adverse Proceeding. There shall not be pending any suit, action or other proceeding by any person before any court or arbitrator or any governmental department, commission, board, bureau, agency or instrumentality in which it-is sought to restrain or prohibit any of the transactions contemplated by this 1 Agreement. ' (b) Approval by PUC, By final action subject to no further appeal, the PUC shall have approved the transfer to TU Electric of Tex-La's certificate of convenience and necessity with respect to the Station and the Transmission Facilities permitting TU Electric's acquisition and ownership of Tex-La's ownership interest in the Station and the Transmission Facilities in accordance f with the terms hereof. In such connection, TU Electric and Tex-La will file within fifteen (15) Business Days of the date of this Agreement and prosecute l to the best of their ability a joint application for approval of the transfer of such certificate of convenience and necessity rights and such other applications or filings with the PUC as shall be necessary and essential in connection with the transactions contemplated under this Agreement. In connection with all such proceedings, each party will bear its own cost and expense of prosecuting such applications or filings. i
s 1 i j Upon the issuance by the PUC of any order or other document purporting to give the approval contemplated under this Agreement with or without conditions,- the parties, with their respective attorneys and other consultants, shall promptly confer and endeavor in good faith to determine if such order or q other document evidences the final approval contemplated by this Agreement l without any condition that is deemed by either party to be inconsistent with the provisions of this Agreement. It is understood and agreed that, in-connection with such applications and filings, TU Electric and Tex-La will y request the PUC not to prejudge either the reasonableness or the recoverability in TU Electric's rates of the consideration payable hereunder or the ratemaking treatment of the consideration received by Tex-La hereunder and to defer any such determinations to subsequent TU Electric and Tex-La rate cases; however, should the PUC refuse to defer such determination and determine in such certification proceedings that all or any portion of the consideration payable hereunder is unreasonable or shall not be recoverable in TU Electric's rates, such determination shall be deemed by TU Electric to be inconsistent with the provisions of this Agreement and therefore shall be inconsistent for the purposes hereof. If such determination is affirmative the parties shall promptly execute a stipulation dated currently to such effect. If such determination is negative, the parties, at their own cost and expense, respectively, will undertake to cause the PUC to lasue such further order or document evidencing its approval as contemplated by this Agreement, including the elimination of any such condition that was deemed by either party to be inconsistent with this Agreement and upon the issuance of any further order or other document by the PUC in such proceedings the same procedures will be followed by the parties as provided in the case of the order or other document first issued by the PUC in such proceedings, including the 1 i
execution of a stipulation dated currently evidencing the affirmative action by the parties in respect of the order or other document issued by the PUC. The date of any stipulation executed by the parties under this paragraph is referred to as the "PUC Affirmative Date." (c) Approval by NRC. The NRC shall have granted all necessary and essential approvals and consents with respect to the transactions provided for herein, including without limitation the entry of a final non-appealable order approving the sale of Tex-La's right, title and interest in the Station and Fuel to TU Electric in accordance with the terms hereof. In such connection, it is understood and agreed that TU Electric will file within fifteen (15) Btminess Days of the date of this Agreement and prosecute to the best of.its ability all appilcations or filings with the NRC as shall, in its judgment, be necessary and , essential in connection with the transactions contemplated under this Agreement. TU Electric will deliver promptly to Tex-La copies of all such applications and filings and will advise Tex-La on a current basis with respect to the status of any such proceeding. In connection with all such proceedings, Tex-La will, at Tex-La's reasonable cost and expense, at the request of TU Electric, render all such assistance as may be appropriate under the. circumstances, including without limitation, providing such of its personnel as may be appropriate to testify and otherwise participate in any such proceedings in support of this Agreement. Upon the issuance by the NRC of any order or other document purporting to approve the transactions contemplated under this Agreement with or ! without conditions, TU Electrie will promptly deliver to Tex-La a reproduced ) l legible copy of such order or other document, and the parties, with their i respective attorneys and other consultants, shall promptly confer and endeavor 1 in good faith to determine if such order or other document evidences the final _ _ _ _ _ _ _ _ _ _ . __ )
approval of the NRC of such transactions contemplated by this. Agreement without any condition that is ' deemed by either party to be inconsistent with i the provisions of this Agreement. If such determination is affirmative the parties shall promptly execute a stipulation dated currently to such effect. If such determination is negative, TU Electric, with the assistance of Tex-La, which shall be at Tex-La's reasonable cost and expense, will undertake to cause the NRC to issue such further order or document evidencing its approval of such transactions including the elimination of any such condition that was deemed by either party to be inconsistent with this Agreement and upon the issuance of any further order or other document by the NRC in such proceedings the same procedures will be followed by the parties as provided in the case of the order or other document first issued by the NRC in such proceedings, . including the execution of a stipulation dated currently evidencing the affirmative action by the parties in respect to the order or other document issued by the NRC. The date of any stipulation executed by the parties under this paragraph is referred to as the "NRC Affirmative Date." (d) Approval of REA, CFC and FFB. The REA, the CFC and the FFB shall have granted all necessary and essential approvals and consents with respect to the transactions provided for herein, including without limitation, their consent to the Assignment Agreement and the acceptance by them of the asignment of the Note, the Mortgage and the vendors lien contained in the Special Warranty Deed with Vendors Lien and Bill of Sale as a partial payment mechanism and security for such partial payment mechanism with respect to all promissory notes, mortgages, or other evidences of indebtedness and security agreaments , or arrangements with respect to the payment thereof, that Tex-La may hav.' in favor of the REA, the CFC and the FFB with respect to the Tex-La Comanche Peak Debt, so that at the Closing Date Tex-La and TU Electric will i enter into the Assignment Agreement and pursuant thereto deliver to the REA i the Note and the Mortgage in return for which the REA, the CFC and the FFB 1 will execute and deliver to Tex-La all such receipts, releases, termination statements and other documents and assurances as shall be necessary or appropriate in the estimation of Tex-La and TU Electric to provide for and evidence the termination and release of all mortgages, liens and other security instruments with respect to the Purchased Assets and provide for the conveyance thereof by Tex-La to TU Electric in accordance with the terms of this Agreement. In addition, the REA, CFC and FFB shall each have entered into the Consent to Assignment Agreement attached to the Assignment Agreement, thereby accepting assignment of the Note as a mechanism for the i partial payment of the Tex-La Comanche Peak Debt and asignment of the Mortgage and the vendors lien contained in the Special Warranty Deed with Vendors Lien and Bill of Sale as security for the payment of the Note. In such connection, it is understood and agreed that Tex-La will carry on discussions with the REA, the CFC and the FFB in order to obtain their consent and agreement in the foregoing respects. In connection with all such undertakings, TU Electric will, at TU Electric's cost and expense, at the request of Tex-La, render all such assistance as may be appropriate under the circumstances, including without limitation, providing such of its personnel as may be appropriate to participate h any such undertakings in support of this Agreement. (e) Execution of Amended and Pgarated Power Supply Agreement, Amended and Restated Transmission Agreement and Amended and Restated Distribution Service Agreement. Tex-La and TU Electric shall have executed the form of Amended and Restated Power Supply Agreement attached hereto as Exhibit G, the form of Amended and Restated Transmission Agreement attached hereto l
as Exhibit H, and the form of Amended and Restated Distribution Service Agreement attached hereto as Exhibit I, it being specifically understood that TU Electric does not hold itself out generally .to perform the contractual duties specified in said Amended and Restated Power Supply Agreement or Amended and Restated Distribution Service Agreement or all of the duties specified in said Amended and Restated Transmission Agreement, that same are not incidents of any obligation of a public utility, and that TU Electric would not enter into said Amended and Restated Power Supply Agreement or . Amended and Restated Transmission Agreement or Amended and Restated Distribution Service Agreement or perform such contractual duties but for the unique and unusual circumstances attendant to Tex-La's ownership interest in Comanche Peak and the considerations made to TU Electric through Tex-La's ., i execution and performance of this Agreement and the other agreements and instruments to be executed and delivered pursuant to this Agreement for the i consideration herein and therein expressed and the desirability of facilitating the transition by Tex-La from being essentially a full requirements wholesale 3.stomer cf TU Electric to Tex-La's establishment of its own separate and independent Electric Reliability Council of Texas Control Area. (f) Consents of Members. The Boards of Directors of each of the Members of Tex-La shall have duly adopted resolutions authorizing and approving the execution, delivery and performance of this Agreement and the other agreements and instruments to be delivered to TU Electric at the Closing, including the mleases and covenants not to sue granted by Tex-La on the Members' behalf in and pursuant to Sections 9.1,9.2 and 9.7 hereof and copies of each of such msolutions certified by the Member's respective corporate secretaries as of the Closing Date shall have been delivered to TU Electric. 1 1 l 1 I
ARTICLE VI CLOSING DOCUMENTS FROM TEX-LA Tex-La and the referenced attorneys, in each case as appropriate, will deliver to TU Electric on the Closing Date the following: 6.1 Deeds and Transfers, etc. (i) An executed and acknowledged Special Warranty Deed with Vendor's Lien and Bill of Sale; (ii) duplicate counterparts executed by Tex-La j of the agreements contemplated under Section 5.3(e) hereof; and (iii) the executed Release, Covenant Not to Sue and Indemnity Agreement specified in Sections 9.1, 9.2 and 9.5 hereof. 6.2 Lien Search. Real property search certificates from a reputable title company and a UCC search certificate from the Secretary of State of Texas disclosing no security interests, judgments or other liens outstanding against Tex-La's ownership interest in the Purchased Assets, other than the Permitted Exceptions and liens securing the Tex-La Comanche Peak Debt to be released at or prior to the Closing. 6.3 Certificate of Secretarial Officer. (i) A certificate of the Secretary of the Board of Directors of Tex-La, dated the Closing Date, with respect to the incumbency of officers and their signatures, the existence and good standing of Tex-La, and the due adoption of resolutions by the Board of Directors and the legally requisite number of Members of Te:.-La authorizing and approving the execution, delivery and performance of this Agreement and the other agreements and instruments to be delivered to TU Electric at the Closing and (11) copies of such resolutions of such Board of Directors and Members. 6.4 Counsel Opinion. An Opinion of Heron, Burchette, Ruckert & Rothwell, counsel for Tex-La, dated the Closing Date and addressed to TU Electric in the form set forth in Exhibit J attached hereto.
, ARTICLE VG CLOSING DOCUMENTS FROM TU ELECTRIC TU Electric and the referenced attorneys, in each case as appropriate, will deliver to Tex-La on the Closing Date the following:
i 7.1 Proof of Payment. Proof of the payment to Tex-La pursuant to Section 1.6(b) hereof. 7.2 Other Instruments. (i) The executed Note and Mortgage; (ii) duplicate counterparts executed by TU Electric of the agreements contemplated under Section 5.3(e) hereof; and (iii) the executed Release, Covenant Not to Sue and Assumption and Indemnity Agreement specified in Sections 9.3, 9.4 and 9.5 hereof; and (iv) the executed Guaranty. 7.3 Certificate' of Secretarial Officer. (i) A certificate of the Secretary or an Assistant Secretary of TU Electric and of TUC, dated the Closing Date, with respect to I the incumbency of officers and their signatures, corporate existence and good standing, and, in the case of TU Electrie, the due adoption of resolutions of the Board of Directors of TU Electric authorizing and approving the execution, delivery and performance of this Agreement and the other agreements and instruments to be delivered by TU Electric to Tex-La' pursuant hereto at the Closing and, in the case of TUC, the due adoption of resolutions of the Board of Directors of TUC authorizing the execution, delivery and performance of the Guaranty to be delivered by TUC to Tex-La pursuant hereto at the Closing and (11) copies of such resolutions. 7.4 Cotmsel's Opinion. An opinion of Worsham, Forsythe, Sampels & Wooldridge, counsel for TU Electric and TUC, dated the Closing Date and addressed to Tex-La in the form set forth in Exhibit K attached hereto.
l ARTICLE VIII CLOSING AND INDEMNIFICATION 1 8.1 Indemnification by Tex-La. Tex-La agrees to indemnify, hold harmless and defend TU Electric and anyone related to or affiliated with TU Electric, including its parent, subsidiaries and affiliates and anyone related to or affiliated with such parent, subsidiaries or affiliates, from and against any and all claims, demands, liabilities, losses, costs and expenses; including reasonable attorneys' fees, which TU Electric or anyone related to or affiliated with TU Electric, including its parent, subsidiaries and affiliates and anyone related to or affiliated with such parent, subsidiaries or affiliates, may sustain and which arise out of or are based upon or relate to the inaccuracy or falsity of any j i representation or warranty made by Tex-La set forth in this Agreement or in any other I agreement or instrument delivered pursuant hereto or the breach or nonperformance by Tex-La of any covenant or agreement with TU Electric or anyone related to or affiliated with TU Electric, including its parent, subsidiaries and affiliates and anyone related to or affiliated with such parent, subsidiaries or affiliates, made by Tex-La set forth in this Agreement or in any other agreement or instrument delivered pursuant hereto. 8.2 Indemnification by TU Electric. TU Electric agrees to indemnify and hold harmless and defend Tex-La and Tex-La's Members and anyone related to or. affiliated with Tex-La and Tex-La's Members from and against any and all claims, demands, liabilities, losses, costs and expenses, including reasonable attorneys' fees, which Tex-La, its Members or anyone related to or affiliated with T::.-Ln er its Members may :=ta!n and which arise out of or are based upon or relate to the inaccuracy or falsity of any representation or warranty made by TU Electric set forth in this Agreement or in any other agreement or instrument delivered pursuant hereto or the breach or nonperformance by TU Electric of any covenant or agreement with Tex-La,its Members or anyone related to or affiliated with Tex-La or its Members made by TU Electric set forth in this 1 Agreement or in any agreement or instrument delivered pursuant hereto. _ - 1
8.3 Survival of Representation and Warranties. The representations, warranties, covenants and agreements of the parties hereto shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated hereunder for a period of four (4) years after the Closing Date or for such longer period as may be commensurate therewith for any document delivered pursuant hereto which is in effect for a longer period than such four years. j l 8.4 Notice and Opportmity to Participate in Defense. In the event that Tex-La, < its Members or TU Electric or any of its parent, subsidiaries or affiliates, or anyone related to or affiliated with any of them, receives notice of the commencement of any action or proceeding or the assertion of any claim in respect of which Tex-La, its Members or TU Electric or any of its parent, subsidiaries or affiliates, or anyone related to or affiliated with any of them, may be entitled to indemnification, the party receiving such notice shall give the indemnifying party written notice within ten (10) calendar days thereof (except that failure to so notify will not relieve the indemnifying party of its obligations hereunder except to the extent it has been prejudiced thereby) and the opportunity to participate in the defense thereof and in any settlement negotiations with respect thereto, and will cooperate with the other party in all reasonable respects and make available to the other party all records, evidence and personnel for consultation and testimony reasonably requested by the other party in contiection therewith. The settlement of any such action, proceeding or claim without the prior written approval of the indemnifying party shall relieve such party of any obligations to the indemnified party in respect of the subject matter of the settlement of such action, proceeding or claim. ARTICLE IX . SETTLEMENT OF PENDING LITIGATION 9.1 Tex-La's Release. Upon the Closing, Tex-La, for itself and on behalf of any person or entity, private or governmental, claiming by, through or under Tex-La, including
without limitation, to the extent it has the standing and right under law to do so, its Members and customers (including the customers of Tex-La's Members and other wholesale customers) and its or their respective insurers, agents, servants, employees, officers, directors, consultants, attorneys and representatives, shall waive, release, discharge, renounce and relinquish any and all Subject Claims involving, concerning, accruing in, arising out of, or relating to the period of time prior to t"e Closing which it has or they have claiming by, through or under Tex-La, or may have, whether known or unknown, contingent or absolute, including, without limitation, those based on common law, whether contract (express or implied, including express or implied warranty) or tort (including, without limitation, intentional tort, negligence or gross negligence, sole, joint or concurrent) or strict liability or fraud, and those based upon any Federal, state or local statute, law, order or regulation, including, without limitation, the Atomic Energy Act of 1954, as amended, the regulations of the NRC, the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, and any rule or regulation under either, the Texas Securities Act (Title 19, Articles 581-1, et seq., V.A.T.S.), the Texas Declaratory Judgment Act (Secs. 37.0001 .011 of the Texas Civil Practice and Remedies Code) and the Texas Deceptive Trade Practices and Consumer Protection Act, against TU Electric or TUC, or both, in any capacity, whether individually, as Project Manager of Comanche Peak or otherwise, and their respective insurers, agents, servants, employees, officers, directors, shareholders, consultants, attorneys and representatives, past and present, and any and all of their respective successors, subsidiaries and affiliates and their respective 1.nsurers, agents, sarvents, employeas, officars, directors, shareholders, consultants, attorneys and representatives, past and present, except (1) Subject Claims arising out of or under this Agreement or any of the other agreements or instruments executed and delivered pursuant hereto, (2) Claims which do not relate to Comanche Peak and are based upon circumstances or facts unknown (and which could not reasonably have been known) to Tex-La at the time of execution of this Agreement and 1 the Release, (3) any defenses which Tex-La has or may have to Subject Claims asserted against Tex-La by any persons or parties whomsoever, provided that Tex-La may not seek any type of affirmative relief hereunder against TU Electric, TUC, or both, their successors, subsidiaries and affiliates, or its or their respective insurers, agents, servants, i employees, officers, directors, shareholders, consultants, attorneys and representatives, I and (4) any counterclaims which Tex-La has or may have against any party other than l TU Electric, TUC, or both, their successors, subsidiaries and affiliates, or its or their respective insurers, agents, servants, employees, officers, directors, shareholders, ; consultants, attorneys and representatives, acting in such capacity, with respect to any Subject Claims being asserted against Tex-La by anyone other than TU Electric, TUC, or 1 both, their successors, subsidiaries and affiliates, or its or their respective insurers, agents, servants, employees, officers, directors, shareholders, consultants, attorneys and representatives. In connection with clause (2) of the immediately preceding sentence, Tex-La represents that it presently is unaware of any Subject Claim with TU Electric which has not been addressed and resolved by this Agreement and the exhibits hereto. Tex-La hereby covenants and warrants that it has not assigned any Subject Claims that are to be released at the Closing. At the Closing, Tex-La will execute and deliver to TU Electric the form of Release attached hereto as Exhibit L. 9.2 Tex-La Covenant Not to Sue. (a) Except as provided for in Section 4.2(f) hereof, upon the Closing, Tex-La, for itself and on behalf of any person or entity, private or governmental, claiming by, through or under Tex-La, including without limitation, to the extent it has the standing and right under law to do so, its Members and customers (including the customers of Tex-La's Members and other wholesale customers) and its or their respective insurers, agents, servants, employees, officers, directors, consultants, attorneys and representatives shall agree and covenant j that it and they, individually, collectively or in any combination, will forebear i
l l from asserting against, and never sue for or look for satisfaction with respect to, TU Electric and TUC and their respective insurers, agents, servants, employees, officers, directors, shareholders, consultants, attorneys and representatives, past and present, and any and all of their respective successors, subsidiaries and affiliates and their respective insurers, agents, ! i servants, employees, officers, directors, shareholders, consultants, attorneys and representatives, past and present, any Subject Claim (including without limitation any Subject Claim against any contractor, subcontractor, supplier, consultant, vendor or other person, firm or entity in privity in any manner with any of them which may therefor or as a result thereof have a right over or Subject Claim in subrogation) in any manner involving, concerning, arising out of, or relating to, the planning, design, construction and licensing of Comanche Peak and the management of such planning, design, construction or licensing, or any other matter relating to the planning, design, construction or licensing of Comanche Peak, and the management, procurement, conversion, enrichment, fabrication, shipping, transportation and storage of the Fuel, j which it has or they have claiming by, through or under Tex-La, or may have, whether known or unknown, contingent or absolute, including, without I limitation, those based on common law, whether contract (expressed or implied, including express or implied warranty) or tort (including, without limitation, intentional tort, negligence or groes negligence, sole, joint or concurrent) or strict liability or fraud, and those based upon any Federal, state
l. or local statute, law, order or regulation, including, without limitation, the Atomic Energy Act of 1954, as amended, the regulations of the NRC, the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, and any rule or regulation under either, the Texas Securities Act f (Title 19, Articles 581-1, et seq., V.A.T.S.) and the Texas Deceptive Trade i
l f Practices and Consumer Protection Act, against TU Electric or TUC, or both, in any capacity, whether individually, as Project Manager of Comanche Peak or otherwise, 'and their respective insurers, agents, servants, employees, officers, directors, shareholders, consultants, attorneys and representatives, past and present, and any and all of their respective successors, subsidiaries and affiliates and their respective insurers, agents, servants, employees, officers, directors, shareholders, consultants, attorneys and representatives, past and present. j l (b)- Except as provided in Section 4.2(f) hereof, Tex-La, for itself and on behalf of ' any person or entity, private or governmental, claiming by, through or under l Tex-La, including without limitation, to the extent it has the standing and right under law to do so, its Members and customers (including the customers of Tex-La's Members and other wholesale customers) and its or their respective insurers, agents, servants, employees, officers, directors, consultants, attorneys and representatives hereby further agrees and ' covenants that, upon and after the Closing, neither it nor they claiming by, through or under Tex-La, individually, coHectively or in any combination, will directly or indirectly, oppose, challenge, contest or assert any complaint in any court or before any administrative agency or body or in any other forum whatsoever with respect to, or in any manner involving, concerning, arising out of, or relating to, Comanche Peak and the incidents and attributes thereof including, without limitation, the planning, design, construction and licensing of Comanche Peak and the management of such planning, design, construction or licensing or any other aspect of such planning, design, construction or . licensing, the costs and schedule of construction and completion of Comanche Peak, and the reasonableness, prudency or efficiency of the planning, design, construction and licensing of Comanche Peak and the management of such planning, design, construction or licensing, and the reasonableness, prudency or efficiency of the management, procurement, conversion, enrichment, fabrication, shipping, transportation and storage of the Fuel, and the costs i incurred in connection with the management, procurement, conversion, enrichment, fabrication, shipping, transportation and storage of the Fuel, and the breach of the Joint Ownership Agreement and any express or implied warranties arising out of the Joint Ownership Agreement, and any represen'tation, misrepresentation, disclosure or non-disclosure in connection with the negotiations or preceding the execution by Tex-La of the Joint Ownership Agreement, and in connection with the performance or nonperformance by TU Electric of its duties, responsibilities or obligations under the Joint Ownership Agreement as Project Manager or otherwise, and i the failure of TU Electric to pursue any remedies, either at law or otherwise, that may be, or may have been, available against any and all contractors, subcontractors, suppliers, consultants, vendors or others with respect to
' Comanche Peak (including separately the Station, Fuel or Transmission Facilities) and on account of anything that has occurred or may have occurred, in whole or in part, with respect to Comanche Peak, (including separately the Station, Fuel or Transmission Facilities) and the incidents and attributes ]
! thereof and any of the foregoing whether known or unknown. Notwithstanding 1 any other provisions of this Agreement, nothing herein shall limit Tex-La's right to defend the prudency of its participation in Comanche Peak or the l l settlement of the Pending Litigation before any court or regulatory agency; 4 provided, however, that since TU Electric by this Agreement is reimbursing Tex-La for its attorneys fees and other litigation costs related to the Pending Litigation, in no event shall Tex-La use any information obtained by it or its attorneys, through discovery in the Pending Litigation in any manner adverse l l 1
L L to TU Electric and in no event shall Tex-La contend, plead, assert, or claim in any proceeding that TU Electric or the Project ' Manager under the Joint Ownership Agreement acted imprudently or that any costs associated with the planning, design, construction and licensing of Comanche Peak and the management of such planning, design, construction or licensing .were imprudently incurred; provided further however, that this sentence shall not prohibit Tex-La from furnishing factual information in response to a specific discovery request and shall not require any representative of Tex-La to violate any obligation to tell the truth under oath in response to a specific request therefor. (c) Notwithstanding anything contained in paragraphs (a) or (b) of this Section 9.2 or elsewhere in this Agreement, Tex-La specifically does not covenant not to sue, and specifically does not agree to not assert, challenge or contest, with regard to: l (1) Subject Claims arising out of or under this Agreement or any of the , other agreements or instruments to be delivered pursuant hereto; ; (2) Subject Claims which could not have been brought in the Pending Litigation and which accrue on or after the Date of Commercial l Operation (as that term is defined in the Joint Ownership i Agreement) and which are based upon the acts or omissions of TU Electric or the Project Manager other than in connection with a the planning, design, construction and licensing of. Comanche Peak and the management of such planning, design, construction and licensing; (3) any defenses which Tex-La has or may have to Subject Claims asserted against Tex-La by any persons or parties whomsoever, I provided that Tax-La may not sesk any type of affirmative relief ' hereunder aga'nst TU Electric, TUC, or both, their successors, sesidiaries asai affiliates, or its or their respective insurers, agents, servants, employees, officers, directors, shareholders, consultants, attorneys and representatives; (4) any counterclaims which Tex-La has or may have against any party other than TU Electric, TUC, or both, their successors, subsidiaries and affiliates, or its or their respective insurers, agents, servants, ' employees, officers, directors, shareholders, consultants, attorneys and representatives, acting in such capacity, with respect to any Subject Claims being asserted against Tex-La by anyone other than 1
TU Electric, TUC, or both, their successors, subsidiaries and affiliates, or its or their respective insurers, agents, servants, employees, officers, directors, shareholders, consultants, attorneys and representatives; or (5) any proceeding in which TU Electric's rates are being determined, provided that Tex-La shall not oppose, or assist any third party , opposition to, the inclusion in TU Electric's rates of any and all l costs related to Comanche Peak. (d)' At the Closing, Tex-La will execute and deliver to TU Electric the form of Covenant Not to Sue attached hereto au Exhibit M. Further, Tex-La covenants and agrees that it will cooperate and assist TU Electric in connection with all necessary approvals of this Agreement and that it will encourage and solicit its attorneys, including Heron, Burchette, Ruckert & Rothwell and Hughes & Luce, and Tex-La's consultants, not to oppose or assist any third party in opposing TU Electric in connection with any matters relating to Comanche Peak; and,if necessary to prevent a conflict of interest, it being understood and agreed that Tex-La's consultants and attorneys may have obtained or developed information regarding Comanche Peak in the course of the Pending Litigation that arguably could be inequitable for them to otherwise utilize in view of the consideration being rendered by TU Electric hereunder in wder to obtain a final settlement of the matters referred to in this Agreement, Tex-La covenants and agrees that it will take all such action as may be necessary or appropriate in order to prevent the consultants and attorneys, including Heron, Burchette, Ruckert & Rothwell and Hughes & t Luce, employed by it in connection with, the Pending Litigation, from participating or assisting in any manner adverse to Tex-La's duty of cooperation herein w to TU Electric in connection with the Pending Litigation, the Pending Houston Suit, the Pending Somervell County Suit or any current w future proceedings a matter before the PUC w the NRC involving or relating to Comanche Peak, or any current or future proceedings ___-__________.-.___.________-_.m____.
before any court or before any administrative agency or body or in any other forum whatsoever with respect to, or in any manner involving, concerning, arising out of, or relating to: (i) the acts or omissions of TU Electric or the Project Manager referred to or in question in the Pending Litigation or which j could have been brought into question in the Pending Litigation; or (ii) the acts or omissions of TU Electric or the Project Manager with respect to Comanche Peak that occur, in whole or in part, prior to the Date of Commercial Operation (as said term is defined in the Joint Ownership Agreement). The covenant set forth in the prior sentence shall survive the Closing hereunder and remain in force until the expiration of any Subject Claim covered thereby. Nothing contained in this Section 9.2(d) shall be construed to prohibit said i attorneys and consultants from representing Tex-La in connee'lon t with the matters described in subparagraphs (1) through (5) of Section 9.2(c). For the purposes of this paragraph, it is recognized that Tex-La can only encourage and solicit its consultants to take or refrain from taking certain actions and does not have the right to prevent or cause such actions on their part. 9,3 TU Electric Release. Upon the Closing, TU Electric, for itself and on behalf of its parent, TUC, and their subsidiaries and affiliates and on behalf of any person or entity, ' private or governmental, claiming by, through or under TU Electric or TUC, including without limitation, to the extent it has the standing and right under law to do so, their customers and shareholders and their respective insurers, agents, servants, employees, officers, directors, consultants, attorneys and representatives shall waive, release, discharge, renounce and relinquish any and all Subject Claims involving, concerning, accruing in, arising out of, or relating to the period of time prior to the Closing which it has or they have claiming by, through or under TU Electric or TUC, or may have, whether known or unknown, contingent or absolute, including, without limitation, those based on common law, whether contract (express or implied, including express or implied warranty) or tort (including, without limitation, intentional tort, negligence or gross negligence, sole, joint or concurrent) or strict liability or fraud, and those based on any Federal, state or local statute, law, order or regulation, including, without limitation, the Atomic Energy Act of 1954, as amended, the regulations of the NRC, the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, and any rule or regulation under either, the Texas Securities Act (Title 19, Articles 581-1, et seq., V.A.T.S.), the Texas Declaratory Judgment Act (Sees. 37.0001-
.011 of the Texas Civil Practice and Remedies Code) and the Texas Deceptive Trade Practices and Consumer Protection Act, against Tex-La, its Members and customers (including the customers of Tex-La's Members and other wholesale customers) in any capacity, whether individually or otherwise, and its and their respective insurers, Edents, servants, employees, officers, directors, consultants, attorneys and representatives, past and present, and any and all of their respective successors, subsidiaries and affiliates and their respective insurers, agents, servants, employees, officers, directors, members, consultants, attorneys, and representatives, past and present, except (1) Subject Claims arising out of or under this Agreement or any of the other agreements and instruments executed and delivered pursuant hereto, (2) Subject Claims which do not relate to Comanche Peak and are based upon circumstances or facts unknown (and which could not reasonab y have been known) to TU Electric at the time of execution of this Agreement and the Release, (3) any defenses which TU Electric has or may have to Subject Claims asserted against TU Electric by any persons or parties whomsoever, provided that TU Electric may not seek any type of affirmative relief hereunder (other than rate relief pursuant to the provisions of the Public Utility Regulatory Act, Article 1446c, V.A.T.S) against Tex-La,its Members and customers (including the customers of Tex-La's Members and other wholesale customers), their respective insurers, agents, employees, officers, -
directors, consultants, attorneys and representatives, and (4) any counterclaims which TU Electric has or may have against any party other than Tex-La, its Members and
customers (including the customeis of Tex-La's Members and other wholesale customers), their respective in! arers, agents, employees, officers, directors, consultants, attorneys and representatives, acting in such capacity (other than in connection with rate relief pursuant to the proeis!nns of the Public Utility Regulatory Act, Article 1446c, V.A.T.S.) with respect to any Subject Claims being asserted against TU Electric by anyone other than Tex-La, its Members and ctstomers (including the customers of Tex-La's Members and other wholesale customers), individually or otherwise, or their respective insurers, agents, employees, officers, directre consultants, attorneys and representatives. In i connection with clause (2) of the immediately preceding sentence, TU Electric represents that it presently is unaware of any Subject Claim with Tex-La which has not been , addressed and resolved by this Agreement and the exhibits hereto. Notwithstanding the foregoing, nothing herein shall prohibit TU Electric from charging Tex-La, or collecting from Tex-La, for any electric power and energy purchased by Tex-La from TU Electric in accordance with the rotes set forth in TU Electric's tarill as same may be approved and in effect from time to time even though said rates may include costs related to Comanche j i Peak. TU Electric hereby covenants and warrants that it has not assigned any Subject Claims that are to be released at the Closing. At the Closing, TU Electric will execute and deliver to Tex-La the form of Release attached hereto as Exhibit N. 9.4 TU Electric Covenant Not to Sue. 1 (a) Except as provided for in Section 4.2(f) hereof, upon the Closing, TU Electric, for itself and on behalf of its parent, TUC, and their subsidiaries and affiliates, and any person or entity, private or governmental, claiming by, through or under TU Electric or TUC, incluCg (thout limitation, to the extent it has the standing and right under law w do so, their customers and shareholders, and their respective insurers, agents, servants, employees, officers, directors, consultants, attorneys and representatives shall agree and ! covenant that it and they claiming by, through or under TU Electric or TUC, j i
individually, collectively or in any combination, will forebear from asserting against, and never sue for or look for satisfaction with respect to, Tex-La and - its Members and their respective insurers, agents, servants, employees, officers, directors, members, cons'ultants, attorneys and representatives, past and' present, and any and all of their respective successors, subsidiaries, and affiliates and their respective insurers, agents, servants, employees, officers, directors, shareholders, members, consultants, attorneys and representatives, past and present, any Subject Claim in any manner involving, concerning, arising out of, or relating to Comanche Peak, and the management, procurement, conversion, enrichment, fabrication, shipping, transportation and storage of the Fuel. (b) Except as provided for in Section 4.2 (f) hereof, TU Electric, for itself and on behalf of its parent, subsidiaries and affiliates, and any person or entity, private or governmental, claiming by, through or under them, including without limitation, to the extent it has the standing and right under law to do so, its or their customers and shareholders, arxl its or their respective insurers, agents, servants, employees, officers, directors, consultants, attorneys and representatives hereby further agrees and covenants that, upon and after the j i Closing, neither it nor they claiming by, through or under TU Electric or TUC, l individually, collectively or in any combination,' will directly or indirectly oppose, challenge, contest or assert any complaint against Tex-La or its Members in any court or before any administrative agency or body or in any 4 other forum whatsoever with respect to, or in any manner involving, concerning, arising out of, or relating to, Comanche Peak and the Joint Ownership Agreement and in connection with the performance or nonperformance by Tex-La of its duties, responsibilities or obligations under the Joint Ownership Agreement, and on account of anything that has occurred or may have occurred, in whole or in part, with respect to Comanche Peak, (including separately the Station, Fuel, or Transmission Facilities) and the incidents and attributes thereof and any of the foregoing whether known or unknown. (c) Notwithstanding anything contained in paragraphs (a) and (b) of this Section 9.4 or elsewhere in this Agreement, TU Electric specifically does not covenant not to sue, and specifically does not agree not to assert, challenge or contest, with regard to: () ;bject Claims arising out of or under this Agreement or any other
. Jreement or instrument executed and delivered pursuant hereto; (2) any right or authority to charge Tex-La, its Members and customers (including the customers of Tex-La's Members and other wholesale customers), for any electric power and ent.rgy purchased by any of them from TU Electric in accordance with the rates set forth in TU Electric's tariff as same may be approved and in effect from time to time even though said rates may include costs related to Comanche Peak; (3) any d hses which TU Electric has or may have to Subject Claims asserted against TU Electric by any persons or parties whomsoever, provided that TU Electric may not seek any type of affirmative relief hereunder (other than rate relief pursuant to the provisions of the Public Utility Regulatory Act; Article 1446e, V.A.T.S.)
against Tex-La, its Members and customers (including the , customers of Tex-La's Members and other wholesale customers), I their respective insurers, agents, employees, officers, directors, consultants, attorneys and representatives; or ' (4) any counterclaims which TU Electric has or may have against any party other than Tex-La, its Members and customers (including the customers of Tex-La's Members and other wholesale customers), their respective insurers, agents, employees, officers, directors, consultants, attorneys and representatives, acting in such capacity (other than in connection with rate relief pursuant to the provisions of the Public Utility Regulatory Act, Article 1446e, V.A.T.S.) with respect to any Subject claims being asserted against TU Electric by anyone other than Tex-La, its Members and customers (including the customers of Tex-La's Members and other wholesale customers), individually or otherwise, or their respective insurers, agents, employees, officers, directors, consultants, attorneys and representatives. (d) At the Closing, TU Electric will execute and deliver to Tex-La the form of Covenant Not to Sue attached hereto as Exhibit O. Further, TU Electric k covenants and agrees that it will encourage and solicit its attorneys, including Worsham, Forsythe, Sampels & Wooldridge, Jackson & Walker, Hunton & Williams, Ackles, Ackles & Ackles and Roy Minton, and TU Electric's consultants, not to oppose or assist any third party in opposing Tex-La in connection with any matters relating to Comanche Peak; and, if necessary to prevent a conflict of interest, it being understood and agreed that TU Electric's separately employed consultants and attorneys may have - obtained or developed information regarding Tex-La in the course of the Pending Litigation that arguably could be inequitable for them to otherwise utillr.e in view of the consideration being rendered by Tex-La hereunder in order to obtain a final settlement of the matters referred to in this Agreement, TU Electric covenants and agrees that it will take all such action as may be necessary or appropriate in order to prevent the consultants and attorneys, including Worsham, Forsythe, Sampels & Wooldridge, Jackson & Walker, Hunton & Williams, Ackles, Ackles & Ackles and Roy Minton, employed by it in connection with the Pending Litigation or otherwise, from participating or assisting in any manner adverse to TU Electric's duty of cooperation herein or to Tex-La in connection with any current or future proceedings or' matter before the PUC involving or relating to Comanche Peak, or any current or future proceedings before any court or before any administrative agency or body or in any other forum whatsoever with respect to, or in any manner involving, concerning, arising out of, or relating to the acts or omissions of Tex-La referred to or in question in the Pending Litigation or which could have been brought into question in the Pending l Litigation. The covenant set forth in the prior sentence shall survive the Closing and remain in force until the expiration of any Subject Claim covered thereby. Nothing contained in this Section 9.4(d) shall be construed to prohibit
said attorneys' and consultants from representing TU Electric in connection with the matters described in subparagraphs (1) and (4) of Section 9.4(c) hereof, and said attorneys 'and consultants may also represent TU Electric in connection with proceedings in which TU Electric's rates are being determined even though said rates may include costs related to Comanche Peak. 9.5 Assumption of Liabilities and Obligations and Indemnification. Effective upon the Closing, TU Electric agrees to assume all of the duties, responsibilities, liabilities and obligations of Tex-la under the Joint Ownership Agreement. Further, effective upon the Closing, TU Electric agrees to indemnify, hold harmless and defend Tex-La and its Members ' and customers (including the customers of Tex-La's Members and other wholesale customers) from and against all Subject Claims for any alleged acts of the Project Manager, its agents, servants, employees or independent contractors acting on behalf of the Project Manager which may be asserted against Tex-La and its Members and customers (including the customers of Tex-La's Members and other wholesale customers) by any third party (other than Tex-La's Members and customers and the customers of Tex-La's Members or other wholesale customers acting in such capacity), including without limitation Subject Claims predicated upon the alleged actual or imputed negligence or gross negligence of Tex-La and its Members and customers (including the. customers of Tex-La's Members and other wholesale customers) arising out of or connected with, the location, planning, design, construction, licensing, condition, maintenance, operation and decommissioning of Comanche Peak, including but not limited to all claims asserted er which might have been or might hereafter be asserted in the Pending Houston Suit and in the Pending Somervell County Suit; provided, however, that i TU Electric specifically shall not indemnify Tex-La and its Members and customers (including the customers of Tex-La's Members and other wholesale customers) in connection with any Subject Claims which may be asserted by Tex-La's Members and customers, and the customers of Tex-La's Member: cr ethcr aholesale customers, or
i i i creditors, acting in such capacity, which in any manner relate to Tex-La's participation as l l an Owner of Comanche Peak or as a party to the Joint Ownership Agreement or Tex-La's decision to enter into the Joint Ownership Agreement, or by reason of Tex-La's involvement in the Pending Litigation, or by reason of Tex-La's decision to prehase an l
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interest in Comanche Peak or the manner of its oversight of the project or its decision to l l sell its interest hereby to settle the Pending Litigation, or by reason of the execution of f this Agreement and participation in the transactions provided for herein, and provided l further, that TU Electric specifically shall not indemnify Tex-La and its Members and customers (including the customers of Tex-La's Members and other wholesale customers) ' in connection with any Subject Claims which may be asserted by Brazos or TMPA or others which arise by reason of Tex-La's participation in the Pending Litigation, or which are asserted solely by reason of the actions of Tex-La in connection with the execution of this Agreement and participation in the transactions provided for herein. TU Electric ; will, in addition to providing such indemnity, assume the defense of Tex-La and its Members and customers (and the customers of Tex-La's Members and other wholesale customers) in any tribunal where any such claim is asserted. Pursuant hereto, at the Closing TU Electric will execute and deliver to Tex-La the form of Assumption and Indemnity Agreement attached hereto as Exhibit P. Effective upon the Closing, Tex-La agrees to indemnify, hold harmless and defend TU Electric, TUC and their respective subsidiaries, affiliates and customers from and against any and all Subject Claims of Tex-La or anyone related to or affiliated with Tex-La, including Tex-La's Members, customers (including the customers of Tex-La's Members and other wholesale customers) and creditors, acting in such capacity, relating to Tex-La's execution of, or participation in, the Joint Ownership Agreement, Tex-La's execution of this Agreement and participation in the transactions provided for herein, and Tex-La's activities as an Owner separate and apart from joint activities with all other Owners or activities by, through and under the Project Manager. Further, effective upon the Closing, Tex-La agrees to
( ' 1 I indemnify, hold harmless and defend TU Electric, TUC and their respective subsidiaries, 1 affiliates and customers from and against any and all Subject Claims of Tex-La or anyone related to or affiliated with Tex-La, including Tex-La's Members and, to the extent they are acting in such capacity, Tex-La's customers (including the customers of Tex-La's l Members and other wholesale customers) and creditors, with respect to, or in any manner l , involving, concerning, arising out of, or relating to: (i) the acts or omissions of TU Electric or the Project Manager referred to or in question in the Pending Litigation or 4 which could have been brought into question in the Pending Litigation, including without limitation Subject Claims based upon the negligence or gross negligence, sole, joint or concurrent, cf TU Electric or the Project Manager; and (ii) the acts or omissions of TU Electric or the Project Manager with respect to Comanche Peak that occur, in whole l or in part, prior to the Date of Commercial Operation (as said term is defined in the Joint Ownership Agreement), including without limitation Subject Claims based upon the negligence or gross negligence, sole, joint or concurrent, of TU Electric or the Project Manager. Pursuant hereto, at the Closing Tex-La will execute and deliver to TU Electric l the form of Indemnity Agreement attached hereto as Exhibit Q. 9.6 Covenant of Cooperation. The parties hereby covenant and agree to assist, cooperate with, and support each other (other than financial support) in the event that a third party institutes any action against either of them with respect to Comanche Peak and any incident or attribute thereof, except that neither of them shall be required to 2 take any position which it believes is contrary to its material pecuniary interests or contrary to the truth. 9.7 Termination of Participation. To the extent that Tex-La can, and not be in violation of Section 210 of the Energy Reorganization Act,42 USC Section 5851 (1983), upon the execution of this Agreement, Tex-La, for itself and on behalf of any person or entity, private or governmental, claiming by, through or under Tex-La, including without limitation, to the extent it has the standing and right underlaw to do so,its Members and r customers (including the customers of Tex-La's Members and other wholesale customers) and its or their respective insurers, agents, servants, employees, officers, directors, consultants, attorneys and representatives, agrees and covenants to immediately abate any and all currently pending actions whatsoever, directly or indirectly, involving or relating to the prosecution or processing of any Subject Claims in any way relating to Comanche Peak against TU Electric or TUC, or their respective directors, officers, employees, agents, insurers, consultants or attorneys, past or present, and any and all of their respective successors, subsidiaries and affiliates and their respective insurers, agents, servants, employees, offleers, directors, shareholders, consultants, attorneys and representatives, past and present, pending in any court or before any administrative agency or body (except Subject Claims being made in the Pending Litigation, which shall be governed by the provisions of Article IV of this Agreement). In such capacity and to the extent Tex-La can and not be in violation of Section 210 of the Energy Reorganization Act, 42 USC Section 5851 (1983) (Tex-La hereby representing and warranting that it knows of no violation, actual or alleged, of Section 210 of the Energy Reorganization Act, 42 USC Section 5851 (1983) which has not heretofore been disclosed to TU Electric in writing), Tex-La agrees and covenants that Tex-La for itself and on behalf of any person or entity, private or governmental, claiming by, through or under Tex-La, including without limitation, to the extent it has the standing and right under law to do so, its Members and customers (including the customers of Tex-La's Members and other wholesale customers) and its or their respective insurers, agents, servants, employees, officers, directors, consultants, attorneys and representatives, shall not prosecute, directly or indirectly, any Subject Claims, objections, motions or other actions adverse to TU Electric in connection with applications for granting the requisite licenses and approvals for Comanche Peak pending before the NRC and its Atomic Safety and Licensing Boards (ASLB) and Atomic Safety and Licensing Appeal Boards, including, without limitation, in NRC Dockets Nos. 50-445-OL, 50-446-OL and 50-445-CPA, in the
Application of Citizens for Fair Utility Regulation (CFUR) for intervention and for resumption of ASLB hearings, the ongoing antitrust review relative to the licensing of Comanche Peak, and any and all appeals from rulings and orders of the NRC related to, or growing out of, said Dockets or proceedings which are pending before any court. Within three (3) Business Days af ter the Closing, Tex-La shall cause the dismissal, with prejudice to the refiling of same in any forum and in any form whatsoever, of all of its Subject Claims against TU Electric, TUC and their subsidiaries and affiliates in the Pending Litigation, and shall withdraw all Subject Claims, if any, adverse to TU Electric in connection with the granting of the requisite licenses and approvals for Comanche Peak pending in the NRC Dockets Nos. 50-445-OL, 50-446-OL and 50-445-CPA and any and all proceedings in any manner related to, or arising out of, said NRC licensing proceedings. Tex-La agrees and covenants, from and after the Closing, to fully cooperate with TU Electric and provide all reasonably requested assistance, including providing the legal assistance of its attorneys (including Heron, Burchette, Ruckert & Rothwell and Hughes & , Luce), in a timely manner in connection with any legal proceedings (excluding the Pending Litigation) involving Comanche Peak, including the licensing of Comanche Peak by the NRC, including without limitation the engoing antitrust review in connection therewith, and all proceedings involving Comanche Peak before the PUC to the extent of not opposing, or assisting any third party in opposing, the position being advocated by TU Electric. Except as specifically provided otherwise in this Agreement, TU Electric shall promptly reimburse Tex-La for any and all reasonable out-of-pocket expenses and any and all reasonable outside professional fees, including, without limitation, attorneys i fees, incurred by Tex-La in providing such cooperation. 9.8 TU Electric Actions and Litigation Costs. Within three (3) Business Days after the Closing, TU Electric shall cause the dismissal, with prejudice to the refiling of same in any forum and in any form whatsoever, of all of its Subject Claims against Tex-La in
the Pending Litigation. All costs and expenses related to or incurred in connection with the Pending Litigation shall be borne and paid by the party by whom incurred or to which they are related. 9.9 Termination of Joint Ownership Agreement and Other Agreements. Except as i otherwise provided in Section 9.5 hereof with respect to TU Electric's assumption of j Tex-La's obligations under the Joint Ownership Agreement, Tex-La and TU Electric j hereby agree that, upon the Closing, the Joint Ownership Agreement, as between Tex-La and TU Electric, shall be deemed terminated and of no further force and eft'ect as between them, it being understood that under the circumstances described in Article II, Section 6 of the Deed of Trust and under the heading " Rescission and Termination" in the Guaranty, the Joint Ownership Agreement may be reinstated. Further, Tex-La and TU Electric agree that, upon the Closing, the Entitlement Assignment Contract between Texas Power & Light Company and Tex-La executed on December 9,1980 and amended on February 12,1982 and amended again on May 12,1982, and the Power Supply 4 Agreement between Texas Power & Light Company and Tex-La executed on December 9, 1980 and amended on February 12,1982, and the Transmission Agreement between Tex-La and Dallas Power & Light Company, Texas Electric Service Company and Texas Power & Light Company executed on December 9,1980 and amended on February 12, 1982, a$d the Distribution Service Agreement between Tex-La and Texas Power & Light Company executed on December 9,1980 and amended on February 12,1982, and the letter of intent dated May 6,1980, between Tex-La and Texas Power & Light Company shall all be deemed terminated and of no further force and effect, except that if the Joint Ownership Agreement is reinstated under the circumstances described in the first sentence hereof, all of t!w foregoing agreements shall likewise be reinstated and substituted for the Amended and Restated Power Supply Agreement, Amended and j Restated Transmission Agreement and Amended and Restated Distribution Service Agreement referenced in Section 5.3(e) hereof and said amended and restated agreements shall be deemed terminated and of no further force and effect. !
ARTICLE X TERRENATION OF AGREEMENT 10.1 Termination of Agreement by TU Electric. In the event of the failure to satisfy any of the conditions specified in Section 5.2 hereof or Section 5.3 hereof, TU Electric may terminate this Agreement and Tex-La ' agrees to- promptly refund and pay to TU Electric the Signing Payment, plus in addition thereto an incremental amount calculated from the date of receipt of the Signing Payment by Tex-La at the rate of l 9.03% per annum and also in addition thereto the payments due pursuant to Section 1.6(cXiii) hereof. Otherwise, the parties shall close and consrmmate the transactions provided for herein upon the terms set forth herein. Tex-La agrees that it shall have no right to withhold payment of any amounts it agrees to pay herein in respect to or on the basis of its alleged claims in the Pending Litigation. In the event of such termination, the rights of the parties with respect to Comanche Peak shall be governed by the Joint Ownership Agreement, the other Agreements referred to in the last sentence of Section 9.9 hereof, and the applicable law as determined and applied in the Pending Litigation or j the New Lawsuit. 10.2 Termination of Agreement by Tex-La. In the event of the failure to satisfy any of the conditions specified in Section 5.1 hereof or Section 5.3 hereof, Tex-La may ! terminate this Agreement and Tex-La will immediately refund and pay to TU Electric the q l Signing Payment plus'in addition thereto an incremental amount calculated from the date of receipt of the Signing Payment by Tex-La at the rate of 9.03% per annum and also in addition thereto the payments due pursuant to Section 1.6(cXili) hereof. Otherwise, the ] l parties shall close and consummate the transactions provided for herein upon the terms l l set forth herein. Tex-La agrees ttut it shall have no right to withhold payment of any J amounts it agrees to pay herein in respect to or on the basis of its alleged claims in the Pending Litigation. In the event of such termination, the rights of the parties with respect to Comanche Peak shall be governed by the Joint Ownership Agreement, the other
Agreements referred to in the last sentence of Section 9.9 hereof, and the applicable law as determined and applied in the Pending Litigation or the New Lawsuit. 10.3 Automatic Termination. Unless either the Closing has occurred or there is a written agreement signed ty TU Electric and Tex-La to extend the date set out in this paragraph, this Agreement shall automatically terminate at 5:00 p.m., Dallas, Texas time, on the date which is at the end of nine (9) months after the date hereof, without any need for the giving of notice or any other action by either TU Electrie or Tex-La. In the event such termination occurs, Tex-La will immediately refund and pg to TU Electric the Signing Payment, plus in addition thereto an incrementa1 amount calculated from the date of receipt of the Signing Payment by Tex-La at the rate of 9.03% per annum and also in addition thereto the payments due pursuant to Section 1.6(cXill) hereof. In the event of such termination, the rights of the parties with respect to Comanche Peak shall be governed by the Joint Ownership Agreement, the other Agreements referred to in the last sentence of Section 9.9 hereof, and the applicable law as determined and applied in the Pending Litigation or the New Lawsuit. 10.4 Waiver of Conditions. If any of the conditions specified in Section 5.1 have not been satisfied, Tex-La, in addition to any other rights which may be available to it, shall have the right to proceed with the transaction contemplated hereby; and, if any of the conditions specified in Section 5.2 have not been satisfied, TU Electric, in addition to any other rights which may be available to it, shall have the right to proceed with the transaction contemplated hereby. 10.5 CaneeRation of Comanche Peak. In the event that, after the date of this Agreement but before the Closing, TU Electric ceases the construction or announces the cancellation of either or both units of Comanche Peak, or the proceedings at the NRC for the licensing of either such unit are for any reason terminated, the parties nevertheless shall proceed with the transaction contemplated hereby. In such event, to the extent that
l !
-1 NRC approval of the transaction provided for herein no longer is legally required, the transaction shall proceed without fulfillment of the conditions set forth in Section 5.3(c).
ARTICLE XI i- MISCELLANEOUS PROVEIONS )) l 11.1. Bulk Sales Law Waiver. To the extent it may lawfully do so, TU Electric 1 hereby waives compliance by Tex-La with the bulk sales law of any jurisdiction, if applicable, with respect to the transactions contemplated hereby, and Tex-La agrees to hold TU Electric harmless from and against any liability, loss, cost or expense, including 1
)
reasonable attorneys' fees, which TU Electric may sustain by reason of such j J
I' noncompliance. TU Electric agrees to give Tex-La prompt notice of the assertion of any { claim resulting from such noncompliance. l 11.2 Further Assurance. Tex-La agrees that, after the Closing, it will from time to I time, upon the reasonable request of TU Electrie, execute, acknowledge and deliver in proper form any instrument of conveyance or further assurance necessary for perfecting in TU Electric or its successors and assigns, as the case may be, the title to the Purchased Assets as provided for herein or for carrying out the purpose and intent of this Agreement. 11.3 Prepayment of Tex-La Comanche Peak Debt. Nothing in this Agreement shall in any way limit the right of Tex-La to prepay and/or refinance the Tex-La Comanche Peak Debt; and in the event of any such refinance at a lower rate of debt service which is committed for within one (1) year from the Closing Date, TU Electric may elect by written notice to Tex-La to reduce the payments under the Note by an amount equal to 50% of the difference between the existing Tex-La and new Tex-La rates upon payment to Tex-La of 50% of all reasonable expenses incurred by Tex-La in connection with such refinancing. 11.4 No Third Party Beneficiaries. The parties hereto acknowledge and agree that this Agreement is entered into for the sole benefit of TU Electric, TUC, Tex-La and
Tex-La's Members, their respective successors and assigns (to the extent permitted) and, to the extent specifically and expressly set forth elsewhere in this Agreement, their respective insurers, agents, servants, employees, officers, direc tors, subsidiaries, affiliates, representatives and customers, and that nothing in this Agreement shall be construed as giving any right, benefit, remedy or claim to any person, firm, corporation or other entity, other than TU Electric, TUC, Tex-La and Tex-La's Members, their respective successors and assigns (to the extent permitted) and, to the extent specifically and expressly set forth elsewhere in this Agreement, their respective insurers, agents, servants, employees, officers, directors, subsidiaries, affiliates, representatives and l l customers. Without in any way limiting the foregoing provisions, it is expressly understood that nothing in this Agreement shall affect any of the rights, obligations and l remedies, if any, among TU Electric and TMPA and Brazos under the Joint Ownership Agreement or otherwise. 11.5 Default. In the event of default in performance hereunder by either Tex-La or TU Electric, the nonMefaulting party shall be entitled to all remedies legally available to l it including the remedy of specific performance, the parties hereto agreeing that no adequate remedy at law exists. 11.6 Property and Transfer Taxes. (a) Property Taxes. All real and personal property taxes, and other similar taxes, charges, and fees imposed on or with respect to or measured by the Purchased Assets not heretofore paid by Tex-La shall be the responsibility and liability of TU Electric, except for such taxes, charges and fees caused by the action or inaction of Tex-La individually or in combination with any of the Owners other than TU Electric or the Project Manager. (b) Transfer Taxes. The payment of any and all real estate transfer, stamp, documentary, deed and recording taxes and fees, and all sales and excise l
taxes imposed in connection with the Purchased Assets or the sale or transfer of the Purchased Assets shall be the responsibility and liability of TU Electric, 11.7 Expenses. Tex-La and TU Electric shall each pay all expenses incurred by them respectively in connection with this Agreement, including the fees of their respective counsel and accountants, if any, except as may be otherwise provided. 11.8 Governing Law. This Agreement shall be construed, and the provisions hereof shall be enforced, in accordance with the laws of the State of Texas. l 11.9 Announcements. All press releases or other announcements by TU Electric or i Tex-La prior to or in connection with the execution of this Agreement shall be approved by Tex-La and TU Electric prior to the issuance thereof, which approval shall not be unreasonably withheld. 1 11.10 Entire Agreement, Amendments. This Agreement, and the other documents delivered pursuant hereto, constitute the entire agreement between Tex-La and TU Electric relating to the subject matter hereof and supersede all other prior ? agreements, representations and understandings between the parties. No supplement to, or modification or amendment of, this Agreement shall be binding, unless executed in ! writing by both Tex-La and TU Electric. 11/11 Assigns, etc. This Agreement shall be binding upon and inure to the benefit of Tex-La and its Members, and TU Electdc and TUC, and their respective successors and assigns but shall not confer any rights gon any third persons except to the extent expressly provided herein. This Agreement mk/ not be assigned by Tex-La without the written consent of TU Electric or by TU Electric without the written consent of Tex-La. l 11.12 Notices. All notices, requests, demands and other communications under this ) Agreement shall be in writing and shall be deemed to have been duly given (a) if served personally on the party to whom notice is to be given at the addresses and to the attention of the persons named as follows, or (b)if sent by telex or nationally recognized r,vernight I _ _ _ _ _ _ _ _ _ _ _ . _ _ _ . _ _ J
j delivery service, or (c) by: first class mail, postage prepaid, certified er.d return receipt s.
- requested, and properly addressed as follows:
(a) To Tex-La at:
~i Tex-La Electric Cooperative of Texas,Inc. j P. O. Box 1623 ,
i Nacogdoches, Texas 75961
' Attentiom John H. Butts For Federal Express:
Tex-La Electric Cooperative of Texas, Inc. l 2905 Westward Drive Nacogdoches, Texas 75961 Attentiom John H. Butts (with copy to) Heron, Burchette, Ruckert & Rothwell Suite 700 1025 Thomas Jefferson Street, N.W. Washington, D.C. 20007 Attentiom William H. Burchette (b) To TU Electric at: Texas Utilities Electric Company 2001 Bryan Street Suite 1900 Dallas, Texas 75201 Attentiom Erle Nye (with copy to) Worsham, Forsythe, Sampels & Wooldridge 2001 Bryan Street Suite 3200 Dallas, Texas 75201
. Attentiom Robert A. Wooldridge 11.13 Headings. The division of this Agreement into Articles and Sections and the insertion of headings are for convenience of reference only and shall not affect the !
construction or interpretation of this Agreement. 4 4 6
11.14 Execution and Counterparts. This Agreement may be executed in any number of counterparts, each and' all of which shall be deemed for all purposes to be one agreement. II.15 Interest on Past Due Payments. In the event that Tex-La or TU Electric fails to timely make any payments to the other which become due under this Agreement, the incremental amount due on the past due payment for the period between and including the due date and the date actually paid shall be calculated at the rate of twelve and one-half percent (12-1/2%) per annum. 11.16 Use of Representations or Recitals. Any representations or recitals made by Tex-La and TU Electric in this Agreement are for the purposes of this Agreement only. In the event that this Agreement is terminated or does not timely c< v at the Closing Date. neitheElectric shall use, as evidence or otherwise, any such rc 'ntations or recitals against the other in any way in the New Lawsuit or any other law:. eoncerning any Subject Claims which have been made in the Pending Litigation. II.17 Separate Litigation. Any Subject Claims arising out of or under this Agreement shall be prosecuted in a lawsuit separate from the lawsuit in which any Subject Claims which have been made in the Pending Litigation are prosecuted. In the event of any such separate lawsuit between TU Electric and Tex-La concerning this Agreement, neither party shall seek to disqualify the other party's attorneys from representing such party in the lawsuit on the ground that the party's attorneys participated in the negotiating and drafting of this Agreement. 11.18 Construction of Comanche Peak. If TU Electric continues to believe that the completion of Comanche Peak is economically and otherwise feasible, TU Electric l covenants that it will use its best efforts to complete, or cause to be completed, the construction of Comanche Peak and placing the same in operation. 11.19 Severability. The parties hereto agree that the various obligations and undertakings specified in this Agreement and in the other agreements or instruments
referred to herein are each mutually dependent upon one another and, in the event that any fundamentalor essential provision of this Agreement or any of such other agreements or instruments is finally determined to be invalid, illegal or unenforceable by a court or administrative body having jurisdiction, TU Electric and Tex-Le hereby agree to conduct good faith negotiations for the purpose of reaching a mutually acceptable written agreement to replace the deleted provision with a provision which will most nearly accomplish the purpose and intent of the deleted provision. Falling to reach such a mutually acceptable agreement, the parties shall rescind the transactions provided for herein and therein. 11.20 Time of the Essence. Time is of the essence in the performance of this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date set forth at the outset hereof. TEXAS UTILITIES ELECTRIC COMPANY (Corporate Seal) By: 1a e4 + e:-e_. Its: $y n N /L<%Aw& l ATI'EST: 1 By: m *!w Lw I Its: [6 L A A A A m
)
1
TEX-LA ELECTRIC COOPERATIVE OF TEXAS, INC. (Corporate Seal) m sST, ie, e me sy: Mt/ 4 Met /s/. 1/,s, m -
/-
1 1 l 1
SCHEDULE A'ITACHED TO AGREEMENT BETWEEN
'lEXAS (TTILTTIES ELECTRIC COMPANY AND TEK-LA ELECTRIC COOPERATIVE OF TEXAS, INC.
DATED MARCH 23,1989 F!8LD NOTES CONANCIE PEAN S.8.8. PROP 8ATY A!! that certaia 1st, tract er parcel of lead la the Jeha W. Fogg Survey. Abstract 27 S. McNelvy Survey. Abstract 44 Jose Antoale Wernandes Survey. Abstract 43. Wm. 3. Salth Survey. Abstract to. Wa. B. Seith Survey. Abstract 91 and the Ms. Parker Survey. Abstract 43 all la Senervell County. Texas: the Galvesten County Scheel Land Survey. Abstract 38 la Senervell and Need Counties. Texas the James D. E111ett survey. Abstract 170 J. Grace Survey. Abstract 803 and the A. 01sney Survey. Abstract 144 all la Reed County. Texas and belag more particularly described by setes and benade se felless: 8881NNING at a pelat la the line ceanos to said Pegg Survey and the vs. W. Parker Survey, Abstract 88 Senervell County Texas, said point being South Se degrees 54 slautes 17 seceeds West. 2134-33/100 feet along said conson 11ae free the South corner ceases to said Fogg and Beraandes Surveys:
TRENCE departlag said ceases survey lias:
North 31 degrees 40 slautes 49 seconde West. 1804-13/100 feet. North 40 degrees 17 alautes of seconde West. 483-93/100 feet. North 30 degrees 51 slautes 45 seconds West. 499-34/200 feet. North 37 degrees 00 slautes 49 seconde West. 897-05/100 feet. North 00 degrees 89 stautes 04 seconde East. 34-3/10 feet. Seeth 88 degrees 33 alautes 14 seconde West. 241-71/100 feet. South 68 degrees 18 alastes 33 seceeds (est. 174-9/10 feet, and North 30 degrees 03 alastec de seconde West. crosslag the line common to said Joba W. regg Survey and said Wa. S. Salth Survey. Abstract St. la all 3803-87/100 feet TEENCg South 50 degrees Se slautes Se seconde West. 904-7/10 feet to a pelat la the line esaaea to said us. s. Smith Servey Abstract 91 and said Wa. Parker Survey Abstrast 88. Senervell Cessty, fesas TESNCE with said esaaes 11ae North to degrees 43 alastes te second West. 3001 feet to a pelats TEENC8 d e p ar ti:,;g asid cessoa survey lias. Seeth SS degrees 39 sinutes West. 1847 feet. Seeth te degrees to elastes West. 349 feet. South $s degrees 31 alastes West. 188 feet and South Se degrees de slautes west. 839 feet to a pelat la the Easterly right-of-way (R/5) of State F.K. l Eighway No. SS (f ormerly F.5. Set): TEENCE sith said Easterly R/W. North 88 degrees 81 minutes West. 444-85/100 feet to the beglasing of a curve to the left havlag a radius of 1493.30 and Northwesterly alth the are of said carve 331-3/10 feet to a pelats i Page 1 et le j
Page 3 of 10 THENCE 489-5/10 feet departist said Easterlf A/W 11ae. North te degrees $$ ainutes west. to a point la the North 11ae of said We. Parker Survey; THENCE with said to a point: North line. North to degrees 44 alautes East. 2858 feet i i TERNCE North Northwesterly corner 30 degrees 00 minutes West. 17 feet to a point in the fenced of said Wa. S. Smith Survey. Abstract 91. common to the Southwesterly corner of said James D. Elliott Survey. Abstreet 173. Neod County. Texas: TWENCE departing said cosaea corner. 2001 feet and North to degrees North al degrees 39 sinutes East. pelat; 03 elautes East. 2043-58/100 feet to a THERCE North 49 degrees 44 minutes 30 at elevation 170 feet. U.S.C.40.3. Datus; seconde West. litt feet to a point TWENCE with said 770 foot contour. South SS degrees 14 minutes 30 seconds ' West. 87-3/10 feet and North 44 degrees te 43-75/100 feet; slautes 30 seconds East. TWENCE departing said 170 foot contour. North 49 degrees 44 sinutes 30 seconds West. 2043-78/100 feet to a pelat; TWENCE North 03 degrees 10 slautes 30 seconds West. 3843-25/100 feet to a pelat on the 790 foot coateur. U.S.C.44.5. Datus; TWENCE with amid 790 foot contour: South 83 degrees 33 slastes Sast. 94-4/10 feet. North 49 degrees 17 alastes East. 134-4/10 feet. South SS degrees 31 aisetse East. 104-98/100 feet. North 77 degrees 04 alastes 8ast. 188-4/10 feet. North 49 degrees 04 aisetse East, 364-18/100 feet. South 46 degrees et alastes 8ast. 314-3/10 feet. South 80 degrees SS saastes East. 331-4/10 feet. Seeth 89 degrees SS alastes 30 seconde East. 181-7/10 feet. North 38 degrees 4t alastes 30 seceede West. 138-4/10 feet. North 38 degrees 41 slastes 30 seconde West. 109-0/10 feet. North 29 degrees SS elastes 30 seceede West. 101-3/10 feet. North 38 degrees 8d elastes 30 seconde West. 81-08/100 feet. North 24 degrees 38 elastes at seconds West. 109-78/100 feet. North te degrees at alastes 30 seceede West. 133-18/199 feet. North 38 degrees 48 staates at seconds West. 144-8/10 feet. North 27 degrees 48 alastes 30 seconde West. 119-3/10 feet. North 18 degrees 11 alastes West. 139-4/16 feet, and North 81 degrees 04 aiantes West. 93-3/10 feet to a pelat la the North itse of said James D. Elliott Survey ceases to the south line of said R. Disney Survey, Bood County Texas
Page 3 of 10 TNINCE departlag said 790 feet North SS conteur and eith said cessen survey line, degrees SS alautes East, 78-8/10 feet to a point en the 77o root contour 11ae. U.S.C.80.S. Datus: 7NENCE departing conaes
'11ae:
said survey line and with said 770 foot contour North 71 degrees 30 slautes West. 94-8/10 feet. North 83 degrees S1 elautes West, 14-3/10 feet. North 54 degrees 53 alautes East. 93-1/10 feet. North 48 degrees 48 etautes 30 acceeds East. 94-0/10 feet. North 00 degrees 54 alautes 30 seconde East. 88-3/10 feet. North 22 degrees 49 alautes 30 seconds West. 111-4/10 feet. North 23 degrees 43 alautes 30 eeceeds West. 108-3/10 feet. ' North 28 degrees 38 stautes 30 seconds West. 87-8/10 feet. North 33 degrees 42 alautes 30 seconde West. 88-48/108 feet. North 43-degrees 57 stautes 30 escends West. 184-7/10 feet. North 87 degrees 21 aiantes 30 seconde West. 113-98/200 feet. North SS degrees 07 alautes West. 134-08/100 feet. North 78 degrees ST alautes 30 seceads West. 271-8/10 feet. .
. North 80 degrees 48 stantes West. 111-68/100 feet.
North 80 degrees 27 stautes West. 147-78/100 feet. North 49 degrees 40 stautes West. 108-08/100 feet. North 80 degrees 23 alautes 30 seconds West. 188-88/100 feet. South SS degrees 21 alautes 30 escende West. 98-8/10 feet. South S4 degrees 27 alautes 30 seconde West. 84-38/200 feet. South 81 degrees 28 stautes 30 seceede West. 100-4/10 feet. South 49 degrees 23 stantes 30 seceede West. 197-38/200 feet. South 40 degrees OS stautes 30 seconde West. 133-7/10 feet. South 44 degrees 38 alautes 30 seconde West. 188-38/100 feet. South 28 degrees 23 stautes 30 escende West. 128-9/10 feet. South 37 degrees 40 alastes 30 escende West. 287-8/10 feet. South 82 degrees 38 alastes 30 sesseds West. 438-9/18 feet. South 87 degrees 41 slastes se seesade West. 128-98/200 feet. North Se degrees 07 alastes Se sesseds West. 78-8/10 feet. South 41 degrees 17 alastes West. 198-18/100 feet. North 80 degrees 04 alastes West. 187-4/10 feet. North 19 degrees 48 saastes Se seceede West. 190-08/100 feet. North 30 degrees 80 misstes Se seceede West. 148-98/100 feet. North SS degrees Se misstes 30 seceede West. 141-18/100 feet. North 80 degrees 84 alastes 30 seceede West. 83-8/10 feet. South de degrees SS elastes se seceede West. 108-3/10 feet. South 84 degrees 44 slastes West. 78-98/100 feet. North 81 degrees 47 slastes East. 88-48/100 feet. North 41 degrees 04 alautes East. 118-18/100 feet. South SS degrees 11 alastes at seconds East. 117-78/100 feet. South 49 degrees 18 alastes 30 seceede East, 138-4/10 feet. Sesth 58 degrees 18 slastes East. 133-48/100 feet. South 23 degrees et alastes Se seceeds East. 98-4/10 feet. South 08 degrees 37 slantes 30 saceeds Best. 189-8/18 feet.
Page 4 ef 10 i North 73 degrees 33 slautes 30 seceede East. 93-35/200 feet. i North 19 degrees 33 slautes 30 seconds fast. 111-3/10 feet, i North to degrees 05 alastes 30 seconde tast. 95-95/100 feet, i North 23 degrees SS alautes 30 escends West. 144-98/100 feet. ! North 32 degrees 30 minutes 30 escends West. 100-S/10 feet. ' North 73 degrees 39 sinutes 30 eeceede Esot. 144-0/10 feet. North.43 degrees 28 alautes 30 escends East. 171-1/10 feet. ' North 47 degrees 15 alautes 30 seceeds test. 154-1/10 feet. North 33 degrees 50 slautes test. 124-48/100 feet. North 18 degrees 39 stautes East. 218-3S/100 feet. North 31 degrees 44 alautes East. 217-9/10 feet. I North 24 degrees 30 elautes East. 234-2/10 feet. ! North 23 degrees 11 slautes East. 181-38/100 feet. North 00 degrees 21,sinutes West. 170-7/10 feet, North 09 degrees 00 slautes East. 214-1/10 feet. i North 07 degrees 00 slautes 30 seceeds fast. 138-1/10 feet. North 09 degrees 81 stantes 30 seconds East. 174-4/10 reet. North 08 degrees 47 alantes 30 seceede East, 138-08/100 feet. " North 19 degrees 39 aientes 30 setende West. 314-3/10 feet. North 10 degrees 47 stantes 30 seconds West. 138-38/100 feet. North 18 degrees 18 alastes 30 seconde West. 173-1/10 feet. North 84 degrees 11 alautes 30 seceeds East. 177-1/10 feet. North'30 degrees SS afastes West. 141-1/10 feet. North 24 degrees SS elastes West. 119-4/10 feet. North 30 degrees le elastes West. 178-18/100 feet. North 31 degrees 15 slantes West, 179-6/10 feet. North 76 degrees at slautes West. 233-3/10 feet. North 44 degrees 30 slautes West. 134-38/100 feet. North 7e degrees 11 minutes East. 191-1/10 feet. 4 ) North S8 degrees 80 slautes East. 43-48/100 feet. North 20 degrees 33 elastes West. 71-9/10 feet. North 44 degrees 88 slautes 30 seceeds West. 383-4/10 feet. l North S7 degrees 43 elastee 30 seceede West. 140-78/100 feet, i North 40 degrees la sleetes 30 sesende West. 191-08/100 feet. North Se degrees 13 elastes 30 asseads West. 144-08/100 feet. North 48 degrees 88 elastes 80 sessade West. 333-48/100 feet. North 73 degrees to elastes 30 seceede West. 304-3/10 feet. North 87 degrees 30 slastes Se essends West. 338-4/10 feet. South 47 degrees et misstes at seconde West. 104-38/100 feet. South to degrees 38 alastee Se seceede West. 300-4/10 feet. South 81 degrees 88 alastes 30 seconde West. 338-18/100 feet. North 48 degrees SS afastes Sast, 213-4/10 feet. North 08 degrees ad elastes gast. 103-9/10 feet. South 70 degrees 07 elastes West. 198-38/100 feet. Seeth SS degrees 33 aisetes West. 201-38/100 feet. South SS degrees 18 aisette West. 131-8/10 feet. Seeth 49 degrees at saastes West. 233-38/100 feet. South 70 degrees SS elastes West. 197-38/100 feet. Seeth 71 degrees 38 alastes West. 393-58/200 feet. South 84 degrees SS elastes West. 394-88/100 feet. 1
Page S of 10 North 14 degrees 08 slastes West. 447-4/10 feet. North 28 degrees 19 elautes West. 411-75/100 feet, North 83 degrees 40 slautes East. 91-7/10 feet. South 14 degrees 17 elautes East. 318-75/100 feet. South 31 degrees 31 alautes East. 94-1/10 feet. South 44 degrees 59 slautes East. 148-4/10 feet. South 79 degrees 41 alautes East. 339-0/10 feet. South 48 degrees 00 elautes East, 143-48/100 feet. North 41 degrees to elastes East. 198-48/100 feet. North 70 degrees 18 alautes East. 501-4/10 feet. North 47 degrees 33 slautes 30 seceeds East. 180-4/10 feet. North 73-degrees OS alautes 30 seceeds East. 173-3S/100 feet. North to degrees 08 etantes 30 seceede East. 133-1/10 feet. North 34 degrees 00 slautes 30 seconde East. 331-18/100 feet. North SS degrees 11 alautes East. 301-9/10 feet. North 58 degrees 38 alautes 30 seconde East. 341-98/100 feet. North 41 degrees 39 stantes East. 197-48/100 feet. North 44 degrees 38 slautes East. 343-08/100 feet. . North 44 degrees 41 alastes East. 241-48/100 feet. North 51 degrees 07 slautes East. 133-1/10 feet. North 10 degrees 38 alautes West. 189-9/10 feet. South 48 degrees 53 alautes ' East. 334-08/100 feet. South 43 degrees 53 alastes 30 seconde East. 310-4/10 feet. South '66 degrees 33 alautes 30 seceede East, 148-3/10 feet. South 77 degrees 04 alastes 30 seceede East, 378-3/10 feet. Werth 70 degrees 41 slautes 30 seceeds East. 333-0/10 feet. North 18 degrees te slautes 30 seconde East. 110-7/10 feet. North la degrees it slautes 30 seceede West. 88-4/10 feet. North la degrees 33 elastes 30 seconde West. 100-48/200 feet. l North.53 degrees 40 staates 30 seceede East. 331-15/100 feet.
]
North 23 degrees 34 alastes 30 seconde East. 307-8/10 feet. 1 South 11 degrees 08 alastes West. 188-0/10 feet. Seeth 84 degrees 83 alastes 30 seconde West. 140-08/100 feet, t South 30 degrees 30 elastee St. seconde West. 118-8/10 feet. l Seeth 38 degrees 81 elastes Se sesende East, 184-48/100 feet. Seeth 10 degrees 30 misstes 80 'seceede East. 104-08/100 feet. Seeth 10. degrees 87 eisetse 80 seceede East. 134-8/10 feet. North 40 degrees 80 slastes East. 100-05/100 feet. Seeth 84 degrees 40 aisetse 30 seceeds East. 313-7/10 feet. South 31 degrees 38 elastes 30 seceeds Sast. 103-4/10 feet. South 31 degrees 41 alastes 30 seconde East. 387-3/10 feet. South 23 degrees 18 sisstes East. 144-4/10 feet. North 13 degrees OS aisetse West. 101-88/100 feet, and South 30 degrees 38 alastes East. 48-88/100 feet to a peint in the centerline of an old read: TEEgCE detarting said 7T0 contour. Seeth at degrees 48 alastes 30 seconds East. 44-38/100 feet to a corner la the Easterly 11ae of said read:
Page 4 et 10 THENCE with said Basterly lias: North 14 degrees 04 elautes West. 255-9/10 feet. North 00 degrees 18 elautes West. 1410-9/10 feet, and North 25 degrees 42 stautes West. 88 feet to its latersection with the 730 contour. Squaw creek Reserve 1r datus: THENCE with said 790 feet conteur; South OS degrees 53 slautes test. 1858-S/10 feet. South 09 degrees 30 slautes East. 91-7/10 feet. South 25 degrees 17 alautes East. 101-2/10 feet. South 17 degrees 07 elastes East. 144-2/10 feet. South 34 degrees 40 stantes East. 121-8/10 feet. South 70 degrees 32 alautes East. 58-3/10 feet. North 87 degrees 59 misstes East. 109-8/10 feet. South 28 degrees 49 alautes West. 84-3/10 feet. . South 01 degree 17 stautes West. 147-7/10 feet. South 39 degrees 08 alastes East. 300-8/10 feet. South 30 degrees 33 stautes East. 149-4/10 feet. South 34 degrees 34 slautes East. 288-4/10 feet. North 81 degrees 84 slautes East. 83-4/10 feet. South 08 degrees it slautes West. 57-4/10 feet. Jouth 44 dsgrees 18 etantes East. 384-8/10 feet. North 77 degrees 11 alastes last. 58-1/10 feet. South 40 degrees 39 minutes East. 113-1/10 feet. South SS degrees 49 aisates East. 133-0/10 feet, l North 48 degrees 27 slantes Bast. 288-3/10 feet. North 33 degrees 21 slautes East. 408-8/10 feet. North 03 degrees 41 slastes West. 398-1/18 feet. North 01 degree 18 elastes West. 408-8/10 feet. North 13 degrees 34 slastes East. 88-8/10 fset. North 38 degrees 30 misstes East. 118-8/10 feet. Seeth 18 degrees 40 misstes Bast. 97-4/18 feet. North Sa degrees 21 sisstes East. 90-8/10 feet. Seeth 13 degrees 33 stantes West. 138-4/10 feet. South 18 degrees SS saastes East. 388-9/10 feet. South S8 degrees 18 sisates East. fie-8/18 feet. North 48 destese 80 misstes East. ?J8-7/10 feet. North 44 degrees 34 alastes East. 178-7/10 feet. South 48 degrees 88 einstes East. 48-4/10 feet. South 38 degrees 88 alastes West. 214-8/10 feet. South 08 degrees 14 sientes West. 108-8/10 feet. - South 30 degrees 38 slastes East. 97-8/10 feet. South 84 degrees te elastes Sast. 278-1/10 feet. South 74 degrees 21 alastes West. 487-4/10 feet. Seeth 80 degrees 88 staates West. 180-0/10 feet. South 34 degrees 14 slantes West. 170-9/10 feet. Sestk 17 degrees 08 afastes West. 384-4/10 feet. Seeth 08 degrees et alastes West. 138-3/10 feet.
Pete 7 of 10 Sout, .3 degrees 38 .i..tes E.st. 180-9/10 feet. South 72 degrees OS ainstes East. 300-0/10 feet. South 02 degrees 48 alautes West. 83-3/10 feet. South 30 degrees 44 atautes East. 438-8/10 feet. sad south 28 degrees 38 slautes East. 323-9/10 feet. 7NENCE South ceases 28 degrees 38 slautes Best at 10-8/10 feet crossing the line to said R. Disney Survey and said James D. Elliott Survey in all 354-5/10 feet and contiautag with said 790 feet casteur South 53 degrees 48 slantes East. 144-2/10 feet. South 48 degrees 47 elautes East. 138-7/10 feet. North 50 degrees 54 slautes East. 173-2/10 feet. North 37 degrees SS stantes East. 201-3/10 feet. North 58 degrees 44 alastes East. 103-8/10 feet. South 03 degrees 18 minutes East. 233-4/10 feet. Seeth 43 degrees 07 alastes East. 284-4/10 feet. - Werth 41 degrees 19 sleutes East. 51-1/10 feet. South 14 degrees 44 slautes West. 173-0/10 feet. South 38 degrees 30 slautes West. 107-9/10 feet. South 08 degrees 20 slantes West. 143-8/10 feet. South 13 degrees 28 minutes East. 123-7/10 feet. South 37 degrees 18 slantes East. 130-7/10 feet. South 80 degrees 80 slautes East. 108-9/10 feet. South 41 degrees 28 alautes East, 173-8/10 feet. North 73 degrees 33 slautes East. 233-4/10 feet. , South 88 degrees Of alastes East. 73-3/10 feet. South 09 degrees 80 staates West. 83-3/10 feet. South 27 degrees 18 alastes West. 141-1/10 feet. South 30 degrees 41 slantes West. 138-0/10 feet. Seeth of degrees 19 elastes West. 107-9/10 feet. South 33 degrees 17 alastes West. 100-3/10 feet. Seeth 17 degrees 17 alastes West. 334-7/10 feet. South 08 degrees 08 slastes West. 138-4/10 feet. Seeth et degrees 14 alastes Best. 374-4/10 feet. South 37 degrees 18 ansetes East. 388-9/10 feet. Sesth 47 degrees 41 simetes East. 380-9/10 feet. North SS degrees et alastes East. 180-8/10 feet. North 30 degrees 41 alastes East. 334-7/10 feet. South Se degreet le elastes East. 183-4/10 feet. North SS degrees Sg slautes East. 131-4/10 feet. North 38 degrees 44 stastes East. 280-4/10 feet. North 31 degrees 38 alastes East. 187-4/10 feet. North 30 degrees te elastes East. 183-9/18 feet. North SS degrees 18 aientes East, 310-3/10 feet. North 04 degrees 30 staates West. 44-4/10 feet. Earth 33 degrees 40 staates East. 33-1/10 feet. and
Page 4 et 10 THENCE North 3d degrees 48 elantes East. 113-2/10 feet to a point in the test line J. Grace of Survey:said James 0. Elliott survey ceases to the West 11ae of said i I TMENCE feet: with said consen 11ae. North 34 degrees 53 elautes West, 371-s1/100 TIENCE departing said ceassa lias: * ( North 45 degrees 24 alastes East. 1449-3S/100 feet. North 40 degrees 87 alautes East. e49-9/10 feet. North SS degrees 23 stantes East. 3111-7/10 feet. { 1 South 29 degrees SS alastes East. 438-9/10 feet. North 40 degrees 41 alautes East. 2771-4/10 feet, and South 35 degrees 32 slautes 15 seceeds East. 1087-S/10 feet to a point in the North line of a read 75ENCE sitt said North lias . l North SS degrees ST afastes East. 107-7/10 feet. North SS degrees 13 alastes 18 seconde East. 128-3/10 feet. North 58 degrees 19 alautes East. 274-9/10 feet. North 41 degrees 00 slautes 30 seconde East. 1041-4/10 feet, and l South 78 degrees Se stantes East. 48-9/10 feet; ) THERCE South 44 degrees OS elantes East. 11-8/10 feet to a point on the South 11ae of
)
the Osa Weltse Coates tract described la the deed recorded la Volume 258. Page 13. Deed Records. Reed Ceesty. Tesas; i TEENCE sitt said Seeth line. South 89 degrees SS alastes West. 1474 feet: TRINCE departlag said Coates tracts South 58 degrees 34 afastes West. 1848-E/10 feet. South 31 degrees 08 staates East. 1881-8/10 feet. North SS degrees 84 slastes East. 1891-8/10 feet, sad South 30 degrees 18 maastes East. 2440-4/19 feet to a pelat la the line ceases to said Jeha C. Grace Survey. Abstract 888 and the Galvesten county Scheel Land Servey. Abstreet SS: TEENCE sith said ceases line. Seeth 48 degrees if slautes West. 7s-7/10 feet to a pelats i TRENCE departlag said ceases survey lias: Seeth 30 degrees et slautes East. 2008-7/10 feet. j North 03 degrees 84 alastes West. 400-0/18 feet. ' North 87 degrees 87 alastes West. 148-f/10 feet. North 18 degrees SS alastes West, 97-1/10 feet. North 49 degrees 19 alastes East. 1013-0/10 feet. I
Page 9 of 10 seeth 08 degrees 33 alastes West. 1811-5/10 feet. ; South 30 degrees 49 slautes East. 308-4/10 feet. North to degrees 81 diantes East. 1359-44/200 feet. South 34 degrees 10 alautes East. 390 feet. North 59 degrees 30 slautes East. 588-48/100 feet. North Se degrees 59 elautes 30 seceeds East. 1530-3/10 feet. South la degrees 59 slautes West. 1143-8/10 feet. South 43 degrees 05 elautes East. 474-9/10 feet. South 09 degrees 08 elautes West. 211-1/10 feet, and South 13 degrees 13 elautes East crossing the line ceases to said Nood and Senervell counties la all 400-8/10 feet to a pelat; , TRENCE South 51 degrees 08 slautes 30 seceede West. 881-04/100 feet. Seeth 28 degrees 53 alautes East. 1088-0/10 feet. North 19 degrees 04 stautes East. 488-4/10 feet. South 15 degrees at misstes 30 seceeds East. 488-3/10 f est to a point on the line ceases to said Salvestes Cesaty Scheel Land Survey. Abstract 38 and said Jose Antente Israsades $srvey. Abstract 43. Senervell County." Teams and with said ceases survey line. Seeth 80 degrees 08 minutes 10 seceeds. Nest. 113-1/10 feet: TEENCE departlag said cosaea survey lias: Seeth 01 degree 38 afastes 18 seceads East. 588-88/180 feet. South 08 degrees 58 alautes East. 204-18/100 feet. South 19 degrees Se slautes 30 seceede West. 1184-78/200 feet. South 08 degrees le slautes 30 seconde East. 3018-88/100 feet. Sesth 01 degree 08 minutes 38 seconde West. 1381-88/100 f ee t to a pcint la the line conses to said J. Eerasades Survey. Abstract 42 and said S. McNelvy Survey, Abstract 48. Senervell Cesaty. Tease; TEENCE departlag said cessoa survey lias. South 29 degrees 35 minutes East, 2078-1/10 feet: TIENCS South 59 degrees 18 misstes West. 8844-3/10 feet to a peist in the ; centerline of Sques Creek, and Seetherly sitt said centerline sese 900 l teets i TEENCE departlag said Sgsas Creek center!!as. Seeth 80 degrees West sose ! 100 feet: TEENCE North of degrees 34 saastes West. 284-44/100 feet. 4 North 80 degrees 81 alastes West. 144-48/199 feet. North it degrees 17 alastes East, 24-84/100 feet. North 80 degrees 48 etastes West. 484-81/194 feet. North 48 degrees 38 alastes West. 1448-88/194 feet. South SS degrees 44 alastes 38 seconde West. 3084-84/194 feet. Sesth te degrees 18 alastes SS seceeds East. 300-4/10 feet. Seeth SS degrees 48 alastes 38 seceeds West. 848-88/194 feet. North at degrees 18 elastes 38 seconds West. 384-8/19 feet.
Page 10 of 10 South 43 degrees 44 alantes 38 seconde Nest. 480-34/100 feet to a point is the 11ae conses to said S. McE41Vy Survey. Abstract 48 and the Wa. N. Parker Survey. Abstract St. Somervell County. Tesse. and continulag vita said conson survey line. North 31 degrees 21 elautes 40 secoads West. 18-04/100 feet to a pelat in the South line of said Jose Antosto Bernandes ! Survey. Abstract 42. Somervell County. Texas; TNENCE with the line conses to said J. Eerasades Survey. Abstract 42 and said Wa. Parker Survey. Abstract St. South 80 degrees 21 elautes 44 seconde West. 1311-50/100 feet to the Southerly correr cosaoa to said J. i Neraandes Survey. Abstract 43 and said John W. Fogg Survey. Abstract 27 Somervell County. Texas; TNENCE coatinalag with the line cosaea to said Jeha W. Fogg Survey, , Abstract 27 and said Wa. Parker Survey, Abstract 43. Somervell County. Texas. South 54 degrees $4 staates 17 escends West. 3184-22/100 feet to { I the place of beglanlag. - l l Save and except'those certata tse (3) 10.07 acre tracts ceavoyed to Billie l W1111 ass Durant, et al. and Alas Williams Andress. et el. described in Volume 2000 Page SSS threagh 548. Deed Records. Reed Cesaty. Texas. e I i
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1
L EXHIBfr A l ASSIGNMENT AGREEMENT cI This ASSIGNMENT AGREEMENT is made and entered into this day of
,1989 by and between the following parties: i I
TEX-LA ELECTRIC COOPERATIVE OP TEXAS, INC., a Texas non-profit electric j cooperative corporation, having its principal office at 2905 Westward Drive, Nacogdoches, Nacogdoches County, Texas (' Tex-La"), and TEXAS UTILfrIEE ELECTRIC COMPANY, a 1 Texas corporation, having its principal office at 2001 Bryan Street, Suite 1900, Dallas, Dallas County, Texas ('TU Electric"). DEFINfrIONS As used in this Assignment Agreement, unless otherwise specified herein, the following terms shall have the following meanings: (a) "Agreeme..t" means the Agreement dated as of March 23, 1989 between Tex-La and TU Electric providing for the sale by Tex-La and purchase by TU Electric of the Purchased Assets. (b) " Assignment" means the form of Assignment attached hereto as Exhibit A. (c) " Assignment Agreement" means this Assignment Agreement and all Schedules and Exhibits attached to this Assignment Agreement. (d) " Business Day" means a day on which banks in Dallas, Texas are open for regular banking business. (e) "CFC" means the National Rural Utilities Cooperative Finance Corporation, or a its successor. (f) " Closing" means the consummation of the sale by Tex-La and the purchase by l TU Electric of the Purchased Assets, as descrioms in the Agreement. (g) " Closing Date" means the Closing Date defined in the Agreement. i 1 i
(h). " Comanche Peak" means the nuclear-fueled electric generating facility under construction on certain lands situated in Hood and Somervell Counties, Texas,
;and consisting of two units having a nominal capacity of 1,150 megawatts each,' and related properties, and is the aggregate and combination of the Station, Fuel and Transmission Facilities, as defined in the Agreement, and all other rights and interests associated with or relating to all of the same.
(i) - " Deed of Trust" means the purchase money mortgage in the form of the Deed of Trust and Security Agreement given to secure payment of the Note, in the form attached to the Agreement as E):hibit D, creating a first lien on the real property.and granting to Tex-La a first and prior security interest in the personal property and fixtures, the aggregate of which comprise the Purchased
. Assets.
(j) "FFB" means the Federal Financing Bank, or its successor. (k) " Government" means the United States of Ameries acting through the Administrator of the REA. (1) . " Government Obligations" means direct obligations of the United States of America, including obligations the principal of and interest on which are unconditionally guaranteed by the United States of America. (m) " Guaranty Agreement" means the Guaranty Agreement of TUC attached as Exhibit B to the Agreement. (n) " Note" means the non-negotiable promissory note, in the form attached to the Agreement as Exhibit E, to be made and delivered at Closing by TU Electric as provided in Section 1.6(c) of the Agreement. (o) " Purchased Assets" means the aggregate of all that part of Comanche Peak (as ; Comanche Peak exists and is constituted on the Closing Date) owned by Tex-La or to which Tex-La has a right, title or interest, as further defined in. the Agreement.
(p) "REA" means the Rural Electrification Administration of the United States Department of Agriculture, or its successor. (q) "REA Mortgage" means the mortgage entered into in September 1981, between l the REA and Tex-La, and all amendments and supplements thereto. 1 (r) "Special Warranty Deed" means the form of Special Warranty Deed with Vendor's Lien and Bill of Sale attached to the Agreement as Exhibit F. j l (s) " Tex-La Comanche Peak Debt" means the aggregate of the indebtedness of 1 Tex-La to the REA, the CFC and the FFB which has been guaranteed by the REA, with respect only to Comanche Peak, which at the date hereof is the unpaid principal amount of Two Hur, dred Five Million, Nine Hundred Ninety Two Thousand, Two Hundred Seventy Six and 67/100 Dollars ($205,992,276.67), and is evidenced and represented by documentation delivered by Tex-La to TU Electric by letter of March 21, 1989. The term does not include Tex-La's line of credit from the CFC evidenced by an April 27, 1987 promissory note to !
- the CFC, which line of credit is not guaranteed by the REA. .
. (t) ' Transfer of Lien" means the form of Transfer of Lien of the Mortgage attached hereto as Exhibit B. (u) "TUC" means Texas Utilities Company, e Texas corporation, which is the corporate parent of TU Electric. (v) " Vendors Lien" means the vendors lien retained in the Special Warranty Deed. maaTAu j A. Tex-La and TU Electric have previously entered into the Agreement. B. Tex-La owns an undivided interest in Comanche Peak which is being purchased by TU Electric on the Closing Date pursuant to the Agreement, and in connection , therewith as partial payment therefor, TU Electric is delivering to Tex-La the Note, , 1 l [ L
i I l the payment of which will be secured by the purchase money lien of the Deed of Trust and Vendors L!en. C. Tex-La wishes to assign the Note and all payments thereunder to the Government in order to provide thereby for the partial payment of the Tex-La Comanche Peak Debt. l D. In consideration for the release by REA of the Purchased Assets from the REA Mortgage, Tex-La wishes to transfer and assign the liens and rights provided for under the Deed of Trust and the Special Warranty Deed to the Government under and pursuant to the Transfer of Lier l E. To provide for additional security Tex-La wishes to transfer and assign all of its j rights under the Guaranty Agreement to the Government. ' F. TU Electric is willing to permit such assignment of the Note, the Deed of Trust and the Vendors Lien. G. Tex-La and TU Electric wish to provide with respect to the terms and circumstances in the event of the prepayment of the Note. I NOW, THEREFORE, for and in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Tex-La and TU Electric do hereby agree as follows:
1. Assignment of Note and Guaranty. Tex-La does hereby set over, transfer, convey and assign all its right, title and interest (but not any obligation, except as to the giving of the notices referenced in paragraph (6)(1) of the Note and Article II, Section 1(c) of the Deed of Trust (which notices may be given by either Tex-La or the Government) and except as may be involved in the provisions set forth under the heading Rescission and Termination in the Guaranty Agreement) in, to and under the Note and Guaranty Agreement to the Government under and pursuant to the terms and conditions of, and as evidenced by, the Assignment; and TU Electric does hereby consent to such Assignment as evidenced by its execution of the Consent to Assignment appearing on the Assignment.
Tex-La does hereby acknowledge that all payments made by TU Electric in accordance with the Note to the Government and CFC as assignee thereof and any subsequent
. permitted assignee shall be considered to be in full and complete satisfaction of - ;
TU Electric's obligation under the Note to Tex-La as the original Noteholder to the extent of all such payments. It is understood and agreed that assignment of the Note, the lien of the Deed of Trust, the Vendors Lien and the Guaranty Agreement by Tex-La to the Government is being accepted by the Government not in extinguishment, but as a mechanism for payment of a portion, of the indebtedness secured by the REA Mortgage and in substitution for the collateral released by the Government in consideration of the undertakings by the parties hereto as described in the Agreement.
2. Assignment of Deed of Trust and Vendors' Lien. Tex-La does hereby transfer, convey and assign the Deed of Trust and the Vendors Lien to the Government under and-pursuant to the Transfer of Lien as replacement security for the lien of the REA Mortgage covering the Purchased Assets which is being released incident to the Closing under the Agreement of the purchase of the Purchased Assets by TU Electric from Tex-La, it being understood that the Government shall exercise for itself and, to the extent permitted under Texas law, for all other mortgagees now or hereafter secured under the REA Mortgage, all rights accruing to the mortgagee in the event of default under the Note or the Deed of Trust.

3. Payment of Other Tex-La Debt. It is understood and agreed that from henceforth, Tex-La will pay the remainder of the Tex-La Comanche Peak Debt by paying to the Government and the CFC, as appropriate, contemporaneously with payments by TU Electric under the Note, such additional amounts in addition to the payments made by TU Electric under the Note as will fully pay the Tex-La Comanche Peak Debt in the aggregate at the times it becomes due and payable. Neither nonpayment of such additional amounts by Tex-La or other default with respect to such debt, nonpayment of l
or other default with respect to any other debt or other obligation of Tex-La to the
l Government, the CFC or otherwise, the' further payment, remittance or application of the payments under the Note in any manner after payment has been made by TU Electric as I specified therein and herein, any action by the Government (other than as provided for in the Agreement, the Note, the Deed of Trust or herein) or the CFC, nor any similar event or occurrence will constitute a default or event of default under either the Note or the l ' Deed of Trust or with respect to the Vendors Lien or in any way be the basis for an acceleration of the indebtedness represented by the Note or foreclosure of the lien provided for in the Deed of Trust, the Vendors Lien or any other lien in favor of the Government or Tex-La with respect to the Purchased Assets; nor shall any default by Tex-La in the payment of the remainder of the Tex-La Comanche Peak Debt in any manner relieve TU Electric or TUC of any of their respective payment and other obligations under the Note or Guaranty Agreement. In any case where T'U Electric is current on its payments under the Note and Tex-La is in default under its obligations described in this paragraph 3, the Government will be relegated thereby to its remedies under Tex-La's notes and the REA Mortgage and with respect to the remaining security of Tex-La for such debt, and will have no recourse to TU Electric under the Deed of Trust or Vendors Lien or by virtue of any theory of subrogation, cross default or otherwise. Payments under the Note are subject to adjustment to the extent and as pr'ovided for in Section 11.3 of the Agreement.
4. Prepayment of Note. TU Electric may prepay the Note at any time in accordance with the provisions thereof. In such event, however, if such prepayment is not permissible at such time, in whole or in part to any extent, under the terms of Tex-La Comanche Peak Debt to wMeh such prepayment would be required to be applied, it is understood and agreed that TU Electric may make a prepayment in full and complete satisfaction of all of its remaining obligations under the Note so as to require release of the lien of the Deed of Trust, the Vendors Lien and any other lien retained in favor of the Government or Tex-La with respect to the Purchased Assets, by irrevocably depositing in
l l { a trust account with a trustee, which shall be a national bank with capital of at least $50 million selected by TU Electric and Tex-La, and acceptable to the Government, in trust, and irrevocably set aside exclusively for such payment under a trust agreement reasonably 1 l acceptable to the Government (which agreement shall provide that it shall remain in i effect until all of the assets in the trust shall have been paid or released in accordance with the terms hereof), money sufficient to make payment, or Government Obligations which viill mature as to principal and interest, in such amount and at such times as will ensure the availability, without reinvestment, of sufficient money to make payment of the remaining principal and interest payments that would be due under the Note during the remainder of the stated term thereof if the Note were not being prepaid. TU Electric shall deliver to Tex-La written notice of the deposit in trust at the time of making same and, within fourteen (14) days after the completion of such deposit, TU Electric shall furnish to Tex-La a reasonably detailed description of the assets deposited in trust. At such time as such money or Government Obligations shall have been deposited in trust with such trustee, the Note will be deemed to be fully paid and all obligations of TU Electric in connection therewith, under the Deed of Trust and with respect to the Vendors Lien fully satisfied, and any rights of the Government, the CFC, the FFB, Tex-La or any assignee of or successor to the Note with respect thereto terminated and fully relinquished; and the Government, the CFC, the FFB, Tex-La or any assignee of or successor to the Note will execute and deliver to TU Electric appropriate releases with respect thereto and with respect to any other liens covering the Purchased Assets in their favor. Such irrevocable deposit in trust may thereafter be terminated at any time or partially from time to time at TU Electric's request at its option at such time or times as underlying Tex-La Comanche Peak Debt becomes prepayable, only by the release to REA, or other permitted payee, from such deposit in trust by the Trustee, and additional , payment by TU Electric if necessary, of sufficient funds to prepay the Note or an applicable portian thereof in accordance with the terms thereof, including prepayment of
appilcable prepayment penalties, if any, on the underlying Comanche Peak Debt (including, to the extent provided in Section 5 of the Note, on any such debt which Tex-La may have refinanced). Any assets remaining in the trust after payment of all of the remaining principal and interest due under the Note, payment of any prepayment penalty I due under the Note, and payment of the referenced prepayment penalties on the underlying Comanche Peak Debt, if any, shall be released to TU Electric.

5. Remedies of Tex-La. Notwithstanding any other provision of this Assignment
. Agreement, Tex-La shall retain the right,in the event of a default of TU Electric or TUC on any payment obligation under the Note or on any payment obligation under the Guaranty Agreement, to pursue, on behalf of und for the benefit of the Government, all remedies available under the Note, Guaranty Agreement or the Deed of Trust, or under law, including, without limitation, the initiation of litigation against TU Electric or TUC l to enforce payment and other provisions of the Note, Guaranty Agreement or Deed of Trust. Such right by Tex-La to pursue remedies shall be in addition to, and shall not be deemed to diminish, the right of the Government to pursue all available remedies on its own behalf, altnough no double recovery shall be permitted.
6. Notices and Payments. All notices, requests, demands and other communications under this Assignment Agreement shall be in writing and shall be deemed to have been duly given (a) if served personally on the party to whom notice is to be given at the addresses and to the attention of the persons named as follows, or (b) If sent by telex or nationally recognised overnight delivery service, or (c) by first class mail, postage prepaid, certified and return receipt requested, and properly addressed as follows:
(a) To Tex-La att Tex-La Electric Cooperative of Texas, Inc. I 2905 Westward Drive - Nacogdoches, Texas 75961 Attentiom John H. Butts
l l (b) To TU Electric at: Texas Utilities Electric Company 2001 Bryan Street Suite 1900 Dallas, Texas 75201 Attention: Treasurer (c) To the REA at: Administrator Rural Electrification Administration U.S. Department of Agriculture Washington, D.C. 20250-1500 As a result of the assignment of the Note, payments made by TU Electric under the Note shall be made by wire transfer as follows: (a) All payments of principal and interest due on June 4 or December 4 of any year, any prepayment or prepayment premium under the Note allocated to the underlying CFC loan, as referenced in Section 5 of the Note, and any preptyment premium on the CFC loan, to: [CFC] (b) All other payments to: (REA] In the event the Government or CFC (or Tex-La in the event of a refinance of Tex-La Comanche Peak Debt) desires to provide for a change in a place of payment of the Note, they shall notify TU Electric thereof in writing received at least five (5) Business Days in advance of the next payment date under the Note.
7. Entire Agreement, Amendments. This Assignment Agreement, and the other documents delivered pursuant hereto or specifically referred to herein, constitute the 9_
i entire agreement be2 ween Tex-La and TU Electric relating to the subject matter hereof j l and supersede all other prior agreements, representations and understandings between the I parties. No supplement to, or modification or amendment of, inis Assignment Agreement . 1 shall be binding, unless executed in writing by both Tex-La and TU Electric, with the consent and acceptance of the Government. IN WITNESS WHEREOF, the parties hereto have executed this Assignment l Agreement as of the date set forth at the outset hereof. TEXAS UTILITIES ELECTRIC COMPANY (Corporate Seal) , By: , , Its: ATTEST: By: Its: TEX-LA ELECTRIC COOPERATIVE OF TEXAS, INC. (Corporate Seal) By: Its: ATTEST: By: , Its: CONEENT AND ACCEPTANCE OF AflSIGNMENT AGREEMENT Subject to t ae terms of the foregoing Assignment Agreement, the undersigned hereby accept, coruent to and approve the terms, conditions and obligations set forth in the foregoing Assignment Agreement. UNITED STATES OF AMERICA By: Its: Administrator of Rural Electrification Administration L - - - - - _ - _ _ _ _ _ _ _ _ _ .
,1 - NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION By: Its: FEDERAL FINANCING BANK By: Its: > 11 -
-_--.--.--__._____m_._.____._____.,, _.
EXHIBIT A AS8IGNMENT FOR VALUE RECEIVED, TEX-LA ELECTRIC COOPERATIVE OF TEXAS, INC. (" Tex-La"), hereby ASSIGNS, TRANSFERS, CONVEYS and SETS OVER to the Rural Electrification Administration, or its successor, all its right, title and interest (but not any obligation, except as to the giving of the notices referenced in the Assignment Agreement to which this form of Assignment has been attached as Exhibit "A")in, to and under the attached note dated ,1989, in the original principal sum of
$ , executed by Texas Utilities Electric Company ("TU Electric"),
hereinafter referred to as the " Note", with full recourse at law or equity to which extent assignee shall specifically have the right of recourse against assignor, its successors and assigns. This assignment is subject to the terms of the aforementioned Assignment Agreement. This assignment of the Note by Tex-La to the Rural Electrification Administration , t is for the purpose of establishing a mechanism for payment of a portion of Tex-La's Comanche Peak Debt as defined in the Assignment Agreement to which this form of Assignment has been attached as Exhibit "A". The Note is not for the purpose of evidencing or creating any additional indebtedness on the part of Tex-La, and if assignee ever exercises its right to recourse as set out hereinabove, assignor, its successors or assigns, reserves the right, at its option, to fulfill its obligations created by the exercise of such right of recourse by paying any payments remaining unpaid on the Note as of the date of the exercise of recourse created hereunder is exercised, to the assignee as said payments become due and payable under the terms of the Note, said payments to be credited to assignor's, its successors' or assigns', payment obligations on outstanding notes 1 to the Government. 1, I \ l 1 i THIS ASSIGNMENT IS WITH THE CONSENT OF TU ELECTRIC AND IS NOT TO l OPERATE OTHERWISE AS A NEGOTIATION OF THE NOTE NOR TO GIVE THE ASSIGNEE THE RIGHT TO COMPEL A NEGOTIATION. I I TEX-LA ELECTRIC COOPERATIVE l l OF TEX AS, INC. i By: __ l Its: CONSENT TO ASSIGNMENT l The undersigned hereby acknowledges that it is the Borrower set out in the Note and hereby consents to the assignment of the Note to the Rural Electrification Administration upon the terms herein stated. TEXAS UTILITIES ELECTRIC COMPANY By: ! Its: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ . _ _ _ _ _ . _ _ . _ _ i
EXHIBIT B TRANSFER OF LIENS THE STATE OF TEXAS : l
KNOW ALL MEN BY THESE PRESENTS:
COUNTIES OF HOOD, SOMERVELL, : JOHNSON AND TARRANT : THAT the undersigned, of the County of Nacogdoches, and State of Texas, the
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i present legal and equitable owner and holder of that one certain promissory note in the l 4 original principal sum of and /100's Dollars )' ($ ), dated , 1989, executed by TEXAS UTILITIES ELECTRIC COMPANY, payable to the order of TEX-LA ELECTRIC COOPERATIVE OF , i TEXAS, INC., more fully described in a Special Warranty Deed with Vendor's Lien and Bill of Sale duly recorded in Volume ,Page of the Deed Records of Hood County, Texas, Volume ,Page of the Deed Records of Somervell County, Texas, Volume
,Page of the Deed Records of Johnson County, Texas and Volume ,Page of the Deed Records of Tarrant County, Texas; and in a Deed of Trust duly recorded in Volume ,Page of the Deed of Trust Records of Hood County, Texas, Volume ,Page of the Deed of Trust Records of Somervell County, Texas, Volume .
Page of the Deed of Trust Records of Johnson County, Texas and Volume ,Page of the Deed of Trust Records of Tarrant County, Texas; said note being secured by said Vendor's Lien and Deed of Trust Lien against the following described property, to-wit: See Attachment Hereto i for good and valuable consideration paid to the undersigned, the receipt and sufficiency of i l which are hereby acknowledged, has TRANSFERRED, ASSIGNED, GRANTED and j CONVEYED and by these presents TRANSFERS, ASSIGNS, GRANTS and CONVEYS unto the Rural Electrification Administration of Washington, D.C., the Vendor's Lien and Deed
1 of Trust Lien securing the above described note, and all liens, and any superior title, held ] l by the undersigned securing 'he payment of such note. This Transfer of Liens is subject to i the terms of that one certain Assignment, and that one certain Assignment Agreement, j both of even date herewith by and between the parties thereto. EXECUTED this day of ,1989. i i TEX-LA ELECTRIC COOPERATIVE OF TEXAS, INC. By: Its: TliE STATE OF TEXAS : COUNTY OF NACOGDOCHES : This instrument was acknowledged before me this day of ,1989, by the said , of Tex-La Electric Cooperative of Texas,Inc. Notary Public, State of Texas My Commission Expire;1:
EXHIBff B GUARANTY AGREEMENT Texas Utilities Company (the " Guarantor") unconditionally guarantees the full and prompt payment of all sums when due, whether at stated maturity thereof, by acceleration, or otherwise,in accordance with the terms of that certain promissory note of even date herewith in the original principal amount of $ (the
" Note") to the Noteholder as defined therein.
This Guaranty Agreement shall be a continuing, absolute, irrevocable and unconditional guaranty and shall remain in full force and effect until the Note has been paid or provision for such payment has been made or provided for in accordance with the terms of the Assignment Agrcement betweea Texas Utilities Electric Company ('TU Electric") and Tex-La Electric Cooperative of Texas, Inc. (' Tex-La") of even date herewith (including any additional payment that may be due from TU Electric upon termination of the trust as provided for in Section 4 of the Assignment Agreement) and irrespective of the genuineness, validity, reguleity or enforceability of the Note or Deed of Trust of even date herewith between TU Electric and Tex-La or any assignment or termination thereof, or the bankruptcy, inulvency, merger, reorganization, termination, discontinuation or dissolution of the Guarantor or TU Electric or any assignment for the benefit of creditors of the Guarantor or TU Electric. Without in any ws" limiting the generality of the absolute and unconditional obligations imposed by the preceding paragraph, the obligations, covenants, agreements and duties of the Guarantor under the Guaranty Agreement shall not be released, diminished, impaired, reduced or affected by the occurrence of any one or more of the , i following events: l (a) the taking or accepting of any additional security or other guaranty for any or all of the referenced indebtedness; l
(b) any release, surrender, exchange, subordination, or loss of any security at any time existing in connection with any or all of such indebtedness; (c) the modification of, amendment to, or waiver of compliance with any terms of the Note agreed to by TU Electric without the notification or consent of the undersigned; (d) any renewal, extension, and/or rearrangement of the payment of any or all of the referenced indebtedness agreed to by TU Electric; (e) the voluntary or involuntary liquidation, dissolution, sale or other disposition of all or substantially all the assets, the marshalling of assets and liabilities, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of, or similar proceeding affecting the Guarantor or TU Electric or any of their assets, or i the ' disaffirmance of the Agreement, dated March 23, 1989 between TU Electric and Tex-La (the " Agreement"), in any such proceeding or elsewhere;
(f) any merger, consolidation or sale of assets by either the Guarantor or TU Elect-8c; and in the event of a merger, consolidation or sale of all or substantially all of its assets by the Guarantor it is agreed thet the successors and assigns of the Guarantor shall be bound by the terms of this Guaranty Agreement in the same manner and to the same degree that Guarantor is bound; (g) the irregularity, illegality, invalidity or unenforceability of the Note or the Deed of Trtat or any part thereof or any default thereunder; (h) any inconsistency between this Guaranty Agreement and the Note, Deed of Trust or the Agreement; (i) to the extent permitted by law any other cause, whether similar or dissimilar to any of the foregoing.
I l l
i The foregoing enumerated events have been set forth for purposes of illustration and are not intended to and do not constitute an exclusive list of events which shall not
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release, diminish, impair, reduce, or affect the unconditional guarantee by the undersigned of the referenced indebtedness of TU Electric. Rescission and Termination. The foregoing terms, conditions and provisions of this Guaranty Agreement are subject to, and qualified to the extent of, the terms, conditions and provisions set forth hereinafter in this paragraph. In the event a court of competent jurisdiction renders a final decision, which is not subject to further appeal, that (i) a failure of transfer of the subject property to TU Electric upon the terms set forth in Articles I and II of the Agreement has occurred or (11) a material default on the part of f 1 Tex-La under the Agreement has occurred and such default has not been waived by TU Electric, then (a) the transactions represented by the Agreement shall be rescinded and the parties restored to their former positions prior to Closing under the Agreement (with credit being given to TU Electric for additional capital investment with respect to such portion of the subject property subsequent to such Closing and prior to such rescission), it being understood that this includes the obligation of TU Electric to protect the transferee against any encumbrances imposed after such Closing on the property subject to the Agreement by, through or under TU Electric and (b) this Guaranty Agreement shall terminate, be void and of no further force or effect. If TU Electric shall be in default on the Note, then in the event of an acceleration of the Note as provided for in paragraph 6 thereof, the total outstanding balance due under the Note at that time (including prepayment premiums due, if any) shall ' immediately become due and payable by the Guarantor regardless of the repayment terms set forth in the Note. The Guarantor hereby acknowledges that it is the intention of the original i Noteholder to assign this Guaranty Agreement to the Rural Electrification Administration I and hereby consents to such assignment. l { I ( N __-__ _ _- - ._
. Executed this ' day of ,1989.
TEXAS UTILITIES COMPANY By:
Title:
G l
EXHIBfr C ELECTRIC COOPERATIVES THAT ARE MEMBERS OF TEX-LA ELECTRIC COOPERATIVE OF TEXAS, INC.
1. Cherokee County Electric Cooperative Association

2. Deep East Texas Electric Cooperative, Inc.

3. Houston County Electric Cooperative, Inc.

4. Jasper-Newton Electric Cooperative, Inc.

5. Rusk County Electric Cooperative, Inc.

6. Sam Houston Electric Cooperative,Inc.

7. Wood County Electric Cooperative, Inc.
t J
r EXHIBfr D DEED OF TRUST AND SECURTrY AGREEMENT, dated as of ,1989 (hereinafter called the " Deed of Trust"), made by and between TEXAS ITTILYrIES ELECTRIC COMPANY, a corporation existing under the laws of the State of Texas (hereinaf ter called the " Grantor"), and (hereinaf ter called ;
' Trustee"), for the benefit of TEX-LA ELECTRIC COOPERATIVE OF TEXAS, INC., a corporation existing under the laws of the State of Texas (hereinafter sometimes called ' Tex-La") and other persons or entities that may hereinafter become "Noteholder" as defined in the Note (to the extent appropriate, Noteholder when used herein shall always ;
include al1 Noteholders if there shall be more than one). NOW, THEREFORE, this Deed of Trust and Security Agreement WIT N E S S ET H: WHEREAS, Grantor has entered into an Agreement with Noteholder dated March 23, 1989, and filed ,1989 in Docket before the Public Utility Commission of Texas (the " Agreement") providing for the purchase by Grantor from ! Noteholder of certain properties and assets (the " Purchased Assets") described in the Agreement and the payment of a portion of the purchase price thereof by Grantor to Noteholder under and pursuant to a Promissory Note of even date herewith from Grantor to Noteholder in the original principal amount of $ (the " Note"); WHEREAS, in order to facilitate the purchase by Grantor of the Purchased Assets and in order to secure the payment of the Note, the Noteholder is willing to transfer the Purchased Assets to Grantor and accept the Note in partial payment therefor, only upon the condition, inter _alla, that Grantor shall have executed and delivered this Deed of Trust as a purchase money mortgage to secure payment of the Note; I NOW, THEREFORE,in order to secure the payment of the principal of and interest on the Note, and prepayment premiums, if any (together representing a portion of the purchase price under the Agreement), according to its tenor and effect, and further to secure the due performance of the covenants, agreements and provisions contained in this Deed of Trust and to declare the terms and conditions upon which the Note is to be secured, the' Grantor, in consideration of the premises has executed and delivered this Deed of Trust, and has granted, bargained, sold, conveyed, warranted, assigned, transferred, mortgaged, pledged and set over, and by these presents does hereby grant, bargain, sell, convey, warrant, assign, transfer, mortgage, pledge and set over, unto the Trustee in trust for the benefit of the Noteholder, and its respective successors and assigns, all and singular the following-described property (hereinafter sometimes called the " Deed of Trust Property"): 1. All right, title and interest of the Noteholder conveyed to the Grantor on the date hereof in and to the Purchased Assets, which includes real and personal property, including fixtures, and which is the property described on Exhibit A attached hereto, as i well as all appurtenances, be%erments and additions thereto, substitutions therefor, and allimprovements now or hereaf ter placed thereon; II. To the extent the same constitute a part of the Purchased Assets, the right, title and interest of the Grantor in, to and under any and all grants, privileges, rights of way and easements now owned, held, leased, enjoyed or exercised, or which may hereaf ter be owned, held, leased, acquired, enjoyed or exercised, by the Grantor for the purposes of, or j i in connection with, the construction or operation by or on behalf of the Grantor of the Purchased Assets, wherever located; III. To the extent the same constitute a part of the Purchased Assets, the right, title ) and interest of the Grantor in, to and under any and all licenses, franchises, ordinances, privileges and permits heretofore granted, issued or executed, or which may hereaf ter be granted, issued or executed, to it by the United States of America, or by any state, or by I i 1
c. any county, township, municipality, village or other political subdivision thereof, or by any agency, board, commission or department of any of the foregoing, authorizing the construction, acquisition, or operation of the Purchased Assets, insofar as the same may by law be assigned, granted, bargained, sold, conveyed, transferred, mortgaged, or pledged; IV. All right, title and interest of the Grantor in, to and under any and all accounts, contract rights and general intangibles (as such terms are defined in the applicable Uniform Commercial Code) heretofore or hereafter acquired by the Grantor and which are part of the Purchased Assets; V. Together with all rents, income, revenues, profits, proceeds and benefits at any time derived, received or had from any and all of the above-described property of the Grantor. TO HAVE AND TO HOLD all and singular the Deed of Trust Property unto the Noteholder and its assigns forever, to secure the payment of the principal of and interest on the Note and prepayment premiums,if any, due under the Note, according to its tenor and effect, without preference, priority or distinction as to interest or principal or premiums (except as otherwise specifically provided herein), to secure the due perform'ance of the covenants, agreements and provisions herein, and for the uses and purposes and upon the terms, conditions, provisos and agreements hereinafter expressed and declared. ARTICLE I PARTICULAR COVRNAlrFB OF THE GRANTOR The Grantor covenants with the Noteholder and any other permitted holder of the Note (hereinaf ter sometimes collectively called the "Noteholder") as follows: SECTION 1. The Grantor is duly authorized under its articles of incorporation and by-laws and the laws of the State of Texas and all other applicable provisions of law to i _ _ _ _ _ - - - _ _ _ _ _ _ - . )
execute and deliver the Note and this Deed of Trust; all corporate action on its part for the execution and delivery of the Note and this Deed of Trust has been duly and effectively taken; and the Note and this Deed of Trust are the valid and enforceable obligations of the Grantor in accordance with their respective terms. The execution, delivery and performance of tbh Deed of Trust will not conflict with or result in any violation of, or constitute a default under,(i) the Articles of Incorporation or By-Laws of Grantor, or (ii) any material provision of any material mortgage, indenture, lease, agreement or:other instrument to which Grantor is subject or a party, including any bonds or other obligation or other evidence of indebtedness, or (iii) any material provision of any material permit, concession, grant, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Grantor or any of its property, including the Comanche Peak Steam Electric Station; or with the passage of time or the giving of notice or the taking of any action by any third party, have any of the effects , described herein. SECTION 2. The Grantor warrants that it has good right and lawful authority to mortgage the property described in the granting clauses of this Deed of Trust for the purposes herein expressed, and that said property is free and clear of any deed of trust, mortgage, lien, charge or encumbrance thereon or affecting the title thereto, except (i) the lien of this Deed of Trust and the vendors lien retaint d by Noteholder, and any liens for taxes, assessments or similar governmental charges not yet due; (ii) deposits or pledges to secure payment of workmen's compensation, unemployment insurance, old age pensions or other social security; (iii) deposits or pledges to secure performance of bids, tenders, contracts (other than contracts tw the payment of borrowed money), leases, public or statutey obligations, surety or appeal bonds, w other deposits or pledges for purposes of like general natwo in the ordinary course of business and liens, controls, obligations, restrictions or rights in favor of, reserved to or vested in any municipal, public or other governmental authority (iv) liens (existing or inchoate) in favor of
mechanics,'materialmen, laborers and suppliers of materials, goods, services, equipment, inventory andlabor;(v) matters affecting the title to all or any part of the Deed of Trust Property created by the acts or omissions of (a) Tex-La, or (b) the parties other than Grantor owning interests in the project of which the Deed of Trust Property is a part, or (c) Grantor as Project Manager acting for the owners of the project of which the Deed of Trust Property is a part; (vi) matters of record affecting the Deed of Trust Properts and (vii) the Joint Ownership Agreement dated January 2,1979, as modified and amended, including its modification by the Agreement and the actions contemplated thereby, to which Grantor and Tex-La are parties relating to the Deed of Trust Property and all licenses, permits, leases, franchises and contracts relating thereto, it being understood i that the reference herein to such Joint Ownership Agreement is included with respect only to matters contained therein which may affect the warranty of title to the Deed of Trust Property in Grantor and does not concern any financial obligation imposed by the Joint Ownership Agreement or any claim with respect thereto and further does not apply with respect to the matters set forth in Section 6 of Article II hereof or the matters set forth under the heading Rescission and Termination in the Guaranty Agreement of even date herewith of Texas Utilities Company with respect to the Note, reference to which is hereby made and the provisions of which are hereby incorporated herein for all purposes. The Grantor will, so long as the Note shall be outstanding, maintain and preserve the lien of this Deed of Trust superior to all other liens affecting the Deed of Trust Property, except to the extent referenced in the preceding sentence, and'will forever warrant and defend the title to the property described as being mortgaged hereby to the Noteholdet against any and all claims and demands whatsoever by, through or under Grantor. The Grantor will promptly pay or discharge any and all obligations for or on account of which any such lien or charge might exist or could be wested and any and alllawful taxes, rates, levies, assessments, liens, claims or other charges imposed upon or accruing upon any of the Deed of Trust Property (whether taxed to the Grantor or to the Noteholder), as and
when the same shall become due and payable; and whenever called upon so to do the Grantor will furnish to the Noteholder adequate proof of such payment or discharge; provided, however, that this provision shall not be deemed to require the payment or discharge of any tax, rate, levy, assessment, lien, claim or other charge while the Grantoc is contesting the validity thereof by appropriate proceedings in good faith and so long as it shall have set aside on its books adequate reserves with respect thereto. SECTION 3. The Grantor will not, without the consent in writing of the Noteholder, charge, pledge, mortgage, or otherwise encumber any of the Deed of Trust Property in any manner so as to adversely affect the priority of the lien established hereby. SECTION 4. The Grantor will duly and punctually pay the principal of and interest on the Note and prepayment premiums,if any, due under the Note, at the dates and in the manner provided therein, according to the true intent and meaning thereof, and all other sums becoming due hereunder. The Grantor may at any time make prepayments on account of all or part of the principal of the Note to the extent and in the manner provided therein and in the Assignment Agreement, to the extent applicable. SECTION 5. The Grantor will at all times, so long as any portion of the Note shall be outstanding, take or cause to be taken all such action as from time to time may be necessary to preserve its corporate existence and use its best efforts to preserve and renew all rights of way, easements and similar real property rights now or hereafter granted to it or conferred upon it relating to the Deed of Trust Property, and will comply with all valid laws, ordinances, regulations and requirements applicable to the Deed of Trust Property, so long as the Grantor is not contesting the validity of any thereof in good faith. The Grantor will not without the approval in writing of the Noteholder consolidate with or merge into any other corporation or permit any other corporation to merge into the Grantor or acquire all or substantially all of the business or assets of another corporation if such acquisition is analogous in purpose or effect to a merger or consolidation, or so consolidate or merge or permit any such merger or so acquire any _ _ _ _ _ _ _ _ _ _ _ _ _ - _ _ l
such business or assets without the approval in writing of the Noteholder unless the l corporation surviving such transaction shall have assumed the obligations of the Grantor i under the Note and the Deed of Trust. SECTION 6. The Grantor will, upon completion, at all times maintain and paeserve the Deed of Trust T roperty, as part of an operating system, in good repair, working order and condition, ordir.ary wear and tear excepted and subject to operating contingencies and maintenance requirements, and in compliance with all applicable laws, regulations and orders, which are not being contested in good faith, and will from time to time make all vedful and proper repairs, renewals and replacements, and useful and proper alterations, additions, betterments and improvements, so that the operations of the Deed of Trust Property as part of an operating system shall be contlucted properly and advantageously. Nothing herein contained, however, shall be held to prevent the Grantor from permanently discontinuing the construction or operation, or reducing the capacity, of the plant of ; which the Deed of Trust Property is a part, if, in the judgment of the Grantor, any such action (which affects the Deed of Trust Property) is necessary or desirable in the conduct of the business of the Grantor, or if the Grantor fails to obtain the necessary regulatory approvals or is ordered so to do by regulatory authority having jurisdiction in the premises, or if the Grantor intends to sell or dispose of the same subject to the lien of this l Deed of Trust or otherwise and within a reasonable time shall endeavor to effectuate such ! sale, nor shall anything herein contained be construed to prevent the Grantor from taking such action with respect to the use of the plant of which the Deed of Trust Property is a part as is proper under the circumstances, including the cessation or omission to exercise rights, permits, licenses, privilegen or franchises which, in t- jtJpnent of the Grantor, can no longer be profitably exercised or avalled of. In the event that any regulatory authority having jurisdiction over the Grantor shall determine that the expenditures for repairs and maintenance necessary to make good any such maintenance deficiency as shall have been so determined would be excessive or shall, by order or regulation, prohibit, in
r whole cc in part, such expenditures for repairs and maintenance, then, upon filing with the Trustee a certified copy of such order or a copy of such regulation, as the case may be, the Grantor shall, so long as such order or such regulation remains in effect, be relieved from compliance with the covenant contained herein,in regard to the maintenance of the Deed of Trust Property, to the extent that such expenditures for repairs and maintenance shall have been held excessive or shall be prohibited. SECTION 7. The Grantor agrees that it will keep or cause to be kept the Deed of Trust Property insured by property insurance to the extent that the plant of which it is a part is so insured, or that it will, in lieu of or supplementing such insurance in whole or in I part, adopt some c.ther method or plan of protection against loss at least equal in protection to the method or plan of protection against loss of companies similarly situated and operating properties subject to similar hazards. Each policy or other contract for such insurance, where allowed by the insurer, shall contain an agreement by the insurer that, notwithstanding any right of cancellation reserved to such insurer such policy or contract shall continue in force for at least 10 days af ter written notice to the Noteholder of cancellation. The Grantor will, upon request of the Noteheader, submit to the Noteholder a schedule of its insurance in effect as required herein on the date specified in 1 such request and, upon request of the Noteholder, will provide certificates of insurance relating thereto. In the event of damage to or the destruction or loss of any portion of the Deed of Trust Property which shall be covered by insurance, unless the Noteholder shall otherwise agree, to the extent possible with available insurance proceeds, the Grantor shall replace or restore such damaged, destroyed or lost portion so that the Deed of Trust Property shall be in substantially the same condition as it was in prior to such damage, destruction or loss, ordinary wear and tear excepted. The Grantor shall replace the loss or shall commence such restoration as soon as practicable after such damage, l l destruction or loss shall have occurred and receipt of the insurance proceeds, and shall } l comp;ete such replacement or restoration as expeditiously as practicable under the 1 l
prevailing circumstances, and shall pay or cause to be paid out of the proceeds of such insurance all costs and expenses in connection therewith so that such replacement or restoration shall be so completed that the portion of the Deed of Trust Property so replaced or restored shall be free and clear of all mechanics' liens and other claims. SECTION 8. In the event of the failure of the Grantor in any respect to comply with the covenants and conditions herein contained with respect to the procuring of insuranm, the payment of taxes, assessments and other charges, the keeping of the Deed of Trust Property in repair and free of liens and other claims or to comply with any other covenant contained in this Deed of Trust, the Noteholder shall have the right (without prejudice to any other rights arising by reason of such default) to advance or expend moneys for the purpose of procuring such insurance, or for the payment of insurance premiums, taxes, assessments or other charges, or to save the Deed of Trust Property from sale or forfeiture for any unpaid tax or assessment, or otherwise, or to redeem the same from any tax or other sale, or other encumbrance thereon, or to make repairs thereon or to comply with any other covenant herein contained or to prosecute or defend any suit in relation to i the Deed of Trust Property or in any manner to protect the Deed of Trust Property and the title thereto, and all sums so advanced for any of the aforesaid purposes shall be deemed a charge upon the Deed of Trust Property in the same manner as the Note is secured and shall be forthwith paid to the Noteholder making such advance or advances upon demand. It shall not be obligatory for the Noteholder in making any such advances or expenditures to inquire into the validity of uly such tax title, or of any of such taxes or assessments or sales therefor, or of any such mechanics' liens or other encumbrances. The Noteholder acting hereunder shall not be liable to the Grantoe except for losses resulting from gross negligence or wilful misfeasance. SECTION 9. The Grantor will at all times keep, and safely preserve, proper books, recorda and accounts in which full and true entries will be made of all of the dealings, business and affairs with respect to the Deed of Trust Property. _g.
SECTION 10. The Grantor will from time to time upon written demand of the Noteholder make, execute, acknowledge and deliver or cause to be made, executed, acknowledged and delivered all such further and supplemental indentures of mortgage, deeds of trust, mortgages, financing statements, continuation statements, security agreements, instruments and conveyances as may reasonably be requested by the Noteholder, and take or cause to be taken all such further action as may reasonably be requested by the Noteholder to effectuate the intention of these presents and to provide for the securing and payment of the principal of and interest on the Note according to the terms thereof and for the purpose of fully conveying, transferring and confirming unto the Noteholder the property hereby conveyed, mortcaged and pledged, or intended so to be, now owned by the Grantor and to reflect the assignment of the rights or interests of the N oteholder. The Grantor will cause this Deed of Trust and any and all supplemental indentures of mortgage, mortgages and deeds of trust and every security agreement, financing statement, continuation statement and every additional instrument which shall be executed pursuant to the foregoing provisions forthwith upon execution to be recorded and filed and rerecorded and refiled as conveyances, mortgages, deeds of *. rust and security interests in real and personal property in such manner and in such places as may be required by law or reasonably requested by the Noteholder in order fully to preserve the security for the Note and to perfect and maintain the superior lien of this Deed of Trust and all supplementalindentures of mortgage, mortgages and deeds of trust and the rights and remedies of the Noteholder. SECTION 11. In the event that the Deed of Trust Property, or any part thereof, shall be taken under the power of eminent domain all proceeds and avails therefrom, except to the extent that the Noteholder shall consent to other use and application thereof by the Grantor, shall forthwith be applied by the Grantor: first, to the ratable payment of any indebtedness by this Deed of Trust secured other than principal or l prepayment premiums, if any, or interest on the notes; second, to the ratable payment of l 4 l e__._______________
interest which shall be accrued on the notes and be unpaid; third, to the ratable payment of or on account of the unpaid principal and prepayment premiums, if any, due under the
. notes, to such installments thereof as may be designated by the respective Noteholders at the time of any such payment; and fourth, the balance shall be paid to whosoever shall be legally entitled thereto.
ARTICLE E REMEDIES OF THE NorEHOLDER SECTION 1. If one or more of the following events (hereinafter called " events of default") shall happen, that is to say: (a) default shall be made in the payment of any installment of or on account of interest or principal of the Note, or prepayment premiums, if any, due under the Note when and as the same shall be required to be made whether by acceleration or otherwise; or (b) any representation or warranty made by the Grantor herein or in any certificate delivered hereunder shall prove to have been incorrect or untrue in any material respect; or (c) default shall be made in the du9 observance or performance of any other of the covenants, conditioas or agreements on the part of the Grantor in this Deed of Trust cantained, and such default shall continue for a period of thirty (30) days after written notice specifying such default and requiring the same to be remedied shall have been received by :he Grantor, unless such default cannot be remedied within such period in which event Grantor shall have such period of time to remedy those defaults capable of being remedied as shall be reasonably necessary provided it begins to remedy such default within such thirty (30) day period and proceeds diligently thereaf ter in such regard but in no event shall the time to remedy such defaults exceed one hundred twenty (120) days; or (d) the expiration of a period of sixty (60) days following the entry of a decree or order by a court having jurisdiction in the premises for relief in respect of the Grantor or Texas Utilities Company under the Federal Bankruptcy Act or any other applicable Federal or state law of a similar nature, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of or for the Grantor or any substantial part of the Deed of Trust Property, or ordering the winding up or liquidation of its affairs unless during such period such decree, order or appointment of a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official shall be vacated or shall be stayed on appeal or otherwise or shall have otherwise ceased to continue in effect; or _ _ _ _ _ - _ _ = - _ . _
-(e)' the commencem'ent by the Grantor or Texas Utilities Company (both in ; the disjunctive but herein referred to collectively as "it") of a voluntary case, or the institution by it' of proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to the institution of i bankruptcy or insolvency proceedings against it, or the filing by it of a 4 petition or ~ answer or consent seeking reorganization, arrangement or relief under the Federal Bankruptcy Act or any other applicable Federal or state law of a similar nature, or the consent'or acquiescence by it to the filing of by possession- any a such ' petition or to the appointment of or taking custodian, receiver, - liquidator, assignee, trustee, sequestrator (or other similar official) of the Grantor or any substantial-part of the Deed of Trust Property, or the making - by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of action; or corporate action by the Grantor in furtherance of any such i
(f) Grantor shall forfeit or otherwise be deprived of its corporate charter i i or any corporate franchise, permit, easement or license required' to carry on any material portion of its business; then in each and every such case the Trustee, to the extent permitted by applicable state law and on behalf and at the direction of the Noteholder, may,in its discretion (aa) without protest, presentment or demand, declare all unpaid principal of -l and accrued interest on the Note, and prepayment premiums, if.any, due under the Note, to be due and payable immediately and upon any i such declaration all such unpaid' principal and accrue,d interest so declared to be.due and payable, together with prepayment premiums due,if any, shall become and be due and payable immediately, anything contained herein or in the Note to the contrary notwithstanding; (bb)- proceed to protect and enforce the rights of the Noteholder under this Deed of Trust by suits or actions in equity or at law in any court or courts'of competent jurisdiction, whether for gecific performance of any covenant or any agreement contained herein: or in aid of the-execution of any power herein granted or for the foreclosure hereof or hereunder or for the sale of the Deed of Trust Property, or any part thereof, or to collect 3e debts hereby sectred or for the enforcement of such other.or additional appropriate legal or equitable remedies as } i may be deemed most effectual to protect and enforce the rights and remedies herein granted or conferred; (ec) sell or offer for sale the Deed of Trust Property in such portions, order and parcels as the Noteholder may determine, to the highest bidder for cash at public auction, such sale to be made at the courthouse door of the counties wherein such property (or that portion thereof to be sold) - is situated (whether the parts or parcels thereof, if any, in different counties are contiguous or not, and without the necessity of having any personal property hereby mortgaged present at such sale) on the first Tuesday of any month between the hours of 10:00 a.m. and 4:00 p.m. after posting a written or printed notice or notices of the place, time and terms of the sale for twenty-one (21) days prior to the date of the sale _ at the courthouse door of the county in which the sale is to be made and at the courthouse door of any other county in which a portion of the property may be situated and filing a copy of such notice (s)in the office of the county clerk in each of such counties, and by serving
. written notice of the proposed sale at least twenty-one (21) days preceding the date of sale by certified mail on Grantor, service of such notice. being completed upon deposit of the notice, enclosed in a postpaid wrapper, properly stamped and addressed to the Grantor at its most recent address as shown by the records of the Noteholder, in a ]
post office or official depository under the care and custody of the 1 United States; j (dd) in lieu of the foregoing, the sale may be accomplished by following the procedures permitted or required by Tex. Prop Code Ann. Section 51.002 (Vernon 1984), as the same may be amended from time to time, relating to the sale of real estate and/or by Chapter 9 of the Tex. Prop. Code relating to the sale of personal property collateral after default by a debtor (as said Section and Chapter may now exist or may hereafter be amended or succeeded), or by any other present or l subsequent articles or enactments relating to the same, it being understood that nothing contained herein shall be construed to limit in any way the Trustee's rights to sell such properties by private sale if, and to the extent, that such private sale is permitted under the laws of the State of Texas or by public or private sale after entry of judgment by any court of competent jurisdiction ordering the same, and at any such sale (i) whether made under power herein contained, the aforesaid Section 51.002, the Code, any other legal requirement or by virtue of any judicial procedure or any other legal right, remedy or recourse, it shall not be necessary for the Trustee to have physically present, or to have constructive possession of, the Deed of Trust Property, and the title to any such property shall pass to the purchaser thereof as completely as if the same had been actually present and delivered to the purchaser at such sale, (11) each instrument of conveyance executed by the Trustee shall contain a warranty of title, binding upon the Grantor, (iii) each and every recital contained lu any instrument of l
, conveyknee made by the Trustee shall conclusively establish the truth and accuracy of the matters recited therein and the advertisement and conduct of such sale in the manner provided herein, (iv) any and all prerequisites to the validity thereof shall be conclusively presumed to have been performed, and (v) the receipt of the Trustee or of such other party or officer making the sale shall be a sufficient discharge to the purchaser or purchasers for his or their purchase money and no such purchaser or purchasers, or his or their assigns or personal i representatives, shall thereafter be obligated to see to the application of such purchase money or be in any way answerable for any loss, misapplication or nonapplication thereof.
SECTION 2. At any public sale hereunder the Noteholder shall have the right to bid for and purchase the Deed of Trust Property, or such part thereof as shall be offered for sale.
SECTION 3. Any proceeds of funds arising from the exercise of any rights or the enforcement of any remedies herein provided af ter the payment 'or provision for the payment.of 'any and all costs and expenses in connection with the exercise of such rights or the enforcement of such remedies and any other sums received by the Noteholder, the disposition of which is not otherwise herein specifically provided for, shall be applieel first, to. the payment of indebtedness hereby secured other than the principal of, prepayment premiums, il any, or interest on the Note; second, to the payment of interest which shall have accrued on the Note and which shall be unpaid; third, to the payment of or on account of the unpaid principal of the Note, and prepayment premiums, if any, due under the Note; and the balance, if any, shall be paid to the Grantor or whosoever else shall be legally entitled thereto. I SECTION 4. Every right or remedy herein. conferred upon or reserved to the Noteholder shall be cumulative and shall be in addition to every other right and remedy. given hereunder or now or hereafter existing at law, or in equity, or by statute. The pursuit of any right or remedy hereunder shall not be deemed to be an election and shall not preclude the pursuit of any other right or remedy. SECTION 5. If at any time after an event of default and prior to the institution of foreclosure proceedings, all payments in respect of principal, interest and prepayment premiums which shall have become due and payable by the terms of the Note shall be paid to the Noteholder, and all other defaults hereunder and under the Note shall have been cured, together with reimbursement for any resulting expense or damage, then and in every such case, such default or defaults shall be waived, but no such waiver shall extend to or affect any subsequent default or impair any right consequent thereon. SECTION 6. If, after the occurrence of any event of default hereunder and pursuit I of the remedies provided for hereinbefore, the Noteholder should obtain ownership of the 1 Deed of Trust Property,it is understood that the Joint Ownership Agreement as defined in the Agreement shall, in the absence of a mutual agreement between the Grantor and the I
1 Noteholder to the contrary, be reinstituted as between such Noteholder and the Grantor I so as from thenceforth to apply to and control the relationship of the Noteholder as owner of the Deed of Trust Property and the Grantor as owner of its interest in the plant and other facilities of which the Deed of Trust Property is a part, it being understood that the Grantor shall have no right to reimbursement from the Noteholder of any amount that the l Grantor has expended with respect to the Deed of Trust Property prior to the resumption l of ownership thereof by the Noteholder, nor shall the proportionate interest in Comanche Peak, as said term is defined in the Agreement, mortgaged hereby be diminished or j reduced except in the event that Grantor shall make a partial payment under the Note in accordance with the terms and conditions set forth in Article III, Section 2 of this Deed of Trust, such interest shall be reduced by the same percentage as is released from the lien of the Deed of Trust. SECTION 7. The Grantor covenants that it will give immediate written notice to the Noteholder of the occurrence of an event of default. ARTICLE III POSSESSION UNTIL DEFAULT, DEFEASANCE AND RELEASE CLAUSES SECTION 1. Until some one or more of the events of default shell have happened, ! the Grantor shall be suffered and permitted to retain actual possession of the Deed of Trust Property, and to manage, operate and use the same and any part thereof, with the rights and franchises appertaining thereto, and to collect, receive, take, use and enjoy the rents, revenues, issues, earnings, income, products and profits thereof or therefrom. SECTION 2. If the Grantor shall well and truly pay or catse to be paid the whole amount of the principal of and interest on the Note, and prepayment premiums, if any, I due tmder the Note, at the times and in the manner therein provided, according to the ' true intent and meaning thereof, and shall also pay or cause to be paid all other sums ; payable hereunder by the Grantor and shall well and truly keep andt erform, according to the true intent and meaning of this Deed of Trust, all covenants herein required to be kept
and performed by it, or if the Grantor shall comply with the provisions of section 4 of that certain Assignment Agreement of even date herewith between the Grantor and the i Noteholder, then and in that case, all property, rights and interests hereby conveyed or assigned or pledged shall revert to the Grantor and the estate, right, title and interest of the Trustee and the Noteholder shall thereupon cease, determine and become void and the Noteholder, and the Trustee, if appropriate, in such case, on written demand of the Grantor but at the Grantor's cost and expense, shall enter satisfaction of this Deed of Trust and release of the lien hereof, and all other IIens including vendors liens in favor of the Noteholder with respect to the Deed of Trust Property, upon the record. In any event, i the Noteholder and, if appropriate, the Trustee upon payment in full to him by the , Grantor of all principal of and interest on the Note, and prepayment premiums, if any, due under the Note, and the payment and discharge by the Grantor of all charges due to the Noteholder hereunder, shall execute and deliver to the Grantor such instruments of satisfaction, discharge or release as shall be required by law in the circumstances. In the event of a partial payment (whether in the form of a mandatory payment referred to in paragraph 2 of the Note or in the form of an optional prepayment referred to in paragraph 5 of the Note or section 4 of the above-referenced Assignment Agreement, or any ' combination of both of such forms of payment) under the Note of twenty-five percent (25%) or more of the principal amount thereof, together with the interest due thereon, and prepayment premiums, if any, due under the Note, the Noteholder shall, on written demand of the Grantor but at the Grantor's cost and expense, enter satisfaction of an undivided twenty percent (20%) interest under this Deed of Trust and release of the lien hereof, upon the record, and in the event of such prepayment by any of such means of fifty percent (50%) or more of such principal amount, together with the interest due thereon, and prepayment premiums, if any, due under the Note, an additional undivided twenty percent (20%) interest under this Deed of Trust shalllikewise be released from the lien hereof and thereafter upon the payment by any of such means of seventy percent i l _____-m___-__-___- _ . . _ _ _ _ _ . . . _ _ _ . _ _ _
(70%) or more and ninety percent (90%) or more of such principal amount, together with the interest due thereon, and prepayment premiums, if any, due under the Note, an additional undivided twenty percent (20%) Interest shall in each instance be likewise released from the lien hereof. In addition, the Noteholder agrees to release to such extent and in such manner any and all other liens including vendors liens in favor of the Noteholder with respect to the Deed of Trust Property by such instruments of i satisfaction, discharge and release as shall be required by law in the circumstances. ARTICLE IV 1 SUBSTrrUTE TRIBTEE SECTION 1. In case of the resignation of the Trustee, or the inability (through death or otherwise), refusal or failure of the Trustee to act, or at the option of the Noteholder, for any other reason (which reason need not be stated), a Substitute Trustee l may be named, constituted and appointed by the Noteholder without other formality than an appointment and designation in writing executed by the Noteholder, which appointment and designation shall be ft.ll evidence of the right and authority to make the same and of all facts therein recited, and this conveyance shall vest in the Substitute Trustee the title, powers and duties herein conferred on the Trustee originally named herein, and the conveyance by the Substitute Trustee to the purchaser (s) at any sale of the Deed of Trust Property or any part thereof shall be equally valid and effective. The right to appoint a Substitute Trustee shall exist as often and whenever the Trustee, original or Substitute, resigns or cannot, will not or does not act, or the Noteholder desires to appoint a new Trustee. No bond shall ever be required of the Trustee, original or Substitute. The recitals in any conveyance made by the Trustee, original or Substitute, shall be accepted and construed in court and elsewhere as prime facie evidence and proof of the facts , recited, and no other proof shall be required as to the request by the Noteholder to the l Trustee to enforce this Trust, or as to the notice of or holding of the sale, or as to any { particulars thereof, or as to the resignation of the Trustee, original or Substitute, or as to j j i the inability, refusal or failure of the Trustee, original or Substitute, to act, or as to the election of the Noteholder to appoint a new Trustee, or as to appointment of a Substitute Trustee, and all prerequisites of said sale shall be presumed to have been performed. The Trustee, original or Substitute, is hereby authorized and empowered to appoint any one or more persons as attorney-in-fact to act as trustee under him and in his name, place and stead in order to take any actions that the Trustee is authorized and empowered to do i hereunder, such appointment to be evidenced by an instrument signed and acknowledged by the Trustee, original or Substitute; and all actr done by said attorney-in-fact shall be valid, lawful and binding as if done b,, the Trustee, original or Substitute, in person. ARTICLE V MISCELLANEOUS SECTION 1. All of the covenants, stipulations, promises, undertakings and agreements herein contained by or on behalf of the Grantor shall bind its successors and assigns, whether so specified or not, and all titles, rights and remedies hereby granted to or conferred upon the Noteholder shall pass to and inure to the benefit of the successors and assigns (to the extent permitted) of this Deed of Trust and shall be deemed to be granted or conferred for the benefit and security of all who shall from time to time be the i holder of the Note. SECTION 2. The descriptive headings of the various articles of this Deed of Trust were formulated and inserted for convenience only and shall not be deemed to affect the meaning or construction of any of the provisions hereof. SECTION 3. All demands, notices, reports, approvals, designations, or directions required or permitted to be given hereunder shall be in writing and shall be deemed to be properly given if mailed by registered mail addressed to the proper party or parties at the following addresses: As to the Grantor: Texas Utilities Electric Company 2001 Bryan Street
a i i l Suite 1900 Dallas, Texas 75201 , { Attention: Erle Nye ! (with copy to)
.Worsham, Forsythe, Sampels & Wooldridge 32nd Floor, 2001 Bryan Tower Dallas, Texas 75201 i A ttention: Robert A. Wooldridge !
As to the Trustee: (with copy to) Administrator
. Rural Electrification Administration i F.S. Department of Agriculture Washington, D.C. 20250-1500 'l As to the Noteholder:
Tex-La Electric Cooperative of Texas,Inc. P. O. Box 1623 Nacogdoches, Texas 75961 Attention: John H. Butts For Federal Express Tex-La Electric Cooperative of Texas,Inc. 2905 Westward Drive Nacogdoches, Texas 75961 Attention: John H. Butts (with copy to) Heron, Burchette, Ruckert & Rothwell l Suite 700 l 1025 Thomas Jefferson Street, N.W. ! Washington, D.C. 20007 Attention: William H. Burchette SECTION 4. The invalidity of any one or more phrases, clauses, sentences, paragraphs or provisions of this Deed of Trust shall not affect the remaining portions hereof. w-__-__-_-____-_________-_
i i l SECTION 5. To the extent that any of the property described or referred to in this Deed of Trust is governed by the provisions of the Uniform Commercial Code this Deed of Trust is hereby deemed a " security agreement" under the Uniform Commercial Code, and i a " financing statement" under the Uniform Commercial Code for said security agreement. The mailing addresses of the Grantor as debtor, and of the Noteholder as secured party, are as set forth in Section 3 of this Article V. SECTION 6. This Deed of Trust may be simultaneously executed in any number of counterparts, and all said counterparts executed and delivered, each as an original, shall constitute but one and the same instrument. IN WITNESS WHEREOF, TEXA8 ITTILfrIES ELECTRIC COMPANY, as Grantor, has caused this Deed of Trust and Security Agreement to be signed in its name and its corporate seal to be hereunto affixed and attested by its officers thereunto duly authorized, , as Trustee, nas caused this Deed of Trust and Security Agreement to be signed in his name, andTEX-LA ELECTRIC COOPERATIVE OF TEXAS,INC., as Noteholder, has caused this Deed of Trust and Security Agreement to be duly executed in its behalf, all as of the day and year first above written. TEXAS IfrILfrIES ELECTRIC COMPANY (SEAL) By: Its: ATTEST: By: Its: l TRUSTEE L____________
TEX-LA ELECTRIC COOPERATIVE OF TEXAS, INC. (SEAL) By: Its: l ATTEST: ! i By: ! Its:
.THE STATE OF TEXAS : !
COUNTY OF : ; I THIS INSTRUMENT was acknowledged before me on ,1989, by , of TEXAS UTILfrIES ELECTRIC COMPANY, a Texas corporation, on behalf of said corporation. j l Notary Public in and for l the State of Texas I Printed Name of Notary: My Commission Expires: 1 ( i l
I 1 THE STATE OF TEXAS : ; COUNTY OF : ; THIS INSTRUMENT was acknowledged before me on ,1989, by _, as Trustee, in the capacity and for the purposes stated.
Notary Public in and for the State of Texas ;
i Printed Name of Notary: My Commission Expires: THE STATE OF TEXAS : COUNTY OF : THIS INSTRUMENT was acknowledged before me on ,1989, by , of TEX-LA ELECTRIC COOPERA11VE OF TEXAS, INC., a Texas corporation, on behalf of said corporation. j l Notary Public in and for i the State of Texas Printed Name of Notary: My Commission Expires: _ l l l l
EXHIBIT E PROMISSORY NOTE Dallas, Texas I
,1989 l )
1
1. For value received, TEXAS (TTILrrIES ELECTRIC COMPANY (the
" Borrower"), a corporation organized and existing under the laws of the State of Texas, promises to pay to TEX-LA ELECTRIC COOPERATIVE OF TEXAS, INC. (" Tex-La"), a corporatfort organized and existing under the laws of the State of Texas, the original Noteholder, or if Tex-La shall cease to be the holder of this note, then to such other person (s) or entity (les) permitted to become holder (s) of the note (Tex-La and such holder (s) hereinaf ter referred to as the "Noteholder"), at the times, in the manner, and with interest at the rate, hereinafter provided, the sum of 1 Dollars ($ ), with interest payable from the date hereof, on the unpaid principal balance until paid, at the rate of ten and one half i
percent (101/2%) per annum in accordance with the schedule of payments set forth on Exhibit A attached hereto.
2. The principal of this note shall be payable at the times and in the amounts set forth on Exhibit A attached hereto, and interest shall be due and payable at the rate provided for hereinbafore on the unpaid principal balance hereof during the term hereof ,
with each installment payment of principalis the amounts set forth on Exhibit A attached hereto, except that no payment of principal or interest shown on such Exhibit A shall be made if such payment was made between August 31, 1989 and the Closing Date pursuant to Section 1.6(111) of the Agreement between the Borrower and Tex-La, dated as of March 23,1989 (the " Agreement"). The unpaid principal balance shall bear interest after maturity of any installment at the rate of twelve and one half percent (121/2%) per annum.
i
3. Each payment'made on this note shall be applied first to the payment of j interest and then on account of principal and shall be in such funds as are then legal .
i tender for the payment of debts.
4. This note represents a portion of the purchase price paid by the Borrower for .
the transfer to it of certain properties and assets by Tex-La as described in the Agreement. Accordingly, the Borrower acknowledges that this note does not represent a loan or advance to, or investment in, the Borrower in an original or primary manner, but rather indebtedness to Tex-La incurred as a portion of such purchase price. The payment of this note is secured by a purchase money mortgage and security interest under a Deed of Trust and Security Agreement of even date herewith from the Borrower to
, Trustee (the " Deed of Trust"), for the benefit of the holder of this note which constitutes a lien on, and represents a security interest in, certain property l
located in Hood, Somervell, Johnson and Tarrant Counties, Texas.
5. This note may be prepaid at any time in whole or in part upon the payment of the applicable prepayment premium (prorated for any prepayment made between payment dates) shown on Exhibit A attached hereto, and compliance with Section 4 of the Assignment Agreement of even date herewith (the " Assignment A greement"), if applicable. In the case of a partial prepayment such prepayment premium shown on Exhibit A shall be reduced proportionately based on the percentage of the total principal being prepaid. In addition, to the extent a prepayment hereof (including payment of the aforementioned premium) by the Borrower causes and requires the payment by Tex-La of a prepayment premium with respect to the same amount of underlying Tex-La Comanche Peak Debt to which such prepayment and premium are applied (including any Tex-La Comanche Peak Debt which Tex-La may have refinanced after the date hereof), the Borrower shall pay to Tex-La the amount of any such prepayment premium due from Tex-La on such mderlying debt; provided that on any portion of such debt refinanced by Tex-La after the date hereof, the prepayment premium to be paid by the Borrower shall
not exceed the amount that would have been due on the date hereof, and on any portion of such debt with respect to which the prepayment premium is increased after-the date hereof as a result of action by the Rural Electrification Administration ("REA") or the U.S. Congress, fifty percent (50%) of the portion of the prepayment premium to be paid which is in excess of the amount that would have been due on the date hereof shall be paid ' by the Borrower and fifty percent (50%) of such excess shall be paid by Tex-La. For q purposes of computing the amount of any such prepayment premium on underlying Tex-La I Comanche Peak Debt (and for purposes of applying any prepayment to the underlying debt pursuant to the precu'ing sentence), the Borrower's prepayment shall be allocated among the various segments of such debt in proportion to tra amount of each segment remaining payable that is permitted to be prepaid at that time (with each of the notes under the CFC loan and each advance under the FFB loan constituting a separate segment). Notwithstanding the foregoing or anything contained in the Assignment Agreement, no partial prepayment of this Note shall be made which shall cause the weighted average annual interest on the remaining Tex-La Comanche Peak debt after such prepayment to exceed the weighted average annual interest on such debt immediately before such prepayment. It is contemplated by the parties that this note will be assigned to the United States of America (the " Government") acting through the Administrator of the i REA by the Assignment Agreement as substitute collateral to be secured by the Deed of l i Trust as replacement for the purchased assets being released by the Government'from a i i mortgage entered into in September,1981, as supplemented and amended, which was given by Tex-La to secure its obligations owed to the Government. The holder hereof ' 1 agrees that partial payment (whether in the form of a mandatory payment referred to in paragraph 2 hereof or in the form of an optional prepayment referred to in this paragraph 5) in part at any time of this note shall, upon the terms and to the extent set forth in Article III, Section 2 of the Deed of Trust, result in a partial release of the i Vendor's Lien referenced in the Agreement and the lien of the Deed of Trust. In addition,
in accordance with the terms of the Assignment Agreement, it is understood that if this note is prepaid by depositing funds in trust as provided for in section 4 of the Assignment Agreement, there will be a release of said Vendor's Lien and the lien of the Deed of Trust. Partial prepayment of this Note shall also cause all subsequent payments of the principal, interest, and prepayment premiums shown on Exhibit A attached hereto to be reduced proportionately based on the percentage of the total principal remaining to be paid thereafter. ;
6. The principal of, all accrued interest on this note and the applicable amount of prepayment premium shown on Exhibit A attached hereto due at the time of occurrence of the referenced events, as well as any resulting prepayment premium with respect to the underlying Tex-La Comanche Peak Debt referred to in paragraph 5 hereof, shall become due and payable at the option of the holder hereof if one or more of the following events shall occur (except if such event is that specified in either Article II, Section 1(d) or Section 1(e) of the Deed of Trust, then this note shall become due automatically without notice or other action on the part of the holder hereof):
(i) Default shall be made by the Borrower in the payment of any installment of ; the principal of or interest on this note when and as the same shall become due and such default shall continue for a period of fifteen (15) days after receipt j of written notice thereof by the Borrower from the holder hereof; or ; (ii) an Event of Default shall occur under the Deed of Trust. Said option shall continue until all such defaults have been cured. In case any one or .more 1 of the events of default specified her61nbefore shall have happened and be continuing, the holder of this note may proceed to protect and enforce its rights either by suit in equity and/or by action at law, or by other appropriate proceedings, whether for the specific l performance (to the extent permitted by law) cf any covenant or agreement contained in l this note, or in aid of the exercise of any power granted in this note, or may proceed to j enforce the payment of this note or to enforce any other legal or equitable right of the j l i 2 m______________.______ _ . _ _ _ _ _ _ . _ _ _ _ _ _ _
holder of this note. In the event of any such default, the holder of this note may, at its option, declare the entire principal, allinterest accrued on this note and the prepayment premiums referred to above to be, and the same shall thereupon become, forthwith due
. and payable, without any presentment, demand, protest or cther notice or diligence of any :
kind, all of which are hereby expressly waived. In such event, the Borrower shall I forthwith pay to the holder of this note the entire principal of this note, all interest , accrued hereon and the prepayment premiums referred to above. No right, power or ; remedy conferred by this note or otherwise available in connection herewith shall be exclusive of any other right, power or remedy hereinaf ter available to the holder hereof. i No failure or delay on the part of the holder of this note in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege.
7. This note shall not be assignable, negotiable or transferable without the consent in writing of the Borrower, except that it is understood and agreed that this note !
is being assigned on the date hereof in accordance with the terms of the Assignment ! Agreement. Any other assignment or transfer of this note, other than a sale or transfer of this note in connection with a sale of assets by the Government now or hereinafter authoriz,ed by statute, shall be void ab initio. Notwithstanding the foregoing, in the event that Tex +La refinances any part of the Tex-La Comanche Peak Debt, Tex-La may, on l proper notice to Borrower pursuant to Section 6 of the Assignment Agreement, direct Borrower to make all or part of the payments due hereunder to the entity which provides such refinancing and such payments shall be subject to the provisions of the Assignment Agreement. ; i
8. Notwithstanding anything to the contrary contained herein, or in the Agreement, the Deed of Trust or any other agreement entered into in connection herewith, it is agreed that the aggregate of allinterest and any other charges constituting '
p interest, or adjudicated as constituting interest, under the laws of the State of Texas and contracted for, chargeable or receivable under this note or otherwise in connection with this transaction shall under no circumstances exceed the maximum amount of interest permitted by applicable law, and any excess shall be deemed a mistake by all parties and cancelled automatically, and if theretofore paid shall, at the option of the holder hereof, l be refunded to the Borrower or credited to the principal amount owing hereon. In the event the maturity of this note is accelerated by reason of an election by the holder hereof resulting from a default hereunder, or in the event of voluntary prepayment in accordance herewith by the Borrower, then earned interest may never include more than the maximum amount permitted by law, computed from the date hereof until maturity or prepayment, and any unearned interest in excess of the maximum amount permitted by law, computed from the date hereof until maturity or prepayment, shall be cancelled automatically and if theretofore paid shall, at the option of the holder hereof, be refunded to the Borrower or credited on the principal amount owing hereon. All sums paid or agreed to be paid to the holder hereof for the use, forbearance or detention of the 1 indebtedness of the Borrower to the holder hereof shall, if necessary, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full term of such indebtedness until payment in full so that the actual rate of interest on
- account of such indebtedness is uniform throughout the actual term of this note and does i
not exceed the maximum lawful rate throughout the entire term of this note. The terms and provisions of this paragraph shall control and supersede every other provision of all agreements between the Borrower and the original holder hereof.
9. This note shall be construed and enforced in accordance with, and governed by, the laws of the State of Texas. This note shall be binding upon and inure to the benefit of the Borrower and Tex-La and their respective successors and assigns (to the extent permitted).
IN WITNESS WHEREOF, the Borrower has caused this note to be signed in its corporate name and its corporate seal to be hereunto affixed and attested by its officers thereunto duly authorized, all as of the date and year first above v ritten. TEXAS LTTILfrIES ELECTRIC COMPANY l l (SEAL) By: ' j Its: ATTEST: By: _ Its: I i i l _7 l
i EXHl81T A (Amortization senedute for the note dated 1989.1 Outstanding Principal Principal Interest Total Prepayment Date Balance Payment Payment Payment Premium 31 Aug 89 $157,000,000.00 30 seo 89 s156,260,609.48 5739,390.52 $486,201.37 $1,425,591.89 S19,567,484.35 04 Dec 89 $155,572,921.50 5687,687.98 12,129,905.81 52,817,593.79 $19,471,305.21 , 31 Dec 89 s153,354,131.45 52,218,790.05 52,057,104.18 54,275,894.23 519,437,219.36 ) 31 Mar 90 5153,142,306.97 s211,824.48 $1,998,860.94 $2,210,685.42 $19,336,652.96 1 04 Jun 90 $153,142,306.97 50.00 $4,106,570.50 $4,106,570.50 $19,241,771.04 30 Jun 90 $152,928,923.87 $213,383.10 $1,993,300.55 $2,206,683.65 $19,204,030.98 ], 30 seo 90 $151,162,463.59 $1,766,460.28 51,987,699.24 $3,754,159.52 $19,089,474.60 l 04 Dec 90 $150,755,604.39 5406,859.20 54,106,570.50 54,513,429.70 518,979,748.45 ) 31 Dec 90 $146,735,910.41 s4,019,693.98 $1,941,329.66 $5,961,023.64 518,942,765.11 ! 31 Mar 91 S146,689,146.43 $46,763.98 S1,835,812.69 $1,882,576.67 518,845,476.47 1 04 Jun 91 5146,689,146.43 S0.00 S4,084,930.04 54,084,930.04 $18,743,323.60 l 30 Jun 91 S146,631,580.75 s57,565.68 $1,834,585.14 $1,892,150.82 $18,708,898.57 : 30 seo 91 5146,559,662.29 $71,918.45 51,833,074.04 s1,904,992.49 $18,607,555.84 l 04 Dec 91 $146,086,045.49 S473,616,81 $4,084,930.04 54,558,546.85 $18,501,086.61 ( 31 Dec 91 S146,000,965.09 $85,080.40 $1,831,186.18 51,916,266.58 518,465,750.05 l 31 Mar 92 S145,912,762.69 588,202.39 51,828,952.82 51,917,155.21 $18,361,611.95 [ 04 Jun 92 $145,912.762.69 $0.00 54,059,738.81 54,059,738.81 518,252,541.30 ! 30 Jun 92 5145,810,375.23 $102,387.47 $1,826.637.51 51,929,024.97 518,215,770.44 ! 30 Seo 92 $145,705,266.72 5105,108.51 51,823,949.84 $1,929,058.34 $18,10 7,586.21 l 04 Dec 92 $145,163,055.11 5542,211.61 54,059,738.81 54,601,950.42 517,994.093.27 31 Dec 92 51/5,046,882.31 s116,172.80 51,821,190.74 s1,937,363.53 517,956,460.75 31 Mar 93 S144,914,565.49 S132,316.82 $1,818,141.20 51,950,458.03 517,845,588.72 04.Jun 93 5144,914,565.49 S0.00 54,030,899.08 $4,030,899.08 517,729,635.14 , 30 Jun 93 5144,778,909.72 5135,655.77 51,814,667.88 $1,950,323.65 517.690,541.06 j 30 seo 93 5144,630,496.67 5148,413.05 51,811,106.92 51,959,519.97 $17,575,603.70 - 04 Dec 93 5143,954,906.27 5675,590.40 54,030,899.08 S4,706,489.48 517,455,118.97 31 Dec 93 S143,792,719.63 5162,186.64 51,807,211.08 51,969,397.72 $17,415,284.43 31 Mar 94 S143,617,299.51 5175,420.12 s1,802,953.68 S1,978,373.80 $17,298,034.49 04 Jun 94 $143,617,299.51 50.00 $3,994,%5.06 S3,994,965.06 $17,175,514.60 30 Jun 94 s143,437,240.01 $180,059.51 $1,798,348.90 s1,978,408.41 517,134,210.06 30 seo 94 s143,249,298.13 5187,941.87 51,793,622.34 $1,981,564.21 517,012,929.01 04 Dec 94 S142,497,491.28 5751,806.85 $3,994,%5.06 S4,746,771.91 $16,885,803.78 31 Dec 94 5142,305,062.07 $192,429.21 s1,788,688.86 si,981,118.08 $16,843,829.35 , 31 Mar 95 S142,108,052.88 $197,009.19 S1,783,637.60 $1,980,644.79 $16,720,406.81 i 04 Jun 95 5142,108,052.88 $0.00 53,954,977.16 53,954,977.16 516,591,371.44 30 Jun 95 5141,906,369.15 $201,683.73 $1,778,466.11 51,980,149.84 $16,547,882.97 30 Sep 95 s141,699,914.37 S206,454.77 51,773,171.91 $1,979,626.68 $16,420,308.22 04 Dec 95 s140,871,891.07 S828,023.30 53,954,977.16 $4,783,000.46 s16,286,477.94 31 Dec 95 $140,660,566.75 $211,324.32 $1,767,752.47 S1,979,076.79 s16,242,346.11 31 Mar 96 5140,444,272.36 s216,294.39 $1,762,205.21 51,978,499.60 $16,112,682.4 7 , 04 Jun 96 5140,444,272.36 $0.00 $3,910,935.37 53,910,935.37 s15,977,027.19 30 Jun 96 s140,2?2,905.28 5221,367.08 51,756,527.48 $1,977,894.56 $15,931,322.25 30 seo 96 f139,996,360.78 5226,544.49 S1,750,716.59 51,977,261.09 515,797,366.39 04 Dec 96 1139,073,066.92 $923,293.86 53,910.935.37 54,834,229.24 515,656,720.79 31 Dec 96 s138,841,238.13 s231,828.80 51,744,769.80 $1,976,598.60 $15,610,418.29 31 Mer 97 f138,604,015.93 $237,222.20 $1,738,684.29 $1,975,906.49 515,474,484.22 04 Jun 97 4138,604,015.93 $0.00 $3,861,826.24 S3,861,826.24 $15,332,174.62 30 Jun 97 5138,361,288.99 S242,726.94 51,732,457.21 si,975,184.16 s15,284,242.71 30 seo 9'T s138,112,943.65 $248,345.34 si,726,085.63 51,974,430.97 s15,143,887.40 04 Dec 97 $137,075,325.11 $1,037,618.54 $3,861,826.24 $4,899,444.78 $14,996,399.59 31 Dec 97 S136,821,245.39 s254,079.73 $1,719,5M.56 si,973,646.29 s14,947,940.12 31 Mar 98 S136,561,312.89 S259,932.50 s1,712,896.97 S1,972,829.47 s14,805,779.52 04 Jun 98 5136,561,312.89 $0.00 $3,806,636.28 S3,806,636.28 $14,656,869.13 30 Jun 98 S136,295,406.77 S265,906.11 S1,706,073.74 S1,971,979.86 514,606,728.23 30 sep 98 S136,023,403.73 S272,003.05 S1,699,093.71 s1,971,096.76 s14,460,032.75 04 Dec 98 S134,871,460.51 81,151,943.21 53,806,636.28 S4,958,579.49 $14,305,768.60 31 Dec 98 S134,593,234.M $278,225.86 S1,691,953.63 51,970,179.49 S14,255,174.77 31 Mar 99 5134,308,657.52 S284,577.14 $1,684,650.20 $1,969,227.34 s14,106,863.55 q 04 Jun 99 S134,308,657.52 S0.00 $3,745,365.50 S3,745,365.50 $13,951,431.55 - 30 Jun 99 5134,017,597.97 S291,059.55 s1,677,180.05 s1,968,239.60 $13,899,109.23 ; 30 sep 99 s133,719,922.19 S297,675.78 si,669,539.74 s1, % 7,215.52 s13,746,167.53 1 04 Dec 99 S132,434,600.19 $1,285,322.00 s3,745,365.50 $5,030,687,50 $13,585,220.52 l 31 Dec 99 5132,130,171.58 $306,428.61 S1,M1,725.75 S1,9M ,154.36 513,532,546.45 1 31 Mar 2000 $131,818,850.71 s311,320.86 si,653,734.50 s1,965,055.36 s13,378,248.22 04 Jun 2000 $131,818,850.71 S0.00 53,6T7,000.43 $3,677,000.43 s13,216,475.69 30 Jun 2000 S131,500,495.31 $318,355.40 $1,645,562.32 s1,963,917.72 $13,162,032.86 i 30 seo 2000 S131,174,960,14 $325,535.17 51,637,205.49 $1,962,740.66 $13,003,031.76 : 04 Dec 2000 $129,737,205.25 s1,437,754.90 $3,677,000.43 55,114,755.33 s12,835,602.88 i 31 Dec 2000 s129,404,342.08 $332,863.17 31,628,660.20 $1,961,523.36 512,780,937.92 1 31 Mar 2001 S129,063,999.62 8340,342.46 51,619,922.54 $1,960,265.00 512,620,914.66 , l I
)
1 1
ExMIBIT A (Amortitstion senscule for the note cated 1989.1 Outstanding Principet Principal Interest Total Preosyment Date Belence Payment Payment Payment Premiun 04 Jun 2001 s129,063,999.62 S0.00 $3,600,527.60 53,600,527.60 $12.453,096.04 30 Jun 2001 S128,716,023.46 5347,976.16 s1,610,988.55 $1,958,964.70 $12,396,630.77 30 seo 2001 5128,360,256.01 5355,767.46 s1,601,854.17 s1,957,621.63 512,231,861.34 04 Dec 2001 5126,770,068.21 51,590,187.80 53,600,527.60 55,190,715.39 $12,058,271.10 31 Dec 2001 5126,406,348.60 5363,719.61 $1,592,515.28 s1,956,234.89 512,001,722.65 31 Mar 2002 5126,034,512.66 S371,835.94 si,582,967.64 si,954,803.58 $11,836,296.55 04 Jun 2002 $126,034,512.66 S0.00 53,515,947.00 53,515,947.00 $11,662,780.13 30 Jun 2002 $125,654,392.83 S380,119.83 $1,573,206.95 51,953,326.78 511,604,409.79 30 seo 2002 5125,265,818.08 5388,574.75 $1,563,228.80 $1,951,803.55 s11,434,227.51 04*Dec 2002 $123,504,143.28 51,761,674.81 $3,515,947.00 s5,277,621.81 511,254,853.77 31 Dec 2002 5123,106,939.06 $397,204.22 s1,553,028.71 s1,950,232.93 $11,196,571.00 31 Mar *2003 $122,700,927.21 5406,011.85 $1,542,602.10 $1,948,613.95 $11,026,183.33 04 Jun 2003 $122,700,927.21 so.00 S3,422,245.17 S3,422,245.17 $10,847,450.68 30 Jun 2003 5122,285,925.89 $415,001.32 $1,531,944.29 51,946,945.61 $10,787,336.73 30 seo 2003 $121,861,749.52 s424,176.37 51,521,050.51 S1,945,226.88 s10,612,223.15 04 Dec 2003 S119,871,425.36 51,990,324.16 $3,422,245.17 $5,412,569.32 $10,427,584.33 31 Dec 2003 S119,437,884.51 S433,540.85 51,509,915.88 $1,943,456.73 $10,367,805.34 31 Mar 2004 5118,994,785.85 5443,098.66 s1,498,535.43 s1,941,634.09 510.193,131.26 04 Jun 2004 $118,994,785.85 $0.00 53,316,381.69 s3,316,381.69 510,009,956.45 30 Jun 2004 5118,541,932.05 S452,853.80 $1,486,904.09 51,939,757.89 59,948.353.81-30 seo 2004 5118,079,121.72 5462,810.33 $1,475,016.68 51,937,827.01 $9,769,036.81 04 Dec 2004 $115,860,148.21 $2,218,973.51 53,316,381.69 55,535,355.20 59,579,958.45 31 Dec 2004 s115,387,175.79 $472,972.42 51,462,867.91 51,935,840.33 $9,518,956.00 31 Mar 2005 s114,903,831.47 $483,344.31 si,450,452.38 S1,933,796.69 59,340,779.40 04 Jun 2005 5114,903,831,47 S0.00 s3,198,356.57 S3,198,356.57 59,154,042.46 30 Jun 2005 5114,409,901,14 $493,930.33 51,437,764.59 S1,931,694.93 $9,091,242.81 30 seo 2005 S113,905,166.23 $504,734.91 s1,424,798.92 s1,929,533.83 58,908,565.79 04 Dec 2005 $111,457,543.37 52,447,622.86 s3,198,356.57 s!,645,979.43 $8,715,985.58 31 Dec 2005 5110,941,780.83 5515,762.54 s1,411,549.63 s1,927,312.17 $8,654,071.40 31 Mar 2006 8110,414,762.98 s527,017.85 $1,398,010.86 S1,925,028.71 $8,473,298.92 04 Jun 2006 S110,414,762.98 30.00 $3,068,169.80 S3,068,169.80 58,283,998.58 30 Jun 2006 $109,876,257.46 $538,505.52 $1,384,176.64 51,922,682.17 $8,220,334.88 30 seo 2006 5109,326,027.09 s550,230.37 s1,370,040.87 $1,?1'0,271.24 s8,035,271.64 04 Dec 2006 S106,611,646.66 52,714,380.43 $3,068,169.80 85,782,550.23 57,840,252.91 31 Dec 2006 S106,049,449.39 5562,197.27 S1,355,597.33 S1,917,794.60 $7,777,824.81 31 Mar 2007 S105,475,038.15 5574,411.24 s1,340,839.65 51,915,250.89 57,595,601.95 04 Jun 2007 8105,475,038.15 S0.00 $2,923,7"4.45 S2,923,794.45 57,494,429.40 30 Jun 2007. s104,888,160.78 $586,877.37 $1,325,761.35 s1,912,638.72 $7,464,715.70 30 seo 2007 S104,288,559.91 $599,600.86 S1,310,355.82 s1,909,956.69 s?,154,686.33 04 Dec 2007 $101,269,313.68 s3,019,246.23 S2,923,794.45 $5,943,040.68 56,958,583.94 3boec 2007 ~ $100,656,726.64 5612,587.04 $1,294,616.30 $1,907,203.34 $6,896,135.15 31 Mar 2008 5100,030,885.32 $625,841.32 51,278,535 J9 s1,904,377.21 $6,713,873.14 04 Jun 2008 5100,030,885.32 S0.00 $2,763,203.55 .$2,763,203.58 $6,523,580.54 30 Jun 2008 s99.391,516.08 S639,369.24 $1,262,107.56 S1,901,476.80 $6,459,559.93 30 seo 2008 198,738,339.M -5653,176.45 51,245,324.11 S1,898,500.56 $6,273,681.72 04 Dec 2008 595,376,119.38 s3,362,220.25 52,763,203.58 se,125,423.83 56,078,172.79 31 Dec 2008 $94,708,850.67 sM7,268.71 s1,228,178.23 51,895,446.94 $6,016,302.20 31 Mar 2009 $94,027,198.76 S681,651.91 S1,210,M2.43 S1,892,314.34 55,835,707.82 04 Jun 2009 594,027,198.76 S0.00 $2,584,370.23 S2,584,370.23 s5,647,631.69 30 Jun 2009 593,330,8M. 70 $696,332.06 81,192,769.06 $1,889.101.12 $5,584,329.81 30 seo 2009 892,619,551.42 $711,315.28 S1,174,490.35 51,885,805.63 s5,400,614.73 04 Oec 2009 888,875,248.92 S3,743,302.50 s2,584,370.23 se,327,672.74 s5,207,732.60 31 Dec 2009 $5 ,149,641.08 S726,607.84 81,155,818.32 si,882,426.16 $5,147,156.08 31 Mar 2010 587,407,424.96 5742,216.12 $1,136,744.87 $1,878,960.99 54,970,264.64 04 Jun 2010 887,407,424.96 $0.00 52,385,267.48 S2,385,267.48 S4,786,700.76 30*Jun 2010 S86,649,278.32 8758,146.M $1,117,261.69 S1, ,408.33 s4,724 875.89 30 Sep 2010 S85,874,872.28 S774,406.04 S1,097,360.34 S1, ,7M.39 54,545,,487.88 04 Dec 2010 881,71 ,379.30 $4,162,492.98 S2,385,267.48 Se, ,760.46 54,357,659.46 31 Dec 2010 800,92 ,378.17 $791,001.13 51,0T7,032.19 $1, ,033.32 54,299,222.42 31 Mar 2011 s80,11 ,439.34 3807,938.83 S1, ,268.41 S1,864,207.23 S4,128,434.26 04 Jun 2011 $80,113,439.34 50.00 s2, ,864.38 S2,163,868.38 $3,952,092.14 30 Jun 2011 $79,288,213.13 S825,226.21 81, ,060.01 S1,860,286.22 S3,892,638.82 30 Seo 2011 $78,445,342.63 $842,870.50 $1,013,397.82 $1,856,268.32 S3,720,126.58 04 Dec 2011 873,825,550.96 s4,619 791.67 S2,163,868.38 86,783,660.06 S3,540,213.66 31 Dec 2011 $72,964,671.90 8860 879.06 $991,272.47 $1,852,151.53 $3,484,904.82 31 Mer 2012 $72,085,412.49 S879,259.41 8968,674.40 $1,847,933.81 S3,323,025.81 04 Jun 2012 572,085,412.49 30.00 $1,918,144.00 $1,918,146.00 S3,200,910.68 30 Jun 2012 S71,187,393.26 5898,019.23 $965,593.84 S1,843,613.07 S3,161,735.28 30 Sep 2012 S70,270,226.90 S917,1M.36 $922,020.83 $1,839,187.19 S2,938,375.11 04 Dec 2012 $65,155,028.30 $5,115,198.60 51,918,146.00 $7,033,344.59 S2,769,719.79 . 31 Dec 2012 SM,218,319.52 5936,708.78 5897,945.22 si,834,653.99 $2,718,686.49 l l
{ EXHIBIT A (Amortization seneaule for the note cated 1989.1 Outstanding Princtpel Principal Interest Total Prepayment [ Date Balance Payment Payment Payment P remt m 31 Mar 2013 563,261,664.86 $956,654.66 5873,356.61 $1,830,011.27 52,568,972.77 04 Jun 2013 563,261,664.86 $0.00 51,646,073.38 51,646,073.38 52,417,078.60 30 Jun 2013 562,284,652.53 5977,012.33 5848,244.43 $1,825,256.76 52,365.671.16 30 sen 2013 561,286,862.24 $997,790.29 5822,597.85 51,820,388.15 52,216,312.97 04 Dec 2013 555,600,040.27 55,686,821.97 $1,646,073.38 $7,332,895.35 52,062,787.86 31 Dec 2013 $54,581,043.04 $1,018,997.22 $796,405.86 $1,815,403.08 52,017,395.24 31 Mar 2014 553,540,401.06 $1,040,641.96 5769,657.18 si,810,299.16 51,883,703.15 04 Jun 2014 553,540,401.06 $0.00 $1,343,596.65 51,343,596.65 S1,750,241.80 30 Jun 2014 $52,477,667.47 $1,062,733.60 s742,340.33 51,805,073.93 51,704,904.31 30 sen 2014 $51,392,386.16 51,085,281.30 5714,443.57 si,799,724.87 51,572,930.30 04 Dec 2014 545,057,724.37 56,334,661.79 51,343,5 % .65 s7,678,258.44 51,439,144.74 31 Dec 2014 $43,949,429.85 51,108,294.52 5685,954.94 $1,794,249.45 $1,400,998.30 31 Mar 2015 S42,817,647.01 51,131,782.84 5656,862.21 51,788,645.05 $1,287,848.58 04 Jun 2015 542,817,647.01 S0.00 51,006,661.93 s1,006,661.93 51,177,966.55 30 Jun 2015 541,661,890.92 $1,155,756.09 5627,152.91 51,782,909.00 51,140,392.46 30 sen 2015 540,481,666.63 51,180,224.28 5596,814.31 51,777,038.59 $1,030,583,50 04 Dec 2015 $33,461,056.79 $7,020,609.84 51,006,661.93 $8,027,271.77 5921,958.58 31 Dec 2015 532,255,859.17 51,205,197.62 $565,833.42 S1,771,031.04 5892,886.68 31 Mar 2016 531,025,172.62 51,230,686.55 $534,196.98 51,764,883.53 5805,434.89 04 Jun 2016 $31,025,172.62 50.00 5633,242.27 5633,242.27 5724,986.39 30 Jun 2016 529,768,470.92 51,256,701.70 5501,891,46 S1,758,593.16 5697,103.39 30 sen 2016 528,485,216.98 $1,283,253.94 5468,903.04 $1,752,156.98 $614,908.75 04 Dec 2016 $20,664,334.42 57,820,882.56 5633,2 4 .27 $8,454,124.83 5537.608.95 31 Deca 2016 s19,353,980.05 51,310,354.37 5435,217.63 51,745,571.99 5519,770.92 31 Mar 2017 S18,371,572.46 5982,407.60 5400,820.82 S1,383,228.42 5464,077.12 04-Jun 2017 518,371,572.46 S0.00 $217,256.86 5217,256.86 $419,041.42 30 Jun 2017 517,368,275.51 51,003,296.95 5375,032.62 si,378,329.57 $402,761.38 30 sep 2017 S16,343,657.95 51,024,617.56 $348,6%.08 $1,373,313.64 5351,909.04 04 Dec 2017 $14,086,576.22 52,257,081.73 S217,256.86 S2,474,338.59 5310,263.60 31 Dec 2017 $13,040,197.87 $1,046,378.35 s321,799.87 $1,368,178.22 $297,844.20 31 Mar 2018 812,097,298.81 s942,899.06 S294,332.44 $1,237,231.50 $258,319.12 04 Jun 2018 512,097 298.81 S0.00 597,204.80 s97,204.80 $228,668.35 30 Jun 2018 $11,134,326.07
, $962,972.74 5269,581.34 $1,232,554.08 5217,738.23 30 sep 2018 $10,150,865.21 $983,460.85 S244,303.30 $1,227,764.15 $183,495.90 04 Dec 2018 59,113,246.68 51,037,618.54 597,204.80 si,134,823.34 $157,718.96 l 31 Dec 2018 $8,108,874.73 S1,004,371.95 8218,487.45 $1,222,859.40 $149,453.90 31 Mar 2019 57,339,062.19 $769,812.54 $192,122.69 5961,935.23 5123,774.51 04 Jun 2019 s7,339,062.19 30.00 $42,014.84 $42,014.84 s105,523.66 30 J w 2019 $6,552,749.39 $786,312.80 $171,915.11 8958,227.91 $98,716.84 30 seo 2019 $5,749,595.69 $803,153.70 5151,274.40 8954,428.10 $77,651.74 04 Dec 2019 54,959,680.61 5789,915.07 542,014.84 $831,929.92 $62,836.46 31 Dec 2019 54,139,338.32 j $820,342.30 s130,191.62 5950,533.91 558,238.85 1 31 Mar 2020 $3,532,077.94 5607,260.37 $108,657.63 5715,918.00 544,330.73 30 Jun 2020 52,911,673.26 5620,404.68 $92,717.05 5713,121.73 532,341.91 30 sen-2020 52,277,852.90 5633,820.36 $76,431.42 5710,251.76 522,364.06 l 31 Dec 2020 s1,630,339.89 5647,513.01 $59,793.64 $707,3Cs.65 s14,491.90 31 Mar 2021 $1,236,057.40 $394,282 49 S42,796.42 5437,078.91 58,823.33 30 Jun 2021 5833,027.61 $403,029.80 $32,446.51 S435,476.30 $4,476.80 30 sep 2021 S421,069.91 S411,957.70 $21,866.97 S433,824.67 51,514.33 31 Dec 2021 $0.00 S421,069.90 811,053.09 S432,122.99 $0.00 $157,000,000.00 5326,568,420.15 S483, 568,420.14 es E 1 < t?
l
EXHIBFr F SPECIAL WARRANTY DEED WITH VENDOR'S LIEN AND BILL OF SALE l" THE STATE OF TEXAS : COUNTIES OF HOOD, i KNOW ALL MEN BY THESE PRESENTS: SOMERVELL, : JOHNSON AND : TARRANT : THAT, TEX-LA ELECTRIC COOPERATIVE OF TEXAS, INC., a Texas corporation having its principal office at 2905 Westward Drive, Nacogdoches, Nacogdoches County, Texas (hereinafter referred to as " Grantor"), for and in consideration of the sum of TEN AND NO/100) DOLLARS ($10.00) and other good and valuable consideration paid in cash to Grantor by the Grantee herein named, has GRANTED, BARGAINED, SOLD, , ASSIGNED, TRANSFERRED and CONVEYED, and by these presents does GRANT, BARGAIN, SELL, ASSIGN, TRANSFER and CONVEY unto TEXAS UTILITIES ELECTRIC COMPANY, a Texas corporation having its principal office at 2001 Bryan Street, Suite 1900, Dallas, Texas 75201 (hereinafter referred to, together with its successors and. I assigns, as " Grantee"), the following: l l (a) all of Grantor's right, title and interest as tenant in common (such right, title and interest being that which was conveyed and transferred to Grantor by j Grantee or its predecessors) in and to the following (collectively, the " Group I i Real Property"); (i) that certain land located in Hood and Somervell Counties of the State of Texas, more particularly described on Exhibit A-I attached hereto and incorporated herein for all purposes, (ii) all buildngs and other structures, fixtures and improvements (including Squaw Creek Lake and Park) located on such land, (111) the estates, rights, privileges, easements and appurtenances belonging or in anywise appertaining to such land and the buildings, structures and improvements located thereon, and, (iv) all subsurface rights, oil, gas and mineral interests, air rights and development rights; (b) all'of Grantor's right, title and interest as tenant in common (such right, title and interest being that which was cenveyed and transferred to Grantor by Grantee or its predecessors)in and to the Purchased Assets as defined in that certain Agreement dated March 23,1989, and filed , 1989, in Docket. before the Public Utility Commission of Texas (the " Agreement") between GTantor and Grantee, a copy of such definition being attached hereto as Exhibit A-II and incorporated herein, to the full extent that such Purchased Assets or relevant parts thereof may be personal property according to' the laws of the State of Texas, together with the rights and appurtenances thereto in anywise belonging (collectively, the " Group I Personal Property"); 1 1 (c) all of Grantor's right, title and interest as tenant in common (such right, title J and interest being that which was conveyed and transferred to Grantor by Grantee or its predecessors as such right, title and interest may, by agreement i of the parties involved, have heretofore- been adjusted or be subject to l adjustment hereafter) in and to that part of the Transmission Facilities (as defined in the Agreement, a copy of such definition being attached hereto as Exhibit A-III and incorporated herein) which is real property according to the laws of the State of Texas including, without limitation, the following (collectively, the " Group II Real Property"); (i) that certain land, and those easements and rignts of way affecting land, located in Hood, Somervell, Johnson and Tarrant Counties of the State of Texas, more particularly described on Exhibit A-IV attached hereto and incorporated herein for all purposes, ; (ii) all buildings and other structures, fixtures and improvements located on such land, including, without limitation, the Comanche Peak-Cleburne Junction and Cleburne Junction-Everman 345 kV electrical transmission lines approximately 51.5 miles in length to the full extent that such transmission lines or relevant parts thereof may be real property , according to the laws of the State of Texas, ' (iii) the estates, rights, privileges and appurtenances belonging or in anywise appertaining to such land, such easements and rights of way and such buildings, structures and improvements, and, (iv) all subsurface rights, oil, gas and mineral interests, tir rights and development rights; and (d) all of Grantor's right, title and interest as tenant in common (such right, title and interest being that which was conveyed and transferred to Grantor by Grantee or its predecessors as such right, title and interest may, by agreement of the parties involved, have heretofore been adjusted or be subject to aquatment hereafter) in and to that part of the Transmission Facilities (as defined in the Agreement, a copy of such definition being attached hereto as Exhibit A-III and incorporated herein) to the full extent that the same or relevant parts thereof may be personal property according to the laws of the State of Texas including, without limitation, all equipment and also including the Comanche Peak-Cleburne Junction and Cleburne Junction-Everman 345 kV electrical transmission lines approximately 51.5 miles in length to the full extent that such transmission lines or relevant parts thereof may be personal property according to the laws of the State of Texas (collectively, the " Group II Personal Property").
Tho Group I Real Property and the Group I Pgrsonal Property shall be referred to herein collectively as the " Group I Property". The Group Il Real Property and the Group II Personal Property shall be referred to herein collectively as the " Group II Property". The Group ! Real Property, the Group I Personal Property, the Group II Real Property and the GroupII Personal Property shall be referred to herein collectively as the " Subject Property". THIS CONVEYANCE IS MADE SUBJECT, however, to the Joint Ownership Agreement (as defined in the Agreement) including, without limitation, Section 3.03 thereof which contains a waiver by the parties thereto of the right to partition, and subject also to the other matters identified on Exhibit B-I attached hereto and incorporated herein. The Joint Ownership Agreement (including the amendments thereto but excluding the exhibits to such agreement or amendments) is attached hereto and incorporated herein as Exhibit B-II (the matters set forth on Exhibit B-I together with the Joint Ownership Agreement shall be referred to herein collectively as the " Permitted Er.cumbrances"). TO HAVE AND TO HOLD the Subject Property unto said Grantee forever; and subject to the Permitted Encumbrances, Grantor does hereby bind itself and its successors and assigns to WARRANT AND FOREVER DEFEND all and singular the Subject Property unto the said Grantee, against every person whensoever lawfully claiming or to claim the same or any part thereof by, through and mder Grantor, but not otherwise. By delivery of this Special Warranty Deed With Vendor's Lien and Bill of Sale, Grantor dallvers possession, dominion and control over its right, title and interest in and to the Subject Property. Grantor warrants the Subject Property to be identical to the interests conveyed and transferred by Grantee to Grantor unless and except (1) the same have been increased, whether by Grantor or otherwise, or (ii) the same have been dimirdshed by joint activities of Grantor with all other Owners (as defined in the Agreement, a copy of such definition being attached hereto as Exhibit A-V and
incorporated herein) or activities by, through, or under the Project Manager (as defined in the Agreement, a copy of such definition being attached hereto as Exhibit A-VI and - incorporated herein). But it is expressly agreed that a Vendor's Lien, as well as the Superior Title in and to the Subject Property, is retained against the Subject Property until that certain Note of even date herewith executed and delivered by Grantee and payable to Grantor in the original sum of Dollars e ($ ) and all interest thereon, and prepayment premiums due, if any, are paid I according to the face, tenor, effect and reading thereof, when this Special Warranty Deed With Vendor's Lien and Bill of Sale shall become absolute, it being understood and agreed that such Vendor's Lien shall be released and Superior Title in and to the Subject Property vested in Grantee to the extent, in the manner and at the times described in Article III, Section 2 (regarding partial payment of the aforementioned Note) of that certain Deed of Trtat of even date herewith covering the Subject Property from Grantee in favor of Grantor securing payment of said Note, reference to which Deed of Trust is hereby made for all purposes. THE SUBJECT PROPERTY IS BEING SOLD "AS IS". GRANTOR MAKES NO . WARRANTIES CCNCERNING THE MERCHANTABILITY OR CONDITION OR FITNESS FOR ANY PARTICULAR PURPOSE OF THE SUBJECT PROPERTY EXCEPT AS EXPRESSLY PROVIDED IN THE AGREEMENT. All capitalized terms used herein, and not otherwise defined, have the meanings ascribed to them in the Agreement.
EXECUTED on the date of the acknowledgement hereto, to be effective for all purposes on the day of , 19_. TEX-LA ELECTRIC COOPERATIVE OF TEXAS, INC. 1 By: Its: ATTEST: By: Its: THE STATE OF TEXAS S S-COUNTY OF S Before me, the undersigned authority, on this day appeared , known to me to be the person whose name is subscribed to the foregoing instrument, and acknowledged to me that he/she executed the instrument by proper authority in the capacity therein stated and for the purposes and consideration expressed. In the instrument. GIVEN UNDER MY HAND AND SEAL OF OFFICE on , 1988. Notary Public in and for the State of Texas Typed / Printed Name of Notary My Commission Expires:
EXHIBfr A-I [ Description to be attached prior to Ciming] l l 4 l ~ - _ _ _ _ __ ._ . _ _ .
EXHIBfr A-D 1 (Description of Purchased Assets, as set forth in subparagraph (gg) of the Definittoos in the Agreement, to be attached prior ! to Closingl I i
) EXHIBfr A-HI (Definition of the Transmission Facilities, as set forth in subparagraph (qq) of the Definitions , in the Agreement, to be attached prior to Closing]
l 1 EXHIBIT A-IV i 1 1 1
)
1 4
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i I i [ Description to be attached prior to Closing] l l
i EXHIBrr A-Y i [ Definition of Owners, as set forth in subparagraph (w) of the Definitions in the Agreement, to be attached prior to Closing] I
l EXHIBIT A-VI i l i I (Definition of Project Manager, as set forth in mabparagraph (dd) of the Definitions in the Agreement, to be attached prior to Closing l
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EXHIBfr B-I d I l 1 1 i i i [ List of Permitted Exceptions, as set forth in subparagraph (ce) of the Definitions in the Agreement, to be attached prior to Closing] I l 1 l l 1
EXIHBIT B-H i [ Joint Ownership Agreement to be attached prior to Closing) 1 4 l l l 1 I
EXHIBfr B-II
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l l I i l l , l l 1 [ Joint Ownership Agreement to be attached prior to Closing] i I l i I I l l l l l
___ ______-___-____ _ _ __-__ ___ _ ___- __ - _ _ _ _ _ _ - _ - _ _ _ _ _ _ . _ _ _ _ _ _ _ _ _ _ _ _ _ _ - _ _ _ _ = _ _ _ EXHIBIT G AMENDED AND RESTATED POWER SUPPLY AGREEMENT THIS AGREEMENT is made and entered icto this day of , 1989, by and between Texas Utilities Electric Company (hereinafter referred to as "TU Electric") and Tex-La Electric Cooperative of Texas,Inc. (hereinaf ter referred to as
" Tex-La"), corporations organized under the laws of the State of Texas.
WHEREAS, Tex-La is the power supplier for its member systems (Deep East Texas Electric Cooperative, Inc.; Jasper-Newton Electric Cooperative, Inc.; Rusk County - Electric Cooperative, Inc.; Sam Houston Electric Cooperative, Inc.; Cherokee County Electric Cooperative Association; Wood County Electric Cooperative, Inc.; and Houston County Electric Cooperative,Inc.] and is authorized and has for its purposes, the right to - engage in the business of generating and transmitting electric power and energy; and I WHEREAS, in connection with the acquisition by Tex-La of an undivided ownership interest in the Comanche Peak Steam Electric Station, Tex-La and TU Electric's predecessor in interest, Texas Power & Light Company, executed a Power. Supply Agreement on December 9,1980 and which was amended by the Amendment of Power Supply Agreement executed on February 12,1982; and WHEREAS, pursuant to the Agreement by and between Tex-La and TU Electric executed on March 23, 1989, Tex-La agreed, inter alla, to sell to TU Electric and TU Electric. agreed, inter alla, to purchase from Tex-La all of Tex-La's undivided ownership interest in the Comanche Peak Steam Electric Station; and WHEREAS, Tex-La and TU Electric desire to amend and restate said Power Supply
. Agreement of December 9,1980, as amended on February 12,1982; and WHEREAS, such Power Supply Agreement is being amended and restated as a result of, and an integral part of, said agreement of March 23,1989 ebove described, and as l
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additional consideration to Tex-La for the agreements and commitments of Tex-La thereunder, NOW, THEREFORE, in consideration of the mutual covenants and agreements of the Parties, each to the other, it is agreed as follows: ARTICLE I RECITALS 1.1 Tex-La's Current Resources: At the date of execution hereof, power and energy required by Tex-La for resale to its member cooperatives is purchased:
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(a) from Southwestern Power Administration pursuant to agreement of l l October 20,1958, between the United States of America and Tex-La Electric ! Cooperative, Inc., as amended, and pursuant to agreement of February 29, i 1984, between the United States of America and Tex-La and Rayburn Country { Electric Cooperative, Inc., and which power is transmitted by TU Electric ! I pursuant to agreement of April 4,1947, between TU Electric's predecessor in i interest, Texas Power & Light Company, and the United States of America, as i amended, and pursuant to agreement of October 30, 1984, between TU Electric and Tex-La and Rayburn Country Electric Cooperative, Inc.; and (b) from TU Electric pursuant to agreement embodied in letter dated l June 30,1987 from Tex-La to TU Electric and letter dated July 1,1987 from I TU Electric to Tex-La. Additionally, at the date of execution hereof, Tex-La is, from time to time, purchasing economy energy for resale to its member cooperatives: (aa) from Houston Lighting and Power Company (HL&P) pursuant to agreement between Tex-La and HL&P of February 10, 1986, and a Scheduling Agent Agreement between Tex-La and TU Electric of November 13,1986; and j l t
(bb) from West Texas Utilities. Company (WTU) pursuant to certain arrangements between Tex-La and WTU and a Scheduling Agent Agreement between Tex-La and TU Electric of July 29,1987.
, 1.2 Partial Requirements Wholesale Sale: Upon the Effective Date of this Agreement, the aforesaid agreement referenced in Section 1.l(b) shall automatically terminate and be of no further force or effect. The agreements referenced in Section 1.l(a), (aa) and (bb) shall remain in full force and effect according to their terms wholly unaffected by the provisions of this Agreement except that the Economy Energy Scheduling Agent Agreements referenced in Section 1.l(aa) and (bb) are hereby modified only to the extent that same are inconsistent with the provisions of Section 8.2 and Article IV of this Agreement. Except for power and/or energy purchased by Tex-La pursuant to said agreements referenced in Section 1.l(a), (aa) and (bb), energy purchased pursuant to any new economy energy arrangement (s) entered into by Tex-La pursuant to the terms of this Agreement, and power and energy from Tex-La's Future Power Supply Resources (as such term is defined in Section 2.12 hereof), all power and energy required by Tex-La for resale to its member cooperatives shall be provided by TU Electric as Supplemental Capacity and Supplemental Energy in accordance with Article III hereof.
1.4 Later Provisions Govern: The rights and obligations of the Parties hereto and definitions of terms herelii employed shall be as set forth in subsequent provisions hereof. Nothing in this Article I shall vary, %ntradict or modify such definitions and provisions. ARTICLE II ' DEFINITIONS The following terms herein shall have the following meanings:
2.1 Agreement
The " Agreement" shall be this Amended and Restated Power Supply Agreement. 2.2 Economy Energy Scheduling Agent Agreements: " Economy Energy Scheduling Agent Agreements" shall mean the Scheduling Agent Agreement for Economy Energy I - - _ _ _ _ _ _ _ _ _ _ _ -
froni West Texas Utilities Company, dated July 29, 1987 and the Scheduling Agent
. Agreement for Economy Energy, regarding purchases from HL&P, dated November 13, ))
1986, 2.3 Effective Date: The " Effective Date" of this Agreement shall be the date first written above. 2.4 Firm Capability: " Firm Capability" means capability which should be available I at all times and even under adverse conditions, during a definite or committed period; to be firm, capability requires both reserve capacity and spinning reserves. l 2.5 Metered Hourly Energy: " Metered Hourly Energy" shall have the meaning as 1 defined in Section 8.1 hereof.
2.6 Parties
" Parties" shall be TU Electric and Tex-La. l l 2.7 Peak Demand: " Peak Demand" shall mean the maximum demand measured ) during a billing month at each Point of Delivery during the time interval specified in the j applicable tariff referenced in Section 3.4. l
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I 2.8 Points of Delivery: " Points of Delivery" shall have the meaning as defined in ) 1 Section 7.1 and shall be those Points of Delivery listed in Exhibit A hereto, as may be
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amended from time to time, at which TU Electric's system is interconnected with i Tex-La's electric system for purposes of delivering power and/or energy to Tex-La for l resale. , 2.9 Power Supply Resources: " Power Supply Resources" shall mean Tex-La's j l power and/or energy supply resources, other than- the Supplemental Capacity and Supplemental Energy provided by TU Electric. At any time during the term of this l Agreement, the maximum number of such Power Supply Resources shown on Exhibit E shall not exceed six (6). Said Exhibit E may be amended from time to time in accordance with this Agreement in order to accommodate additional Power Supply Resources or to reflect deletions or subst'itutions of Power Supply Resources so long as the maximum number of such Power Supply Resources does not exceed six (6). Such Power Supply
l l l Resources listed on Exhibit E, as same may be amended from time to time, shall include any Tex-La Future Power Supply Resources in accordance with the terms of this
' Agreement ' and also include any new economy energy arrangements to offset Supplemental Energy (including offsetting Supplemental Energy by virtue of energy in 1
excess of the Firm Capability of a Tex-La Future Power Supply Resource being received from an Electric Reliability Council of Texas Control Area other than TU Electric's from I which such Tex-La Future Power Supply Resource emanates) provided that, as concerns any such new economy energy arrangements, such may be reflected on Exhibit E only if Tex-La e.nd TU Electric shall have executed an economy energy scheduling agent agreement containing the same terms and conditions as set forth in the Scheduling Agent Agreement for Economy Energy from West Texas Utilities Company between TU Electric j and Tex-La dated July 29,1987 (as said Scheduling Agent Agreement for Economy Energy l from West Texas Utilities Company is modified by the terms of this Agreement), TU Electric agreeing to negotiate in good faith such economy energy scheduling agent agreement (s). Except for a reasonable period sufficient for TU Electric to make any i required computer hardware and/or software changes to accommodate such new economy energy arrangements, nothing herein shall require advance notice for execution and implementation of new economy energy arrangements pursuant to said additional economy energy scheduling agent agreement (s). 2.10 Supplemental Capacity: " Supplemental Capacity" shall have the meaning defined in Seetion 3.1 hereof. 2.11 Supplemental Energy: " Supplemental Energy" shall have the meaning defined in Section 3.1 hereof. l 2.12 Tex-La's Future Power Supply Resources:
rex-La's Future Power Supply Resources" means Firm Capability that may be supplied from (1) jointly owned generating units covered by ownership participation agreements, if any, which may in the future be voluntarily entered into between Tex-La and TU Electric, and (2) additional Tex-La power ;
= _ _ - _ _ _ _ _ - _ _ _ _ - - _- .
supply resources hereinaf ter obtained independently by Tex-La, where Tex-La has served i upon TU Electric not less than three (3) years' prior written notice (such notice not being i 4 required regarding a scheduling agent agreement as described in Section 4.8 hereof)of its intention to use such additional power supply resources and provided that appropriate transmission service to deliver power from such other supply resources to TU Electric's transmission system is agreed to by the Parties. For purposes of this Agreement, power and energy supplied Tex-La on account of Tex-La's entitlement to power and energy ! from the Denison Dam Hydroelectric Project and/or the Whitney Dam Hydroelectric Project prior to the termination of the agreement of October 30,1984 among TU Electric, Tex-La and Rayburn Country Electric Cooperative, Inc. shall not be one of Tex-La's Future Power Supply Resources. The Power Supply Resources listed on Exhibit B hereto l prior to the Execution of this Agreement, if any (except any new economy energy arrangements), shall be treated as Tex-La's Future Power Supply Resources for all purposes under this Agreement except that the minimum three (3) years' prior written notice requirement shall not apply to those Power Supply Resources listed on said j Exhibit B. 2.13 Uncontrollable Force: " Uncontrollable Force" shall mean any cause beyond the reasonable control of the Party affected, including, but not restricted to, failure or threat of failure of facilities or fuel supply, flood, earthquake, storm, fire, lightning, epidemic, war, acts of public enemy, riot, civil disturbance or disobedience, strike, lockout, work stoppages, other industrial disturbance or dispute, whether determined to have arisen out of an unfair labor practice by any Party, labor or material shortage, ; sabotage, restraint by court order or other public authority, any action or non-action by, or failure to obtain the necessary authorizations or approvals from, any governmental agency or authority, and breakdown or malfunction of equipment. Nothing contained herein shall be construed so as to require a Party to settle any strike, lock out, or i stoppage, or other industrial disturbance or dispute in which it may be involved.
-o- !
F' 2.14 Unintentional Energy: " Unintentional Energy" shall have the meaning as , defined in Section 8.1 hereof. ARTICLE III SUPPLEMENTAL CAPACITY AND SUPPLEMENTAL ENERGY 3.1 Purchase and Sale of Supplemental Capacity and Supplemental Energy: Beginning with the Effective Date of this Agreement, Tex-La shall purchase from , TU Electric and TU Electric will sell to Tex-La, at each of the Points of Delivery, during ! each billing interval (as specified in the then applicable TU Electric tariff) of each billing month during the term hereof for resale to Tex-La's member cooperatives the following: (a) Supplemental Capacity equal to the difference between the metered demand during the billing interval (as specified in the then applicable TU Electric tariff) on each of the metering points at each Point of Delivery delivering power and energy to Tex-La for resale and the sum of: (i) capacity furnished to Tex-La from TU Electric associated with the power generated at the South Unit of the Denison Dam Hydroelectric Project as specified and determined in accordance with the agreement of October 30,1984, among TU Electric, Tex-La and Rayburn Country Electric Cooperative, Inc., until 1 termination of such agreement; and (11) a portion (CPp) of the Firm Capability of Tex-La's Future Power Supply Resources. The quantity CPp shall have the following definition: CPF = AFCI x FPSRC x [ (1/TLd) or (1/DL d )l' w here, AFCi shall be the ith Point of Delivery's share of the Firm Capability of the sum of Tex-La's Power Supply Resources for a given hour of the billing period; l
The factor "(1/DL d)" shall not be used for Points of Delivery at voltages greater than or equal to 69 kV. The factor "(1/TLd)" shall not be used for Points of Delivery at voltages less than 69 kV. .
l l i
, 1 AFCI is equal to the 60-minute integrated demand for the ith Point of Delivery during each hour of the current billing month divided by the sum of ' . the demands for all Tex-La's Points _of Delivery during said hour.
FPSRC = The Firm. Capability (MW) of Tex-La's Future Power Supply i l- Resources actually scheduled and delivered to TU Electric's i transmission system during a given clock hour .on behalf of I
-Tex-La, in accordance v'ith the terms of this Agreement, !
coincident with the metered demand at the ith Point of l Delivery during the same hour of the billing month. TLd = The TU Electric transmission system demand loss factor as contained in TU Electric's Cost of Service Study most recently ( approved by the Public Utility Commission of Texas. At the time of execution of this Agreement, this factor is 1.03063139 ! as shown in Exhibit C attached hereto and made a part hereof. l DLd = The 'TU Electric primary system demand loss factor as contained in TU Electric's Cost of Service Study most recently 1 approved by the Public Utility Commission of Texas. - At the time of execution of this Agreement, this factor is 1.05802362 as shown in Exhibit C attached hereto and made a part hereof. { (b) Supplemental Energy, at each Point of Delivery, equal to hourly metered kilowatt hour energy deliveries for resale less the sum of: (i) energy supplied to Tex-La from TU Electric associated with the generation from the 1 South Unit of the Denison Dam Hydroelectric Project (EPHDEN) as specified and determined in accordance with the agreement of October 30,1984 among TU Electric, Tex-La and Rayburn Country Electric Cooperative, Inc., until termination of such agreement, and (ii) a portion (EPHECON) of the energy scheduled and delivered from the sources identitled in the. Economy Energy Scheduling Agent Agreements and any new economy energy arrangements entered into between Tex-La and TU Electric pursuant to the terms of this Agreement, and (iii) a portion (EPHF) of the energy from Tex-La's Future
' Power Supply Resources.
The quantities EPHDEN, EPHECON, and EPHP shall have the following definitions: . EPHDEN = The energy metered at each Point of Delivery that receives credit for power and energy generated at the South Unit of ; Denison Dam during such hour multiplied by the quantity ; 15 MW divided by the sum of Tex-La's and Rayburn Country Electric Cooperative's highest metered non-coincident peak l _ _ __ __________ - - - - _ . - - - _ - - - - - - _ - - - _ - - - - - - - - - - - - - _ _ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -------------------d
fif teen (15) minute demands (expressed in MW) during the most recent billing period and previous eleven (11) billing periods at the points of delivery to Tex-La and Rayburn Country Electric Cooperative that receive credit for power and energy generated at the South Unit of Denison Dam. 1 EPHECON = AFEi x ECONHE x ((1/TLe) o_r (1/DLe)]* EPHP = AFEi x FPSRHE x ((1/TLe) of (1/DLe)]* where, I AFEi is equal to the metered energy for the ith Point of Delivery during each hour of the current billing month divided by the sum of the metered energy for all Tex-La's Points of Delivery during said hour. TLe loss factor as used in the
= The average by determination transmission energy,ty Commission of Texas of the Public Utiu TU Electric's fuel factors then currently in effect for transmission voltage line losses. At the time of the execution of this Agreement, this factor is equal to 1.024789 as shown in Exhibit D attached hereto and made a part hereof.
DLe = The average distribution energy loss factor used in the determination by the Public Utility Commission of Texas of TU Electric's fuel factors then currently in effect for primary voltage line losses. At the time of the execution of this ; Agreement, this factor is equal to 1.051741 as shown in i Exhibit D attached hereto and made a part hereof. ECONHE = The scheduled generation (MWH) actually scheduled and delivered on behalf of Tex-La as provided in the Economy Energy Scheduling Agent Agreements and any new economy energy arrangements entered into between Tex-La and TU Electric pursuant to the terms of this Agreement during said hour. FPSRHE = The energy (MWH) associated with Tex-La's Future Power Supply Resources actually scheduled and delivered on behalf of
' Tex-La in accordance with the terms of this Agreement during said hour.
For Points of Delivery at voltages equal to or greater than 69 kV, the factor
"(1/DLe)" shall not be used. For Points of Delivery less than 69 kV, the factor "(1/TLe)" l shall not be used. I I
{ 1 {
Subject to negotiation of appropriate arrangements with third parties and subject to the execution of an economy energy scheduling agent agreement between Tex-La and TU Electric which shall include the scheduling criteria set forth in Section 4.6 hereof, Tex-La may schedule quantitles of energy from an Electric Reliability Council of Texas Control Area other than TU Electric's from which a Tex-La Future Power Supply Resource emanates which are in excess of the Firm Capability of such Tex-La Future Power Supply Resource, provided that in no event shall the quantity FPSRC defined in Section 3.l(a) hereof exceed the Firm Capability of said Tex-La Future Power Supply Resource. All energy scheduled and delivered into TU Electric's transmission system from such a Control Area shall be included in the quantity EPHF as defined in Section 3.l(b) hereof, unless such energy is in excess of the Firm . Capability of such Tex-La Future Power Supply Resource in which case such energy shall be included in .the quantity EPHECON. 3.2 Initial Commitment of TU Electric: The initial total commitment of TU Electric to Tex-La shall be for Supplemental Capacity and Supplemental Energy for Tex-La to resell to its aforesaid member cooperatives and for resale by such member cooperatives to their members and patrons. Such commitment may be increased for normal load growth, in accordance with plans developed pursuant to Section 3.3 hereof, provided, that Tex-La complies with the provisions of Section 7.2 hereof. Both Parties recognize that, in cases of a substantial increase in load in excess of normal load growth and/or substantially increased requirements for Supplemental Capacity and Supplemental Energy, TU Electric may not have sufficient generation capacity and/or other facilities in i place to accommodate such an increase and, accordingly, several years' advance notice is required to allow for certification, construction and installation of appropriate facilities. If TU Electric does not have sufficient generation capacity and/or other facilities to i accommodate a substantial increase in load in excess of normal load growth or such an increase would impair its ability to render full and reliable service to its customers or
impair its abil'tyi to discharge prior commitments, it may defer supplying Supplemental-Capacity and Supplemental Energy until sufficient generation capacity and/or other facilities are available. Upon the date Tex-La begins to operate its own utility Control Area or moves the operational control of all of the Points of Delivery to the Control Area of another utility which is a member of the Electric Reliability Council of Texas as provided for in Article X hereof, TU Electric shall have no utility duty to serve Tex-La's I capacity and energy needs and shall no longer have any obligation under this Agreement to provide Supplemental Capacity and/or Supplemental Energy to Tex-La.
3.3 Planning
In order to keep TU Electric advised of Tex-L a's future requirements so that TU Electric may include those requirements in its long range system ' i plans, Tex-La will cooperate with TU Electric in its system planning and will advise i TU Electric prior to June 1 of every year of its anticipated load requirements for the next i five (5) years at each existing Point of Delivery together with its plans for additional ! transmission facilities and Power Supply Resources, and its anticipated need for additional ! Points of Delivery along with the particulars thereof for that five (5) year period. ! 3.4 , cice of Supplemental Capacity and Supplemental Energy: The price of Supplemental Capacity and Supplemental Energy to be charged by TU Electric and paid by Tex-La shall be determined by the customer, demand, energy and other appropriate - charges of TU Electric's tariff filed with and approved or set by the Public Utility Commission of Texas or other approportate regulatory body. Such tariff shall be the TU Electric Rate WP, Wholesale Power, or subsequent tariff applicable to the service provided pursuant to this Agreement, together with all pertinent riders thereto. The demand charge under said tariff for Supplemental Capacity shall be calculated on the basis of the demand determination as specified in said tariff in each billing month, subject to the provisions of Section 7.3 hereof. 3.5 Emergency Transmission Limitations: To the extent that the amount of capacity and energy actually delivered during any hour during the billing month from a l l
Tex-La Future Power Supply Resource supplier that is an electric utility member of the Electric Reliability Council of Texas is less than the amount of capacity and energy actually scheduled pursuant to Section 4.6 from said Tex-La Future Power Supply Resource during said hou" and said difference is caused by a third party (a third party being an electric utility member of the Electric Reliability Council of Texas other than TU Electric, Tex-La or said Tex-La Future Power Supply Resource supplier) transmission limitation, TU Electric and Tex-La agree to the following: (a) Subject to the provisions of (b), (c), (d) and (e) below, if Tex-La has included in its written agreement with said Tex-La Future Power Supply Resource supplier a contractual commitment on the part of said sh? plier to replace in kind to TU Electric, at a time mutually agreeable to TU Electric ! l and said supplier, such capacity and energy not delivered to TU Electric during i such period of transmission limitation, TU Electric will supply such difference to Tex-La under the terms and conditions of TU Electric's Rate WP or subsequent tariff applicable to the service provided pursuant to this Agreement, together with all pertinent riders thereto, and to the extent that such capacity and energy is in fact replaced in kind, TU Electric will credit Tex-La for same in its monthly billings to Tex-La as if such difference had not occurred; (b) The credit provided for in (a) above shall apply only if such transmission limitation was caused by, or resulted from, an Electric Reliability Council of Texas system emergency; (c) The credit provided for in (a) above shall be limited to a maximum of three (3) occurrences of Electric Reliability Council of Texas system emergencies per year of a cumulative total duration of ten (10) hours; (d) Tex-La shall indemnify and hold harmless TU Electric (or shall require its said supplier to do so) from any and all claims, demands, liability,
charges,- actions, causes of action, suits or other proceedings (including all costs in connection therewith and in connection with the defense thereof, including reasonable attorneys' fees of TU Electric) incident to or in connection with the transmission of such replacement capacity and energy from the system of said supplier to TU Electric's transmission system, i including any losses that are incurred in connection with said transmission of such replacement capacity and energy; and (e) TU Electric shall have approved the terms of said contractual commitment in the written agreement between Tex-La and said supplier for the sole purpose of ensuring that such written agreement contains provisions which are consistent with (a), (b), (c) and (d) above. ARTICLE IV SCHEDULING AGENT AND ADMINISTRATIVE FUNCTIONS 4.1 TU Electric to Serve as Tex-La's Scheduling Agent: As of the Effective Date of this Agreement, TU Electric will serve as Tex-La's Scheduling Agent with respect to capacity and/or energy from the Power Supply Resources in accordance with the notices received by TU Electric from Tex-La pursuant to Section 4.6 hereof. 4.2 System Modification Costs Payable by Tex-La: Tex-La shall pay to TU Electric, no later than thirty (30) days prior to TU Electric's commencement of scheduling activities pursuant hereto with respect to capacity and/or energy from each of the Power Supply Resources (other than with respect to the Economy Energy Scheduling 1 Agent Agreements), a reasonable sum to cover TU Electric's costs of making necessary computer hardware and software changes in order to accommodate said scheduling activities. Should further computer hardware and/or software changes be necessary in order to continue to provide such scheduling activities after the first year which immediately follows the date on which such scheduling activities from each of the Power Supply Resources (other than with respect to the Economy Energy Scheduling Agent I l
Agreements, the obligation of Tex-La with respect to which shall continue to be governed by the provisions of Section 4.1 of each of the Economy Energy Scheduling Agent Agreements) first commences, then Tex-La also agrees to pay TU Electric the reasonable costs thereof. 4.3 Monthly Fee for Serving as Scheduling Agent: TU Electric shall bill Tex-La and Tex-La shall pay to TU Electric a fee for TU Electric's services as Tex-La's l Scheduling Agent under this Agreement each month during the term of this Agreement, which fee shall be the sum of the following: (a) An Administrative Charge in the sum of $9,000.00 to cover the administrative costs associated with the services rendered by TU Electric pursuant to Articles III and VIII hereof; plus (b) A Scheduling Agent Charge with respect to the Economy Energy Scheduling Agent Agreements in the sum of $5,100.00 payable in months in which economy energy is scheduled pursuant to either of the Economy Energy j Schedtding Agent Agreements or $1,000.00 payable in months in which no economy energy is scheduled pursuant to either of the Economy Energy Scheduling Agent Agreements; plus (c) A Scheduling Agent Charge, to be negotiated by the Parties, to effect the scheduling of power and energy from Tex-La's Future Power Supply Resources or any new economy energy scheduling agent agreements entered into between Tex-La and TU Electric pursuant to this Agreement, which Scheduling Agent Charge shall fully compensate TU Electric for all costs it incurs in order to effect such scheduling. It is understood that the above fees do not represent the value of the services provided, nor do they represent a substitution for the actual costs to Tex-La if it were to purchase and install facilities and provide administrative personnel to perform such scheduling services for itself. Rather, TU Electric is only willing to provide such services 1
F and to reduce its fees, as part of the purchase transaction under which TU Electric is reacquiring Tex-La's interest in the Comanche Peak Steam Electric Station. 4.4 Escalation of Monthly Fee for Serving as Scheduling Agent: The monthly fee determined in accordance with Section 4.3 hereof shall be increased to include the effects of salary increases and changes in overhead rates beginning January 1, 1990, ia accordance with the following: (a) The percentage inflation which occurred during the calendar year preceding January 1 of each year prior to January 1, 1991, in which TU Electric serves as Tex-La's Scheduling Agent pursuant to this Agreement shall be determined from the Bureau of Labor Statistics of the United States Department of Labor, Employment and Earnings: Transportation and Public Utilities-Electric Services average hourly earnings using January,1990 as the base period, said average hourly earnings numbers to be taken from SIC Code 491 (or if said SIC Code 491 is discontinued, from such other statistics of the Bureau of Labor Statistics of the United States Department of Labor that are most nearly comparable to SIC Code 491 and as agreed by TU Electric and Tex-La); (b) The sum of the integer 1 plus the percentage inflation expressed as a decimal determined in accordance with (a) above shall be multiplied by the monthly fee as determined in accordance with Section 4.3 hereof, and the product of that multiplication shall be the monthly fee applicable during calendar year 1991; (c) For years subsequent to calendar year 1991, the percentage inflation expressed as a decimal determined in accordance with (a) above for the prece$ng calendar year shall be summed with the integer 1, and that sum multiplied by the monthly fees applicable during the preceding year to derive L_____ - _ . . _ _ _-___ __m . . _ _ . _ . _ _
the-monthly fees applicable for the following year, and so on during the term of this Agreement. 4.5 Credit Against Monthly Fees for Serving as Scheduling Agent: The amount of the monthly fees actually paid by Tex-La to TU Electric pursuant to Section 4.2 of the Scheduling Agent Agreement for Economy Energy between TU Electric and Tex-La of November 13, 1986 and/or Sections 4.2 and 4.3 of the Scheduling Agent Agreement for Economy Energy from West Texas Utilities Company between TU Electric and Tex-La of July 29,1987 shall be credited against and deducted from the monthly fee payable under this Agreement as determined pursuant to Sectior.s 4.3 and 4.4 hereof. 4.6 Procedures for Implementing Schedules: By no later than 4:00 P.M. on the prior Friday (if Friday is not a Working Day, then on the prior Working Day), TU Electric will, subsequent to the termination of the agreement of October 30, 1984 among TU Electric, Tex-La and Rayburn Country Electric Cooperative and to the extent that TU Electric is entitled to schedule the generation from the Denison Dam and/or Whitney Dam Hydroelectric Projects, provide to Tex-La an estimate of TU Electric's daily schedule requirements from Tex-La's entitlement to the Denison Dam and/or Whitney Hydroelectric Projects during the forthcoming calendar week. In the event TU Electric intends to submit a modified scaedule to the Southwestern Power Administration which deviates from the estimated schedule provided in accordance with the above, TU Electric will notify Tex-La by no later than 10:00 A.M. on the Working Day prior to the Schedule Period for which said modified schedule applies. The aforesaid weekly estimates and i modified schedules shall be in writing by facsimile communication to Tex-La, at telecopier number (409) 560-9215. In the event that TU Electric causes more generation ! from the Denison Dam and Whitney Dam Hydroelectric Projects (combined) to be scheduled and delivered to the TU Electric system during any hour (s) than that indicated in TU Electric's notification to Tex-La by 10:00 A.M. of the Working Day previous to the I applicable Schedule Period, such excess generation will, to the extent that such excess
'I )
_ - _ _ _ _ _ _ _ -_ - _ ________ -_ ___ - ___=___ __ . _ - - - - _ _ - - _ _ _ _ _ _ _ - _ _ - _ _ _ _ . generation will cause Ine energy supplied by Tex-La's Power Supply Rescurces to exceed the Metered Hourly Energy (as such teem is defined in Section 8.1 hereof), be purchased by TU Electric at a price equal to ninety-five percent (95%) of TU Electric's actual avoided energy cost daring the pertinent hour (s) irrespective of the three percent (3%) limitation applicable to Unintentional Erergy as defined in Article Vill. Tex-La shall notify TU Electric in writing by facsimile communication to the Texas Utilities System Operating Center, at telecopier number (214) 330-4598, no later than 12:00 noon on the Working Day prior to the Schedule Period durirt which Tex-La desires to receive power and energy from any of the Power Supply Resources, which written notice shall specify the amount of capacity and energy (MWH) that Tex-La desires TU Electric to schedule on its behalf during each hour of the Schedule Period from each of Tex-La's Power Supply Resources, provided that no such notice shall specify power and/or energy that require scheduling from more than two (2) Electric Reliability Council of Texas Control Areas other than TU Electric's during any twenty-four (24) hour period, provided that to the extent that TU Electric is entitled (subsequent to the termination of the agreement of October 30, 1984 among TU Electric, Tex-La, and Rayburn Country Electric Cooperative) to schedule the generation from the Denison Dam and/or Whitney Dam Hydroelectric Projects (or firming resources referenced in Section 4.8 hereof) against the demands on TU Electric's system, includiny Tex-La's contribution to such demands on TU Electric's system, the Denison Dam and/or Whitney Dam Hydroelectric i Projects (or firming resources referenced in Section 4.8 hereof) shall not be counted as L l being scheduled from another Control Area even though same may require scheduling from an Electric Reliability Council of Texas Control Area other than TU Electric's. No such notice shall contain more than four (4) changes in the delivery rate (two up and two down) in any twenty-four (24) hour period per such other Control Area, it being understood that such changes will be accomplished at a ramp rate of not less than two megawatts / minute nor more than ten megawatts / minute.
I i l In the event that a declared Electric Reliability Council of Texas transmission emergency interrupts the delivery of power and energy from a Tex-La Future Power Supply Resource scheduled from an Electric Reliability Councli of Texas Control Area l other than TU Electric's during such twenty-four (24) hour period, Tex-La may notify TU Electric in writing by facsimile communication to the Texas Utilities System Operating Center, at telecopier number (214) 330-4598, which written notice, for each such interrupted Tex-La Future Power Supply Resource that Tex-La desires to change, I shall specify the amount of capacity and energy (MWH) that Tex-La desires TU Electric to schedule on its behalf during each hour of the Schedule Period from a substitute Power Supply Resource, provided that no such notice shall contain more than four (4) changes in l the delivery rate (two up and two down) per such substitute Power Supply Resource during ) I the remaining portion of the said twenty-four (24) hour period and provided that j ( TU Electric shall not be required to schedule power and/or energy on Tex-La's behalf I from more than two (2) Electric Reliability Council of Texas Control Areas otner than i TU Electric's at any one time. It is specifically understood, however, that in the event of such a declared Electric Reliability Council of Texas transmission emergency, < TU Electric's first priority shall always be to assure the reliability of electric service to , all of its customers and such priority may cause delay in attempting to effect Tex-La's desired substitution (s). The term " Schedule Period" as used herein means a period of one (1) calendar day unless such day is not a Working Day, in which event the Schedule Period shall be all consecutive days which are not Working Days plus the first following Working Day. The term " Working Day" as used herein means any day from MondEy through Friday which is ) not a holiday recost.ized by TU Electric. Any provision of the Economy Energy Scheduling Agent Agreements inconsistent with the scheduling procedures specified in this Section 4.6 (including the requirement that economy energy may be scheduled from only one of the sources specified in the Economy Energy Scheduling Agent Agreements during any l
single calendar month) are hereby modified such that the provisions of this Section 4.6 shall . control the obligations of the Parties with respect to the procedures for the scheduling of economy energy pursuant to the Economy Energy Scheduling Agent Agreements. 4.7 Modifications to Economy Energy Scheduling Agent Agreements: Sections 3.1, 3.2 and 3.3 of both of the Economy Energy Scheduling Agent Agreements are deleted beginning on the Effective Date of this Agreement; provided however and notwithstanding the deletion of said Sections, Tex-La shall continue to pay TU Electric any and all demand-related costs included in the energy component of TU Electric's wholesa2e transmission voltage rate schedule WP, or its successor applicable to the service provided pursuant to this Agreement, for the energy scheduled and delivered pursuant to the Economy Energy Scheduling Agent Agreements (which demand-related costs are currently 0.1 cents per kilowatthour but are subject to redetermination upon approval by the Public Utility Commission of Texas of any revision or successor to said rate schedule WP). TU Electric will bill Tex-La monthly for such demand-related costs in an amount determined by multiplying the total kilowatthours of such energy by the amount of demand-related costs included in such energy component, and Tex-La shall pay said amount to TU Electric. Since Tex-La shall pay for Supplemental Capacity in accordance with Section 3.4 hereof and since there is no etedit or reduction in the Supplemental Capacity determined in accordance with Section 3.1(a) hereof, TU Electric shall continue l to not charge Tex-La any-separate wheeurg enarges for the transmission of energy l pursuant to the Economy Energy Scheduling Agent Agreements to Tex-La on TU Electric's transmission system. Section 1.2 of both of the Economy Energy Scheduling Agent Agreements shall remain as written except that the words "the passage of six consecutive months" are hereby changed to read: "the passage of twelve consecutive months". 4.8 Scheduling of Capacity and Energy from Denison Dam and/or Whitney Dam After Termination of October 30,1984 Agreement: If Tex-La desires, TU Electric hereby 4
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_ _ _ _ _ _ _ _ _ - _ _ _ _ _ - _ _ _ l
l 1 agrees to negotiate in good faith an appropriate scheduling agent agreement pursuant to l I which TU Electric will serve as Tex-La's Scheduling Agent with respect to capacity ' and/or energy from Tex-La's entitlement from the Denison Dam Hydroelectric Project and/or the Whitney Dam Hydroelectric Project following the termination of the agreement of October 30,1984 among TU Electric, Tex-La and Rayburn Country Electric Cooperative, Inc., which scheduling agent agreement will contain no less benefits to Tex-La than those provided for in said agreement of October 30, 1984. Any such j scheduling agent agreement will contain provisions which fully compensate TU Electric in accordance with the provisions of Sections 4.2, 4.3 and 4.4 hereof for serving as Tex-La's said Scheduling Agent and for delivering such capacity and/or energy to Tex-La, and shall specify the amount of capacity and energy from such resources to be applied under the terms of this Agreement. Should Tex-La desire that capacity and energy from such resources be scheduled and delivered on behalf of Tex-La from the Control Area of an electrie utility in the Electric Reliability Council of Texas other than TU Electric, TU Electric will receive said capacity and energy into its system for delivery to Tex-La's Points of Delivery, pursuant to the Amended and Restated Transmission Agreement of even date herewith and the Amended and Restated Distribution Service Agreement of even date herewith, in accordance with the procedures specified in Section 4.6 hereof upon Tex-La's agreeing in a separate written agreement to compensate TU Electric (in accordance with the provisions of Sections 4.2, 4.3 and 4.4 hereof) for effecting the scheduling of, and delivering, such capacity and energy and maldng the determinations pursuant to Articles III and VIII hereof with respect thereto. Subject to the aLove l provisions of this Section 4.8, to the extent that Tex-La, through good faith negotiations with TU Electric (both TU Electric and Tex-La recognizing that avah good faith negotiations may not result in a mutually acceptable agreement) and/or third parties, is able to cause 27.5 MW of capacity to be delivered after June 30, 1990 from Tex-La's entitlement to the output of the Denison Dam and/or Whitney Dam Hydroelectric i
}
t l
- Projects on a firm basis (meaning that said 27.5 MW will be available to TU Electric at all -
times irrespective of hydrological conditions, even if same has to come from cther firming resources) to TU Electric in accordance with the following scheduling criteria (scheduling to be by TU Electric against the demands on TU Electric's system, including Tex-La's contributions to such demands on TU Electric's system): . i (i) 200 hours per month maximum; (11) 60 hours per month minimum, (iii) maximum, of 600 hours in any four (4) consecutive months, and (iv) 1200 hours per year, then TU Electric shall recognize the aforestjd capacity and energy in the calculation of Supplemental Capacity (Section 3.l(a)], Supplemental Energy (Section 3.l(b)], and Unintentional Energy (Section 8.1). For the purpose of determining Supplemental Capacity, a third quantity, (CPDEN), shall be added to Section 3.l(a), first paragraph, as item (iii). The following equation shall be added to the second paragraph of Section 3..l(a): CPDEN = AFCI x 27.5 MW x [(1/TLd) 0.r (1/DLd )l* For the purpose of determining the Supplemental Energy, a fourth quantity (EPHDEN1) shall be added to Section 3.l(b), first paragraph, as item (iv). The following equation shall be added to the second paragraph of Section 3.l(b): EPHDEN ' = AFEl x DENHE x [(1/TLe) o.r (1/DLa)]* where, DENHE = The actual generation (MWH) scheduled and received by TU Electric from the Denison Dam and/or Whitney Dam Hydroelectric Projects (or a firming resource) during such hour. ! For the purpose of determining Unintentional Energy, a fourth quantity, (EPHDEN1), shall l be added to the third paragraph of Section 8.1, as item (iv). EPHDEN1 shall be the portion of energy scheduled and delivered by TU Electric from the Denison Dam and/or Whitney Dam Hydroelectric Projects (or a firming resource), if any, during such hour. The following equation shall be added to the third paragraph of Section 8.1:
l PHDEN1' = AFEi x DENHE x ((1/TLe) pLr (1/DLe)]O
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w here, DENHE = The actual generation (MWH) scheduled and received by TU Electric from the Denison Dam and/or Whitney Dam Hydroelectric Projects (or a firming resource), if any, during j such hour. 1 l 4.9 Tex-La Scheduling Economy Energy from a Third Party to a Control Area j l which includes a Tex-La Future Power Supply Resource: In the event that an Electric Reliability Council of Texas Control Area other than TU Electric's from which a Tex-La Future Power Supply Resource emanates serves as Tex-La's scheduling agent with respect ) to a Power Supply Resource which is a new economy energy arrangement with a third i party, TU Electric hereby agrees that it will not impose any wheeling charges (other than charges to compensate for losses) by reason of the transfer of such economy energy from , J the transmission system of such third party to the transmission system of said other Control Area so long as Tex-La includes in its arrangements with such third party and j 1 such other Control Area provisions which allow TU Electric to require the interruption or j J limitation of such transfer to the same extent as set forth in Section 2.4 of the Scheduling Agent Agreement for Economy Energy from West Texas Utilities Company dated July 29, 1987 [h, said new economy energy arrangements being accorded the same priority as set forth in Section 2.4(b)(vil) of said Scheduling Agent Agreement for Economy Energy from West Texas Utilities Companyj and provided that nothing herein shall affect Tex-La's responsibility for paying all wheeling and loss charges that may be owing to utilities other than TU Electric on account of such transfer. ARTICLE V BILLING AND PAYMENT 5.1 Meter Readings: The parties recognize that meters installed at the Points of Delivery will record the power and energy from the Power Supply Resources as well as the 4 1 1 1 1
l 1
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Supplemental Capacity and Supplemental Energy sold and furnished by TU Electric hereunder. Tex-La will, at TU Electric's request, provide to _TU Electric, each month, hourly , I records of its Power Supply Resources adequate for preparation of billings. 5.2 Billing Period: It is recognized by the parties hereto that the meters at all the Points of Delivery are not all read on the same dates. Therefore, in order to establish a common billing period for all Points of Delivery, meter readings will be taken at each of the Points of Delivery in accordance with TU Electric's regular meter reading cycles and, making use of the data obtained from such readings, a common billing period will be established applicable to each Point of Delivery. The regular meter reacings shall be taken by TU Electric as nearly as practicable every thirty (30) days. 5.3 Payment of Bills: Bills shall be rendered and due monthly. If not paid within tidrty (30) days of the due date as stated in the bill, the amount due shall be subject to an interest charge computed at nine and one-half percent (9-1/2%) per annum, compounded monthly, but not to exceed the maximum rate which may be lawfully charged. Interest shall be calculated from the due date set forth on the bill until paid. Bills shall set forth the electric power and energy transactions between Tex-La and TU Electric during the billing month in such detail as may be needed for operating records or for settlements under this Agreement. ARTICLE VI 1 METERING 6.1 Meter Reading: The Parties shall cause meters to be read monthly at times agreed upon. Metering records shall be available at all reasonable times to authorized representatives and employees of the Parties. 6.2 Meter Tests: Each meter used hereunder shall, by comparison with accurate standards, be tested and calibrated by the Party owning the meter at approximate
I. intervals of twelve (12) months. If a meter shall be found not registered accurately, it shall be restored to an accurate condition or an accurate meter shall be substituted. 6.3 Meter Accuracy: The Parties shall have the right to request that a special test of metering equipment be made at any time. If any test, made at a Party's request, discloses that the metering equipment tested is registering within two percent (2%) accuracy, the Party requesting the test shall bear the expense thereof. The expense of all other such tests shall be borne by the Party owning the meter. 6.4 Meter Adjustments: The results of all tests and calibrations shall be open to examination by the Parties and a report of every test shall be furnished immediately to the other Party. Any meter tested and found to be within two percent (2%) accuracy shall be considered to be accurate. If, as a result of any test, any meter is found to register not within two percent (2%) accuracy, the readings of such meter previously taken shall be corrected according to the percentage of inaccuracy so found, but no such correction shall extend beyond the date such meter was last tested, but not to exceed six (6) months, previous to the day on which an inaccuracy was discovered by such test. If any metering equipment falls to register or if the meter registration is erratic, the capacity and energy delivered shall be determined by the Parties, i ARTICLE VII TEX-LA POINTS OP DELIVERY 7.1 Delivery of Power and Energy: Power and energv delivered by TU Electric to Tex-La hereunder shall be delivered to Tex-La at the Points of Delivery specified in Exhibit A hereto, as same may be amended from time to time. 7.2 Changes in Points of Delivery: (a) Tex-La may, at its expense and upon two (2) years' advance written notice to TU Electric, provide additional delivery capacity at the Points of Delivery specified in Exhibit A or provide additional Points of Delivery on the systems of its member cooperatives at locations agreed by the Parties, subject to the following: 1
(i) . If any new or additional facilitics are required and furnished by TU Electric, Tex-La shall pay to TU hlectric a facilities charge Qich will compensate .TU Electric for the ' costs of such facilities beyond the cost i
'TU Electric would otherwise incur for its own use. -(ii) The facilities furnished by TU Electric shall in all events be those 1 deemed necessary by TU Electric to provide such service in accordance with TU Electric's then-current construction and operating standards. i (ill) Any additional facilities furnished by TU Electric pursuant to the above provisions shall in all events be owned by and be the sole property of TU Electric subject to no rights or claims of Tex-La.
(iv) Additional Points of Delivery to serve cooperatives not members of Tex-La at the time of the execution of this Agreement shall be established at the sole discretion of TU Electric, and additional Points of Delivery to cooperatives which are members of Tex-La at the time of the execution of this Agreement shall be established upon the mutual agreement of TU Electric and Tex-La. (b) If TU Electric defers providing an increase over normal load growth of Supplemental Capacity and Supplemental Energy at any Point of Delivery pursuant to Section 3.2 hereof, it may, for the same period of time, defer any increased delivery ) capacity at such Point of Delivery. (c) If it is not economically feasible to provide additional delivery capacity at an existing Point of Delivery but is economically feasible to provide additional delivery capacity at an alternate Point of Delivery, the Parties shall agree on an alternate Point of Delivery to be established in accordance with the provisions of this Section 7.2. 7.3 Billing Demand Charges in Event of Termination or Reduction of Firm I' Capability of Tex-La's Future Power Supply Resources or Abandonment of Point (s) of Delivery: a 1
(a) Reductions in Firm Capability ' (i) No Concurrent Point (s) of Delivery Abar.donment(s): In the event that Tex-La obtains Firm Capability from one or more of Tex-La's Future Power Supply Resources and if, at or before the termination of this Agreement, the total Firm Capability listed on Exhibit E hereto is
.l terminated or reduced without a concurrent abandonment of Point (s) of I l
Delivery [ abandonment meaning that all or a portion of the load at suca Point (s) of Delivery is removed from the TU Electric system], then the i billing demands for all Points of Delivery shall be computed in accordance with the procedure specified in Section I of Exhibit F hereto and Tex-La shall be required to pay TU Elactric an amount equal to i "DCl minus DC2". Furthermore, revised Contract Capacities set forth in Exhibit A hereto will be agreed to by the Parties and Tex-La shall pay for all Supplemental Capacity and Supplemental Energy delivered to the Points of Delivery in accordance with TU Electric's tariff as may, from time to time, be applicable. I (ii) Concurrent' Abandonment of Point (s) of Delivery Which Exceeds the l i Reduction in Firm Capability: In the event that Tex-La obtains Firm Capabuity from one or more of Tex-La's Future Power Supply Resources and if, at or before the termination of this Agreement, the total Firm Capability listed on Exhibit E hereto is terminated or reduced, and such termination or reduction in the Firm Capability is accompanied by concurrent abandonment (s) of Point (s) of Delivery [ abandonment meaning ; that all or a portion of the load at such Point (s) of Delivery is removed i from the TU Electric system] such that the total demand or portion of such demand which will be removed from such Point (s) of Delivery attributable to said Point (s) of Delivery [as measured by the maximum
i integrated demand during the billing interval as specified in the then applicable TU Electric tariff recorded at said Point (s) of Delivery during-f the twelve months immediately preceding the termination or reduction in the Firm Capability] equals or exceeds the amount of Firm Capability termination or reduction, then the billing demands for all Points of Delivery shall be computed in accordance with the procedure specified in Section I of Exhibit F hereto except that Tex-La shall not be required to pay the amount equal to "DCl minus DC2". The portion of- the' load removed from such Point (s) of Delivery will be determined by calculating the difference between the maximum recorded demand during the twelve months prior to such abandonment and the maximum recorded demand during the twelve months following such abandonment or, at Tex-La's option, TU ElecUtic will' install (and remove when no longer needed), at Tex-La's sole expense, metering equipment twelve months prior to such abandonment which will measure the portion of such. demand to be removed. Furthermore, revised Contract Capacities set forth in Exhibit A hereto will be agreed to by the Parties and Tex-La shall pay for all Supple:. ee.tti Capacity and Supplemental Energy delivered to the Points of Delivery in acccedance with TU Electric's tariff as may, from time to time, be appilcable. (iii) Concurrent Abandonment of Point (s) of Delivery Which Is Less Than The Reduction In Firm Capability: In the event that Tex-La obtains Firm - Capability from one or more of Tex-La's Future Power Supply Resources and if, at or before the termination of this Agreement, the total Firm J l Capability listed on Exhibit E hereto is terminated or reduced, and such l termination or reduction in the Firm Capability is accompanied by concurrent abandonment (s) of Point (s) of Delivery [ abandonment meaning
that all or a portion of the load at such Point (s) of Delivery is removed from the TU Electric system] such that the total demand or portion of such- demand which ' will be . removed from such Point (s) of Delivery attributable to the abandoned Point (s) of Delivery [as measured by the maximum integrated" demand during the billing interval as specified in
.the then applicable TU Electric tariff recorded at said Point (s) of .
Delivery during the twelve months immediately preceding the ! termination or reduction in the Firm Capability] is less than the amount of Firm Capability termination or reduction, then the billing demands for all Points of Delivery shall be computed in. accordance with the procedure specified in Section 1 of Exhibit F hereto, but the amount -
"DCI minus DC2" shall be reduced by multiplying the quantity "DCl minus DC2" by the ratio of the net increase in Supplemental Demand placed on the TU Electric system by Tex-La to the amount of reduction or termination of the Firm Capability of Tex-La's Future Poiver Supply Resources and Tex-La chall pay to TU Electric such reduced amount.
The portion of the load removed from such Point (s)'of Delivery will be
. determined by calculating the difference between the maximum recorded demand during the twelve months prior to such abandonment and the maximuro recorded demand during the twelve months following such abandonment or, at Tex-La's option, TU Electric will install (and remove when no longer needed), at Tex-La's sole expense, metering equipment twelve months prior to such abandonment which will measure the portion of such demand to be removed. Furthermore, revised i
Contract Capacities set forth in Exhibit A hereto will be agreed to by ' ' the Parties and Tex-La shall pay for all Supplemental Capacity and
l 1 Supplemental Energy delivered to the Points of Delivery in accordance ] 1 with TU Electric's tariff as may, from time to time, be applicable. l (b) Abandonments 'of Point (s) of Delivery: Upon twelve (12) months' [or, if Tex-La ] l exercises its option pursuant to Section 7.3(a)(li) or 7.3(a)(lii), eighteen (18) 1 months'] advance written notice to TU Electric, Tex-La may abandon [ abandon within the meaning of this Subsection (b) and all of its subparts means that all l 1 or a portion of the load at such Point (s) of Delivery is removed from the 1 TU Electric system] any Point (s) of Delivery. Such abandonment shall become effective on the date specified by Tex-La in the notice; provided that, in addition to payment for idled facilities as provided for in Section 7.7 hereof, for billing purposes for Supplemental Capacity at such Point (s) of Delivery beyond the date of abandonment, the billing demand charge shall be calculated and paid by Tex-La in accordance with the following: (i) No Concurrent Reduction in Tex-La Firm Capability: In the event that said abandonment is not accompanied by a concurrent reduction in the Firm Capability listed on Exhibit E hereto, then the billing demand charge for the billing periods immediately following the abandonment on account of such abandonment [and, in the event that only a portion of the load at such Point (s) of Delivery is removed from the TU Electric ; system, revised Contract Capacities set forth in Exhibit A hereto shall be agreed to by the Parties and Tex-La shall pay for all Supplemental Capacity and Supplemental Energy delivered to such Point (s) of Delivery in accordance with TU Electric's tariff as may, from time to time be applicable] shall be in accordance with TU Electric's then applicable tariff. An example calculation is shown in Section II of Exhibit F hereto. ' f (ii) Concurrent Reduction in Tex-La Firm Capability Which Exceeds the l Point (s) of Delivery Maximum Demands: In the event tut said l l g , _ _ ___ _ _ _ _ _ _ _ abandonment is accompanied by- a. concurrent reduction in the Firm Capability listed on Exhibit E hereto which is equal to or exceeds the-maximum integrated demands during the billing interval as specified in a the then applicable TU Electric tariff for said Point (s) of Delivery experienced during the twelve months immediately preceding the abandonment, then there shall be no billing demand charge for the billing-periods immediately following the abandonment on account of such abandonment (and, in the event that only a portion of the load at such Point (s) of Delivery is removed from the TU Electric system, revised Contract Capacities set forth in Exhibit A hereto shall be agreed to by the Parties and Tex-La shall pay for all Supplemental Capacity an.d l Supplemental Energy delivered to such Point (s) of Delivery in accordance with TU Electric's tariff as may, from time to time be applicable). (iii) Concurrent Reduction of Tex-La Firm Capability Which Is Less Than the ~ Point (s) of Delivery Maximum Demands: In- the event tnat said abandonment is accompanied by a concurrent reduction in the Firm Capability listed on Exhibit E hereto which is less than the maximum integrated demands during the billing interval as specified in the then ! applicable TU Electric tariff for said Point (s) of Delivery experienced during the twelve months innmediately preceding the abandonment, then ! the billing demand charge for the billing periods immediately following-the abandonment on account of such abandonment [and, in the event that only a portion of the load at such Point (s) of Delivery is removed from the TU Electric system, revised Contract Capacities set forth in Exhibit A hereto shall be agreed to by the Parties and Tex-La shall pay for all Supplemental Capacity and Supplemental Energy delivered to such Point (s) of Delivery in accordance with TU Electric's tariff as may, from time to time, be, applic2ble] shall be equal to the demand charge computed in accordance with Section 7.3(b)(i) hereof, multiplied by the difference between.the maximum integrated demands during the billing interval as specified in the then applicable TU Electric tariff at said Point (s) of Delivery during the twelve months immediately preceding the
~ + abandonment and the amount of the' reduction in the Firm Capability listed on Exhibit E hereto, divided by the maximum integrated demands )
during the billing interval as specified in the then applicable TU Electric' tariff at said Point (s) of Delivery during the twelve months immediately 1 preceding the abandonment. < 7.4 Pacilities at Points of Delivery: Unless otherwise agreed, TU Electric will install and maintain meters at each Point of Delivery. Any and all appe.ratus, except i metering equipment, required to control properly the flow of power and energy at the j Point or Points of Delivery provided hereunder or to change the delivery voltage at any Point of Delivery shall be furnished, installed, maintained and operated by, and at the expense of, Tex-La, subject to the' specifications as to the type cnd capacity of such apparatus as may be prescribed by standard engineering practice. 4 7.5 Change of Voltage: If TU Electric converts its line or system at any Point of ; Delivery to a different operating voltage, Tex-La may, at its option and expense, alter its facilities so as to receive power and energy at that Point of Delivery at the changed 1 voltage, and, if necessary or desirable, to transform the same to the voltage it requires or -! it may discontinue such Point of Delivery. TU Electric will give Tex-La stritten notice of any proposed voltage change two (2) years, or such lesser period as muy be agreed, in I advance of such change. 7.6 Contract Capacity at Points of Delivery: Exlwit A hereto shall, for each Point of Delivery, specify the Contract Capacity applicable to Supplemental Capacity and TU Electric's tariff applicable thereto. Such Contract Capacity shr.!! be the maximum . I 1
Supplemental Capacity which TU Electric is obligated to provide at each such Point of Delivery. Any and all changes in such maximum Contract Capacity shall be accomplished only by written amendment to such Exhibit A and compliance with this Article VII.
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( 7.7- Idle Facilities: In the event that the maximum load for which the transmission and/or distribution facilities are designed by TU Electric for a Point of Delivery is reduced by the removal of a load from the TU Electric system or if the TU Electric facilities are' physically disconnected from the facilities of Tex-La at such Point of Delivery, then Tex-L6 agrees to pay TU Electric the then current cost of any transmission and/or distribution facilities for a Point of Delivery rendered idle (the facilities rendered idle being determined in the sole judgment of TU Electric using sound engineering principles for such determination) plus removal costs less salvage value of the idled f facilities, all such costs to be estimated in accordance with TU Electric's standard l procedures then currently in practice; said payment is due TU Electric whether or not facilities are actually' removed. " Currant cost" as used herein means the reproduction cost new less an allowance for age and condition. In lieu of paying TU Electric for the i idled facilities, Tex-La may, at the sole option of TU Electric, purchase the idled 8 facilities or pay TU Electric annually the reasonable carrying costs of the idled facilities. 1 ARTICLE VIII UNINTENTIONAL ENERGY i 8.1 Unintentional Energy Defined: Unintentional Energy shall be energy scheduled and received into TU Electric's system from the Power Supply Resources in any hour (the l
" Power Supply Resource Hourly Energy") which is in excess of the Metered Hourly Energy j during such hour. The Metered Hourly Energy shall be equal to the sum of the energy l metered at all Points of Delivery during such hour. I Unintentional Energy shall be equal to the sum of the Power Supply Resource Hourly Energy for all Points of Delivery, less the sum of the Metered Hourly Energy during such hour.
Power Supply Resource Hourly Energy, at each Point of Delivery, is equal-to the I sum of: (1) energy supplied to Tex-La.from TU Electric associated with the generation from the South Unit of the Denison Dam Hydroelectric Project (EPHDEN) as specified and q i determined in accordance with the agreement of October 30, 1984 among TU Electric, l Tex-La and Rayburn Country Electric Cooperative, Inc., until termination of such agreement, during such hour, and (ii) a portion (EPHECON) of the scheduled and delivered l l energy from the sources identified in the Economy Energv Scheduling Agent Agreements. as specified and determinea in accordance with the Economy Energy Scheduling Agent Agreements, and from the sources identified in any new economy energy arrangements entered into between Tex-La and TU Electric pursuant to the terms of this Agreement as specified and determined in accordance with the economy energy scheduling agent ; agreement (s) between Tex-La and TU Electric with cespect to such new economy energy agreements, dwing such hour, and (iii) a portion (EPHP) of the energy from Tex-La's Future Power Supply Resources scheduled and delivered during such hour. The quantities EPHDEN,EPHECON, and EPHF shall have the following definitions: EPHDEN = The energy metered at each Point of Delivery that receives credit for power and energy generated at the South Unit of Denison Dam during such hour multiplied by the quantity 15 MW divided by the sum of Tex-La's and Rayburn Country Electric Cooperative's highest ~ metered non-coincident peak fifteen (15) minute demands (expressed in MW) during the most ; recent billing period and previous eleven (11) billing periods at the points of delivery to Tex-La and Rayburn Country Electric , Cooperative that receive credit for power and energy ; generated at the South Unit of Denison Dam. l EPHECON = AFEi x ECONHE x ((1/TLe) o, r (1/DLe)]* EPHP = AFEi x FPSRHE x ((1/TLe) o_r (1/DLe)]* where,
. l
The factor "(1/DL )" shall not be used for Points of Delivery at voltages greater than or equal to 69 kV. The factor "(1/TLe)" shall not be used for Points of Delivery at voltages less than 69 kV.
I l
p AFEi is equal'to' the metered energy for the ith Point of Delivery during , er.ch hour of the current billing month divided by the sum of the metered i energy for allTex-La's Points of Delivery during such hour. l TLe- = The average transmission energy loss factor as used in the determination by the Public Utility Commission of Texas of l TU Electric's fuel factors then currently _ in effect for j transmission voltage line losses. At the time of the execution 1 of this Agreement, this factor is equal to 1.024789 as shown in I Exhibit D. !
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DL e = The average distribution energy loss factor used in the determination by the Public Utility Commission of Texas of TU Electric's fuel factors then currently in effect for primary voltage line losses.. At the time of the execution of this Agreement, this factor is equal to 1.051741 as shown in Exhibit D. I ECONHE = The actual generation (MWH) scheduled and received on behalf j of Tex-La as provided in the Economy Energy- Scheduling Agent Agreements and any new economy eneegy arrangements entered into between Tex-La and TU Electric pursuant to the terms of this Agreement during such hour. FPSRHE = The energy (MWH) associated with Tex-La's Future Power Supply Resources actually scheduled and delivered on behalf of Tex-La in accordance with the terms of this Agreement during such hour. 3.2 Purchase of Unintentional Energy: TU Electric will purchase from Tex-La during each hour a quantity of Unintentional Energy not in excess of three (3) percent of ! the Metered Hourly Energy during said hour. Any provision of the Economy Energy Scheduling Agent Agreements inconsistent with TU Electric's obligation to purchase Unintentional Energy pursuant this Section 8.2 are hereby modified such that the provisions of this Section 8.2 shall control the obligations of TU Electric to Tex-La witn respect to energy from the Power Supply Resources (which include the resources pertinent I to the Economy Energy Scheduling Agent Agreements). Notwithstanding anything in this j Agreement to the contrary, TU Electric shall have no responsibility or obligation to pay or otherwise compensate Tex-Le for any Unintentional Enwgy in excus of said three (3) percent of the Metered Hourly Energy during any hour. The price of such purchased Unintentional Energy shall be equal to ninety-five t percent (95%) of TU Electric's actual avoided energy cost during the pertinent hour. l 1 l 1
In order to determine the magnitude of Unintentional Energy, TU Electric shall edit and correct, to the highest degree possible, 60 minute interval metered data of all of the Points of Delivery following the end of any month in which Tex-La receives power and energy from its Power Supply Resources. TU Electric shall be responsible for accumulating said 60 minute interval metered data and for determining therefrom the . total hourly load (in kilowatthours) during each hour of each month in which Tex-La receives power and energy from its Power Supply Resources. It is recognized that it may take TU Electric as much as three (3) months following the end of the pertinent TU Electric billing month to accomplish such determination. Tex-La shall be solely responsible for paying all charges for performance of the services required by this Section 8.2, such charges being included in the Administrative Charge provided in Article IV of this Agreement. In addition to said Administrative Charge, TU Electric will provide to Tex-La 15-minute intarval load data on a monthly basis for each of the Points of Delivery specified in Exhibit A. Said load data shall be supplied to Tex-La within three (3) months following the end of the month in which the data were obtained. Tex-La will pay to TU Electric an additional charge for providing such data, the format of such data being, what is commonly known as, either floppy disk or one-half inch magnetic tape. The additional charge to Tex-La for such data shall initially be $1;.00 per Point of Delivery per month for floppy disk format and $15.00 per Point of Delivery per month for one-half inch magnetic tape format. However, should TU Electric's approved tariffs reflect a charge for providing a service of this nature, then the format and the additional charge for this data shall be as reflected in such approved tariffs. In the event that TU Electric determines that Unintentional Energy existed during a billing month for which billings have already been rendered, TU Electric shall credit or debit future billings to reflect the provisions of this Article VIII. In the event that TU Electric determines that Unintentional Energy exista during a billing month, TU Electric shall furnish to Tex-La, at i t
l no additional cost to Tex-La, data sufficient to support TU Electric's said determination for each of the hours that TU Electric determined that Unintentional Energy existed. . ARTICLE IX ADDITIONAL PROVISIONS 9.1 Covenants of Tex-La: 1 (a) Tex-La covenants for itself and its member cooperatives: (i) that, as far as reasonably possible, the character of apparatus installed on the lines of Tex '.a, its member cooperatives and their l members and patrons, will be limited so that such apparatus or its operation will not produce undue disturbance on the lines of TU Electrie; - and i (ii) that all single phase branet 'ines will be arranged so as to give f TU Electric, as far as is reasonably possible, a normally balanced load. (b) All lines of Tex-La and its membec cooperatives energized from each i F >lnt of Delivery shall be operated as an individual and separate system and shall not be { interconnected and operated in parallel with lines normally energized from any other Point of Delivery hereunder without TU Electric's written consent. If Tex-La desires to make such interconnections, it will notify TU Electric of its intent and supply all i J pertinent data with respect thereto. If such interconnection and any rearrangement of ) 1 TU Electric's facilities and meters necessary to accommodate such interconnection are economically and technicaly feasible and if Tex-La will bear the expense of such rearrangement or such portion thereof as exceeds the benefits to TU Electric therefrom, TU Electric will consent to same and make the necessary rearrangements of its faellities; Tex-La shall defer such interconnection until the rearrangement is completed. 9.2 Continuity of Service: TU Electric will exercise reasonable diligence and care to deliver capacity and energy in accordance with this Agreement and to avoid ; i interruptions and irregular! ties. TU Electric shall not be liable for any damages to I 1
a l
-Tex-La,'its member ' cooperatives and their members and patrons for damages caused by irregularities or interruptions in service or failure to serve because of an Uncontrollable Force, and in no event shall TU Electric be liable for any special, indirect or consequential damages. TU Electric may interrupt service to make repairs, to change equipment or to-Install new equipment, but only for such period as may be reasonably unavoidable; reasonable advance notice of such interruptions shall be given if the nature of the situation permits, l
9.3 Right of Access: Each Party shall give all necessary permission to the other i to enable the agents of the other Party to carry out this Agreement, and shall give the g h other the right by its fully authorized agent and employees to enter the premises of the other at all reasonable times for the purposes of reading or checking meters; for inspecting, testing, repairing, renewing or exchanging any or all of its equipment which may be located on the property of the other; and for performing any other work incident l to rendering the service covered by this Agreement. It is agreed, however, that neither Party hereto assumes the duty of inspecting the equipment, lines and facilities of the other.
9.4 Interconnections
Tex-La agrees that TU Electric shall not be required to maintain, meGify or utilize any connection herein established or any modification or alteration of facilities, directly or indirectly, connected with TU Electric's transmission or distribution facilities except on terms that fully compensate TU Electric for its costs, ; including a reasonable return on investment; and in no event shallTU Electric be required i to establish or maintain any such connection would could, directly or indirectly, unreasonably impair system reliability or emergency transmission capacity, it being
- recognized that while some transmission may be operated fully loaded, other transmission ;
may be for emergency use and operated either unloaded or partially loaded. Therefore, f Tex-La agrees that except for the establishment, maintenance, modification or utilization of the connection and associated transmission and distribution facilities contemplated by i
6 ] this Agreement, it shall give TU Electric reasonable advance notice of any proposal to esteblish, maintain, modify or utilize any connection which could involve or affect, directly or indirectly, TU Electric's transmission or distribution facilities and shall thereafter pay all costs, including a reasonable return on investment, prior to the establishment, maintenance, modification or utilization thereof. l 9.5 Intrastate Operations: The provisions of this Section 9.5 apply only to the ! facilities of Tex-La which are directly or indirectly interconnected with the facilities of TU Electric, and a reference to Tex-La in this Section 9.5 shall be limited to such facilities. Except in compliance with the Orders of the Federal Energy Regulatory Commission ) 1 (the "FERC") in FERC Docket Nos. EL 79-8, EL-79-8-002, and E-9558, TU Electric and Tex-La herein represent and warrant to each other that they do not, either directly or , 1 through connections with other entities, transmit electric energy in interstate commerce j or own or operate any facilities therefor and each party hereto agrees that it will not, l except in compliance with such Orders, hereafter engage, directly or through other entities, in any such interstate activities or operate, establish, maintain, modify, or 1 utilize, directly or through other entities, any connection or facility med or to be used for the sale or transmission of electric energy in interstate commerce without one year's prior written notice to the other party; provided further, that such party desiring to commence interstate operation agrees to file an application with, and use its best efforts to obtain an order from, the PERC, applicable to the other party (unless such other party agrees in writing that such application need not be filed), under Sections 210, 211, and 217
l. of the Federal Power Act, requiring the establishment, maintenance, modification, or utilization of any such connection which may be involved; provided, however, that compliance with such Orders shall not require further notice to the parties or application .
to the FERC pursuant to this Section 9.S. [ lt is understood and agreed that the failure of the party electing to commence j interstate operations to comply with any provision of this Section 9.5 or said Orders shall entitle the other party to disconnect its facilities. Subject to the foregoing provisions of this Section 9.5, TU Electric will not disconnect from or refuse to connect its then existing or proposed facilities with the facilities of Tex-La or any entity with which it maintains connections, used or proposed to be used for the transmission of electric energy in interstate commerce by reason of the interstate character of such facilities, and TU Electric will not prevent Tex-La or any entity with which TU Electric maintains connections from establishing, maintaining, modifying, or utilizing a connection with facilities used or proposed to be used for the transmission of electric energy in interstate commerce by reason of the interstate character of such facilities; provided that, anything in this paragraph of this Section 9.5 to the contrary notwithstanding, in the event Tex-La or any entity seeks to establish, maintain, modify, or utilize any connection which could affect the nonjurisdictional status of TU Electric under the Federal Power Act, it shall have first filed an application with and used its best efforts to obtain an order from the Federal Energy Regulatory Commission, applicable to TU Electric under Sections 210, 211, and 212 of such Act, requiring the establishment, maintenance, modification, or utilization of such connection. , TU Electric and Tex-La hereby agree that it will be impossible to measure in terms of money the damages which may or will accrue by reason of any breach of the representation and warranty above set forth, or any failure in the performance of any of the obligations contained in this Section 9.5 And, for that reason, among others, TU Electric and Tu-La agree that, in case of any such breach or failure, the non-breaching party will be irreparably damaged if this agreement is not specifically enforceable, and accordingly, TU Slectric and Tex-La agree that the non-breaching party is entitled to specific performance of the provisioe of this Section 9.5, in addition to any other remedies which exist. If the non-breaching party should institute proceedings to l 1 L__ _ _ _ _ _ _____ __ __ _ l
enforce the provisions h2reof, ths breaching party hereby waives any claim or defense ! that an adequate remedy at law exists. Nothing contained in this Section 9.5 shall preclude the utilization of connections - for the transmission of electric energy in interstate commerce under bona fide emergencies pursuant to the provisions of Section 202(d) of the Federal Power Act. ARTICLE X i ESTABLISHMENT OF TEX-LA'S SEPARATE CONTROL AREA Tex-La shall, by December 31,1997, at Tex-La's sole expense, either establish its own separate and independent Control Area which includes all of the Points of Delivery or move the operational control of all of the Points of Delivery to the Control Area of another utility which is a member of the Electric Reliability Council of Texas. In this connection, Tex-La shall install all equipment and retain all personnel necessary, in keeping with the guidelines of the Electric Reliability Council of Texas applicable at the time for Tex-La or such other utility to maintain fullload responsibility for the portion of Tex-La's electric system interconnected with TU Electric and any other electric utility within the Electric Reliability Council of Texas and to instantaneously and continuously match the electrical output of the generating resources owned or contracted for by
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Tex-La, as required by Electric Reliability Council of Texas practice, with the electrical ' I load requirements of Tex-La's members and customers connected with the portion of l Tex-La's electric system interconnected with TU Electric and any other electric utility within the Electric Reliability Council of Texas. Said equipment shall provide megawatt, [ megawatt-hour and other information for each Point of Delivery on a real-time basis and said equipment and information shall in all respects be in conformity with . all recommendations and requirements of the then applicable Electric Reliability Council of Texas " Guide for Uniform Practices in Inter-Utility Telemetry" and " Guides for Uniform Practices on Metering between ERCOT Control Areas." i
TU Electric hereby agrees to negotiate in good faith an appropriate Interconnection Agreement with Tex-La (and, if appropriate, with such other utility having operational control of all of the Points of Delivery) and any amendments that may be appropriate to
the Amended and Restated Transmission Agreement of even date herewith and the Amended and Restated Distribution Service Agreement of even date herewith to become effective when said separate and independent Control Area becomes fully operational or such move of the operational control of all of the Points of Delivery to the Control Area of such other utility and, upon the effective date of such Interconnection Agreement (s) and amendments to said Amended and Restated Transmission Agreement and Amended and Restated Distribution Service Agreement, this Agreement shall terminate and the rights and duties of the Parties one to another shall be governed by said Interconnection Agreement (s), said Amended and Restated Transmission Agreement as amended, and said Amended and Restated Distribution Service Agreement as amended.
In connection with TU Electric's obligation hereunder to negotiate in good faith 1 I appropriate amendments to the Amended and Restated Transmission Agreement and the Amended and Restated Distribution Service Agreement, TU Electric hereby agrees that, 1 for a term beginning on the effective date of said Interconnection Agreement (s) and l ending at 5:00 P.M., local time in Dallas, Texas, on the thirty-fifth anniversary of the Effective Date of this Agreement, it will accept into TU Electric's transmission system i from each separate firm power resource of Tex-La and concurrently deliver to Tex-La's Points of Delivery connected to TU Electric's electric facilities all electric power and energy, less losses, scheduled by or on behalf of Tex-La to serve the load requirements of I Tex-La's members and customers at said Points of Delivery, provided that (i) Tex-La makes arrangements with other entities whose facilities are involved in the transmission of such power and energy, from its source (s) to said Points of Delivery and pays all compensation as may be requested by and claimed to be due to such other entitles, (ii) such transmission services can be functionally and technically accommodated, (iii) Tex-La l
gives TU Electric reasonabl@ advance notice of its schedule and requirements, and (is) any such transmission services would not unreasonably impair the' reliability of TU Electric's system or emergency transmission capacity; further, in such connection,in the event that TU Electric determines that the requirements of either proviso (ii) or (iv) above will not permit the provision of such service by TU Electric, TU Electric will provide Tex-La with a written explanation describing the condition (s) and the estimated costs of modifying or installing transmission and/or distribution facilities which would enable the service to be rendered and, if Tex-La offers to pay TU Electric for the costs of such modifications or installations, TU Electric will seek all necessary government approvals and certifications and, upon receiving same and payment of such costs from Tex-La, will undertake such modifications or installations and, upon completion of same, will provide such service so long as the requirements of provisos (i) and (iii) permit the provision of such service; further, in such connection, TU Electric and Tex-La hereby agree that such separate transmission services will be priced according to the same pricing methodologies as set forth respectively in.the Amended and Restated Transmission Agreement of even date herewith and in the Amended and Restated Distribution Service Agreement of even date herewith except that the Parties recognize that adequate provisions must be added to said pricing methodologies to adequately compensate TU Electric for all losses incurred by TU Electric in connection with such services. TU Electric will not oppose the establishment by Tex-La of its own separate and independent Control Area or the move of the operational control of all of the Points of Delivery to the Control Area of another utility which is a member of the Electric Reliability Council of Texas as contemplated by this Article X. Moreover, TU Electric will not oppose the disconnection by Tex-La of any of the Points of Delivery from TU Electric's electric system and connecting such Point (s) of Delivery to the Southwest Power Pool.
Nothing in this Article X shall be construed to obligate TU Electric to establish, maintain, modify, or utilize, directly or indirectly, any connection which could affect the nonjurisdictional status of TU Electric under the Federal Power Act, and any Interconnection Agreement (s), amendments to the Amended and Restated Transmission Agreement and amendments to the Amended and Restated Distribution Service Agreement shall contain provisions identical to those set forth in Section 9.5 of this Agreement. In the event that Tex-La does not establish such Control Area or move the i operational control of all of the Points of Delivery to the Control Area of such other utility by December 31, 1997, then the rights, duties, and obligations of the Parties shall be governed solely by the terms and provisions set forth in Exhibit G hereto and Exhibits Nos. 1, 2, 3, 4, and 5 to said Exhibit G. ARTICLE XI DEFAULT 11.1 Default Defined: As used in this Article XI, ' default" shall mean the failure of Tex-La or TU Electric to make any payment or to perform any obligation in the time and manner provided in this Agreement or under the Agreement by and between Tex-La and TU Electric executed on March 23, 1989, pursuant to which Tex-La agreed to sell to i TU Electric, and TU Electric agreed to purchase from Tex-La, Tex-La's undivided ownership interest in the Comanche Peak Steam Electric Station. No default shall exist where such failure to discharge obligations (other than the payment of money) is the result of an Uncontrollable Force as herein defined. 11.2 Notice of Default: Upon failure of a Party hereto to make a payment or to perform an obligation required hereunder, except as provided otherwise in Section 9.5 hereof, or to perform an obligation pursuant to the Agreement by and between Tex-La and TU Electric executed on March 23,1989, pursuant to which Tex-La agreed to sell to TU Electric, and TU Electric agreed to purchase from Tex-La, Tex-La's undivided ownership interest in the Comanche Peak Steam Electric Station, the other Party shall give written notice of-such default to the Party in default. The Party in default shall have thirty (30) days within which to cure such default and,if cured within such time, the default specified in such notice shall cease to exist. 11.3 Remedies for Default: If a Default is not cured as provided in Section 11.2 hereof, the Party not in default may suspend performance hereof. The Party in default may, af ter expiration of the period set forth in Section 11.2 hereof, remedy such default and pay the Party not in default all incidental costs plus interest at nine and one-half percent (9-1/2%) per annum incurred by the non-defaulting Party in respect to such I default and thereupon such default shall cease to exist. If such default is not cured within six (6) months after the notice specified in Section 11.2, the Party not in default may i terminate this Agreement and may pursue all remedies afforded by la*.v. ARTICLE XII GENERAL PROVISIONS 12.1 Governing Law: The validity, interpretation and performance of this Agreement and each of its provisions shall be governed by the laws of the State of Texas, f l 12.2 Uncontrollable Force: In the event that any Party to this Agreement is , rendered unable, in whole or in part, by an Uncontrollable Force to perform any of its obligations under this Agreement (other than obligations to pay monies when due and except for the conditions envisioned by Section 3.5), upon such Party giving notice and the full particulars of such Uncontrollable Force in writing or by telephone to the other Party i as soon as reasonably possible after the occurrence of the cause relied upon, the obligations of the Party giving such notice, so far as same are affected by such Uncontrollable Force, shall be suspended during the continuance of any inability of performance or cause, but for no longer period. Telephone notices, allowable under the provision of this Section 12.2, shall be confirmed in writing as soon as reasonably possible and shall specifically state full particulars of the Uncontrollable Force, the time and date when the Uncontrollable Force occurred, and when the Uncontrollable Force is reasonably expected to cease. This Agreement shall not be terminated by reason of any such cause but shall remain in full force and effect. No Uncontrollable Force shall extend the term of this Agreement. 12.3 Notices: Any notice, request, demand, or statement, which may be given to or made upon a Party hereto by the other Party hereto under any of the provisions of this Agreement, shall be in writing unless it is specifically provided otherwise herein, and shall oe treated as duly delivered when the same is either (1) personally delivered to the President of TU Electric or to the President or General Manager of Tex-La, or (2) deposited in the United States mail, by certified mail return receipt requested, postage prepaid, and properly addressed to the Party to be served, as follows: If the notice is to TU Electric: President TU Electric 400N. Olive St., L.B. 81 Dallas, Texas 75201 If the notice is to Tex-La: General Manager Tex-La Electric Cooperative of Texas,Inc. P. O. Box 1623 Nacogdoches, Texas 75961 12.4 Section Headings Not to Affect M,eaning: The descriptive headings of the vatfous articles and sections of this Agreement have been inserted for convenience of reference only and shall in no way modify or restrict any of the terms and provisions thereof. 12.5 Further Assurances: From time to time after the execution of this j Agreement, the Parties shall execute such instruments, upon the request of the other, as may be necessary or appropriate, to carry out the intent of this Agreement. I
12.6 Counterparts: This Agreement may be executed simultaneously in two or more counterparts, each of wnich shall be deemed an original, but all of which together shall constitute one and the same instrument. 12.7 Amendments: This Agreement may be amended upon mutual agreement of the Parties, which amendment shall not be effective until reduced to writing and executed by both Parties. 12.8 Severability: The Parties hereto agree that the various obligations and I undertakings specified in this Agreement are each mutually dependent upon one another and, in the event antt fundamental or essential provision of this Agreement is finally determined to be invalid, illegal or unenforceable by a court or administrative body having jurisdiction, TU Electric and Tex-La hereby agree to conduct good faith negotiations for the purpose of reaching a mutually acceptable written agreement to replace the deleted provisions with a provision which will most nearly accomplish the purpose and intent of the deleted provision. Failure to reach such a mutually acceptable agreement, the Parties shall rescind the transactions provided for herein. 12.9 Computation of Time: In computing any period of time, prescribed or allowed by this Agreement (other than in connection with Section 4.6 hereof), the day of the act, event, or default from which the designated period of time begins to run shall not be included. The last day of this period so computed shall be included unless it is a Saturday, Sunday, or legal holiday, in which event the period shall run until the end of the next business day which is neither a Saturday, Sunday, or legal holiday. 12.10 Interpretation This Agreement shall not be interpreted to limit the right of either Party hereaftar to design, construct, acquire, or own any facilities it deems desirable. 12.11 No Third Party Beneficiaries: This Agreement is not intended to and shall not create rights, remedies or benefits of any character whatsoever in favor of any persons, corporations, associations, or entities other than the Parties to this Agreement, and the
i obligations herein assumed are solely for the use and benefit of the Parties to this Agreement, their successors in interest, or assigns. 12.12 Term: This Agreement is binding upon the Parties as of the Effective Date and shall continue in effect until the establishment of the separate and independent Control Area by Tex-La or the move of the operational control of all of the Points of i Delivery to the Control Area of another utility in accordance with Article X hereof, or if ' said Control Area is not established or the operational controlis not moved in accordance l
)
with Article X hereof, this Agreement shall, except for Exhibit G hereto and Exhibits Nos. 1, 2, 3, 4 and 5 to said Exhibit G, terminate at 12:00 midnight on December 31,1997 and the rights, dutics and obligations of the Parties shall be governed by said Exhibit G hereto and Exhibits 1, 2,1, 4 and 5 to said Exhibit G for the term specified in Section 12.11 of said Exhibit G. 12.13 Waivers: A waiver by either Party of the other Party's defaults shall not be deemed a waiver of any other or subsequent default. 12.14 Regulation: This Agreement is subject to approval by applicable regulatory authorities having or asserting jurisdiction. This Agreement is also subject to applicable federal, state, and local laws, ordinances, rules, and regulations. Nothing herein contained shall be construed as a waiver of any right to question or contest any such law, ordinance, rule, regulation, or asserted regulatory jurisdiction. 12.15 Successors and Assigns: This Agreement shall inure to the benefit of and be binding upon the successors in interest and assigns of the respective Parties, but neither Party shall assign this Agreement, in whole or in part, without the prior written consent of the other. 12.16 Exhibits: Exhibits A, B, C, D, E, P and G referred to herein and attached hereto are made a part hereof for all purposes. 12.17 No Precedent: It is recognized and agreed that the charges for, the provision of, and the terms and conditions of, the services provided for in this Agreement shall not
l l constitute any precedent for future services to Tex-La or to any other entity within the ! Electric Reliability Council of T6xas or otherwise because of, among other reasons, the unique aspects of this transaction, the nature of the services being desirable in facilitating the transition by Tex-La from being essentially a full requirements wholesale j customer of T'l Electric to Tex-La's establishment of its own Control Area or the move of the operational control of all of the Points of Delivery to the Control Area of another utility, and other considerations including Tex-La's agreement to sell to TU Electric, and ; TU Electric's agreement to purchase from Tex-La, Tex-La's undivided ownership interest in the Comanche Peak Steam Electric Station. EXECUTED the date and year first above written. TEXAS UTILITIES ELECTRIC COMPANY By: Its: ATTEST: Secretary TEX-LA ELECTRIC COOPERATIVE OF TEXAS, IN C. By: Its: ATTEST: . i Secretary l l
) EXHIBIT A Tex-La's Points of Deliverv . l Point of Delivery Voltace Tvoe l Contract CaDacitv 2 Deep East Texas Electric Cooperative, Inc.
1) Oak Ridge D

2) Central Heights T

3) Chireno T

4) Etoile T

5) Fitze D

6) Bayou Loco T

7) Shawnee Road D

8) Timpson T

9) Southeast Cushing T
' This Voltage Type will be used for the purposes of determining the appropriate loss factors, TL , DLe d , TIg , and DL, to be used in the calculations referenced in Articles III and VIII. "T" shall mean that the voltage of the Point of Delivery is greater than or equal to 69 kV and "D" shall mean that the voltage of the Point of Delivery is less than 69 kV.
2 This quantity shall be the contract kW to be used in connection with the provisions of the tariff referenced in Section 3.4 of this Agreement. Exhibit A Page 1 of 3
Houston County Electric Cooperative, Inc.
10) Berea D

11) Crockett D

12) Elkhart D

13) Grapeland D

14) Kennard D i

15) Latexo D '

16) Latexo-West D

17) Lufkin, Highway 94 D 18)- North centerville D

19) Oakwood South D i

20) Slocum D

21) Pleasant Springs T !
l Cherokee County Electric Cooperative Assn.
22) Bascom D

23) Cushing. D

24) Dialville D

25) - Owentown D

26) Teaselville D

27) Swinneytown T Rusk County Electric Cooperative, Inc.

28) Fitze D

29) Laneville D Exhibit A Page 2 of 3
l
30) Stryker Creek D

31) Happy. Valley D 1
Sam Houston Electric Cooperative, Inc.
' 32) Corrigan T
33) Diboll Southeast D j

34) Huntington D

35) Rocklatid D Wood County Electric Cooperative, Inc.

36) Hide-A-Way Lake D

37) North Emory. T

38) Primrose T Jasper-Newton Electric Cooperative, Inc.
I
39) Zavalla-Hwy. 147
. D 1
l p 1 Exhibit A Page 3 of 3 h L_i_____ _ _ _ _ _ I
EXHIBIT B POWER SUPPLY RESOURCES IN PLACE ON EFFECTIVE DATE Term During Which Firm Capability Name of Resource Firm Capability
Will Be Supplied To Tex-La*
I Beginning Ending 1. 2. 3.
*Not applicable to any new economy energy arrangements.
F 7268301 000223 0 - E 21
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G 0O00000000000 1 A . P * - - - dCUHPO ctePHPcN - t O0BBPlaaPO: l s Oet 3-6aMD E 1 23561 9737385 0 1 C 8291 3647241 68 9 3 R U 99409291.80904 0 5 OOOPet *t t
s eseAo O 1 334680462042 0 6 s 1- t S 089052837 727 3 0 E 50845 1 345 1 0
W . C M 4251 6 4 1 t I . V R R 3332933232329 E O 8886388686063 T 00031 00303031 3 C 2222322222223 A 2220622020206 F 6668066868680 8805388585853 F S 0000000000000 S O O 1 it t 1 1 1 1 tt 1 1 1 L ' - - : .
. f - .' -
T R 874738635519 0 0 E 2081 01 802371 7 6 S T 6560405379484 5 E e 0 s 48570662011 05 8 41 22426371405 5 C w 1
. 9435 1 345 9 k -
4t S1 4 i 1 - Y . N ' ' A 4 ' i P P O G000000000' 000 0000000000000 ?. E T 704181 31 11 01 9 ~ 3 I C 53814 28 8 t. 2440 .' 3295769168$6t 3 ( 0 C b 61 985653e6577 0571 9590551 46 4
~
0 3447744544255 ' A 0 0OO0O00000000 C i ' I S R 570221 3 3'0 1 053 0 82867781 04420 7 R Mf a 8 4 2 4.s.0 6 6 9 7 6 8 5 8 T s 2332643227529 7 281 $60248 425 2 C 1
. 58.S.71 7t 2 697, , M.
E 1 7283 1 2 0 1 2 6 L E S s N E O ' ~ s I 4 I Y S s
.Jd r
R S ;r . T H i A fG I ;~ I S Ef.4 ;
.m MfNl ,4 I
I r. R .MeS I 1g RN "
- I t t L EE 1t P A CC SiE - #
9INNWPtc - " . D I I I .PWCGG T VV4 + p .N T s RRE 4VI ISeiRR e A t s U R O EECM$RFFNfVEE SSII;EI VVtSUUfTtOO S !IRWW h;. Et
.D ^
T LLRRe PPH1$PP S s 5 C A AAEEhE I e$fLEE ~ltA A F T ISSTTLLl!.ALL T NNLLOLPP : .PAA LIAALl E P W EEAAV - I ITtISS . X l DDRR DCCEtCEE t s a I I EEHRI I EEI LL E E h SSNNGANNRRNOO T E EEEEIUUUTTUHH s T O RRGGHGI S A B S5A WW I Y
' : .. i 1 T
N , * - E , D 1N I . t' .I N ' I t t fi R;f" t RR C PT P PT N i . . P. : I S O L C H V A N S , P - P~ H T O E PVLPPLL5PP O N RR4GHG$ $ 4 9 S$1 WW 8 T jll!
E XHIBIT D TU Ektrie Fuel Cast Factor Filing Publie Utility Commission of Texas EXHISIT SJH-3 DOCKET # 7209 PAGE 1 OF 1 TEXAS UTILITIES ELECTRIC COMPANY LOSS CALCULATIONS BASED ON ESTIMATED kWh SALES AND SYSTEM INPUT SY VOLTAGE LEVEL kWh SALES SYSTEM IM*UT LOSS RATIO MULTIPLIER SECONDARY 54,988,330,519 59,518,299,981 1.002381 1.011057 PR! MARY 11 SM,573,900 12,400,557,005 1.051741 0.982436 TRANSMISSION 9,349,384,501 9,SS1,142,934 1.024789 0.957260 TOTAL 76,204,209,000 St.500,000,000 1.070543 1.000000 l l - _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - _ __ l
EXHIBIT E List of Power Supply Resources
1. Capacity and energy associated with the generation at the South Unit of the Denison Dam Hydroelectric Project as specified and determined in accordance with the agreement of October.30,1984 among TU Electric, Tex-La and Rayburn Country Electric Cooperative, Inc.

2. Economy energy from Houston Lighting and Power Company (HL&P) pursuant to the agreement between Tex-La and HL&P of February 10, 1986, and the Scheduling Agent Agreement between Tex-La and TU Electric of November 13,1986 3.. Economy energy from West Texas Utilities Company (WTU) pursuant to certain l arrangements between Tex-La and WTU and the Scheduling Agent Agreement between Tex-La and TU Electric of July 29,1987

4. Tex-La's Future Power Supply Resource [to be specified (which specification shall include the name of the resource, the Firm Capability of the resource, and the beginning and the end of the term that such resource will be supplying Firm Capability to Tex-La) and added in accordance with, and subject to, the provisions t of this Agreement] or new economy energy arrangement or the Power Supply Resource hsted on line 1 of Exhibit B, if any

5. . Tex-La's Future Power Supply Resource [to be specified (which specification shall include the name of the resource, the Firm Capability of the resource, and the beginning and the end of the term that such resource will be supplying Firm Capability to Tex-La) and added in accordance with, and subject to, the provisions of this Agreement) or new economy energy arrangement or the Power Supply Resource listed on line 2 of Exhibit B, if any 4

6. Tex-La's Future Power Supply Resource (to be specified (which specification shall include the name of the resource, the Firm Capability of the resource, and th' beginning and the end of the term that such resource will be supplyinrj Firr.
Capability to Tex-La) and added in accordance with, and subject to, the provisions of this Agreement] or new economy energy arrangment or the Power Supply Resource listed on line 3 of Exhibit B, if any
-q 1
l 2 This Exhibit E may be amended from time to time in accordance with the terms of this Agreement to reflect additions, deletions and/or substitutions, provided that at no time j during the term of this Agreement shall the total number of Power Supply Resources J shown on this Exhibit E exceed six (6).
l I 1 EXHIBIT F I. Firm Cepability from Tex-La's Future Power Supply Resources Reduced or Terminated 1 l When Tex-La obtains Firm Capability from one or more of Tex-La's Future I Power Supply Resources pursuant to the terms of this Agreement, then the following procedure shall be used to calculate the billing demand for each of the Points of l>elivery during the twelve (12) months beginning with the first month during which . Tex-La obtains such Firm Capability: ! STEP 1: For each such month, calculate the billing demand and demand charge in ! at :ordance with TU Electric's then applicable tariff. The demand charges so determined will be referred to as "DCl". STEP 2* 1 Adjust the metered demands at the Point of Delivery during the eleven (11) ! months immediately preceding the month in which the Firm Capability of one or more of Tex-La's Future Power Supply Resources becomes effective as follows: i Adjust Metered Demand for said Point of Delivery - Actual Metered Demand (or Supplemental Capacity as provided in STEP 6) minus the quantity, AFCI, determined in accordance with Section 3.l(a), applicable to the Point of Delivery during the hour of maximum demand determination (said maximum demand determination being specified in the then applicable tariff) multiplied by, The Firm Capability of Tex-La's Future Power Supply Resources which becomes effective. multiplied by, The appropriate loss factor 1/TLd or 1/DLd as defined in Section 3.l(a). STEP 3 Adjust the Contract Capacity at said Point of Delivery to the new Contract l Capacity for the first month during which Tex-La obtains such Firm Capability and i for each subsequent month. i 1 EXHIBfr F Page 1 of 5
l STEP 4: For F : month durin the succeeding eleven (11) g which months, Tex-La calculate the billing first obtains demandsuch Firm Capability and demand charges and for in accordance with the then applicable tariff, using the adjusted metered demands determined in STEP 2 above, and the adjusted Contract Capacity specified in STEP 3 above. The resulting demand charge shall be referred to as "DC2". STEP 5: Tex-La shallinitially be billed the demand Charge DC2, as determined above. However, if at or before the termination of this Agreement, the total Firm Capability listed in Exhibit E is terminated or reduced, then an amount equal to DCI minus DC2 shall be calculated and Tex-La shall be required to pay TU Electric the amount specified in Section 7.3(a) of the Agreement, with interest thereon calculated at the rate of nine and one-half percent (9-1/2%) per annum. However, if at. such termination of this Agreement, Tex-La establishes its own separate and independent Control Area or moves the operational control of all of its Points of Delivery to the Control Area of another utility pursuant to Article X of .this Agreement, then Tex-La shall not be required to pay such amount equal to "DCl 1 minus DC2".- Furthermore, .due to the twenty-year term of Exhibit G to this Agreement, if the "DCI minus DC2" amount becomes payable due to said Exhibit G l becoming applicable, no interest shall be added. STEP 6: If Tex-La shall obtain Firm Capability from one or more of Tex-La's Future Power Supply Resources at a given point in time and, at some later point in time, obtains an additional one or more of Tex-La's Future Power Supply Resources, then the STEPS 1 through 5 shall be repeated for such additional Firm Capability. An example calculation for a single Point of Delivery assuming Firm Capability of 100 MW, and using the terms and conditions of TU Electric's Rate WP (applicable to Supplemental Capacity at the Effective Date)is shown on pages 3 and 4 of this Exhibit F. U. Abandonment of a Point of Delivery An example calculation of the billing demand charges to be paid by Tex-La resulting from abandonment of a single Point of Delivery is shown on page 5 of this Exhibit F. Nothing herein shall be interpreted or construed to modify in any way the terms of the Agreement dated May 26,1987 between Tex-La and TU Electric.
.EXHIBrr F Page 2 of 5
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ML20246A935: Difference between revisions

Latest revision as of 03:04, 9 March 2021

Contents

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Title:

2.1 Agreement

2.6 Parties

3.3 Planning

9.4 Interconnections

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